electronic transmission disclaimer …resources.inktankir.com/clho/prospectus.pdfcleopatra hospital...

ELECTRONIC TRANSMISSION DISCLAIMER

STRICTLY NOT TO BE FORWARDED TO ANY OTHER PERSONS

IMPORTANT: You must read the following disclaimer before continuing. This electronic transmissionapplies to the attached document and you are therefore advised to read this disclaimer carefully beforereading, accessing or making any other use of the attached international offering memorandum (the‘‘Offering Memorandum’’) relating to Cleopatra Hospital Company S.A.E. (the ‘‘Company’’) dated18 May 2016 accessed from this page or otherwise received as a result of such access and you are thereforeadvised to read this disclaimer carefully before reading, accessing or making any other use of the attacheddocument. In accessing the attached document, you agree to be bound by the following terms andconditions, including any modifications to them from time to time, each time you receive any informationfrom us as a result of such access. You acknowledge that this electronic transmission and the delivery of theattached document is confidential and intended for you only and you agree you will not forward, reproduceor publish this electronic transmission or the attached document to any other person. The OfferingMemorandum has been prepared solely in connection with the proposed offering of ordinary shares (the‘‘Shares’’) of the Company to certain institutional investors in a number of countries, including Egypt butexcluding the United States (the ‘‘International Offer’’). The Offering Memorandum relates to theInternational Offer only. A simultaneous offer of Shares will take place in Egypt to Egyptian retailinvestors. Prospective Egyptian retail investors should refer to the document to be issued in connectionwith the domestic offering in Egypt and may not rely on the Offering Memorandum. The OfferingMemorandum has been published and is available from the Company’s registered office and on theCompany’s website at http://investors.cleopatrahospitals.com. Pricing information and other relateddisclosures have also been or will be, as applicable, published on this website. Prospective investors areadvised to access such information prior to making an investment decision.

THIS ELECTRONIC TRANSMISSION AND THE ATTACHED DOCUMENT MAY ONLY BEDISTRIBUTED OUTSIDE THE UNITED STATES IN ‘‘OFFSHORE TRANSACTIONS’’ ASDEFINED IN, AND IN RELIANCE ON, REGULATION S UNDER THE U.S. SECURITIES ACTOF 1933, AS AMENDED (THE ‘‘U.S. SECURITIES ACT’’). ANY FORWARDING, DISTRIBUTIONOR REPRODUCTION OF THE ATTACHED DOCUMENT IN WHOLE OR IN PART ISUNAUTHORISED. FAILURE TO COMPLY WITH THIS NOTICE MAY RESULT IN A VIOLATIONOF THE U.S. SECURITIES ACT OR THE APPLICABLE LAWS OF OTHER JURISDICTIONS.NOTHING IN THIS ELECTRONIC TRANSMISSION AND THE ATTACHED DOCUMENTCONSTITUTES AN OFFER OF SECURITIES FOR SALE IN ANY JURISDICTION WHERE IT ISUNLAWFUL TO DO SO.

THE SECURITIES HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S.SECURITIES ACT OR WITH ANY SECURITIES REGULATORY AUTHORITY OF ANY STATEOF THE UNITED STATES OR OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD,PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, IN OR INTO THEUNITED STATES.

This electronic transmission and the attached document and the International Offer when made are onlyaddressed to and directed at persons in member states of the European Economic Area who are ‘‘qualifiedinvestors’’ within the meaning of Article 2(1)(e) of the Prospectus Directive (Directive 2003/71/EC)(‘‘Qualified Investors’’). In addition, in the United Kingdom, this electronic transmission and the attacheddocument is being distributed only to, and is directed only at, Qualified Investors (i) who have professionalexperience in matters relating to investments falling within Article 19(5) of the Financial Services andMarkets Act 2000 (Financial Promotion) Order 2005, as amended (the ‘‘Order’’) and Qualified Investorsfalling within Article 49(2)(a) to (d) of the Order, and (ii) to whom it may otherwise lawfully becommunicated (all such persons together being referred to as ‘‘relevant persons’’). This electronictransmission and the attached document must not be acted on or relied on (i) in the United Kingdom, bypersons who are not relevant persons, and (ii) in any member state of the European Economic Area otherthan the United Kingdom, by persons who are not Qualified Investors. Any investment or investmentactivity to which this document relates is available only to (i) in the United Kingdom, relevant persons, and(ii) in any member state of the European Economic Area other than the United Kingdom, QualifiedInvestors, and will be engaged in only with such persons.

Confirmation of Your Representation: This electronic transmission and the attached document isdelivered to you on the basis that you are deemed to have represented to the Company and EFG HermesPromoting and Underwriting (EFG Hermes) that (i) you are acquiring such securities in ‘‘offshoretransactions’’, as defined in, and in reliance on, Regulation S under the U.S. Securities Act; (ii) if you are inthe U.K., you are a relevant person, and/or a relevant person who is acting on behalf of, relevant persons inthe United Kingdom and/or Qualified Investors to the extent you are acting on behalf of persons or

entities in the U.K. or the EEA; (iii) if you are in any member state of the European Economic Area otherthan the U.K., you are a Qualified Investor and/or a Qualified Investor acting on behalf of, QualifiedInvestors or relevant persons, to the extent you are acting on behalf of persons or entities in the EEA orthe U.K.; and (iv) you are an institutional investor that is eligible to receive this document and you consentto delivery by electronic transmission.

You are reminded that you have received this electronic transmission and the attached document on thebasis that you are a person into whose possession this document may be lawfully delivered in accordancewith the laws of the jurisdiction in which you are located and you may not nor are you authorised to deliverthis document, electronically or otherwise, to any other person. This document has been made available toyou in an electronic form. You are reminded that documents transmitted via this medium may be alteredor changed during the process of electronic transmission and consequently neither the Company, EFGHermes nor any of their respective affiliates accepts any liability or responsibility whatsoever in respect ofany difference between the document distributed to you in electronic format and the hard copy version. Byaccessing the attached document, you consent to receiving it in electronic form. None of EFG Hermes orany of its affiliates accepts any responsibility whatsoever for the contents of the attached document or forany statement made or purported to be made by it, or on its behalf, in connection with the Company or theShares. EFG Hermes and each of its affiliates, each accordingly disclaims all and any liability whetherarising in tort, contract or otherwise which they might otherwise have in respect of such document or anysuch statement. No representation or warranty express or implied, is made by EFG Hermes or any of itsaffiliates as to the accuracy, completeness or sufficiency of the information set out in the attacheddocument.

Price range ProsPectus18 May 2016

Cleopatra Hospital Company S.A.E.(a joint stock company incorporated under the laws of the Arab Republic of Egypt)

Offer of up to 40,000,000 Shares at an Offer Priceexpected to be between EGP 8.75 and EGP 11.88 per Share

Care Healthcare Limited (Care Healthcare or the Selling Shareholder) is offering up to 40,000,000 ordinary shares(Shares) of Cleopatra Hospital Company S.A.E. (Cleopatra Hospital Company or the Company) through (i) aninstitutional offering of up to 34,000,000 Shares (the International Offer Shares) to certain institutional investorsin a number of countries, including Egypt but excluding the United States, (the International Offer) and (ii) anoffering of up to 6,000,000 Shares (the Egyptian Retail Offer Shares and, together with the International OfferShares, the Offer Shares) in a domestic retail offering in Egypt (the Egyptian Retail Offer and, together with theInternational Offer, the Combined Offer). The International Offer Shares and the Egyptian Retail Offer Shareswill be offered and sold by the Selling Shareholder at the same price (the Offer Price), which is expected to bebetween EGP 8.75 and EGP 11.88 per Share (the Offer Price Range).

Following completion of the Combined Offer, the Company will offer to the Selling Shareholder by way of aclosed subscription (the Closed Subscription) the right to subscribe for up to 40,000,000 new Shares (the ClosedSubscription Shares) at the Offer Price. The number of Closed Subscription Shares will equal the number of OfferShares less any Shares repurchased by the Selling Shareholder pursuant to Stabilisation (defined herein).Pursuant to the Closed Subscription, the Company will issue and allot the Closed Subscription Shares to theSelling Shareholder and the Selling Shareholder will pay to the Company the Offer Price multiplied by thenumber of Closed Subscription Shares. The Closed Subscription will be available only to the Selling Shareholderand the Selling Shareholder has undertaken to exercise the Closed Subscription. The purpose and effect of theCombined Offer and the Closed Subscription is to raise capital for the Company through an increase of its sharecapital.

Although it is expected that 34,000,000 Shares will be sold pursuant to the International Offer and 6,000,000Shares will be sold pursuant to the Egyptian Retail Offer, Offer Shares may be reallocated from theInternational Offer to the Egyptian Retail Offer depending on the level and nature of demand for the OfferShares (Right of Reallocation). The Right of Reallocation will be at the discretion of the Company and the SoleGlobal Coordinator.

The Shares were listed on the Egyptian Exchange (EGX) on 13 April 2016 (Listing), but trading of the Shares isconditional on the satisfaction of certain conditions set out in the EGX Listing Rules including, withoutlimitation, completion of the Combined Offer. Trading of the Shares is expected to commence on the EGX on2 June 2016 (Commencement of Trading).

This international offering memorandum (this Offering Memorandum) relates to the International Offer only.Prospective Egyptian retail investors should refer to, and will be purchasing Egyptian Retail Offer Shares solelyin reliance on, the document to be issued in connection with the Egyptian Retail Offer (the Public OfferingNotice) and may not rely on this Offering Memorandum. All information included in this Offering Memorandumrelating to the Egyptian Retail Offer has been included for information purposes only. Investors purchasingInternational Offer Shares may not purchase Egyptian Retail Offer Shares.

Investing in the International Offer Shares involves a high degree of risk. Please read the RiskFactors beginning on page 17 for a discussion of certain matters that prospective investorsshould consider prior to making an investment in the International Offer Shares.

The International Offer Shares are offered by EFG Hermes Promoting and Underwriting (EFG Hermes or theSole Global Coordinator) as sole global coordinator and bookrunner, subject to receipt and acceptance by it of, andsubject to its right to reject, in whole or in part, any order.

Sole Global Coordinator and Bookrunner

EFG Hermes Promoting and UnderwritingManager

Pharos HoldingORDINARY SHARE CAPITAL OF THE COMPANY

Issued and fully paid

Number Nominal Value

160,000,000 EGP 0.5

This Offering Memorandum is dated 18 May 2016.

The Selling Shareholder is offering up to 34,000,000 International Offer Shares and up to 6,000,000Egyptian Retail Offer Shares to raise gross proceeds of EGP 412.6 million (assuming the Offer Price is setat the mid-point of the Offer Price Range, all of the Offer Shares are sold in the Combined Offer and noStabilisation).

Following completion of the Combined Offer, the Company will offer to the Selling Shareholder by way ofthe Closed Subscription the right to subscribe for up to 40,000,000 Closed Subscription Shares at the OfferPrice. The number of Closed Subscription Shares will equal the number of Offer Shares less any Sharesrepurchased by the Selling Shareholder pursuant to Stabilisation (defined herein). Pursuant to the ClosedSubscription, the Company will issue and allot the Closed Subscription Shares to the Selling Shareholderand the Selling Shareholder will pay to the Company the Offer Price multiplied by the number of ClosedSubscription Shares. The Closed Subscription will be available only to the Selling Shareholder and theSelling Shareholder has undertaken to exercise the Closed Subscription. The purpose and effect of theCombined Offer and the Closed Subscription is to raise capital for the Company through an increase of itsshare capital.

The Offer Price Range has been set by the Selling Shareholder and the Company (in consultation with theSole Global Coordinator), and it is currently expected that the Offer Price will be set within the Offer PriceRange. The Offer Price Range is indicative only and the Offer Price may be set within or below, but notabove, the Offer Price Range. All Offer Shares will be sold at the Offer Price, which will be determined bythe Selling Shareholder and the Company following a bookbuilding process and consultation with the SoleGlobal Coordinator. A number of factors will be considered in determining the Offer Price and the basis ofallocation, including the level and nature of demand for the Offer Shares during the bookbuilding process,prevailing market conditions and the objective of establishing an orderly after market in the Shares, as wellas the Company’s historical performance, estimates of its business potential and earnings prospects andconsideration of these factors in relation to the market valuation of companies in related businesses. Apricing statement (the Pricing Statement) containing the Offer Price and related disclosures will bepublished on or about 26 May 2016 and will be available on the Company’s website at http://investors.cleopatrahospitals.com.

The Sole Global Coordinator is acting exclusively for the Company and the Selling Shareholder and noone else in connection with the International Offer. The Sole Global Coordinator will not regard any otherperson (whether or not a recipient of this Offering Memorandum) as a client in relation to theInternational Offer and will not be responsible to anyone other than the Company and the SellingShareholder for providing the protections afforded to its clients or for the giving of advice in relation to theInternational Offer or any transaction, matter, or arrangement referred to in this Offering Memorandum.Apart from the responsibilities and liabilities, if any, which may be imposed on the Sole GlobalCoordinator by the regulatory regime established thereunder or under the regulatory regime of anyjurisdiction where exclusion of liability under the relevant regulatory regime would be illegal, void orunenforceable, neither the Sole Global Coordinator nor any of its affiliates accepts any responsibilitywhatsoever for the contents of this Offering Memorandum including its accuracy, completeness andverification or for any other statement made or purported to be made by it, or on its behalf, in connectionwith the Company, the Shares or the International Offer. The Sole Global Coordinator and each of itsaffiliates accordingly disclaim, to the fullest extent permitted by applicable law, all and any liability whetherarising in tort, contract or otherwise (save as referred to above) which they might otherwise be found tohave in respect of this Offering Memorandum or any such statement. No representation or warrantyexpress or implied, is made by the Sole Global Coordinator or any of its affiliates as to the accuracy,completeness, verification or sufficiency of the information set out in this Offering Memorandum, andnothing in this Offering Memorandum will be relied upon as a promise or representation in this respect,whether or not to the past or future.

This Offering Memorandum does not constitute or form part of any offer or invitation to sell or issue, orany solicitation of any offer to purchase or subscribe for, any securities other than the securities to which itrelates or any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for,such securities by any person in any circumstances in which such offer or solicitation is unlawful.

No action has been or will be taken in any jurisdiction that would permit a public offering of theInternational Offer Shares or the possession, circulation or distribution of this Offering Memorandum orany other material or information relating to the Company or the International Offer Shares in anyjurisdiction where action for that purpose is required. Accordingly, the International Offer Shares may notbe offered or sold, directly or indirectly, and neither this Offering Memorandum nor any other offering

2

material or advertisement in connection with the International Offer Shares may be distributed orpublished, in or from any country or jurisdiction except in full compliance with any applicable rules andregulations of that country or jurisdiction.

The International Offer Shares have not been and will not be registered under the United States SecuritiesAct of 1933, as amended (the U.S. Securities Act), or any state securities laws in the United States or underthe applicable securities laws of Australia, Canada or Japan. Further, the International Offer Shares maynot be offered or sold directly or indirectly in or into the United States. There will be no offer, public orotherwise, of the International Offer Shares in the United States. Neither the U.S. Securities andExchange Commission (the SEC) nor any state securities commission has approved or disapproved ofthese securities or passed upon the adequacy or accuracy of this Offering Memorandum. Anyrepresentation to the contrary is a criminal offence in the United States. The International Offer Sharesare being offered and sold exclusively outside the United States in reliance on Regulation S under the U.S.Securities Act.

The distribution of this Offering Memorandum and the offer and sale of the International Offer Shares incertain jurisdictions may be restricted by law. No action has been or will be taken by the Company, theSelling Shareholder or the Sole Global Coordinator to permit a public offering of the International OfferShares under the applicable securities laws of any jurisdiction. No action has been taken or will be taken topermit the possession or distribution of this Offering Memorandum (or any other offering or publicitymaterials relating to the International Offer Shares) in any jurisdiction where action for that purpose maybe required or where doing so is restricted by law. Accordingly, neither this Offering Memorandum, norany advertisement, nor any other offering material may be distributed or published in any jurisdictionexcept under circumstances that will result in compliance with any applicable laws and regulations. Personsinto whose possession this Offering Memorandum comes should inform themselves about and observe anysuch restrictions. Any failure to comply with such restrictions may constitute a violation of the securitieslaws of any such jurisdiction.

In connection with the International Offer, the Sole Global Coordinator and any of its affiliates, acting asinvestors for their own accounts, may acquire International Offer Shares and in that capacity may retain,purchase, sell, offer to sell or otherwise deal for their own accounts in such International Offer Shares andother securities of the Company or related investments in connection with the Combined Offer orotherwise. Accordingly, references in this Offering Memorandum to the Shares being issued, offered,subscribed, acquired, placed or otherwise dealt in should be read as including any issue, offer, subscription,acquisition, dealing or placing by, the Sole Global Coordinator and any of its affiliates acting as investorsfor their own accounts. The Sole Global Coordinator does not intend to disclose the extent of any suchinvestment or transactions otherwise than in accordance with any legal or regulatory obligations to do so.

In connection with the Egyptian Retail Offer, EFG Hermes, or any of its agents, may effect transactions inthe Shares with a view to supporting or maintaining the market price of the Shares at a level higher thanthat which might have otherwise prevailed in the open market (Stabilisation). EFG Hermes will withholdfrom the payment of the proceeds of the Combined Offer an amount equal to 15 per cent. of the grossproceeds of the sale of all Offer Shares at the Offer Price, which shall be deposited in a stabilisationaccount (the Stabilisation Fund). If the trading price per Share falls below the Offer Price on or after thedate of Commencement of Trading, and ending 30 days after that date (such period being the StabilisationPeriod), purchasers of Egyptian Retail Offer Shares in the Egyptian Retail Offer may submit sell ordersand EFG Hermes will submit purchase orders for Shares at the Offer Price, which will remain open untilthe end of the Stabilisation Period. At the end of the Stabilisation Period, open purchase orders submittedby EFG Hermes will be matched with open sale orders and executed on the EGX. All Shares purchased inthis manner will be placed in the Stabilisation Fund. EFG Hermes will remit to the Selling Shareholder, atthe end of the Stabilisation Period, any funds then remaining in the Stabilisation Fund and any remainingShares purchased during the Stabilisation Period using the Stabilisation Fund.

Purchasers of International Offer Shares in the International Offer may not participate in the Stabilisation.EFG Hermes will disclose any Stabilisation transactions to the EGX at the end of the Stabilisation Period.

3

CONTENTS

PART PAGE

Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

PART 1 Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

PART 2 Presentation of Financial and Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

PART 3 Directors, Secretary, Registered and Head Office and Advisers . . . . . . . . . . . . . . . . . . 49

PART 4 Expected Timetable of Principal Events and Offer Statistics . . . . . . . . . . . . . . . . . . . . . 50

PART 5 Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51

PART 6 Business Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62

PART 7 Directors, Senior Management and Corporate Governance . . . . . . . . . . . . . . . . . . . . . 87

PART 8 Selected Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

PART 9 Operating and Financial Review . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

PART 10 Capitalisation and Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134

PART 11 Unaudited Pro Forma Consolidated Financial Information . . . . . . . . . . . . . . . . . . . . . 136

PART 12 Details of the Combined Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

PART 13 Additional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155

PART 14 Historical Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

PART 15 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307

4

SUMMARY

The summary should be read as an introduction to this Offering Memorandum. Any decision to invest inthe securities should be based on consideration of this Offering Memorandum as a whole by the investor.

No consent has been given by the Company or any person responsible for drawing up this OfferingMemorandum to the use of this Offering Memorandum for subsequent resale or final placement ofsecurities by financial intermediaries.

ISSUER AND SELLING SHAREHOLDER

Legal name of issuer Cleopatra Hospital Company S.A.E.

Domicile and legalform of issuer . . . . The Company was incorporated as an Egyptian limited partnership company on

6 November 1979 under the Investment Guarantees and Incentives Law No. 8 of1997, as amended (the Investment Law). On 28 July 2005 the Company became ajoint stock company. The Company’s registration number is 199393.

Legal name of sellingshareholder . . . . . Care Healthcare Limited

Domicile and legalform of sellingshareholder . . . . . The Selling Shareholder is a company organised and existing under the laws of

the Republic of Malta under registration number C64614.

Current operationsand principalactivities . . . . . . . . The Group is the largest private hospital group in Egypt, measured by number of

hospital beds and number of hospitals, and currently operates four hospitals inGreater Cairo, each of which was acquired within the past two years. TheGroup’s hospitals, on an aggregated basis, had 624 hospital beds as at31 December 2015, and in 2015 serviced 47,256 inpatients, 606,206 outpatientclinic visits and 278,404 emergency room patients and performed 34,900surgeries. The Group’s vision is to become the leading integrated healthcareprovider in Egypt through a platform of world class quality medical facilities andservices to enhance patients’ quality of life. The Group’s mission is to deliver thefinest quality of healthcare in a safe, reliable and caring environment, throughhighly trained healthcare providers, state of the art facilities and the latestmedical technology, putting patients and their families first.

The Group’s four hospitals—Cleopatra, Cairo Specialized Hospital, Nile Badrawiand Al Shorouk—are multi-speciality hospitals that offer a full array of generaland emergency healthcare services. Some of their service offerings includegeneral surgery, emergency and ambulance services, cardiology, gynaecology andobstetrics, oncology, orthopaedics and a number of outpatient clinics, includingdental, physiotherapy and primary care. The Group plans to develop, in additionto the general services that the Group’s hospitals currently offer, centres ofexcellence in each of the hospitals in separate specialised medical fields, such asrenal transplantation and oncological radiotherapy. The centres of excellence willhave state-of-the-art equipment for the relevant speciality practice and will staffthe most renowned doctors in the respective field. This business model allowspatients to attend the Group’s facilities at locations convenient to them forroutine examinations, simple procedures and operations and general servicessuch as pharmacy, blood bank and diagnostic services while also being able tooffer highly specialised services at other hospitals in the Group’s platform.

5

Over the past decade, the private healthcare sector in Egypt has grownsignificantly, as the population is seeking higher quality and safer healthcareoptions than those offered by the government. Traditionally, patients tended tochoose their healthcare providers based on the personal reputations of thephysicians. As the private medical insurance industry grows in size and influence,patients have begun choosing their healthcare providers based on the reputationand brand of the hospitals. This is due to private insurance providers andcompanies offering their employees private medical coverage through directcontractual agreements generally with hospitals rather than individual physicians.The Group is at the forefront of this market evolution in which hospitals aregrowing larger, consolidating and developing their own reputations and brandidentities.

The Group aims to lead this trend by implementing a uniform standard ofhigh-quality patient care across its platform, expanding its existing one-stop shopmodel to contract patients so that patients can receive all required healthcareservices within the Group’s platform, upgrading its facilities with state-of-the-artequipment and attracting the best doctors and healthcare providers in Egypt.

Significant recenttrends affecting theGroup . . . . . . . . . The Group’s overall operational performance remained positive during the first

quarter in 2016. Sales volume and operating revenue both increased comparedwith the same period in 2015 and gross profit remained strong and in line withmanagement’s projections. Management is therefore confident in the operationaland financial ability of the Group to execute its strategy as set forth in thisOffering Memorandum and is confident in the Group’s long-term outlook.

Group structure . . . . The Company owns and controls the majority of the share capital of each ofCairo Specialized Hospital Company S.A.E. (Cairo Specialized HospitalCompany), Nile Badrawi Hospital Company S.A.E. (Nile Badrawi HospitalCompany) and Al Shorouk Hospital Company S.A.E. (Al Shorouk HospitalCompany). The term ‘‘Group’’ refers to the Company, Cairo Specialized HospitalCompany, Nile Badrawi Hospital Company and Al Shorouk Hospital Company.

Major shareholders . As at the date of this Offering Memorandum, 99.99 per cent. of the share capitalof the Company is owned and controlled by Care Healthcare. Care Healthcare isbeneficially owned, through intermediate wholly-owned subsidiaries, by AbraajNAH Limited (Abraaj NAH), European Bank for Reconstruction andDevelopment (EBRD), DEG-Deutsche Investitions-und EntwicklungsgesellschaftmbH (DEG) and Societe de Promotion et de Participation pour la CooperationEconomique S.A. (Proparco). Abraaj NAH is owned by funds managed andcontrolled by The Abraaj Group, a Dubai-based private equity firm.

Immediately following completion of the Closed Subscription, it is expected thatCare Healthcare will hold at least 80 per cent. of the issued ordinary share capitalof the Company.

6

Selected key financialinformation . . . . . . The tables below set out summary financial information for the Company and

each of its three subsidiaries for the periods indicated and certain unaudited proforma consolidated financial information. The summary financial informationbelow has been extracted from the audited unconsolidated financial statements ofCleopatra Hospital Company, Cairo Specialized Hospital Company, NileBadrawi Hospital Company and Al Shorouk Hospital Company as at and for thethree years ended 31 December 2015, 2014 and 2013 and the unaudited proforma consolidated financial information set out in Part 11 (Unaudited ProForma Consolidated Financial Information). Consolidated results for 2015include the full-year results of Cleopatra Hospital Company, as well as threemonths of results for Cairo Specialized Hospital Company (acquired by anaffiliate of Care Healthcare in 2014, but structured under the Company in lateSeptember 2015) and Nile Badrawi Hospital Company (acquired by the Companyin September 2015). Consolidated results for 2015 do not include the results of AlShorouk Hospital Company, which was acquired by the Company in January2016.

Summary statement of income data of Cleopatra Hospital Company, CairoSpecialized Hospital Company, Nile Badrawi Hospital Company and AlShorouk Hospital Company

Year ended 31 December 2015

CairoCleopatra Specialized Nile Badrawi Al ShoroukHospital Hospital Hospital HospitalCompany Company Company Company

(audited)(EGP)

Operating revenue . . . . . . . . . . . . . . . . . . . . . 332,002,699 149,377,454 121,307,079 138,642,178Operating costs . . . . . . . . . . . . . . . . . . . . . . . (214,407,386) (111,849,380) (81,601,341) (99,913,207)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . 117,595,313 37,528,074 39,705,738 38,728,917General and administrative expenses . . . . . . . . . . (27,859,422) (14,207,273) (28,072,750) (25,581,868)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . (2,973,505) (6,945,188) (4,218,259) (5,070,124)Other income . . . . . . . . . . . . . . . . . . . . . . . . 1,028,699 3,808,193 1,856,750 1,231,343

Profit for the year before finance income and incometax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,791,085 20,183,806 9,271,479 9,308,322

Finance cost . . . . . . . . . . . . . . . . . . . . . . . . (8,487,998) — — (1,333,834)Profit for the year before income tax . . . . . . . . . . 84,407,319 24,204,940 9,265,392 8,102,830Profit for the year . . . . . . . . . . . . . . . . . . . . . 64,690,205 17,248,355 3,612,489 4,193,032

Non-GAAP measures:Adjusted profit for the year(1) . . . . . . . . . . . . . . . 64,690,205 24,154,267 15,454,757 12,006,467EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . 99,445,630 33,487,278 27,104,161 22,550,534Adjusted EBITDA(1) . . . . . . . . . . . . . . . . . . . . 99,445,630 33,487,278 27,104,161 22,550,534

(1) Unaudited.

7

Summary pro forma statement of income data

Pro FormaYear ended

31 December 2015

(unaudited)(EGP)

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741,329,410Operating cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (507,357,411)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,971,999General and administrative expenses . . . . . . . . . . . . . . . . . . (95,721,313)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,207,076)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,924,985

Profit before finance income & income tax . . . . . . . . . . . . . . 126,968,595

Finance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (59,417,233)Profit before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,798,983

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,721,548

Non-GAAP measures:Pro forma EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,587,602

Note: The pro forma statement of income shows the effect of the Company’s ownership of CairoSpecialized Hospital Company, Nile Badrawi Hospital Company and Al Shorouk Hospital Companyas if the acquisition of each of those companies had occurred on 1 January 2015. For moreinformation, see Part 11 (Unaudited Pro Forma Consolidated Financial Information).

8

Summary statement of income data

Year ended 31 December

2015 2014 2013

(audited)(EGP)

Cleopatra Hospital Company

Operating revenue . . . . . . . . . . . . . . . . 332,002,699 290,294,814 243,293,152

Gross profit . . . . . . . . . . . . . . . . . . . . . 117,595,313 85,686,660 71,687,122Profit for the year . . . . . . . . . . . . . . . . 64,690,205 43,802,125 38,688,155

Non-GAAP measures:Adjusted profit for the year(1) . . . . . . . . 64,690,205 64,102,125 41,785,123EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . 99,445,630 72,842,960 59,211,607Adjusted EBITDA(1) . . . . . . . . . . . . . . . 99,445,630 93,142,960 62,308,575

Cairo Specialized Hospital Company




Nile Badrawi Hospital Company




Al Shorouk Hospital Company


Gross profit . . . . . . . . . . . . . . . . . . . . . 38,728,917 31,741,518 22,488,817Profit for the year . . . . . . . . . . . . . . . . 4,193,032 11,448,396 (70,196)


(1) Unaudited.

9

Key operational performance indicators

Year ended31 December

2015 2014 2013

Inpatient revenue per inpatient (EGP)(1)

Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,171 3,639 3,186Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . 2,986 2,639 2,504Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,565 5,661 3,980Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,546 4,105 3,798

Outpatient revenue per outpatient clinic visit (EGP)(2)

Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 180 168Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . 84 106 146Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272 308 145Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 271 263

Operating revenue per bed (EGP thousands)(3)

Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,012 1,759 1,475Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . 747 616 570Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 873 773 624Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,155 980 821

Note: Figures include data for periods during which the Company did not own the respectivehospitals.

(1) Defined as the operating revenue generated by inpatients (defined as patients admitted to anaccommodation room) divided by the number of inpatients.

(2) Defined as the operating revenue generated by outpatient clinic visits (defined as the totalnumber of visits to the outpatient clinics made by patients during the period) divided by thenumber of outpatient clinic visits.

(3) Defined as operating revenue divided by total number of beds.

Summary balance sheet data of Cleopatra Hospital Company, CairoSpecialized Hospital Company, Nile Badrawi Hospital Company andAl Shorouk Hospital Company

As at 31 December 2015

Cairo NileCleopatra Specialized Badrawi Al ShoroukHospital Hospital Hospital HospitalCompany Company Company Company

(audited)(EGP)

Total non-current assets . . . . . . . 427,851,466 25,678,386 18,884,960 52,946,283Total current assets . . . . . . . . . . 99,658,411 82,793,359 51,291,592 35,439,387Total assets . . . . . . . . . . . . . . . 527,509,877 108,471,745 70,176,552 88,385,770

Total non-current liabilities . . . . . 217,906,819 1,727,506 — 891,782Total current liabilities . . . . . . . . 109,580,657 40,341,609 35,267,169 44,949,796

Total liability . . . . . . . . . . . . . . 327,487,476 42,069,115 35,267,169 45,841,578

Total shareholders’ equity . . . . . 200,022,401 66,402,630 34,909,383 42,544,092

Total funding of working capitaland non-current liabilities(1) . . 417,929,220 68,130,136 34,909,383 43,435,874

Non-GAAP measures:Net debt(2) . . . . . . . . . . . . . . . . 260,736,241 (28,379,862) 7,394,084 25,573,457

(1) Total funding of working capital and non-current liabilities is a measurement required by EAS.

(2) Unaudited.

10

Summary pro forma balance sheet data

Pro FormaAs at

31 December 2015

(unaudited)(EGP)

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 657,475,446

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,171,019

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230,127,498

Total Shareholder’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,966,544

Non-Controlling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,078,338

Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,044,882

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463,474,085

Total equity and non-current liabilities . . . . . . . . . . . . . . . . . . . . 625,518,967

Non-GAAP measures:Pro forma net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538,596,607

Note: The pro forma balance sheet shows the effect of the Company’s ownership of Al ShoroukHospital Company as if the acquisition of that company had occurred on 31 December 2015. TheCompany already owned Cairo Specialized Hospital Company and Nile Badrawi Hospital Companyas at 31 December 2015. For more information, see Part 11 (Unaudited Pro Forma ConsolidatedFinancial Information).

11

Summary balance sheet data

As at 31 December

2015 2014 2013

(audited)(EGP)


Total assets . . . . . . . . . . . . . . . . . . 527,509,877 192,221,873 169,253,303

Total liability . . . . . . . . . . . . . . . . . 327,487,476 56,889,677 38,907,471Total shareholders’ equity . . . . . . . . 200,022,401 135,332,196 130,345,832

Non-GAAP measures:Net debt(1) . . . . . . . . . . . . . . . . . . . 260,736,241 (23,779,663) 4,026,626


Total assets . . . . . . . . . . . . . . . . . . 108,471,745 87,735,328 80,571,883

Total liability . . . . . . . . . . . . . . . . . 42,069,115 36,884,298 29,345,816

Total shareholders’ equity . . . . . . . . 66,402,630 50,851,030 51,226,067

Non-GAAP measures:Net debt(1) . . . . . . . . . . . . . . . . . . . (28,379,862) (26,860,379) (22,465,844)


Total assets . . . . . . . . . . . . . . . . . . 70,176,552 61,029,923 45,192,087

Total liability . . . . . . . . . . . . . . . . . 35,267,169 29,733,029 29,728,325


Non-GAAP measures:Net debt(1) . . . . . . . . . . . . . . . . . . . 7,394,084 16,751,013 24,686,565


Total assets . . . . . . . . . . . . . . . . . . 88,385,770 85,993,190 78,427,213

Total liability . . . . . . . . . . . . . . . . . 45,841,578 38,777,022 37,342,954


Non-GAAP measures:Net debt(1) . . . . . . . . . . . . . . . . . . . 25,573,457 21,776,790 22,748,754

(1) Unaudited.

Qualifications in theauditor’s report onthe historicalfinancialinformation . . . . . . There are no qualifications to the auditor’s reports on the historical financial

information included in this Offering Memorandum.

Working capital . . . . In the opinion of the Company, the Group has sufficient working capital for itspresent requirements, that is for at least the next 12 months following the date ofthis Offering Memorandum.

12

THE SECURITIES

Type and class ofsecurities . . . . . . . Pursuant to the Combined Offer, the Selling Shareholder is offering up to

34,000,000 International Offer Shares and up to 6,000,000 Egyptian Retail OfferShares of EGP 0.5 each. All Shares in issue are fully paid. The Shares areregistered with ISIN number EGS729J1C018 and under the symbol ‘‘CLHO.CA’’.

Currency . . . . . . . . . Egyptian pounds

Issued share capital . As at the date of this Offering Memorandum and immediately followingCommencement of Trading, the issued share capital of the Company isEGP 80,000,000, comprising 160,000,000 Shares of EGP 0.5 each (all of which arefully paid or credited as fully paid).

Rights attaching tothe Shares . . . . . . The rights attaching to the Shares are uniform in all respects and they will form a

single class for all purposes, including with respect to voting and for all dividendsand other distributions thereafter declared, made or paid on the ordinary sharecapital of the Company.

Each shareholder of the Company (Shareholder) shall have one vote per Share.

Restrictions ontransfer . . . . . . . . There are no restrictions on the free transferability of the Offer Shares.

Listing andCommencement ofTrading . . . . . . . . . The Shares were listed on the EGX on 13 April 2016, but trading of the Shares is

conditional on the satisfaction of certain conditions set out in the EGX ListingRules including, without limitation, completion of the Combined Offer. Tradingof the Shares is expected to commence on the EGX on 2 June 2016.

Dividend policy . . . . The Company may pay dividends only as permitted by law and the Statutes of theCompany and subject to consideration of its investment requirements, financialcondition (including its level of indebtedness and liquidity requirements) and itsresults of operations. The Directors expect to maintain a flexible dividend policywith a view to balance between growth opportunities and availability of funds fordividend distribution. The Directors currently expect that in accordance with theGroup’s well-defined integration plan, no dividends will be paid in 2016 and 2017as the reinvestment of cash surpluses into the business will have a better impacton long-term shareholder value than the distribution as dividends. There can beno assurance that any dividends will be paid in the future or as to the level of anysuch dividends.

The declaration, amount and payment of dividends is determined, subject to thelimitations set forth above, by an absolute majority vote of the shareholdersrepresented at an ordinary general assembly meeting on the recommendation ofthe Directors. Future dividends will depend on the Group’s results of operations,financial position, dividends received from its subsidiaries and affiliates, cashrequirements, legal reserve and minimum capital requirements, availability ofopportunities that fit the Group’s scope and investment criteria, restrictivecovenants in the Group’s finance agreements and other factors deemed relevantby the Directors and the Shareholders. If the Company defaults on its debtobligation, it will be limited in its ability to pay dividends.

The Group intends to maintain, starting in 2018, a policy of distributing, subjectto the liquidity and capital expenditure requirements of the business in each year,all excess cash. In the absence of viable expansion or investment opportunitiesthat fit the Company’s scope and investment criteria, the expected payout ratio is50 per cent. or higher of profits available for distribution. For more detail on thedistribution of dividends, see ‘‘Dividends’’ in paragraph 2 of Part 13 (AdditionalInformation) of this Offering Memorandum.

13

THE COMBINED OFFER

Net proceeds andcosts of theCombined Offer . . The Selling Shareholder is offering up to 40,000,000 Offer Shares to raise gross

proceeds of EGP 412.6 million (assuming the Offer Price is set at the mid-pointof the Offer Price Range, all of the Offer Shares are sold in the Combined Offerand no Stabilisation).

Following completion of the Combined Offer, the Company will offer to theSelling Shareholder by way of the Closed Subscription the right to subscribe forup to 40,000,000 Closed Subscription Shares at the Offer Price. The number ofClosed Subscription Shares will equal the number of Offer Shares less any Sharesrepurchased by the Selling Shareholder pursuant to Stabilisation. Pursuant to theClosed Subscription, the Company will issue and allot the Closed SubscriptionShares to the Selling Shareholder and the Selling Shareholder will pay to theCompany the Offer Price multiplied by the number of Closed SubscriptionShares. The Closed Subscription will be available only to the Selling Shareholderand the Selling Shareholder has undertaken to exercise the Closed Subscription.The purpose and effect of the Combined Offer and the Closed Subscription is toraise capital for the Company through an increase of its share capital.

The aggregate expenses of, or incidental to, the Combined Offer and the ClosedSubscription to be borne by the Company, including the Sole GlobalCoordinator’s commission, professional fees and expenses and the costs ofprinting and distribution of documents, are estimated to be approximatelyEGP 35 million (including all applicable taxes and assuming the Offer Price is atthe mid-point of the Offer Price Range, all of the Offer Shares are sold in theCombined Offer and no Stabilisation), which the Company intends to pay out ofthe proceeds of the Closed Subscription.

Reasons for theCombined Offerand use ofproceeds . . . . . . . . All of the proceeds from the Combined Offer will be received by the Selling

Shareholder. The Selling Shareholder has undertaken to use the gross proceedsof the Combined Offer (less any amount reclaimed by purchasers of EgyptianRetail Offer Shares pursuant to Stabilisation) to subscribe for the ClosedSubscription Shares at the Offer Price pursuant to the Closed Subscription.

The Company intends to use the net proceeds from the Closed Subscription, inaddition to a portion of cash available for capital expenditure and operationalactivities, to fund its capital expenditure plans, including development ofextensions of Al Shorouk and Cleopatra. The Group is also considering theacquisition of a facility in New Cairo that it would develop into a new hospitalfacility.

The Directors believe that the Combined Offer and the Closed Subscription willfurther increase the Group’s profile, brand recognition and credibility with itscustomers, suppliers and employees, as well as assist in recruiting, retaining andincentivising key management, doctors and employees.

Terms and conditionsof the CombinedOffer . . . . . . . . . . The Selling Shareholder is offering up to 40,000,000 Offer Shares through (i) an

institutional offering of up to 34,000,000 International Offer Shares to certaininstitutional investors in a number of countries, including Egypt but excluding theUnited States, and (ii) an offering of up to 6,000,000 Egyptian Retail OfferShares in a domestic retail offering in Egypt.

14

This Offering Memorandum relates to the International Offer only. ProspectiveEgyptian retail investors should refer to, and will be purchasing Egyptian RetailOffer Shares solely in reliance on, the Public Offering Notice and may not rely onthis Offering Memorandum. All information included in this OfferingMemorandum relating to the Egyptian Retail Offer has been included forinformation purposes only. Investors purchasing International Offer Shares maynot purchase Egyptian Retail Offer Shares.

The Offer Price is expected to be between EGP 8.75 and EGP 11.88 per Share. Inaddition, Shares (representing up to 15 per cent. of the total number of OfferShares) are being made available pursuant to Stabilisation.

Following completion of the Combined Offer, the Company will offer to theSelling Shareholder by way of the Closed Subscription the right to subscribe forup to 40,000,000 Closed Subscription Shares at the Offer Price. The number ofClosed Subscription Shares will equal the number of Offer Shares less any Sharesrepurchased by the Selling Shareholder pursuant to Stabilisation. Pursuant to theClosed Subscription, the Company will issue and allot the Closed SubscriptionShares to the Selling Shareholder and the Selling Shareholder will pay to theCompany the Offer Price multiplied by the number of Closed SubscriptionShares. The Closed Subscription will be available only to the Selling Shareholderand the Selling Shareholder has undertaken to exercise the Closed Subscription.The purpose and effect of the Combined Offer and the Closed Subscription is toraise capital for the Company through an increase of its share capital.

The Offer Price Range has been set by the Selling Shareholder and the Company(in consultation with the Sole Global Coordinator), and it is currently expectedthat the Offer Price will be set within the Offer Price Range. The Offer PriceRange is indicative only and the Offer Price may be set within or below, but notabove, the Offer Price Range. All Offer Shares will be sold at the Offer Price,which will be determined by the Selling Shareholder and the Company followinga bookbuilding process and consultation with the Sole Global Coordinator. Anumber of factors will be considered in determining the Offer Price and the basisof allocation, including the level and nature of demand for the Offer Sharesduring the bookbuilding process, prevailing market conditions and the objectiveof establishing an orderly after market in the Shares, as well as the Company’shistorical performance, estimates of its business potential and earnings prospectsand consideration of these factors in relation to the market valuation ofcompanies in related businesses. The Pricing Statement containing the OfferPrice and related disclosures will be published on or about 26 May 2016 and willbe available on the Company’s website at http://investors.cleopatrahospitals.com.

Although it is expected that 34,000,000 Shares will be sold pursuant to theInternational Offer and 6,000,000 Shares will be sold pursuant to the EgyptianRetail Offer, Offer Shares may be reallocated from the International Offer to theEgyptian Retail Offer depending on the level and nature of demand for the OfferShares. The Right of Reallocation will be at the discretion of the Company andthe Sole Global Coordinator.

The Shares were listed on the EGX on 13 April 2016, but trading of the Shares isconditional on the satisfaction of certain conditions set out in the EGX ListingRules including, without limitation, completion of the Combined Offer. Tradingof the Shares is expected to commence on the EGX on 2 June 2016.

The Combined Offer is subject to the satisfaction of certain conditions containedin the Underwriting Agreement, which are typical for an agreement of thisnature, including Commencing of Trading occurring no later than 10:00 a.m.Cairo time on 2 June 2016 and on the Underwriting Agreement not having beenterminated prior to Commencement of Trading.

15

Selling Shareholderand Lock-up . . . . . As at the date of this Offering Memorandum, Care Healthcare owns and controls

99.99 per cent. of the ordinary share capital of the Company.

Abraaj NAH, EBRD, DEG and Proparco beneficially own, through intermediatewholly-owned subsidiaries, 72.5 per cent., 12.5 per cent., 7.5 per cent. and 7.5 percent. of Care Healthcare, respectively. Abraaj NAH is owned by funds managedand controlled by The Abraaj Group, a Dubai-based private equity firm.

Immediately following completion of the Closed Subscription, it is expected thatCare Healthcare will hold at least 80 per cent. of the issued ordinary share capitalof the Company.

Pursuant to the EGX Listing Rules, the Company is required to lock-up 51 percent. of the Shares held by the Selling Shareholder until the later of (i) thepublication of the second annual financial statements following Commencementof Trading or (ii) 24 months following Commencement of Trading (the MandatoryLock-up), subject to certain exceptions. During the Mandatory Lock-up period,the Company can increase its share capital, but the Selling Shareholder mustmaintain the percentage of locked-up Shares, except for any bonus shares.

Pursuant to the Underwriting Agreement, the Company will agree that, subject tocertain exceptions including the Closed Subscription, during the period of180 days from Commencement of Trading, it will not, without the prior writtenconsent of the Sole Global Coordinator, issue, offer, sell or contract to sell, orotherwise dispose of, directly or indirectly, or announce an offer of any Shares (orany interest therein or in respect thereof) or enter into any transaction with thesame economic effect as any of the foregoing.

Pursuant to the Underwriting Agreement, the Selling Shareholder will agree that,subject to certain exceptions, during the period of 180 days from Commencementof Trading, it will not, without the prior written consent of the Sole GlobalCoordinator, offer, sell or contract to sell, or otherwise dispose of, directly orindirectly, or announce an offer of any Shares (or any interest therein in respectthereof) or enter into any transaction with the same economic effect as any of theforegoing.

Expenses charged tothe investor . . . . . . No expenses will be charged by the Company or Selling Shareholder to any

investor who purchases Offer Shares pursuant to the International Offer.

16

PART 1Risk Factors

Any investment in the Shares is subject to a number of risks. Prior to investing in the Shares, prospectiveinvestors should carefully consider the risk factors associated with any investment in the Shares, the Group’sbusiness and the industry in which it operates, together with all other information contained in this OfferingMemorandum including, in particular, the risk factors described below.

Prospective investors should note that the risks relating to the Group, its industry and the Shares summarised inthe section of this Offering Memorandum headed ‘‘Summary’’ are the risks that the Directors and the Companybelieve to be the most essential to an assessment by a prospective investor of whether to consider an investmentin the Shares. However, as the risks which the Group faces relate to events and depend on circumstances thatmay or may not occur in the future, prospective investors should consider not only the information on the keyrisks summarised in the section of this Offering Memorandum headed ‘‘Summary’’ but also, among otherthings, the risks and uncertainties described below.

The risk factors described below are not an exhaustive list or explanation of all risks which investors may facewhen making an investment in the Shares and should be used as guidance only. Additional risks anduncertainties relating to the Group that are not currently known to the Group, or that the Group currentlydeems immaterial, may individually or cumulatively also have a material adverse effect on the Group’s business,results of operations and/or financial condition and, if any such risk should occur, the price of the Shares maydecline and investors could lose all or part of their investment. An investment in the Shares involves complexfinancial risks and is suitable only for investors who (either alone or in conjunction with an appropriatefinancial or other adviser) are capable of evaluating the merits and risks of such an investment and who havesufficient resources to be able to bear any losses that may result therefrom. Investors should consider carefullywhether an investment in the Shares is suitable for them in the light of the information in this OfferingMemorandum and their personal circumstances.

RISKS RELATED TO EGYPT

1. Continued political instability in Egypt may materially and adversely affect the Group’s business.

Egypt has been subject to political instability and multiple changes of government in the last five years.Popular unrest led to the 25 January revolution in 2011 (the Revolution) and resulted in the stepping downof long-standing President Hosni Mubarak, the suspension of the Egyptian constitution and the handoverof power to the Supreme Council of the Armed Forces in February 2011. Demonstrations and protestscontinued throughout 2011 in response to the perceived slow pace of political change, and Egyptexperienced continued political uncertainty and instability over the course of 2012 and 2013. Following apopular uprising, which led to the downfall of the previous government, presidential elections were held inMay 2014 and Abdel Fattah Al Sisi was sworn in as President of Egypt on 8 June 2014. The political andeconomic disturbances that occurred in Egypt following popular uprisings in 2011 and 2013 resulted inworker strikes, security concerns in the countryside, international delivery delays, replacement ofgovernmental officials, fluctuations in currency prices and reduced foreign currency reserves. Morerecently, as part of a general Egyptian government policy for economic reform, the public has experiencedincreased fuel costs as government subsidies have decreased. The sustained political uncertainty andinstability, including the adoption of two constitutions in short succession, have had and may continue tohave a material adverse effect on Egyptian businesses.

The policies of the government are subject to uncertainties following parliamentary elections concluded inDecember 2015, as is the reaction of the various political parties to the policies of the government. Thegovernment is likely to continue to face socio-economic challenges and risks of instability that oftenaccompany political transition. These challenges, together with other incidents of social and politicalunrest and violence, have had an adverse effect on the Egyptian economy. Further incidents of political orsocial instability, protests or violence may directly or indirectly affect Egypt and its economy, which, inturn, could have a material adverse effect on the Group’s business, prospects, financial condition or resultsof operations.

2. Egypt has experienced, and continues to experience, terrorist incidents and occasional civil disorder.

Egypt has experienced, and continues to experience, terrorist attacks and occasional civil disorder.Terrorist attacks have largely targeted security and military personnel, religious minorities and politicalfigures, and have also targeted natural gas pipelines. In July 2015, militants launched a number of

17

simultaneous attacks, including suicide car bombings, on Egyptian military checkpoints in the SinaiPeninsula, killing 21 soldiers. In October 2015, a bomb was planted by a terrorist organisation on a Russiancommercial airliner departing from Sharm el-Sheikh. The bomb exploded while the plane was flying overthe Sinai Peninsula, killing all of the 224 passengers and crew. Given these, and other, security concerns inNorth Africa and the Middle East, there can be no assurance that extremists or terrorist groups will notescalate or continue violent activities in Egypt or expand their operations to include more targets.

Egypt has also experienced incidents of civil disorder, including demonstrations by banned political groups,football-related violence and sit-ins by opposition parties. Many of these events have resulted in violenceand, in many cases, loss of life and has discouraged tourists from visiting, and deterred investments in,Egypt. Such events could lead to a deterioration of the macroeconomic climate, creating further strain onnet international reserves and, in turn, a worsening of the political and social environment. The effects ofany such terrorist activities or civil disorder could have a material adverse effect on the Group’s business,prospects, financial condition or results of operations, as well as on investor confidence in investing inEgypt.

3. The Group’s results are subject to the political, social and economic conditions of Egypt.

The Group’s revenue has benefited in part from the increasing expenditure in Egypt on lifestyle diseasesrequiring routine treatment and a higher frequency of hospital visits. In 2013, according to the LOGICReport, Egypt had the 3rd highest prevalence of diabetes globally in the 20–79 age group, 62.0 per cent. ofthe Egyptian population was overweight and 28.9 per cent. of the population was considered obese. Egyptalso had one of the highest number of cases of hepatitis C globally in 2012, according to the LOGICReport. The Group believes that the increased expenditure on these lifestyle diseases has not been a resultof increased prevalence of such diseases, but a result of Egyptians’ increased ability to afford the necessarytreatments and an increasing awareness of health-related issues in the general population.

Where patients, directly or indirectly (such as through private health insurance premiums), are responsiblefor all or part of the cost of their healthcare, individual decisions to reduce healthcare expenditures mayresult in a reduction in demand for the Group’s services. A decrease in household disposable income, orthe perception thereof, in times of economic downturn can lead to a reduction in individuals’ healthcareexpenditures. This may result in patients postponing certain types of medical treatment and could result ina significant decrease in the volume of business the Group is able to conduct. Further, during economicdownturns, employers generally seek to cut costs. If companies in Egypt cut employee benefit schemes,including healthcare plans, the Group’s revenue derived from its contract customers could be materiallyadversely affected. The Group is therefore subject to political, social and economic conditions in Egypt,which have varied in recent years.

The Egyptian Ministry of Finance estimates that the budget deficit grew to 12.2 per cent. of GDP in thegovernment’s 2013/14 fiscal year and then decreased to 11.5 per cent. of GDP in 2014/15. At the EgyptEconomic Development Conference in March 2015, certain Gulf Cooperation Council (GCC) memberstates pledged substantial grants, private investment and other budgetary support to Egypt to help tacklethe budget deficit and stabilise the economy. However, with the onset of the decline in world oil prices, thisneeded aid has largely failed to materialise. In the first half of the government’s 2015/16 fiscal year, netforeign direct investment in Egypt rose to US$3.1 billion from US$2.6 billion in the same period theprevious year. This is below the average of US$4.1 billion since the Revolution, and far below the peak ofUS$13.2 billion in 2007/08.

Revenue from tourism has been steadily decreasing—down 15 per cent. in 2015 compared to 2014,according to the Ministry of Tourism—and was hit hard after the attack on the Russian commercial airlinerin October 2015 by a terrorist organisation. The Egyptian Prime Minister Sherif Ismail estimated that as of29 February 2016, the attack had led to a loss of roughly US$1.3 billion in tourism revenue.

In the absence of robust tourism revenue, Egypt’s net international reserves have been heavily supportedby supplies of energy on concessionary terms and new deposits with the Central Bank of Egypt by GCCmember states. There can be no assurance that these concessionary terms will continue, in particular inlight of recent low oil prices. As of 30 April 2016, net international reserves at the Central Bank of Egypthad fallen to just US$17.01 billion, which is equivalent to approximately three months’ worth of imports.Net foreign assets turned negative in September 2015 and stood at negative EGP 13.6 billion as at31 December 2015.

18

Egypt may continue to experience further political, social and economic difficulties and there can be noassurance that Egypt will be able to adequately address these and other difficulties and stabilise or improvethe political and macroeconomic environment. In particular, significant failures to address Egypt’s fiscaland current account deficits may lead to a challenging macroeconomic environment that could lead tosome fiscal or balance of payments difficulties. The inability to obtain adequate amounts of foreigncurrency has put a strain on the economy, and low oil prices have reduced remittances sent home byEgyptian workers abroad and have affected revenue from the Suez Canal. Unemployment in Egyptremains high, at a rate of 12.8 per cent. in the fourth quarter of 2015, according to the state statisticsagency CAPMAS, and is expected to remain high for the next several years.

Further, Egypt may not continue to benefit from fiscal or foreign exchange support that it has received inthe past from member states of the GCC. Any reduction or cessation of this support may lead todeterioration in the macroeconomic environment in Egypt, which may have a material adverse effect onthe Group’s business, prospects, financial condition or results of operations.

Prolonged economic downturns like the recent global economic crisis are characterised by highunemployment, lower household income, lower corporate earnings, lower business investment and lowerconsumer spending, any of which could negatively affect demand for the Group’s services, and thus have amaterial adverse effect on the Group’s business, prospects, financial condition or results of operations.

Additionally, changes in investment policies or shifts in the prevailing political climate in Egypt couldresult in the introduction of increased government regulations, or the enforcement of governmentregulations in a different manner, with respect to, among other things:

• price controls;

• export and import controls;

• income and other taxes;

• ownership restrictions;

• access to capital;

• foreign exchange and currency controls; and

• labour and welfare benefit policies.

Any unexpected changes in the political, social, economic or other conditions in Egypt, or in neighbouringcountries, could have a material adverse effect on the Group’s business, results of operations, financialcondition and prospects.

4. The Group is exposed to the risk of inflation.

The Egyptian economy has been characterised by substantial inflation. Central Bank of Egypt coreinflation has averaged approximately 7.9 per cent. since January 2011, standing at 8.4 per cent. in March2016. Central Bank of Egypt headline inflation averaged 9.4 per cent. in that period and frequently rosesubstantially above 10 per cent. The inflation has largely reflected the Egyptian pound’s significantdevaluation over the last five years. Between January 2011 and January 2015 the Egyptian pound fell23 per cent. against the US dollar, between January 2015 and December 2015 it fell 8 per cent. and in thefirst four months of 2016 it fell 14 per cent., according to the Central Bank of Egypt. This inflation hasnegatively affected the Group’s revenue and margins. The Group endeavours to preserve its margins byenhancing operational efficiencies and increasing its bargaining power with suppliers and contractcustomers in order to reduce costs. When possible, the Group passes inflation related cost increases on toits customers. An inability to pass these costs onto customers could result in reduced margins that couldmaterially and adversely affect the Group’s financial condition and results of operations, while increasingprices to cover inflationary cost increases may cause some of the Group’s customers to stop using theGroup’s services, which would have a material adverse effect on the Group’s business, results ofoperations, financial condition and prospects.

19

5. Egyptian law does not permit the transfer of Egyptian pounds outside of Egypt, and the supply of foreigncurrency in Egypt is limited, which may materially and adversely affect the ability of the investors outsideof Egypt to repatriate proceeds and dividends from their Egyptian investments.

The Group intends to pay any dividends or make other distributions in Egyptian pounds. Egyptian lawprohibits the transfer of Egyptian pounds out of Egypt, and foreign currency is transferable out of Egyptonly through registered banks. The Central Bank of Egypt currently allows foreign investors who access theEgyptian market through the Central Bank of Egypt to convert, without delay, the proceeds and dividendsfrom their Egyptian investments to foreign currency for repatriation through registered banks (theRepatriation Fund). The Repatriation Fund was re-instituted in 2013 and its policies have been modified fromtime to time since then.

Outside of the Repatriation Fund, the availability of foreign currency in Egypt is limited, unpredictable andsometimes only available at unfavourable exchange rates. Without access to the Repatriation Fund, theability of investors outside of Egypt to transfer dividend payments or proceeds of the sale of investmentsout of Egypt may be materially and adversely affected by the unavailability, and/or fluctuating exchangerates for or high cost, of foreign currency in Egypt and the possible imposition of additional remittancerestrictions. There can be no assurance that the Repatriation Fund will continue to allow such repatriationof dividend payments or proceeds of the sale of investments.

6. The Egyptian legal system and new legislation can create an uncertain environment for investment andbusiness activity.

The Egyptian legal system is still developing the framework to support a market economy. As a result,there are uncertainties that may not exist in countries with more developed market economies with respectto legal, business and tax decisions. The evolution of Egypt’s legal system may adversely affect relevantmarket developments resulting in certain cases of ambiguities, inconsistencies or anomalies in the law, itsimplementation and judicial practice. Further, as relevant legislation evolves, the rules and regulationsgoverning the Group may change, which could result in non-compliance by the Group or increasedcompliance costs. Enforcement of contractual rights through the courts may also face difficulties anddelays. The foregoing factors may have an adverse effect on the Group’s ability to protect certaincontractual rights or to defend against certain claims by others, including challenges by regulatory andgovernmental authorities in relation to the Group’s compliance with applicable laws and regulations andcould have a material adverse effect on the Group’s business, prospects, financial condition and results ofoperations.

7. The Egyptian income tax regime has recently changed.

The Egyptian tax regime is subject to regular changes, and recent amendments to Income Tax Law No. 91of 2005 as amended by Law no. 53 of 2014 and Law no. 96 of 2015 and Executive Regulations (MinisterialDecree No. 172 of 2015 amended Ministerial Decree 991 of 2005) (together, the Egyptian Income Tax Law)are ambiguous and untested. Differing opinions regarding the interpretation of the Egyptian Income TaxLaw exist, creating uncertainty and potential areas of conflict for the Group and foreign investors.

Egypt is expected to transition from the current sales tax system to a value added tax system in 2016. Theenvisaged value added tax system will apply to a broader range of goods and services, although thehealthcare sector is expected to be exempt under the Egyptian value added tax legislation that is currentlyunder review by the Egyptian parliament. For more detail, see Paragraph 8 ‘‘Egyptian Taxation’’ in Part 13(Additional Information) of this Offering Memorandum. There can be no assurance that such legislationwill be enacted.

The Egyptian Ministry of Finance introduced in August 2015 a reduced maximum rate of income taxapplicable to both corporate and personal income of 22.5 per cent. Additionally, the previously applied fiveper cent. surtax was abolished. The new tax regimes are ambiguous and untested, and there can be noassurance that the tax laws will remain the same or that the Group will correctly predict how they areenforced.

8. Official statistics and data published in Egypt may not be complete or reliable.

Although a number of ministries, agencies and entities within the Egyptian government produce nationalstatistics and data, such statistics and data may not be as accurate or reliable as those compiled in moredeveloped countries.

20

Neither the Directors nor the Company has independently verified such official statistics or other data, andany discussion of this data in this Offering Memorandum is accordingly subject to uncertainty regardingthe completeness or reliability of such information.

RISKS RELATED TO THE GROUP’S BUSINESS AND INDUSTRY

9. Failure to comply with Egyptian healthcare laws and regulations, and changes in such laws andregulations, may materially adversely affect the Group’s business.

The Group’s business is subject to, and affected by, extensive, stringent and frequently changing laws andregulations, as well as frequently changing enforcement regimes. The Group’s hospitals are regulated byvarious bodies and legislation, including, but not limited to, the Egyptian Ministry of Health andPopulation (MoHP) and the Egyptian Law No. 51 for the year 1981 and its Executive Regulations, asamended from time to time (Medical Establishments Law). The extensive regulatory regimes include, butare not limited to, laws and regulations requiring:

• licensing of healthcare facilities and healthcare professionals;

• compliance with operational, personnel and quality requirements, including annual inspections by theMOHP;

• compliance with requirements relating to the social insurance of employees and contributions toemployee training and service funds;

• establishment of safety and health standards for employees;

• proper handling, transportation and disposal of biological and hazardous waste; and

• maintaining the privacy of patient data.

For more on the regulations to which the Group is subject, see ‘‘Regulatory Overview’’ in Part 6 (BusinessDescription) of this Offering Memorandum.

The Group must meet extensive requirements relating to workplace safety for employees in hospitals whocould be exposed to various biological risks, such as blood-borne pathogens (including HIV and thehepatitis B virus). These requirements include work practice controls, protective clothing and equipment,training and medical follow-up and may also include vaccinations and other measures designed tominimise exposure to, and transmission of, blood-borne pathogens.

A regulatory agency or tribunal may conclude that the Group is not in compliance in all material respectswith applicable laws and regulations, or may choose to investigate potential non-compliance, and has thepower to permanently or temporarily close all or part of the Group’s facilities. For instance, the MoHPtemporarily closed Nile Badrawi’s radiology department following the death of a patient being treated bythat department approximately a year and a half prior to the Company’s acquisition of Nile Badrawi. Thedoctor and two nurses treating the patient were found guilty of malpractice in an Egyptian court and theMoHP closed the department for approximately six months at the end of 2014 while it investigatedcompliance with applicable regulations. For more detail on this incident, see ‘‘Legal and AdministrativeProceedings’’ in Part 6 (Business Description) of this Offering Memorandum.

If the Group fails to comply with applicable laws and regulations, if such laws or regulations change in amatter adverse to the Group or if the Group cannot maintain, renew or secure required permits, licensesor other necessary regulatory approvals, such as licenses from the MoHP, the Group may be unable tooperate its business or commercialise its services, suffer civil and criminal penalties or fines, or incuradditional liabilities from third-party claims. For instance, the building permit for the top two floors of NileBadrawi requires those floors to be used for residential purposes, rather than the commercial purposes forwhich they’re currently being used. There is a risk that the Cairo Governorate could choose to enforce thatbuilding permit and either require Nile Badrawi to cease commercial operations on those floors or payfines. If any of the foregoing were to occur, the Group’s reputation could be damaged, importantrelationships with insurance providers or other contract customers could be adversely affected and thesedevelopments could have a material adverse effect on the Group’s business, prospects, financial conditionand results of operations.

Regulation in the healthcare industry is constantly changing, and the Group may be unable to accuratelypredict the future course of such regulation. In addition, safety, health and environmental laws andregulations in Egypt have been increasing in stringency in recent years, and it is possible that they will

21

become significantly more stringent in the future. To comply with these requirements, the Group may haveto incur substantial operating costs and/or capital expenditure in the future, which could have a materialadverse effect on the Group’s business, prospects, financial condition or results of operations.

10. The Group’s business is dependent on obtaining and maintaining governmental licenses necessary tooperate its private healthcare facilities.

The Group’s business is subject to extensive licensing requirements. In particular, the Group is required toobtain licenses for, among others, the following activities: operation of a private hospital, provision ofionised radiation services, provision of heart catheterisation services, operation of a blood bank, provisionof pharmaceutical services, operation of a medical laboratory, provision of physiotherapy services,operation of kidney dialysis units and provision of organ transplantation operations. In addition to licensesfor certain medical services, the Group’s business requires licenses to operate its power generators, boilersand elevators, which are essential to its operations. The Group’s business activities and operations aresubject to regular reviews by licensing authorities. If any licensing requirements are not met by the Group,the authorities may suspend or revoke the Group’s licenses or impose other restrictions on its operations.In addition, the licensing requirements in Egypt can be complex and are often not transparent orconsistently enforced, which gives rise to compliance risks. The Group cannot predict what new licensingrequirements, if any, will be implemented or the effect such licensing requirements may have on theGroup. Further, the Group cannot predict whether the government will begin enforcing requirements thatare currently unenforced. Punitive restrictions on the Group’s operations or suspension or revocation ofany of the Group’s licenses could result in costly remedial actions or disruptions in the Group’s operations,which could have a material adverse effect on the Group’s business, prospects, financial condition orresults of operations.

The Group’s hospitals are in the process of renewing or obtaining certain licenses from governmentalauthorities with respect to their current operations (see ‘‘Regulatory Overview’’ in Part 6 (BusinessDescription) of this Offering Memorandum). The Group is currently operating without these licenses andfailure to renew or obtain them could have a material adverse effect on the Group’s business, prospects,financial conditions or results of operations.

The Group’s relationship with local licensing authorities is important to the continued operation of itsbusiness and to its future growth, including the Group’s ability to maintain its existing licenses and obtainadditional licenses for any new healthcare facilities. Deterioration of the Group’s relationship with any keygovernment agencies could have a material adverse effect on its business, prospects, financial condition orresults of operations.

11. The Group’s performance depends on its ability to recruit and retain high quality doctors and otherhealthcare professionals.

The Group’s operations depend on the number, efforts, ability and experience of the doctors and otherhealthcare professionals at its hospitals. The Group competes with other healthcare providers to recruitand retain qualified doctors and other healthcare professionals.

As is common in the Egyptian private healthcare market, the Group does not employ the majority of thedoctors who work at its hospitals. Rather, the Group enters into non-exclusive arrangements with doctorswhereby a doctor will utilise a hospital’s facilities and the hospital will share in the doctor’s fees generatedfrom the patient. The Group refers to these doctors as consultant doctors (see ‘‘Consultant Doctors’’ inPart 6 (Business Description) of this Offering Memorandum).

The reputation, expertise and demeanour of the doctors and other medical professionals who providemedical services at the Group’s hospitals are instrumental to its ability to maintain high safety and qualitystandards and attract patients and are a key part of the Group’s strategy. The success of the Group’shospitals depends, therefore, in part on the number and quality of the doctors working at the hospitals, theadmitting practices of those doctors and maintaining good relations with those doctors. The Group iscurrently aiming to add an additional 50 to 60 new physicians to its roster of consultant doctors across itsplatform by the end of 2016.

Because the arrangements with consultant doctors are non-exclusive, there is significant competitionbetween the Group and its competitors to ensure that the highest qualified and most renowned doctors arepractising at its hospitals. The factors that doctors consider important in deciding where they will workinclude their compensation package, the reputation of the hospital, the quality of equipment and facilities,

22

the quality and number of supporting staff and market leadership of the hospital. The Group may not beable to compete with other healthcare providers on all of these factors.

In addition, the Group has experienced and expects to continue to experience significant wage and benefitpressures created by a current shortage of healthcare professionals. The recent growth of the Egyptianprivate healthcare market has created a shortage of highly qualified healthcare professionals. The Groupexpects this shortage to continue, and it may be required to enhance wages and benefits to recruit andretain highly qualified healthcare professionals in the face of increasing opportunities for its healthcareprofessionals.

The loss of a significant number of the Group’s doctors or other healthcare professionals, or the inabilityto attract or retain sufficient numbers of qualified doctors and other healthcare professionals, could have amaterial adverse effect on the Group’s business, prospects, financial condition or results of operations.

12. The failure to maintain the quality of services provided at the Group’s facilities may negatively impactthe Group’s brand or reputation and could lead to a decrease in the number of patients.

Some of the Group’s patients are referred to its hospitals by medical professionals while others select theirhealthcare providers themselves based upon brand recognition and reputation. The Group’s business isdependent upon providing high quality healthcare (e.g., medical care, facilities and related services),measured by reference to factors such as quality of medical care, doctor expertise, friendliness of staff,waiting times and ease of access to doctors. If the Group is unable to provide high quality services to itspatients, fails to maintain a high level of patient satisfaction, is unable to execute its on-going medicalcapital expenditure plan or experiences a high rate of mortality or medical malpractice suits, its brand orreputation could be damaged. This damage could cause patients to select alternative healthcare providersor could cause medical professionals to refer patients to the Group’s competitors, either of which couldhave a material adverse effect on the Group’s business, prospects, financial condition or results ofoperations.

Quality of healthcare is also a key criteria that is evaluated in connection with accreditations andcertifications from industry standards bodies such as the International Organization for Standardization(ISO) and Joint Commission International (JCI). Cleopatra hospital and Al Shorouk hospital have bothobtained accreditations by the ISO, and the Group is working towards JCI accreditation for all of itshospitals. Although the Company believes its hospitals are not at risk of losing their existing accreditations,if this were to occur, or if the Group’s hospitals fail to obtain JCI accreditations, the Group’s brand andreputation could be adversely affected and could have a material adverse effect on the Group’s business,prospects, financial condition or results of operations.

13. The Company may not be able to successfully integrate the businesses that it recently acquired or mayacquire in the future, and the Group may not be able to realise the anticipated cost savings, revenueenhancements or other synergies from such acquisitions.

The Company has acquired all of its subsidiaries and the majority of its business operations within the pasttwo years. The integration of the Group’s operations is still on-going and it has a limited track record ofoperating more than one hospital. In addition, part of the Group’s growth strategy involves potentialfurther acquisitions. The process of integrating acquired businesses involves risks. These risks include, butare not limited to:

• recruiting qualified management personnel to lead integration processes and diversion of existingmanagement’s attention from the management of daily operations to the integration of newlyacquired operations;

• difficulties in the assimilation of different corporate cultures, practices and sales and distributionmethodologies;

• difficulties in conforming the acquired company’s accounting, book and records, internal accountingcontrols, procedures and policies;

• retaining the loyalty and business of the customers of acquired businesses;

• retaining employees who may be vital to the integration of the acquired business or to the futureprospects of the combined businesses;

23

• difficulties and unanticipated expenses integrating technologies and maintaining uniform standards,such as internal accounting controls, procedures and policies; and

• unanticipated costs and expenses associated with any undisclosed or potential liabilities.

Failure to transfer business operations successfully and to otherwise integrate the former operations of anyacquired businesses may result in lower margins or fewer operating efficiencies than those the Group hasachieved or might have achieved if it had not acquired such businesses, as well as the loss of customers ofthe acquired businesses.

Furthermore, even if the Group is able to integrate the operations of acquired businesses successfully, itmay not be able to realise the potential cost savings, synergies and revenue enhancements that wereanticipated from the integration, either in the amount or within the timeframe the Group expects, and thecosts of achieving these benefits may be higher than expected. The Group’s ability to realise anticipatedcost savings, synergies and revenue enhancements may be affected by a number of factors, including, butnot limited to, the following:

• the Group’s ability to realise economies of scale with suppliers and insurance providers and othercontract customers;

• the use of more cash or other financial resources on integration and implementation activities thanthe Group expects;

• increases in other expenses unrelated to the acquisitions, which may offset the cost savings and othersynergies from the acquisitions;

• the Group’s ability to eliminate duplicative back-office overhead and overlapping and redundantfunctions; and

• the Group’s ability to avoid labour disruptions in connection with any integration, particularly inconnection with any headcount reduction.

If the Group fails to realise anticipated cost savings, synergies or revenue enhancements either at all or inthe expected timeframe, its business, prospects, financial condition or results of operations could bematerially adversely affected.

14. If the Group does not continually enhance its facilities with the most recent technological advances indiagnostic and surgical equipment, the Group’s prospects for growth, its reputation and its ability torecruit and retain medical staff could be materially adversely affected.

Technological advances in the medical field continue to evolve rapidly. In order to compete with otherhealthcare providers for patients, as well as attract consultant doctors and recruit and retain medical staff,the Group must continually assess its equipment needs at its facilities and upgrade equipment as a result oftechnological improvements. Operating room equipment, as well as radiology, intensive care unit andlaboratory equipment, tends to have a relatively short lifespan and must be replaced often with moreadvanced equipment. Such equipment costs represent significant capital expenditure. If the Group isunable to purchase new technology, medical practitioners would be unable to provide required services.This could lead to a decline of revenue, as patients would seek out other healthcare providers that offersuch services, or a loss of medical staff, as the Group considers its facilities and equipment to be a keyrecruitment tool. Rapid technological advances could also, at times, lead to earlier-than-plannedredundancy of equipment and result in asset impairment charges. Any of these outcomes could have amaterial adverse effect on the Group’s business, prospects, financial condition or results of operations.

15. Hospital groups are often the subject of litigation by patients, and it is possible that some of these caseswill be determined adversely against the Group.

In recent years, plaintiffs have brought actions against hospitals and other healthcare providers in Egypt,including against the Group’s hospitals, alleging malpractice, product liability or other legal claims. Mostclaims are for relatively small amounts, but in July 2015 the heirs of a deceased patient filed a lawsuitagainst Nile Badrawi Hospital Company claiming civil damages of EGP 95 million. The claim is based oncriminal judgments rendered against a doctor and two nurses in 2014 for wrongful death due to medicalmalpractice. The case is currently pending. For more detail on this incident, which occurred nearly a yearand a half prior to the Company’s acquisition of Nile Badrawi, see ‘‘Legal and Administrative Proceedings’’in Part 6 (Business Description) of this Offering Memorandum.

24

Although the Group maintains professional liability and general liability insurance coverage to coverclaims arising out of the operations of its hospitals, the Group’s insurance coverage may not be sufficient tocover all future claims. For example, Nile Badrawi did not have malpractice insurance at the time of theaforementioned malpractice incident at that hospital, and the Group may therefore be liable for anydamages awarded by the court. While the Group will continue to defend itself vigorously against claimsand lawsuits, these matters could:

• require the Group to pay substantial damages or amounts in judgments or settlements which,individually or in the aggregate, could exceed amounts, if any, that may be recovered under theGroup’s insurance policies where coverage applies and is available;

• cause the Group to incur substantial expenses and/or substantial increases in its insurance premiums;

• require significant time and attention from the Group’s management; and

• require the Group to incur debt to finance any judgment or settlement.

In addition to financial risks, legal claims or judgments against the Group’s hospitals can result in harm tothe Group’s reputation and the goodwill associated with its brand. For instance, the claim against NileBadrawi discussed above was widely publicised in the Egyptian media and led to the closure of thehospital’s radiology department for approximately six months by the MoHP while it investigatedcompliance with applicable regulations.

Any of the aforementioned outcomes could have a material adverse effect on the Group’s business,prospects, financial condition or results of operations.

16. Because of the risks typically associated with the operation of medical care facilities, patients maycontract serious communicable infections or diseases at hospitals.

The operation of a hospital involves the treatment of patients with a variety of infectious diseases.Previously healthy or uninfected people may contract serious communicable diseases in connection withtheir stay or visit at hospitals. This could result in significant claims for damages and, as a result of reportsand press coverage, to loss of reputation. For example, although not currently prevalent in Egypt, diseasesor infections such as Methicillin-resistant Staphylococcus Aureus, or MRSA, and legionella bacteria maypose risks in the future. Furthermore, these germs or infections could also infect employees and thussignificantly reduce the treatment and care capacity at the medical facilities involved in the short-,medium- and long-term as well as lead to legal claims for damages. In addition to claims for damages, anyof these events may lead directly to limitations on the activities of the hospital involved as a result ofquarantines, closing of parts of the hospitals at times for sterilisation, regulatory restrictions on, or thewithdrawal of, permits and authorisations, and it may indirectly result, through a loss of reputation, inreduced utilisation of the affected hospitals. Although the Group knows of no confirmed cases of patientsbeing infected with a disease or communicable illness as a result of a stay or visit at one of its hospitals, ifthis were to occur at any of the Group’s hospitals, its business, prospects, financial condition or results ofoperations could be materially affected.

17. The Group may be unable to identify expansion opportunities or may experience delays or other problemsin pursuing those opportunities.

The Group’s strategy involves expansion through opportunistic acquisition of existing hospital facilities inGreater Cairo. Although the Group continuously evaluates acquisition opportunities, it may not be able toidentify suitable targets or negotiate attractive terms for such acquisitions. The number of attractiveexpansion opportunities may be limited and may command high valuations, in particular if the Group’scompetitors vie for the same opportunities.

In addition, the Group’s ability to make future acquisitions depends, in part, on its available financialresources and could be limited by restrictions imposed by competition or other authorities or by availabilityof funding, in particular under the Group’s credit arrangements. Future acquisitions may require theGroup to borrow additional debt, issue additional equity or assume significant liabilities, resulting in eitherincreased financial leverage or significant dilution of existing shareholders. The Group may not be able tosource adequate financing or may only be able to find such financing on unfavourable pricing terms orterms that restrict its business. Further, the expansion of the Group, whether by acquisition or organicinvestment, may require the Group to commit significant capital expenditure to the expansion projects.

25

If such acquisitions are commenced, their implementation may be delayed or fail if adequate managementand capital resources are not available or if the Group faces increased competition. If the Group cannotidentify suitable expansion opportunities, secure financing for its expansion plans or implement such planseffectively, its business, prospects, financial condition or results of operations could be materially adverselyaffected.

18. The Group faces competition from other hospitals and healthcare providers, which may result in adecline in revenues, profitability and market share.

The healthcare business in Egypt is competitive, and competition among hospitals and other healthcareproviders for patients and customers has intensified in recent years. Hospitals compete on factors such asreputation, clinical excellence and patient satisfaction. Recently, as the number of patients in Egyptcovered by private insurance plans or employer-sponsored healthcare plans has increased, the Group hasfaced steep competition in contract customer pricing, especially from new market entrants. The Group alsofaces competition from other providers such as state-owned hospitals, standalone clinics, outpatientcentres and diagnostic centres and may face further competition from international healthcare companieswith substantially greater resources than the Group, which may begin providing services in Egypt in thefuture.

Consolidation in the medical industry is on the rise and there has been an increase in foreign investment inthe private healthcare sector in Egypt. The Group’s competitors may merge, develop alliances or receiveforeign investment and may acquire significant market share and improve their competitive position.

In addition, hospitals and day patient medical centres that focus on one or only a few medical specialitiescontinue to operate and are currently being developed. If the number of such hospitals and day patientmedical centres increases over time, they may attract patients for their respective specialities who mightotherwise go to the Group’s hospitals for the same specialities, causing increased competition for theGroup’s business, which could, in turn, negatively affect its patient volumes and overall market share.

Should the Group fail to compete effectively with other healthcare providers and other firms generally,prospective patients could elect to seek treatment at other healthcare service providers, which wouldadversely affect the Group’s business, prospects, financial condition or results of operations.

19. The Group’s success depends on the skills, experience and efforts of the senior management team.

Individuals with industry-specific experience are scarce, and the market for such individuals is highlycompetitive. As a result, the Group may not be able to attract and retain qualified personnel to replace orsucceed members of its senior management or other key employees, should the need arise. None of theGroup’s directors (the Directors) or members of senior management are covered by key man life insurancepolicies. The loss of services of one or more members of the Group’s senior management couldsignificantly weaken the Group’s ability to deliver healthcare services efficiently. This could have a materialadverse effect on the Group’s business, prospects, financial condition or results of operations.

20. The Group is subject to environmental, health and safety laws and regulations and may be exposed tosignificant liabilities if it fails to comply with such laws and regulations.

The Group is subject to various national and local environmental, health and safety laws and regulations,and may incur substantial costs as a result of compliance with these laws and regulations. The principalenvironmental, health and safety laws and regulations applicable to the Group’s operations relate toproper management of regulated materials; medical, low-level radioactive and hazardous waste; safetymeasures relating to the hospitals’ personnel; hazardous or flammable equipment and management ofbuilding conditions. As the Group’s assets were only recently acquired by the Group, there can be noassurance that the previous management teams adhered to necessary regulations. Despite seeking strictadherence to safety standards, the Group’s employees may be harmed, environmental damage may occuror the Group’s strategy of increasing safety and quality and obtaining key quality accreditations may bedelayed as a result of the Group’s activities. Waste in some healthcare facilities may not be properlydisposed of because of misconduct or mistakes by employees or contracted individuals or businesses, anddamages may be incurred as a result. The Group may be subject to requirements related to theremediation of hazardous substances and other regulated materials that have been released into theenvironment at properties now or formerly owned or operated by the Group, or at properties where suchsubstances and materials were sent for off-site treatment or disposal. Liability for costs of investigation andremediation may be imposed without regard to fault, and under certain circumstances on a joint andseveral basis. These costs could be substantial. Any of these factors could have a material adverse effect onthe Group’s business, prospects, financial condition or results of operations.

26

21. The Group is subject to stringent privacy laws and information security policies, which if breached couldlead to lawsuits, liability, reputational damage and loss of customers.

The Group receives, generates and stores significant volumes of personal and sensitive information, suchas patient medical information, and is therefore subject to privacy and security regulations with respect tothe uses and disclosures of protected health information, which are intended to protect the confidentiality,integrity and availability of such information. Egyptian privacy regulations and the Egyptian criminal codeestablish a regulatory framework on a variety of subjects, including:

• the prohibition of disclosing certain health information learned during the course of diagnosis andtreatment;

• the circumstances under which use or disclosure of protected health information is permitted orrequired without a specific authorisation by the patient;

• the requirements to notify patients of privacy practices for protected health information; and

• safeguards required of entities that use or receive protected health information.

If the Group does not adequately safeguard confidential patient data or other protected healthinformation, or if such information or data are wrongfully used by the Group or disclosed to anunauthorised person or entity, the Group’s reputation could suffer, resulting in a loss of customers, and itcould be subject to fines, penalties and litigation, any of which could have a material adverse effect on theGroup’s business, prospects, financial conditions or results of operations.

22. The Group’s operations could be impaired by a failure of its information systems or any failure to updateor upgrade these systems in a timely manner.

The Group’s information systems are essential to a number of critical areas of the Group’s businessoperations, including patient and insurance billing, electronic document management systems, medical andnon-medical materials management and patient information management. Further, the Group is investingheavily to integrate and centralise its information technology functions across its hospitals, which arecurrently using the legacy systems that existed prior to the Group’s acquisitions of the hospitals. TheGroup expects that, as the systems are integrated and centralised across its platform, the systems will havean increasingly large role in its business. Any system failure that causes an interruption in service oravailability of the Group’s systems could materially adversely affect the Group’s business and/or delay thecollection of revenue. Further, because the Group’s patient management systems track medical history,medication requirements and dietary requirements, a failure of these systems could lead to patientillnesses or, in the most extreme cases, death.

In addition, although the Group has implemented network security measures, its servers are potentiallyvulnerable to computer viruses, break-ins and similar disruptions from unauthorised tampering. Theoccurrence of any of these events could result in interruptions, delays, the loss or corruption of data or theunavailability of systems, and these outcomes may subject the Group to liability as a result of any theft ormisuse of personal information stored in its systems. Any of these events could have a material adverseeffect on the Group’s business, prospects, financial condition or results of operations. Furthermore, theback-up policies and procedures the Group has in place to support its disaster recovery processes arecurrently limited manual processes such as server replacement or hard disk replacement, which couldresult in a delay in the Group’s ability to access and process information.

In addition, the Group is currently in the process of implementing a new enterprise resource planning(ERP) system to be provided by SAP. The implementation of this system requires migration of extensivedata from existing systems. There can be no assurance that the Group will not encounter data migration orother errors, which could result in the loss of important data, interruptions, delays or cessations in theavailability of the Group’s systems, any of which could have a material adverse effect on the Group’sbusiness, financial condition or results of operations.

23. The Group’s internal controls over financial reporting are exposed to risk.

As a result of the Group having acquired all of its business operations within the past two years, the Grouphas not yet fully integrated its IT and internal financial control systems. The Group therefore currentlyuses different IT systems that are not interconnected or sufficiently secured, and the Group has identifiedand is addressing the resulting weaknesses in its internal financial control systems relating to having anadequate fixed assets register and coding system to facilitate controls over fixed assets including physical

27

existence and accounting; having adequate ageing analysis to assist in more effective follow-up andcalculation of probability of customer default; having a uniform general ledger coding system and uniformmapping to allow efficient preparation of separate and consolidated financial information; having anautomated liquidity analysis to assist management in cash management decisions; and having anautomated segmental revenue and cost analysis for better segmental reporting. The Group’s managementis in the process of upgrading its IT systems into a unified platform. As part of this upgrade, the Group hasselected and acquired an SAP ERP system for the back-office functions, implementation of which isintended to be complete by the end of 2016. The Group has also implemented standard accounting policiesand treatments across its hospitals, implemented a centralised authority matrix, applied a dual-signatoryrequirement for banking transactions and is unifying its financial reporting systems, amongst otherinitiatives. If the Group is unable to effectively implement the new ERP system or any of its other remedialmeasures, or if the Group is otherwise unable to remedy the lack of a unified system with respect to itsinternal financial controls, the Group may be unable to strengthen control over financial reporting,generate accurate data required for calculation of depreciation of fixed assets and impairment ofreceivables, facilitate the consolidation process including segmental reporting or generate more accuraterisk management data. Any of these outcomes could have a material adverse effect on the Group’sbusiness, prospects, financial condition or results of operations.

24. Litigation, enforcement and/or administrative proceedings could materially and adversely affect theGroup’s business, financial condition, results of operations, client base and reputation.

The Group is involved, and in the future may become involved, in various legal proceedings, includingdisputes, proceedings, investigations or enforcement actions concerning professional liability andmalpractice, employee-related matters, regulatory matters, administrative, civil or other proceedings, aswell as inquiries from, or investigations or enforcement actions commenced by, regulators, othergovernmental agencies and/or health insurance carriers. For more detail, see ‘‘Legal and AdministrativeProceedings’’ in Part 6 (Business Description) of this Offering Memorandum. Some of the proceedings mayconcern claims for substantial amounts of money and could divert management’s attention from day-to-daybusiness operations to address such issues, as well as result in substantial monetary damages and legalexpenses, damage to the Group’s reputation and/or decreased demand for its services. The outcome of anyproceedings, investigations, enforcement actions or claims referred to above, if adverse to the Group couldhave a material adverse effect on the Group’s business, results of operations, financial condition,reputation and prospects. As at 31 December 2015, the Group (excluding Al Shorouk) and Al ShoroukHospital Company had an EGP 17.9 million and EGP 11.9 million, respectively, provision for potentialliabilities relating to claims and litigation, which the Directors believe, if determined adversely to theGroup, would not have a material adverse effect on its results of operations. The quantum of this provisionhas been determined by management with regard to the likelihood of success of various legal andadministrative claims against the Group and may not be sufficient to cover all potential liabilities related tolitigation or administrative proceedings.

25. The Group is involved in disputes over its real estate and property.

It was discovered in the 1980s that a part of the Nile Badrawi facility was erected on state-owned property.The owners of Nile Badrawi at that time approached the Cairo Governorate to rectify the error through apurchase of the relevant land, and in 1988 the Cairo Governorate issued a decree approving the sale. In1995 it was discovered that the land in question had not been owned by the Cairo Governorate, but hadbeen allocated to the River Transport Authority and could therefore not be disposed of by the CairoGovernorate. In 2002, the matter was submitted to the Ministerial Committee for Settlement ofInvestment Disputes, which issued a decision approving the Cairo Governorate’s decision to sell the landand confirming the River Transport Authority’s non-objection to the transfer subject to receivingappropriate compensation. The Ministerial Committee for Settlement of Investment Disputes suggestedthat such compensation be guided by the amount paid to the Cairo Governorate in 1988. The terms of thetransfer have not yet been agreed with the River Transport Authority. The Company has recentlysubmitted an application to the Ministerial Committee for Settlement of Investment Disputes to expediteresolution of the matter. In order to acquire proper title to the land, the Group could have to paycompensation and could be impacted by loss or disruption of operations.

On 13 May 2015, the Head of the Dar Al Salam District rendered a demolition order for the 12th and13th floors of Nile Badrawi, alleging those floors were built without a permit. Nile Badrawi HospitalCompany filed a lawsuit before the Cairo Administrative Court requesting: a summary court judgment

28

ordering the suspension of execution of the demolition order until a judgment on the substance is renderedby the court; the cancellation of the demolition order and appointment by the court of an expert toconduct a site visit of Nile Badrawi to review the building permit and the technical drawings and plans ofthe building. The hospital is comprised of a basement, a ground floor and 11 floors, and management is ofthe opinion that the building complies with its permit. The court is scheduled to render its judgment inrelation to the summary court order request on 26 May 2016, which, in the worst case scenario, could resultin the demolition of part of the Nile Badrawi building. Management does not believe this to be a likelyoutcome.

The Group is involved in an administrative lawsuit in connection with its plot of land adjacent toCleopatra, which the Group intends to develop into an extension of the hospital. The plot contains abuilding that is listed by the Heritage Buildings Committee, and the Company is attempting to overturnthe listing in order to demolish the building and develop the hospital extension. The court rendered apreliminary judgment ordering a committee of engineering professors from Ain Shams University to adviseon the matter. If the listing is not overturned, the Group may not be able to proceed with its plans to buildan extension of Cleopatra.

The Group is also party to two administrative lawsuits against the Cairo Governorate regarding aresidential apartment purchased by the Group and used for administrative purposes. The CairoGovernorate alleges that the apartment is being used for administrative purposes without a proper licenseand issued an order to stop such usage of the apartment. The Group obtained a judgment from thesummary court suspending execution of the order until a judgment on the substance is issued by theadministrative court where the Group has challenged the Cairo Governorate’s order. The CairoGovernorate has challenged the summary court judgment before the high administrative court. Theadministrative court ruling on the substance of the order rejected the Group’s challenge on 28 April 2016,and the Group is in the process of filing an appeal before the high administrative court. If the Group isunsuccessful in the lawsuits, it may not be able to use the apartment for administrative purposes and couldhave to pay fines.

Land and property legislation in Egypt is complicated and often ambiguous. Due to the complexity ofrecording historical changes to the legal status of real estate in the relevant Egyptian registries, data inthese registries is commonly not updated upon the purchase or sale of real estate. Although registration oftitle in Egypt is not presently required to confer ownership, personal rights or possession rights, it isessential to confer title to real estate. As a result of inconsistencies and inaccuracies in the registrationsystems, transferring title to the Group may be delayed or suspended or the Group may have to undertakecostly measures to establish its title to land. For instance, Al Shorouk has not yet perfected its title to a plotof land upon which an extension of the hospital was built and has filed a claim to perfect such title. If theGroup fails to establish title to its real estate, or is required to devote significant time or capital to establishtitle, the Group’s business, prospects, financial condition or results of operations could be materiallyadversely affected.

26. If the Group’s relationships with insurance providers and other contract customers deteriorate, if theGroup is unable to negotiate and retain similar fee arrangements, or if these third parties are unable tomake payments to the Group, the Group’s business may be materially adversely affected.

Over the last few years, an increasing proportion of the Group’s revenues has been received from healthinsurance companies and other contract customers that typically contract on discounted fee structures. In2015, revenue from these third parties represented 61.1 per cent., 65.6 per cent., 67.4 per cent. and39.1 per cent. of Cleopatra’s, Cairo Specialized Hospital’s, Nile Badrawi’s and Al Shorouk’s total revenues,respectively. If the Group is not able to negotiate extensions of the contracts on favourable terms, theGroup’s revenue or margins could be materially adversely affected.

The Group generally negotiates on an annual basis with insurance companies and other contract customersregarding the fees or pricing arrangements to be paid for services provided at the Group’s facilities.Recently, there has been consolidation in the Egyptian insurance market, including some small providersjoining third-party administration organisations, which insurers use to control costs by centralising backoffice functions, processing claims and negotiating fees and pricing arrangements with hospitals. TheGroup may face downward pressure on some of the payment rates from these insurers, particularly if thereis further consolidation of insurance companies, which may strengthen their bargaining position and resultin less favourable pricing and other terms for the Group. The Group may also be unable to effectively passon any increases in its cost base to the tariffs paid by insurers. Further, international insurance providers

29

are entering the Egyptian market, and these providers generally have more complex and regulatedpayment models, which may require further IT and other investment by the Group in order to comply withtheir policies.

The Group’s future success will depend, in part, on is ability to maintain good relationships with insuranceproviders and other contract customers. Referrals to the Group’s hospitals by insurance providers andother contract customers have been an increasingly large driver of revenue in recent years, and the Groupexpects that trend to continue. Competition from other hospital groups and healthcare providers mayimpact the Group’s relationships with, or ability to negotiate fee increases or other favourable terms from,insurance providers and other contract customers. If these relationships deteriorate, the Group may beunable to negotiate favourable fee arrangements and/or its business may otherwise be adversely affected.The Group’s strategy of becoming a one-stop shop through its ancillary services (including pharmacy,radiology and laboratory diagnostics) is particularly susceptible to this risk, as the profitability of theseancillary services are dependent on the Group’s ability to reach attractive fee arrangements and discountmodels with third-party payers.

The Group is also exposed to the risk that insurance companies and other contract customers reject, delayor fail to make payment for claims the Group submits for medical services rendered to patients claimingcoverage under such schemes. This risk may arise from disputes with insurers over the medical necessity ofservices the Group provides, clerical errors that occur when the Group provides information to insurancecompanies during the claims process, gaps in system and process compatibility between the Group and theinsurance companies, or financial difficulties such as liquidity constraints and insolvency experienced bythe insurance companies. An increase in claims rejections or significant failures by insurance companies tomake payments could have a material adverse effect on the Group’s business, prospects, financialcondition or results of operations.

27. The Group is dependent on third-party suppliers and sub-contractors.

The Group sources the majority of its medical supplies, pharmaceuticals and equipment from Egypt-basedagents acting as the distributors for third-party suppliers in Egypt. The Group also outsources variousactivities, such as renovation services, to sub-contractors. The use of third-party suppliers andsub-contractors exposes the Group to potential supplier bottlenecks, quality problems and other potentialliabilities that may arise in cases where such third-party suppliers and sub-contractors fail to meet theircommitments. If the Group is not able to access high-quality products on a cost-effective basis or ifsuppliers are not able to fulfil the Group’s requirements for such products, the Group could face a declinein patient volumes or disruption in its relationships with doctors. In addition, the Group may face increasesin the cost of supplies that it is unable to pass through fully to increases in its tariffs. To the extent that theGroup is unable to rely on these third-party suppliers and sub-contractors, either due to an adverse changein relationships with them, increases in the cost of their goods and services that the Group is unable to passthrough to its patients or their insurers, or a supplier’s or sub-contractor’s inability to provide the Groupwith the requisite quantity and quality of supplies or services in a timely manner, the Group’s business,prospects, financial condition and results of operations could be materially adversely affected.

28. The Group is subject to antitrust regulations, the violation of which would materially and adversely affectthe Group’s business.

The Group is the largest private hospital group in Egypt, measured by number of hospital beds andnumber of hospitals, and currently operates four of the ten largest hospitals in Cairo. The Egyptianhospital market is large and fragmented, and the private sector is only a small part of that market, whichconsists of small and large private hospitals and large governmental and quasi-governmental institutions.As a company operating in Egypt, the Group is subject to antitrust and competition-related restrictions, aswell as the possibility of investigation by the Egyptian Competition Authority. The Group could facepenalties if it is found to be in a dominant position in the Egyptian or Greater Cairo market and/orengaging in prohibited practices (for example, preventing competitors from penetrating the market orrestricting suppliers from dealing with other competitors). The Directors believe that the Group does notengage in prohibited practices and does not hold a dominant position in the Egyptian or Greater Cairohospital market, as described above. These determinations are subject to the assessment of the EgyptianCompetition Authority. While no such determinations have been made with regard to the Group, if theEgyptian Competition Authority were to investigate the Group and determine that it does hold a dominantmarket position in Egypt or Greater Cairo and/or engages in prohibited practices, it could impose fines

30

and other penalties, which could have a material adverse effect on the Group’s business, prospects,financial condition and results of operations.

29. Ageing electromechanical infrastructure and power outages in Egypt could have a negative adverse effecton the Group’s operations.

Electromechanical infrastructure—such as cooling systems, air intake and filtration systems, ventilationsystems and backup power generators—in the Group’s facilities is ageing, requiring frequent maintenance.Such maintenance is part of the Group’s capital expenditure plans, but if the systems nevertheless fail, theGroup’s operations could be negatively adversely affected.

In 2014, due to a shortage of Egypt’s natural gas supplies, the country experienced rolling blackouts inFebruary and then again, more acutely, in the summer months of July–September. Most outages inGreater Cairo lasted one to one and a half hours, but a system failure in the electricity grid led to thelongest outage in the capital area of more than four hours. The Group’s hospitals each have two redundantpower supplies to protect against an outage in either one, as well as backup generators. Further, whencontrolled power outages have occurred, the government has prioritised maintaining electric power tohospitals.

However, there can be no assurance that these failsafes will work as designed, and there are unique risksfor healthcare providers during power outages and failures of electromechanical systems. If the Group’sgenerators were to fail during a power outage, life support equipment, cooling systems, air intake andfiltration systems and other electromechanical systems would cease to function and could cause death,injury, dehydration or heatstroke. Moreover, if the Group’s facilities were affected uniquely by a powerfailure, this could have a detrimental impact on the Group’s reputation. Any such failures ofelectromechanical systems or backup generators could have a material adverse effect on the Group’sbusiness, prospects, financial condition or results of operations.

30. The Group’s insurance coverage may be insufficient to cover its losses.

The Group carries insurance of various types, including civil liability, malpractice (only at Cleopatra, CairoSpecialized Hospital and, since February 2015, Nile Badrawi), property, theft, fire and default. While theGroup seeks to maintain appropriate levels of insurance, not all claims are insurable and there can be noassurances that the Group will not experience major incidents of a nature not covered by its insurancepolicies. For example, Nile Badrawi did not have malpractice insurance at the time of the 2015 malpracticeincident at that hospital described further in ‘‘Legal and Administrative Proceedings’’ in Part 6 (BusinessDescription) of this Offering Memorandum, and the Group may therefore be liable for any damagesawarded by the court.

The Group maintains an amount of insurance protection that it believes is adequate, but there can be noassurances that its insurance coverage will be sufficient or effective under all circumstances and against allliabilities to which it may subject. The Group could, for example, be subject to substantial claims fordamages upon the occurrence of several events within one calendar year. In addition, the Group’sinsurance costs may increase over time in response to any negative developments in its claims history ordue to material price increases in the insurance market in general. The Group may not be able to maintainits current insurance coverage or do so at a reasonable cost. Liabilities that are not covered by insurance orthat exceed the insurance coverage, or the Group’s inability to maintain its current insurance coverage,could have a material adverse effect on its business, prospects, financial condition or results of operations.

31. Business interruption at one of the Group’s hospitals could result in significant losses to the Group’sbusiness.

All of the Group’s operations are located on four sites in Greater Cairo, Egypt. The functionality of eachof these sites is therefore critical to the Group’s business. External factors such as natural disasters, fire,riots, terrorism, acts of war, vandalism, extended power failures or other unforeseen events may causebusiness interruption to any of these four sites. For example, in 2013 the Cairo-wide curfew resulted in adecrease in the number of outpatients for a period of about one week. Business interruption could also bethe result of internal factors such as failure to comply with regulatory requirements and the resulting lossof authorisation to operate the facility. For instance, the MoHP temporarily closed Nile Badrawi’sradiology department for approximately six months at the end of 2014 following the death of a patientbeing treated by that department while it investigated compliance with applicable regulations. For moredetail on this incident, which occurred nearly a year and a half prior to the Company’s acquisition of Nile

31

Badrawi, see ‘‘Legal and Administrative Proceedings’’ in Part 6 (Business Description) of this OfferingMemorandum. A business interruption of any kind at one of the Group’s facilities could have a severenegative impact on its overall business, both by direct loss of revenue and profits related to the site, butalso through the long-term damage that such a business interruption could inflict on patient relationshipsand the Group’s reputation. Either of these outcomes could have a material adverse effect on the Group’sbusiness, prospects, financial condition or results of operations.

32. Labour disputes could disrupt the Group’s operations or lead to higher labour costs.

The Group is subject to the risk of labour disputes, which may disrupt its operations. Labour laws andconsultative procedures could limit the Group’s flexibility with respect to employment policy or economicreorganisation and could limit its ability to respond to market changes efficiently. Even where consultativeprocedures are not mandatory, important strategic business decisions could be negatively received by someemployees, which could lead to labour actions that could disrupt the Group’s business.

Although the Group believes its relations with its employees are good, its operations may nevertheless bematerially affected by strikes, work stoppages, work slowdowns or other labour-related developments inthe future. Further, labour-related disruptions, including the settlement of actual or threatened labourdisputes, may materially and adversely affect the Group’s labour costs, productivity and flexibility, which inturn may materially and adversely affect the Group’s business, prospects, financial condition or results ofoperations.

33. The Group may not be able to protect its name and trademarks.

The Group’s name and trademarks support its business. The Group believes that its reputation isassociated with the Cleopatra, Cairo Specialized Hospital, Nile Badrawi and Al Shorouk names, and thatthis association has contributed towards the success of its business. The Group has registered thetrademark for ‘‘Cleopatra Hospital’’, and is in the process of initiating the registration of the trademark‘‘Cleopatra Hospital Group’’, in Egypt. Marketing activities that are carried out to promote the Group’sproducts and services and to strengthen its position within the industry depend on the association of theGroup’s brand names with the Group’s reputation, and the Group’s brand names may be damaged if theyare used by third parties whose reputation or brand is not associated with quality. The Group currentlyknows of other medical facilities in Cairo not associated with the Group using the Cleopatra brand name.Failure by the Group to control the unauthorised use of its brand names could have a material adverseeffect on the Group’s business, prospects, financial condition or results of operations.

34. The Company’s credit facilities may restrict its ability to pay dividends or obtain financing.

Certain of the Company’s credit facilities restrict its ability to pay dividends. The Company is subject tocovenants that prohibit the payment of dividends during any period in which the Company is in default ofits payment obligations under the credit and financing arrangements or during any given financial year inwhich due payment (including principal, interest, commissions and expenses) under the credit andfinancing arrangements is in arrears. A breach of any covenant may restrict the Company’s ability to paydividends to Shareholders.

Certain of the Company’s credit facilities also include financial covenants and restrictions, including, butnot limited to, requirements to maintain debt to equity ratios and debt service levels, restrictions ondisposing of or mortgaging assets and the incurrence of additional indebtedness. Such covenants andrestrictions may limit the Company’s ability to obtain additional financing or to finance future expansionplans, which could limit the growth of the Group.

Although the Company has not experienced any material problems with its current credit facilities, or withsecuring financing in general, there can be no assurance that the lenders will continue to show suchflexibility. If a lender, in the future, decided not to grant an increase of a borrowing limit or relax acovenant or restriction, the Company could breach provisions of its credit facilities. This could have amaterial adverse effect on the Company’s business, prospects, financial condition or results of operations.

35. The Group may be required to make payments to statutory employees’ funds.

Egyptian employment law requires every employer in Egypt employing more than ten employees to payone per cent. of its annual net profits to the Professional Training Fund established by the Ministry ofManpower. The Group does not pay such contributions and believes it is a common practice in Egypt for

32

companies not to make such contributions, as the constitutionality of the requirement is currently disputed.However, the government occasionally seeks payment of due amounts retroactively. In the event suchrequirement is enforced, the Group’s results of operations could be materially adversely affected.

RISKS RELATED TO THE INTERNATIONAL OFFER AND THE SHARES

36. The Company’s ability to pay dividends in the future depends, among other things, on the Group’sfinancial performance and capital requirements and is therefore not guaranteed.

If the Group’s cash flow underperforms market expectations, then the Company’s capacity to pay adividend may be affected. The Directors intend to adopt a dividend policy that reflects the long-termearnings and cash flow potential of the Group, but there can be no assurance that the Company will paydividends in the future.

The Group intends to pay any dividends or make other distributions in Egyptian pounds. Egyptian lawprohibits the transfer of Egyptian pounds out of Egypt, and foreign currency is transferable out of Egyptonly through registered banks. The Egyptian government currently allows foreign investors who access theEgyptian market through the Central Bank of Egypt to convert, without delay, the proceeds and dividendsfrom their Egyptian investments to foreign currency for repatriation through registered banks. TheRepatriation Fund was instituted in 2013 and its policies have been modified from time to time since then.There can be no assurance that the Repatriation Fund will continue to allow such repatriation of dividendpayments or proceeds of the sale of investments. (see Risk Factors—Risks Related to Egypt and the MENARegion—Egyptian Law does not permit the transfer of Egyptian pounds outside of Egypt, and the supply offoreign currency in Egypt is limited, which may materially and adversely affect the ability of the investors outsideof Egypt to repatriate proceeds and dividends from their Egyptian investments).

Any proposal to the shareholders’ general meeting to declare and pay dividends will be made at thediscretion of the Directors and will depend on, among other things, applicable law, regulation, restrictions,the Group’s financial position, regulatory capital requirements, working capital requirements, financecosts, general economic conditions and other factors the Directors deem significant from time to time.

37. Fluctuations in the value of the Egyptian pound could significantly affect the value of an investment inthe Shares and any dividends paid to Shareholders that are subsequently converted to other currencies.

The quoted price of the Shares will be in, and any dividends that the Company pays will be paid in,Egyptian pounds. The Egyptian pound has been significantly devalued over the last five years. BetweenJanuary 2011 and January 2015 the Egyptian pound fell 23 per cent. against the US dollar, betweenJanuary 2015 and December 2015 it fell 8 per cent. and in the first four months of 2016 it fell 14 per cent.,according to the Central Bank of Egypt. Fluctuations in, or significant devaluation of, the Egyptian poundin relation to other currencies may affect the value of the Shares and dividends upon conversion to othercurrencies.

38. The EGX is less liquid than major world equity securities markets.

The EGX is less liquid than major world equity securities markets and, therefore, prices of Egyptiansecurities have tended to be more volatile than in such other securities markets. In addition, a smallnumber of stocks represent a disproportionately large percentage of the aggregate market capitalisationand trading volume of the EGX. The limited market capitalisation and liquidity of the EGX may impairthe ability of holders of Shares to sell the Shares or impair the price realised from such a sale.

Although the EGX has a book-entry system for trading dematerialised shares, settlement procedures inEgypt remain less developed than those in more established securities markets. Accordingly, while theofficial settlement period for trades effected on the EGX is up to two business days, settlement delays andadministrative problems may occur.

39. Egyptian disclosure standards, corporate governance requirements and protections for Shareholders maydiffer in certain significant respects from those in more developed markets leading to a relatively limitedamount of information being available.

The corporate affairs of the Company are governed by laws governing companies incorporated in Egyptand listed on the EGX. The rights of the Shareholders and the responsibilities of the Directors underEgyptian law are different in certain respects from those applicable to companies organised in the UnitedKingdom and other jurisdictions. In particular, Egyptian law significantly limits the circumstances under

33

which shareholders of an Egyptian company may bring shareholder derivative actions. Regulationsgoverning the Egyptian securities market are not as extensive as those in the United Kingdom and certainother markets.

In addition, although Egyptian law imposes restrictions and penalties on insider trading and pricemanipulation, the Egyptian securities market is not highly regulated or supervised and regulations are lessrigorously enforced than in more established securities markets such as those in the United Kingdom andcertain other Western European countries. Moreover, many provisions of Egypt’s securities laws have notyet received judicial or regulatory interpretation or review and are therefore less developed thancomparable provisions in certain other countries.

There is generally less information available about Egyptian companies than is regularly available for listedcompanies in the United Kingdom and other jurisdictions with more established securities markets.Regulations concerning reporting requirements and auditing standards for Egyptian companies may notafford the same degree of investor protection that is available in the United Kingdom or other Europeanmarkets, for instance. The Group is subject to Egyptian disclosure requirements, including therequirement to submit annual and interim financial statements prepared in accordance with EgyptianAccounting Standards (EAS), to provide notices of any material developments to the Egyptian FinancialSupervisory Authority (EFSA) and to the EGX, to provide EFSA with minutes of ordinary andextraordinary general meetings and to publish annual and semi-annual financial statements in localnewspapers. In recent years, the corporate governance and disclosure standards applicable to Egyptianpublicly listed companies have been subject to significant amendments including, most recently, theamendment and restatement of the EGX Listing Rules as of 1 February 2014. The interpretation andapplication of these recently introduced rules are still evolving. Many aspects of laws and regulations inEgypt relating to public companies and the capital markets have not yet been subject to judicial orregulatory interpretation or review and are, therefore, still subject to certain uncertainties relating to theirapplication.

40. The Abraaj Group will have a significant interest in and exert substantial influence over the Groupfollowing the Combined Offer and Closed Subscription and its interests may differ from or conflict withthose of other Shareholders.

Immediately following completion of the Closed Subscription, Care Healthcare will own at least 80 percent. of the issued ordinary share capital of the Company. Abraaj NAH beneficially owns, throughintermediate wholly-owned subsidiaries, 72.5 per cent. of Care Healthcare. Abraaj NAH is owned by fundsmanaged and controlled by The Abraaj Group, a Dubai-based private equity firm. As a result of itsultimate control over Care Healthcare, The Abraaj Group will possess sufficient voting power to have asignificant influence over Company matters requiring shareholder approval, including the election ofdirectors and approval of significant corporate transactions. While the EGX Listing Rules provide forshareholder approval of related party transactions (discussed in detail in ‘‘Related Party Transactions’’ inPart 7 (Directors, Senior Management and Corporate Governance) of this Offering Memorandum),nonetheless there is no relationship agreement governing how The Abraaj Group may exert its influenceover the Group. The interests of The Abraaj Group may not always be aligned with those of other holdersof Shares. In particular, The Abraaj Group may hold interests in, or may make acquisitions of orinvestments in, other businesses that may be, or may become, competitors of the Group.

41. The market price of the Shares could be negatively affected by sales of substantial amounts of suchshares in the public markets following the expiry of the lock-up periods, or the perception that these salescould occur.

Following completion of the Closed Subscription, the Selling Shareholder will own beneficially, inaggregate, at least 80 per cent. of the Company’s issued ordinary share capital. The Selling Shareholderand the Company are subject to restrictions on the issue, sale and/or transfer of Shares as described in‘‘Lock-up arrangements’’ in Part 12 (Details of the Combined Offer) of this Offering Memorandum. Theissue or sale of a substantial number of Shares by the Company, the Selling Shareholder, the Directors orsenior management after any applicable lock-up restrictions expire may depress the market price of theShares and could impair the Group’s ability to raise capital through the sale of additional equity securities.

34

42. Foreign judgments may not be enforceable against the Company or the Directors.

The ability of a Shareholder to bring an action against the Company may be limited under law. TheCompany is a joint stock company incorporated under Egyptian law. The rights of Shareholders aregoverned by Egyptian law and by the Statutes of the Company (the Statutes). These rights may differ fromthe rights of shareholders in other jurisdictions. A Shareholder may not be able to enforce a judgmentagainst the Directors and executive officers. All of the executive officers and a majority of the Directorsare residents of Egypt, and all of the Company’s assets are located in Egypt. Consequently, it may not bepossible for a Shareholder to effect service of process upon the Directors and executive officers within theShareholder’s country of residence or to enforce against the Directors and executive officers judgments ofcourts of the Shareholder’s country of residence based on civil liabilities under that country’s securitieslaws.

Further, Shareholders may not be able to enforce any judgments in civil and commercial matters or anyjudgments under the securities laws of countries other than Egypt against the Directors or executiveofficers who are residents of a country other than those in which judgment is made. In addition, the courtsin Egypt, or elsewhere, may not impose civil liability on the Directors or executive officers in any originalaction based solely on foreign securities laws brought against the Company or the Directors in a court ofcompetent jurisdiction in Egypt or another country. Enforcement of foreign judgments in Egypt is subjectto the following conditions:

• the foreign courts rendering the relevant judgment offer reciprocal treatment to judgments obtainedin the courts of Egypt. If reciprocal treatment is not offered by the court where judgment is obtained,then the Egyptian courts will re-examine the merits of the case in the same manner as that adopted bythose courts;

• the courts of Egypt are not exclusively competent to hear the dispute which constituted the object ofthe foreign judgment while the foreign courts are shown to have been competent to hear the disputein accordance with their own respective laws;

• the parties to the dispute were duly notified and properly represented in the proceedings; the foreignjudgment is final and conclusive in accordance with the relevant law; and

• the foreign judgment does not conflict with a prior Egyptian judgment in the same case and is notcontrary to public order or morality in Egypt.

Judgments of the courts of foreign jurisdictions may not be enforceable in Egypt because there may be nobilateral treaties between Egypt and the relevant jurisdiction on the enforcement of judgments and theforeign courts may be deemed not to offer reciprocal treatment to judgments obtained in the courts ofEgypt.

43. There is only a limited free float of the Shares and this may have a negative impact on the liquidity ofand market price for the Shares.

After completion of the Closed Subscription, the percentage of the Company’s outstanding share capitalheld by persons other than the Selling Shareholder is expected to be 20 per cent. The limited free float mayhave a negative impact on the liquidity of the Shares and result in a low trading volume of the Shares,which could adversely affect the then prevailing market price for the Shares.

44. There is no existing market for the Shares and an active trading market for the Shares may not developor be sustained.

Prior to Commencement of Trading there has been no public trading market for the Shares. Although theGroup has applied for admission to trading on the EGX, the Group can give no assurance that an activetrading market for the Shares will develop or, if developed, could be sustained following the closing of theInternational Offer. If an active trading market is not developed or maintained, the liquidity and tradingprice of the Shares could be adversely affected.

45. Shares in the Company may be subject to market price volatility and the market price of the Shares inthe Company may decline in response to developments that are unrelated to the Company’s operatingperformance.

The Offer Price is not indicative of the market price of the Shares following Commencement of Trading.The market price of the Shares may be volatile and subject to wide fluctuations. The market price of the

35

Shares may fluctuate as a result of a variety of factors, including, but not limited to, those referred to inthese Risk Factors, as well as period-to-period variations in operating results or changes in revenue orprofit estimates by the Group, industry participants or financial analysts. The market price could also beadversely affected by developments unrelated to the Group’s operating performance, such as the operatingand share price performance of other companies that investors may consider comparable to the Company,speculation about the Group in the press or the investment community, unfavourable press or researchanalyst ratings, strategic actions by competitors (including acquisitions and restructurings), changes inmarket conditions and regulatory changes. Any or all of these factors could result in material fluctuationsin the price of Shares, which could lead to investors getting back less than they invested or a total loss oftheir investment.

46. The issuance of additional Shares in the Company in connection with future acquisitions, any shareincentive or share option plan or otherwise may dilute all other shareholdings.

The Group may seek to raise financing to fund future acquisitions and other growth opportunities. TheGroup may, for these and other purposes, such as in connection with share incentive and share optionplans, issue additional equity or convertible equity securities. As a result, the Company’s existingShareholders may suffer dilution in their percentage ownership or the market price of the Shares may beadversely affected.

36

PART 2Presentation of Financial and Other Information

General

Investors should only rely on the information in this Offering Memorandum. No person has beenauthorised to give any information or to make any representations in connection with the InternationalOffer, other than those contained in this Offering Memorandum and, if given or made, such informationor representations must not be relied upon as having been authorised by or on behalf of the Company, theSelling Shareholder, the Directors or the Sole Global Coordinator. No representation or warranty, expressor implied, is made by the Sole Global Coordinator, any of its respective affiliates or any selling agent as tothe accuracy or completeness of such information, and nothing contained in this Offering Memorandum is,or shall be relied upon as, a promise or representation by the Sole Global Coordinator, any of its affiliatesor any selling agent as to the past, present or future. Neither the delivery of this Offering Memorandumnor any purchase of International Offer Shares pursuant to the International Offer shall, under anycircumstances, create any implication that there has been no change in the business or affairs of the Groupsince the date of this Offering Memorandum or that the information contained herein is correct as of anytime subsequent to its date.

The Company will update the information provided in this Offering Memorandum prior toCommencement of Trading by means of a supplement hereto if a significant new factor that may affect theevaluation by prospective investors of the International Offer occurs after the publication of this OfferingMemorandum or if this Offering Memorandum contains any mistake or substantial inaccuracy.

The contents of this Offering Memorandum are not to be construed as legal, business or tax advice. Eachprospective investor should consult his or her own lawyer, financial adviser or tax adviser for legal,financial or tax advice. In making an investment decision, each investor must rely on their ownexamination, analysis and enquiry of the Company and the terms of the International Offer, including themerits and risks involved.

This Offering Memorandum is not intended to provide the basis of any credit or other evaluation andshould not be considered as a recommendation by any of the Company, the Selling Shareholder, theDirectors or the Sole Global Coordinator or any of their affiliates or representatives that any recipient ofthis Offering Memorandum should purchase the International Offer Shares. Prior to making any decisionas to whether to purchase the International Offer Shares, prospective investors should read this OfferingMemorandum. Investors should ensure that they read the whole of this Offering Memorandum carefullyand not just rely on key information or information summarised within it. In making an investmentdecision, prospective investors must rely upon their own examination of the Company and the terms of thisOffering Memorandum, including the risks involved.

Investors who purchase International Offer Shares in the International Offer will be deemed to haveacknowledged that: (i) they have not relied on the Sole Global Coordinator, its affiliates, officers, directorsor any person affiliated with it in connection with any investigation of the accuracy of any informationcontained in this Offering Memorandum or their investment decision; and (ii) they have relied on theinformation contained in this Offering Memorandum, and no person has been authorised to give anyinformation or to make any representation concerning the Group or the Shares (other than as contained inthis Offering Memorandum) and, if given or made, any such other information or representation shouldnot be relied upon as having been authorised by the Company, the Selling Shareholder, the Directors orthe Sole Global Coordinator.

None of the Company, the Selling Shareholder, the Directors or the Sole Global Coordinator or any oftheir affiliates or representatives is making any representation to any offeree or purchaser of theInternational Offer Shares regarding the legality of an investment by such offeree or purchaser.

In connection with the International Offer, the Sole Global Coordinator and any of its affiliates, acting asinvestors for their own accounts, may acquire International Offer Shares and in that capacity may retain,purchase, sell, offer to sell or otherwise deal for their own accounts in such International Offer Shares andother securities of the Company or related investments in connection with the Combined Offer orotherwise. Accordingly, references in this Offering Memorandum to the Shares being issued, offered,subscribed, acquired, placed or otherwise dealt in should be read as including any or issue, offer,subscription, acquisition, dealing or placing by, the Sole Global Coordinator and any of its affiliates actingas investors for their own accounts. The Sole Global Coordinator does not intend to disclose the extent of

37

any such investment or transactions otherwise than in accordance with any legal or regulatory obligationsto do so.

Stabilisation

In connection with the Egyptian Retail Offer, EFG Hermes, or any of its agents, may effect transactions inthe Shares with a view to supporting or maintaining the market price of the Shares at a level higher thanthat which might have otherwise prevailed in the open market. EFG Hermes will withhold from thepayment of the proceeds of the Combined Offer an amount equal to 15 per cent. of the gross proceeds ofthe sale of all Offer Shares at the Offer Price, which shall be deposited in the Stabilisation Fund. If thetrading price per Share falls below the Offer Price during the Stabilisation Period, purchasers of EgyptianRetail Offer Shares in the Egyptian Retail Offer may submit sell orders and EFG Hermes will submitpurchase orders for Shares at the Offer Price, which will remain open until the end of the StabilisationPeriod. At the end of the Stabilisation Period, open purchase orders submitted by EFG Hermes will bematched with open sale orders and executed on the EGX. All Shares purchased in this manner will beplaced in the Stabilisation Fund. EFG Hermes will remit to the Selling Shareholder, at the end of theStabilisation Period, any funds then remaining in the Stabilisation Fund and any remaining Sharespurchased during the Stabilisation Period using the Stabilisation Fund.


Presentation of financial information

The Company directly operates the Cleopatra hospital in Egypt and also has three main operatingsubsidiaries—Cairo Specialized Hospital Company, Nile Badrawi Hospital Company and Al ShoroukHospital Company—each of which operates a hospital in Egypt. The Company was beneficially acquiredby Abraaj NAH in July 2014. Also in July 2014, Abraaj NAH acquired a majority beneficial stake in CairoSpecialized Hospital Company, which it subsequently made a subsidiary of the Company in September2015 as part of a corporate restructuring. Nile Badrawi Hospital Company and Al Shorouk HospitalCompany were acquired by the Company in September 2015 and January 2016, respectively. Together, theGroup’s four hospitals constitute all of the business undertakings of the Company as at the date of thisOffering Memorandum. For more detail on the formation of the Group, see ‘‘History’’ and ‘‘GroupStructure’’ in Part 6 (Business Description) of this Offering Memorandum.

Because the hospitals were acquired at various times during 2014, 2015 and 2016, the Company believesthat its current business undertakings are not accurately represented by the audited consolidated financialstatements of the Company and its subsidiaries as at and for the year ended 31 December 2015 or theaudited financial statements of the Company as at and for the three years ended 31 December 2015, 2014and 2013. Accordingly, the Company has included in this Offering Memorandum the following financialinformation:

• audited financial statements for each of Cleopatra Hospital Company, Cairo Specialized HospitalCompany, Nile Badrawi Hospital Company and Al Shorouk Hospital Company as at and for the threeyears ended 31 December 2015, 2014 and 2013; and

• audited consolidated financial statements for Cleopatra Hospital Company and its subsidiaries as atand for the year ended 31 December 2015 (note that consolidated results for 2015 include thefull-year results of Cleopatra Hospital Company, as well as three months of results for CairoSpecialized Hospital Company (acquired by an affiliate of Care Healthcare in 2014, but structuredunder the Company in late September 2015) and Nile Badrawi Hospital Company (acquired by theCompany in September 2015). Consolidated results for 2015 do not include the results of Al ShoroukHospital Company, which was acquired by the Company in January 2016).

The historical financial information included in this Offering Memorandum has been prepared inaccordance with EAS and has been extracted from the audited consolidated financial statements of theCompany and its subsidiaries as at and for the year ended 31 December 2015 and the audited financialstatements of Cleopatra Hospital Company, Cairo Specialized Hospital Company, Nile Badrawi HospitalCompany and Al Shorouk Hospital Company as at and for the three years ended 31 December 2015, 2014and 2013 (the Historical Financial Information).

This Offering Memorandum also includes the unaudited pro forma consolidated financial informationprepared for illustrative purposes only to show the effect of the Company’s ownership of Al Shorouk

38

Hospital Company as if the acquisition of that company had occurred on 31 December 2015 from abalance sheet perspective and to show the effect of the Company’s ownership of Cairo SpecializedHospital Company, Nile Badrawi Hospital Company and Al Shorouk Hospital Company as if theacquisition of each of those companies had occurred on 1 January 2015 from a statement of incomeperspective (the Unaudited Pro Forma Consolidated Financial Information). Because of its nature, theUnaudited Pro Forma Consolidated Financial Information addresses a hypothetical situation and does not,therefore, represent the Group’s actual financial position or trading results.

The Company’s financial year runs from 1 January to 31 December. The financial information included inPart 14 (Historical Financial Information) is covered by the respective auditor’s reports therein. Thesignificant EAS accounting policies applied in the financial information of the Group are appliedconsistently in the financial information in this Offering Memorandum.

Restatements

The audited financial statements as at and for the three years ended 31 December 2015 for CairoSpecialized Hospital Company included elsewhere in this Offering Memorandum have been restated toreflect an increase in the tax provision not accounted for in the existing 2014 financial informationpreviously issued.

The audited financial statements as at and for the three years ended 31 December 2015 for Nile BadrawiHospital Company included elsewhere in this Offering Memorandum have been restated to correct certainaccounting errors in the 2013 and 2014 financial information previously issued.

The audited financial statements as at and for the three years ended 31 December 2015 for Al ShoroukHospital Company included elsewhere in this Offering Memorandum have been restated to correct certainaccounting errors in the 2013 and 2014 financial information previously issued.

The financial information included in this Offering Memorandum that corresponds to 2014 financialinformation of Cairo Specialized Hospital Company, 2013 and 2014 financial information of Nile BadrawiHospital Company and 2013 and 2014 financial information of Al Shorouk Hospital Company is thereforelabelled ‘‘restated’’ to state that fact.

Certain differences between EAS and IFRS

Certain differences exist between EAS and International Financial Reporting Standards as issued by theInternational Accounting Standards Board (IFRS) that may be material to the financial informationincluded in this Offering Memorandum. A description of significant differences between EAS and IFRS isincluded in ‘‘Summary of Significant Differences Between IFRS and EAS’’ in Part 9 (Operating and FinancialReview) of this Offering Memorandum. The Company is responsible for preparing the description therein.

The Company has not prepared a complete reconciliation of its Historical Financial Information betweenEAS and IFRS and has not quantified such differences. In making an investment decision, investors mustrely upon their own examination of the Company, the terms of the International Offer and the HistoricalFinancial Information.

Each potential investor is advised to consult its own accounting advisers for an understanding of thedifferences between EAS and IFRS and how those differences might affect the Historical FinancialInformation and other financial information included in this Offering Memorandum.

Non-GAAP financial measures

This Offering Memorandum includes certain references to non-GAAP measures such as the Group’s netdebt, total capital, capital expenditure, gearing ratio, working capital, adjusted operating costs, adjustedgross profit, adjusted general and administrative expenses, EBITDA margin, adjusted EBITDA margin,EBITDA, pro forma EBITDA, pro forma net debt, adjusted EBITDA and adjusted profit for the year (theNon-GAAP Financial Measures). The Non-GAAP Financial Measures are supplemental measures of theGroup’s ability to service debt that are not required by, or presented in accordance with EAS.

The Non-GAAP Financial Measures are not measurements of the Group’s financial performance underEAS and should not be considered as an alternative to operating revenue, gross profit, profit for the yearor any other performance measures derived in accordance with EAS or as an alternative to cash flows fromoperating activities as a measure of the Group’s liquidity. Potential investors are cautioned not to placeundue reliance on the Non-GAAP Financial Measures and should note that the Non-GAAP Financial

39

Measures as calculated by the Group, may differ materially from similarly titled measures reported byother companies, including the Group’s peers.

Net debt

Net debt is the sum of current portion of borrowings (which includes overdrafts), non-current portion ofborrowings and creditors and other credit balances less cash on hand and at banks.

Total capital

Total capital is net debt plus total equity.

Capital expenditure

Capital expenditure is payments made to purchase fixed assets recorded on the statement of cash flows.

Gearing ratio

Gearing ratio is net debt divided by total capital.

Working capital

Working capital is inventories and trade receivables less creditors and other credit balances.

Adjusted operating costs

Adjusted operating costs are operating costs excluding fixed assets depreciation and write-offs.

Adjusted gross profit

Adjusted gross profit is gross profit excluding fixed assets depreciation and write-offs.

Adjusted general and administrative expenses

Adjusted general and administrative expenses are general and administrative expenses excludingimpairment of trade receivables and fixed assets depreciation.

Adjusted profit for the year

Adjusted profit for the year is profit for the year excluding certain non-recurring items, including adonation, liquidation of an employee fund, certain portions of impairment of trade receivables andprovisions for claims.

The reconciliation of Cleopatra Hospital Company’s profit for the year to adjusted profit for the year isas follows:

For the year ended31 December

2015 2014 2013

(unaudited)(EGP thousands)

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,690 43,802 38,688Add back:Donations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 3,097(1)

Employees fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 20,300(2) —

Adjusted profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,690 64,102 41,785

(1) Non-recurring donation to a university in Cairo. The hospital made donations in 2015 and 2014, the average of which was EGP641,060. This amount is considered to be recurring and has been deducted from the total donation amount incurred in 2013 thatis being excluded from adjusted profit for the year.

(2) Non-recurring liquidation of the hospital’s employee fund that the Group no longer operates.

40

The reconciliation of Cairo Specialized Hospital Company’s profit for the year to adjusted profit for theyear is as follows:


2015 2014 2013


Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,248 18,525 22,141Add back:Provisions for claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,000(1) — —Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 906(2) — —

Adjusted profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,154 18,525 22,141

(1) Provisions for claims incurred in 2015 but that are relevant to a prior period and are not expected to be incurred in the futurebecause, going forward, appropriate provisions will be made for each period separately.

(2) The portion of impairment of trade receivables that does not pertain to 2015 � one per cent. of revenue is considered to be therecurring portion.

The reconciliation of Nile Badrawi Hospital Company’s profit for the year to adjusted profit for the year isas follows:


2015 2014 2013


Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,612 18,157 6,728Add back:Provisions for claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,925(1) — —Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,917(2) — —

Adjusted profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,455 18,157 6,728

(1) Provisions for claims incurred in 2015 but that are partially relevant to a prior period and such part not expected to be incurredin the future because, going forward, appropriate provisions will be made for each period separately.

(2) Provisions taken in 2015 that are related to receivables’ balances not pertaining to 2015.

The reconciliation of Al Shorouk Hospital Company’s profit for the year to adjusted profit for the year isas follows:


2015 2014 2013


Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,193 11,448 (70)Add back:Provisions for claims(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,870 — 6,823Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,943(2) — —

Adjusted profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,006 11,448 6,753

(1) Required provisions covering claims for the periods prior to 2013 and 2015, as applicable, and are not expected to be incurredin the future because, going forward, appropriate provisions will be made for each period separately.

(2) The portion of impairment of trade receivables that does not pertain to 2015 � one per cent. of revenue is considered to be therecurring portion.

EBITDA and adjusted EBITDA

EBITDA is calculated from profit for the year adjusted for finance income, finance costs, current tax,deferred tax, fixed asset depreciation and write-offs, provisions, (loss)/gain on currency translation

41

differences and impairment of trade receivables. Adjusted EBITDA is EBITDA excluding a non-recurringdonation to a university in Cairo and a non-recurring liquidation of Cleopatra’s employee fund. Theliquidation occurred because the Group no longer plans to operate the fund. EBITDA and adjustedEBITDA are not a measurements of the Group’s financial performance under EAS. Information regardingEBITDA and adjusted EBITDA or similar measures is sometimes used by investors to evaluate theefficiency of a company’s operations and its ability to employ its earnings toward repayment of debt, capitalexpenditures and working capital requirements. There are no generally accepted principles governing thecalculation of EBITDA and adjusted EBITDA or similar measures and the criteria upon which EBITDAand adjusted EBITDA or similar measures are based can vary from company to company. EBITDA andadjusted EBITDA, by themselves, do not provide a sufficient basis to compare the Company’sperformance with that of other companies and should not be considered in isolation or as a substitute foroperating profit or any other measure as an indicator of operating performance, or as an alternative tocash generated from operating activities as a measure of liquidity. The Company uses EBITDA andadjusted EBITDA in the management reporting of its segments and in assessing the Group’s growth andoperational efficiencies.

The reconciliation of Cleopatra Hospital Company’s profit for the year to EBITDA and adjusted EBITDAis as follows:


2015 2014 2013

(audited)(EGP thousands)

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,690 43,802 38,688Add back:Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,104) (2,087) (1,573)Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,488 3 —Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,603 21,372 13,997Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (886) (283) (11)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,974 2,887 761Fixed asset depreciation and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . 6,551 7,153 7,278Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,130 (4) 71

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,446 72,843 59,212

Add back:Donations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 3,097(1)

Employees fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 20,300(2) —

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,446 93,143 62,309

(1) Non-recurring donation to a university in Cairo. The hospital made donations in 2015 and 2014, the average of which was EGP641,060. This amount is considered to be recurring and has been deducted from the total donation amount incurred in 2013 thatis being excluded from adjusted EBITDA.

(2) Non-recurring liquidation of the hospital’s employee fund that the Group no longer operates.

42

The reconciliation of Cairo Specialized Hospital Company’s profit for the year to EBITDA and adjustedEBITDA is as follows:


2015 2014 2013


Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,248 18,525 22,141Add back:Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,021) (2,705) (2,260)Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,387 8,689 7,006Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (431) 694 265Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,945 710 —Fixed asset depreciation and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . 3,676 3,636 3,065Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,682 737 —

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,487 30,287 30,219

Add back:Donations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —Employees fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —

Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,487 30,287 30,219

The reconciliation of Nile Badrawi Hospital Company’s profit for the year to EBITDA and adjustedEBITDA is as follows:


2015 2014 2013


Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,612 18,157 6,728Add back:Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (11)(Loss)/gain on currency translation differences . . . . . . . . . . . . . . . . . . . . . 6 (38) (18)Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,991 7,018 2,061Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 662 (282) (417)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,218 723 —Fixed asset depreciation and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . 1,197 3,462 3,851Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,417 (104) 1,230

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,104 28,936 13,423


Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,104 28,936 13,423

43

The reconciliation of Al Shorouk Hospital Company’s profit for the year to EBITDA and adjustedEBITDA is as follows:


2015 2014 2013


Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,193 11,448 (70)Add back:Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (128) (113) (73)Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,334 55 21Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,108 4,492 2,638Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (198) (30) (172)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,070 — 6,677Fixed asset depreciation and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . 3,842 4,889 5,042Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,330 — 35

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,551 20,741 14,098


Adjusted EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,551 20,741 14,098

Pro forma EBITDA

Pro forma EBITDA is pro forma profit for the year adjusted for pro forma finance income, pro formafinance costs, pro forma (loss)/gain on currency translation differences, pro forma current tax, pro formadeferred tax, pro forma provisions, pro forma fixed asset depreciation and write-offs and pro formaimpairment of trade receivables.

The reconciliation of the Company’s pro forma profit for the year to pro forma EBITDA is as follows:

Pro forma forthe year ended

31 December 2015


Pro forma profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,722Add back:Pro forma finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,254)Pro forma finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,417Pro forma (loss) / gain on currency translation differences . . . . . . . . . . . . . . . . . . . 6Pro forma current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,931Pro forma deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (854)Pro forma provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,207Pro forma fixed asset depreciation and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . 14,852Pro forma impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,560

Pro forma EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,588

Note: Pro forma results show the effect of the Company’s ownership of Cairo Specialized Hospital Company, Nile Badrawi HospitalCompany and Al Shorouk Hospital Company as if the acquisitions of those companies had occurred on 1 January 2015.

Pro forma net debt

Pro forma net debt is the sum of pro forma current portion of borrowings (which includes overdrafts), proforma non-current portion of borrowings, pro forma creditors and other credit balances less cash on handand at banks.

EBITDA margin

EBITDA margin is EBITDA divided by operating revenue.

44

Adjusted EBITDA margin

Adjusted EBITDA margin is adjusted EBITDA divided by operating revenue.

Currency presentation

Unless otherwise indicated, all references in this Offering Memorandum to ‘‘EGP’’ or ‘‘Egyptian pounds’’are to the lawful currency of Egypt. The Company prepares its financial statements in EGP. All referencesto ‘‘pounds sterling’’, ‘‘British pounds’’, ‘‘GBP’’, ‘‘£’’ or ‘‘pence’’ are to the lawful currency of the UnitedKingdom. All references to the ‘‘euro’’ or ‘‘A’’ are to the currency introduced at the start of the third stageof European economic and monetary union pursuant to the Treaty establishing the European Community,as amended. All references to ‘‘US dollars’’ or ‘‘US$’’ are to the lawful currency of the United States.

The average exchange rates of the Egyptian pound, the Group’s functional currency, are shown relative topounds sterling, the euro and the US dollar below. The rates below may differ from the actual rates used inthe preparation of the financial statements and other financial information that appears elsewhere in thisOffering Memorandum. The inclusion of these exchange rates is for illustrative purposes only and does notmean that the EGP amounts actually represent such pounds sterling, euro or US dollar amounts or thatsuch EGP amounts could have been converted into pounds sterling, euro or US dollars at any particularrate, if at all.

Average Egyptian pound rate against the British pound

British pound

Year Period End Average High Low

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.5062 10.7545 11.5062 10.07472014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1403 11.6722 12.2727 11.09522015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.5277 11.7777 12.4175 10.7876January 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1527 11.2808 11.5697 11.1022February 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.8909 11.2016 11.4183 10.8626March 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.7896 12.0389 12.8648 10.9231April 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.9586 12.7031 12.9885 12.4911May 2016 (through 11 May) . . . . . . . . . . . . . . . . . . . . . . . . 12.8433 11.9473 13.0398 10.8626

Average Egyptian pound rate against the euro

Euro


2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5753 9.1309 9.5783 8.37492014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.6526 9.4115 9.7900 8.65262015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5018 8.5543 9.1146 7.9763January 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4811 8.5042 8.5762 8.4111February 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5127 8.6938 8.8710 8.5127March 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1121 9.4061 10.1121 8.4923April 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1685 10.0720 10.1685 9.9636May 2016 (through 11 May) . . . . . . . . . . . . . . . . . . . . . . . . . 10.1492 8.8503 10.2324 8.2633

45

Average Egyptian pound rate against the US dollar

US dollar


2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.9456 6.8746 7.0325 6.35922014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.1506 7.0851 7.1600 6.95342015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8229 7.7047 8.0392 7.1390January 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8300 7.8288 7.8354 7.8146February 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8281 7.8286 7.8346 7.8183March 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8800 8.4400 8.9518 7.8250April 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8819 8.8792 8.8864 8.8696May 2016 (through 11 May) . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.8755 7.9653 8.9518 7.5301

Source: Bloomberg Composite Rate

Roundings

Certain data in this Offering Memorandum, including financial, statistical, and operating information hasbeen rounded. As a result of the rounding, the totals of data presented in this Offering Memorandum mayvary slightly from the actual arithmetic totals of such data. Percentages in tables have been rounded andaccordingly may not add up to 100 per cent.

Market, economic and industry data

Unless the source is otherwise stated, the market, economic and industry data in this OfferingMemorandum constitute the Directors’ estimates, using underlying data from independent third parties.The Company obtained market data and certain industry forecasts used in this Offering Memorandumfrom internal surveys, reports and studies, where appropriate, as well as market research, publicly availableinformation and industry publications, including publications and data compiled by the Central Agency forPublic Mobilization and Statistics of Egypt (CAPMAS), World Health Organization (WHO), BusinessMonitor International (BMI), the International Monetary Fund (IMF) and the World Bank.

Certain statements in this Offering Memorandum relating to the Group’s business have been extractedwithout material adjustment from a report purchased by the Group prepared by LOGIC Market Research,a market research company (the LOGIC Report). Where information has been extracted from the LOGICReport, it is so noted.

Whilst the Directors believe the third-party information included herein to be reliable, the Company hasnot independently verified such third-party information, and neither the Company nor the Sole GlobalCoordinator make any representation or warranty as to the accuracy or completeness of such informationas set forth in this Offering Memorandum. The Company confirms that all third-party data contained inthis Offering Memorandum has been accurately reproduced and, so far as the Company is aware and ableto ascertain from information published by that third party, no facts have been omitted that would renderthe reproduced information inaccurate or misleading.

Where third-party information has been used in this Offering Memorandum, the source of suchinformation has been identified.

Enforcement of arbitral decisions and civil liabilities in Egypt

Egypt is a party to the New York Convention. Consequently, Egyptian courts should recognise and enforcein Egypt a valid arbitral award made in the United Kingdom and other signatories of the New YorkConvention, on the basis of the rules of the New York Convention, subject to qualifications provided for inthe New York Convention and compliance with Egyptian procedural regulations and arbitration law.However, in practice, it may be difficult to enforce arbitral awards in Egypt due to:

a) the relatively limited experience of Egyptian courts in enforcing international commercial arbitralawards;

b) the Egyptian courts’ inability or unwillingness to enforce those awards; and/or

c) legal grounds (e.g., the concept of ‘‘public order’’) and/or technical grounds (e.g., the lack of capacityof the parties or the invalidity of an arbitration clause).

46

In addition, the Company is an Egyptian joint stock company and the liability of its shareholders is limitedto their respective capital contributions. All of the executive officers and a majority of the Directors areresidents of Egypt, and all of the assets of the Company are located in Egypt. It may not be possible forinvestors to effect service of process within the United Kingdom or elsewhere on the Company or any ofthose persons or to enforce against any of them judgments obtained in courts outside of Egypt predicatedon the civil liability provisions of the securities laws of those other jurisdictions.

Enforcement of foreign judgments in Egypt is subject to the following conditions:

a) the foreign courts rendering the relevant judgment offer reciprocal treatment to judgments obtainedin the courts of Egypt. If reciprocal treatment is not offered by the court where judgment is obtained,then the Egyptian courts will re-examine the merits of the case in the same manner as that adopted bythose courts;

b) the courts of Egypt are not exclusively competent to hear the dispute which constituted the object ofthe foreign judgment while the foreign courts are shown to have been competent to hear the disputein accordance with their own respective laws;

c) the parties to the dispute were duly notified and properly represented in the proceedings;

d) the foreign judgment is final and conclusive in accordance with the relevant law; and

e) the foreign judgment does not conflict with a prior Egyptian judgment in the same case and is notcontrary to public order or morality in Egypt.


No incorporation of website information

The contents of the Group’s websites do not form part of this Offering Memorandum.

Information not contained in this Offering Memorandum

No person has been authorised to give any information or make any representation other than thosecontained in this Offering Memorandum and, if given or made, such information or representation mustnot be relied upon as having been so authorised. Neither the delivery of this Offering Memorandum norany purchase made hereunder shall, under any circumstances, create any implication that there has beenno change in the affairs of the Company since the date of this Offering Memorandum or that theinformation in this Offering Memorandum is correct as of any time subsequent to the date hereof.

Definitions

Certain terms used in this Offering Memorandum, including all capitalised terms and certain technical andother items, are defined and explained in Part 15 (Definitions) of this Offering Memorandum.

Information regarding forward-looking statements

This Offering Memorandum includes forward-looking statements. These forward-looking statementsinvolve known and unknown risks and uncertainties, many of which are beyond the Group’s control and allof which are based on the Directors’ current beliefs and expectations about future events. Forward-lookingstatements are sometimes identified by the use of forward-looking terminology such as ‘‘believe’’,‘‘expects’’, ‘‘may’’, ‘‘will’’, ‘‘could’’, ‘‘should’’, ‘‘shall’’, ‘‘risk’’, ‘‘intends’’, ‘‘estimates’’, ‘‘aims’’, ‘‘plans’’,‘‘predicts’’, ‘‘continues’’, ‘‘assumes’’, ‘‘positioned’’ or ‘‘anticipates’’ or the negative thereof, other variationsthereon or comparable terminology. These forward-looking statements include all matters that are nothistorical facts. They appear in a number of places throughout this Offering Memorandum and includestatements regarding the intentions, beliefs or current expectations of the Directors or the Groupconcerning, among other things, the results of operations, financial condition, prospects, growth, strategies,and dividend policy of the Group and the industry in which it operates. In particular, the statements underthe headings ‘‘Summary’’, ‘‘Risk Factors’’, ‘‘Business Description’’ and ‘‘Operating and Financial Review’’regarding the Company’s strategy and other future events or prospects are forward-looking statements.

47

These forward-looking statements and other statements contained in this Offering Memorandumregarding matters that are not historical facts involve predictions. No assurance can be given that suchfuture results will be achieved; actual events or results may differ materially as a result of risks anduncertainties facing the Group. Such risks and uncertainties could cause actual results to vary materiallyfrom the future results indicated, expressed, or implied in such forward-looking statements. These include,among others, statements relating to:

• the economic and political instability in Egypt, including terrorist incidents and occasional civildisorder;

• the general political, social and economic conditions of Egypt;

• the devaluation of the Egyptian pound and access to foreign currency;

• restrictions on the transfer of Egyptian pounds out of Egypt;

• uncertainty regarding the Egyptian legal system, laws and new income tax regime;

• the Group’s compliance with applicable laws, regulations and licensing requirements and which maychange from time to time, including environmental, health, safety and privacy laws and regulations;

• the Group’s ability to recruit and retain personnel;

• the Group’s ability to maintain its quality standards;

• the Group’s integration of its recently acquired businesses;

• the Group’s ability to enhance its facilities with technological advances;

• litigation brought by patients, enforcement proceedings by regulators or other third parties against theGroup;

• failure to identify expansion opportunities or to pursue those opportunities in a timely manner;

• failure to detect or correct in a timely manner deficiencies and weaknesses in the Group’s internalcontrols over financial reporting;

• the incidence of serious communicable infections or diseases in the Group’s hospitals

• failure of the Group’s information systems and failure to update these systems in a timely manner;

• the Group’s ability to counter competition in the healthcare industry in Egypt;

• the Group’s ability to retain contract customers;

• risks associated with the Combined Offer; and

• other factors discussed in this Offering Memorandum, including the detailed discussions of certainrisks in Part 1 (Risk Factors).

Such forward-looking statements contained in this Offering Memorandum speak only as of the date of thisOffering Memorandum. The Company, the Selling Shareholder, the Directors and the Sole GlobalCoordinator expressly disclaim any obligation or undertaking to update these forward-looking statementscontained in this Offering Memorandum to reflect any change in their expectations or any change inevents, conditions, or circumstances on which such statements are based unless required to do so byapplicable law.

48

PART 3Directors, Secretary, Registered and Head Office and Advisers

Directors Dr. Ahmed Ezzeldin Mahmoud AbdelaalAhmed Adel BadreldinWalid Fayez Said BakrDr. Mohamed Awad Tag El DinNabil Walid KamhawiOmar Atef KinawySameh Mahmoud Mohsen

Registered and head office of the 39–41 Cleopatra StreetCompany Heliopolis

CairoEgypt

Sole Global Coordinator and EFG Hermes Promoting and UnderwritingBookrunner B129, Phase 3

Smart Village, Km 28Cairo Alexandria Desert RoadEgypt

English and US legal advisers to the Freshfields Bruckhaus Deringer LLPCompany 65 Fleet Street

London EC4Y 1HSUnited Kingdom

Egyptian legal advisers to the Zulficar & PartnersCompany Nile City Building, South Tower

Eighth Floor, 2005 A Cornich El NilRamlet Beaulac, Cairo, Egypt 11221

English and US legal advisers to the Shearman & Sterling (London) LLPSole Global Coordinator and 9 Appold StreetBookrunner London EC2A 2AP

United Kingdom

Egyptian legal advisers to the Sole Matouk BassiounyGlobal Coordinator and 12 Mohamed Ali GenahBookrunner Garden City

Cairo, Egypt

Manager Pharos Holding7 Abu El Feda StreetZamalek 11211Cairo, Egypt

Auditors Mansour & Co. PricewaterhouseCoopers(PricewaterhouseCoopers)Plot No 211, Second Sector, City CenterNew Cairo 11835PO Box 170New Cairo, Egypt

49

PART 4Expected Timetable of Principal Events and Offer Statistics

Expected timetable of principal events

Event Time and Date(1)(2)

Publication of this Offering Memorandum . . . . . . . . . . . . . . 18 May 2016Announcement of Offer Price and allocation(3) . . . . . . . . . . . 26 May 2016Publication of the Pricing Statement(3) . . . . . . . . . . . . . . . . . 26 May 2016Commencement of Trading . . . . . . . . . . . . . . . . . . . . . . . . . 10:00 a.m. Cairo time on 2 June 2016

(1) Times and dates set out in the timetable above and mentioned throughout this Offering Memorandum that fall after the date ofpublication of this Offering Memorandum are indicative only and may be subject to change without further notice.

(2) All references to time in this timetable are to Cairo time.

(3) The Offer Price will be set out in the Pricing Statement. The Pricing Statement will not necessarily be sent to persons whoreceive this Offering Memorandum but it will be available free of charge on the Company’s website (subject to certainexceptions) at http://investors.cleopatrahospitals.com.

Offer statistics

Offer Price Range (per Share)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EGP 8.75 to EGP 11.88Number of International Offer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . up to 34,000,000Number of Egyptian Retail Offer Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . up to 6,000,000Number of Shares subject to Stabilisation(2) . . . . . . . . . . . . . . . . . . . . . . . . . up to 6,000,000Number of Shares currently in issue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160,000,000Number of Shares following the Closed Subscription(3) . . . . . . . . . . . . . . . . . 200,000,000Market capitalisation of the Company at the Offer Price following the

Closed Subscription(3)(4)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EGP 2,063.0 millionEstimated gross proceeds of the Combined Offer receivable by the Selling

Shareholder(3)(4)(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . EGP 412.6 million

Notes:

(1) It is currently expected that the Offer Price will be within the Offer Price Range. It is expected that the Pricing Statementcontaining the Offer Price will be published on or about 26 May 2016 and will be available (subject to certain restrictions) onthe Company’s website at http://investors.cleopatrahospitals.com.

(2) The maximum number of Shares subject to Stabilisation is, in aggregate, equal to 15 per cent. of the number of Offer Shares.Only purchasers of Egyptian Retail Offer Shares in the Egyptian Retail Offer will be eligible to participate in the Stabilisation.

(3) Assuming all of the Offer Shares are sold in the Combined Offer and no Stabilisation.

(4) Assuming the Offer Price is set at the mid-point of the Offer Price Range.

(5) The market capitalisation of the Company at any given time will depend on the market price of the Shares at that time. Therecan be no assurance that the market price of a Share will be equal to or exceed the Offer Price.

(6) The Selling Shareholder has undertaken to use the proceeds of the Combined Offer to subscribe for the Closed SubscriptionShares at the Offer Price pursuant to the Closed Subscription.

50

12MAY201607370034

PART 5Industry Overview

Unless indicated otherwise, market data, statistics and information in this section of this Offering Memorandumin respect of the Egyptian hospital markets, including statements of expectation, projections and forecasts, havebeen extracted from the LOGIC Report and information derived from the Central Agency for PublicMobilization and Statistics of Egypt, WHO, IMF, World Bank, Business Monitor International, as well as otherpublicly available information sources. Such reports were neither prepared nor independently verified by theCompany.

In considering industry wide trends and opportunities discussed below, investors should be aware that, given theGroup’s particular strengths and strategies, on the one hand, and its risks, on the other, the impact on the Groupof such trends and opportunities may be more or less than their impact on the industry as a whole. Additionalfactors which should be considered in assessing the usefulness of the market and competitive data describedelsewhere in this Offering Memorandum, including those set out in the section of this Offering Memorandumheaded ‘‘Risk Factors’’.

Overview of the Healthcare System Structure

The diverse and stratified healthcare system in Egypt comprises numerous stakeholders with respectiveroles and functions on different levels. In the public sector, the MoHP operates a network of publichealthcare facilities and supervises those run by the semi-government sector. In the private sector, privatehospitals and non-governmental organizations, funded by out-of-pocket payments by individuals andinsurance companies, provide relatively more developed and alternative healthcare services.

659

941

Hospitals in Egypt

Public

Private

Healthcare System Structure in Egypt

Public Healthcare

MoHP

HealthInsurance

Organization

THIO andCCO(1)

Ministry ofHigher

Education(UniversityHospitals)

Otherministries,including

Ministry ofDefense andMinistry of

Interior

Private Healthcare

PrivateHospitals/

Clinics/Doctors

PrivateVoluntary

Organisations(2)

NGOs

As of 31 December 2014

Source: Healthcare System Egypt USAID-2020, NHA Egypt—2008/2009, CAPMAS, LOGIC Report

(1) Teaching Hospitals and Institutes Organization (THIO) and Curative Care Organization (CCO)

(2) Religiously affiliated clinics and privately owned charitable organisations.

Public Healthcare

The MoHP is the primary healthcare services provider in Egypt, providing healthcare services on all levelsincluding primary, secondary and tertiary levels to offer comprehensive, preventative and curative careservices in among others, general hospitals, specialized medical centres and hospitals and basic carecentres. Services provided by MoHP facilities are accessible by all Egyptian citizens with substantialsubsidies by the government, funding from donors through grants and loans. In general, approximately

51

9MAY201622171223 9MAY201622171363

20 per cent. of MoHP services require direct out-of-pocket payments from patients. The MoHP is also thepolicy-setting body and regulator of the healthcare system in Egypt. Under the authority of MoHP, theHealth Insurance Organization provides insurance to all Egyptians and operates hospitals, outpatientclinics and school clinics. THIO and CCO, which act autonomously under the umbrella of MoHP, operategeneral teaching hospitals and research institutes.

The Ministry of Higher Education, through university hospitals, also runs a network of hospitals asteaching and research institutes. In addition, other ministries such as the Ministry of Interiors, the Ministryof Transport, and the Ministry of Defence operate their own facilities.

As of 31 December 2014, the public healthcare sector consisted of 659 public hospitals (approximately41 per cent. of the 1,600 hospitals in Egypt) with an aggregate of 98,000 beds (approximately 75 per cent.of the 130,600 beds in Egypt).

Private Healthcare

The private sector is fragmented and comprises a wide range of for-profit and non-profit service providers,including private hospitals, clinics, pharmacies, NGOs, mosques and church clinics. The private sector hasbeen well-established in Egypt and offers comprehensive healthcare services. Private healthcare servicestend to offer more advanced and a wider range of alternative services than public facilities and are moreconcentrated in Cairo and the urban districts. All private healthcare service providers are required toregister with the MoHP and the national-level Medical Syndicate. Funded directly through out-of-pocketpayments by individuals and households, private healthcare service providers usually charge a higher feethan those in the public sector.

As of 31 December 2014, the private healthcare sector consisted of 941 private hospitals (approximately59 per cent. of the total number of hospitals) with an aggregate of 32,600 beds (approximately 25 per cent.of the total number of beds in Egypt).

Split of hospital beds in Egypt (2014) Split of hospital in Egypt (2014)

25%

75%

% of Private Hospital Beds% of Public Hospital Beds

59%41%

% of Private Hospitals% of Public Hospitals


Source: LOGIC Report

52

9MAY201622171081

9MAY201622170418

Historical Growth in Number of Beds in Egypt (‘000s)

131

CAGR -1.2%

CAGR 5.1%

128

TotalPublicPrivate

128128

2009 2010 2011 2012 2013

3332292927

98979999103

129

Source: CAPMAS, LOGIC Report

Growth Drivers for the Private Hospital Market

Underserved Egyptian Hospitals Market with Low Public Sector Contribution

Egyptian national healthcare expenditure (defined as the final consumption or spending on healthcaregoods and services) has historically constituted a relatively low percentage of the GDP. During the periodfrom 2011 to 2014, national healthcare expenditure amounted to an average of 5.0 per cent. of the GDP, ofwhich public and private healthcare expenditures represented 42 per cent. and 58 per cent., respectively, in2014. In January 2014, a new constitution was passed in Egypt which requires a minimum of three per cent.of GDP spending on healthcare. As such, healthcare spending is expected to grow to approximately 6 percent. in 2019. The following shows the total healthcare spending in Egypt, including private and publichealthcare services:

Egyptian Healthcare Market

11.3

2011

12.7

2012 2013

12.9

2014

14.7

2015

16.6

2016

16.6

Healthcare Spending (USD mn)Healthcare Spending as a % of GDP

2017

23

2018

27.2

2019

31.8

4.9% 5.0% 5.1% 5.2% 5.3% 5.5% 5.7% 5.9% 6.0%

CAGR 9.2%

CAGR 17.6%


53

9MAY201622511965

9MAY201622512302

The demand for healthcare services in Egypt exceeds the supply of public healthcare services. Egyptspends less on healthcare than its regional and developed peers, resulting in high out-of-pockets paymentsexpenditure. It is estimated that 42 per cent. of the Egyptian population is not covered under the publichealth insurance under the administration of the Health Insurance Organization. Disadvantaged patientsin the low-income group in particular receive limited coverage in healthcare services, despite the presenceof multiple public and semi-public healthcare providers.

Healthcare Expenditure per Capita (USD)(2013)


Source: World Bank

In comparison with its regional peers, the Egypt hospitals market is relatively underpenetrated, with a verylow number of hospital beds per 1,000 people (0.5 hospital beds/1,000 people) as compared to advancedcountries such as Germany (8.2 hospital beds/1,000 people).

Hospital Beds / (1,000 people) (2013)


Source: World Bank, LOGIC Report

Low Quality Public Healthcare Services

As a result of the low government spending on public healthcare services, public hospitals receive limitedfunding and therefore have weak infrastructure and facilities. Further, public hospitals have a high averagenumber of beds (149 per public hospital in 2014), thereby contributing to lower healthcare quality. Due tothe imbalance in supply and demand, public hospitals are believed to be unable to devote much attentionto each patient. In comparison, private hospitals serve an average 35 beds per hospital.

54

9MAY201622165876

9MAY201622170814

Beds per hospital in Egypt (2014)

35

Private Public

149



Further, physicians and health staff receive low wages and therefore have little incentive to provide a highquality of service. In addition, almost 80 per cent. of the doctors work in both the public and privatesectors, contributing to the problem of doctors being overworked and unable to tend to each patient withthe level of care they deserve. In turn, this translates into a strong demand for private healthcare services.

According to World Bank, a survey conducted in 2011 showed that 66 per cent of patients were satisfiedwith service at public MoHP hospitals while 76 per cent. of patients were satisfied with service at privatehospitals.

Growth Potential in Private Sector

Benefitting from the low government spending on public healthcare and the low quality of publichealthcare services, the Egypt private healthcare services market has seen an increase in demand for goodquality healthcare services. From 2009 to 2013, the number of private hospital beds increased from 26,814to 31,653, representing a CAGR of 5.1 per cent. In contrast, the number of public hospital beds decreasedfrom 136,882 to 128,473, representing a CAGR of �3.4 per cent. Similarly, the number of private hospitalsincreased from 686 in 2008 to 941 in 2014, representing a CAGR of 5.4 per cent., whereas the number ofpublic hospitals decreased from 1,146 to 659, representing a CAGR of �8.8 per cent.

Private healthcare spending in the form of out-of-pockets payments has increased from US$5.5 billion in2009 to US$7.7 billion in 2013, representing a CAGR of 8.7 per cent. (as compared to public healthcarespending of US$3.9 billion in 2009 and US$5.3 billion in 2013, representing a CAGR of 8.0 per cent.). Thisincludes inpatient, outpatient, long-term medical care services, and medical goods includingpharmaceuticals and supplies, and collective services and capital formation such as administrationrequirements and development costs. It is estimated that 9.6 per cent. of household income is spent onhealthcare in 2015.

In 2014, the outpatient care segment was the largest segment in private healthcare spending, with totalexpenditure of US$5.4 billion, representing 37.0 per cent. of the sector’s overall value, followed by medicalgoods (26.7 per cent.), inpatient care (21.2 per cent.), collective services and capital formation (9.6 percent.) and long-term care (5.5 per cent.).

37%

27%

21%

10%

5%

Outpatient care

Medical goods

Inpatient care

Collective services and Capitalformation

Long-term care



55

9MAY201622170026

9MAY201622170287

9MAY201622171510

Favourable Demographic and Socio-Economic Indicators

Egypt population is growing and ageing

The population of Egypt, estimated to be 93.4 million in 2016 (a 2.2 per cent. CAGR increase from 2012),is further expected to increase to 100.5 million by the end of 2020. This represents one of the highestannual growth rates in population among both developed and developing countries. The country’spopulation aged over 65 who generally have a higher incidence of chronic illnesses comprises 5 per cent. ofthe Egypt population in 2013. As life expectancy is expected to increase from 69.8 years in 2007 to71.7 years in 2013, the population is also facing an ageing problem with a greater population of elderlypeople.

Population (in million) and Growth Rate

85.787.6

89.6

CAGR 2.2%91.5

93.4

100.5

20202016F2015e201420132012

Source: Business Monitor International

Life Expectancy at Birth (years) Demographic Profile (per cent.)

5%

33%

62%

Ages 65+

Ages 0-14

Ages 15-64

69.870

70.2

70.570.7

70.9

71.7

2007 2008 2009 2010 2011 2012 2013



Higher spending per capita

As Egypt’s GDP rises in recent years, the nominal GDP per capita increases and therefore the spendingpower of the country has strengthened. Nominal GDP per capita increased from EGP 19,120 in 2012 toEGP 26,126 in 2015, representing a CAGR of 11.0 per cent. and is further expected to reach EGP 44,889

56

9MAY201622170680

9MAY201622171650

in 2020 with a CAGR of 11.4 per cent.. Egypt’s richest 10 per cent. command 30 per cent. of Egypt’s GDP,while the poorest 20 per cent. only contributes to 9 per cent. of Egypt’s GDP.

Growing GDP per capita (EGP)(1)

19,12020,700

23,04026,126

29,097

32,892

36,825

40,748

44,889

2012 2013 2014 2015 2016 2017 2018 2019 2020

(1) Nominal GDP per capita

Source: IMF

Population Pyramid by Socio-Economic Class

Class A10%

Class B10%

Class C20%

Class D20%

Class E20%

Class F20%

Richest 10 per cent.

14 per cent. of GDP

20 per cent. of GDP

15 per cent. of GDP

12 per cent. of GDP

Poorest 20 per cent.



Prevalence of Certain Diseases

In recent years Egypt has experienced an increasing incidence of lifestyle and chronic non-communicablediseases such as Hepatitis C, diabetes, obesity and cancer. These diseases contribute to a host of otherhealth conditions that require long-term and constant monitoring and treatment. In particular, Egypt hasthe highest Hepatitis C prevalence in the world, with more than 6.0 million cases in 2012 (as compared to3.4 million in the United States).

57

9MAY201622512136

9MAY201622171782

Hepatitis C Prevalence (‘000 cases)



Egypt also ranks high in the world in terms of diabetes prevalence (third highest in the 20–79 years agegroup in 2013) and in cancer prevalence (third highest in total cases of cancer prevalence in 2012).According to the LOGIC Report, 62 per cent. of the Egypt population was overweight and 29 per cent. wasobese in 2013. Non-communicable diseases caused 72 per cent. of all mortality and morbidity in 2010 (interms of disability-adjusted life-years).

Further, as health awareness improves through education and policy initiatives, the general expectations ofhealthcare services provided also increase and thereby drive more demand for private healthcare services.

Competitive Landscape for Private Hospitals

Geography

Private hospitals in Egypt are generally centred in Greater Cairo and other more urbanised city centres.Competition in such metropolitan areas is more intense than the outlying areas. The following table showsthe distribution of private healthcare services in Greater Cairo versus other regions in Egypt:

Private Hospitals and Beds

367 14996

574 17604

Private Hospitals Private Beds

OthersGreater Cairo


Source: LOGIC, CAPMAS

Market Players

The competitive landscape for hospital healthcare services in Egypt is divided between public hospitals andclinics managed either by the MoHP or other government entities and privately owned and managedhospitals. Competition is based on factors such as reputation, quality of practicing doctors and health staff,range of medical services offered, technology, quality and efficiency of care, pricing and geographicalconvenience.

The private healthcare sector is highly fragmented, with the top 10 hospitals of more than 100 bedscapturing almost 10 per cent. of the private beds in Greater Cairo. According to the LOGIC Report, theCompany is the market leader with four hospitals under the group and 624 beds (indicated in red in thefollowing chart), followed by Dar Al Fouad and As Salam International, which operate as a group and havea combined 345 beds, and Saudi German Hospital with one hospital and 300 beds.

58

16MAY201602262661

The following table shows the top large private hospitals in Cairo by number of beds:

300200 200 177 165 152 145 139 120 120 110 100

SaudiGerman (1)

Hospital

CairoSpecialized

Hospital

As SalamInternational

El Do'aatDar El Shefaa Cleopatra Al ShoroukDar Al Fouad Nile Badrawi Dar El Hekma NozhaInternational

Ganzouri

Total Number of Beds in Cairo



(1) Saudi German Hospital started operations in Q1 2016

Insurance Market

Overview of health insurance activity in Egypt

1964 . . . . . . . . . . Health Insurance Organization established to provide health insurance coveragefor all Egyptians

1975 . . . . . . . . . . People’s Assembly passed Public Law 32 providing coverage to certaingovernmental employees

Public Law 79 was also passed to provide coverage to other governmentalemployees, employees, retirees, and widows of publicly owned institutions andsome private sector employees

1992 . . . . . . . . . . Public Law 99 was passed to roll out the Student Health Insurance Program thatcovers schoolchildren

Newborns receive coverage by a ministerial decree

2001 . . . . . . . . . . Egypt took part in the Abuja Declaration, which set a target for membercountries to allocate at least 15 per cent. of their annual budget to improve thehealth sector.

2014 . . . . . . . . . . New constitution passed in January 2014 to increase public healthcare spending,which led to health target spending for 2016 through 2017 to be set at 3 per cent.of GDP. By November 2014, subsidies provided by the government for medicalcare for ‘‘incapable citizens’’ had risen by 28.2 per cent., from EGP 255.6 millionin October to EGP 327.8 million in November. This constituted a 22.4 per cent.year-on-year rise over the EGP 267.8 million recorded in November 2013.

2015 . . . . . . . . . . Subsidy increases of 208% for the health insurance system were approved at thestart of 2015, from EGP 811 million to EGP 2.5 billion. The Minister of Healthannounced that the new law requires a mandatory contribution of 4 per cent.,with employers contributing 3 per cent. The MoHP will start implementing thenew scheme in a limited number of cities as a pilot before it is rolled out acrossthe country.

Source: Oxford Business Group

59

9MAY201622395007

16MAY201619375336

Insurance Schemes

The Health Insurance Organization is the primary provider of insurance to Egypt citizens. However due tothe lack of funds, the population under coverage represents only 58 per cent. of the total population.Further, the social insurance system does not cover the majority of clinical services but only 6 per cent. ofhealth expenditures.

HIO Coverage(millions of people)

45.046.8 46.9

48.750.2

2010 2011 2012 2013 2014

Source: CAPMAS

Public Health Insurance Coverage Sources of Healthcare Financing in Egypt

58%

42%

72%

15%

Population under coverage

Population out of coverage

1%5%

5%1% 1%

Out-of-pocketspayments

MoHP

THIO, CCO and others

Health InsuranceOrganization

Firms/NGOs

Ministry of HigherEducation and otherpublic agencies

Private/SyndicateInsurance

As of 31 December 2014 As of 31 December 2010

Source: LOGIC Report Source: World Bank

In addition to the public health insurance provided by the Health Insurance Organization, private healthinsurance coverage is also provided by mainly inter-state companies such as Misr Life Insurance. On asmaller scale, many companies, both private and semi-governmental, provide medical care to employees ofcorporate employers through commercial arrangements. Further, groups of professionals and workers(such as the medical, commercial, agricultural sectors) are organized into occupational associations, orsyndicates, that give members and families coverage for outpatient and inpatient care, as well aspharmaceuticals, at providers contracted by the syndicate.

Generally, the following are the different sources of health financing:

• Social Health Insurance—primary insurance provider covering formal public sector workers,schoolchildren, widows, pensioners and children under five years old

• MoHP / other agencies—free / heavily subsidised services to citizens not covered under HIO

• Program for Treatment at the Expense of the State—extends financial assistance to cover the uninsuredand currently covers 1.7 million people

• Family health funds—provides basic benefit package to the poor and those in the informal sector

60

9MAY201622171914

• Private firms and organisations (including private insurance companies, professional syndicates andnon-profit organisations)—two per cent. of private healthcare spending is funded by private insurance(as shown in the following table)

Private healthcare spending remains largely funded by individual out-of-pocket payments rather thanthrough insurance schemes. The following shows the proportions of private healthcare spending in 2013:

Private Health Expenditure

2% 98%Private spendby type (2013)

Insurance

Out Of Pocket(OOP)



61

PART 6Business Description

Investors should read this Part 6 (Business Description) in conjunction with the more detailed informationcontained in this Offering Memorandum including the financial and other information appearing in Part 9(Operating and Financial Review). Where stated, financial information in this section has been extracted fromPart 11 (Unaudited Pro Forma Consolidated Financial Information) Part 14 (Historical FinancialInformation).

Introduction

The Group is the largest private hospital group in Egypt, measured by number of hospital beds andnumber of hospitals, and currently operates four hospitals in Greater Cairo, each of which was acquiredwithin the past two years. The Group’s hospitals, on an aggregated basis, had 624 hospital beds as at31 December 2015, and in 2015 serviced 47,256 inpatients, 606,206 outpatient clinic visits and 278,404emergency room patients and performed 34,900 surgeries. The Group’s vision is to become the leadingintegrated healthcare provider in Egypt through a platform of world class quality medical facilities andservices to enhance patients’ quality of life. The Group’s mission is to deliver the finest quality ofhealthcare in a safe, reliable and caring environment, through highly trained healthcare providers, state ofthe art facilities and the latest medical technology, putting patients and their families first.

The Group’s four hospitals—Cleopatra, Cairo Specialized Hospital, Nile Badrawi and Al Shorouk—aremulti-speciality hospitals that offer a full array of general and emergency healthcare services. Some of theirservice offerings include general surgery, emergency and ambulance services, cardiology, gynaecology andobstetrics, oncology, orthopaedics and a number of outpatient clinics, including dental, physiotherapy andprimary care. The Group plans to develop, in addition to the general services that the Group’s hospitalscurrently offer, centres of excellence in each of the hospitals in separate specialised medical fields, such asrenal transplantation and oncological radiotherapy. The centres of excellence will have state-of-the-artequipment for the relevant speciality practice and will staff the most renowned doctors in the respectivefield. This business model allows patients to attend the Group’s facilities at locations convenient to themfor routine examinations, simple procedures and operations and general services such as pharmacy, bloodbank and diagnostic services while also being able to offer highly specialised services at other hospitals inthe Group’s platform.

Over the past decade, the private healthcare sector in Egypt has grown significantly, as the population isseeking higher quality and safer healthcare options than those offered by the government. Traditionally,patients tended to choose their healthcare providers based on the personal reputations of the physicians.As the private medical insurance industry grows in size and influence, patients have begun choosing theirhealthcare providers based on the reputation and brand of the hospitals. This is due to private insuranceproviders and companies offering their employees private medical coverage through direct contractualagreements generally with hospitals rather than individual physicians. The Group is at the forefront of thismarket evolution in which hospitals are growing larger, consolidating and developing their own reputationsand brand identities.

The Group aims to lead this trend by implementing a uniform standard of high-quality patient care acrossits platform, expanding its existing one-stop shop model to contract patients so that patients can receive allrequired healthcare services within the Group’s platform, upgrading its facilities with state-of-the-artequipment and attracting the best doctors and healthcare providers in Egypt.

The Group’s hospitals date back as far as 1976 when Dr. Hassan Zahed, a prominent Egyptian physician,opened Cairo Specialized Hospital, one of Egypt’s first private sector hospital. Cleopatra, Al Shorouk andNile Badrawi were established in 1979, 1981 and 1982, respectively. In 2014, Abraaj NAH acquired amajority beneficial stake in Cairo Specialized Hospital Company and, in the same month, acquired amajority beneficial stake in Cleopatra Hospital Company. In 2015, the Company acquired a majority stakein Nile Badrawi Hospital Company and, in 2016, a majority stake in Al Shorouk Hospital Company.

62

The following table sets forth certain key financial information of the Group:


Key Financial Information(1) 2015 2014 2013

Operating revenue (EGP millions)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332.0 290.3 243.3Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149.4 123.3 114.0Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121.3 107.5 86.8Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138.6 117.6 98.5

Adjusted profit for the year(2) (EGP millions)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64.7 64.1 41.8Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.2 18.5 22.1Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.5 18.2 6.7Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.0 11.4 6.8

EBITDA(3) (EGP millions)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.4 72.8 59.2Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.5 30.3 30.2Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.1 28.9 13.4Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.6 20.7 14.1

Adjusted EBITDA(4) (EGP millions)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.4 93.1 62.3Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.5 30.3 30.2Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.1 28.9 13.4Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.6 20.7 14.1

EBITDA margin(5) (%)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.0 25.1 24.3Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.4 24.6 26.5Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.3 26.9 15.5Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.3 17.6 14.3

Adjusted EBITDA margin(6) (%)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.0 32.1 25.6Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.4 24.6 26.5Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.3 26.9 15.5Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.3 17.6 14.3

Key Pro Forma Financial Information(7)

Pro forma operating revenue (EGP millions) . . . . . . . . . . . . . . . . . . . . . . . . . . 741.3Pro forma EBITDA(8) (EGP millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182.6Pro forma EBITDA margin(9) (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.6

(1) Figures include data for periods during which the Company did not own the respective hospitals.

(2) See ‘‘Non-GAAP financial measures’’ in Part 2 (Presentation of Financial and Other Information) for a reconciliation of profitfor the year to adjusted profit for the year.

(3) Defined as profit for the year adjusted for finance income, finance costs, current tax, deferred tax, fixed asset depreciation andwrite-offs, provisions, (loss)/gain on currency translation differences and impairment of trade receivables.

(4) Defined as EBITDA excluding a non-recurring donation to a university in Cairo and a non-recurring liquidation of Cleopatra’semployee fund. The liquidation occurred because the Group no longer plans to operate the fund.

(5) Defined as EBITDA divided by operating revenue.

(6) Defined as adjusted EBITDA divided by operating revenue.

(7) Pro forma to show the effect of the Company’s ownership of Cairo Specialized Hospital Company, Nile Badrawi HospitalCompany and Al Shorouk Hospital Company as if the acquisitions of those companies had occurred on 1 January 2015.

(8) Defined as pro forma profit for the year adjusted for pro forma finance income, pro forma finance costs, pro forma (loss)/gainon currency translation differences, pro forma current tax, pro forma deferred tax, pro forma provisions, pro forma fixed assetdepreciation and write-offs and pro forma impairment of trade receivables.

(9) Defined as pro forma EBITDA divided by pro forma operating revenue.

63

Group Key Performance Indicators (KPIs)

The following table sets forth certain key performance indicators that the Group uses to manage itsbusiness.


Key Performance Indicator(1) 2015 2014 2013

Inpatient occupancy rate(3)

Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64.1% 67.4% —(2)

Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71.2% 72.5% —(2)

Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46.0% 53.3% —(2)

Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98.9% 95.8% —(2)

Number of inpatients(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,256 46,886 46,613Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,211 14,555 14,204Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,869 13,771 13,151Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,528 8,089 9,116Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,648 10,471 10,142

Number of outpatient clinic visits(5) . . . . . . . . . . . . . . . . . . . . . . . . 606,206 472,319 419,222Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310,627 276,713 249,170Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191,745 95,987 73,173Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,710 43,801 45,806Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,124 55,818 51,073

Number of emergency room patients(6) . . . . . . . . . . . . . . . . . . . . . 278,404 253,523 230,283Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176,503 171,185 159,218Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67,979 50,615 43,008Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,248 11,049 10,277Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,674 20,674 17,780

Number of surgeries(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,900 33,925 32,535Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,995 13,832 13,719Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,938 9,037 8,040Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,389 4,493 4,705Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,578 6,563 6,071

Number of lab tests(8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,022,543 1,025,632 872,000Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470,386 491,946 361,393Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,929 196,198 203,828Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 158,965 159,253 147,753Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,263 178,235 159,026

Number of catheterisation patients(9) . . . . . . . . . . . . . . . . . . . . . . . 2,644 2,354 2,287Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 992 913 894Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,203 1,027 1,040Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449 414 353Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —

Average length of stay (days)(10)

Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.07 2.13 —(2)

Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.36 3.44 —(2)

Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.52 3.08 —(2)

Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.53 3.47 —(2)

(1) Figures include data for periods during which the Company did not own the respective hospitals. Totals represent aggregatedsums of the Group’s four hospitals, including for periods during which the Company did not own the respective hospitals.

(2) Data not available.

(3) Defined as the number of nights occupied divided by the total number of nights available in the accommodation rooms andICU. Inpatient occupancy rate does not include emergency room, operating room, incubator and dialysis or outpatient clinicsand therefore does not reflect the hospitals’ overall utilisation rate.

(4) Defined as patients admitted to an accommodation room.

(5) Defined as the total number of visits to the outpatient clinics made by patients during the period.

(6) Defined as the total number of visits to the emergency room during the period.

(7) Defined as the number of surgeries performed during the period.

64

(8) Defined as the number of tests performed at the relevant laboratory in the period.

(9) Defined as the total number of visits to the catheterisation lab during the period.

(10) Defined as the average number of days an inpatient stays at the hospital.

The following table sets forth the number and type of hospital beds at each of the Group’s four hospitals.

Hospital beds(1) 2015 and 2014

Room/ward beds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

Emergency room beds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Operating room beds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

Catheterisation room beds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Intensive care unit beds(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Incubators and dialysis beds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

Total beds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 624Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120


(2) Includes neonatal ICU beds.

65

History

Year Event

1976 . . . . . . . . . . . . Establishment of Cairo Specialized Hospital• Cairo Specialized Hospital is established by Dr. Hassan Zahed as Egypt’s

first private sector hospital1979 . . . . . . . . . . . . Establishment of Cleopatra

• Cleopatra hospital is established in Heliopolis, Cairo1981 . . . . . . . . . . . . Establishment of Al Shorouk

• Al Shorouk hospital is established in Mohandesin, Giza1982 . . . . . . . . . . . . Establishment of Nile Badrawi

• Nile Badrawi hospital is established in Maadi, Cairo1998 . . . . . . . . . . . . Radiotherapy introduced to Nile Badrawi

• Nile Badrawi acquires a radiotherapy linear accelerator, positioning thehospital as an oncology centre

1999 . . . . . . . . . . . . Expansion of Cleopatra• Cleopatra adds a new building adjacent to its existing facility

1999–2000 . . . . . . . . Expansion of Al Shorouk• Al Shorouk acquires an adjacent building, allowing the hospital to reach

120 beds2014 . . . . . . . . . . . . Formation of the Group

• Abraaj NAH acquires majority beneficial stake in Cleopatra HospitalCompany and Cairo Specialized Hospital Company

2015 . . . . . . . . . . . . Expansion of the Group• The Company acquires control of Nile Badrawi Hospital Company

2016 . . . . . . . . . . . . Further expansion and IPO• The Company acquires control of Al Shorouk Hospital Company and

plans an initial public offering on the EGX

Group Structure

The Company owns and controls the majority of the share capital of each of Cairo Specialized HospitalCompany, Nile Badrawi Hospital Company and Al Shorouk Hospital Company. As at the date of thisOffering Memorandum, 99.99 per cent. of the share capital of the Company is owned and controlled by

66

12MAY201614011884

Care Healthcare. Care Healthcare is beneficially owned, through intermediate wholly-owned subsidiaries,by Abraaj NAH, EBRD, DEG and Proparco.

99.99%

Care Healthcare Limited

100%

Creed Healthcare Limited

Creed Healthcare Holdco Ltd.

72.5% 7.5% 7.5% 12.5%

99.99%The Group

99.9% 52.7% 99.9%

Nile BadrawiHospital Company

Acquired in September 2015

AbraajNAH*

DEG

Cairo SpecializedHospital Company

Acquired in July 2014**

EBRDProparco

Al ShoroukHospital CompanyAcquired in January 2016

Offshore Entities


Acquired in July 2014

* Abraaj NAH is owned by funds managed and controlled by The Abraaj Group, a Dubai-based private equity firm

** Creed Healthcare Holdco Ltd. acquired beneficial ownership of Cairo Specialized Hospital Company in July 2014. CleopatraHospital Company acquired beneficial ownership in September 2015 as part of a corporate restructuring.

Competitive Strengths

Exposure to a resilient market with structural demand in an underpenetrated private hospital market

Egypt has largely demonstrated stable growth based on strong market fundamentals since 2010, despiterecent political and economic turmoil in the region. GDP growth in Egypt is expected to stabilise andimprove over the long-term, according to the International Monetary Fund and is expected to be higherthan in many other regional and more developed markets. According to the IMF’s World EconomicOutlook Database, the CAGR of nominal GDP per capita between 2015 and 2020 is expected to be11.4 per cent., compared to an expected average rate of 2.7 per cent. for the G7 countries.

The Group anticipates that Egypt’s relatively high GDP per capita growth rate will be reflected in greaterhealthcare spending. Relative to other developed markets both globally and regionally, Egypt is anunderpenetrated market with US$159 of healthcare expenditure per capita in 2013, compared to US$1,551and US$1,052 in the United Arab Emirates and Saudi Arabia, respectively, according to the World Bank.Further, there was only one hospital bed per every 2,000 people in Egypt, compared to 16.4 in Germany,5.8 in the United States and 4.2 in Saudi Arabia. The Egyptian healthcare market grew by a CAGR of9.0 per cent. between 2011 and 2014, and the number of private hospital beds in Egypt has grown over thepast several years while the number of public hospital beds has remained relatively flat. LOGIC Market

67

Research forecasts that the Egyptian healthcare market will grow by a CAGR of 17.6 per cent. between2015 and 2019.

Driven by the confluence of the following trends, the Group expects Egyptians to spend an increasingamount on healthcare:

• A population that is growing and rapidly ageing: according to the IMF’s World Economic OutlookDatabase and Business Monitor International, the population of Egypt is projected to increase by aCAGR of 1.9 per cent. from 2015 to 2020, while the percentage of the population aged 65 or over isprojected to grow from 5.2 per cent. to 5.5 per cent. in the same period.

• Increased spending on lifestyle-related medical conditions: As Egyptian GDP per capita grows, theGroup expects the expenditure on lifestyle diseases to increase. In particular, Egypt ranks 3rd in theworld for prevalence of diabetes in the 20–79 age group, amounting to 16.6 per cent. of that age groupin Egypt in 2013. Further, 62.0 per cent. of the population was overweight in 2013 and 28.9 per cent.were considered obese, according to the LOGIC Report. Diabetes and obesity are drivers ofnumerous medical conditions, including those that are the most expensive to treat and which requirethe greatest degree of medical specialisation and sophistication, such as diseases of the cardiovascularsystem, the kidneys and the eyes. Egypt also had one of the highest number of cases of hepatitis Cglobally in 2012, according to the LOGIC Report.

• Increased government spending on healthcare: The new Egyptian constitution passed in January 2014stipulates that the government must spend a minimum of three per cent. of GDP on healthcare. TheGroup believes this will further boost its revenue as patients under the public health plans areexpected to be able to attend private hospitals so long as the hospitals charge those patients in linewith government prices.

Reputable brands, a strong track record and a leading market position with high barriers to entry

The Group’s hospitals date back as far as 1976 when Dr. Hassan Zahed, a prominent Egyptian physician,opened Cairo Specialized Hospital, Egypt’s first private sector hospital. Since then, Cairo SpecializedHospital, and subsequently the Group’s three other hospitals, have enjoyed strong track records ofprofitable growth, even through adverse economic conditions during the sub-prime crisis and theRevolution. The Group’s hospitals, on an aggregated basis, performed 34,900 surgeries and serviced47,256 inpatients, 606,206 outpatient clinic visits and 278,404 emergency room patients in 2015.

The consultant doctors practising at the Group’s hospitals are highly qualified, with a majority of them alsoholding positions as university professors, and Cleopatra boasts one of the best staffed emergency rooms inEgypt. The Group is now the largest institutional hospital group in Egypt measured by the number ofhospitals and the number of beds, with 624 beds and four hospitals in Greater Cairo on an aggregated basisas at 31 December 2015, compared to an aggregate of 345 beds at the As Salam International / Dar AlFouad Hospital group, which is the Group’s next largest competitor.

The Group benefits from high barriers to entry in the Egyptian private healthcare market. Largeinvestments on medical infrastructure, equipment and real estate are required, and wide geographiccoverage is needed to penetrate a highly fragmented market. The Group’s size make it well-positioned totake advantage of these high barriers to entry. Further, each of the Group’s hospitals has operated in Cairofor decades and has established strong relationships and brand equity in the private healthcare market,including an ability to attract the most renowned consultant doctors.

Seasoned and experienced management team with robust track record in the healthcare industry

The Group has a seasoned and experienced management team. The CEO has worked at Johnson &Johnson as a director overseeing government affairs and policy for MENA and Pakistan and has alsoworked at GlaxoSmithKline, where he led the Middle East region integration plan as part of the merger ofSmithKline & Beecham and Glaxo Wellcome. The managing directors of each of the Group’s fourhospitals have an average of over 33 years of experience in the healthcare sector. They each hold PhDs orMDs and have served in prestigious positions at universities and hospitals in Cairo. The Group is led by aseasoned board of directors which includes medical and financial experts including a former Minister ofHealth of Egypt, the founder of Cleopatra and the former head of Ernst & Young in Egypt.

68

Significant scale and integrated platform

The Group has grown into a major player in the Egyptian private medical hospital market and is now thelargest institutional hospital group in Egypt measured by the number of hospitals and the number of beds,with 624 beds and four hospitals in Greater Cairo on an aggregated basis as at 31 December 2015,compared to an aggregate of 345 beds at the As Salam International / Dar Al Fouad Hospital group, whichis the Group’s next largest competitor. The Group has started and will continue to enhance operationalefficiencies. These initiatives include centralising the quality, IT, human resources, finance and supplychain functions, standardising operating procedures across the Group’s hospitals and implementing newERP and hospital information systems. Centralising the supply chain function will ensure standardisedprocurement processes and enable savings across the Group from increased bargaining power withsuppliers. The Group also expects to have increased bargaining power with private insurance providers andother contract customers to negotiate better pricing.

The Group’s hospital brands have a strong reputation for quality and patient care, with two of its hospitalshaving achieved ISO accreditations and each of its four hospitals working toward JCI accreditation . TheGroup intends to further enhance its reputation and the quality of its services as it integrates its hospitals.The Group’s size and brand reputation have positioned it to capitalise on the increased demand andexpenditure on healthcare services in Egypt and have placed it at a competitive advantage to itscompetitors, allowing it to forge mutually beneficial relationships with strategic partners such as Philipsand GE Healthcare to enhance the Group’s technical capabilities.

Solid financial performance and potential for enhanced profitability

Revenue of each of the Group’s four hospitals has grown steadily over the past three years, with CAGRs of16.8 per cent., 14.4 per cent., 18.2 per cent. and 18.6 per cent. between 2013 and 2015. Gross profit atCleopatra, Cairo Specialized Hospital, Nile Badrawi and Al Shorouk grew at a CAGR of 28.1 per cent.,8.4 per cent., 49.5 per cent. and 31.2 per cent., respectively, between 2013 and 2015. Adjusted EBITDA hasalso grown steadily, with CAGRs of 26.3 per cent., 5.3 per cent., 42.1 per cent. and 26.5 per cent. between2013 and 2015 at the Group’s four hospitals. In 2015, Cleopatra, Cairo Specialized Hospital, Nile Badrawiand Al Shorouk had adjusted EBITDA margins of 30.0 per cent., 22.4 per cent., 22.3 per cent. and 16.3 percent., respectively.

The Group aims to enhance profitability by improving efficiencies of underperforming recently-acquiredassets. For instance, Cairo Specialized Hospital was acquired by an Abraaj entity in July 2014. Between2014 and 2015, the number of outpatient clinic visits at Cairo Specialized Hospital increased by99.8 per cent., the number of emergency room procedures increased by 34.3 per cent., the number ofinpatients increased by 0.8 per cent. and revenue increased by 21.2 per cent. The Group believes there isscope to continue significantly enhancing profitability at each of its four hospitals.

The Group’s Strategy

Improve quality of care

The Group’s mission is to deliver the finest quality of healthcare in a safe, reliable and caring environment,through highly trained healthcare providers, state of the art facilities and the latest medical technology,putting patients and their families first. In order to achieve this, the Group consistently invests in itsinfrastructure and the most advanced technology through its short-term capital expenditure plan. Of itscash available for capital expenditure and operational activities, the Group is targeting to spend EGP124 million in 2016 on short-term capital expenditure. The Group expects that of this EGP 124 million,EGP 64 million will be spent on medical capital expenditure such as new electric beds, ventilators,ambulances, interventional x-ray and other medical equipment; EGP 33 million will be spent on civilcapital expenditure such as building infrastructure, electromechanical infrastructure and vehicles; andEGP 20 million will be spent on information technology systems, including the implementation of a newhospital information system and ERP system. The remaining EGP 7 million is expected to be spent at AlShorouk but has not been allocated to specific projects. Of the cash intended to be spent on medicalcapital expenditure, about half is expected to be spent at Cairo Specialized Hospital; of the cash intendedto be spent on civil capital expenditure, the majority is expected to be spent at Cairo Specialized Hospitaland Nile Badrawi; and of the cash intended to be spent on IT capital expenditure, the majority is expectedto be spent at Cleopatra and Cairo Specialized Hospital. Not only will these initiatives improve the qualityof care, the Group believes they will help attract the most renown consultant doctors to practise at the

69

Group’s hospitals. The Group believes that continued investment into the quality of care provided at itshospitals is key to achieving its aim of becoming the leading integrated healthcare provider in Egypt.

Enhance utilisation of and optimise existing capacity

The Group aims to grow its number of patients by enhancing the utilisation of and optimising its existingfacilities. The Group believes that with better management, its recently acquired hospitals have thepotential to be as operationally efficient as Cleopatra. Cairo Specialized Hospital is already benefitingfrom this: from 2014 to 2015 its number of outpatient clinic visits grew 99.8 per cent., its number ofemergency room patients grew 34.3 per cent. and its revenue grew 21.2 per cent.

The Group is implementing a plan to reallocate space in its hospitals to increase space for services inhigher demand, such as the intensive care units (ICUs). There is currently a shortage of ICU beds in Egypt,and such beds tend to be priced between 50 per cent. and 100 per cent. higher than other hospital beds.The Group intends to add new ICU beds in Cleopatra Hospital and Nile Badrawi Hospital. The Group’soutpatient clinics will also benefit from optimised facilities. For instance, the Group is aiming to implementstrategies to enhance the utilisation of space in the outpatient clinics to accommodate more revenue-generating space, as well as create more appointment times for the consultant doctors in highest demand.The Group is also targeting strategies to decrease waiting times for patients, including systems to enhancecommunication with patients ahead of their appointments and developing better waiting rooms. TheGroup also plans to increase the operating hours of its outpatient clinics at Nile Badrawi and Al Shoroukfrom six hours per day to 12 hours per day, six days per week, to accommodate more patients. At itsinpatient departments, the Group is aiming to shorten average length of stay through enhanced clinicaland operational procedures. The Group also plans to undertake various civil works and refurbishments,which it expects to enhance the quality of services and attract better consultant doctors, thereby enabling itto increase prices.

The Group plans to expand and enhance its ancillary service offerings, including radiology, laboratorytesting and pharmacy services. The Group’s hospitals each offer these services, but prior to the Companyacquiring them the hospitals did not effectively leverage these offerings. For instance, patients were beingreferred by doctors in the hospitals to pharmacies outside of the hospitals. On average in 2015, pharmacyservices accounted for around 30—35 per cent. of a patient’s bill. By increasing the number of patients whouse the in-house ancillary services, the Group’s hospitals will be able to increase revenue per patient. TheGroup, with its expanded scale and service offerings, recently renegotiated more favourable arrangementswith major private insurance companies operating in Egypt to enable patients being treated at the Group’shospitals to use the pharmacies located in those hospitals. Cairo Specialized Hospital is in the process ofupgrading and renovating its radiology department, in partnership with Philips, so that the Group’s otherhospitals will be able to leverage their relationship with Cairo Specialized Hospital by referring to itpatients needing advanced radiology services. Increased usage of the Group’s ancillary services is expectedto boost revenue margins, as laboratory and radiology services tend to have strong margins.

Build additional capacity

The Group plans to increase capacity by expanding its existing facilities. The Group has acquired twofacilities, one adjacent to Al Shorouk and one adjacent to Cleopatra. It plans to develop those facilitiesinto expansions of the existing hospitals. The Al Shorouk expansion will increase capacity by approximately40 beds, including beds dedicated to ICU, which tend to achieve higher revenue than other hospital beds.The Cleopatra expansion will alleviate the current high occupancy rate at that hospital’s outpatient clinicsand ICU department, among others. The expansion is expected to increase capacity by approximately100 beds. The Al Shorouk expansion and Cleopatra expansion are expected to cost approximately EGP150 million and EGP 250 million, respectively, and the Group intends to finance these projects with the netproceeds of the Closed Subscription.

Develop centres of excellence in separate specialised medical fields at each of the Group’s hospitals to drivehigher margins

In order to leverage the expertise of certain of the Group’s physician consultants, each of the hospitals willbecome a centre of excellence in separate specialised medical fields while each also maintaining theirgeneral, multi-speciality business model. The Group intends the centres of excellence to havestate-of-the-art equipment for the relevant specialty practice (for example, oncology and renaltransplantation at Nile Badrawi) and will seek to staff the most renowned doctors in the respective field.

70

For more detail see ‘‘Centres of Excellence’’ in this Part 6 (Business Description) of this OfferingMemorandum. This is designed to allow patients to attend the Group’s facilities at locations convenient tothem for routine examinations, simple procedures and operations and general services while also beingable to offer highly specialised services at other hospitals in the Group’s platform. The Group intends toseek affiliations with international institutions in order to attract globally recognised experts in therespective fields. This business model will result in a mix of offered services geared toward morespecialised services, which command premium pricing and higher margins. Establishing centres ofexcellence will also decrease required capital expenditure because the Group will not need to invest in thesame specialty equipment in each of its hospitals.

Expand customer reach through a feeder network of polyclinics

Proximity to healthcare facilities is a main concern for Egyptian patients. The Group is aiming toimplement a hub-and-spoke polyclinic business model in order to penetrate smaller neighbourhoods.Under this plan, the Group would open Cleopatra-branded polyclinics, which would act as extensions ofthe Group’s hospital platform, in key secondary urban developments where population density doesn’teconomically justify opening a full hospital. The polyclinics, which would require relatively low capitalexpenditure to setup and operate, would have the capabilities to perform minor procedures, routineexaminations and diagnostic testing. The polyclinics could leverage the Group’s size when referrals to alarger hospital are required for more complex procedures. Each polyclinic is expected to costapproximately EGP 3.5 million to open, which would be funded out of cash generated from operatingactivities. The Group expects to begin implementation of this strategy by the end of 2016, but does notexpect any capital expenditure outlays to occur until 2017. The Group is targeting to open a total of10 polyclinics over the next five years.

After successful implementation of this plan in the Greater Cairo area, the Group will look to establishpolyclinics or smaller hospitals in other governorates in Egypt. Because Cairo is the only major medicalcentre in Egypt, patients in other governorates commonly travel to Cairo for medical care. By expandinginto these other governorates, the Group would seek to capture these patients’ business when they travel toCairo for highly specialised procedures. The feeder network would operate under the Cleopatra brand inorder to leverage the Group’s brand identity.

Broaden Group reach and expand scale through opportunistic acquisitions

The Group is also targeting expansion through opportunistic acquisition of existing hospital facilities inGreater Cairo. The Group has a track record of growth through acquisition and has been able to reducecosts through economies of scale and operational synergies. The Group intends to leverage its scalablebusiness model, strong brand reputation and reputation for quality medical services to continue thisexpansion where suitable opportunities arise. Proximity to healthcare facilities is a main concern forEgyptian patients and the Group will seek to expand into areas of Greater Cairo in which it does not yethave a presence. In the longer term, the Group will also explore expansion into governorates other thanCairo.

Business Operations

Service Offerings

Medical services

The medical services offered by the Group at its four hospitals include, but are not limited to:

• Emergency room and ambulance services. Each of the Group’s four hospitals provides emergencyrooms staffed round-the-clock for prompt treatment of acute illnesses, traumas and other medicalemergencies, as well as private ambulance services. Some of the Group’s ambulances are equipped tooperate as mobile ICUs.

• General surgery. The Group offers a range of private general surgery, both open and laparoscopic,aimed at the diagnosis and treatment of injury, deformity and disease by the use of instruments. TheMoHP has licensed Nile Badrawi and Al Shorouk to perform renal, or kidney, transplantation, ahighly complicated procedure. The Group plans to make Nile Badrawi a centre of excellence for thissought-after procedure and already has amassed a substantial waiting list. The percentage of surgicalinpatients from total inpatients in 2015 was 68.5 per cent., 46.2 per cent., 48.9 per cent. and 58.1 percent. at Cleopatra, Cairo Specialized Hospital, Nile Badrawi and Al Shorouk, respectively.

71

• Cardiology and cardiovascular surgery. Cardiology deals with disorders of the heart, includingcongenital heart defects, coronary artery disease, heart failure and valvular heart disease.Cardiovascular surgery is surgery on the heart or large blood vessels to the heart performed by cardiacsurgeons to treat heart disease, correct congenital heart defects or treat valvular heart disease. TheGroup offers a catheterisation lab, as well as a range of tests and scans, procedures and heartoperations performed by its consultant cardiologists and cardiac surgeons includingelectrocardiograms, cardiac MRI scans, coronary angiography, pacemaker implementation, valvereplacement and coronary artery bypass graft.

• Gynaecology and obstetrics. Gynaecology is the medical specialty dealing with the care of the femalereproductive system. The Group offers a comprehensive, specialist service, including normal andsurgical procedures, for all gynaecological conditions, pelvic pain, period problems, prolapse,incontinence, fertility and polycystic ovarian syndrome, gynaecological malignancy and endometriosis.The gynaecology and obstetrics department is complemented by its paediatric and intensive care unitsto provide neonatal ICU services. The Group’s obstetric and gynaecological treatments include:colposcopy, endometrial ablation, female sterilisation, hysterectomy, nuchal scanning, ovarian cystremoval, stress urinary incontinence, ultrasound scan, uterine fibroid embolization and vaginal repairoperation. The Group’s hospitals also offer other women’s health procedures, such as breast lumpinvestigation and removal.

• Oncology. Oncology is the branch of medicine that deals with cancer. The Group has dedicated teamswith specially trained physicians, clinical pharmacists, chemotherapy technicians and nurses to supportthe oncologists and haematologists who practise at its hospitals. The Group’s oncology offeringincludes the diagnosis as well as treatment of cancer patients. Diagnostic services include physicalexaminations, blood tests, scans and biopsies. As part of treatment, patients may undergo surgeryand/or receive chemotherapy prepared by professional, clinical pharmacists, and at Nile Badrawi,patients may receive radiotherapy.

• Orthopaedics and arthroplasty. Orthopaedics and arthroplasty are branches of surgery concerned withthe musculoskeletal system. Orthopaedic surgeons use both nonsurgical and surgical means, includinglaparoscopic procedures, to treat musculoskeletal trauma, sports injuries, degenerative diseases,infections, tumours and congenital disorders. The Group’s orthopaedic procedures include: back paininvestigations, hip replacement surgery, back surgery, joint pain treatment, carpel tunnel syndrome,knee arthroscopy, epidural injections, knee ligament surgery, facet joint injections, knee replacementsurgery, foot bunion removal, shoulder arthroscopy, ganglion removal, shoulder replacement surgeryand extracorporeal shock wave therapy.

• Outpatient clinics. The Group’s hospitals offer a number of services that do not require patients to beadmitted to its facilities overnight.

• Dental. The Group offers dental services aimed at preventing, diagnosing and treating diseases,disorders and conditions of the mouth and teeth.

• Physiotherapy. Physiotherapy is the branch of medicine that deals with the rehabilitation ofmovement and function after an injury. Cleopatra’s physiotherapy capabilities includeelectrotherapy, electrodiagnosis, hydrotherapy and access to gymnasiums.

• Primary care. Primary care is a general term for the diagnosis and treatment of acute and chronicillnesses. Providing primary care services at the Group’s hospitals enables the Group to capturenew patients and increase referrals to other services, doctors or hospitals in the Group’splatforms.

Ancillary services

The Group offers the following ancillary services at its four hospitals.

• Blood bank services. There are two distinct types of blood banks that can be operated by privatehospitals in Egypt—storage and collection. Storage blood banks can operate with fewer licenses andare limited to storage, analysis of samples and preparation of samples for transfusions. Collectionblood banks are licensed for storage services and to collect, distribute and sell blood samples.Cleopatra, Cairo Specialized Hospital and Al Shorouk each operate a collection blood bank, withCairo Specialized Hospital’s being one of the largest in the country, and Nile Badrawi operates astorage blood bank.

72

• Laboratory services. The Group offers laboratory testing of blood and other biological samples inorder to obtain information about the health of the patient.

• Pharmacy. The Group’s hospitals each have inpatient pharmacy services for patients admitted to thehospitals, outpatient pharmacy services that act as retail pharmacies for outpatients and chemotherapyservices that complement the hospitals’ oncology departments.

• Radiology. Radiology is a medical specialty that uses imaging to diagnose and treat diseases seenwithin the body.

Development of the Group’s ancillary services is a key part of the Group’s strategy to enhance revenue andmargins. Pharmacy services, for example, on average, accounted for around 30–35 per cent. of a patient’sbill in 2015. By developing and marketing the ancillary services to patients who are already using theGroup’s hospitals, the Group will be able to increase its revenue per patient. For instance, the Grouprecently negotiated favourable arrangements with certain insurance companies to enable patients beingtreated at the Group’s hospitals to use the pharmacies located in those hospitals. Further, CairoSpecialized Hospital is in the process of upgrading and renovating its radiology department so that theGroup’s other hospitals will be able to leverage their relationship with Cairo Specialized Hospital byreferring to it patients needing advanced radiology services.

The following chart sets forth the wide range of specialties and services offered at the Group’s hospitals.

CairoCleopatra Medical Center Nile Badrawi Al Shorouk

Inpatients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . � � � �Surgeries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . � � � �Catheters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . � � �Outpatient clinics . . . . . . . . . . . . . . . . . . . . . . . . . . � � � �Laboratory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . � � � �Radiology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . � � � �Heart tests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . � � � �Oncology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . � � �Emergency room . . . . . . . . . . . . . . . . . . . . . . . . . . � � � �Endoscopy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . � � � �Dental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . � � � �Physiotherapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . � � � �(1)

Pharmacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . � � � �Dialysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �(3) �(3) �(1) �(1)

Renal transplantation . . . . . . . . . . . . . . . . . . . . . . . � �(2)

(1) The Group is in the process of obtaining the necessary license.

(2) The Group is in the process of renewing the necessary license.

(3) Cleopatra and Cairo Specialized Hospital do not have a kidney dialysis unit and are providing dialysis services on an emergencyneed basis for inpatients.

Centres of Excellence

Each of the Group’s hospitals provides a full array of general healthcare services as discussed above in‘‘Service Offerings’’. In order to leverage the expertise of certain of the Group’s physician consultants, eachof the hospitals will become a centre of excellence in separate specialised medical fields, such as renaltransplantation and oncological radiotherapy. The Group intends the centres of excellence to havestate-of-the-art equipment for the relevant specialty practice and will seek to staff the most renowneddoctors in the respective field. This is designed to allow patients to attend the Group’s facilities at locationsconvenient to them for routine examinations, simple procedures and operations and general services whilealso being able to offer highly specialised services at other hospitals in the Group’s platform. The Groupintends to seek affiliations with international institutions in order to attract globally recognised experts inthe respective fields. The Group is aiming to establish the following centres of excellence:

• Neuroscience and urology at Al Shorouk

• Cardiology and radiology at Cairo Specialized Hospital

• Orthopaedic and micro-invasive surgeries at Cleopatra

• Oncology and renal transplantation at Nile Badrawi

73

6MAY201603561552

Consultant Doctors

In the Egyptian private healthcare market, it is uncommon for senior specialised medical doctors andsurgeons (referred to herein as consultant doctors) to be employed directly by hospitals. Rather, hospitalsenter into non-exclusive arrangements with consultant doctors, often on an unwritten basis, whereby aconsultant doctor will utilise a hospital’s facilities and the hospital will share in the consultant doctor’s feesgenerated from the patient.

Consultant doctors are approved to work in each of the Group’s hospitals by medical committees withineach hospital, generally comprising the hospital’s medical director and key consultants within the relevantspeciality. The arrangements are individually agreed with each consultant doctor.

A patient’s bill is divided into hospital fees, of which the hospital keeps 100 per cent, and consultant fees,which are generally shared between the consultant doctor and the hospital. The fee split varies based onthe type of service provided by the doctor and the doctor’s seniority and reputation. On average, thehospital will receive approximately 30-40 per cent. and the consultant doctor will receive approximately60-70 per cent. of the consultant fees generated from contract patients. If a consultant doctor specificallyrefers one of his or her patients to the hospital to receive treatment by himself or herself, and that patientpays out-of-pocket, the consultant will generally keep 100 per cent. of the consultant fees.

The Group’s hospital platform is able to attract well-reputed consultant doctors because of the Group’shospitals’ track record, brand reputation and patient base.

The hospitals employ certain doctors directly, including senior management, general managers and certainheads of departments, as well as junior doctors (referred to as resident doctors) who provide medicalsupport to the consultant doctors and staff the hospitals 24 hours a day.

Revenue generation

The Group derives its operating revenue from two principal types of patients: contract and out-of-pocket.Contract patients are those patients whose services are partially or fully paid for by private medicalinsurance providers or through direct corporate agreements with the patients’ employers. Out-of-pocketpatients are those patients who pay for their own services entirely. The following charts set forth thebreakdown of the Group’s revenue by patient type in 2015.

Out-of-pocket39%

Out-of-pocket33%

Out-of-pocket34%

Out-of-pocket61%

Contract61%

Contract67%

Cleopatra revenueby patient type

(2015)

Contract66%

Contract39%

Cairo Specialized Hospitalrevenue by patient type

(2015)

Nile Badrawi revenueby patient type

(2015)

Al Shorouk revenueby patient type

(2015)(1)

(1) The percentage of Al Shorouk’s operating revenue derived from out-of-pocket patients has historically been higher because itsbusiness model was largely built on patients referred to specific consultant doctors, which patients tend to pay out-of-pocket.Also, Al Shorouk is certified to provide check-ups of travellers to Gulf countries as part of the Gulf Approved Medical CentresAssociation programme, and these patients are classified as out-of-pocket.

74

Contract patients

Contract patients, which in 2015 represented 61.1 per cent., 65.6 per cent., 67.4 per cent. and 39.1 per cent.of Cleopatra’s, Cairo Specialized Hospital’s, Nile Badrawi’s and Al Shorouk’s revenue, respectively,include patients whose services are paid for by private medical insurance providers or througharrangements with patients’ employers. Insurance providers and companies contract directly with theGroup for set services at set prices. Contracts generally have a duration of one year and are non-exclusive.Each hospital maintains a price list that forms the basis of negotiations for its contracts with insuranceproviders and certain other contract customers. Syndicates generally have their own price lists. TheGroup’s contract customers will receive discounts, which range from five per cent. to 20 per cent., based onfactors such as the volume of services expected under the contract, the complexity of the services coveredby the contract, the expected turnover and the quality classification of the relevant hospital.

The percentage of the Group’s revenue derived from contract customers has grown steadily over the pastthree years at 54.5 per cent., 37.2 per cent., 41.9 per cent. and 70.0 per cent. between 2013 and 2015 atCleopatra, Cairo Specialized Hospital, Nile Badrawi and Al Shorouk, respectively. As at 31 December2015, the Group had 499 contracts with insurance providers and other companies. This number does notadjust for insurance providers or other companies that have contracts with multiple Group hospitals, whichthe Group is in the process of consolidating at a Group-wide level.

Insurance companies in Egypt classify healthcare providers into several categories based on pricing andquality of service. As an example, MetLife uses the following classifications:

• Gold card. This category includes the premium quality hospitals that are relatively more expensive.Services at these hospitals are available only to the highest insurance package holders. Gold cardholders are welcome to use any hospitals in the system. Gold card hospitals generally achieve betweena 15 and 20 per cent. pricing premium over silver card hospitals.

• Silver card. This category includes 2nd tier hospitals for midsized insurance package holders. Silvercard holders can use any hospitals in the system except for the gold card tier.

• Green card. This category includes 3rd tier hospitals for patients with a lower profile grade. Greencard holders can use green or orange card hospitals.

• Orange card. This category includes the cheapest insurance packages and lowest quality of healthcareservices. These hospitals are available to all patients, regardless of their profile grades. Orange cardholders may only use hospitals in this tier.

Cleopatra is a gold card hospital and Cairo Specialized Hospital, Nile Badrawi and Al Shorouk are silvercard hospitals.

75

The Group’s top contract customers in 2015 are listed below, by hospital, along with the correspondingpercentage of contract revenue from each contract customer.

% of contractrevenue

CleopatraMetLife . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23%Glob Med . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7%Prime Health . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7%Med Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%Next Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%

Cairo Specialized HospitalMetLife . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8%D.M.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%Presidential Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%MedCare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%Life for Health Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%

Nile Badrawi(1)

MedCare . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7%Ahram Institution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%Radio and Television Union . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%Eastern Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6%Telecom Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3%

Al Shorouk(1)

Embassy of Libya . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36%Egyptian Ministry of Justice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8%MetLife . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8%Bupa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5%Ahly Projects and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4%


The Group has established a business development function to strengthen relationships with contractcustomers and help ensure that the Group is maximising potential profit from contract patients byimproving the billing and collection processes. For more detail on these processes, see ‘‘Billing andPayment’’ in this Part 6 (Business Description).

Out-of-pocket patients

Out-of-pocket patients, which in 2015 represented 38.9 per cent., 34.4 per cent., 32.6 per cent. and 60.9 percent. of Cleopatra’s, Cairo Specialized Hospital’s, Nile Badrawi’s and Al Shorouk’s revenue, respectively,include patients who pay for their services entirely out-of-pocket. These patients typically attend one of theGroup’s hospitals because of that hospital’s reputable brand, because of the quality of the consultantdoctors practising in it or after being referred to it by a physician. Historically, patients would be referredto the consultant doctors practising at the Group’s hospitals through word of mouth in the medicalcommunity. The Group plans to implement a business development strategy to increase awareness of itshospitals with referring physicians, as well as directly with patients. Out-of-pocket patients are chargedaccording to the price lists maintained by each of the Group’s hospitals. Those price lists are generallyreviewed annually by a Group-wide pricing committee.

Al Shorouk has a higher percentage of out-of-pocket patients as compared to the rest of the hospitals inthe Group because some of its largest clients, including GAMCA, are considered cash accounts.

Ambulances

Each of the Group’s hospitals owns and operates a number of ambulances. The Group’s ambulance serviceis private and is used for emergency pickups, for transfers of patients between facilities or to specialist

76

centres or to drive certain patients home following discharge from the hospital. The following table setsforth the number of ambulances each of the Group’s hospitals owns and operates.

Number ofambulances

Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

The Group’s Hospital Facilities

Cleopatra

Cleopatra Hospital Company operates the Cleopatra hospital in Heliopolis, Cairo. The hospital wasbrought under common control with Cairo Specialized Hospital in July 2014. As at 31 December 2015,Cleopatra had 7,380 square metres of gross internal area, 165 beds, six operating rooms, 14 outpatientclinics and one catheterisation lab with four beds. The hospital, which has developed over40 specialisations since it was established in 1979, is one of Egypt’s leading private general hospitals. As at31 December 2015, it employed 335 nurses and 260 resident doctors. Many of the consultant doctorspractising at Cleopatra are university professors and renowned in their field of expertise. Cleopatra alsohas one of Egypt’s best staffed emergency rooms, with specialised medical doctors in addition to generalpractitioners.

In 2006, the Company acquired a facility adjacent to Cleopatra that the Group intends to develop into anextension of the hospital. Since Cleopatra currently has a high occupancy rate at its outpatient clinics andICU department, among others, the new facility is intended to serve as overflow for those services, as wellas expanded radiology services. The extension is intended to house approximately 100 beds and is expectedto be operational within 12–18 months after obtaining the necessary licenses and permits.

Since management began the integration of the Group, the following key integration milestones have beenaccomplished:

• Introduction of a business development department

• Replacement of equipment in the endoscopy department

• Quality team tasked with monitoring KPIs

• Inclusion of Cleopatra’s pharmacy prescriptions in eight of the top ten insurance agreements

• Clinical pharmacists hired to oversee medicine administration for inpatients

• Utilisation of outpatient clinics’ schedules improved

• Procurement department tasked with overseeing all purchasing activities

• Salary review undertaken and adjustment to employee packages

• Development of a business and capital expenditure plan

• Conversion of unutilised beds into ICU beds, which tend to command higher fees

• Introduction of disposable gowns and linens, which has improved cost savings and hygiene

Cairo Specialized Hospital

Cairo Specialized Hospital Company operates the Cairo Specialized Hospital, located in Heliopolis, Cairo.The hospital was brought under common control with Cleopatra in July 2014 and became a subsidiary ofCleopatra Hospital Company in September 2015. As at 31 December 2015, Cairo Specialized Hospital had14,600 square metres of gross internal area, 200 beds, nine operating rooms, 17 outpatient clinics and onecatheterisation lab with four beds. It employed 212 nurses and 183 resident doctors as at 31 December2015. The hospital also has around 206 consultant doctors who practise at its facilities, the majority ofwhom are university professors. Cairo Specialized Hospital was one of the first private sector hospital builtin Egypt.

77

Since management began the integration of the Group, the following key integration milestones have beenaccomplished:

• New managing director, operations director, sales and marketing manager, emergency room manager,head nurse and head of quality hired

• Renovation of the emergency room, endoscopy, ICU and dental departments

• Dental and outpatient clinics brought under direct management of the hospital

• Chief pharmacist and team hired to manage inpatient medication and the outpatient pharmacy

• Blood bank’s monthly rental fee doubled

• Kitchen renovated and Compass Group hired to provide catering services


Nile Badrawi

Nile Badrawi Hospital Company operates the Nile Badrawi hospital, located in Maadi, Cairo. The hospitalwas acquired by the Company in September 2015. As at 31 December 2015, Nile Badrawi had 10,980square metres of gross internal area, 139 beds, five operating rooms, 17 outpatient clinic and onecatheterisation lab with one bed. It employed 138 nurses and 94 resident doctors as at 31 December 2015.The hospital also has around 270 consultant doctors who practise at its facilities. The hospital specialises incomplex treatments such as in vitro fertilisation, neonatal care, organ transplant and open heart surgery,and it was one of the first hospitals in Egypt to offer radiotherapy. Nile Badrawi’s oncology departmentalso features a state-of-the-art linear accelerator.

Since the Company’s acquisition of Nile Badrawi, the following key integration milestones have beenaccomplished:

• Appointment of a new managing director, medical director and head of radiology

• Blood bank license obtained

• Development of a strategic plan for hospital renovation, including electromechanical and civil works,as well as upgrades to the outpatient clinics

• Improvement of utilisation of catheterisation labs by hiring new consultant doctors and internationalexperts

• Number of renal transplantation patients increased


Al Shorouk

Al Shorouk Hospital Company operates the Al Shorouk hospital, located in Mohandesin, Giza near Cairo.The hospital was acquired by the Company in January 2016 for EGP 280 million, subject to closing accountadjustments. As at 31 December 2015, Al Shorouk had 5,270 square metres of gross internal area, 120beds, six operating rooms and 17 outpatient clinics. It employed 304 nurses and 96 resident doctors as at31 December 2015. The hospital also has around 221 consultant doctors who practise at its facilities, themajority of whom are university professors. The hospital was established with the purpose of constructing atherapeutic hospital that is fully equipped for patient care. In 2010, Al Shorouk Hospital Companyacquired a facility adjacent to its existing hospital that the Group intends to develop into an extension ofthe hospital. The extension is intended to, in addition to general services, focus on ICU services, of whichthere is a current shortage in Cairo and which tend to achieve higher revenue than other hospital beds.The extension is intended to house approximately 40 beds and is expected to be operational in 2017,subject to obtaining all necessary licenses and approvals.

Since the Company’s acquisition of Al Shorouk, the following key integration milestones have beenaccomplished:

• New management hired for the laboratory and radiology departments

• Appointment of a financial controller, a human resources business partner and a head of businessdevelopment

• Alignment of the 2016 pharmacy purchases with the Group’s pharmaceutical tender

• Application of a standard organisational chart and introduced a business model to align with the restof the Group

78

Marketing

The Group does not currently engage in traditional advertising such as billboards, TV or radio, though itwill seek to do so in the future with special campaigns for each new service. To market its hospital brands,the Group plans to sponsor healthcare awareness campaigns, which it will do through its planned callcentre and other traditional advertising such as radio, provided it obtains the necessary approvals formedical advertising. Also, some of the Group’s resident doctors have participated, and will continue toparticipate, in medical convoys with the MoHP. These medical convoys travel to areas of Egypt that lackadequate healthcare services and provide low-cost or free healthcare services to the local population. Thecosts of these convoys are generally covered by the MoHP and/or private hospitals as part of corporatesocial responsibility programmes.

The Group intends to, in the short term, keep the existing branding of each hospital as it is, rather thanmerge them under a single brand. Once all of the Group’s hospitals have been operationally integrated anddemonstrate a Group-wide standard of care, the Group plans to develop a single umbrella brand.

In the meantime, the Group plans to begin operating its ambulances under a single brand. This strategy ismeant to ensure that, no matter where a patient is in Cairo, they can call a standard Group ambulancephone number and know that an ambulance is nearby. The ambulances will take the patient to the nearestGroup hospital for treatment.

Procurement and Warehousing

Since 2015, the Group has been working to integrate and centralise its procurement and warehousingfunctions. The Group has established specific guidelines for purchasing, tendering and evaluation that ithas applied across Cleopatra, Cairo Specialized Hospital and Nile Badrawi. It aims to apply theseguidelines to Al Shorouk, which was only recently acquired. Since the beginning of 2016, the Group ismaking purchases of both medical and non-medical supplies on a Group-wide basis and thereby takingadvantage of economies of scale and increased bargaining power with suppliers.

The Group is also in the advanced stages of centralising its warehousing. Currently, instead of a centralisedwarehouse, each of the Group’s hospitals has its own storage rooms within its facilities. The Group plans tooutsource its warehousing to a third-party in order to free up space in the hospitals that can be used forrevenue generating services.

Intellectual Property

The Group operates its hospitals and medical centres under the trade names Cleopatra, Cairo SpecializedHospital, Nile Badrawi and Al Shorouk, along with logos incorporating those names. The Companyregistered the trademark for ‘‘Cleopatra Hospital’’ in Egypt on 29 July 2010, and the trademarkregistration will expire on 20 June 2017. The Group is in the process of initiating the registration of thetrademark ‘‘Cleopatra Hospital Group’’ in Egypt.

Information Technology

The Group is reliant on IT systems for several key aspects of its administrative and patient managementoperations. The patient management system tracks information relating to patients throughout theirjourney within the Group’s facilities including registrations, patient records, admissions, surgeries,transfers and discharge, while administrative modules manage different aspects of HR, finance andprocurement functions.

The Group’s hospitals currently use different systems that are not interconnected. The Group is in theprocess of upgrading its IT systems into a unified platform comprising a new Hospital InformationSystem (HIS) and an Enterprise Resource Planning System. The Group has selected and acquired an SAPsystem for the back-office functions (comprising procurement, supply chain, finance and reporting) andintends to complete implementation by the end of 2016. The Group has also implemented a new HRmanagement information system that manages and controls the Group’s HR operations centrally. TheGroup is in the final phases of selection of an HIS which will manage the Group’s patient managementoperations, electronic medical records and clinical decision support systems. Implementation of the newHIS is expected to commence in the third quarter of 2016 and complete within 12 months thereafter. Thenew HIS system will ensure full electronic medical records and clinical integration of the Group.

79

17 IT professionals are currently employed by the Group, and the Group intends to implement a newdepartmental structure as it moves to full centralisation of the IT function.

Quality and Accreditation

The Group has established a Group-wide quality department tasked with developing a unified standard ofquality across the Group’s platform and obtaining key quality accreditations, including from JCI. The headof the quality department is Dr. Mohamed Khaled Hussein Elnoury, formerly the chief operating office ofthe 57357 children cancer hospital.

The Group is planning to employ eight members of staff in each of its hospitals dedicated to implementingits quality strategy. These employees will be overseen by the Group-wide quality department, which in turnreports to the quality committee of the Board of Directors.

Cleopatra has historically had a well-structured quality department that focuses on ISO standards and hasobtained ISO 9001, ISO 22000 and ISO 10002 certifications for quality, food safety and customersatisfaction, respectively. Al Shorouk has also obtained the ISO 9001 quality certification.

The Group’s target is to have all of its hospitals accredited by JCI by the end of 2017. The JCI teamconducted a full accreditation readiness assessment for Cleopatra and Cairo Specialized Hospital duringthe first half of 2015. The assessment identified improvement areas, in response to which the Group hasimplemented a number of quality-related initiatives, primarily focused on patient safety; assessment ofpatients; anaesthesia and surgical care; medication management and use; and prevention and infectioncontrol. The average JCI accreditation process takes 18–24 months from the first readiness assessment.

The Group is also targeting the Occupational Health and Safety Assessment Series 18001 certification forits health and safety management system, the Hazard Analysis and Critical Control Points foodmanagement system certification and the SGS food management system certification.

Competition

Our main competition (targeting similar patient segments) are typically private hospitals that are greaterthan 100 beds in size (examples include Al Nozha Hospital, Ganzouri Hospital, Dar Al Fouad, and AsSalam). To a lesser extent, the Group may also be competing with certain publicly owned hospitals(primarily those run by the Ministry of Defence) as these hospitals generally have good quality facilitiesand extend their service to the general public at market rates in certain specialties. The following table setsforth the number of beds in Egypt at each of these competitors as at 31 December 2015 as compared to theGroup.

Number ofbeds in Egypt

The Group(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 624Dar Al Fouad Hospital and As Salam International Hospital(2)(3) . . . . . . . . . . . . . . . . . . . 345Al Nozha Hospital(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110Ganzouri Hospital(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100

(1) The figure is an aggregate of the Group’s four hospitals as at 31 December 2015, including Al Shorouk, which the Company didnot own at that time.

(2) Source: LOGIC Report.

(3) Dar Al Fouad Hospital and As-Salam International Hospital operate as a group.

Billing and Payment Processing

Out-of-pocket patients generally pay a portion of the expected cost of services prior to receiving suchservices. The amount of the prepayment is generally dependant on the type of services that will berendered. Outpatients are expected to pay the difference immediately following receipt of the services. Inthe case of inpatients, the fees chargeable to the patient are reviewed at the end of each day that thepatient remains admitted. If the expected cost of services rises, the advance payment will be adjustedaccordingly by charging the patient an additional amount. The patient will be expected to pay theremaining balance upon discharge from the hospital.

In the case of patients paying through insurance providers or other healthcare payment plans, the Groupinvoices the respective third-party payers at the beginning of the calendar month following treatment. The

80

invoices are payable within 15–60 days, depending on the arrangements established with each third-partypayer.

According to the Group’s accounting policies, a provision is made for amounts remaining unpaid for morethan 150 days.

Employees

The following table sets forth the numbers of the Company’s employees, all of whom are employed inEgypt, and consultant doctors as at 31 December 2015 and 2014:

Employees and Consultant Doctors(1)(2)

As at31 December

2015 2014

Management and administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,255 2,291Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 875 888Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 534 547Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 483 487Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363 369

Nursing staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 989 925Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 335 331Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 177Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 133Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 304 284

Doctors employed by the Group(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 633 584Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260 245Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 145Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 97Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 97

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,877 3,800

Consultant doctors(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 980 —(5)

Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 283 —(5)

Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206 —(5)

Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 270 —(5)

Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 221 —(5)

(1) The data represents the aggregate number of employees and consultant doctors on 31 December of each year.


(3) Doctors employed by the Group comprise the heads of departments and resident doctors, and not consultant doctors.

(4) Consultant doctors are not employed by the Group. The consultant doctors use the Group’s medical facilities and share withthe hospital the doctors’ fees generated from their services. For more detail, see ‘‘Consultant Doctors’’ in this Part 6 (BusinessDescription). The data represents the number of consultant doctors approved to work in the Group’s hospitals. The figures areestimates only.

(5) Data not available.

None of the Group’s employees is covered by a collective bargaining agreement or represented by a labourorganisation. To date, the Group has not experienced any material labour-related work stoppages. TheCompany considers its relations with its employees to be good.

Legal and Administrative Proceedings

The Group is a defendant in several litigation proceedings which predominantly include malpractice andemployment lawsuits. The Group has also filed several lawsuits against patients refusing to pay medicalfees and governmental regulatory authorities in an attempt to suspend and cancel certain administrativedecisions.

81

Malpractice

As at 11 May 2016, the Group was involved in ten malpractice lawsuits with claimed amounts of damagesranging between EGP 40,000 and EGP 300,000, save for one lawsuit in which the plaintiff’s civil damagesclaim is EGP 95 million. The details of this lawsuit are as follows:

In 2014, nearly a year and a half prior to the Company acquiring Nile Badrawi, the heirs of a deceasedpatient filed a criminal lawsuit against a doctor and two nurses who were involved in the treatment of thedecedent. The decedent died due to complications during a hysterography procedure on her uterus at NileBadrawi when she was injected with formalin instead of the dye normally used for such a procedure. On17 November 2014 a court rendered a judgment ordering five years imprisonment for the doctor and threeyears for the two nurses. The condemned parties appealed the judgment before the Court of Appeal, andon 25 May 2015 the Court of Appeal affirmed the judgment against the doctor and reduced the nurses’prison terms to two years and one year, respectively. In 2015, based on the judgment rendered in thecriminal lawsuit, the heirs of the decedent filed a civil damages claim against, amongst others, Nile BadrawiHospital Company. The heirs of the decedent have made a joint claim against Nile Badrawi HospitalCompany and the other defendants for EGP 95 million for material and moral damages. The case iscurrently being heard by the trial court.

See ‘‘Hospital groups are often the subject of litigation by patients, and it is possible that some of these cases willbe determined adversely against the Group’’ in Part 1 (Risk Factors) of this Offering Memorandum.

In 2015, the parents of a patient filed a complaint against Nile Badrawi Hospital Company alleging that thepatient was infected, as a result of medical negligence, with hepatitis during a surgery. The publicprosecution has referred the matter to forensic medical examination for further investigation. If theinvestigation establishes that medical negligence occurred and a court renders such a judgment, theplaintiff will be entitled to file a civil damages claim against Nile Badrawi Hospital Company.

In April 2013, following the death of a patient at Cairo Specialized Hospital due to complications thatfollowed an operation to remove a tumour, the heirs of the deceased patient filed a lawsuit against thehospital requesting an expert’s opinion to establish whether the death resulted from medical negligence.The court referred the case to a forensic medical investigation, which concluded that the operation wasnecessary and that in similar cases the results of such operations are not guaranteed. Furthermore, theforensic medical investigation could not confirm, in view of the documentation presented, whether medicalnegligence occurred. Accordingly, the forensic medical investigation recommended referral of the matterto the General Directorate of Private Practice at the MoHP for further investigation. The court hasdiscretion whether or not to follow such recommendation. If the court concludes that medical negligenceoccurred, the plaintiff will be entitled to claim civil damages, despite not having claimed any initially.

Employment

As at 11 May 2016, there were six employment lawsuits pending against the Group in which the claimantsare demanding the payment of profit-sharing bonuses and compensation for unfair dismissal. The claimsrange from EGP 15,000 to EGP 600,000.

Real Estate and Property

It was discovered in the 1980s that a part of the Nile Badrawi facility was erected on state-owned property.The owners of Nile Badrawi at that time approached the Cairo Governorate to rectify the error through apurchase of the relevant land, and in 1988 the Cairo Governorate issued a decree approving the sale. In1995 it was discovered that the land in question had not been owned by the Cairo Governorate, but hadbeen allocated to the River Transport Authority and could therefore not be disposed of by the CairoGovernorate. In 2002, the matter was submitted to the Ministerial Committee for Settlement ofInvestment Disputes, which issued a decision approving the Cairo Governorate’s decision to sell the landand confirming the River Transport Authority’s non-objection to the transfer subject to receivingappropriate compensation. The Ministerial Committee for Settlement of Investment Disputes suggestedthat such compensation be guided by the amount paid to the Cairo Governorate in 1988. The terms of thetransfer have not yet been agreed with the River Transport Authority. The Company has recentlysubmitted an application to the Ministerial Committee for Settlement of Investment Disputes to expediteresolution of the matter. In order to acquire proper title to the land, the Group could have to paycompensation and could be impacted by loss or disruption of operations.

82

On 13 May 2015, the Head of the Dar Al Salam District rendered a demolition order for the 12th and13th floors of Nile Badrawi, alleging those floors were built without a permit. Nile Badrawi HospitalCompany filed a lawsuit before the Cairo Administrative Court requesting: a summary court judgmentordering the suspension of execution of the demolition order until a judgment on the substance is renderedby the court; the cancellation of the demolition order and appointment by the court of an expert toconduct a site visit of Nile Badrawi to review the building permit and the technical drawings and plans ofthe building. The hospital is comprised of a basement, a ground floor and 11 floors, and management is ofthe opinion that the building complies with its permit. The court is scheduled to render its judgment inrelation to the summary court order request on 26 May 2016.

The Group is involved in an administrative lawsuit in connection with its plot of land adjacent toCleopatra, which the Group intends to develop into an extension of the hospital. The plot contains abuilding that is listed by the Heritage Buildings Committee, and the Company is attempting to overturnthe listing in order to demolish the building and develop the hospital extension. The court rendered apreliminary judgment ordering a committee of engineering professors from Ain Shams University to adviseon the matter.

The Group is also party to two administrative lawsuits against the Cairo Governorate regarding aresidential apartment purchased by the Group and used for administrative purposes. The CairoGovernorate alleges that the apartment is being used for administrative purposes without a proper licenseand issued an order to stop such usage of the apartment. The Group obtained a judgment from thesummary court suspending execution of the order until a judgment on the substance is issued by theadministrative court where the Group has challenged the Cairo Governorate’s order. The CairoGovernorate has challenged the summary court judgment before the high administrative court. Theadministrative court ruling on the substance of the order rejected the Group’s challenge on 28 April 2016,and the Group is in the process of filing an appeal before the high administrative court.

Insurance

The Group carries insurance of various types, including civil liability, malpractice (only at Cleopatra, CairoSpecialized Hospital and, since February 2015, Nile Badrawi), property, theft, fire and default. The Groupmaintains an amount of insurance protection that it believes is adequate.

Internal Financial Controls

As a result of the Group having acquired all of its business operations within the past two years, the Grouphas not yet fully integrated its IT and internal financial control systems. The Group therefore currentlyuses different IT systems that are not interconnected or sufficiently secured. The Group has identified andis addressing weaknesses in its internal financial control systems relating to having an adequate fixed assetsregister and coding system to facilitate controls over fixed assets including physical existence andaccounting; having adequate ageing analysis to assist in more effective follow-up and calculation ofprobability of customer default; having a uniform general ledger coding system and uniform mapping toallow efficient preparation of separate and consolidated financial information; having an automatedliquidity analysis to assist management in cash management decisions; and having an automated segmentalrevenue and cost analysis for better segmental reporting.

In order to strengthen control over financial reporting, generate accurate data required for calculation ofdepreciation of fixed assets and impairment of receivables, facilitate the consolidation process includingsegmental reporting and generate more accurate risk management data, the Group’s management is in theprocess of upgrading its IT systems into a unified platform. As part of this upgrade, the Group has selectedand acquired an SAP ERP system for the back-office functions, implementation of which is intended to becomplete by the end of 2016. The Group has also implemented standard accounting policies andtreatments across its hospitals, implemented a centralised authority matrix, applied a dual-signatoryrequirement for banking transactions and is unifying its financial reporting systems, amongst otherinitiatives.

Regulatory Overview

Medical Establishments Law

The Medical Establishments Law is the primary legislation governing the establishment, operation, andlicensing of hospitals, clinics and certain other medical establishments in Egypt. The regulatory body that

83

grants licenses and monitors the hospitals’ compliance with the provisions of the Medical EstablishmentsLaw is the General Directorate of Private Practice at the MoHP.

Operational License

The Medical Establishments Law requires that hospitals obtain a license from the MoHP. The MedicalPermanent Committee of the MoHP is charged with reviewing licensing requests and issuing preliminaryapprovals for the establishment of private hospitals and monitoring the completion of equipmentinstallation and adequate qualification of personnel. Once a hospital obtains approval from the MedicalPermanent Committee, is registered with the Egyptian Medical Syndicate and has satisfied all conditionsand requirements of the Medical Establishments Law, the relevant governor must issue an operationallicense (the Operational License) for the hospital. The Operational License must be issued in the name of adoctor who is licensed to practice medicine in Egypt, as further detailed under the heading ‘‘Managementof Private Hospitals’’ below.

If a hospital is found to be operating without the necessary license, the MoHP can shut down the hospitaland request a court to impose a fine of EGP 1,000 to EGP 50,000.

Operational Licenses do not have a prescribed duration and must be amended if the hospital undertakescertain changes, including, but not limited to, a change of the hospital’s medical manager or the addition ofnew units or departments.

An Operational License can be revoked by the MoHP in certain circumstances, including, but not limitedto: (i) the hospital being rebuilt or moving to a new location; (ii) the hospital being altered or modified inviolation of applicable law; (iii) the hospital undertaking any activity outside of the license’s scope; (iv) acourt rendering a judgment to shut down the hospital; (v) the hospital repeating a violation after previouslybeing sanctioned for such a violation or (vi) unlicensed personnel undertaking healthcare services at thehospital.

Hospitals in Egypt are subject to annual inspections by the MoHP. If a violation is found, the MoHP willnotify the medical manager of the hospital to rectify the violation within 30 days. In the event of a seriousviolation, the relevant governor may, upon the request of the MoHP, order the administrative closure ofthe hospital for a period of time set by the governor. The hospital may not re-open until evidence isprovided that the violation has been rectified. Any violation of the Medical Establishments Law can bepenalised by a fine of EGP 2,000 to EGP 20,000. If a hospital does not remedy such a violation within therelevant notification period, a court may render a judgment to shut down the hospital temporarily orpermanently. If it is possible to shut down only the unit or department of the hospital found to be inviolation, the court may shut down only that unit or department.

Nile Badrawi hospital is in the process of amending its Operational License, as legally required, to reflectits recent change of its medical manager. Al Shorouk has recently opened a new outpatient clinic located ina leased premise adjacent to its currently facility, and opening such a clinic requires a separate license. Thelicense for this clinic reflects Dr. Khaled El Borolossy, Al Shorouk’s managing director, as the owner of theclinic, and the Group is in the process of rectifying this to designate Al Shorouk Hospital Company as theowner. Each of the Group’s hospitals has a valid Operational License.

Management of Private Hospitals

The medical director of each hospital in Egypt must be a doctor licensed to practice medicine in Egypt andmust be noted on the hospital’s Operational License. The MoHP and the relevant branch of the generalEgyptian medical syndicate must be notified within two weeks if the medical director is replaced. If themedical director leaves the hospital and is not replaced within two weeks, the hospital is required to shutdown until a new medical director is appointed.

A hospital’s file with the competent medical syndicate needs to be updated upon any change to thehospital’s Operational License. This process can be lengthy and cause delays if certain requireddocumentation is required. Nile Badrawi is currently facing such a delay after changing its medicaldirector, but management does not believe there have been any negative consequences as a result of suchdelay.

84

Personnel

All hospital personnel carrying out healthcare services, including doctors, nurses and technicians, must belicensed and registered with the MoHP. If any personnel are found to be practising without the properlicense or registration, the relevant hospital’s Operational License may be revoked. All personnel workingin a hospital must abide by their relevant professional code of conduct.

A hospital must have one resident doctor for every 20 beds. Additionally, it must have one nurse for everyfive beds, covering 24 hours a day.

Fees Charged by Private Hospitals

According to the Medical Establishments Law, the fees and prices a hospital can charge for patient staysand services should be determined by a committee of the MoHP and announced in a decree by therelevant governor.

The MoHP committee has not been operative and has only convened once, in 2005. None of the Group’shospitals has any governor decree determining its fees and prices.

Patients Data Privacy

Under the Medical Establishments Law, private hospitals are bound by the Medical Code of Ethics,promulgated by the Ministerial Decree No. 238 for the year 2003. Pursuant to the code and the MedicalEstablishments Law, doctors and hospitals have a duty not to disclose any confidential information abouttheir patients.

Other regulated medical activities

In Egypt, a hospital may also engage in certain specialised medical services provided that it obtains therequisite licenses. Similar to the Operational License, the licenses for specialised medical services areissued in the name of the manager who must be (i) a specialised licensed doctor in the relevant area ofpractice and (ii) duly licensed and registered with the MoHP.

Each unit providing specialised medical services is subject to inspection by the MoHP. Failure to complywith applicable requirements may lead to the closure of the breaching unit until such breach is rectified. Inaddition, the hospital may be fined and, in certain instances, the manager in charge of the breaching unitand/or the hospital may be imprisoned.

In addition to the Medical Establishments Law, specialised medical services are governed by certain otherlaws. Specialised medical services subject to such additional laws include, but are not limited to,pharmacological activities, blood bank activities, diagnostic and laboratory services, physiotherapy,catheterisation, ionised radiation services, kidney dialysis and organ transplantation.

Al Shorouk is in the process of obtaining a license to operate its physiotherapy unit and is renewing itslicense to provide organ and renal transplantation services. Nile Badrawi is in the process of updating itsradiology license following a change of manager. The Group’s other hospitals have each obtained therequisite licenses to carry on the services provided therein. The MoHP has provided an annotation onAl Shorouk’s and Nile Badrawi’s Operational Licenses, pursuant to which the hospitals are providingkidney dialysis services. Al Shorouk and Nile Badrawi are each in the process of obtaining separate licensesto provide kidney dialysis services in compliance with Ministerial Decreee No. 518 for the year 2012.

Licensing of certain non-medical activities

In addition to the laws related to provision of healthcare services, hospitals are bound by other lawsgoverning the operation and licensing of certain equipment, including, but not limited to, boilers,generators and elevators.

Nile Badrawi and Al Shorouk are each in the process of obtaining or renewing the required licenses tooperate their elevators. Nile Badrawi is missing a license to operate its boiler, but the hospital is in theprocess of replacing the existing boiler with other machinery that will not require a license or permit. Eachof the Group’s other hospitals has its required non-medical licenses. Failure to obtain the required licensesis penalised by a fine and the relevant administrative authority may order the equipment to be shut downuntil the license is obtained.

85

Environmental Requirements and Handling Hazardous Medical Wastes

The Law No. 4 for the year 1994 and its executive regulations (the Environmental Law) is the primary lawgoverning matters relating to the environment, including, but not limited to, treatment and handling ofhazardous substances and waste and protection of the air and water from pollution. The regulatoryauthority that monitors compliance with the Environmental Law is the Egyptian Environmental AffairsAgency (EEAA).

Under the Environmental Law, the Company’s hospitals must maintain environmental and hazardouswaste registers; engage a licensed company to dispose of hazardous waste; and obtain a license to handleand dispose of hazardous substances and waste. The Environmental Law also mandates the locations thatcan be used for the disposal of waste. Cleopatra Hospital is in the process of renewing the required licenseto handle and dispose of hazardous substances and wastes.

The EEAA conducts periodic inspections to ensure compliance with the Environmental Law. Violationsare generally penalised by fines and/or imprisonment of the chairman of the company or the manager incharge of the hospital. In addition to these penalties, the hospital may be subject to administrative closureuntil the breach is remedied.

Hospitals are required to operate a hazardous waste treatment unit, or, if such operation would bedifficult, to collect and transport the hazardous waste to specified collection locations. A licensed entitymust be used for the transportation of such waste.

Hospitals are subject to additional laws regulating public cleanliness and the disposal of liquid waste.

Health and Safety Requirements

The Law No. 12 for the Year 2003 (the Labour Law) is the main legislation regulating occupational healthand safety. The Labour Law and certain other ministerial decrees mandate that companies provide allnecessary health and safety precautions, equipment and machinery, as well as ensure the safety of theworking environment from (i) physical dangers resulting from fluctuating temperature, noise anddangerous and harmful radiation, (ii) mechanical dangers resulting from equipment and machinery,(iii) biological dangers such as bacteria or viruses or (iv) dangers resulting from chemicals.

The Labour Law allows the competent authority to shut down all or part of a company, or suspend the useof certain machinery or equipment, if it determines that there is an imminent safety hazard or health risk.

The Group must also allow the General Authority for Medical Insurance to perform periodic medical testsfor the Group’s employees.

The Group’s management considers that the Group complies with the health and safety requirements ofthe Labour Law, except for certain fire-related requirements in Al Shorouk, Cairo Specialized Hospitaland Nile Badrawi. The Group is in the process of rectifying these violations by obtaining the requiredequipment.

Failure to comply with the health and safety requirements of the Labour Law could result in imprisonmentof the Company’s legal representative for a period of not less than 3 months and/or a fine betweenEGP 1,000 and EGP 10,000. The penalty is doubled for recurring violations.

The Group is subject to the additional health and safety requirements regulated under laws and decreesgoverning, inter alia, organ transplantation, certain medical tests and radiology. These additionalrequirements generally relate to infection control and protective equipment for hospital personnel.

86

PART 7Directors, Senior Management and Corporate Governance

Directors

Pursuant to the Company’s Statutes, the Board must consist of a minimum of three and a maximum ofnine Directors. Currently, the Board consists of seven Directors appointed by the Shareholders at theordinary general meeting on 10 December 2015. The Board must meet at least once per year, Directors aregenerally elected for a term of three years. The committees of the Board are discussed in ‘‘CorporateGovernance’’ below.

The following table lists the names and positions of the Directors.

Name Position

Dr. Ahmed Ezzeldin Mahmoud Abdelaal . . . . . . . . . . Chairman and Group Chief Executive OfficerAhmed Adel Badreldin . . . . . . . . . . . . . . . . . . . . . . . Non-Executive DirectorWalid Fayez Said Bakr . . . . . . . . . . . . . . . . . . . . . . . . Non-Executive DirectorDr. Mohamed Awad Tag El Din . . . . . . . . . . . . . . . . . Independent Non-Executive DirectorNabil Walid Kamhawi . . . . . . . . . . . . . . . . . . . . . . . . . Independent Non-Executive DirectorOmar Atef Kinawy . . . . . . . . . . . . . . . . . . . . . . . . . . . Independent Non-Executive DirectorSameh Mahmoud Mohsen . . . . . . . . . . . . . . . . . . . . . Non-Executive Director

Dr. Ahmed Ezzeldin Mahmoud Abdelaal (Chairman and Group Chief Executive Officer)

Dr. Ahmed Ezzeldin Mahmoud Abdelaal joined the Group in June 2015 after previously working atJohnson & Johnson as a director overseeing government affairs and policy for MENA and Pakistan. Hehad earlier served as managing director responsible for the medical sector at the same company, coveringEgypt and Libya. There, he played a role in the development of healthcare systems in Egypt and theMiddle East through the creation of four centres of excellence that together trained more than 1,500healthcare professionals annually from 2006 through 2012. Prior to that, Dr. Ezzeldin worked atGlaxoSmithKline, where he led the Middle East region integration plan as part of the merger ofSmithKline & Beecham and Glaxo Wellcome, as well as having roles in resource planning andsegmentation projects. He had earlier spent 18 years with pharmaceutical company Merck Sharp &Dohme. Dr. Ezzeldin is past co-chairman of the Healthcare and Pharmaceutical Committee of theAmerican Chamber of Commerce in Egypt and was a member of the Egyptian Ministry of Health’sSupreme Committee for Registration of Medical and Diagnostics Devices. He holds a Bachelor Degree inPharmaceutical Science from Cairo University.

Ahmed Adel Badreldin (Non-Executive Director)

Mr. Badreldin is a Partner and Head of MENA at The Abraaj Group and oversees its investments in theMiddle East and North Africa. He currently serves as a director at Integrated Diagnostics Holdings,Oncology Diagnostics Morocco, and Clinique Taoufik Group. Prior to joining The Abraaj Group in 2008,he was a Director in Investment Banking at Barclays Capital in London in the Financial Sponsors andLeveraged Finance Team.

Walid Fayez Said Bakr (Non-Executive Director)

Mr. Walid Fayez Said Bakr has 20 years of experience in finance, investment and operational roles acrossthe Middle East, Europe and the U.S. He is also a Managing Director of the Abraaj Group and a memberof its Middle East and North Africa investment team. He also serves on the Board of Trustees ofEducation for Employment Egypt, the American University in Cairo’s Entrepreneurship and InnovationCouncil and the Bidaya Fund advisory board. Prior to joining The Abraaj Group in 2010, Mr. Bakr was adirector of Riyada Ventures and Director of the Technology Development Fund, Egypt’s leading venturecapital fund. He also worked with AT&T in Kuwait and managed and established several IT companies inthe United States and Europe. Mr. Bakr holds a Bachelor Degree of Science in CommunicationsEngineering from Alexandria University and was selected as a Kauffman Fellow in 2013.

Dr. Mohamed Awad Tag El Din (Independent Non-Executive Director)

Dr. Awad Tag El Din was the Egyptian Minister of Health from March 2002 to December 2005. Prior tothat, he was the president and vice president of Ain Shams University for one and four years, respectively.

87

He holds a Bachelor Degree in medicine, two diplomas in internal medicine and pulmonology diseases anda PhD from Ain Shams University. He is also a professor and consultant of pulmonology.

Nabil Walid Kamhawi (Independent Non-Executive Director)

Mr. Kamhawi has over 40 years of consulting, audit and advisory experience in Europe and the MiddleEast in a wide range of industries. He was the managing partner of Ernst & Young in Egypt following itsintegration with Arthur Andersen, of which he was the managing partner. Mr. Kamhawi holds a BachelorDegree in commerce (accounting) from Ain Shams University and is a member of the Institute ofChartered Accountants in England and Wales.

Omar Atef Kinawy (Independent Non-Executive Director)

Mr. Kinawy joined the Group in 2015. Prior to that, he was the former deputy head of the EgyptianGeneral Intelligence and graduated from the Egyptian Military College in 1968.

Sameh Mahmoud Mohsen (Non-Executive Director)

Mr. Mohsen is one of the founders and former CEO of Cleopatra and has worked in the industry for morethan 29 years. He holds a Bachelor Degree in engineering from Cairo University.

Senior Management

The Company’s senior management, in addition to the Group Chief Executive Officer listed above, are asfollows:

Name Position

Marwa Mohamed Hassan El Abassiry . . . . . . . . . . . . . Human Resources DirectorAmr Abdelghany Alashkar . . . . . . . . . . . . . . . . . . . . . Chief Information OfficerDr. Khaled Abdelwahab Elborolossy . . . . . . . . . . . . . . Al Shorouk Chief Executive OfficerHassan Ahmed Hassan Fikry . . . . . . . . . . . . . . . . . . . Corporate Strategy and Development

ManagerKhaled Hassan Ahmed . . . . . . . . . . . . . . . . . . . . . . . Chief Financial OfficerDr. Mohamed Ibrahim Ahmed Yousef . . . . . . . . . . . . Cleopatra General ManagerMona Makram Kamel . . . . . . . . . . . . . . . . . . . . . . . . Supply Chain DirectorDr. Mohamed Khaled Hussein Elnoury . . . . . . . . . . . Group Quality Director and Nile Badrawi

Chief Executive OfficerProfessor Hassan Mohamed Zakaria Shaker . . . . . . . . Cairo Specialized Hospital Managing Director

Marwa Mohamed Hassan El Abassiry (Human Resources Director)

Ms. Marwa Al Abassiry joined the Group in February 2015. Previously, she was the Human ResourcesBusiness Partner at Electrolux Egypt. She also worked at Aga-Khan Cultural Services, Mobinil and P&GEgypt. Ms. Al Abassiry holds a Bachelor of Arts from the Faculty of Al-Alsun, Ain Shams University.

Amr Abdelghany Alashkar (Chief Information Officer)

Mr. Amr Abdelghany Alashkar joined the Group in November 2015. Previously, he was the ChiefInformation Officer at Integrated Diagnostics Holdings and worked at OMS and the United Nations. Heholds a Bachelor Degree in Computer Science from Ain Shams University, a Master of Computer Sciencefrom the University of Louisville and a Doctorate in Business Administration from Maastricht BusinessSchool, Holland.

Dr. Khaled Abdelwahab Elborolossy (Al Shorouk Chief Executive Officer)

Dr. Khaled Abdelwahab Elborolossy is a co-founder, Chief Executive Officer and former ManagingDirector of Al Shorouk Hospital Company. He is also a Professor and Head of the Department ofAnaesthesia at Cairo University. He holds a Bachelor Degree and two Masters Degrees, with a specialty inanaesthesia, from Cairo University.

88

Hassan Ahmed Hassan Fikry (Corporate Strategy and Development Manager)

Prior to joining the Group in October 2015, Mr. Hassan Fikry was the Co-Founder Executive Director ofEl Seha Laboratories, the Executive Director of Dr. Ahmed Hassan Fikry Medical Centre and theCoordinator and Strategic Planner at Orascom Telecom Holding. He has a Bachelor of Commerce andEconomics from the John Molson School of Business, Concordia University.

Khaled Hassan Ahmed (Chief Financial Officer)

Mr. Khaled Hassan joined the Group in January 2015 and has 25 years of experience in financialmanagement. Previously, he worked at Gozour Holding, ASEC Holding and FRANKE Egypt. Mr. Hassanholds a Bachelor Degree in Commerce from Cairo University, a Masters in Financial Control and iscertified in Financial Modelling.

Dr. Mohamed Ibrahim Ahmed Yousef (Cleopatra General Manager)

Prior to joining Cleopatra Hospital Company in 2001, Dr. Mohamed Ibrahim was a physician at MilitaryHospital and the Commander of Navy Hospital, UAE. He holds a Bachelor and Masters from Ain ShamsUniversity, faculty of Medicine, with a specialty in obstetrics and gynaecology, as well as a Masters inHospital Management from the American University in Cairo.

Mona Makram Kamel (Supply Chain Director)

Ms. Mona Makram joined the Group in November 2015. Prior to this, she served as the supply chaindirector at As-Salam International Hospital (part of the Alameda Group), as the regional supply chainmanager of Telsol-El-Sewedy, as the procurement manager of CARE in Egypt and as the procurementmanager of Al Futtaim in Egypt. She holds a Bachelor Degree in Agriculture and an international businessadministration diploma from the Institute of Agriculture Cooperation. She is also certified as anInternational Certified Supply Chain Manager by the International Purchasing and Supply ChainManagement Institute in the United States as of 2013 and as a Certified Supply Chain Manager by APICSas of 2015.

Dr. Mohamed Khaled Hussein Elnoury (Group Quality Director and Nile Badrawi Chief ExecutiveOfficer)

Dr. Mohamed Khaled Hussein Elnoury received his Doctorate of Business Administration, HospitalManagement from the Arab Academy for Science, Technology & Maritime Support and his Master inInternal Medicine and Bachelor of Medicine and Surgery from Cairo University. He also has a HospitalAdministration Diploma from Ain Sham University and a Healthcare TQM from the American Universityin Cairo. Before joining the Group in October 2015, Dr. El Noury was the Chief Operating Officer of the57357 children cancer hospital. He also served as Medical Director and Director of Operations, Accidentand Emergency at Arab Contractors Medical Center.

Professor Hassan Mohamed Zakaria Shaker (Cairo Specialized Hospital Managing Director)

Professor Hassan Shaker received his MD in General Surgery, his Master of General Surgery and hisBachelor of Medicine from Ain Shams University. He is also a Professor of Surgery in the faculty ofMedicine at Ain Shams University. Professor Shaker joined the Group in October 2015 after a previousmanagerial career including serving as the Managing Director of Ain Shams University SpecializedHospital and a Member of the Board at Railway Hospital and Arab Contractors Medical Center.

Corporate governance

The corporate affairs of the Company are governed by Law No. 159 of 1981 and its Executive Regulations,as amended (the Companies Law), the Capital Market Law, the EGX Listing Rules, other laws governingcompanies incorporated in Egypt and its Statutes.

The Company subject to Egyptian disclosure requirements and is required to publish annual and quarterlyfinancial statements prepared in accordance with EAS, provide notices of any material developments toEFSA and the EGX and provide EGX with minutes of the Company’s ordinary and extraordinary generalmeetings.

89

Board Committees

Audit committee

Pursuant to the EGX Listing Rules, a listed company is required to have an audit committee comprising atleast three non-executive directors with experience in the relevant sector. At least two members must beindependent (defined as a non-executive director who, during the preceding three years was not anemployee of, a party to an agreement with or a board member of the company, its holding company, itssubsidiaries or its affiliates or any of their related parties).

The audit committee must ensure that a listed company’s management abide with the auditor and EFSA’srecommendations, as well as meet and provide the Board with reports at least once every quarter. If theBoard does not follow a material recommendation of the audit committee, the chairman of the auditcommittee must, within 60 days, notify both the EGX and EFSA.

The Company’s audit committee complies with the requirements of the EGX Listing Rules. Nabil WalidKamhawi is the chairman and Walid Fayez Said Bakr and Dr. Mohamed Awad Tag El Din are alsomembers. Nabil Walid Kamhawi is considered a financial and accounting expert. Nabil Walid Kamhawi andDr. Mohamed Awad Tag El Din are Independent Non-Executive Directors.

Quality control committee

The quality control committee is in charge of the development and implementation of the Group’s qualitycontrol programmes. As part of this responsibility, it monitors the performance indicators and providesrecommendations on strategic directions for the development of the Group’s services.

The quality control committee is chaired by Dr. Mohamed Awad Tag El Din and Dr. Mohamed KhaledHussein Elnoury is also a member.

Nominations and remuneration committee

The nominations and remuneration committee is in charge of providing recommendations on theremuneration of the senior management, reviewing the Group’s bonus schemes and the development ofthe employment succession plan.

The nominations and remuneration committee is chaired by Ahmed Adel Badreldin and also comprisesWalid Fayez Said Bakr and Nabil Walid Kamhawi as members.

Related Party Transactions

The following summarises the principles of the Companies Law with respect to related party transactions:

• Any bilateral contract between a company and any of its founding shareholders during the first fiveyears of the company’s existence, and any bilateral contract between a company and any of its boardmembers at any time, must be authorised by the ordinary general meeting before each individualcontract is entered into, failing which the contract will be deemed to be null and void.

• No board member or manager may engage in the same business activities as those of the company orany branch thereof without the prior authorisation of the ordinary general meeting, failing which thecompany will be entitled to compensation or to treat such competitive transactions as having beencarried out for the account of the company.

• Where any matter to be considered by the board of a company involves or creates a conflict of interestbetween that company and any of its board members or managers, each such board member ormanager must disclose such conflict to the board and refrain from voting on such matter. All suchmatters must be reported to the ordinary general meeting before any resolution relating to suchmatter is voted on by the ordinary general meeting.

• No board member or manager may enter into any bilateral contract on behalf of a company with asecond entity of which the board member or manager is also a director, or in which a shareholder orshareholders of the company own the majority of the shares, if the consideration for such contract is20 per cent. or more below that which could be secured in an arm’s length agreement, failing whichthe transaction and/or contract shall be considered null and void.

A related party transaction that is presented to a company’s ordinary general meeting must be approved bymore than 50 per cent. of the shareholders attending the meeting.

90

Additionally, the EGX Listing Rules provide that insiders, founders and main shareholders(i.e. shareholders and their related parties owning, directly or indirectly, ten per cent. or more of thecompany’s shares) and their related parties may not be parties to any bilateral contracts with the companyunless the contract is submitted for approval by the ordinary general meeting of the company with all itsdetails and data including the quantity and price prior to undertaking the transaction or executing thecontract. It should be noted that the concerned party from among the insiders, founders, mainshareholders and/or their related parties cannot vote in such shareholders’ meeting.

For a description of related party transactions entered into by the Company, see ‘‘Related PartyTransactions’’ in Part 13 (Additional Information).

91

PART 8Selected Financial Information

The selected financial information and the related footnotes set out below has been extracted from the proforma financial information included in Part 11 (Unaudited Pro Forma Consolidated Financial Information)and from the Historical Financial Information in Part 14 (Historical Financial Information) of this OfferingMemorandum, where it is shown with important notes describing some of the line items and should be read inconjunction with Part 2 (Presentation of Financial and Other Information) and Part 9 (Operating andFinancial Review).

Pro Forma Statement of Income

Pro FormaYear ended

31 December 2015

(unaudited)(EGP)

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 741,329,410Operating cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (507,357,411)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,971,999

General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (95,721,313)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19,207,076)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,924,985

Profit before finance income & income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,968,595

Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,253,708Finance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (59,417,233)Foreign currency (Loss)/gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,087)

Profit before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76,798,983

Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,931,261)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 853,826

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,721,548

Profit attributable to:Owners of the parent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,541,522Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,180,027

51,721,548

Non-GAAP measures:Pro forma EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,587,602

Note: The pro forma statement of income shows the effect of the Company’s ownership of Cairo Specialized Hospital Company, NileBadrawi Hospital Company and Al Shorouk Hospital Company as if the acquisition of each of those companies had occurred on1 January 2015. For more information, see Part 11 (Unaudited Pro Forma Consolidated Financial Information).

92

Cleopatra Hospital Company Statement of Income Data


2015 2014 2013

(audited)(EGP)

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332,002,699 290,294,814 243,293,152Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (214,407,386) (204,608,154) (171,606,030)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,595,313 85,686,660 71,687,122General and administrative expenses . . . . . . . . . . . . . . . . (27,859,422) (20,670,525) (20,556,280)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,973,505) (2,886,902) (761,088)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,028,699 678,591 731,740

Profit for the year before finance income and income tax . 87,791,085 62,807,824 51,101,494

Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,104,232 2,086,651 1,572,705Finance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,487,998) (3,235) —

Profit for the year before income tax . . . . . . . . . . . . . . . . 84,407,319 64,891,240 52,674,199Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,603,310) (21,372,222) (13,996,640)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 886,196 283,107 10,596

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,690,205 43,802,125 38,688,155

Non-GAAP measures:Adjusted profit for the year(1) . . . . . . . . . . . . . . . . . . . . . 64,690,205 64,102,125 41,785,123EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,445,630 72,842,960 59,211,607Adjusted EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,445,630 93,142,960 62,308,575

(1) Unaudited.

Cairo Specialized Hospital Company Statement of Income Data


2015 2014 Restated 2013

(audited)(EGP)

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,377,454 123,280,745 114,040,779Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (111,849,380) (90,405,164) (82,119,996)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,528,074 32,875,581 31,920,783General and administrative expenses . . . . . . . . . . . . . . . . . (14,207,273) (10,058,402) (7,794,833)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,945,188) (710,000) —Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,808,193 3,096,473 3,027,518

Profit for the year before finance income and income tax . . 20,183,806 25,203,652 27,153,468

Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,021,134 2,704,661 2,259,506

Profit for the year before income tax . . . . . . . . . . . . . . . . . 24,204,940 27,908,313 29,412,974Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,387,426) (8,688,849) (7,006,480)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,841 (694,392) (265,067)

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,248,355 18,525,072 22,141,427

Non-GAAP measures:Adjusted profit for the year(1) . . . . . . . . . . . . . . . . . . . . . . . 24,154,267 18,525,072 22,141,427EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,487,278 30,287,270 30,218,695Adjusted EBITDA(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,487,278 30,287,270 30,218,695

(1) Unaudited.

93

Nile Badrawi Hospital Company Statement of Income Data


2015 2014 Restated 2013 Restated

(audited)(EGP)

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121,307,079 107,482,434 86,802,150Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (81,601,341) (76,120,070) (69,045,206)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,705,738 31,362,364 17,756,944General and administrative expenses . . . . . . . . . . . . . . . . . . (28,072,750) (9,245,588) (10,286,049)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,218,259) (722,700) —Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,856,750 3,460,673 871,475

Profit for the year before finance income and income tax . . . 9,271,479 24,854,749 8,342,370

Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 11,312(Loss)/gain on currency translation differences . . . . . . . . . . . (6,087) 38,313 17,577

Profit for the year before income tax . . . . . . . . . . . . . . . . . . 9,265,392 24,893,062 8,371,259Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,991,312) (7,017,881) (2,060,578)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (661,591) 282,104 417,112

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,612,489 18,157,285 6,727,793


(1) Unaudited.

Al Shorouk Hospital Company Statement of Income Data


2015 2014 Restated 2013 Restated

(audited)(EGP)

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,642,178 117,592,072 98,542Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (99,913,207) (85,850,554) (76,035,389)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,728,971 31,741,518 22,488,817General and administrative expenses . . . . . . . . . . . . . . . . . . (25,581,868) (17,078,570) (14,540,905)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,070,124) — (6,676,913)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,231,343 1,189,322 1,072,690


Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,342 113,062 72,973Finance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,333,834) (55,125) (20,861)

Profit for the year before income tax . . . . . . . . . . . . . . . . . . 8,102,830 15,910,207 2,395,801Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,108,178) (4,491,563) (2,638,327)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,380 29,752 172,330

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,193,032 11,448,396 (70,196)


(1) Unaudited.

94

Pro Forma Balance Sheet

Pro FormaAs at

31 December 2015

(unaudited)(EGP)

AssetsNon-current assetsProperty, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 377,459,385Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 277,852,615Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,163,446

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 657,475,446

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Held to maturity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,080Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,230,153Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,273,624Other debit balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,632,474Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,996,688

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,171,019

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,960,921Other credit balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,844,319Current Portion Of Long Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,077,471Income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,244,787

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230,127,498

Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31,956,479)

Total investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625,518,967

Financed as follows: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Paid up capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000,000Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (62,303,508)Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,270,052

Total Shareholder’s equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,966,544

Non-Controlling interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,078,338

Total Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,044,882

Long Term Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 372,291,782Trade and other payables—Due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,379,723Deferred income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,802,580

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463,474,085

Total equity and non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 625,518,967

Non-GAAP measures:Pro forma net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538,596,607

Note: The pro forma balance sheet shows the effect of the Company’s ownership of Al Shorouk Hospital Company as if theacquisition of that company had occurred on 31 December 2015. The Company already owned Cairo Specialized Hospital Companyand Nile Badrawi Hospital Company as at 31 December 2015. For more information, see Part 11 (Unaudited Pro FormaConsolidated Financial Information).

95

Cleopatra Hospital Company Balance Sheet Data

As at 31 December

2015 2014 2013

(audited)(EGP)

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 421,851,466 62,787,629 66,494,758Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,658,411 129,434,244 102,758,545Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 521,509,877 192,221,873 169,253,303

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 217,906,819 2,297,712 2,580,819Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,580,657 54,591,965 36,326,652

Total liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327,487,476 56,889,677 38,907,471

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . 200,022,401 135,332,196 130,345,832

Total funding of working capital and non-current liabilities(1) 417,929,220 137,629,908 132,926,651

Non-GAAP measures:Net debt(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260,736,241 (23,779,663) 4,026,626


(2) Unaudited.

Cairo Specialized Hospital Company Balance Sheet Data

As at 31 December

20142015 Restated 2013

(audited)(EGP)

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,678,386 21,981,202 24,139,669Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,793,359 65,754,126 56,432,214Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,471,745 87,735,328 80,571,883

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1,727,506 2,158,347 1,463,955Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,341,609 34,725,951 27,881,861

Total liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,069,115 36,884,298 29,345,816

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . 66,402,630 50,851,030 51,226,067

Total funding of working capital and non-current liabilities(1) 68,130,136 53,009,377 52,690,022

Non-GAAP measures:Net debt(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,379,862) (26,860,379) (22,465,844)


(2) Unaudited.

96

Nile Badrawi Hospital Company Balance Sheet Data

As at 31 December

2014 20132015 Restated Restated

(audited)(EGP)

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,884,960 12,971,036 12,155,920Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,291,592 48,058,887 33,036,167Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,176,552 61,029,923 45,192,087

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,267,169 29,733,029 29,728,325Total liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,267,169 29,733,029 29,728,325

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,909,383 31,296,894 15,463,762

Total funding of working capital and non-current liabilities(1) . . 34,909,383 31,296,894 15,463,762

Non-GAAP measures:Net debt(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,394,084 16,751,013 24,686,565


(2) Unaudited.

Al Shorouk Hospital Company Balance Sheet Data

As at 31 December


(audited)(EGP)

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,946,283 53,097,084 53,220,907Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,439,387 32,896,106 25,206,306Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88,385,670 85,993,190 78,427,213

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891,782 1,871,996 3,533,974Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,949,796 36,905,026 33,808,980

Total liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,841,578 38,777,022 37,342,954

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,544,092 47,216,168 41,084,259

Total funding of working capital and non-current liabilities(1) . . . 43,435,874 49,088,164 44,618,233

Non-GAAP measures:Net debt(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,573,457 21,776,790 22,748,754


(2) Unaudited.

Cleopatra Hospital Company Cash Flow Statement Data


2015 2014 2013

(audited)(EGP)

Net cash flows generated from operating activities . . . . . . . . 148,822,297 76,243,422 45,008,936Net cash flows used in investing activities . . . . . . . . . . . . . . (381,630,465) (1,337,905) (25,003)Net cash flows generated from / (used in) financing activities 202,733,506 (38,815,761) (44,189,019)Change in cash and cash equivalents during the year . . . . . . (30,074,662) 36,089,756 794,914

Cash and cash equivalents at the end of the year . . . . . . . . . 23,557,392 53,632,054 17,542,289

97

Cairo Specialized Hospital Company Cash Flow Statement Data


20142015 Restated 2013

(audited)(EGP)

Net cash flows generated from operating activities . . . . . . . . . 17,174,218 29,238,155 22,842,235Net cash flows used in investing activities . . . . . . . . . . . . . . . (55,262,110) (1,491,790) (2,442,473)Net cash flows used in financing activities . . . . . . . . . . . . . . . (1,696,755) (18,900,109) (17,331,847)Change in cash and cash equivalents during the year . . . . . . . (39,784,647) 8,846,256 3,067,915

Cash and cash equivalents at the end of the year . . . . . . . . . 4,674,101 44,458,748 35,612,492

Nile Badrawi Hospital Company Cash Flow Statement Data



(audited)(EGP)

Net cash flows generated from operating activities . . . . . . . . . . . 13,663,167 14,604,868 10,453,828Net cash flows used in investing activities . . . . . . . . . . . . . . . . . (1,233,595) (3,995,126) (2,802,430)Net cash flows used in financing activities . . . . . . . . . . . . . . . . . — (7,234,243) (7,110,812)Change in cash and cash equivalents during the year . . . . . . . . . 12,429,572 3,375,499 540,586

Cash and cash equivalents at the end of the year . . . . . . . . . . . 18,786,253 6,356,681 2,981,182

Al Shorouk Hospital Company Cash Flow Statement Data



(audited)(EGP)

Net cash flows generated from operating activities . . . . . . . . . . 10,519,029 12,264,230 14,587,418Net cash flows used in investing activities . . . . . . . . . . . . . . . . . (3,940,191) (4,679,141) (2,126,337)Net cash flows used in financing activities . . . . . . . . . . . . . . . . (7,247,688) (7,032,293) (10,382,797)Change in cash and cash equivalents during the year . . . . . . . . (668,850) 552,796 2,078,284

Cash and cash equivalents at the end of the year . . . . . . . . . . . 4,089,819 4,758,669 4,205,873

98

PART 9Operating and Financial Review

This Part 9 (Operating and Financial Review) should be read in conjunction with the selected key HistoricalFinancial Information table included within the ‘‘Summary’’, Part 2 (Presentation of Financial and OtherInformation), Part 5 (Industry Overview), Part 6 (Business Description), Part 8 (Selected FinancialInformation), Part 11 (Unaudited Pro Forma Consolidated Financial Information) and Part 14 (HistoricalFinancial Information). Prospective investors should read the entire document and not just rely on the summaryset out below. The financial information included in this Part 9 (Operating and Financial Review) is extractedfrom the financial information set out in Part 14 (Historical Financial Information) and has been prepared inaccordance with EAS.

The following discussion of the Company’s results of operations and financial condition contains forward-looking statements. The Company’s actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include those discussed below andelsewhere in this Offering Memorandum, particularly under Part 1 (Risk Factors) and Part 2 (Presentation ofFinancial and Other Information). In addition, certain industry issues also affect the Company’s results ofoperations and are described in Part 5 (Industry Overview).

Overview

The Group is the largest private hospital group in Egypt, measured by number of hospital beds andnumber of hospitals, and currently operates four hospitals in Greater Cairo, each of which was acquiredwithin the past two years. The Group, on an aggregated basis, had 624 hospital beds as at 31 December2015, and in 2015 serviced 47,256 inpatients, 606,206 outpatient clinic visits and 278,404 emergency roompatients and performed 34,900 surgeries. The Group’s aim is to become the leading integrated healthcareprovider in Egypt through a platform of world class quality medical facilities and services to enhancepatients’ quality of life. The Group’s mission is to deliver the finest quality of healthcare in a safe, reliableand caring environment, through highly trained healthcare providers, state of the art facilities and thelatest medical technology, putting patients and their families first.

Over the past decade, the private healthcare sector in Egypt has grown significantly, as the population isseeking higher quality and safer healthcare options than those offered by the government. Traditionally,patients tended to choose their healthcare providers based on the personal reputations of the physicians.As the private medical insurance industry grows in size and influence, patients have begun choosing theirhealthcare providers based on the reputation and brand of the hospitals. This is due to private insuranceproviders and companies offering their employees private medical coverage through direct contractualagreements generally with hospitals rather than individual physicians. The Group is at the forefront of thismarket evolution in which hospitals are growing larger, consolidating and developing their own reputationsand brand identities.

The Group aims to lead this trend by implementing a uniform standard of high-quality patient care acrossits platform, expanding its existing one-stop shop model to contract patients so that patients can receive allrequired healthcare services within the Group’s platform, upgrading its facilities with state-of-the-artequipment and attracting the best doctors and healthcare providers in Egypt.

The Group’s hospitals date back as far as 1976 when Dr. Hassan Zahed, a prominent Egyptian physician,opened Cairo Specialized Hospital, Egypt’s first private sector hospital. Cleopatra, Al Shorouk and NileBadrawi were established in 1979, 1981 and 1982, respectively. In 2014, Abraaj NAH acquired a majoritybeneficial stake in Cairo Specialized Hospital Company and, in the same month, acquired a majoritybeneficial stake in Cleopatra Hospital Company. In 2015, the Company acquired a majority stake in NileBadrawi Hospital Company and, in 2016, a majority stake in Al Shorouk Hospital Company.

In 2015, the Group generated pro forma operating revenue of EGP 741.3 million and pro forma profit forthe year of EGP 51.7 million, as if the acquisition of each of its hospitals had occurred on 1 January 2015.

Significant Factors Affecting the Group’s Results of Operations

The Group’s results of operations are affected by a variety of factors. Set out below is a discussion of themost significant factors that have affected its results in the past and which the Group expects may affect itsresults in the future. Factors other than those set forth below could also have a significant impact on theGroup’s results of operations and financial condition.

99

Increasing patient capacity and volumes and enhancing efficiency

The Group’s revenue depends on the number of patients it treats at its hospitals. Since Abraaj NAHacquired a majority beneficial stake in the Company in July 2014, the Company has acquired CairoSpecialized Hospital from another Abraaj Group entity, as well as Al Shorouk and Nile Badrawi. Theseacquisitions have increased both patient capacity and volume, growing the Group through acquisition to atotal of 624 hospital beds.

Going forward, the Group intends to organically increase capacity by expanding its existing facilities, aswell as inorganically through selective acquisition. The Group has acquired two facilities, one adjacent toAl Shorouk and one adjacent to Cleopatra. It plans to develop those facilities into expansions of theexisting hospitals. The Al Shorouk expansion is intended to increase capacity by approximately 40 beds,including beds dedicated to ICU, which tend to achieve higher revenue than other hospital beds. TheCleopatra expansion is intended to alleviate the current high occupancy rate at that hospital, which wouldallow Cleopatra to accommodate an increased number of patients. The expansion is expected to increasecapacity by approximately 100 beds.

Proximity to healthcare facilities is a main concern for Egyptian patients, so the Group plans to increasethe volume of patients by expanding its footprint in Greater Cairo by organically opening polyclinics thatwill act as a feeder network for the Group’s hospitals.

The Group has increased, and expects to continue increasing, utilisation of its facilities through initiativessuch as implementation of a system that allows consultant doctors with higher demand access to more timeslots, increasing the opening hours of its outpatient clinics at Nile Badrawi and Al Shorouk from six hoursper day to 12 hours per day (six days per week), splitting underutilised suites into multiple standard roomsand increasing revenue-generating space by removing underutilised storage areas.

Sales mix

The Group also plans to increase the volume of sales at its pharmacies and laboratories by making themavailable to contract patients. Insurance providers and companies providing medical coverage to theiremployees require patients under their plans to use specific pharmacies and diagnostic laboratories and,until recently, the Group’s pharmacies and laboratories were not included on these lists due to high prices.Because of the Group’s leverage resulting from its increased size, many insurance providers and othercompanies are now allowing patients under their plans to be referred to the Group’s pharmacies andlaboratories. The contract patients are utilising this option because of the convenience of having thefacilities inside the referring hospital. The Group’s results for the first six months of 2016 will reflect thispharmacy and laboratory revenue growth.

The Group has coupled the growth in outpatient clinic visits with an increased focus on complex surgeriescommanding higher revenue per patient. In its inpatient departments, the Group has targeted increasingadvanced medical procedures that tend to have minimal recovery times, thereby decreasing the averagelength of stay. The Group expects this initiative to increase available capacity, as well as increase marginsdue to the higher revenue generated on a patient’s first day compared to the remainder of his or her stay.

Capital expenditure

The Group has spent an increasing amount on capital expenditure in the past several years. Cleopatra’scapital expenditure was EGP 1.9 million, EGP 3.5 million and EGP 5.6 million in 2013, 2014 and 2015,respectively. Cairo Specialized Hospital’s capital expenditure was EGP 2.4 million, EGP 1.5 million andEGP 7.4 million in 2013, 2014 and 2015, respectively. Nile Badrawi’s capital expenditure was EGP2.9 million, EGP 4.0 million and EGP 1.2 million in 2013, 2014 and 2015, respectively. Al Shorouk’s capitalexpenditure was EGP 2.2 million, EGP 4.8 million and EGP 4.0 million in 2013, 2014 and 2015,respectively. This was largely due to upgrades of medical equipment, renovation of facilities andimprovement of the quality of services offered. Going forward, the Group intends to continue its increasedlevel of capital expenditure on these initiatives, as well as on integrating the Group’s hospitals andenhancing operational efficiency.

The Group has acquired two facilities, one adjacent to Al Shorouk and one adjacent to Cleopatra, whichthe Group plans to develop into extensions of those hospitals. The Group is also considering theacquisition of a facility in New Cairo that it would develop into a new hospital facility. The Group intendsto fund these projects with the net proceeds of the Closed Subscription in addition to a portion of cash

100

available for capital expenditures and operational activities. For more detail, see ‘‘Capital expenditure’’ inPart 9 (Operating and Financial Review) of this Offering Memorandum.

Key cost drivers

The Group’s primary operating cost drivers are fees paid to consultant doctors, the purchase of medicalsupplies and the salaries of medical staff. Fees paid to consultant doctors accounted for 38.0 per cent.,23.3 per cent., 17.5 per cent. and 23.8 per cent. of operating costs in 2015 at each of Cleopatra, CairoSpecialized Hospital, Nile Badrawi and Al Shorouk, respectively. Fees paid to consultant doctors increasedas a percentage of operating costs over the period under review, reflecting increased revenue from doctors’fees as a result of an increased number of doctors practising at the Group’s hospitals. The Group iscurrently aiming to add an additional 50 to 60 new physicians to its current roster of approximately 979consultant doctors across its platform by the end of 2016, which the Group expects will increase fees paidto consultant doctors by around 10 per cent. and result in a corresponding increase of revenue.

Salaries paid to medical staff at some of the Group’s hospitals also increased as a percentage of operatingcosts. These increases were driven by competitive pressures, largely a result of the recent growth in Egypt’sprivate healthcare sector, which has increased the demand for highly qualified medical personnel. In orderto remain competitive, the Group underwent a salary review that resulted in the raise of many medicalstaff salaries across the Group’s platform. Across the Group’s platform, costs related to medical staffsalaries increased approximately 20 per cent. in 2015, and in 2016 these costs are expected to increase afurther 10–15 per cent. Salary costs for non-medical staff are also expected to increase in 2016, byapproximately 10 per cent.

Synergies and cost savings initiatives

The acquisition of each of its four hospitals have positioned the Group to be able to take advantage ofcertain synergies. The Group is in the process of centralising and standardising functions across theGroup’s platform with the aim of enhancing its margins. Since 2014 management has been working tointegrate and centralise the procurement functions, whereas each of the hospitals had previouslypurchased supplies separately. The Group has established specific guidelines for purchasing, tendering andevaluation that it is applying across Cleopatra, Cairo Specialized Hospital and Nile Badrawi. It aims toapply these guidelines to Al Shorouk, which was only recently acquired, by the end of 2016. Once fullyimplemented, the Group expects to make purchases of both medical and non-medical supplies on aGroup-wide basis and thereby take advantage of economies of scale and increased bargaining power withsuppliers. The Group has already seen some positive effects of this at Cleopatra and Cairo SpecializedHospital, where it has begun rolling out this strategy on a preliminary basis and which contributed to adecrease in medical supply costs as a percentage of revenue at each of the hospitals—from 16.5 per cent. in2014 to 15.1 per cent. in 2015 at Cleopatra and from 32.6 per cent. in 2014 to 31.8 per cent. in 2015 atCairo Specialized Hospital.

The Group is also in the advanced stages of centralising its warehousing. Currently, instead of a centralisedwarehouse, each of the Group’s hospitals has its own storage rooms within its facilities. The Group plans tooutsource its warehousing to a third-party in order to free up space in the hospitals that can be used forrevenue generating services.

As the Group continues to standardise its service offerings across its platform, it plans to negotiateGroup-wide terms with contractual and insurance clients that will be more favourable than the currentterms negotiated by each individual hospital. The Group has begun this process at Cleopatra and CairoSpecialized Hospital, where it has renegotiated fees paid by some of its contract customers in 2015 andwhich contributed to a higher gross profit margin.

Many of the Group’s patients are covered by third-party payers such as health insurance providers. As aresult of the payment structure for third-party payers, the Group generally collects fees from these payersaround two months after a claim is submitted. The Group has created a business development departmenttasked, in part, with shortening the average payment gap. The Group is targeting implementation of a45-day payment policy for its receivables.

Contract patient base

A key driver of the Group’s revenue growth is its ability to win new, and retain existing, contract customerssuch as private insurance companies and corporations. In 2015, revenue from these contract customers

101

represented 61.6 per cent., 65.6 per cent., 67.4 per cent. and 39.1 per cent. of Cleopatra’s, Cairo SpecializedHospital’s, Nile Badrawi’s and Al Shorouk’s total revenues, respectively. The Group believes it iswell-placed to continue to win new, and retain existing, contracts given its relationships with many of theseinstitutions, its focus on quality and its increased bargaining power resulting from the Group’s larger size.The Group, on an aggregated basis, had 499 contracts with insurance providers and other companies. Thisnumber does not adjust for insurance providers or other companies that have contracts with multipleGroup hospitals, which the Group is in the process of consolidating at a Group-wide level. As the Egyptianprivate medical insurance industry continues to grow, the Group’s ability to win new, and retain existing,contract customers will give the Group access to a larger patient base that is spending an increasingamount on healthcare services. The Group plans to achieve this, in part, by hiring a business developmentteam to focus on winning new, and retaining existing, contract customers.

Demographics and health habits of the population in Egypt

The Group’s revenue has benefited in part from the high prevalence in Egypt of diseases requiring routinetreatment and a higher frequency of hospital visits. In 2013, according to the LOGIC Report, Egypt hadthe 3rd highest prevalence of diabetes globally in the 20–79 age group, 62.0 per cent. of the Egyptianpopulation was overweight and 28.9 per cent. of the population was considered obese. Egypt also had oneof the highest number of cases of hepatitis C globally in 2012, according to the LOGIC Report. Diabetesand obesity are drivers of numerous medical conditions, including those that are the most expensive totreat and which require the greatest degree of medical specialisation and sophistication, such as diseases ofthe cardiovascular system, the kidneys and the eyes.

Healthcare expenditure grew from 4.8 per cent. of GDP to 5.3 per cent. of GDP between 2010 and 2015,according to the LOGIC Report. In line with this trend, the Group has seen its revenues growing fasterthan Egypt’s GDP. Between 2013 and 2015, GDP per capita in Egypt grew by a CAGR of 12.3 per cent.,according to the IMF. Revenue generated by Cleopatra Hospital Company, Cairo Specialized HospitalCompany, Nile Badrawi Hospital Company and Al Shorouk Hospital Company grew by a CAGR of16.8 per cent., 14.4 per cent., 18.2 per cent. and 18.6 per cent., respectively, between 2013 and 2015. TheGroup believes that the increased expenditure on these lifestyle diseases has not been a result of increasedprevalence of such diseases, but a result of Egyptians’ increased ability to afford the necessary treatmentsand an increasing awareness of health-related issues in the general population.

The Group expects these general trends to continue and therefore expects its revenue to outpace theEgyptian economy as a whole. The Egyptian healthcare market is underpenetrated by global and regionalstandards. For example, total annual healthcare expenditure per capita in 2013 was approximately US$159in Egypt, compared to US$1,551 and US$1,052 in the United Arab Emirates and Saudi Arabia,respectively, according to the World Health Organization. Further, there was only one hospital bed perevery 2,000 people in Egypt, compared to 16.4 in Germany, 5.8 in the United States and 4.2 in SaudiArabia. The LOGIC Report forecasts that the Egyptian healthcare market will grow by a CAGR of17.6 per cent. between 2015 and 2019, in part fuelled by the expected population growth, and in particularthe growth in the elderly segment of the population that is more vulnerable to acute diseases. The Groupexpects the demand for medical services, and consequently the Group’s revenue, to reflect the expectedincreases in healthcare spending per capita.

Inflation and devaluation of the Egyptian pound

The Egyptian economy has been characterised by substantial inflation. Central Bank of Egypt coreinflation has averaged approximately 7.9 per cent. since January 2011, standing at 8.4 per cent. in March2016. Central Bank of Egypt headline inflation averaged 9.4 per cent. in that period and frequently rosesubstantially above 10 per cent. The inflation has largely reflected the Egyptian pound’s significantdevaluation over the last five years. Between January 2011 and January 2015 the Egyptian pound fell23 per cent. against the US dollar, between January 2015 and December 2015 it fell 8 per cent. and in thefirst four months of 2016 it fell 14 per cent., according to the Central Bank of Egypt. This inflation hasnegatively affected the Group’s revenue and margins. The Group endeavours to preserve its margins byenhancing operational efficiencies and increasing its bargaining power with suppliers and contractcustomers in order to reduce costs. When possible, the Group passes inflation related cost increases on toits customers.

102

Seasonality

The Group’s revenue, in particular revenue derived from outpatient clinics, is affected by seasonalityduring the summer holidays, which fall in the second half of the year. Travellers from the Gulf region andelsewhere in the Middle East seek medical treatment in Egypt during their summer holidays due to therelatively low cost of treatment. On average, revenue in the second half of the year is approximately 10 percent. higher than the first half of the year.

The Group’s revenue is generally lower during the month of Ramadan, as Egyptians tend not to attendhospitals for voluntary procedures during this month. In recent years, Ramadan has fallen in the summermonths, offsetting the aforementioned seasonality.

Presentation of Financial Information and Comparability of Results

The Company directly operates the Cleopatra hospital in Egypt and also has three main operatingsubsidiaries—Cairo Specialized Hospital Company, Nile Badrawi Hospital Company and Al ShoroukHospital Company—each of which operates a hospital in Egypt. The Company was beneficially acquiredby Abraaj NAH in July 2014. Also in July 2014, Abraaj NAH acquired a majority beneficial stake in CairoSpecialized Hospital Company, which it subsequently made a subsidiary of the Company in September2015 as part of a corporate restructuring. Nile Badrawi Hospital Company and Al Shorouk HospitalCompany were acquired by the Company in September 2015 and January 2016, respectively. Together, theGroup’s four hospitals constitute all of the business undertakings of the Company as at the date of thisOffering Memorandum.

For more detail about the financial information included in this Offering Memorandum, see ‘‘Presentationof financial information’’ in Part 2 (Presentation of Financial and Other Information).

Going forward, the Group will report its results of operations on a fully consolidated basis. This will differfrom the presentation of financial information in this Offering Memorandum. Further, there can be noguarantee that the Group’s historic performance will be repeated in the future, particularly given thecompetitive nature of the industry in which it operates, and its sales, profit and cash flow may significantlyunderperform market expectations.

Key Performance Indicators

The following table sets forth certain key operational performance indicators that the Group uses tomanage its business.


Key Operational Performance Indicator(1) 2015 2014 2013

Inpatient revenue per inpatient (EGP)(2)

Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,171 3,639 3,186Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,986 2,639 2,504Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,565 5,661 3,980Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,546 4,105 3,798

Outpatient revenue per outpatient clinic visit (EGP)(3)

Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 180 168Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 106 146Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 272 308 145Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 378 271 263

Operating revenue per bed (EGP thousands)(4)

Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,012 1,759 1,475Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 747 616 570Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 873 773 624Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,155 980 821


(2) Defined as the operating revenue generated by inpatients (defined as patients admitted to an accommodation room) divided bythe number of inpatients.

(3) Defined as the operating revenue generated by outpatient clinic visits (defined as the total number of visits to the outpatientclinics made by patients during the period) divided by the number of outpatient clinic visits.

(4) Defined as operating revenue divided by total number of beds.

103

The following table sets forth certain key financial performance indicators that the Group uses to manageits business.


Key Financial Performance Indicator(1) 2015 2014 2013

Gross profit (EGP millions)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117.6 85.7 71.7Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.5 32.9 31.9Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39.7 31.4 17.8Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38.7 31.7 22.5

Gross profit margin(2) (%)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35.4 29.5 29.5Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.1 26.7 28.0Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32.7 29.2 20.5Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.9 27.0 22.8

Adjusted profit for the year(3) (EGP millions)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64.7 64.1 41.8Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.2 18.5 22.1Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15.5 18.2 6.7Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.0 11.4 6.8

EBITDA(4) (EGP millions)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.4 72.8 59.2Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.5 30.3 30.2Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.1 28.9 13.4Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.6 20.7 14.1

Adjusted EBITDA(5) (EGP millions)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.4 93.1 62.3Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.5 30.3 30.2Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27.1 28.9 13.4Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.6 20.7 14.1

EBITDA margin(6) (%)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.0 25.1 24.3Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.4 24.6 26.5Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.3 26.9 15.5Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.3 17.6 14.3

Adjusted EBITDA margin(7) (%)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30.0 32.1 25.6Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.4 24.6 26.5Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.3 26.9 15.5Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16.3 17.6 14.3

Key Pro Forma Financial Performance Indicator(8)

Pro forma gross profit (EGP millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 234.0Pro forma gross profit margin (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31.6Pro forma EBITDA(9) (EGP millions) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182.6Pro forma EBITDA margin(10) (%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.6


(2) Defined as gross profit divided by operating revenue.

(3) See ‘‘Non-GAAP financial measures’’ in Part 2 (Presentation of Financial and Other Information) for a reconciliation of profitfor the year to adjusted profit for the year.

(4) Defined as profit for the year adjusted for finance income, finance costs, current tax, deferred tax, fixed asset depreciation andwrite-offs, provisions, (loss)/gain on currency translation differences and impairment of trade receivables. For a reconciliationof profit for the year to EBITDA, see ‘‘Non-GAAP financial measures’’ in Part 2 (Presentation of Financial and OtherInformation) of this Offering Memorandum.

(5) Defined as EBITDA excluding a non-recurring donation to a university in Cairo and a non-recurring liquidation of Cleopatra’semployee fund. The liquidation occurred because the Group no longer plans to operate the fund.

104

(6) Defined as EBITDA divided by operating revenue.

(7) Defined as adjusted EBITDA divided by operating revenue.

(8) Pro forma to show the effect of the Company’s ownership of Cairo Specialized Hospital Company, Nile Badrawi HospitalCompany and Al Shorouk Hospital Company as if the acquisition of each of those companies had occurred on 1 January 2015.

(9) Defined as pro forma profit for the year adjusted for pro forma finance income, pro forma finance costs, pro forma (loss)/gainon currency translation differences, pro forma current tax, pro forma deferred tax, pro forma provisions, pro forma fixed assetdepreciation and write-offs and pro forma impairment of trade receivables.

(10) Defined as pro forma EBITDA divided by pro forma operating revenue.

Current Trading and Prospects

The Group’s overall operational performance remained positive during the first quarter in 2016. Salesvolume and operating revenue both increased compared with the same period in 2015 and gross profitremained strong and in line with management’s projections. Management is therefore confident in theoperational and financial ability of the Group to execute its strategy as set forth in this OfferingMemorandum and is confident in the Group’s long-term outlook.

Egyptian Tax Considerations

The applicable corporate tax rate on all Egyptian corporations is currently 22.5 per cent., effective from2015. In 2014, the applicable corporate tax rate on Egyptian corporations was 25 per cent., plus anadditional 5 per cent. surtax applicable on income in excess of EGP 1 million. Prior to 2014, the applicablecorporate tax rate on all Egyptian corporations was 25 per cent. In 2013, the applicable corporate tax ratefor Egyptian corporations was 20 per cent. on the first EGP 10 million of income and 25 per cent. on theincome in excess of EGP 10 million.

Description of Key Line Items

Operating revenue

Operating revenue comprises fees received by the Group for medical services. Operating revenue ismeasured at the fair value of the consideration received or receivable, including cash and balances andtrade and notes receivable arising from rendering medical services and sale of medicine throughout theGroup’s ordinary course of business, net of sales taxes, deductions or discounts.

The Group recognises revenue when the amount of revenue can be reliably measured; when it is probablethat future economic benefits related to the sale process or service provision will flow to the Group; andwhen other specific criteria have been met for the Group’s activities as described below. The Group basesits estimates on historical results, taking into consideration the type of customer, the type of transactionand the specifics of each arrangement.

Medical services revenue

The Group renders several medical services, including surgeries, accommodation, medical supervision,laboratories, tests, different types of radiology, emergency room services and outpatient clinics andservices. Revenue from medical services is recognised when the service is rendered to the patient.

Sale of medicine revenue

The Group sells medicine through the hospital pharmacies and its outpatient clinics, in addition to usingmedicine for treatment when providing inpatient services. Revenue is recognised once the medicine isreceived by the patient or used during the patient’s stay in the hospital.

Operating costs

Operating costs consist mainly of medicines and other medical supplies, fees paid to consultant doctors,salaries of medical staff, lease payments for medical equipment, depreciation charges for medical assets,licensing and compliance expenses, other regulatory expenses and certain other direct operational costs.

105

General and administrative expenses

General and administrative expenses consist mainly of non-medical staff costs (including managementcosts), non-medical consumables, professional and consulting fees, depreciation charges for non-medicalassets and certain other expenses such as utilities and IT.

Provisions

Provisions consist mainly of provisions set aside to settle expected or potential obligations relating to legal,tax and other claims and employee benefits.

Other income

Other income consists mainly of rental income from the leasing of facilities to third parties, cafeteria sales,gift sales and sales of scrap materials.

Finance income

Finance income consists mainly of interest receivable on deposits and favourable currency translationdifferences.

Finance costs

Finance costs consist mainly of interest payable on loans and facilities.

(Loss)/gain on currency translation differences

(Loss)/gain on currency translation differences consists of favourable or unfavourable currency translationdifferences at Nile Badrawi Hospital Company.

Current tax

Current tax is calculated on the basis of the tax laws enacted at the balance sheet date on profit before taxadjusted for expenses not deductible for tax purposes.

Deferred tax

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amountsof assets and liabilities in the financial information and the corresponding tax bases used in thecomputation of the taxable profit.

Results of Operations

Cleopatra’s results of operations


2015 2014 2013


Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332,003 290,295 243,293Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (214,407) (204,608) (171,606)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,595 85,687 71,687General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . (27,859) (20,671) (20,556)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,974) (2,887) (761)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,029 679 732

Profit for the year before finance income and income tax . . . . . . . . . . 87,791 62,808 51,101

Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,104 2,087 1,573Finance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,488) (3) —

Profit for the year before income tax . . . . . . . . . . . . . . . . . . . . . . . . . 84,407 64,891 52,674Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,603) (21,372) (13,997)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 886 283 11

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,690 43,802 38,688

106

Operating revenue

Operating revenue increased by EGP 41.7 million, or 14.4 per cent., from EGP 290.3 million in 2014 toEGP 332.0 million in 2015. Operating revenue increased by EGP 47.0 million, or 19.3 per cent., fromEGP 243.3 million in 2013 to EGP 290.3 million in 2014. The radiology, physiotherapy, endoscopy andlaboratory departments’ revenue witnessed significant growth in 2014 compared to 2013. The revenue ofthe outpatient clinics, physiotherapy and endoscopy departments grew in 2015 compared to 2014. Theseincreases were primarily a result of an increase in both number of surgeries, as well as revenue per surgeryresulting from price increases. The hospital also targeted more advanced procedures commanding higherprices. The emergency room had an increase in revenue, as simple procedures were reallocated from theoperating room to the emergency room. This was done in order to free up capacity in the operating roomswhere more complex procedures commanding higher fees can be performed. Management’s efforts toimprove the efficiency and optimisation of the hospital’s outpatient clinics resulted in an increase in thenumber of outpatient clinic visits.

Operating costs


2015 2014 2013


Doctor fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,388 67,449 56,457Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,643 68,307 51,123Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,035 48,055 43,521Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . . . . . . . . 6,569 6,860 7,360Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . . . . . . . . . 6,324 5,321 4,743Fixed assets depreciation and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . 5,860 6,530 6,645Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,589 2,086 1,757

214,407 204,608 171,606

Operating costs increased by EGP 9.8 million, or 4.8 per cent., from EGP 204.6 million in 2014 toEGP 214.4 million in 2015. This represented a decrease from 70.5 per cent. to 64.6 per cent. as apercentage of operating revenue. As a percentage of operating revenue, adjusted operating costs, whichexcludes fixed assets depreciation and write-offs, decreased from 68.2 per cent. in 2014 to 62.8 per cent. in2015. The decrease was primarily due to a reduction of medical staff costs resulting from controlling andefficiently managing overtime shifts and linking their compensation to performance, as well as a one-timeliquidation of the hospital’s employee fund in 2014. This liquidation, which amounted to a total payment toemployees of EGP 20.3 million, was accounted for in part as an operating cost (EGP 14.5 million) and inpart as a general and administrative expense (EGP 5.8 million). The liquidation occurred because theGroup no longer intends to operate the fund. The more advanced procedures targeted by the hospital,which tend to have minimal recovery times as a result of medical improvements, resulted in a decreasedaverage length of stay and therefore lower operating costs as a percentage of operating revenue. Further, apreliminary procurement strategy was put in place, which led to a decrease in medical supply costs as apercentage of operating revenue. Fees paid to consultant doctors increased slightly as a percentage ofoperating revenue due to renegotiated fee arrangements with outpatient clinic consultant doctors.

Operating costs increased by EGP 33.0 million, or 19.2 per cent., from EGP 171.6 million in 2013 toEGP 204.6 million in 2014. As a percentage of operating revenue, the hospital’s operating costs remainedflat at 70.5 per cent. As a percentage of operating revenue, adjusted operating costs increased from67.8 per cent. in 2013 to 68.2 per cent. in 2014. This was primarily due to the aforementioned one-timeliquidation of the hospital’s employee fund in 2014.

Gross profit

Gross profit increased by EGP 31.9 million, or 37.2 per cent., from EGP 85.7 million in 2014 toEGP 117.6 million in 2015. Adjusted gross profit, which excludes fixed assets depreciation and write-offs,increased by 33.9 per cent. from EGP 92.2 million in 2014 to EGP 123.5 million in 2015. This increase wasprimarily due to an increase in both number of surgeries, as well as revenue per surgery resulting fromprice increases. Improvements to the hospital’s outpatient clinics, emergency room and a reduction ofmedical staff costs resulting from efficiently managing overtime shifts also contributed positively. Further,

107

a preliminary procurement strategy was put in place, which led to a decrease in medical supply costs as apercentage of operating revenue.

Gross profit increased by EGP 14.0 million, or 19.5 per cent., from EGP 71.7 million in 2013 toEGP 85.7 million in 2014. Adjusted gross profit increased by 17.7 per cent. from EGP 78.3 million in 2013to EGP 92.2 million in 2014. This increase was primarily due to an increased number of surgeries andhigher revenue per surgery as a result of inflation related price increases.



2015 2014 2013


Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,159 16,200 12,456Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,130 (4) 71Professional and consulting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,732 190 49Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 928 247 245Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 861 351 319Donations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 696 586 3,738Fixed assets depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 691 622 633Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . . . . . . . . . . . 581 433 441Government fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548 288 168Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,533 1,757 2,436

27,859 20,671 20,556

General and administrative expenses increased by EGP 7.2 million, or 34.8 per cent., fromEGP 20.7 million in 2014 to EGP 27.9 million in 2015. This represented an increase from 7.1 per cent. to8.4 per cent. as a percentage of operating revenue. Adjusted general and administrative expenses, whichexcludes impairment of trade receivables and fixed assets depreciation, increased from 6.9 per cent. to7.5 per cent. as a percentage of operating revenue. This increase was primarily due to increasednon-medical staff costs relating to the newly hired corporate management team, offset in part by theEGP 5.8 million portion of the one-time liquidation of the hospital’s employee fund in 2014 that wasaccounted for in general and administrative expenses. The other main driver of general and administrativeexpenses for the period was professional and consulting fees relating to the Company’s acquisitions ofCairo Specialized Hospital Company and Nile Badrawi Hospital Company in 2015.

General and administrative expenses increased by EGP 0.1 million, or 0.6 per cent., from EGP 20.6 millionin 2013 to EGP 20.7 million in 2014. This represented a decrease from 8.4 per cent. to 7.1 per cent. as apercentage of operating revenue. Adjusted general and administrative expenses decreased from 8.2 percent. to 6.9 per cent. as a percentage of operating revenue. This decrease was primarily due to a donationin 2013 to a university in Cairo of EGP 3.7 million, of which 3.1 million is considered to be non-recurring.The decrease was offset by the aforementioned one-time liquidation of the hospital’s employee fund in2014.

Provisions

Cleopatra Hospital Company made EGP 3.0 million of provisions in 2015, up EGP 0.1 million or 3.0 percent., from EGP 2.9 million in 2014.

Cleopatra Hospital Company made EGP 2.9 million of provisions in 2014, up EGP 2.1 million or 279.4 percent., from EGP 0.8 million in 2013.

Other income

Other income increased by EGP 0.4 million, or 51.5 per cent., from EGP 0.7 million in 2014 toEGP 1.0 million in 2015. This increase was primarily due to growth of cafeteria sales resulting from theincreased number of patients and an increase of rental income.

Other income decreased by EGP 0.1 million, or 7.3 per cent., from EGP 0.7 million in 2013 toEGP 0.7 million in 2014. This decrease was primarily due to losses on the sale of medical equipment.

108

Profit for the year before finance income and income tax

Profit for the year before finance income and income tax increased by EGP 25.0 million, or 39.8 per cent.,from EGP 62.8 million in 2014 to EGP 87.8 million in 2015. This increase was primarily due to increasedgross profit, offset in part by impairment of trade receivables.

Profit for the year before finance income and income tax increased by EGP 11.7 million, or 22.9 per cent.,from EGP 51.1 million in 2013 to EGP 62.8 million in 2014. This increase was primarily due to increasedgross profit in 2014 and a one-time donation in 2013 to a university in Cairo of EGP 3.7 million. Profit forthe year before finance income and income tax was offset, in part, by the aforementioned one-timeliquidation of the hospital’s employee fund in 2014.

Finance income

Finance income increased by EGP 3.0 million, or 144.6 per cent., from EGP 2.1 million in 2014 toEGP 5.1 million in 2015. Finance income increased by EGP 0.5 million, or 32.7 per cent., fromEGP 1.6 million in 2013 to EGP 2.1 million in 2014. These increases were primarily due to credit intereston cash balances.

Finance costs

Finance costs increased by EGP 8.5 million, from EGP 3 thousand in 2014 to EGP 8.5 million in 2015. Thisincrease was primarily due to a loan agreement entered into by Cleopatra Hospital Company related to theacquisitions of Cairo Specialized Hospital Company and Nile Badrawi Hospital Company in September2015.

Current tax

Current tax decreased by EGP 0.8 million, or 3.5 per cent., from EGP 21.4 million in 2014 toEGP 20.6 million in 2015. The hospital’s effective tax rate in 2015 was 23.2 per cent., compared to 32.5 percent. in 2014. The decrease was primarily due to the reduction in the applicable corporate tax rate to22.5 per cent. in 2015 from 30 per cent. in 2014.

Current tax increased by EGP 7.4 million, or 52.7 per cent., from EGP 14.0 million in 2013 toEGP 21.4 million in 2014. The hospital’s effective tax rate in 2014 was 32.5 per cent., compared to 26.5 percent. in 2013. The increase was primarily due to an increase in the applicable corporate tax rate on incomeover EGP 1 million from 25 per cent. in 2013 to 30 per cent. in 2014.

Deferred tax

Deferred tax increased by EGP 0.6 million, or 213.1 per cent., from EGP 0.3 million in 2014 toEGP 0.9 million in 2015. Deferred tax increased by EGP 0.3 million, from EGP 0.01 million in 2013 toEGP 0.3 million in 2014.

Profit for the year

Profit for the year increased by EGP 20.9 million, or 47.7 per cent., from EGP 43.8 million in 2014 toEGP 64.7 million in 2015. This increase was primarily due to increased profit for the year before financeincome and income tax and a reduction of the applicable corporate tax rate in Egypt.

Profit for the year increased by EGP 5.1 million, or 13.2 per cent., from EGP 38.7 million in 2013 toEGP 43.8 million in 2014. This increase was primarily due to increased profit for the year before financeincome and income tax.


Cleopatra’s adjusted profit for the year is profit for the year excluding a non-recurring donation in 2013 toa university in Cairo and a non-recurring liquidation in 2014 of the hospital’s employee fund that theGroup no longer operates.

Adjusted profit for the year increased by EGP 0.6 million, or 0.9 per cent., from EGP 64.1 million in 2014to EGP 64.7 million in 2015. This increase was primarily due to increased gross profit, offset in part byincreased impairment of trade receivables and increased finance costs resulting from a loan agreement

109

entered into by Cleopatra Hospital Company related to the acquisitions of Cairo Specialized HospitalCompany and Nile Badrawi Hospital Company in September 2015.

Adjusted profit for the year increased by EGP 22.3 million, or 53.4 per cent., from EGP 41.8 million in2013 to EGP 64.1 million in 2014. This increase was primarily due to increased gross profit in 2014.

Cairo Specialized Hospital’s results of operations


2015 2014 Restated 2013

(audited)(EGP)

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,377,454 123,280,745 114,040,779Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (111,849,380) (90,405,164) (82,119,996)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,528,074 32,875,581 31,920,783General and administrative expenses . . . . . . . . . . . . . . . . . (14,207,273) (10,058,402) (7,794,833)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,945,188) (710,000) —Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,808,193 3,096,473 3,027,518

Profit for the year before finance income and income tax . . 20,183,806 25,203,652 27,153,468

Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,021,134 2,704,661 2,259,506

Profit for the year before income tax . . . . . . . . . . . . . . . . . 24,204,940 27,908,313 29,412,974Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,387,426) (8,688,849) (7,006,480)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 430,841 (694,392) (265,067)

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,248,355 18,525,072 22,141,427

Operating revenue

Operating revenue increased by EGP 26.1 million, or 21.2 per cent., from EGP 123.3 million in 2014 toEGP 149.4 million in 2015. Revenue in the endoscopy, laboratory, radiology and emergency roomdepartments grew significantly from 2014 to 2015 as a result of efficiency initiatives. Inpatient revenueincreased as a result of renegotiated higher fees from insurance providers and other contract customers in2015. The number of surgeries per patient increased the number of overall surgeries performed at thehospital, and there was also an increase in revenue per surgery. Prior to the Company’s acquisition ofCairo Specialized Hospital, the outpatient clinics, pharmacy and blood bank were each rented to third-party doctors. Under the rental arrangements, the hospital collected fixed rental fees and the third-partydoctors kept the revenue generated from procedures performed in that department, which had the effectof capping the hospital’s revenue. All of the rental agreements, other than the blood bank, wereterminated during 2015 under the hospital’s new management, shifting revenue from other income tooperating revenue.

Operating revenue increased by EGP 9.3 million, or 8.1 per cent., from EGP 114.0 million in 2013 toEGP 123.3 million in 2014. This increase was primarily due to an increased number of surgeries from 8,040in 2013 to 9,037 in 2014, increased revenue per surgery and an increase in the number of inpatients from13,151 in 2013 to 13,771 in 2014.

Operating costs


20142015 Restated 2013


Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,548 40,231 36,385Doctors’ fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,045 20,440 19,940Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,468 16,378 13,716Fixed assets depreciation and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . 3,643 3,603 3,037Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,424 2,525 2,124Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . . . . . . . . . . 5,732 4,932 3,272Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,989 2,296 3,647

111,849 90,405 82,120

110

Operating costs increased by EGP 21.4 million, or 23.7 per cent., from EGP 90.4 million in 2014 toEGP 111.8 million in 2015. This represented an increase from 73.3 per cent. to 74.9 per cent. as apercentage of operating revenue. As a percentage of operating revenue, adjusted operating costs increasedfrom 70.4 per cent. in 2014 to 72.4 per cent. in 2015. The increase was primarily due to increases in medicalstaff salaries, which were previously considered to be relatively low. The hospital’s medical supply costsdecreased as a percentage of operating revenue, despite devaluation of the Egyptian pound during theperiod, as a result of a preliminary cost control programme with respect to medical supply costs. Fees paidto consultant doctors increased slightly as a result of new consultant doctors.

Operating costs increased by EGP 8.3 million, or 10.1 per cent., from EGP 82.1 million in 2013 toEGP 90.4 million in 2014. This represented an increase from 72.0 per cent. to 73.3 per cent. as apercentage of operating revenue. Adjusted operating costs increased as a percentage of operating revenuefrom 69.3 per cent. in 2013 to 70.4 per cent. in 2014. The increase was primarily due to a large increase inmaintenance and energy costs in 2014 resulting from increased energy prices in Egypt, as well as smallerincreases in medical supply costs and medical staff salaries as a percentage of operating revenue.

Gross profit

Gross profit increased by EGP 4.7 million, or 14.2 per cent., from EGP 32.9 million in 2014 to EGP 37.5million in 2015. Adjusted gross profit increased by 12.9 per cent. from EGP 36.5 million in 2014 toEGP 41.2 million in 2015. This increase was primarily due to higher prices from insurance providers andother contract customers that the Group was able to renegotiate in 2015, offset in part by higher medicalstaff salaries and doctor consultant fees.

Gross profit increased by EGP 1.0 million, or 3.0 per cent., from EGP 31.9 million in 2013 to EGP 32.9million in 2014. Adjusted gross profit increased by 4.4 per cent. from EGP 35.0 million in 2013 to EGP 36.5million in 2014. This increase was primarily due to an increased number of surgeries, increase revenue persurgery and an increase in the number of inpatients.



20142015 Restated 2013


Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,591 6,703 6,673Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,682 737 —Professional and consulting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,822 1,531 103Energy expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 236 205 105Fixed assets depreciation and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 33 29Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 843 848 886

14,207 10,058 7,795

General and administrative expenses increased by EGP 4.1 million, or 41.2 per cent., from EGP 10.1million in 2014 to EGP 14.2 million in 2015. This represented an increase from 8.2 per cent. to 9.5 per cent.as a percentage of operating revenue, reflecting primarily a higher impairment of trade receivables in 2015(for invoices not collected within 150 days). Adjusted general and administrative expenses increased as apercentage of operating revenue from 7.5 per cent. in 2014 to 7.7 per cent. in 2015. The remaining increasewas primarily due to higher non-medical staff costs relating to the hospital’s new management team.

General and administrative expenses increased by EGP 2.3 million, or 29.0 per cent., from EGP 7.8 millionin 2013 to EGP 10.1 million in 2014. This represented an increase from 6.8 per cent. to 8.2 per cent. as apercentage of operating revenue. Adjusted general and administrative expenses increased as a percentageof operating revenue from 6.8 per cent. in 2013 to 7.5 per cent. in 2014. This increase was primarily due toprofessional and consultancy expenses incurred in 2014 relating to financial, auditing and legal services.

Provisions

Cairo Specialized Hospital Company made EGP 6.9 million of provisions in 2015, up EGP 6.2 million,from EGP 0.7 million in 2014.

111

Cairo Specialized Hospital Company made EGP 0.7 million of provisions in 2014, compared to nilprovisions made in 2013. The provisions made in 2014 primarily related to legal claims and balances keptin relation to retired employees’ vacation allowances.

Other income

Other income increased by EGP 0.7 million, or 23.0 per cent., from EGP 3.1 million in 2014 to EGP 3.8million in 2015. Prior to the Company’s acquisition of Cairo Specialized Hospital, some of the medicaldepartments such as the pharmacy and blood bank, as well as the cafeteria, were rented to third parties.Under the rental arrangements, the hospital collected a fixed rental fee and the third parties kept therevenue generated from the department. The increase of other income reflects increases in the rental fees.All of these rental agreements, except the blood bank, were terminated during 2015 under the hospital’snew management.

Other income increased by EGP 0.07 million, or 2.2 per cent., from EGP 3.0 million in 2013 to EGP 3.1million in 2014. This increase was primarily due to increased rental income from the pharmacy and bloodbank.


Profit for the year before finance income and income tax decreased by EGP 5.0 million, or 19.9 per cent.,from EGP 25.2 million in 2014 to EGP 20.2 million in 2015. The decrease was primarily due to one-timeprovisions made in 2015, a higher non-recurring impairment of trade receivables in 2015 and highernon-medical staff costs relating to the hospital’s new management team, each of which offset the growth ofthe hospital’s gross profit.

Profit for the year before finance income and income tax decreased by EGP 1.9 million, or 7.2 per cent.,from EGP 27.2 million in 2013 to EGP 25.2 million in 2014. This decrease was primarily due toprofessional and consultancy expenses incurred in 2014 relating to financial, auditing and legal services.

Finance income

Finance income increased by EGP 1.3 million, or 48.7 per cent., from EGP 2.7 million in 2014 to EGP 4.0million in 2015. Finance income increased by EGP 0.4 million, or 19.7 per cent., from EGP 2.3 million in2013 to EGP 2.7 million in 2014. These increases were primarily due to credit interest earned on cashbalances.

Current tax

Current tax decreased by EGP 1.3 million, or 15.0 per cent., from EGP 8.7 million in 2014 to EGP 7.4million in 2015. The hospital’s effective tax rate in 2015 was 28.7 per cent., compared to 33.6 per cent. in2014. This decrease was primarily due to the reduction in the applicable corporate tax rate to 22.5 per cent.in 2015 from 30 per cent. in 2014.

Current tax increased by EGP 1.7 million, or 24.0 per cent., from EGP 7.0 million in 2013 to EGP 8.7million in 2014. The hospital’s effective tax rate in 2014 was 33.6 per cent., compared to 24.7 per cent. in2013. The increase was primarily due to an increase in the applicable corporate tax rate on income overEGP 1 million from 25 per cent. in 2013 to 30 per cent. in 2014.

Deferred tax

Deferred tax decreased by EGP 1.1 million, or 162.1 per cent., from negative EGP 0.7 million in 2014 toEGP 0.4 million in 2015. Deferred tax increased by EGP 0.4 million, or 161.9 per cent., from negativeEGP 0.3 million in 2013 to negative EGP 0.7 million in 2014.

Profit for the year

Profit for the year decreased by EGP 1.3 million, or 6.9 per cent., from EGP 18.5 million in 2014 toEGP 17.2 million in 2015. The decrease was primarily due to decreased profit for the year before financeincome and income tax. Profit for the year was positively affected by a reduction of the applicablecorporate tax rate in Egypt.

112

Profit for the year decreased by EGP 3.6 million, or 16.3 per cent., from EGP 22.1 million in 2013 toEGP 18.5 million in 2014. The decrease was primarily due to decreased profit for the year before financeincome and income tax.


Cairo Specialized Hospital’s adjusted profit for the year is profit for the year excluding provisions forclaims incurred in 2015 but that are relevant to a prior period and the portion of impairment of tradereceivables that does not pertain to 2015 (one per cent. of revenue is considered to be the recurringportion).

Adjusted profit for the year increased by EGP 5.6 million, or 30.4 per cent., from EGP 18.5 million in 2014to EGP 24.2 million in 2015. This increase was primarily due to higher prices from insurance providers andother contract customers that the Group was able to renegotiate in 2015, offset in part by higher medicalstaff salaries and doctor consultant fees.

Adjusted profit for the year decreased by EGP 3.6 million, or 16.3 per cent., from EGP 22.1 million in 2013to EGP 18.5 million in 2014. This decrease was primarily due to decreased profit for the year beforefinance income and income tax.

Nile Badrawi’s results of operations



(audited)(EGP)


Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,705,738 31,362,364 17,756,944General and administrative expenses . . . . . . . . . . . . . . . . . . (28,072,750) (9,245,588) (10,286,049)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,218,259) (722,700) —Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,856,750 3,460,673 871,475


Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 11,312

(Loss)/gain on currency translation differences . . . . . . . . . . . (6,087) 38,313 17,577

Profit for the year before income tax . . . . . . . . . . . . . . . . . . 9,265,392 24,893,062 8,371,259Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,991,312) (7,017,881) (2,060,578)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (661,591) 282,104 417,112

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,612,489 18,157,285 6,727,793

Operating revenue

Operating revenue increased by EGP 13.8 million, or 12.9 per cent., from EGP 107.5 million in 2014 toEGP 121.3 million in 2015. Revenue per surgery increased as a result of more complex surgeries beingperformed, in part due to receiving an organ transplantation license from the MoHP. Prior to theacquisition, the outpatient clinic revenue had been negatively affected by the hospital’s relatively weakinfrastructure and equipment, which had resulted in a number of outpatient consultant doctors leaving thehospital or limiting the number of outpatients served. The radiotherapy department experienced anincreased number of patients and, because of minimal competition at other hospitals, it was also able toincrease prices. Revenue in the catheterisation laboratory in the cardiology department grew because anew head of the department was hired and globally renowned consultants were invited to performoperations at the hospital.

Operating revenue increased by EGP 20.7 million, or 23.8 per cent., from EGP 86.8 million in 2013 toEGP 107.5 million in 2014. This increase was primarily due to higher outpatient revenue and higherrevenue in the radiotherapy department resulting from acquisition of an advanced radiotherapy machinefor which the hospital charged higher prices.

113

Operating costs




Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,319 31,755 27,938Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,995 13,810 12,762Doctor fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,242 11,990 9,293Maintenance, energy, communication and facilities costs . . . . . . . . . . . . . . 7,838 7,213 8,081Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,414 4,290 2,000Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,486 3,455 3,766Fixed assets depreciation and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . 1,197 3,462 3,851Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 144 1,354

81,601 76,120 69,045

Operating costs increased by EGP 5.5 million, or 7.2 per cent., from EGP 76.1 million in 2014 to EGP 81.6million in 2015. This represented a decrease from 70.8 per cent. to 67.3 per cent. as a percentage ofoperating revenue, primarily due to smaller fixed asset depreciation and write-offs of medical equipmentand medical infrastructure as a result of a applying the Group’s depreciation policy that reflects industrystandard rates and asset lifetimes. Adjusted operating costs as a percentage of operating revenuedecreased from 67.6 per cent. in 2014 to 66.3 per cent. in 2015. This decrease was primarily due to areduction of medical supply costs as a percentage of operating revenue. This reduction was offset, in part,by higher fees paid to consultant doctors as the hospital focused on more complex procedures for whichconsultant doctors charge higher fees.

Operating costs increased by EGP 7.1 million, or 10.2 per cent., from EGP 69.0 million in 2013 toEGP 76.1 million in 2014. This represented a decrease from 79.5 per cent. to 70.8 per cent. as a percentageof operating revenue. Adjusted operating costs as a percentage of operating revenue decreased from75.1 per cent. in 2013 to 67.4 per cent. in 2014, primarily due to effective management of the purchase andusage of medical and certain other supplies.

Gross profit

Gross profit increased by EGP 8.3 million, or 26.6 per cent., from EGP 31.4 million in 2014 to EGP 39.7million in 2015. Adjusted gross profit increased by 17.5 per cent. from EGP 34.8 million in 2014 toEGP 40.9 million in 2015. This increase was primarily due to an increase in revenue per surgery as a resultof more complex surgeries being performed, in part due to receiving an organ transplantation license fromthe MoHP. The radiotherapy department experienced an increased number of patients and, because ofminimal competition at other hospitals, it was also able to increase prices. Revenue in the catheterisationlaboratory in the cardiology department, as well as in the emergency room and laboratory departments,grew significantly in the period. This revenue growth was offset in part by a number of outpatientconsultant doctors ceasing to practise at the hospital as a result of weak infrastructure and equipment.

Gross profit increased by EGP 13.6 million, or 76.6 per cent., from EGP 17.8 million in 2013 to EGP 31.4million in 2014. Adjusted gross profit increased by 61.2 per cent. from EGP 21.6 million in 2013 toEGP 34.8 million in 2014. This increase was primarily due to higher outpatient revenue and higher revenuein the radiotherapy department resulting from acquisition of an advanced radiotherapy machine for whichthe hospital charged higher prices.

114





Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,417 (104) 1,230Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,131 5,262 4,840Maintenance, energy, communication and facilities costs . . . . . . . . . . . . . . 1,303 1,301 1,697Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 787 688 37Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539 547 539Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,895 1,552 1,944

28,073 9,246 10,286

General and administrative expenses increased by EGP 18.8 million, or 203.6 per cent., from EGP 9.3million in 2014 to EGP 28.1 million in 2015. This represented an increase from 8.6 per cent. to 23.1 percent. as a percentage of operating revenue. The increase was a result of the net impact of a one-timeimpairment of trade receivables in 2015 of EGP 9.9 million resulting from the corrective accountingtreatment of historically inaccurate impairment policies employed by the hospital’s previous management.Adjusted general and administrative expenses increased as a percentage of operating revenue from 8.7 percent. in 2014 and 12.9 per cent. in 2015. The increase was primarily due to a patient service charge that washistorically accounted for on the hospital’s balance sheet being moved onto the statement of income in2015. The service charge is paid by all overnight patients at the hospital, and the hospital’s managementspends it on employee incentivisation such as bonus payments or special events. As of 2015, those expensesare accounted for as general and administrative expenses.

General and administrative expenses decreased by EGP 1.0 million, or 10.1 per cent., from EGP 10.3million in 2013 to EGP 9.2 million in 2014. This represented a decrease from 11.8 per cent. to 8.6 per cent.as a percentage of operating revenue, primarily due to a reversal of an impairment of trade receivables in2014. Adjusted general and administrative expenses decreased as a percentage of operating revenue from10.4 per cent. in 2013 to 8.6 per cent. in 2014.

Provisions

Nile Badrawi Hospital Company made EGP 4.2 million of provisions in 2015, up EGP 3.5 million, fromEGP 0.7 million in 2014.

Nile Badrawi Hospital Company made EGP 0.7 million of provisions in 2014, compared to nil provisionsmade in 2013.

Other income

Other income decreased by EGP 1.6 million, or 46.3 per cent., from EGP 3.5 million in 2014 to EGP 1.9million in 2015. This decrease was primarily due to a decrease in cafeteria sales in 2015 and to receipt bythe hospital in 2014 of a EGP 1.8 million payment for a legal claim related to an outstanding balance froma customer.

Other income increased by EGP 2.6 million, or 297.4 per cent., from EGP 0.9 million in 2013 to EGP 3.5million in 2014. This increase was due to payment of an EGP 1.8 million legal claim to the hospital in 2014.


Profit for the year before finance income and income tax decreased by EGP 15.6 million, or 62.7 per cent.,from EGP 24.9 million in 2014 to EGP 9.3 million in 2015. The decrease was primarily due to animpairment of trade receivables in 2015 resulting from the corrective accounting treatment of historicallyinaccurate impairment policies by the hospital’s previous management, as well as provisions made in 2015.Further, expenses relating to a patient service charge that were historically accounted for on the hospital’sbalance sheet were moved onto the statement of income in 2015. These expenses offset the growth of thehospital’s gross profit.

Profit for the year before finance income and income tax increased by EGP 16.5 million, or 198.0 per cent.,from EGP 8.3 million in 2013 to EGP 24.9 million in 2014. This increase was primarily due to higher

115

outpatient revenue, higher revenue in the radiotherapy department resulting from acquisition of anadvanced radiotherapy machine and a reversal of an impairment of trade receivables in 2014.

Current tax

Current tax decreased by EGP 2.0 million, or 28.9 per cent., from EGP 7.0 million in 2014 toEGP 5.0 million in 2015. The hospital’s effective tax rate in 2015 was 61.0 per cent., compared to 27.1 percent. in 2014. This increase was due to lower profit before income tax in 2015 coupled with higher expensesnot deductible for tax purposes relating to higher impairment of trade receivables. These factors offset thepositive effect of the reduction of the applicable corporate tax rate in Egypt in 2015.

Current tax increased by EGP 5.0 million, or 240.5 per cent., from EGP 2.1 million in 2013 toEGP 7.0 million in 2014. The hospital’s effective tax rate in 2014 was 27.1 per cent., compared to 19.6 percent. in 2013. The increase was primarily due to an increase in the applicable corporate tax rate on incomeover EGP 1 million from 25 per cent. in 2013 to 30 per cent. in 2014.

Deferred tax

Deferred tax increased by EGP 0.9 million, or 334.7 per cent., from EGP 0.3 million in 2014 to negativeEGP 0.7 million in 2015. Deferred tax decreased by EGP 0.1 million, or 32.4 per cent., fromEGP 0.4 million in 2013 to EGP 0.3 million in 2014.

Profit for the year

Profit for the year decreased by EGP 14.5 million, or 80.1 per cent., from EGP 18.2 million in 2014 toEGP 3.6 million in 2015. The decrease was primarily due to a decrease in profit for the year before financeincome and income tax, offset in part by a reduction of the applicable corporate tax rate in Egypt.

Profit for the year increased by EGP 11.4 million, or 169.9 per cent., from EGP 6.7 million in 2013 toEGP 18.2 million in 2014. This increase was primarily due to an increase in profit for the year beforefinance income and income tax.


Nile Badrawi’s adjusted profit for the year is profit for the year excluding provisions taken in 2015 that arerelated to receivables’ balances not pertaining to 2015 and provisions for claims incurred in 2015 but thatare partially relevant to a prior period and such part not expected to be incurred in the future.

Adjusted profit for the year decreased by EGP 2.7 million, or 14.9 per cent., from EGP 18.2 million in 2014to EGP 15.5 million in 2015. This decrease was primarily due to expenses relating to a patient servicecharge that were historically accounted for on the hospital’s balance sheet being moved onto the statementof income in 2015. These expenses offset the growth of the hospital’s gross profit and a reduction of theapplicable corporate tax rate in Egypt.

Adjusted profit for the year increased by EGP 11.4 million, or 169.9 per cent., from EGP 6.7 million in2013 to EGP 18.2 million in 2014. This increase was primarily due to an increase in profit for the yearbefore finance income and income tax.

116

Al Shorouk’s results of operations



(audited)(EGP)


Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,728,971 31,741,518 22,488,817General and administrative expenses . . . . . . . . . . . . . . . . . . (25,581,868) (17,078,570) (14,540,905)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,070,124) — (6,676,913)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,231,343 1,189,322 1,072,690


Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,342 113,062 72,973Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,333,834) (55,125) (20,861)

Profit for the year before income tax . . . . . . . . . . . . . . . . . . 8,102,830 15,910,207 2,395,801Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,108,178) (4,491,563) (2,638,327)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 198,380 29,752 172,330

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,193,032 11,448,396 (70,196)

Operating revenue

Operating revenue increased by EGP 21.1 million, or 17.9 per cent., from EGP 117.6 million in 2014 toEGP 138.6 million in 2015. Revenue per surgical patient increased as a result of the introduction of morecomplex procedures and specialties, and revenue per surgery also increased due to higher levels of medicalsupply cost increases being passed on to patients. The number of non-surgical patients also increased in theoncology department. Outpatient clinic visits increased due to an increase in demand and higher pricescharged for check-ups of travellers to Gulf countries as part of the Gulf Approved Medical CentresAssociation programme, which the hospital is certified to conduct.

Operating revenue increased by EGP 19.1 million, or 19.4 per cent., from EGP 98.5 million in 2013 toEGP 117.6 million in 2014. This increase was primarily due to an increased number of surgeries and higherrevenue per surgery as a result of increases in price.

Operating costs




Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,978 39,022 34,726Physician fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,808 19,245 14,824Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,603 15,905 15,720Fixed assets depreciation and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . 3,794 4,758 5,042Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . . . . . . . . . . 2,986 2,819 1,998Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,649 2,339 2,087Rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 523 — —Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,573 1,763 1,638

99,913 85,851 76,035

Operating costs increased by EGP 14.1 million, or 16.4 per cent., from EGP 85.9 million in 2014 toEGP 99.9 million in 2015. This represented a decrease from 73.0 per cent. to 72.1 per cent. as a percentageof operating revenue. As a percentage of operating revenue, adjusted operating costs which adjusts fordepreciation of medical equipment and medical infrastructure, increased slightly from 69.0 per cent. in2014 to 69.3 per cent. in 2015. Fees paid to consultant doctors increased as a result of increases in thenumber of outpatient clinic visits and complex surgeries that command higher fees. This was offset bymedical staff costs decreasing as a percentage of operating revenue as salaries increased slightly while the

117

number of such staff stayed relatively constant. Medical supply costs also decreased as a percentage ofoperating revenue due to price increases that outpaced cost increases.

Operating costs increased by EGP 9.8 million, or 12.9 per cent., from EGP 76.0 million in 2013 toEGP 85.9 million in 2014. This represented a decrease from 77.2 per cent. to 73.0 per cent. as a percentageof operating revenue. Adjusted operating costs decreased as a percentage of operating revenue from72.1 per cent. in 2013 to 69.0 per cent. in 2014, primarily due to medical staff costs decreasing as apercentage of revenue.

Gross profit

Gross profit increased by EGP 7.0 million, or 22.0 per cent., from EGP 31.7 million in 2014 toEGP 38.7 million in 2015. Adjusted gross profit increased by 16.5 per cent. from EGP 36.5 million in 2014to EGP 42.5 million in 2015. This increase was primarily due to increasing revenue per patient as a resultof the introduction of more complex procedures and specialties, and increasing revenue per surgery due tohigher levels of medical supply cost increases being passed on to patients.

Gross profit increased by EGP 9.3 million, or 41.1 per cent., from EGP 22.5 million in 2013 toEGP 31.7 million in 2014. Adjusted gross profit increased by 32.6 per cent. from EGP 27.5 million in 2013to EGP 36.5 million in 2014. This increase was primarily due to an increased number of surgeries andhigher revenue per surgery as a result of increases in price.





Consultancy and legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,851 4,198 3,700Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,203 3,476 2,330Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,329 — 35Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,395 2,745 2,318Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . . . . . . . . . . 1,733 1,673 1,317BOD meeting allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,475 777 653Rentals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607 714 670Fixed assets depreciation and write-offs . . . . . . . . . . . . . . . . . . . . . . . . . . 48 131 —Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,938 3,362 3,519

25,582 17,079 14,541

General and administrative expenses increased by 8.5 million, or 49.8 per cent., from EGP 17.1 million in2014 to EGP 25.6 million in 2015. This represented an increase from 14.5 per cent. to 18.5 per cent. as apercentage of operating revenue, primarily due to a one-time impairment of trade receivables in 2015resulting from the corrective accounting treatment of historically inaccurate impairment policies employedby the hospital’s previous management. Adjusted general and administrative expenses increased as apercentage of operating revenue from 14.4 per cent. in 2014 to 15.3 per cent. in 2015. Prior to January2016, Al Shorouk Hospital Company paid professional and consulting fees to a management companyestablished by the hospital’s previous owners. Payment of these fees ceased in January 2016 when AlShorouk Hospital Company was acquired by the Company. Food and beverage costs also increased, aswell.

General and administrative expenses increased by EGP 2.5 million, or 17.5 per cent., fromEGP 14.5 million in 2013 to EGP 17.1 million in 2014. This represented a relatively small decrease from14.8 per cent. to 14.5 per cent. as a percentage of operating revenue. Adjusted general and administrativeexpenses remained relatively flat as a percentage of operating revenue from 14.7 per cent. in 2013 to14.4 per cent. in 2014. Non-medical staff costs, food and beverage costs and professional and consultingfees all remained relatively flat as a percentage of operating revenue during the period.

118

Provisions

Al Shorouk Hospital Company made EGP 5.1 million of provisions in 2015, up from nil in 2014. Theprovisions made in 2015 primarily relate to required provisions for retired employees’ remaining vacationallowance.

Al Shorouk Hospital Company made no provisions in 2014, down from EGP 6.7 million in 2013. Theprovisions made in 2013 relate to required provisions.

Other income

Other income increased by EGP 0.04 million, or 3.5 per cent., from EGP 1.19 million in 2014 toEGP 1.23 million in 2015. Other income increased by EGP 0.1 million, or 10.9 per cent., fromEGP 1.1 million in 2013 to EGP 1.2 million in 2014.


Profit for the year before finance income and income tax decreased by EGP 6.5 million, or 41.3 per cent.,from EGP 15.9 million in 2014 to EGP 2.3 million in 2015. This decrease was primarily due to animpairment of trade receivables in 2015 resulting from the corrective accounting treatment of historicallyinaccurate impairment policies by the hospital’s previous management, as well as provisions made in 2015.

Profit for the year before finance income and income tax increased by EGP 13.5 million fromEGP 2.3 million in 2013 to EGP 15.6 million in 2014. This increase was primarily due to an increasednumber of surgeries and higher revenue per surgery as a result of increases in price, as well as medical staffcosts staying relatively flat and costs of medical consumables growing in line with revenue.

Current tax

Current tax decreased by EGP 0.4 million, or 8.5 per cent., from EGP 4.5 million in 2014 toEGP 4.1 million in 2015. The hospital’s effective tax rate in 2015 was 47.0 per cent., compared to 28.0 percent. in 2014. This increase was due to lower profit before income tax in 2015 coupled with higher expensesnot deductible for tax purposes relating to higher impairment of trade receivables. These factors offset thepositive effect of the reduction of the applicable corporate tax rate in Egypt in 2015.

Current tax increased by EGP 1.9 million, or 70.2 per cent., from EGP 2.6 million in 2013 toEGP 4.5 million in 2014. The hospital’s effective tax rate in 2014 was 28.0 per cent., compared to 103.0 percent. in 2013. This decrease was due to lower expenses not deductible for tax purposes, offset in part by theincrease in the applicable corporate tax rate on income over EGP 1 million from 25 per cent. in 2013 to30 per cent. in 2014.

Deferred tax

Deferred tax increased by EGP 168.6 thousand, from EGP 29.8 thousand in 2014 to EGP 198.4 thousandin 2015. Deferred tax increased by EGP 142.6 thousand., from EGP 172.3 thousand in 2013 toEGP 30 thousand in 2014.

Profit for the year

Profit for the decreased by EGP 7.3 million, or 63.4 per cent., from EGP 11.4 million in 2014 toEGP 4.2 million in 2015. This decrease was primarily due to an impairment of trade receivables in 2015resulting from the corrective accounting treatment of historically inaccurate impairment policies by thehospital’s previous management, as well as provisions made in 2015.

Profit for the year increased by EGP 11.5 million, from a loss of EGP 70.1 thousand in 2013 to a gain ofEGP 11.4 million in 2014. This increase was primarily due to an increased number of surgeries and higherrevenue per surgery as a result of increases in price, as well as medical staff costs staying relatively flat andcosts of medical consumables growing in line with revenue.


Al Shorouk’s adjusted profit for the year is profit for the year excluding required provisions coveringclaims for the periods prior to when they were accounted for and the portion of impairment of tradereceivables that does not pertain to 2015 (one per cent. of revenue is considered to be the recurringportion).

119

Adjusted profit for the year increased by EGP 0.6 million, or 4.9 per cent., from EGP 11.4 million in 2014to EGP 12.0 million in 2015. This increase was primarily due to increasing revenue per patient as a resultof the introduction of more complex procedures and specialties, and increasing revenue per surgery due tohigher levels of medical supply cost increases being passed on to patients.

Adjusted profit for the year increased by EGP 4.7 million, or 69.5 per cent., from EGP 6.8 million in 2013to EGP 11.4 million in 2014. This increase was primarily due to an increased number of surgeries andhigher revenue per surgery as a result of increases in price, as well as medical staff costs staying relativelyflat and costs of medical consumables growing in line with revenue.

Liquidity and Capital Resources

Capital expenditure

The following table sets forth a breakdown of the Group’s capital expenditure in 2015, 2014 and 2013.Historically, the Group and its hospitals has financed capital expenditure primarily from cash flowsgenerated from operating activities.


2015 2014 2013

Capital Expenditure(1) (EGP million)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 3.5 1.9Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4 1.5 2.4Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2 4.0 2.9Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0 4.8 2.2

Capital Expenditure/operating revenue(1) (%)Cleopatra . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7 1.2 0.8Cairo Specialized Hospital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.9 1.2 2.1Nile Badrawi . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.0 3.7 3.3Al Shorouk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.9 4.0 2.2


The Group has a well-defined short-term capital expenditure plan. Of its cash available for capitalexpenditure and operational activities, the Group is targeting to spend EGP 124 million in 2016 onshort-term capital expenditure. The Group expects that of this EGP 124 million, EGP 64 million will bespent on medical capital expenditure such as new electric beds, ventilators, ambulances, interventionalx-ray and other medical equipment; EGP 33 million will be spent on civil capital expenditure such asbuilding infrastructure, electromechanical infrastructure and vehicles; and EGP 20 million will be spent oninformation technology systems, including the implementation of a new hospital information system andERP system (see ‘‘Information Technology’’ in Part 6 (Business Description) of this OfferingMemorandum). The remaining EGP 7 million is expected to be spent at Al Shorouk but has not beenallocated to specific projects. Of the cash intended to be spent on medical capital expenditure, about half isexpected to be spent at Cairo Specialized Hospital; of the cash intended to be spent on civil capitalexpenditure, the majority is expected to be spent at Cairo Specialized Hospital and Nile Badrawi; and ofthe cash intended to be spent on IT capital expenditure, the majority is expected to be spent at Cleopatraand Cairo Specialized Hospital.

The Group may use part of this available cash, in addition to part or all of the net proceeds of the ClosedSubscription, to fund its capital expenditure plans, including the development of extensions of Al Shoroukand Cleopatra, as well as the possible acquisition of a facility in New Cairo, as set forth below.

In 2010 Al Shorouk Hospital Company acquired a facility on a 366.5 m2 plot of land adjacent to its existinghospital. The Group intends to utilise the adjacent facility as an extension offering general services, with afocus on ICU services, of which there is a current shortage in Cairo and which tend to be priced higherthan other hospital beds. The extension is intended to house approximately 40 beds and is expected to beoperational in 2017, subject to obtaining all necessary licenses and approvals. The cost of development ofthe extension is expected to be approximately EGP 150 million. This amount does not include the cost ofacquiring the property, which Al Shorouk incurred in 2010.

In 2006, the Company acquired a facility on a 1,176.25 m2 plot of land adjacent to Cleopatra, which theGroup intends to utilise as an extension to Cleopatra. Since Cleopatra currently has a high bed occupancy

120

rate in certain departments such as outpatient clinics and ICU, the new facility is expected to serve asoverflow for those departments, among others, as well as expanded radiology services. The extension isintended to house approximately 100 beds and is expected to be operational within 12–18 months afterobtaining the necessary licenses and permits, all of which have been applied for. The cost of developmentof the extension is expected to be approximately EGP 250 million. This amount does not include the costof acquiring the property, which the Company incurred in 2006.

The Group is considering the acquisition of a facility in New Cairo with a total gross internal area of21,604 m2. The facility would be expected to house approximately 200 beds, seven surgical rooms, onecatheter laboratory, 20 outpatient clinics and 10 emergency room beds. The Group believes the facilitywould be operational within 12 months of acquisition and would cost approximately EGP 300–350 million,including the cost of the acquisition.

Proximity to healthcare facilities is a main concern for Egyptian patients. The Group is aiming toimplement a hub-and-spoke polyclinic business model in order to penetrate smaller neighbourhoods.Under this plan, the Group would open Cleopatra-branded polyclinics, which would act as extensions ofthe Group’s hospital platform, in key secondary urban developments where population density doesn’teconomically justify opening a full hospital. The polyclinics, which would require relatively low capitalexpenditure to setup and operate, would have the capabilities to perform minor procedures, routineexaminations and diagnostic testing. The polyclinics could leverage the Group’s size when referrals to alarger hospital are required for more complex procedures. Each polyclinic is expected to costapproximately EGP 3.5 million to open, which would be funded out of cash generated from operatingactivities. The Group expects to begin implementation of this strategy by the end of 2016, but does notexpect any capital expenditure outlays to occur until 2017. The Group is targeting to open a total of10 polyclinics over the next five years.

Cash flow


The following table sets forth a summary of Cleopatra Hospital Company’s cash flow statement for 2015,2014 and 2013.


2015 2014 2013

(audited)(EGP millions)

Net cash flows generated from operating activities . . . . . . . . . . . . . . . . . . . . . . 148.8 76.2 45.0Net cash flows used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (381.6) (1.3) (0.03)Net cash flows generated from / (used in) financing activities . . . . . . . . . . . . . . 202.7 (38.8) (44.2)Change in cash and cash equivalents during the year . . . . . . . . . . . . . . . . . . . . (30.1) 36.1 0.8

Cash and cash equivalents at the end of the year . . . . . . . . . . . . . . . . . . . . . . 23.6 53.6 17.5

Net cash flows generated from operating activities

For 2015, Cleopatra’s net cash flows generated from operating activities were EGP 148.8 million, anincrease of EGP 72.6 million, or 95.3 per cent., from EGP 76.2 million for 2014. This increase wasprimarily due to an increase in creditors and credit balances resulting from an interest-free shareholderloan of EGP 47 million from Care Healthcare to Cleopatra Hospital Company, which was converted toshareholders’ equity reserves in the second quarter of 2016 and will not be repaid. Cash generated fromoperating activities also increased because of an increase in working capital due to shorter delays inreceiving payments from contract customers.

For 2014, Cleopatra’s net cash flows generated from operating activities were EGP 76.2 million, anincrease of EGP 31.2 million, or 69.3 per cent., from EGP 45.0 million for 2013. This increase wasprimarily due to a decrease in debtors and other debit balances.

Net cash flows used in investing activities

In 2015, Cleopatra’s net cash flow used in investing activities was EGP 381.6 million, an increase ofEGP 380.3 million, from EGP 1.3 million in 2014. This increase was primarily due to the acquisitions of

121

Cairo Specialized Hospital Company and Nile Badrawi Hospital Company in 2015, as well as aEGP 15 million cash deposit into an interest-generating savings account.

In 2014, Cleopatra’s net cash flow used in investing activities was EGP 1.3 million, an increase ofEGP 1.3 million, from EGP 0.03 million in 2013. This increase was primarily due to increased capitalexpenditure on medical equipment.

Net cash flows generated / (used in) financing activities

In 2015, Cleopatra’s net cash flow generated from financing activities was EGP 202.7 million, an increaseof EGP 241.5 million, from EGP 38.8 million used in 2014. This increase was primarily due to a cash inflowin 2015 of EGP 203 million from a secured loan facility, offset in part by EGP 38.8 million of dividendspaid in 2014 compared to nil dividends paid in 2015.

In 2014, Cleopatra’s net cash flow used in financing activities was EGP 38.8 million, a decrease ofEGP 5.4 million, from EGP 44.2 million in 2013. This decrease was due to fewer dividends paid in 2014.


The following table sets forth a summary of Cairo Specialized Hospital Company’s cash flow statement for2015, 2014 and 2013.


20142015 Restated 2013


Net cash flows generated from operating activities . . . . . . . . . . . . . . . . . . . . . 17.2 29.2 22.8Net cash flows used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (55.3) (1.5) (2.4)Net cash flows used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.7) (18.9) (17.3)Change in cash and cash equivalents during the year . . . . . . . . . . . . . . . . . . . (39.8) 8.8 3.1

Cash and cash equivalents at the end of the year . . . . . . . . . . . . . . . . . . . . . . 4.7 44.5 35.6

Note: Figures include data for periods during which the Company did not own the hospital.


For 2015, Cairo Specialized Hospital’s net cash flows generated from operating activities wereEGP 17.2 million, a decrease of EGP 12.0 million, or 41.1 per cent., from EGP 29.2 million for 2014. Thisreduction was primarily due to an increase in trade receivables resulting from inaccurate billing and claimsprocedures. The new centralised management have hired a medical error auditor to reduce similar issuesin the future.

For 2014, Cairo Specialized Hospital’s net cash flows generated from operating activities wereEGP 29.2 million, an increase of EGP 6.4 million, or 28.1 per cent., from EGP 22.8 million for 2013. Thisincrease was primarily due to a decrease in trade receivables of EGP 3.8 million and an increase increditors and other credit balances of EGP 2.4 million.


In 2015, Cairo Specialized Hospital’s net cash flow used in investing activities was EGP 55.3 million, anincrease of EGP 53.8 million, from EGP 1.5 million in 2014. This increase was primarily due to aEGP 47.9 million time deposit made with a maturity of six months and increased capital expenditure ofEGP 7.4 million on machinery and equipment.

In 2014, Cairo Specialized Hospital’s net cash flow used in investing activities was EGP 1.5 million, adecrease of EGP 0.9 million, or 37.5 per cent., from EGP 2.4 million in 2013. This decrease was primarilydue to reduced capital expenditure on equipment and infrastructure.

122

Net cash flows used in financing activities

In 2015, Cairo Specialized Hospital’s net cash flow used in financing activities was EGP 1.7 million, adecrease of EGP 17.2 million, from EGP 18.9 million in 2014. This decrease was due to a lower level ofdividends paid in 2015.

In 2014, Cairo Specialized Hospital’s net cash flow used in financing activities was EGP 18.9 million, anincrease of EGP 1.6 million, or 9.2 per cent., from EGP 17.3 million in 2013. This increase was due to apurchase of treasury shares by the Company, which offset a decrease in the amount of dividends paid.


The following table sets forth a summary of Nile Badrawi Hospital Company’s cash flow statement for2015, 2014 and 2013.




Net cash flows generated from operating activities . . . . . . . . . . . . . . . . . . . . 13.7 14.6 10.5Net cash flows used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . (1.2) (4.0) (2.8)Net cash flows used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . — (7.2) (7.1)Change in cash and cash equivalents during the year . . . . . . . . . . . . . . . . . . . 12.4 3.4 0.5

Cash and cash equivalents at the end of the year . . . . . . . . . . . . . . . . . . . . . 18.8 6.4 3.0



For 2015, Nile Badrawi’s net cash flows generated from operating activities were EGP 13.7 million, adecrease of EGP 0.9 million, or 6.4 per cent., from EGP 14.6 million for 2014. This decrease was primarilydue to a decrease in the hospital’s profit before tax and an increase in tax paid.

For 2014, Nile Badrawi’s net cash flows generated from operating activities were EGP 14.6 million, anincrease of EGP 4.2 million, or 39.7 per cent., from EGP 10.5 million for 2013. This increase was primarilydue to an increase in the hospital’s profit before tax, offset in part by a decrease in trade receivables.


In 2015, Nile Badrawi’s net cash flow used in investing activities was EGP 1.2 million, a decrease ofEGP 2.8 million, or 70.0 per cent., from EGP 4.0 million in 2014. This decrease was primarily due to adecrease in the amount of capital expenditure spent on both medical and non-medical equipment andinfrastructure.

In 2014, Nile Badrawi’s net cash flow used in investing activities was EGP 4.0 million, an increase ofEGP 1.2 million, or 42.9 per cent., from EGP 2.8 million in 2013. This increase was primarily due to anincrease in the amount of capital expenditure spent on both medical and non-medical equipment andinfrastructure.


In 2015, Nile Badrawi’s net cash flow used in financing activities was nil, compared to EGP 7.2 million in2014 primarily consisting of dividends paid.

In 2014, Nile Badrawi’s net cash flow used in financing activities was EGP 7.2 million, an increase ofEGP 0.1 million, or 1.7 per cent., from EGP 7.1 million in 2013. This increase was primarily due to anincrease in dividends paid.

123


The following table sets forth a summary of Al Shorouk Hospital Company’s cash flow statement for 2015,2014 and 2013.




Net cash flows generated from operating activities . . . . . . . . . . . . . . . . . . . . 10.5 12.3 14.6Net cash flows used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . (3.9) (4.7) (2.1)Net cash flows used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . (7.2) (7.0) (10.4)Change in cash and cash equivalents during the year . . . . . . . . . . . . . . . . . . . (0.7) 0.6 2.1

Cash and cash equivalents at the end of the year . . . . . . . . . . . . . . . . . . . . . 4.1 4.8 4.2



For 2015, Al Shorouk’s net cash flows generated from operating activities were EGP 10.5 million, adecrease of EGP 1.8 million, or 14.6 per cent., from EGP 12.3 million for 2014. This decrease wasprimarily due to prior management’s poor working capital management system and a failure to collectaccounts receivable on a timely basis, which the Group has taken steps to correct.

For 2014, Al Shorouk’s net cash flows generated from operating activities were EGP 12.3 million, adecrease of EGP 2.4 million, or 16.3 per cent., from EGP 14.6 million for 2013. This decrease wasprimarily due to prior management’s poor working capital management system and a failure to collectaccounts receivable on a timely basis, which the Group has taken steps to correct.


In 2015, Al Shorouk’s net cash flow used in investing activities was EGP 3.9 million, an increase ofEGP 0.8 million, or 17.0 per cent., from EGP 4.7 million in 2014. This increase was primarily due to anincrease in interest payments of EGP 1.3 million, offset by a decrease in capital expenditure ofEGP 700,000.

In 2014, Al Shorouk’s net cash flow used in investing activities was EGP 4.7 million, an increase ofEGP 2.6 million, or 123.8 per cent., from EGP 2.1 million in 2013. This increase was primarily due to largecapital expenditures on new equipment and to maintain the facility’s overall infrastructure.


In 2015, Al Shorouk’s net cash flow used in financing activities was EGP 7.2 million, an increase ofEGP 0.2 million, or 2.9 per cent., from EGP 7.0 million in 2014. This increase was primarily due to higherdividends paid and a change in facility loans that resulted in higher interest paid.

In 2014, Al Shorouk’s net cash flow used in financing activities was EGP 7.0 million, a decrease ofEGP 3.4 million, or 32.7 per cent., from EGP 10.4 million for 2013. This decrease was primarily due tofewer dividends paid and a decrease in facility loan payments resulting from a restructuring of thehospital’s finance lease from a long-term loan to a capital lease agreement.

124

Working capital

The following table sets forth the Group’s working capital as at 31 December 2015.


Cleopatra Cairo Specialized Nile Badrawi Al ShoroukHospital Hospital Hospital HospitalCompany Company Company Company

(unaudited)(EGP millions)

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.9 3.1 4.5 8.7Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . 39.9 24.7 25.3 20.3Creditors and other credit balances . . . . . . . . . . . . (42.2) (24.2) (26.2) (19.3)

Working capital . . . . . . . . . . . . . . . . . . . . . . . . . . 5.6 3.6 3.6 9.7

Many of the Group’s patients are covered by third-party payers such as health insurance providers. As aresult of the payment structure for third-party payers, the Group generally collects fees from these payersaround two months after a claim is submitted. Claims are submitted up to one month after a patient isdischarged. This lengthy payment process diminishes the Group’s working capital reserves, and to date theGroup has utilised cash received from out-of-pocket patients to cover this shortfall. The Group is aiming toshorten the average payment gap from third-party payers as it further integrates its hospitals and can takeadvantage of increased bargaining power with third-party payers. The Group is targeting implementationof a 45-day payment policy for its receivables. It is also targeting to extend payment of its payables to anaverage of 120 days.

Prior to being acquired, the Group’s hospitals did not have effective inventory or working capitalmanagement systems. The Group has since implemented such systems to mitigate the risk of a workingcapital shortfall, and such implementation has been the key driver of working capital at the Group’shospitals since each was acquired by the Company. Al Shorouk is exposed to some additional workingcapital risk because one of its key contract customers, a regional embassy, is sometimes unable to pay itsfees on time due to political instability.

In the opinion of the Company, taking into account the net proceeds receivable by the Company from thesubscription for Closed Subscription Shares in the Closed Subscription, the Group has sufficient workingcapital for its present requirements, that is for at least the next 12 months following the date of thisOffering Memorandum.

Indebtedness

The following table sets forth a breakdown of the Group’s interest-bearing loans and borrowings as at31 December 2015.


CairoCleopatra Specialized Nile Badrawi Al ShoroukHospital Hospital Hospital HospitalCompany Company Company Company


Current liabilities:Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,600 — — 9,477

Non-current liabilities:Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,400 — — 892

Total interest bearing loans and borrowings . . . . . . . . . 203,000 — — 10,369

125

Contractual Obligations and Commitments

The following table sets forth the Group’s contractual obligations and commitments as at 31 December2015.

Within 1 to 5 More thanTotal 1 year years 5 years

(EGP millions)

Cleopatra Hospital CompanyBorrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203.0 40.6 162.4 —Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203.0 40.6 162.4 —


Cairo Specialized Hospital CompanyBorrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —


Nile Badrawi Hospital CompanyBorrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 2.5 2.8 —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.3 2.5 2.8 —


Al Shorouk Hospital CompanyBorrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.4 9.5 0.9 —Operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0 1.3 0.8 —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.4 10.8 1.7 —

Credit Facilities

CIB Medium Term Loan Agreements

The Company is party to two medium term loan agreements with Commercial International Bank (CIB).The first agreement was entered into on 16 July 2015 for the purpose of financing the acquisition of CairoSpecialized Hospital Company and/or other hospitals. The second agreement was entered into on19 January 2016 for the purpose of financing the acquisition of Al Shorouk Hospital Company. Themaximum loan amount available under each agreement is EGP 203 million and EGP 230 million,respectively.

As of 21 January 2016, the Company had fully utilised the first loan and had utilised EGP 208.7 million ofthe second loan. Interest on each loan is payable at a rate of 2.4 per cent. above the Central Bank of Egyptlending corridor rate, and the loans are scheduled to be fully repaid by 31 December 2020 and 20 January2022, respectively.

The loan agreements contain standard covenants and undertakings for transactions of this nature, inaddition to the following: (i) to deposit with CIB as a custodian all of the shares of Cairo SpecializedHospital Company, Nile Badrawi Hospital Company and Al Shorouk Hospital Company that are owned bythe Company and (ii) to maintain ownership of, directly or indirectly, at all times, at least 51 per cent. ofCairo Specialized Hospital Company, Nile Badrawi Hospital Company, Al Shorouk Hospital Companyand/or any companies or hospitals acquired with financing through facility agreements granted by CIB,unless the prior written approval of CIB is obtained.

Although not a party to the loan agreements, Care Healthcare, as the majority shareholder of theCompany, has undertaken to (i) not approve any distribution of the Company’s profits in any given year

126

except after any due payment (including principal, interest, commission and expenses) under the loan andprovided that such distribution does not result in breach of any of the financial covenants provided forunder the loan agreements and (ii) cover any deficit in the debt service coverage ratio (1:1) through acapital increase and/or a subordinated shareholders’ loan, without obtaining a loan from any other bank.

Pursuant to the second loan agreement, Care Healthcare has also undertaken to settle any differencebetween the final acquisition price of Al Shorouk Hospital Company shares and this loan amount througheither a shareholders’ loan and/or cash funding, the repayment of which is to be subordinated to the CIBloans.

The security packages for the loans include (i) promissory notes issued by the Company in the name ofCIB covering the instalments payable under the loan agreements, which are released to the Company uponpayment of each corresponding instalment; (ii) an insurance policy designating CIB as the sole beneficiarycovering the Company’s owned fixed assets and inventory against the risk of fire and other certain risks fora minimum amount of EGP 127 million. The Company is entitled to use a maximum of EGP 25 million ofany such insurance payments for the restoration of destroyed assets, while any amount overEGP 25 million must be used for the mandatory prepayment of the loan amounts; (iii) a pledge in favourof CIB of 100 per cent. of the Company’s Shares owned by Care Healthcare; (iv) a pledge in favour of CIBof 100 per cent. of the shares of Cairo Specialized Hospital Company and Al Shorouk Hospital Companythat are owned by the Company (the pledge of shares of Al Shorouk Hospital Company is in the process ofbeing finalised); (v) a pledge in favour of CIB of 51 per cent. of the shares of Nile Badrawi HospitalCompany that are owned by the Company; and (vi) insurance policies designating CIB as the solebeneficiary covering all the fixed assets and inventory owned by Al Shorouk Hospital Company and NileBadrawi Hospital Company.

The loan agreements also provide that, if the Company’s resources are not sufficient to repay anyoutstanding amounts due under the loans, the Company undertakes to vote its shares in the generalshareholders’ meeting of Al Shorouk Hospital Company, Cairo Specialized Hospital Company and NileBadrawi Hospital Company in favour of distribution of dividends to the Company, which will in turn usesuch dividends to repay any outstanding amounts due to CIB.

The loan agreements provide that the Company shall not sell, mortgage, grant a priority right and/or issuea power of attorney for the sale or pledge or waiver of any of the Company’s current or future tangible orintangible assets that would prejudice its obligations under the loan agreements unless it obtains priorwritten approval of CIB.

For the purpose of the Combined Offer, CIB has approved the deposit of the Shares with MCDR and torelease the pledge on 40,000,000 Shares (representing 25 per cent. of the issued share capital of theCompany), provided that any Shares to be acquired by and/or issued and subscribed to fully by CareHealthcare in the Closed Subscription are immediately pledged to CIB following completion of the ClosedSubscription.

Al Shorouk Hospital Company Overdrafts

Al Shorouk Hospital Company has two overdraft credit facilities with a total value of EGP 8 million fromAudi Bank and Societe Arabe Internationale de Banque (SAIB). The provisions of these agreements arestandard and do not include any restrictions on the transfer of shares or change of control.

Audi Bank

Al Shorouk Hospital Company has one overdraft credit facility with Audi Bank, with a value ofEGP 5 million. The facility is subject to an interest rate of 3.25 per cent. above the Central Bank of Egypt’smid-corridor rate with a minimum of 13 per cent. and a commission of 1/1000 on the highest monthly debitbalance. To secure the repayment, Al Shorouk Hospital Company issued a promissory note covering theamount of the overdraft, which is to be paid upon request. As at 31 December 2015, Al Shorouk HospitalCompany had borrowed EGP 5.6 million under the overdraft. Audi Bank commonly allows the Group toover-draw due to the Group’s credit history with the bank.

SAIB

Al Shorouk Hospital Company has one overdraft credit facility with SAIB, with a value of EGP 3 million.The facility is subject to an interest of 3.25 per cent. above the Central Bank of Egypt’s mid-corridor ratewith a minimum of 13 per cent. and a commission of 1/1000 on the highest monthly debit balance. Tosecure the repayment, Al Shorouk Hospital Company issued a promissory note covering the amount of theoverdraft, which is to be paid upon request. As at 31 December 2015, EGP 2.9 million of the overdraft wasutilised.

127

Financial Leases

Financial Lease with the International Company for Leasing (Incolease)

On 25 November 2014, Al Shorouk Hospital Company entered into a financial lease agreement withIncolease for the lease of a particular 366.45 m2 plot of land. The plot was initially valued atEGP 13.9 million (amended to EGP 19.3 million in December 2014), of which EGP 16.0 million was paidin advance by Al Shorouk Hospital Company to Incolease. The remaining amount is to be paid in monthlyinstalments that began on 25 November 2014 and end on 25 October 2017. The agreement includes anoption for Al Shorouk Hospital Company to buy the plot of land.

The lease agreement requires the prior written approval of Incolease in certain situations, including:(i) any changes or improvements to the leased plot of land, (ii) any merger or dissolution of Al ShoroukHospital Company and (iii) any assignment or transfer of the shares of Al Shorouk Hospital Company byits shareholders at the time of the lease.

Al Shorouk Hospital Company is required to maintain an all-risk insurance policy designating Incolease asthe beneficiary, although such an insurance policy has not been concluded.

Financial Leases with Corplease for Financial Leasing (Corplease)

Al Shorouk Hospital Company has entered into five financial lease agreements with Corplease, four ofwhich are for the lease of medical equipment and one of which is for an ambulance vehicle. The total valueof the five leases is EGP 1.8 million.

The instalments are expected to be fully paid by July 2018. The financial leases contain standard terms andinclude certain restrictions, including (i) a prohibition on distributing profits, except after satisfyingobligations under the agreements, (ii) a prohibition on obtaining loans or financial leases without the priorwritten approval of Corplease and (iii) a prohibition on changing the Al Shorouk Hospital Companyshareholding structure without prior approval from Corplease. Pursuant to each of the five agreements, AlShorouk Hospital Company is required to maintain an all-risk insurance policy designating Corplease asthe beneficiary. Al Shorouk currently holds the required insurance policies under three out of the fiveaforementioned financial leases.

In 2012, Nile Badrawi Hospital Company entered into two financial lease agreements with Corplease forthe lease of medical equipment. The total value of the two leases is EGP 11.2 million. The instalments areexpected to be fully paid by September 2018. The financial leases contain standard terms and includecertain restrictions, including (i) a prohibition on distributing profits without the prior written approval ofCorplease and provided that Nile Badrawi Hospital Company has settled its due instalments and (ii) aprohibition on changing the Nile Badrawi Hospital Company shareholding structure without priorapproval from Corplease. Pursuant to the agreements, Nile Badrawi Hospital Company is required tomaintain an all-risk insurance policy designating Corplease as the beneficiary.

Shareholder Loan

As of 31 December 2015, Care Healthcare had an outstanding EGP 47 million loan to the Company on aninterest-free basis. In April 2016, Care Healthcare agreed to amend the loan terms, such that the amountwill be repayable to all of the Company’s Shareholders, pro rata, upon any future liquidation of theCompany, and only after settlement of all other Company liabilities. As such, as of the date of theagreement, the loan was reclassified in the Company’s accounts from a non-current liability to theshareholders’ equity reserves.

Dividend Policy

The Company may pay dividends only as permitted by law and the Statutes of the Company and subject toconsideration of its investment requirements, financial condition (including its level of indebtedness andliquidity requirements) and its results of operations. The Directors expect to maintain a flexible dividendpolicy with a view to balance between growth opportunities and availability of funds for dividenddistribution. The Directors currently expect that in accordance with the Group’s well-defined integrationplan, no dividends will be paid in 2016 and 2017 as the reinvestment of cash surpluses into the business willhave a better impact on long-term shareholder value than the distribution as dividends. There can be noassurance that any dividends will be paid in the future or as to the level of any such dividends.

128

The declaration, amount and payment of dividends is determined, subject to the limitations set forthabove, by an absolute majority vote of the shareholders represented at an ordinary general assemblymeeting on the recommendation of the Directors. For more detail on the distribution of dividends, see‘‘Dividends’’ in paragraph 2 of Part 13 (Additional Information) of this Offering Memorandum.

Future dividends will depend on the Group’s results of operations, financial position, dividends receivedfrom its subsidiaries and affiliates, cash requirements, legal reserve and minimum capital requirements,availability of opportunities that fit the Group’s scope and investment criteria, restrictive covenants in theGroup’s finance agreements and other factors deemed relevant by the Directors and the Shareholders. Ifthe Company defaults on its debt obligation, it will be limited in its ability to pay dividends.

The Group intends to maintain, starting in 2018, a policy of distributing, subject to the liquidity and capitalexpenditure requirements of the business in each year, all excess cash. In the absence of viable expansionor investment opportunities that fit the Company’s scope and investment criteria, the expected payoutratio is 50 per cent. or higher of profits available for distribution.

Quantitative and qualitative disclosures about market risks

Financial risk

The Group’s activities expose it to a variety of financial risks: market risk (including currency risk and fairvalue and cash flow interest rate risk), credit risk and liquidity risk. The Group is not exposed to price risk,as it does not have financial assets at fair value through profit and loss. The Group’s management aims tominimise potential adverse effects of such risks on the financial performance of the Group by themonitoring the processes undertaken by the finance department and general manager of each subsidiarycompany and the Company’s executive committee.

The Group does not use any derivative financial instruments to hedge specific risks.

Market risk

Currency risk

Foreign currency risk represents the changes in foreign currency rates, which affect the payments andreceipts denominated in foreign currencies, as well as the evaluation of foreign currency assets andliabilities. Given the nature of the Group’s activities, the Group does not undertake transactionsdenominated in foreign currencies as it carries out all purchases in Egyptian pounds. The Group’s verylimited revenue in foreign currencies are generated from certain foreign embassies. Management is of theopinion that the foreign currency balances are considered immaterial. For more detail, see Note 3 in eachof the audited financial statements of Cleopatra Hospital Company, Cairo Specialized Hospital Company,Nile Badrawi Hospital Company and Al Shorouk Hospital Company as at and for the three years ended31 December 2015, 2014 and 2013 and the audited consolidated financial statements for CleopatraHospital Company and its subsidiaries as at and for the year ended 31 December 2015.

Fair value and cash flow interest rate risk

The Company obtained a long-term loan at an interest rate linked to the Central Bank of Egypt corridorrate and, therefore, it is not exposed to cash flow risks. For more detail on this loan, see ‘‘CIB MediumTerm Loan Agreements’’ in this Part 9 (Operating and Financial Review).

Credit risk

Credit risk arises from cash and bank balances, deposits with banks and credit exposures to the Group’scustomers. The management of each Group company, as well as the Company’s centralised financedepartment and executive committee manage the credit risks of the Group.

For bank credit risk, the Company transacts with banks that are regulated by the Central Bank of Egyptand that have high credit ratings and creditworthiness.

For customer credit risk, the finance director and general manager of each hospital perform analyses onthe credit risk for each potential credit customer in accordance with the Group’s policies. The Company’sexecutive committee follows up with credit terms and reviews default cases and the debt ageing report totake the necessary decisions whether to cancel the credit or to refer the defaulted customer to the Group’slegal department.

129

The Group maintains a provision for impairment equal to 100 per cent. of payments in default for morethan 150 days from the invoice date, in addition to a provision based on historical default rates.

Balances to credit risks are as follows:

As at 31 December

Cleopatra Hospital Company 2015 2014 2013

(audited)(EGP)

Cash at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,268,580 53,398,419 17,542,298Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,487,820 37,669,240 26,518,224

As at 31 December

Cairo Specialized Hospital Company 2015 2014 2013

(audited)(EGP)


As at 31 December

Nile Badrawi Hospital Company 2015 2014 2013

(audited)(EGP)


As at 31 December

Al Shorouk Hospital Company 2015 2014 2013

(audited)(EGP)


Liquidity risk

Management makes cash flow projections on a monthly basis that are discussed with the executivecommittee. Management takes the necessary actions to negotiate with suppliers, follow-up the collectionprocess and manage the inventory balances in order to ensure sufficient cash is maintained to discharge theGroup’s liabilities.

The table below sets forth the Group’s liabilities by maturity as at 31 December 2015.

Less than 3 months 1 to More thanCleopatra Hospital Company 3 months to 1 year 5 years 5 years

(audited)(EGP)

Trade and notes payable . . . . . . . . . . . . . . . . . . . 12,538,630 461,097 — —Due to related parties . . . . . . . . . . . . . . . . . . . . . 29,659,700 — — 54,095,303Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 40,600,000 162,400,000 —

Less than 3 months 1 to More thanCairo Specialized Hospital Company 3 months to 1 year 5 years 5 years

(audited)(EGP)

Trade and notes payable . . . . . . . . . . . . . . . . . . . 12,229,553 1,125,210 — —Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . 8,946,150 — — —

Less than 3 months 1 to More thanNile Badrawi Hospital Company 3 months to 1 year 5 years 5 years

(audited)(EGP)

Trade and notes payable . . . . . . . . . . . . . . . . . . . 19,525,308 — — —

130

Less than 3 months 1 to More thanAl Shorouk Hospital Company 3 months to 1 year 5 years 5 years

(audited)(EGP)

Trade and notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 9,773,357 — — —Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,497,257 980,214 891,782 —

Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a goingconcern in order to provide returns for shareholders and benefits for other stakeholders and to maintainan optimal capital structure to reduce the cost of capital, as is the case for other companies operating inthe same field.

The Group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided bytotal capital. Net debt is the sum of current portion of borrowings (which includes overdrafts), non-currentportion of borrowings and creditors and other credit balances less cash on hand and at banks. Total capitalis represented in net debt plus total equity as shown in the balance sheet.

The following table sets forth the Group’s gearing ratio as at 31 December 2015 and 2014.

As at 31 December

Cleopatra Hospital Company 2015 2014 2013

(audited)(EGP)

Current portion of borrowings . . . . . . . . . . . . . . . . . . . . . . 40,600,000 — —Non-current portion of borrowings . . . . . . . . . . . . . . . . . . . 162,400,000 — —Creditors and other credit balances . . . . . . . . . . . . . . . . . . 96,293,633 29,852,391 21,568,924Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . . . (38,557,392) (53,632,054) (17,542,298)

Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260,736,241 (23,779,663) 4,026,626Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,022,401 135,332,196 130,345,832

Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460,758,642 111,552,533 134,372,458

Gearing ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56.6% (21.3)% (3.0)%

As at 31 December

Cairo Specialized Hospital Company 2015 2014 2013

(audited)(EGP)

Current portion of borrowings . . . . . . . . . . . . . . . . . . . . . . — — —Non-current portion of borrowings . . . . . . . . . . . . . . . . . . — — —Creditors and other credit balances . . . . . . . . . . . . . . . . . . 24,183,362 17,598,369 13,146,648Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . . . (52,563,224) (44,458,748) (35,612,492)

Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (28,379,862) (26,860,379) (22,465,844)Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,402,630 50,851,030 51,226,067

Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,022,768 23,990,651 28,760,223

Gearing ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (74.6)% (112.0)% (78.1)%

131

As at 31 December

Nile Badrawi Hospital Company 2015 2014 2013

(audited)(EGP)

Current portion of borrowings . . . . . . . . . . . . . . . . . . . . . . . — — —Non-current portion of borrowings . . . . . . . . . . . . . . . . . . . . — — —Creditors and other credit balances . . . . . . . . . . . . . . . . . . . 26,180,337 23,107,694 27,667,747Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . . . . (18,786,253) (6,356,681) (2,981,182)

Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,394,084 16,751,013 24,686,565Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,909,383 31,296,894 15,463,762

Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,303,467 48,047,907 40,150,327

Gearing ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17.5)% (34.9)% (61.5)%

As at 31 December

Al Shorouk Hospital Company 2015 2014 2013

(audited)(EGP)

Current portion of borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 9,477,471 5,546,003 5,544,706Non-current portion of borrowings . . . . . . . . . . . . . . . . . . . . . . 891,782 1,871,996 3,533,974Creditors and other credit balances . . . . . . . . . . . . . . . . . . . . . . 19,294,023 19,117,460 17,875,947Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,089,819) (4,758,669) (4,205,873)

Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,573,457 21,776,790 22,748,754Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,544,092 47,216,168 41,084,259

Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,117,549 68,992,958 63,833,013

Gearing ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37.5% 31.6% 35.6%

The gearing ratio changed due to the loan from CIB obtained by the Company during 2015.

Critical Accounting Policies and Estimates

Estimates and assumptions are evaluated based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under the circumstances. The Groupmakes estimates and assumptions concerning the future. The resulting accounting estimates will seldomequal the actual results.

Provisions

Provisions are recognised when there is a present legal or constructive obligation as a result of past events,it is more likely than not that an outflow of resources will be required to settle the obligation and theamount has been reliably estimated. The Group reviews the provision at each balance sheet date andadjusts it to reflect the current best estimate by using the appropriate advisory experience of experts.

Impairment of goodwill

The Group’s management evaluates goodwill annually to determine any impairment in goodwill. Thecarrying amount of goodwill is reduced if it is higher than the expected recoverable amount. Any losses as aresult of impairment of goodwill is charged to the statement of income and cannot be reversedsubsequently.

Impairment of receivables and customer balances

Impairment of receivables and customer balances is estimated by monitoring the ageing of receivables. TheGroup’s management examines the credit position and ability of debtors and customers to make paymentsfor their past due debts. Impairment is recognised for amounts due from debtors and customers whosecredit position, as assessed by management, does not allow them to pay their dues. In addition, the Groupcalculates impairment at a Group level for customers and balances that suffered impairment and suchimpairment was not determined by reference to historical default rates applicable to the Group companies.

132

Summary of Significant Difference Between IFRS and EAS

Overview

The Group prepares its financial statements in accordance with EAS. EAS differs in certain respects toIFRS and accordingly the following represents a narrative summary of significant differences betweenIFRS and EAS, as applied by the Group in preparing its financial statements as at and for the year ended31 December 2015. The Group has not reconciled any differences between EAS and IFRS and does notundertake to do so or to identify all potential differences that may exist.

The differences included below relate to the significant differences that may impact amounts recorded inthe Group’s financial statements rather than differences that may arise as a result of financial statementpresentation or disclosure.

It should be noted that Mansour & Co. PricewaterhouseCoopers has not performed any audit, review orother procedures in respect of the narrative summary of differences included below.

Profit Sharing—Recognition and measurement

The Group has a profit sharing scheme whereby profits are paid to employees and members of the Boardin accordance with applicable laws. Under EAS, profit sharing payment to employees and members of theBoard are recognised as a distribution of profits through equity and as a liability when approved at theGroup’s annual meeting of shareholders.

Under IFRS, these profit sharing arrangements would be considered to arise from employee service orDirectors fees and not as a result of a transaction with the Group’s owners. Profit-sharing payments underIFRS would therefore be recognised as an expense in the period incurred.

Business combination—Accounting for transaction costs

The Company has acquired two subsidiaries during the year ended 31 December 2015. Under EAS,transaction costs that are directly attributable to these acquisitions are capitalised. Accordingly, the Grouphas recorded the transactions’ costs within the investment in subsidiary account.

Under IFRS, transaction costs that are directly attributable to a business combination are recognised as anexpense within the income statement.

Leases—Accounting for finance leases

The Group has assets (equipment) that are held under finance lease arrangements. Under EAS, theseleased assets are recognised in the accounting records of the lessor and depreciated over their estimateduseful lives. The Group, as lessee, recognises lease payments in the income statement in the period inwhich they are paid with the leased asset remaining in the accounting records of the lessor.

Under IFRS, lease classification depends upon whether substantially all of the risks and rewards incidentalto ownership of a leased asset have been transferred from the lessor to the lessee.

Therefore, under a finance lease arrangement, the leased assets would be derecognized by the lessor andinstead accounted for as assets held under finance leases in the accounting records of the lessee withdepreciation charged to the income statement over the estimated useful lives of the assets.

133

PART 10Capitalisation and Indebtedness

The tables below set out the consolidated capitalisation and indebtedness of the Company as at31 December 2015.

The capitalisation and indebtedness information has been sourced from the consolidated financialinformation as at 31 December 2015 and therefore does not include Al Shorouk Hospital Company.

As at31 December 2015

(EGP)

Total current debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,600,000Guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,600,000Unguaranteed/unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Total non-current debt (excluding current portion of long-term debt) . . . . . . . . . . . . . 162,400,000Guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,400,000Unguaranteed/unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Shareholder’s equityShare capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000,000Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,827,660Other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (76,131,168)

Total capitalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,696,492

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,017,745Cash equivalent(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,889,124

(1) Cash equivalent comprises time deposits of up to six months.

Note: Cleopatra Hospital Company’s loans are secured by Care Healthcare’s Shares of the Company and Cleopatra HospitalCompany’s shares of Cairo Specialized Hospital. Al Shorouk Hospital Company’s loans are secured by overdraft promissory notesand by the land subject to the Incolease loan. For more details, see ‘‘Credit Facilities’’ in Part 9 (Operating and Financial Review) ofthis Offering Memorandum.

Note: The capitalisation and indebtedness of Al Shorouk Hospital Company as at 31 December 2015 is as follows:

As at31 December 2015

(EGP)Total current debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,477,471Guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,477,471

Total non-current debt (excluding current portion of long-term debt) . . . . . . . . . . . . . . . . . . . . . . . . . 891,782Guaranteed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891,782Unguaranteed/unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —

Shareholder’s equityShare capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000,000Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,324,923Other reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,890,096

Total capitalisation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,215,019

On 19 January 2016 the Company entered into a medium term loan agreement with CIB for the purposeof financing the acquisition of Al Shorouk Hospital Company. The maximum loan amount available underthe agreement is EGP 230 million, and as of 21 January 2016, the Company had utilisedEGP 208.7 million. For more detail, see ‘‘Credit Facilities’’ in Part 9 (Operating and Financial Review) ofthis Offering Memorandum.

The Company undertook a share split of its ordinary shares on 13 March 2016 at an extraordinary generalmeeting. Pursuant to the split, the par value of the Shares decreased from EGP 10 to EGP 0.5. As of thedate of this Offering Memorandum, the issued share capital of the Company is EGP 80,000,000, consisting

134

of 160,000,000 ordinary shares of EGP 0.5 each. The Company’s authorised share capital is EGP800,000,000.

As of 31 December 2015, Care Healthcare had an outstanding EGP 47 million loan to the Company on aninterest-free basis. In April 2016, Care Healthcare agreed to amend the loan terms, such that the amountwill be repayable to all of the Company’s Shareholders, pro rata, upon any future liquidation of theCompany, and only after settlement of all other Company liabilities. As such, as of the date of theagreement, the loan was reclassified in the Company’s accounts from a non-current liability to theshareholders’ equity reserves.

Other than as set forth above, there has been no material change in the Company’s capitalisation since31 December 2015.

The aggregate expenses of, or incidental to, the Combined Offer and the Closed Subscription to be borneby the Company, including the Sole Global Coordinator’s commission, professional fees and expenses andthe costs of printing and distribution of documents, are estimated to be approximately EGP 35 million(including all applicable taxes and assuming the Offer Price is at the mid-point of the Offer Price Range,all of the Offer Shares are sold in the Combined Offer and no Stabilisation), which the Company intendsto pay out of the proceeds of the Closed Subscription.

Following completion of the Closed Subscription, the Company’s issued share capital is expected to beEGP 100,000,000 divided into 200,000,000 ordinary shares of EGP 0.5 each (assuming all of the OfferShares are sold on the Combined Offer and no Stabilisation).

135

PART 11Unaudited Pro Forma Consolidated Financial Information

The Unaudited Pro Forma Consolidated Financial Information includes the pro forma consolidatedbalance sheet of Cleopatra Hospital Company and its subsidiaries, which comprises Cairo SpecializedHospital Company and Nile Badrawi Hospital Company and Al Shorouk Hospital Company and the proforma consolidated statement of income of the Company and Al Shorouk Hospital Company as at and forthe year ended 31 December 2015. The Unaudited Pro Forma Consolidated Financial Information hasbeen prepared using the audited consolidated financial statements of the Company as at and for the yearended 31 December 2015 and the audited financial statements of Cleopatra Hospital Company, CairoSpecialized Hospital Company, Nile Badrawi Hospital Company and Al Shorouk Hospital Company, eachof them as at and for the three years ended 31 December 2015. The Unaudited Pro Forma ConsolidatedFinancial Information has been prepared by applying the estimates, assumptions and adjustments asdescribed in the accompanying notes to the Unaudited Pro Forma Consolidated Financial Information,which includes applying purchase accounting for the acquisitions of Nile Badrawi Hospital Company andAl Shorouk Hospital Company.

The audited financial statements described above have been prepared in accordance with EAS. TheUnaudited Pro Forma Consolidated Financial Information is based on certain preliminary estimates andassumptions and has been prepared to reflect adjustments to our Historical Financial Information that are:

• directly attributable to the Cairo Specialized Hospital Company, Nile Badrawi Hospital Company,and Al Shorouk Hospital Company acquisitions;

• factually supportable; and

• with respect to the pro forma statement of income, expected to have a continuing impact on ourresults.

The Unaudited Pro Forma Consolidated Financial Information does not include certain expenses, such aslegal and advisory fees, related to the acquisitions described above and includes preliminary fair values ofthe net assets of both Al Shorouk Hospital Company and Nile Badrawi Hospital Company prior to thecompletion of their respective purchase price allocation exercises. All pro forma adjustments and theirunderlying assumptions are described in more detail in the notes to our unaudited Pro FormaConsolidated Financial Information.

The Unaudited Pro Forma Consolidated Financial Information has been prepared on a voluntary basis,and has not necessarily been prepared in accordance with the requirements of the European UnionRegulation under Regulation 809/2004, and with the content of the recommendation issued by theEuropean Securities and Markets Authority (ESMA) for the consistent implementation of theaforementioned Regulation (ESMA/2013/319).

The Unaudited Pro Forma Consolidated Financial Information has been prepared solely for illustrativepurposes to reflect how the acquisition of Cairo Specialized Hospital Company, Nile Badrawi HospitalCompany and Al Shorouk Hospital Company as if the acquisitions were completed on 1 January 2015could have affected the consolidated balance sheet and the consolidated statement of income of theCompany as at and for the year ended 31 December 2015. Accordingly, the Unaudited Pro FormaConsolidated Financial Information is hypothetical and does not purport to represent the actual financialposition or the actual results of the Company subsequent to the acquisition of Cairo Specialized HospitalCompany, Nile Badrawi Hospital Company and Al Shorouk Hospital Company. The Unaudited ProForma Consolidated Financial Information also does not attempt to project the financial position of theCompany subsequent to these acquisitions nor the results of their operations at a future date or for aperiod in the future.

For pro forma purposes:

• The unaudited pro forma consolidated balance sheet of the Company as at 31 December 2015 hasbeen prepared as if the acquisition of Al Shorouk Hospital Company had been completed on31 December 2015. The pro forma consolidated balance sheet of the Company includes the actualbalance sheets of both Cairo Specialized Hospital Company and Nile Badrawi Hospital Company, asthese two acquisitions were completed during 2015.

136

• The unaudited pro forma consolidated statement of income of the Company for the year ended31 December 2015 has been prepared as if the acquisition of each hospital by Cleopatra HospitalCompany had been completed on 1 January 2015.

The final determination of fair values arising from the completed purchase price allocation exercise mayresult in changes to the pro forma adjustments below and in the pro forma information included elsewherein this Offering Memorandum. Any changes to the final purchase price allocation exercise from thepreliminary exercise may result in significant differences to this Unaudited Pro Forma ConsolidatedFinancial Information.

The Unaudited Pro Forma Consolidated Financial Information of Cleopatra Hospital Company and itsaccompanying notes must be read in conjunction with the audited consolidated financial statements of theCompany as at and for the year ended 31 December 2015 and the audited financial statements ofCleopatra Hospital Company, Cairo Specialized Hospital Company, Nile Badrawi Hospital Company andAl Shorouk Hospital Company, each of them as at and for the three years ended 31 December 2015.

137

Pro forma balance sheet

CleopatraHospital Al ShoroukCompany Hospital

consolidated Company Pro Forma Pro Forma2015 2015 Adjustments 2015

(unaudited)(EGP)

AssetsNon-current assetsProperty, plant and equipment . . . . . . . . . 267,049,952 50,782,837 59,626,596 (a) 377,459,385Intangible assets . . . . . . . . . . . . . . . . . . . 97,195,020 — 180,657,595 277,852,615Deferred tax . . . . . . . . . . . . . . . . . . . . . . — 2,163,446 — 2,163,446

Total non-current assets . . . . . . . . . . . . . 364,244,972 52,946,283 240,284,191 657,475,446

Current assetsHeld to maturity investments . . . . . . . . . . 38,080 — — 38,080Inventories . . . . . . . . . . . . . . . . . . . . . . . 15,517,957 8,712,196 — 24,230,153Trade receivables . . . . . . . . . . . . . . . . . . . 89,986,584 20,287,040 — 110,273,624Other debit balances . . . . . . . . . . . . . . . . 18,282,142 2,350,332 — 20,632,474Cash and cash equivalents . . . . . . . . . . . . 109,906,869 4,089,819 (71,000,000) (a) 42,996,688

Total current assets . . . . . . . . . . . . . . . . . 233,731,632 35,439,387 (71,000,000) 198,171,019

Current liabilitiesProvisions . . . . . . . . . . . . . . . . . . . . . . . . 19,890,797 12,070,124 — 31,960,921Other credit balances . . . . . . . . . . . . . . . . 92,550,296 19,294,023 — 111,844,319Current Portion Of Long Term Loans . . . . 40,600,000 9,477,471 — 50,077,471Income tax liabilities . . . . . . . . . . . . . . . . 32,136,609 4,108,178 — 36,244,787

Total current liabilities . . . . . . . . . . . . . . 185,177,702 44,949,796 — 230,127,498

Working capital . . . . . . . . . . . . . . . . . . . . 48,553,930 (9,510,409) (71,000,000) (31,956,479)

Total investment . . . . . . . . . . . . . . . . . . . 412,798,902 43,435,874 169,284,191 625,518,967

Financed as follows:EquityPaid up capital . . . . . . . . . . . . . . . . . . . . 80,000,000 25,000,000 (25,000,000) (a) 80,000,000Legal reserve . . . . . . . . . . . . . . . . . . . . . (62,303,508) 10,215,019 (10,215,019) (a) (62,303,508)Retained earnings . . . . . . . . . . . . . . . . . . 108,270,052 7,329,073 (7,329,073) (a) 108,270,052

Total Shareholder’s equity . . . . . . . . . . . . 125,966,544 42,544,092 (42,544,092) 125,966,544

Non-Controlling interest . . . . . . . . . . . . . 33,250,055 — 2,828,283 (a) 36,078,338

Total Equity . . . . . . . . . . . . . . . . . . . . . . 159,216,599 42,544,092 (39,715,809) 162,044,882

Long Term Loans . . . . . . . . . . . . . . . . . . 162,400,000 891,782 209,000,000 (a) 372,291,782Trade and other payables—Due to related

parties . . . . . . . . . . . . . . . . . . . . . . . . . 47,379,723 — — 47,379,723Deferred income tax liabilities . . . . . . . . . 43,802,580 — — 43,802,580

Total non-current liabilities . . . . . . . . . . . 253,582,303 891,782 209,000,000 463,474,085

Total equity and non-current liabilities . . . 412,798,902 43,435,874 169,284,191 — 625,518,967

138

Pro forma statement of income

Cairo NileCleopatra Specialized Badrawi Al ShoroukHospital Hospital Hospital HospitalCompany Company Company Company Pro Forma Pro Forma

2015 2015 2015 2015 Adjustments 2015

Operating revenue . . . . . 332,002,699 149,377,454 121,307,079 138,642,178 — 741,329,410Operating cost . . . . . . . . (214,407,386) (111,849,380) (81,601,341) (99,913,207) 413,903 (c) (507,357,411)

Gross profit . . . . . . . . . . 117,595,313 37,528,074 39,705,738 38,728,971 413,903 233,971,999—

General andadministrative expenses (27,859,422) (14,207,273) (28,072,750) (25,581,868) 0 (95,721,313)

Provisions . . . . . . . . . . . (2,973,505) (6,945,188) (4,218,259) (5,070,124) 0 (19,207,076)Other income . . . . . . . . . 1,028,699 3,808,193 1,856,750 1,231,343 — 7,924,985

Profit before financeincome & income tax . . 87,791,085 20,183,806 9,271,479 9,308,322 413,903 126,968,595

—Finance income . . . . . . . 5,104,232 4,021,134 — 128,342 — 9,253,708Finance cost . . . . . . . . . . (8,487,998) — — (1,333,834) (49,595,401) (b) (59,417,233)Foreign currency (Loss)/

gain . . . . . . . . . . . . . . — — (6,087) — (6,087)

Profit before income tax . 84,407,319 24,204,940 9,265,392 8,102,830 (49,181,498) 76,798,983—

Income tax . . . . . . . . . . (20,603,310) (7,387,426) (4,991,312) (4,108,178) 11,158,965 (d) (25,931,261)Deferred tax . . . . . . . . . 886,196 430,841 (661,591) 198,380 0 853,826

Profit for the year . . . . . . 64,690,205 17,248,355 3,612,489 4,193,032 (38,022,533) 51,721,548

Profit attributable to:Owners of the parent . . . 64,690,205 17,248,355 3,612,489 4,193,032 (46,202,559) (e) 43,541,522Non-Controlling interests . — — — — 8,180,027 (e) 8,180,027

64,690,205 17,248,355 3,612,489 4,193,032 (38,022,533) — 51,721,548

139

Notes to the Unaudited Pro Forma Consolidated Financial Information

1. Description of the Cairo Specialized Hospital Company Acquisition and Preliminary Pro FormaPurchase Price Allocations

The Unaudited Pro Forma Consolidated Financial Information reflects the acquisition by CleopatraHospital Company of 52.7% of the equity share capital of Cairo Specialized Hospital Company on16 September 2015 for a purchase price of EGP 107 million. Cleopatra Hospital Company signed a 5-yearfinancing facility with Commercial International Bank amounting to EGP 203 million, at an interest rate2.4% plus a corridor specified by the Egyptian Central Bank, which corresponded to an average annualinterest rate of 14.1% in 2015 to acquire Cairo Specialized Hospital Company.

Unlike Al Shorouk Hospital Company and Nile Badrawi Hospital Company, the acquisition of CairoSpecialized Hospital Company by Cleopatra Hospital Company has not been accounted for under theacquisition accounting method, but has instead been accounted for as a common control transaction. Theacquisition of Cairo Specialized Hospital Company has been excluded from the purchase method underEAS, based on the fact that this entity was previously held by the parent company of Cleopatra HospitalCompany and therefore represents a business combination under common control, which is not requiredto be accounted for under the acquisition accounting method. These balances have instead beenincorporated into the Unaudited Pro Forma Consolidated Financial Information at book value on aprospective basis, which reflects Cleopatra Hospital Company’s accounting policy for such transactions.

2. Description of the Nile Badrawi Hospital Company Acquisition and Preliminary Pro Forma PurchasePrice Allocation

The Unaudited Pro Forma Consolidated Financial Information reflects the acquisition by CleopatraHospital Company of 99.9% of the equity share capital of Nile Badrawi Hospital Company on22 September 2015 for a purchase price of EGP 259 million, partially financed by EGP 96 million from theremainder of the loan taken out for the Cairo Specialized Hospital Company acquisition, together with anEGP 47 million loan from Care Healthcare, and the remaining EGP 116 million in cash.

3. Description of the Al Shorouk Hospital Company Acquisition and Pro Forma Purchase Price Allocation

The Unaudited Pro Forma Consolidated Financial Information reflects the acquisition by CleopatraHospital Company of 99.4% of the equity share capital of Al Shorouk Hospital Company on 31 January2016 for a purchase price of EGP 280 million, subject to closing accounts, partially financed through a5 year financing facility amounting to EGP 209 million with Commercial International Bank, at an interestrate of 2.4% plus a corridor specified by the Egyptian Central Bank, which corresponded to an averageannual interest rate of 14.1% in 2015. The remaining balance of EGP 71 million is assumed to be paid incash.

The Unaudited Pro Forma Consolidated Financial Information does not include adjustments relating toany potential restructuring liabilities. Certain costs relating to the integration of the three companies suchas restructuring and training costs are expected to be incurred, however, any such costs will be recognizedwhen incurred and have not been included within the pro forma adjustments above. Similarly, anypotential synergies that may be derived from the transaction have also been excluded from this pro formafinancial data save to the extent reflected in goodwill.

The Group will have at its disposal final valuations prepared by independent experts for both Al ShoroukHospital Company and Nile Badrawi Hospital Company within the twelve month period after theacquisition date which will be used to determine the final values to be assigned to the transaction relatedassets and liabilities.

4. Harmonisation of accounting policies

The accounting policies applied by Cleopatra Hospital Company to prepare its audited consolidatedfinancial statements in accordance with EAS have been used in the preparation of the unaudited ProForma Consolidated Financial Information. For the purpose of preparing this Pro Forma ConsolidatedFinancial Information we have assumed that the accounting policies applied by Al Shorouk HospitalCompany, Nile Badrawi Hospital Company and Cairo Specialized Hospital Company to prepare itsaudited financial statements in accordance with EAS as at and for the three years ended 31 December2015 have no significant differences as compared to the accounting policies used to prepare the audited

140

consolidated financial statements of Cleopatra Hospital Company and its subsidiaries as at and for the yearended 31 December 2015.

5. Adjustments to the unaudited Pro Forma Consolidated Financial Information

The unaudited pro forma consolidated balance sheet of Cleopatra Hospital Company has been preparedas if the acquisition of Al Shorouk Hospital Company occurred on 31 December 2015. The unaudited proforma consolidated balance sheet of Cleopatra Hospital Company already includes balance sheet positionsof Cairo Specialized Hospital Company and Nile Badrawi Hospital Company, as these two acquisitionswere completed during 2015. The unaudited pro forma consolidated statement of income of CleopatraHospital Company, Cairo Specialized Hospital Company, Nile Badrawi Hospital Company, andAl Shorouk Hospital Company for the year ended 31 December 2015 has been prepared as if theacquisitions have been completed on 1 January 2015. Explanations of the aforementioned adjustments areas follows:

a) This adjustment reflects a step up to fair value in property, plant and equipment of EGP 59.6 millionfor Al Shorouk Hospital Company relating to the preliminary third party valuation conducted inFebruary 2016 as part of the acquisition accounting procedures. As part of purchase price accounting,this adjustment also removes the equity balance of Al Shorouk Hospital Company, and includes thebalance of the EGP 280 million consideration paid for the 99.4% share of the business, the remainingportion of non-controlling interest, as well as EGP 180.7 million preliminarily goodwill arising on theacquisition. As this acquisition occurred subsequent to year-end, a purchase price allocation exercisehas not yet been performed on the assets acquired. Therefore, it is assumed that, aside from property,plant and equipment, no other net assets will have a significant difference between their book valuesand fair values.

b) This adjustment reflects the interest expense on the EGP 209 million that Cleopatra HospitalCompany borrowed to finance the acquisition of Al Shorouk Hospital Company, as well as the loan ofEGP 203 million on 16 September 2015 to finance the acquisitions of Cairo Specialized HospitalCompany and Nile Badrawi Hospital Company. However, for purposes of calculating the interestexpense within the pro forma statement of income, both loans were assumed to have originated as of1 January 2015. The loans are assumed to have interest accruing from the date of acquisition, which is1 January 2015, and without any grace period or upfront fees. The calculation also assumes that theEGP 47 million financing received from the parent company to finance the Nile Badrawi HospitalCompany acquisition does not carry any interest.

c) The adjustment in operating costs reflects adjustments to depreciation expense related to the fairvalue of and adjustments to the useful lives of property, plant and equipment assuming theAl Shorouk Hospital Company and Nile Badrawi Hospital Company acquisitions had beenconsummated on 1 January 2015. It was assumed that the amounts to be adjusted should be reflectedwithin operating costs, as Nile Badrawi Hospital Company and Al Shorouk Hospital Company hadinsignificant depreciation charges in general & administrative expenses during the year. The finalvaluation for intangible assets has not yet been completed and allocated between intangible assets andgoodwill, therefore no amortization is assumed for the purposes of this pro forma adjustment. CairoSpecialized Hospital Company assets would continue to be valued at cost post-acquisition, asdiscussed above. Additionally, there was no change to the useful lives of Cairo Specialized HospitalCompany assets. Therefore, there is no impact on depreciation expense relating to Cairo SpecializedHospital Company assets.

d) This adjustment reflects an income tax expense adjustment for the items noted in (b) and (c),calculated at a weighted statutory tax rate of 22.5%. Interest expense related to the loans in (b) andthe acquisition costs in (c) would have been recognized within the separate financial statements ofCleopatra Hospital Company, reducing the income tax expense for the year due to the fact thatincome tax expense is calculated based on the separate financial statements of each legal entity. It isassumed that (d) would have no effect on the income tax expense, as fair value adjustments from thepurchase price accounting exercises will only be reflected in the Company’s consolidated financialstatements, and therefore will not result in a change in taxable income at each separate legal entity.

e) This adjustment reflects the portion of net income for each of the three acquisitions that areattributable to the respective non-controlling interests in each business, as well as contemplating theeffects for how the pro forma adjustments noted in (b) through (d) would be allocated to owners andnon-controlling interests.

141

6. Pro Forma Non-GAAP Measures

Pro forma for theyear ended

31 December2015


Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51,722Add back:Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,254)Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59,417(Loss) / gain on currency translation differences . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,931Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (854)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,207Fixed asset depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,852Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,560

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,588

EBITDA margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24.6%

Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 538,597

142

Report on the Pro Forma Consolidated Financial Information Included in the Offering Memorandum

To the Board of Directors of Cleopatra Hospital Company SAE

We have completed our assurance engagement to report on the compilation of pro forma consolidatedfinancial information of Cleopatra Hospital Company and its subsidiaries, which comprises CairoSpecialised Hospital Company (‘‘CSH’’) and Nile Badrawi Hospital Company (‘‘NBH’’) (the ‘‘Group’’)and Al Shorouk Hospital Company (‘‘ASH’’), and the related notes 1-6, as set out on pages 133 - 139 of theOffering Memorandum issued by the Company. This pro forma consolidated financial information hasbeen prepared in relation to the international offering of ordinary shares of Cleopatra Hospital Companyby Care Healthcare Limited (the ‘‘Offering Memorandum’’). The applicable criteria on the basis of whichmanagement has compiled the pro forma consolidated financial information is described in notes 1-6.

The pro forma consolidated financial information has been compiled by management and prepared forillustrative purposes only to reflect the impact of the acquisition of CSH, NBH and ASH (the‘‘Acquisitions’’) on the balance sheet and statement of income of Cleopatra Hospital Company as at andfor the year ended 31 December 2015 had the Acquisitions taken place at 31 December 2015 and1 January 2015, respectively. This pro forma consolidated financial information does not present, and isnot meant to present, the Group’s past or future results of operations or financial position as detailed inthe notes to the pro forma consolidated financial information. As part of this process, information aboutthe financial position and financial performance of the Group, Cleopatra Hospital Company, CSH, NBH,and ASH has been extracted by management from the respective financial statements for the year ended31 December 2015, on which audit reports have been published.

Management’s Responsibility for the Pro Forma Consolidated Financial Information

Management is solely responsible for the criteria used to compile the pro forma consolidated financialinformation as detailed in notes 1-6 to the pro forma consolidated financial information. The pro formaconsolidated financial information has been compiled by management and has not been prepared inaccordance with the European Commission Regulation (EC) 809/2004 and ESMA recommendationspublished for the consistent implementation of that Commission Regulation (ESMA/2013/3/9).

Our Responsibilities

Our responsibility is to express an opinion about whether the pro forma consolidated financial informationhas been compiled, in all material respects, in accordance with the criteria established by management asdisclosed in the notes to the pro forma consolidated financial information.

We conducted our engagement in accordance with International Standard on Assurance Engagements(ISAE) 3420, Assurance Engagements to Report on the Compilation of Pro Forma Financial InformationIncluded in a Prospectus, issued by the International Auditing and Assurance Standards Board. Thisstandard requires that the practitioner comply with ethical requirements and plan and perform proceduresto obtain reasonable assurance about whether management has compiled, in all material respects, the proforma consolidated financial information on the basis of the criteria established for such compilation.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinionson any historical financial information used in compiling the pro forma consolidated financial information,nor have we, in the course of this engagement, performed an audit or review of the financial informationused in compiling the pro forma consolidated financial information.

The purpose of pro forma consolidated financial information included in a prospectus is solely to illustratethe impact of a significant event or transaction on unadjusted financial information of the entity as if theevent had occurred or the transaction had been undertaken at an earlier date selected for purposes of theillustration. Accordingly, we do not provide any assurance that the actual outcome of the event ortransaction at either 1 January 2015 or 31 December 2015 would have been as presented.

A reasonable assurance engagement to report on whether the pro forma consolidated financial information hasbeen compiled, in all material respects, on the basis of the applicable criteria involves performing procedures toassess whether the applicable criteria used by management in the compilation of the pro forma consolidatedfinancial information provide a reasonable basis for presenting the significant effects directly attributable to theevent or transaction, and to obtain sufficient appropriate evidence about whether:

• the related pro forma adjustments give appropriate effect to those criteria used by management; and

• the pro forma consolidated financial information reflects the application of those adjustments to theunadjusted financial information.

143

The procedures selected depend on the practitioner’s judgment, having regard to the practitioner’sunderstanding of the nature of the company, the event or transaction in respect of which the pro formaconsolidated financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the pro forma consolidated financialinformation.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for ouropinion.

Opinion

In our opinion, the pro forma consolidated financial information has been compiled, in all materialaspects, on the basis of the criteria described in notes 1-6 to the pro forma consolidated financialinformation.

Tamer Abdel Tawab Ahmed Gamal Hamadallah El-AtreesMember of Egyptian Society of Accountants & Member of Egyptian Society of Accountants &Auditors AuditorsMember of AICPA Member of the Egyptian Tax SocietyR.A.A. 17996 R.A.A. 8784

EFSA Registration 136Mansour & Co. PricewaterhouseCoopers Mansour & Co. PricewaterhouseCoopers

17 May 2016Cairo

144

PART 12Details of the Combined Offer

Background

The Selling Shareholder is offering up to 40,000,000 Offer Shares pursuant to the Combined Offer to raisegross proceeds of EGP 412.6 million (assuming no Stabilisation, all of the Offer Shares are sold in theCombined Offer and the Offer Price is set at the mid-point of the Offer Price Range).

The Combined Offer is being made by way of:

(i) an institutional offering of up to 34,000,000 International Offer Shares to certain institutionalinvestors in a number of countries, including Egypt but excluding the United States; and

(ii) an offering of up to 6,000,000 Egyptian Retail Offer Shares in a domestic retail offering in Egypt.

Following completion of the Combined Offer, the Company will offer to the Selling Shareholder by way ofthe Closed Subscription the right to subscribe for up to 40,000,000 Closed Subscription Shares at the OfferPrice. The number of Closed Subscription Shares will equal the number of Offer Shares less any Sharesrepurchased by the Selling Shareholder pursuant to Stabilisation. Pursuant to the Closed Subscription, theCompany will issue and allot the Closed Subscription Shares to the Selling Shareholder and the SellingShareholder will pay to the Company the Offer Price multiplied by the number of Closed SubscriptionShares. The Closed Subscription will be available only to the Selling Shareholder and the SellingShareholder has undertaken to exercise the Closed Subscription. The purpose and effect of the CombinedOffer and the Closed Subscription is to raise capital for the Company through an increase of its sharecapital.

The Shares were listed on the EGX on 13 April 2016, but trading of the Shares is conditional on thesatisfaction of certain conditions set out in the EGX Listing Rules including, without limitation,completion of the Combined Offer. Trading of the Shares is expected to commence on the EGX on 2 June2016. All dealings before Commencement of Trading will be of no effect if Commencement of Tradingdoes not take place. Those dealings will be at the sole risk of the parties concerned.

The Shares are registered with ISIN number EGS729J1C018 under the symbol ‘‘CLHO.CA’’.

Following completion of the Closed Subscription, it is expected that at least 80 per cent. of the Company’sissued ordinary share capital will be held by Shareholders other than the Selling Shareholder.

The Company, the Selling Shareholder and the Sole Global Coordinator are not bound to proceed withthe Combined Offer. Completion of the Combined Offer will be subject to the determination of the OfferPrice and each of the Company’s, the Selling Shareholder’s and the Sole Global Coordinator’s decisions toproceed with the Combined Offer. It will also be subject to the satisfaction of certain conditions containedin the Underwriting Agreement, which are typical for an agreement of this nature, including Commencingof Trading occurring no later than 10:00 a.m. Cairo time on 2 June 2016 and on the UnderwritingAgreement not having been terminated prior to Commencement of Trading. The Combined Offer cannotbe terminated once trading of the Shares has commenced on the EGX. Further details of the UnderwritingAgreement are set out below under the heading ‘‘Underwriting Arrangements’’.

The rights attaching to the Shares will be uniform in all respects, including the right to vote and the right toreceive all dividends and other distributions declared, made or paid in respect of the Company’s sharecapital after Commencement of Trading. The Offer Shares will, immediately on and from Commencementof Trading, be freely transferable under the Company’s Statutes.

In connection with the International Offer, the Sole Global Coordinator and any of its affiliates, acting asinvestors for their own accounts, may acquire Offer Shares and in that capacity may retain, purchase, sell,offer to sell or otherwise deal for their own accounts in such Shares and other securities of the Company orrelated investments in connection with the Combined Offer or otherwise. Accordingly, references in thisOffering Memorandum to the Offer Shares being issued, offered, subscribed, acquired, placed orotherwise dealt in should be read as including any or issue, offer, subscription, acquisition, dealing orplacing by, the Sole Global Coordinator and any of its affiliates acting as investors for their own accounts.The Sole Global Coordinator does not intend to disclose the extent of any such investment or transactionsotherwise than in accordance with any legal or regulatory obligations to do so.

145

The Egyptian Retail Offer

The Egyptian Retail Offer consists of a domestic offering by the Selling Shareholder of up to 6,000,000Shares to the public in Egypt. The Egyptian Retail Offer is pursuant to the Capital Market Law, the EGXListing Rules and regulations promulgated by EFSA and is expected to be open from 22 May 2016 to30 May 2016.

Although it is expected that 34,000,000 Shares will be sold pursuant to the International Offer and6,000,000 Shares will be sold pursuant to the Egyptian Retail Offer, Offer Shares may be reallocated fromthe International Offer to the Egyptian Retail Offer depending on the level and nature of demand for theOffer Shares. The Right of Reallocation will be at the discretion of the Company and the Sole GlobalCoordinator.

This Offering Memorandum relates to the International Offer only. Prospective Egyptian retail investorsshould refer to, and will be purchasing Egyptian Retail Offer Shares solely in reliance on, the PublicOffering Notice and may not rely on this Offering Memorandum. All information included in this OfferingMemorandum relating to the Egyptian Retail Offer has been included for information purposes only.Investors purchasing International Offer Shares may not purchase Egyptian Retail Offer Shares.

Reasons for the Combined Offer and Use of Proceeds

All of the proceeds from the Combined Offer will be received by the Selling Shareholder. The SellingShareholder has undertaken to use the gross proceeds of the Combined Offer (less any amount reclaimedby purchasers of Egyptian Retail Offer Shares pursuant to Stabilisation) to subscribe for the ClosedSubscription Shares at the Offer Price pursuant to the Closed Subscription.

The Company intends to use the net proceeds from the Closed Subscription, in addition to a portion ofcash available for capital expenditure and operational activities, to fund its capital expenditure plans,including development of extensions of Al Shorouk and Cleopatra. The Group is also considering theacquisition of a facility in New Cairo that it would develop into a new hospital facility.

In 2010 Al Shorouk Hospital Company acquired a facility on a 366.5 m2 plot of land adjacent to its existinghospital. The Group intends to utilise the adjacent facility as an extension offering general services, with afocus on ICU services, of which there is a current shortage in Cairo and which tend to be priced higherthan other hospital beds. The extension is intended to house approximately 40 beds and is expected to beoperational in 2017, subject to obtaining all necessary licenses and approvals. The cost of development ofthe extension is expected to be approximately EGP 150 million. This amount does not include the cost ofacquiring the property, which Al Shorouk incurred in 2010.

In 2006, the Company acquired a facility on a 1,176.25 m2 plot of land adjacent to Cleopatra, which theGroup intends to utilise as an extension to Cleopatra. Since Cleopatra currently has a high bed occupancyrate in certain departments such as outpatient clinics and ICU, the new facility is expected to serve asoverflow for those departments, among others, as well as expanded radiology services. The extension isintended to house approximately 100 beds and is expected to be operational within 12–18 months afterobtaining the necessary licenses and permits, all of which have been applied for. The cost of developmentof the extension is expected to be approximately EGP 250 million. This amount does not include the costof acquiring the property, which the Company incurred in 2006.

The Group is considering the acquisition of a facility in New Cairo with a total gross internal area of21,604 m2. The facility would be expected to house approximately 200 beds, seven surgical rooms, onecatheter laboratory, 20 outpatient clinics and 10 emergency room beds. The Group believes the facilitywould be operational within 12 months of acquisition and would cost approximately EGP 300–350 million,including the cost of the acquisition.

The Directors believe that the Combined Offer and the Closed Subscription will further increase theGroup’s profile, brand recognition and credibility with its customers, suppliers and employees, as well asassist in recruiting, retaining and incentivising key management, doctors and employees.


146

Offer Price, Bookbuilding and Allocations

The Offer Price is expected to be between EGP 8.75 and EGP 11.88 per Share.

The Offer Price Range has been set by the Selling Shareholder and the Company (in consultation with theSole Global Coordinator), and it is currently expected that the Offer Price will be set within the Offer PriceRange. The Offer Price Range is indicative only and the Offer Price may be set within or below, but notabove, the Offer Price Range. All Offer Shares will be sold at the Offer Price, which will be determined bythe Selling Shareholder and the Company following a bookbuilding process and consultation with the SoleGlobal Coordinator. A number of factors will be considered in determining the Offer Price and the basis ofallocation, including the level and nature of demand for the Offer Shares during the bookbuilding process,prevailing market conditions and the objective of establishing an orderly after market in the Shares, as wellas the Company’s historical performance, estimates of its business potential and earnings prospects andconsideration of these factors in relation to the market valuation of companies in related businesses. ThePricing Statement containing the Offer Price and related disclosures will be published on or about 26 May2016 and will be available on the Company’s website at http://investors.cleopatrahospitals.com.

Although it is expected that 34,000,000 Shares will be sold pursuant to the International Offer and6,000,000 Shares will be sold pursuant to the Egyptian Retail Offer, Offer Shares may be reallocated fromthe International Offer to the Egyptian Retail Offer depending on the level and nature of demand for theOffer Shares. The Right of Reallocation will be at the discretion of the Company and the Sole GlobalCoordinator.

In the event that demand for the International Offer Shares exceeds the number of International OfferShares, allocations may be scaled down in any manner determined by the Selling Shareholder and theCompany, after consultation with the Sole Global Coordinator. Participants in the International Offer willbe notified of the number of International Offer Shares that they have been allocated as soon aspracticable following pricing and allocation. Each prospective investor in the International Offer will becontractually committed to acquire the number of International Offer Shares allocated to it at the OfferPrice and, to the fullest extent permitted by law, will be deemed to have agreed that it will not be entitledto exercise any rights to rescind or terminate or, subject to any statutory withdrawal rights, otherwisewithdraw from, such commitment.

Stabilisation

In connection with the Egyptian Retail Offer, EFG Hermes, or any of its agents, may effect transactions inthe Shares with a view to supporting or maintaining the market price of the Shares at a level higher thanthat which might have otherwise prevailed in the open market. EFG Hermes will withhold from thepayment of the proceeds of the Combined Offer an amount equal to 15 per cent. of the gross proceeds ofthe sale of all Offer Shares at the Offer Price, which shall be deposited in the Stabilisation Fund. If thetrading price per Share falls below the Offer Price during the Stabilisation Period, purchasers of EgyptianRetail Offer Shares in the Egyptian Retail Offer may submit sell orders and EFG Hermes will submitpurchase orders for Shares at the Offer Price, which will remain open until the end of the StabilisationPeriod. At the end of the Stabilisation Period, open purchase orders submitted by EFG Hermes will bematched with open sale orders and executed on the EGX. All Shares purchased in this manner will beplaced in the Stabilisation Fund. EFG Hermes will remit to the Selling Shareholder, at the end of theStabilisation Period, any funds then remaining in the Stabilisation Fund and any remaining Sharespurchased during the Stabilisation Period using the Stabilisation Fund.


Settlement and Clearance of the International Offer Shares on the EGX and MCDR

A computerised trading system at the EGX allows for automatic electronic matching of bids and offers.The electronic trading system allows brokers remote access to the trading floor and links all independentbookkeeping activities to the Misr for Central Clearing, Depositary and Registry (MCDR), which helpsensure greater speed and efficiency in the settlement process. Trading on the EGX takes place between10:00 a.m. and 2:30 p.m. Cairo time, Sunday through Thursday, excluding official public holidays.

During each trading session, the price of a share is generally restricted from moving up or down by morethan five per cent. from the previous day’s closing price. Such restriction can be removed by the EGXpricing committee at the request of a broker if such broker is willing to effect a transaction outside theprice window. The closing price of traded shares is determined by calculating a volume weighted average

147

price of the traded shares for the session. Cumulative transactions less than 100 shares do not affect theclosing price of the relevant underlying security.

All investors in the International Offer Shares must have established a valid client-specific custody accountwith a local custodian within Egypt authorised by EFSA (a Local Custodian) and must have a unique,personalised stock exchange code for the EGX (a Unified Code). Investors will need to provide, amongother things, information as to their legal name and any sub-account details, together with details of theircustody account and their Unified Code when submitting a request for an allocation of International OfferShares. Accordingly, requests for an allocation of International Offer Shares can only be taken from aninvestor if such investor already has a valid custody account open with a Local Custodian. Investors shouldcontact their global custodian to set up a custody account in Egypt. It can take up to two weeks to set upsuch an account.

All transfers of ownership of the International Offer Shares must be effected on the EGX by anEFSA-licensed broker. Ownership of the International Offer Shares will be shown on the MCDR. Thetransfer of ownership will be executed at the EGX and will be effected through the records of the MCDR.Transfer of the International Offer Shares will settle in the same day funds.

Settlement of share transfers on the EGX occurs on a delivery-versus-payment basis, with transfers ofdematerialised securities such as the International Offer Shares settling at T+2. Non-Egyptian purchasersof International Offer Shares must arrange for their International Offer Shares to be delivered to a LocalCustodian to hold in dematerialised form. The Local Custodian designated by the purchaser will hold theInternational Offer Shares in accordance with the purchaser’s instructions.

Subject to compliance with the transfer restrictions set forth herein, purchasers of the International OfferShares wishing to sell their International Offer Shares must instruct an EGX-licensed broker to block suchInternational Offer Shares. The broker then effects such sale through the EGX, which will register suchtransfer on the registry.

None of the Company, the Selling Shareholder or the Sole Global Coordinator will have any responsibilityfor the performance by the Local Custodians or their agents of their respective obligations under the rulesand procedures governing their operations.

Brokerage commissions for transactions are not fixed by the EGX or other regulatory bodies and varydepending on the size of the transaction and the brokerage house executing the trade.

Underwriting Arrangements

The Company, the Selling Shareholder and the Sole Global Coordinator will enter into the UnderwritingAgreement with respect to the International Offer on or around the date of publication of the PricingStatement. Subject to the satisfaction of certain conditions, the Sole Global Coordinator will agree to usereasonable endeavors to procure purchasers for, or in the event of failure of any purchaser that hascommitted to purchase, to purchase itself the number of International Offer Shares set forth in the PricingStatement at the Offer Price.

In the Underwriting Agreement, the Company and the Selling Shareholder will make certainrepresentations and warranties and will agree to indemnify the Sole Global Coordinator against certainliabilities.

The Underwriting Agreement will contain provisions entitling the Sole Global Coordinator to terminatethe Combined Offer (and the arrangements associated with it) at any time prior to Commencement ofTrading in certain circumstances. If this right is exercised, the Combined Offer and these arrangements willlapse and any moneys received in respect of the Combined Offer will be returned to applicants withoutinterest. The Underwriting Agreement will provide for the Company to pay the Sole Global Coordinator acommission in respect of the Offer Shares sold and to reimburse it for certain expenses incurred inconnection with the Combined Offer. Any commissions received by the Sole Global Coordinator may beretained, and any Shares acquired by it may be retained or dealt in, by it, for its own benefit.

The Underwriting Agreement does not relate to the Egyptian Retail Offer and the Sole GlobalCoordinator is not under any obligation to procure purchasers for, or to purchase any, Egyptian RetailOffer Shares offered in the Egyptian Retail Offering.

148

Lock-up Arrangements

Pursuant to the EGX Listing Rules, the Company is required to lock-up 51 per cent. of the Shares held bythe Selling Shareholder until the later of (i) the publication of the second annual financial statementsfollowing Commencement of Trading or (ii) 24 months following Commencement of Trading, subject tocertain exceptions as set forth below. During the Mandatory Lock-up period, the Company can increase itsshare capital, but the Selling Shareholder must maintain the percentage of locked-up Shares, except forany bonus shares.

During the Mandatory Lock-up period, after obtaining approval from EFSA and a resolution from anordinary general shareholders’ meeting of the Company, the Selling Shareholder may dispose of all or partof its Shares to (i) banks, (ii) insurance companies, (iii) direct investment fund, (iv) specialized investmentcompanies, or (v) any judicial person having expertise in the same field of the Company, conditional uponobtaining an undertaking from the purchaser that it will uphold the Mandatory Lock-Up restriction.

Pursuant to the Underwriting Agreement, the Company will agree that, subject to certain exceptionsincluding the Closed Subscription, during the period of 180 days from Commencement of Trading, it willnot, without the prior written consent of the Sole Global Coordinator, issue, offer, sell or contract to sell,or otherwise dispose of, directly or indirectly, or announce an offer of any Shares (or any interest thereinor in respect thereof) or enter into any transaction with the same economic effect as any of the foregoing.

Pursuant to the Underwriting Agreement, the Selling Shareholder will agree that, subject to certainexceptions, during the period of 180 days from Commencement of Trading, it will not, without the priorwritten consent of the Sole Global Coordinator, offer, sell or contract to sell, or otherwise dispose of,directly or indirectly, or announce an offer of any Shares (or any interest therein in respect thereof) orenter into any transaction with the same economic effect as any of the foregoing.

Selling Restrictions

The distribution of this Offering Memorandum and the offer of International Offer Shares in certainjurisdictions may be restricted by law and therefore persons into whose possession this OfferingMemorandum comes should inform themselves about and observe any restrictions, including those set outin the paragraphs that follow. Any failure to comply with these restrictions may constitute a violation of thesecurities laws of any such jurisdiction.

No action has been or will be taken in any jurisdiction that would permit a public offering of theInternational Offer Shares, or possession or distribution of this Offering Memorandum or any otheroffering material in any country or jurisdiction where action for that purpose is required. Accordingly, theInternational Offer Shares may not be offered or sold, directly or indirectly, and neither this OfferingMemorandum nor any other offering material or advertisement in connection with the International OfferShares may be distributed or published in or from any country or jurisdiction except in circumstances thatwill result in compliance with any and all applicable rules and regulations of any such country orjurisdiction. Persons into whose possession this Offering Memorandum comes should inform themselvesabout and observe any restrictions on the distribution of this Offering Memorandum and the offer ofInternational Offer Shares contained in this Offering Memorandum. Any failure to comply with theserestrictions may constitute a violation of the securities laws of any such jurisdiction. This OfferingMemorandum does not constitute an offer to subscribe for or purchase any of the International OfferShares to any person in any jurisdiction to whom it is unlawful to make such offer of solicitation in suchjurisdiction.

European Economic Area

In relation to each Member State of the European Economic Area, the Bookrunner has represented andagreed that with effect from and including the date on which the Prospectus Directive is implemented in aMember State (the ‘‘Relevant Implementation Date’’) it has not made and will not make an offer of anyInternational Offer Shares to the public in a Member State, except that it may, with effect from andincluding the Relevant Implementation Date, make an offer of International Offer Shares in a MemberState:

a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;

b) to fewer than 150 natural or legal persons (other than ‘‘qualified investors’’ as defined in theProspectus Directive), as permitted under the Prospectus Directive, subject to obtaining the priorconsent of the Bookrunner for any such offer; or

149

c) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of International Offer Shares shall require the Company or the Sole GlobalCoordinator to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement aprospectus pursuant to Article 16 of the Prospectus Directive.

Each person in a Member State who receives any communication in respect of, or who acquires anyInternational Offer Shares will be deemed to have represented, warranted and agreed to and with the SoleGlobal Coordinator and the Company that:

a) it is a qualified investor within the meaning of the law in a Member State implementing Article 2(1)(e)of the Prospectus Directive; and

b) in the case of any International Offer Shares acquired by it as a financial intermediary, as that term isused in Article 3(2) of the Prospectus Directive, (i) the International Offer Shares acquired by it havenot been acquired on behalf of, nor have they been acquired with a view to their offer or resale to,persons in any Member State other than qualified investors, as that term is defined in the ProspectusDirective, or in the circumstances in which the prior consent of the representative(s) of theBookrunner has been given to the offer or resale or (ii) where International Offer Shares have beenacquired by it on behalf of persons in any Member State other than qualified investors, the offer ofsuch shares to it is not treated under the Prospectus Directive as having been made to such persons.

For the purposes of the provisions and representations above, the expression ‘‘an offer to the public’’ inrelation to any shares in any Member State means the communication in any form and by any means ofsufficient information on the terms of the offer and any shares to be offered so as to enable an investor todecide to purchase or subscribe for any International Offer Shares, as the same may be varied in thatMember State by any measure implementing the Prospectus Directive in that Member State, theexpression ‘‘Prospectus Directive’’ means Directive 2003/71/EC (and amendments thereto, including the2010 PD Amending Directive, to the extent implemented in the Member State), and includes any relevantimplementing measure in the Member State and the expression ‘‘2010 PD Amending Directive’’ meansDirective 2010/73/EU.

United Kingdom

This Offering Memorandum is for distribution only to persons who: (i) are outside the United Kingdom;or (ii) have professional experience in matters relating to investments falling within Article 19(5) of theFinancial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended, the ‘‘FinancialPromotion Order’’); or (iii) are persons falling within Article 49(2)(a) to (d) (‘‘high net worth companies,unincorporated associations etc’’) of the Financial Promotion Order; or (iv) persons to whom an invitationor inducement to engage in investment activity (within the meaning of section 21 of the FSMA) inconnection with the issue or sale of any securities may otherwise lawfully be communicated or caused to becommunicated (all such persons together being referred to as ‘‘relevant persons’’). This OfferingMemorandum is directed only at relevant persons and must not be acted on or relied on by persons whoare not relevant persons. Any investment or investment activity to which this Offering Memorandumrelates is available only to relevant persons and will be engaged in only with relevant persons.

The Bookrunner has represented and agreed that:

a) it has only communicated or caused to be communicated and will only communicate or cause to becommunicated an invitation or inducement to engage in investment activity (within the meaning ofSection 21 of the FSMA) received by it in connection with the issue or sale of the shares incircumstances in which Section 21(1) of the FSMA does not apply to the Company; and

b) it has complied and will comply with all applicable provisions of the FSMA with respect to anythingdone by it in relation to the shares in, from or otherwise involving the United Kingdom.

Canada

The International Offer Shares may be sold only to purchasers in the Canadian provinces other thanManitoba and Newfoundland and Labrador purchasing, or deemed to be purchasing, as principal that areaccredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1)of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the InternationalOffer Shares must be made in accordance with an exemption from, or in a transaction not subject to, theprospectus requirements of applicable securities laws.

150

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remediesfor rescission or damages if this Offering Memorandum contains a misrepresentation, provided that theremedies for rescission or damages are exercised by the purchaser within the time limit prescribed by thesecurities legislation of the purchaser’s province or territory. The purchaser should refer to any applicableprovisions of the securities legislation of the purchaser’s province or territory for particulars of these rightsor consult with a legal advisor.

Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (‘‘NI 33-105’’), theBookrunner is not required to comply with the disclosure requirements of NI 33-105 regarding underwriterconflicts of interest in connection with the Combined Offer.

Egypt

No International Offer Shares may be offered or sold in any form of general solicitation or generaladvertising or in a public offering in Egypt, unless the pre-approval of EFSA and/or the EGX has beenobtained. International Offer Shares offered and sold in the Combined Offer may only be offered or soldin Egypt: (a) in connection with the Egyptian Retail Offer pursuant to the Public Offering Notice; and/or(b) by way of a private placement to Egyptian QIBs or High Net Worth Investors (each as defined herein)whose ordinary activities involve them in acquiring, holding, managing or disposing of investments for thepurposes of their business and only in accordance with applicable Egyptian laws and regulations.

Each purchaser of International Offer Shares offered in Egypt will be deemed to have represented that it iseither an Egyptian QIB or High Net Worth Investor within the meaning of the Egyptian Law No. 95 of1992 (the Capital Market Law), its Executive Regulations and the Egyptian Capital Market Authority’s (theCMA) Directive no. 31 of the year 2002 and guidelines concerning private placements.

United States

The International Offer Shares have not been and will not be registered under the U.S. Securities Act orwith any securities regulatory authority of any state or other jurisdiction of the United States and theInternational Offer Shares may not be offered, sold, or otherwise transferred, directly or indirectly, in orinto the United States.

There will be no public offer of the International Offer Shares in the United States. The InternationalOffer Shares are being offered and sold outside the United States in reliance on Regulation S under theU.S. Securities Act.

Until 40 days after the commencement of the International Offer, an offer or sale of the InternationalOffer Shares within the United States by any dealer (whether or not participating in the InternationalOffer) may violate the registration requirements of the U.S. Securities Act.

Each purchaser of International Offer Shares in the International Offer will be deemed by its acceptanceof the International Offer Shares to have represented and agreed, on its own behalf and on behalf of anyinvestor accounts for which it is purchasing the International Offer Shares, that:

a) either:

i. it is, or at the time the International Offer Shares are sold will be, the beneficial owner of thepurchased International Offer Shares and (a) it is located outside the United States and hasacquired, or has agreed to acquire and will have required, the International Offer Shares outsideof the United States, (b) it is not an affiliate of the Company or a person acting on behalf of suchan affiliate and (c) it is not in the business of buying and selling securities or, if it is in suchbusiness, it did not acquire the International Offer Shares from the Company or any affiliatethereof in the initial distribution of International Offer Shares; or

ii. it is a broker-dealer acting on behalf of its customer, its customer has confirmed to it that suchcustomer is, or at the time the International Offer Shares are sold will be, the beneficial owner ofthe purchased International Offer Shares and (a) it is located outside the United States and hasacquired, or has agreed to acquire and will have required, the International Offer Shares outsideof the United States, (b) it is not an affiliate of the Company or a person acting on behalf of suchan affiliate and (c) it is not in the business of buying and selling securities or, if it is in suchbusiness, it did not acquire the International Offer Shares from the Company or any affiliatethereof in the initial distribution of International Offer Shares;

151

b) the International Offer Shares have not been offered to it by means of any ‘‘directed selling efforts’’ asdefined in Regulation S;

c) the purchaser is aware that the International Offer Shares have not been nor will be registered underthe U.S. Securities Act or with any securities regulatory authority of any state or other jurisdiction ofthe United States, and may not be offered or sold in the United States absent registration or in atransaction exempt from registration under the U.S. Securities Act; and

d) it acknowledges that the Company and others will rely upon the truth and accuracy of the foregoingacknowledgements, representations and warranties and agrees that if any such acknowledgements,representations and warranties deemed to have been made by virtue of its purchase of theInternational Offer Shares are no longer accurate, it will promptly notify the Company, and if it ispurchasing International Offer Shares as a fiduciary or agent for one or more accounts, it representsthat it has sole discretion with respect to each such account and full power to make the foregoingacknowledgements, representations and warranties on behalf of each account.

United Arab Emirates (excluding the Dubai International Financial Centre)

This Offering Memorandum is strictly private and confidential and is being distributed to a limited numberof investors and must not be provided to any person other than the original recipient, and may not bereproduced or used for any other purpose. If you are in any doubt about the contents of this OfferingMemorandum, you should consult an authorised financial adviser.

By receiving this Offering Memorandum, the person or entity to whom it has been issued understands,acknowledges and agrees that this Offering Memorandum has not been approved by or filed with theUAE Central Bank, the UAE Securities or Commodities Authority (the ‘‘SCA’’) or any other authorities inthe UAE, nor has the Bookrunner received authorisation or licencing from the UAE Central Bank, SCA orany other authorities in the UAE to market or sell securities or other investments within the UAE. Nomarketing of any financial products or services has been or will be made from within the UAE other thanin compliance with the laws of the UAE and no subscription to any securities or other investments may orwill be consummated within the UAE. It should not be assumed that the Bookrunner is a licenced broker,dealer or investment advisor under the laws applicable in the UAE, or that any of them advise individualsresident in the UAE as to the appropriateness of investing in or purchasing or selling securities or otherfinancial products. The International Offer Shares may not be offered or sold directly or indirectly to thepublic in the UAE. This does not constitute a public offer of securities in the UAE in accordance with theCompanies Law or otherwise.

Nothing contained in this Offering Memorandum is intended to constitute investment, legal, tax,accounting or other professional advice. This Offering Memorandum is for your information only andnothing in this Offering Memorandum is intended to endorse or recommend a particular course of action.Any person considering acquiring securities should consult with an appropriate professional for specificadvice rendered based on their respective situation.

Dubai International Financial Centre

The International Offer Shares have not been offered and will not be offered to any persons in the DubaiInternational Financial Centre except on that basis that an offer is:

(i) an ‘‘Exempt Offer’’ in accordance with the Markets Rules (MKT) module of the Dubai FinancialServices Authority (the ‘‘DFSA’’); and

(ii) made only to persons who meet the Professional Client criteria set out in Rule 2.3.2 of the DFSAConduct of Business Module.

Kingdom of Saudi Arabia

This Offering Memorandum may not be distributed in the Kingdom of Saudi Arabia (‘‘KSA’’), except tosuch persons as are permitted under the Offers of Securities Regulations (the ‘‘Saudi Regulations’’) issuedby the Board of the Capital Market Authority (the ‘‘Capital Market Authority’’) resolutionnumber 2-11-2004 dated 4 October 2004 and amended by the Board of the Capital Market Authorityresolution number 1-28-2008 dated 18 August 2008.

The Capital Market Authority does not make any representations as to the accuracy or completeness ofthis Offering Memorandum, and expressly disclaims any liability whatsoever for any loss arising from, orincurred in reliance upon, any part of this Offering Memorandum. Prospective investors of the

152

International Offer Shares should conduct their own diligence on the accuracy of the information relatingto the International Offer Shares. If a prospective purchaser does not understand the contents of thisOffering Memorandum, he or she should consult an authorised financial adviser.

The International Offer Shares must not be advertised, offered or sold and no memorandum, informationcircular, brochure or any similar document has or will be distributed, directly or indirectly, to any person inthe KSA other than to Sophisticated Investors within the meaning of Article 10 of the Saudi Regulations.

The offer of International Offer Shares in the KSA shall not, therefore, constitute a ‘‘public offer’’pursuant to the Saudi Regulations. Prospective investors are informed that Article 17 of the SaudiRegulations places restrictions on secondary market activity with respect to the International Offer Shares.Any resale or other transfer, or attempted resale or other transfer, made other than in compliance with theabove stated jurisdictions shall not be recognised by the Company.

Lebanon

This Offering Memorandum does not constitute or form part of any offer or invitation to sell or issue, orany solicitation of any offer to purchase or subscribe for, any International Offer Shares in the Company inthe Lebanese territory, nor shall it (or any part of it), nor the fact of its distribution, form the basis of, or berelied on in connection with, any subscription.

The Company has not been, and will not be, authorised or licenced by the Central Bank of Lebanon and itsInternational Offer Shares cannot be marketed and sold in Lebanon. No public offering of theInternational Offer Shares is being made in Lebanon and no mass-media means of contact are beingemployed. This Offering Memorandum is aimed at institutions and sophisticated, high net worthindividuals only, and this Offering Memorandum will not be provided to any person in Lebanon exceptupon the written request of such person.

Recipients of this Offering Memorandum should pay particular attention to the section titled ‘‘RiskFactors’’ in this Offering Memorandum. Investment in the International Offer Shares is suitable only forsophisticated investors with the financial ability and willingness to accept the risks associated with such aninvestment, and said investors must be prepared to bear those risks.

Oman

This Offering Memorandum does not constitute a public offer of securities in the Sultanate of Oman, ascontemplated by the Commercial Companies Law of Oman (Royal Decree No. 4/1974) or the CapitalMarket Law of Oman (Royal Decree No. 80/1998) and Ministerial Decision No.1/2009 or an offer to sellor the solicitation of any offer to buy non-Omani securities in the Sultanate of Oman.

This Offering Memorandum is strictly private and confidential. It is being provided to a limited number ofsophisticated investors solely to enable them to decide whether or not to make an offer to the Company toenter into commitments to invest in the International Offer Shares outside of the Sultanate of Oman, uponthe terms and subject to the restrictions set out herein and may not be reproduced or used for any otherpurpose or provided to any person other than the original recipient.

Additionally, this Offering Memorandum is not intended to lead to the making of any contract within theterritory or under the laws of the Sultanate of Oman.

The Capital Market Authority and the Central Bank of Oman take no responsibility for the accuracy of thestatements and information contained in this Offering Memorandum or for the performance of theCompany with respect to the International Offer Shares nor shall they have any liability to any person fordamage or loss resulting from reliance on any statement or information contained herein.

Bahrain

The International Offer Shares have not been offered or sold, and will not be offered or sold to any personin the Kingdom of Bahrain except on a private placement basis to persons who are ‘‘accredited investors’’.

For this purpose, an ‘‘accredited investor’’ means:

(i) an individual holding financial assets (either singly or jointly with a spouse) of USD 1,000,000 ormore;

(ii) a group, partnership, trust or other commercial undertaking which has financial assets available forinvestment of not less than USD 1,000,000; or

153

(iii) a government, supranational organisation, central bank or other national monetary authority or astate organisation whose main activity is to invest in financial instruments (such as a state pensionfund).

Kuwait

The International Offer Shares have not been and will not be offered, sold, promoted or advertised inKuwait except on the basis that an offer is made in compliance with Decree Law No. 31 of 1990 and theimplementing regulations thereto, as amended, and Law No. 7 of 2010 and the bylaws thereto, as amendedgoverning the issue, offering and sale of securities. No private or public offering of the International OfferShares is being made in Kuwait, and no agreement relating to the sale of the International Offer Shareswill be concluded in Kuwait. No marketing or solicitation or inducement activities are being used to offeror market the International Offer Shares in Kuwait.

Qatar

The International Offer Shares have not been offered or sold, and will not be offered or sold or delivered,directly or indirectly, in the State of Qatar including the Qatar Financial Centre, other than on the basisthat an offer is made: (i) in compliance with all applicable laws and regulations of the State of Qatarincluding the Qatar Financial Centre; and (ii) through persons or corporate entities authorised andlicenced to provide investment advice and/or engage in brokerage activity and/or trade in respect of foreignsecurities in the State of Qatar.

Jordan

Any marketing of the International Offer Shares to Jordanian investors shall be done by way of privateplacement only. The International Offer Shares are being offered in Jordan on a cross border basis basedon one-on-one contacts to no more than 30 potential investors and accordingly the International OfferShares will not be registered with the Jordanian Securities Commission and a local prospectus in Jordanwill not be issued.

South Africa

Due to restrictions under the securities laws of South Africa, the International Offer Shares are notoffered, transferred, sold, made, renounced or delivered in South Africa or to a person with an address inSouth Africa and the Combined Offer is not made, offered, transferred, sold, renounced or delivered inSouth Africa or to a person with an address in South Africa, unless such person falls within one or more ofthe exemptions to the securities laws relating to offers to the public set out in Section 96 of the CompaniesAct, No. 71 of 2008 (as amended). The exemptions include:

• offers made only to the following persons, namely (i) persons whose ordinary business, or part ofwhose ordinary business, is to deal in securities, whether as principals or agents; (ii) the PublicInvestment Corporation as defined in the Public Investment Corporation Act, No. 23 of 2004 (asamended); (iii) persons regulated by the Reserve Bank of South Africa; (iv) authorised financialservices providers as defined in the Financial Advisory and Intermediary Services Act, No. 37 of 2002(as amended); (v) financial institutions as defined in the Financial Services Board Act, No. 97 of 1990;(vi) wholly owned subsidiaries of the persons contemplated in (iii), (iv) and (v), acting as agent in thecapacity of authorised portfolio manager for a pension fund registered in terms of the Pension FundsAct, No. 24 of 1956 or as a manager for a collective investment scheme registered in terms of theCollective Investment Schemes Control Act, No. 45 of 2002; (vii) any combination of the personscontemplated in (i) to (vi); and

• offers made to a single addressee acting as principal where the contemplated acquisition cost of theInternational Offer Shares is equal to or greater than R1,000,000.

The Combined Offer does not constitute an offer for the sale of or subscription for, or the solicitation ofan offer to buy and subscribe for, International Offer Shares to the public as defined in the CompaniesAct, No. 71 of 2008 (as amended) and will not be distributed to any person in South Africa in any mannerwhich could be construed as an offer to the public in terms of the Companies Act, No. 71 of 2008 (asamended) and should any person who does not fall into any of the above exemptions receive this OfferingMemorandum they should not and will not be entitled to acquire any International Offer Shares orotherwise act thereon. This Offering Memorandum does not, nor is it intended to, constitute a prospectusprepared and registered under the Companies Act, No. 71 of 2008 (as amended).

154

PART 13Additional Information

1. Incorporation and Share Capital

1.1 The Company was established as an Egyptian limited partnership company under the EgyptianInvestment Law on 6 November 1979. On 28 July 2005, the Company changed its legal form to ajoint stock company. The Company’s registration number is 199393.

1.2 The Company’s registered office is at 39–41 Cleopatra Street, Heliopolis, Cairo, Egypt and itstelephone number is +20(2) 24143-931.

1.3 The share capital history of the Company is as follows:

1.3.1 On incorporation as a joint stock company in 2005, the share capital of the Company wasEGP 109,320,000 divided into 10,932,000 ordinary shares of EGP 10 each.

1.3.2 On 14 May 2008, pursuant to a decree issued by the Egyptian government, the Company decreasedits issued capital to EGP 80,000,000 divided into 8,000,000 ordinary shares of EGP 10 each.

1.3.3 The Company undertook a share split of its ordinary shares on 13 March 2016 at an extraordinarygeneral meeting. Pursuant to the split, the par value of the Shares decreased from EGP 10 toEGP 0.5. As of the date of this Offering Memorandum, the issued share capital of the Company isEGP 80,000,000, consisting of 160,000,000 ordinary shares of EGP 0.5 each. The Company’sauthorised share capital is EGP 800,000,000.

1.3.4 Following completion of the Closed Subscription, the Company’s issued share capital is expected tobe EGP 100,000,000 divided into 200,000,000 ordinary shares of EGP 0.5 each (assuming all of theOffer Shares are sold in the Combined Offer and no Stabilisation).

2. Statutes of the Company and Applicable Egyptian Law

The following is a summary of the Company’s Statutes and certain applicable Egyptian law relevant to thecorporate governance of the Company. It is intended only as a summary and does not purport to contain afull description of the Statutes or of all applicable law.

Duration

The duration of the Company is 25 years from 28 July 2005. The duration of the Company may beextended by a Shareholder resolution, with the approval of the General Authority for Investment and FreeZones (GAFI), an affiliate of the Egyptian Ministry of Investment.

Limitation of Liability

Pursuant to the Companies Law, a shareholder’s liability for the losses of an Egyptian joint stock companyis limited to the amount of his or her investment in the shares.

Voting Rights and Shareholders’ Meetings

Shareholders wishing to attend general meetings of the Company are required to deposit their shares withthe bookkeeping company holding their shares or at the company’s headquarters and to present evidenceof such deposit at least three days prior to the date of the general meeting. No transfer of ownership ofsuch deposited shares may be recorded until the meeting closes.

The Company’s general meetings may take place in Cairo or Dubai, and they may not be held during EGXtrading sessions.

General meetings can be convened by the Chairman of the Board, the Directors, the Company’s auditorsor Shareholders representing at least five per cent. of the Company’s outstanding share capital.

Shareholders representing at least 50 per cent. of the issued share capital will constitute a quorum atgeneral meetings. Resolutions voted upon at a validly convened general meeting are passed by an absolutemajority vote of the Shares represented at the meeting. If a quorum is not met, the meeting is adjournedfor a maximum of 30 days. Upon recommencement of the adjourned meeting, there is no quorumrequirement for the meeting to be valid. The invitation to the meeting may refer to the date and time ofthis second meeting, and the Statutes provide that the second meeting shall be deemed valid regardless of

155

the number of Shares present or represented in the meeting. A general meeting must be convened at leastonce a year within three months of the end of each fiscal year.

An extraordinary general meeting can be called upon the request of the Board or Shareholdersrepresenting ten per cent. or more of the Company’s outstanding share capital. Resolutions voted upontherein are passed by a two-thirds majority of the Shares represented at the meeting. Resolutionspertaining to an increase or decrease of the share capital, mergers of the Company and any other entity,amendments to the Company’s stated objectives or its dissolution require a super majority of 75 per cent.of the Shares represented at the meeting. If a quorum is not present, the meeting is adjourned for amaximum of 30 days. Upon recommencement of the adjourned meeting, a quorum is constituted and themeeting is valid by the presence of Shareholders (or their representatives) representing at least 25 per cent.of the outstanding share capital.

At least three Directors must attend any Shareholders’ meeting in order for such meeting to be consideredvalid.

Any Shareholder may attend a Shareholders’ meetings in person or by proxy. The proxy must be in writingand must be given to a Shareholder. Shareholders that are not represented by a Director on the Board maynot give a proxy to a Director. A Shareholder may not represent by proxy more than ten per cent. of thetotal number of Shares in the Company or 20 per cent. of the Shares represented at the meeting.

The minutes of any Shareholders’ meetings must be ratified by GAFI and disclosed to EFSA and theEGX. Minutes are available for review by Shareholders, the Company’s auditor and certain administrativeauthorities, but they are not available to the public. The resolutions are required to be disclosed to EFSAand the EGX, and material resolutions will be published on the EGX’s website.

Shareholders who have objected to a particular resolution or who did not attend the meeting (for a validreason) where a particular resolution was passed, are entitled to request the suspension or nullity of suchresolution if the resolution is found to favour or disfavour a certain group of Shareholders or provides aspecial benefit to the Directors or others without considering the Company’s benefit. GAFI may act onbehalf of the Shareholders if so requested.

Dividends

Dividends are declared by Shareholder resolution at general meetings. They must be distributed within onemonth from the date of such general meeting. Dividends are payable to the Shareholders of record whosenames are recorded in the Shareholders’ ledger or the MCDR records.

According to the Statutes, the annual net profits of the Company, after deducting all general expenses andother charges, are distributed as follows:

a) A sum equal to five per cent. of the net profits must be deducted and allocated as a legal reserve. Suchdeduction shall cease when the aggregate legal reserve reaches an amount equivalent to 50 per cent.of the issued share capital. When the reserve falls below that amount, deductions shall resume.

b) A sum equal to ten per cent. of the net profits, but not exceeding the total annual salaries of theCompany’s employees, is to be distributed to the employees, as recommended by the Directors andapproved by the Shareholders.

c) An initial distribution of a minimum of five per cent. of the net profits is to be paid to theShareholders, distributed on a pro rata basis.

d) If the company has founding quotas, the founding shareholder shall receive payment of their portionin the dividends, but in all cases not exceeding ten per cent. of the remaining amount.

e) A maximum of five per cent. of the remaining amount is to be allocated to the Directors asremuneration.

The remaining net profits, if any, may be (i) paid to the Shareholders as additional dividends or (ii) uponthe proposal of the Directors, carried forward to the following year as retained earnings or allocated to anextraordinary reserve or an extraordinary depreciation reserve.

The shareholders may decide at an ordinary general meeting to distribute all or part of the profits declaredby the quarterly financial statements, provided such accounts are accompanied by a report from theCompany’s auditor.

156

Increases and Reductions in Capital

The Company’s share capital may be decreased or increased only by a Shareholder resolution by a three-quarters majority of the Shares represented at the general meeting. The approval of EFSA is required forthe issuance of any new Shares or the reduction of share capital. Any amendment to Articles 6 and 7 of theStatues in connection with an increase or decrease of the authorised and/or issued share capital of theCompany requires the approval of the Chairman of GAFI, as the Company is incorporated pursuant to theEgyptian Investment Law. An increase in the issued share capital of the Company that does not exceed theapproved authorised share capital may be made by a resolution adopted at a duly convened Boardmeeting.

Increases in the share capital must be made at fair value at the time of issuance of the Shares inaccordance with a fair valuation report issued by an independent financial adviser (an IFA), provided thatthe rights issue allocated among existing shareholders of the Company may be made at par value, subjectto the approval by a general meeting. An IFA report is required if any new Shares are offered to a newinvestor at fair value. In the case of a rights issuance, the subscription rights may be traded by the holdersof the Shares independently from the Shares following the commencement of the subscription period.

According to the EGX Listing Rules, the Company may not increase or decrease its share capital, orpublish the invitation to an Extraordinary General Assembly Meeting to consider the same or carry out therequired procedures, without submitting a disclosure report in the prescribed form to the EFSA togetherwith the relevant Board minutes approving the increase or decrease and the EFSA’s approval of suchreport and its publication on the EGX trading screens. The invitation to the Extraordinary GeneralAssembly Meeting and/or the commencement of capital increase or decrease procedures must be madewithin one week from the date of EFSA’s approval of the disclosure report and its publication on the EGXtrading screens, and the relevant Board minutes must include an authorisation to the Chairman toundertake the same.

Certificates, Registry and Transfer

The Shares are dematerialised and registered on the MCDR system, and they cannot be held incertificated form. According to the EGX Listing Rules and the Capital Market Law, each Shareholderacquiring, including through its related parties, five per cent. or multiples thereof of the Shares orsubscription rights of the Company must disclose its holding. Shareholders must also disclose the decreaseof their shareholdings, including through its related parties, by five per cent. or multiples thereof. Directorsand employees, and their respective related parties, must abide by the aforementioned disclosurerequirements when their shareholdings increase or decrease by multiples of three per cent. In the eventthat the stake acquired by the shareholder, including its related parties, represents 25.0% or more of theShares or voting rights, the purchasing shareholder must disclose its future investment plan and any plansregarding the Company’s management. In each of the above cases, disclosure must be made to EGX. EGXpublishes such disclosures on the trading screens and its website.

A person may acquire, independently or together with related parties, less than one-third of the sharecapital or voting rights of the Company through open market transactions (i.e., by applying the normalapplicable EGX trading rules) or through a voluntary tender offer. The obligation to launch a mandatorytender offer for the acquisition of 100 per cent. of the Shares, voting securities and convertible securities ofthe Company would arise in any of the following situations:

a) if a person acquires, independently or together with related parties, one-third or more of the sharecapital or voting rights of the Company; provided, however, that EFSA may temporarily exempt suchperson from this obligation if the excess percentage does not exceed three per cent. of the sharecapital or voting rights of the Company, such excess is disposed of within six months from reaching theone-third threshold and the excess Shares do not entitle the holder to any voting rights within suchperiod (i.e., until the disposal of the excess percentage takes place);

b) if a person that holds, independently or together with related parties, between one-third and one-halfof the share capital or voting rights of the Company, independently or together with related parties,and (i) acquires more than an additional two per cent. of the share capital or voting rights within12 consecutive months or (ii) exceeds one-half of the share capital or voting rights at any point intime; or

c) if a person that holds, independently or together with related parties, between one-half and three-quarters of the share capital or voting rights of the Company, independently or together with relatedparties, and (i) acquires more than an additional two per cent. of the share capital or voting rightswithin 12 consecutive months or (ii) exceeds three-quarters of the share capital or voting rights at anypoint in time.

157

The foregoing provisions do not apply in the case of a decrease of share capital due to the cancellation oftreasury shares or the increase of share capital in cash or through debt-to-equity swaps. The provisions willapply if a Shareholder purchases subscription rights.

Liquidation Rights and Other Distributions

In the event of the liquidation, dissolution or winding-up of the Company, the assets of the Company areto be applied to satisfy its liabilities. Shareholders will receive any remaining surplus on a pro rata basis.

If, during any financial year, the losses of the Company exceed 50 per cent. of its capital, an extraordinarygeneral meeting must be convened to decide whether to dissolve the Company or to continue its activities.Resolutions of the extraordinary general meeting in relation to dissolution or continuation are adopted bya three-quarters majority of the Shares represented at the meeting.

Pre-emptive Rights

If there is an increase in the share capital of the Company’s by the issuance of new shares, the EgyptianCompanies Law and the Statutes provide that the existing Shareholders have a right to subscribe for up totheir pro rata share in the new Share issue, unless a meeting of Shareholders resolves, by a three-quartersmajority of the Shares represented at the meeting, to offer part or all of the new Shares in a publicsubscription without applying the pre-emptive rights.

Acquisition of Company’s Own Shares

The Company may purchase its own Shares pursuant to a Board resolution in order to reduce itsoutstanding share capital, to make a distribution to its employees in the form of an employee share schemeor in connection with delisting from the EGX. In accordance with the Egyptian Companies Law, if theCompany acquires its own Shares, it must either resell or cancel those Shares within one year, but it musthold such Shares in treasury for a minimum period of three months. Any buyback of Shares by theCompany must be made in compliance with EGX directives guaranteeing equality among investors andmarket stability. The Company may not acquire or own more than ten per cent. of its listed share capital inthe form of treasury Shares.

The Company must notify the EGX of its plan to acquire treasury Shares at least three business daysbefore carrying out the acquisition. The notice must include the reasons for the acquisition, the source offinancing, the expected impact on the Company’s performance indicators, the purchase price, the quantity,the envisaged period of implementation and the Company’s broker. The minutes of the Board meetingapproving the buyback must be attached to the notice.

3. Directors’ and Senior Managers’ interests

3.1 As at the date of this Offering Memorandum, no Directors or members of senior management own,or will own immediately following the Combined Offer or the Closed Subscription, any Shares.

3.2 Insofar as is known to the Directors, the following are the interests which represent, or willrepresent, directly or indirectly, 3 per cent. or more of the issued share capital of the Companyassuming no Stabilisation:

Immediately prior to Immediately following Immediately followingCommencement of Trading Commencement of Trading Closed Subscription

Percentage Percentage Percentageof issued of issued of issued

Number of share Number of share Number of shareShareholder Shares capital Shares capital Shares capital

Care Healthcare . . 159,999,960 99.99% 119,999,960(1) 74.99%(1) 159,999,960 79.99%(1)

(1) Assuming all of the Offer Shares are sold in the Combined Offer and no Stabilisation.

Save as disclosed above, insofar as is known to the Directors, there is no other person who is or willbe immediately following Commencement of Trading, directly or indirectly, interested in 3 per cent.or more of the issued share capital of the Company, or of any other person who can, will or could,directly or indirectly, jointly or severally, exercise control over the Company. The Directors have noknowledge of any arrangements the operation of which may at a subsequent date result in a change

158

of control of the Company. None of the Company’s major shareholders have or will have differentvoting rights attached to the shares they hold in the Company.

3.3 No Director has or has had any interest in any transactions which are or were unusual in theirnature or conditions or are or were significant to the business of the Company or any of itssubsidiaries and which were effected by the Company or any of its subsidiaries during the current orimmediately preceding financial year or during an earlier financial year and which remain in anyrespect outstanding or unperformed.

3.4 There are no outstanding loans or guarantees granted or provided by any member of the Group toor for the benefit of any of the Directors.

4. Directors’ terms of appointment

4.1 The Directors and their functions are set out in Part 7 (Directors, Senior Management andCorporate Governance). Below is a summary of their terms of appointment.

4.2 Executive Directors

4.2.1 Executive Directors are appointed for terms of three years. They do not receive any compensationfor their role as a Director in addition to their compensation for their services as a senior manager.

4.3 Non-Executive Directors

4.3.1 Non-Executive Directors are appointed for terms of three years. Non-Executive Directors receiveEGP 10,000 for each Board meeting they physically attend, except that Non-Executive Directorsrepresenting Abraaj NAH do not receive any compensation. The Directors currently representingAbraaj NAH are Ahmed Adel Badreldin and Walid Fayez Said Bakr.

4.4 Senior Management Remuneration

In 2015, the aggregate remuneration to the senior management who served each of Cleopatra, CairoSpecialized Hospital and Nile Badrawi during 2015 was EGP 8,016,797, EGP 1,750,000 andEGP 1,335,000, respectively. These figures include remuneration paid to members of the Group’s seniormanagement who are no longer employed by the Group. In 2015, Al Shorouk was managed by amanagement company comprising four of the hospital’s previous owners. This management agreement wasterminated prior to the Company acquiring Al Shorouk.

4.5 Directors’ current and past directorships and partnerships

Set out below are the directorships and partnerships held by the Directors (other than, where applicable,directorships held in the Company and its subsidiaries), in the five years prior to the date of this OfferingMemorandum:

Name Current directorships / partnerships Past directorships / partnerships

Dr. Ahmed EzzeldinMahmoud Abdelaal . . . . — —Johnson & Johnson Egypt S.A.E.

—Johnson & Johnson Middle East FZ LLC—GlaxoSmithKline S.A.E.

Ahmed Adel Badreldin . . . —ABRAAJ Aqua SPV Limited —Minnow Marine Projects Limited—Abraaj Viking Holdco Limited —Stanford Asia Holding Company—Abraaj Viking Management Limited —Stanford Mermaid Limited—Abraaj Viking Partners Limited —Stanford Caracara Limited—Al Shorouk Hospital Company S.A.E —Stanford Condor Limited—Aqua Consortium Limited —Stanford Gold Limited—Assad —Stanford Kestrel Limited—Bisco Invest for Trading and Investment —Stanford Kite Limited—Bisco Invest for Trading and Investment S.A.E. —Stanford Merlin Limited—Cairo for Investment in Real Estate Development S.A.E —Stanford Osprey Limited—Cairo Specialized Hospital Company S.A.E —Abraaj Partners Holding Company—Cleopatra Hospital Company S.A.E —Cairo Medical Tower Laboratory (Al Borg Laboratory)—Clinique Taoufik Group—ECCO Outsourcing—Eclipse Holdings Limited—Eclipse Holdings Limited—Enshaa PSC—Fresh Quick Service Restaurants BV—Fresh Quick Service Restaurants, Ltd—Gray Mackenzie Retail Management Limited—Integrated Diagnostics Group Limited—Integrated Diagnostics Holdings Limited—Integrated Diagnostics Investments Limited

159

Name Current directorships / partnerships Past directorships / partnerships

—Integrated Diagnostics TopCo Limited—Kantara Investments Limited—KEC SPV Limited—Kuwait Energy plc—MediaquestCorp Enterprises Incorporated—Nile Badrawi Hospital Company S.A.E—OMS—Oncology Diagnostics Morocco—RED Entertainer SPV Limited—Riyada Enterprise Development Limited—Riyada Managers Limited—Saham Finances—Saham Finances—Societe d’Articles Hygieniques—Spinneys Algeria Limited—Spinneys Egypt Limited—Spinneys Group Limited—Spinneys Group Operations Limited—Spinneys Holdings Limited—Spinneys IP Limited—Spinneys Iraq Limited—Spinneys Jordan Limited—Spinneys Kazakhstan Limited—Spinneys KSA Limited—Spinneys Levant Limited—Spinneys Qatar Limited—Spinneys Syria Limited—Stanford Marine Group Inc.—Stanford Marine Group Inc.—Tiba Cayman Limited—Tiba Cayman Limited—Viking

Walid Fayez Said Bakr . . . —Cairo for Investment and Real Estate Development —Arab Directory Services Company—OMS —ECCO—Nymgo SA —Eclipse Technologies—D1G Limited —Eclipse Holdings Limited

Dr. Mohamed Awad Tag ElDin . . . . . . . . . . . . . —Arab Company for Drug Industries and Medical

Appliances (ACDIMA International)—Egyptian International Pharmaceutical Industry Company(EPICO)

Nabil Walid Kamhawi . . . . Delta Brokerage Co S.A.E. —Middle East Glass Manufacturing Company ESC—Prime Holdings ESC—Rasmala Egypt Securities ESC—Rasmala Egypt Asset Management ESC—Delta Rasmala Investment Company ESC

Omar Atef Kinawy . . . . . — —

Sameh Mahmoud Mohsen . — —

4.6 Within the period of five years preceding the date of this Offering Memorandum, none of theDirectors:

a) has had any convictions in relation to fraudulent offences;

b) has been a member of the administrative, management or supervisory bodies or director orsenior manager (who is relevant in establishing that a company has the appropriate expertiseand experience for management of that company) of any company at the time of anybankruptcy, receivership or liquidation of such company; or

c) has received any official public incrimination and/or sanction by any statutory or regulatoryauthorities (including designated professional bodies) or has ever been disqualified by a courtfrom acting as a member of the administrative, management or supervisory bodies of acompany or from acting in the management or conduct of affairs of a company.

5. Employee Funds and Profit-Sharing Distributions

Profit-Sharing Distributions

Under Egyptian law, in any particular year, companies are required to make profit-sharing distributions totheir employees if they pay dividends to their shareholder in that year. The amount of the employeedistributions must be the lesser of (i) 10 per cent. of the distributed net profits or (ii) 100 per cent. of theCompany’s total salaries and wages paid in that year.

160

Employee Long Term Incentive Plan

The Company intends to explore implementation of an employee long term incentive plan (LTIP)following Commencement of Trading, for the benefit of employees, senior management and the ExecutiveDirectors. Such a plan shall be reviewed by the Board and, upon the Board’s acceptance, shall besubmitted to an extraordinary general shareholders meeting for approval. The Statutes of the Companymay have to be amended, and regulatory approvals may have to be obtained in accordance with applicablelaw and the EGX Listing Rules, in order to implement the LTIP.

6. Subsidiaries, investments and principal establishments

The Company is, in addition to the operating company of the Cleopatra hospital, the holding company ofthe Group. The principal subsidiaries of the Company are as follows:

6.1 Subsidiaries

Country of Ownershipincorporation interest and

Name and operations voting power Field of activity

Al Shorouk Hospital Company . . . . . . . . . . . Egypt 99.9% Hospital operating companyCairo Specialized Hospital Company . . . . . . Egypt 52.7% Hospital operating companyNile Badrawi Hospital Company . . . . . . . . . . Egypt 99.9% Hospital operating company

6.2 Principal establishments

The following are the principal establishments of the Group:

Name and location Type of facility Tenure

Cleopatra, Heliopolis, Cairo, Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hospital OwnedCairo Specialized Hospital, Heliopolis, Cairo, Egypt . . . . . . . . . . . . . . . . . . . . Hospital OwnedNile Badrawi, Maadi, Cairo, Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hospital Owned(1)

Al Shorouk, Mohandesin, Giza, Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Hospital Owned

(1) It was discovered in the 1980s that part of the Nile Badrawi facility was erected on state-owned property. In 2003, all partiesinvolved and the Ministerial Committee for Settlement of Investment Disputes reached an agreement that Nile BadrawiHospital Company would pay compensation to the River Transport Authority and ownership of the relevant land would betransferred to Nile Badrawi Hospital Company. The terms of the transfer have not yet been agreed with the River TransportAuthority. For more detail, see ‘‘Legal and Administrative Proceedings’’ in Part 6 (Business Description) of this OfferingMemorandum.

7. Material contracts

The following contracts (not being contracts entered into in the ordinary course of business) have beenentered into by the Company or another member of the Group: (a) within the two years immediatelypreceding the date of this Offering Memorandum which are, or may be, material to the Company or anymember of the Group, and (b) at any time and contain provisions under which the Company or anymember of the Group has an obligation or entitlement which is, or may be, material to the Company orany member of the Group as at the date of this Offering Memorandum:

7.1 Underwriting Agreement

See ‘‘Underwriting Arrangements’’ in Part 12 (Details of the Combined Offer) of this OfferingMemorandum.

7.2 Credit and Financing Arrangements

See ‘‘Credit and Financing Arrangements’’ in Part 9 (Operating and Financial Review) of this OfferingMemorandum.

8. Egyptian Taxation

The statements herein regarding Egyptian taxation are based on the laws in effect in Egypt as of the dateof this Offering Memorandum and are subject to any changes of law occurring after such date, whichchanges could be made on a retroactive basis.

161

The following is a summary of the principal tax consequences for corporate holders of Shares who are notresident in Egypt (‘‘non-residents’’). This summary addresses only the tax consequences for non-residentcorporate investors who hold Shares as capital assets, and this summary does not address the taxconsequences which may be relevant to other classes of non-resident investors, such as dealers insecurities. The summary is not intended to be an authoritative or complete statement of the applicablelaws. Prospective investors are referred to ‘‘The Egyptian income tax regime has recently changed’’ in Part 1(Risk Factors) of this Offering Memorandum. Prospective investors must seek their own tax advice inrelation to their specific tax position.

Acquisition of Shares

There is currently no stamp duty or other transaction tax levied on the acquisition of Shares.

Dividends

Dividends were not previously taxable in Egypt, but the Egyptian Income Tax Law introduced a 10 percent. dividend withholding tax.

The Egyptian Income Tax Law defines dividends as any income resulting from shares, including preferredshares, founding shares or any other instruments giving their holders an entitlement to participate in theprofits of an Egyptian company.

According to the Egyptian Income Tax Law, dividends distributed by Egyptian companies to non-residentsare subject to a 10 per cent. withholding tax, without deducting any costs or expenses. Dividends in theform of shares (i.e. stock dividends) are not subject to dividend withholding tax.

The withholding tax rate is reduced to five per cent., without deducting any costs or expenses, providedthat (i) the non-resident to which dividends will be distributed holds more than 25 per cent. of thecompany’s capital or voting rights and (ii) the non-resident holds such shareholding for no less than twoyears.

A relevant double taxation treaty may reduce the withholding tax rate applicable on dividends paid by anEgyptian company to its non-resident shareholders.

The Company should be entitled to a 90 per cent. participation exemption on the dividend incomereceived from its Egyptian subsidiaries. That is, 10 per cent. of the dividend income received by theCompany from its Egyptian subsidiaries would be subject to corporate tax at 22.5 per cent. Thewithholding tax already deducted cannot be used as a tax credit to satisfy this corporate tax liability.

Disposal of Shares

According to the Egyptian Income Tax Law, capital gains realised from the sale of Egyptian shares listedon the EGX by both resident and non-resident shareholders are subject to a 10 per cent. withholding tax.However, the application of this tax is suspended for two years starting 17 May 2015 (i.e. the date of theofficial announcement made by the Cabinet of Ministers regarding this exemption).

A relevant double taxation treaty may eliminate non-resident taxation in Egypt on the disposal of shares inthe Company.

Inheritance Tax

There is currently no tax on inheritances in Egypt. Accordingly, no inheritance taxes in Egypt will bechargeable on the death of an owner of the Shares.

THE DISCUSSION ABOVE IS A GENERAL SUMMARY. IT DOES NOT COVER ALL TAX MATTERSTHAT MAY BE OF IMPORTANCE TO A PARTICULAR INVESTOR. EACH PROSPECTIVE INVESTORIS URGED TO CONSULT ITS OWN TAX ADVISER ABOUT THE TAX CONSEQUENCES TO IT OF ANINVESTMENT IN THE SHARES IN LIGHT OF THE INVESTOR’S OWN CIRCUMSTANCES.

9. Enforcement of arbitral decisions and civil liabilities in Egypt

Egypt is a party to the New York Convention. Consequently, Egyptian courts should recognise and enforcein Egypt a valid arbitral award made in the United Kingdom and other signatories of the New YorkConvention, on the basis of the rules of the New York Convention, subject to qualifications provided for in

162

the New York Convention and compliance with Egyptian procedural regulations and arbitration law.However, in practice, it may be difficult to enforce arbitral awards in Egypt due to:

a) the relatively limited experience of Egyptian courts in enforcing international commercial arbitralawards;

b) the Egyptian courts’ inability or unwillingness to enforce those awards; and/or

c) legal grounds (e.g., the concept of ‘‘public order’’) and/or technical grounds (e.g., the lack of capacityof the parties or the invalidity of an arbitration clause).

In addition, the Company is an Egyptian joint stock company and the liability of its shareholders is limitedto their respective capital contributions. All of the executive officers and a majority of the Directors areresidents of Egypt, and all of the assets of the Company are located in Egypt. It may not be possible forinvestors to effect service of process within the United Kingdom or elsewhere on the Company or any ofthose persons or to enforce against any of them judgments obtained in courts outside of Egypt predicatedon the civil liability provisions of the securities laws of those other jurisdictions.

Enforcement of foreign judgments in Egypt is subject to the following conditions:

a) the foreign courts rendering the relevant judgment offer reciprocal treatment to judgments obtainedin the courts of Egypt. If reciprocal treatment is not offered by the court where judgment is obtained,then the Egyptian courts will re-examine the merits of the case in the same manner as that adopted bythose courts;

b) the courts of Egypt are not exclusively competent to hear the dispute which constituted the object ofthe foreign judgment while the foreign courts are shown to have been competent to hear the disputein accordance with their own respective laws;

c) the parties to the dispute were duly notified and properly represented in the proceedings;

d) the foreign judgment is final and conclusive in accordance with the relevant law; and

e) the foreign judgment does not conflict with a prior Egyptian judgment in the same case and is notcontrary to public order or morality in Egypt.


10. Litigation

Save as described in ‘‘Legal and Administrative Proceedings’’ in Part 6 (Business Description) of thisOffering Memorandum, there are no governmental, legal or arbitration proceedings (including suchproceedings which are pending or threatened of which the Company is aware) during the 12 monthspreceding the date of this Offering Memorandum, which may have, or have had, a significant effect on theCompany’s and/or the Group’s financial position or profitability.

11. Related party transactions

The Company leases from Lashin for Plastic Industries S.A.E. (Lashin) a 2000 m2 space in a warehouse.After approval from Lashin, the Company sublet 532 m2 of space to Cairo Specialized Hospital beginningon 1 November 2014 for 14 months with automatic renewal unless either party notifies the other of itsintention to terminate at least one month prior to expiration of the current term.

Save as described above and in the Company’s audited consolidated financial information for the yearended 31 December 2015 and the audited financial information for each of Cleopatra Hospital Company,Cairo Specialized Hospital Company, Nile Badrawi Hospital Company and Al Shorouk Hospital Companyfor the three years ended 31 December 2015, 2014 and 2013 set out in Part 14 (Historical FinancialInformation), there are no other related party transactions between the Company or members of theGroup that were entered into during the three financial years ended 31 December 2015, 2014 and 2013 andduring the period between 31 December 2015 and 12 May 2016 (the latest practicable date prior to thepublication of this Offering Memorandum).

163

12. No significant change

There has been no significant change in the financial or trading position of the Company since31 December 2015, the date as of which the last audited consolidated financial statements of the Groupwere prepared.

13. Fees and expenses


Dated: 18 May

164

PART 14Historical Financial Information


Auditor’s report

To: The Shareholders of Cleopatra Hospital Company S.A.E.

Report on the separate financial statements

We have audited the accompanying separate financial statements of Cleopatra Hospital Company S.A.E.which comprise the separate balance sheet as at 31 December 2015, 2014 and 2013 and the separatestatements of income, changes in equity and cash flows for the fiscal year then ended, and a summary ofsignificant accounting policies and other notes.

Management’s responsibility for the separate financial statements

These separate financial statements are the responsibility of the Company’s management. Management isresponsible for the preparation and fair presentation of these separate financial statements in accordancewith Egyptian Accounting Standards and in light of the prevailing Egyptian laws. This responsibilityincludes designing, implementing and maintaining internal control relevant to the preparation and fairpresentation of financial statements that are free from material misstatement, whether due to fraud orerror. Management’s responsibility also includes selecting and applying appropriate accounting policiesand making accounting estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these separate financial statements based on our audit. Weconducted our audit in accordance with Egyptian Standards on Auditing and in light of the prevailingEgyptian laws. Those standards require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance that the separate financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe separate financial statements. The procedures selected depend on the auditor’s judgement, includingthe assessment of the risks of material misstatement of the separate financial statements, whether due tofraud or error. In making those risk assessments, the auditor considers internal control relevant to theCompany’s preparation and fair presentation of the separate financial statements in order to design auditprocedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion onthe effectiveness of the Company’s internal control. An audit also includes evaluating the appropriatenessof accounting policies used and the reasonableness of accounting estimates made by management, as wellas evaluating the overall presentation of the separate financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion on these separate financial statements.

Opinion

In our opinion, the separate financial statements referred to above present fairly, in all material respects,the separate financial position of Cleopatra Hospital Company S.A.E. as at 31 December 2015, 2014 and2013 its financial performance, and its separate cash flows for the fiscal year then ended in accordance withthe Egyptian Accounting Standards and in light of the related Egyptian laws and regulations.

Tamer Abdel Tawab Ahmed Gamal El-AtreesMember of Egyptian Society of Accountants & Fellow of Egyptian Society of Accountants &Auditors AuditorsMember of AICPA R.A.A. 8784R.A.A. 17996 E.F.S.A. 136Mansour & Co. PricewaterhouseCoopers Mansour & Co. PricewaterhouseCoopers

6 April 2016Cairo

165

CLEOPATRA HOSPITAL COMPANY S.A.E.Originally issued in Arabic

Balance sheet

At 31 December 2013, 2014 and 2015

(All amounts in Egyptian Pounds)

Note 2015 2014 2013

Non-current assetsFixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 61,804,067 62,787,629 66,494,758Investments in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . 6 366,047,399 — —

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . 427,851,466 62,787,629 66,494,758

Current assetsHeld-to-maturity investments . . . . . . . . . . . . . . . . . . . . . . . 7 38,080 38,080 38,080Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 7,869,572 6,337,822 8,335,984Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 39,935,176 34,246,704 23,091,203Debtors and other debit balances . . . . . . . . . . . . . . . . . . . . 10 13,258,191 35,179,584 53,750,980Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . . . 11 38,557,392 53,632,054 17,542,298

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,658,411 129,434,244 102,758,545

Current liabilitiesProvisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 6,179,017 3,367,352 761,088Creditors and other credit balances . . . . . . . . . . . . . . . . . . 13 42,198,330 29,852,391 21,568,924Current portion of borrowings . . . . . . . . . . . . . . . . . . . . . . 14 40,600,000 — —Current income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . 23 20,603,310 21,372,222 13,996,640

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 109,580,657 54,591,965 36,326,652

(Deficit) / surplus in working capital . . . . . . . . . . . . . . . (9,922,246) 74,842,279 66,431,893

Total investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417,929,220 137,629,908 132,926,651

Financed as follows:Shareholders’ equityIssued and paid up capital . . . . . . . . . . . . . . . . . . . . . . . . . 15 80,000,000 80,000,000 80,000,000Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 13,827,660 11,637,554 9,594,619Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,194,741 43,694,642 40,751,213

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . 200,022,401 135,332,196 130,345,832

Non-current liabilitiesCreditors and other credit balances—due to related parties . 13 54,095,303 — —Non-current portion of borrowings . . . . . . . . . . . . . . . . . . . 14 162,400,000 — —Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 1,411,516 2,297,712 2,580,819

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . 217,906,819 2,297,712 2,580,819

Total funding of working capital and non-current liabilities . 417,929,220 137,629,908 132,926,651

Mr. Khalid Ahmed Hassan Mr. Ahmad Ezz El Din MahmoudHead of Finance Chairman and Managing Director

6 April 2016Auditor’s report attached

The accompanying notes form an integral part of these financial statements.

166


Statement of income

For the year ended 31 December 2013, 2014 and 2015


Note 2015 2014 2013

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . 17 332,002,699 290,294,814 243,293,152Less:Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 (214,407,386) (204,608,154) (171,606,030)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,595,313 85,686,660 71,687,122Add / (Less)General and administrative expenses . . . . . . . . . . . . 19 (27,859,422) (20,670,525) (20,556,280)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (2,973,505) (2,886,902) (761,088)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 1,028,699 678,591 731,740

Profit for the year before finance income andincome tax . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,791,085 62,807,824 51,101,494

Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 5,104,232 2,086,651 1,572,705Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,487,998) (3,235) —

Profit for the year before income tax . . . . . . . . . . 84,407,319 64,891,240 52,674,199Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 (20,603,310) (21,372,222) (13,996,640)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 886,196 283,107 10,596

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . 64,690,205 43,802,125 38,688,155


167


Statement of changes in shareholders’ equity



RetainedShare capital Reserve earnings Total

Balance at 1 January 2013 as previously issued . 80,000,000 7,268,881 46,514,757 133,783,638Effect of correction of prior years’ errors . . . . . . — — 2,063,058 2,063,058

Balance at 1 January 2013 as restated . . . . . . . . 80,000,000 7,268,881 48,577,815 135,846,696Transfer to reserves . . . . . . . . . . . . . . . . . . . . . . — 2,325,738 (2,325,738) —Dividends distribution for 2012 . . . . . . . . . . . . . — — (44,189,019) (44,189,019)Profit for the year . . . . . . . . . . . . . . . . . . . . . . . — — 38,688,155 38,688,155

Balance at 31 December 2013 . . . . . . . . . . . . . . 80,000,000 9,594,619 40,751,213 130,345,832

Balance at 1 January 2014 . . . . . . . . . . . . . . . . 80,000,000 9,594,619 40,751,213 130,345,832Transfer to reserves . . . . . . . . . . . . . . . . . . . . . . — 2,042,935 (2,042,935) —Dividends distribution for 2013 . . . . . . . . . . . . . — — (38,815,761) (38,815,761)Profit for the year . . . . . . . . . . . . . . . . . . . . . . . — — 43,802,125 43,802,125


Balance at 1 January 2015 . . . . . . . . . . . . . . . . 80,000,000 11,637,554 43,694,642 135,332,196Transfer to reserves . . . . . . . . . . . . . . . . . . . . . . — 2,190,106 (2,190,106) —Profit for the year . . . . . . . . . . . . . . . . . . . . . . . — — 64,690,205 64,690,205



168


Statement of cash flows



Note 2015 2014 2013

Cash flows from operating activitiesProfit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,407,319 64,891,240 52,674,199Adjustments to reconcile net income to cash flows

from operating activitiesFixed assets depreciation and write-off . . . . . . . . . . . . 5 6,550,928 7,152,719 7,278,349Loss / (gain) on sale of fixed assets . . . . . . . . . . . . . . 15,970 (39,112) (100,671)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 2,973,505 2,886,902 761,088Impairment of customers’ balances . . . . . . . . . . . . . . 9 2,282,745 555,915 143,576Provisions no longer required . . . . . . . . . . . . . . . . . . 9 (152,634) (560,400) (72,902)Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,487,998 — —Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,000,274) (2,068,573) (1,538,525)

Operating profits before changes in working capital 99,565,557 72,818,691 59,145,114Changes in working capitalChange in inventories . . . . . . . . . . . . . . . . . . . . . . . . (1,531,750) 1,998,163 (1,353,166)Change in trade receivables . . . . . . . . . . . . . . . . . . . . (7,818,583) (11,151,016) 7,329,182Change in debtors and other debit balances . . . . . . . . 21,921,393 18,571,396 (7,437,812)Change in creditors and other credit balances . . . . . . . 58,219,742 8,283,466 2,985,978Provisions utilized . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (161,840) (280,638) —Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,372,222) (13,996,640) (15,660,360)

Net cash flows generated from operating activities . 148,822,297 76,243,422 45,008,936

Cash flows from investing activitiesProceeds from sale of fixed assets . . . . . . . . . . . . . . . 10,860 62,300 332,910Payments to purchase fixed assets . . . . . . . . . . . . . . . (5,594,200) (3,468,778) (1,896,438)Finance income received . . . . . . . . . . . . . . . . . . . . . . 5,000,274 2,068,573 1,538,525Payments to investments in subsidiaries . . . . . . . . . . . (366,047,399) — —Deposits with maturity of more than 3 months from

the date of placement . . . . . . . . . . . . . . . . . . . . . . (15,000,000) — —

Net cash flows used in investing activities . . . . . . . . (381,630,465) (1,337,905) (25,003)

Cash flows from financing activitiesDividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (38,815,761) (44,189,019)Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . 203,000,000 — —Finance cost paid . . . . . . . . . . . . . . . . . . . . . . . . . . . (266,494) — —

Net cash flows generated from / (used in) financingactivities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202,733,506 (38,815,761) (44,189,019)

Change in cash and cash equivalents during the year . (30,074,662) 36,089,756 794,914Cash and cash equivalents at the beginning of the year 53,632,054 17,542,298 16,747,375

Cash and cash equivalents at the end of the year . . . . 11 23,557,392 53,632,054 17,542,289


169


Notes to the separate financial statements


(All amounts in the notes are shown in Egyptian Pounds unless otherwise stated)

1. General information

Cleopatra Hospital (Lasheen & Co.) was initially incorporated as a limited liability company on 19 July1979.

On 27 June 2005, a resolution no. 4092 of 2005 was issued by the Chairman of the General Authority ForInvestment (GAFI) authorizing Cleopatra Hospital (Lasheen & Co.), ‘‘a limited partnership company’’, totransform its legal form to Cleopatra Hospital Company S.A.E (‘‘the company ‘‘). in accordance with theprovisions of Law No. 8 for 1997 and Law No. 95 for 1992.

The purpose of the Company is establishing a private hospital with the aim to offer modern and highquality medical services and medical care and treatment for patients. The Company may have interest orparticipate in any manner in companies or other firms which carry on similar activities in Egypt or abroad.The Company may acquire such entities or merge therewith as approved by GAFI.

The Company is located at 39 Cleopatra Street, Heliopolis, Cairo.

Care Healthcare LTD (the parent company) holds a percentage of 99.99% of the issued share capital

On 16 September 2015, Cleopatra Hospital Company S.A.E. acquired 52.7% of the shares of CairoSpecialized Hospital.

On 22 September 2015, Cleopatra Hospital Company S.A.E. acquired 99.92% of the shares of NileBadrawi Hospital.

These separate financial statements have been approved for issuance by the management on 6 April 2016,considering the fact that the Shareholders’ Ordinary General Assembly have the authority to amend theseparate financial statements after being issued.

2. Accounting policies

The following are the accounting policies applied in the preparation of these separate financial statements:

A. Basis of preparation for the separate financial statement

The separate financial statements have been prepared in accordance with Egyptian Accounting Standards(EASs) and relevant laws, which have all been applied consistently throughout the fiscal year except whenotherwise indicated. The separate financial statements have been prepared under the historical costconvention.

The preparation of the separate financial statements in conformity with EASs requires the use of certaincritical accounting estimates. It also requires management to exercise its judgement in the process ofapplying the Company’s accounting policies. The areas where the most significant accounting estimatesand judgements applied in preparation of the separate financial statements are disclosed in Note 4.

The EASs require the reference to the International Financial Reporting Standard when there is no EAS,or legal requirements that explain the treatment of specific balances and transactions.

Subsidiaries

The subsidiaries are the entities (including special purpose entities) over which the Company has thepower to directly or indirectly govern its financial and operating policies. This usually happens when theCompany usually has a shareholding of more than one half of voting rights. The effect of potential votingrights that are currently exercisable or convertible are considered when assessing whether the ParentCompany controls the subsidiary.

Separate financial statements are prepared in accordance with the local related regulations. Consolidatedfinancial statements have also prepared for the Company and related subsidiaries in accordance with the

170


Notes to the separate financial statements (Continued)



2. Accounting policies (Continued)

EAS. In order to get a complete understanding of the financial position of the Company and related resultsof operations, cash flows and changes in equity, the separate financial statements are to be read along withthe consolidated financial statements issued at and for the year ended 31 December 2015.

The subsidiaries and associates are accounted for in the Parent Company’s separate financial statementsusing the cost method. Under this method, the investments are recognised at the acquisition cost, includingany goodwill less any impairment losses, and the dividends are recognised in the statement of income whensuch dividends are approved and the Parent Company’s right to receive them is established.

New standards and amendments not yet adopted

In accordance with the Minister of Investment Decree No. 110/2015 issued on July 2015, EgyptianAccounting Standards previously issued by the Ministerial Decree on 2006 are replaced by the standardsattached to the Decree No 110 referred to above starting from 1 January 2016. Those standards areapplicable to all financial years starting on or after 1 January 2016.

None of the new and amended standards, when adopted, will have significant effect on the valuespresented in the Group financial statements.

Amendments applicable on the Group’s activities and financial statements are summarised in thepresentation and disclosure. According to the new standards balance sheet will be presented differentlyand working capital will not be presented in the financial statements. Results of operations will bepresented in two statements; the first will present income and expenses for the year (statement of income),and the second will start by the net income (loss) for the year and will include income and expenses itemsrecognised in equity to present the comprehensive income (statement of comprehensive income). The newstandards will require more disclosure on the financial risk management.

B. Foreign currency translation

(1) Functional and presentation currency

Items included in the separate financial statements are measured using the currency of theprimary economic environment in which the Company operates (the ‘‘functional currency’’). Theseparate financial statements are presented in Egyptian Pounds, which is the Company’sfunctional and presentation currency.

(2) Transactions and balances

Foreign currency transactions during the year are translated into the functional currency usingthe exchange rates prevailing at the dates of the transactions. Foreign exchange gains and lossesresulting from the settlement of such transactions and from the revaluation of monetary assetsand liabilities denominated in foreign currencies at balance sheet date are recognised in thestatement of income.

C. Fixed assets

Fixed assets are stated at historical cost less accumulated depreciation. Historical cost includes all expensesthat are attributable to the acquisition of the asset and bringing it to a ready-for-use condition.

All expenses incurred by the Company to acquire or construct fixed assets are recognised within ‘‘projectsunder construction’’. When the fixed asset is commissioned and brought to ready-for-use condition, theasset’s value is be transferred to the fixed assets.

171






All repair and maintenance costs are charged to the statement of income during the fiscal year in whichthey are incurred. Major renovation costs are capitalised and included in the asset’s cost when they areexpected to increase future economic benefits beyond the estimated original benefits when the asset wasinitially acquired. And the costs of such additions can be reliably measured. These costs will be depreciatedat the lower of the asset’s remaining useful life and the expected useful life of these renovations.

The straight line method is used to calculate the depreciation by reducing the asset’s value to its salvagevalue over the estimated useful life except the land that is not considered a depreciable asset. The fixedassets’ salvage value and useful life are reviewed annually, and adjusted if appropriate.

The depreciation rates by type of asset are as follows:

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5%Machinery, equipment & devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15%Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25%

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carryingamount is greater than its estimated recoverable amount. Gains and losses on disposals are determined bycomparing the realisable value with the net carrying amount, and the difference is recognised in thestatement of income.

D. Inventories

Inventories are measured at the lower of actual cost and net realisable value. Cost is determined using theweighted average method and includes purchase cost and other direct costs. The net realisable valuecomprises the estimated selling price in the ordinary course of business, less selling expenses. Allowance ismade for slow moving inventories based on management’s assessment of inventory movements.

E. Financial assets

(1) Classification

The Company classifies its financial assets into the following categories at initial recognitiondepending on the purpose for which the financial assets are acquired:

Loans and receivables:

Loans and receivables are non-derivative financial assets with fixed or determinable values thatare not quoted in an active market.

They are included in current assets, except for those with maturities greater than 12 months afterthe balance sheet date. In this case, they are classified as non-current assets.

Loans and receivables include trade receivables, cash on hand and at banks, and due from relatedparties.

(2) Initial and subsequent measurement:

1. The financial assets are measured on acquisition at fair value plus transaction costs.

2. The financial assets are derecognised when the right to receive cash flows from such assetshas expired or has been transferred and the Company has transferred substantially all risksand rewards of ownership.

172






3. Loans and receivables are subsequently measured at amortised cost using the effectiveinterest method.

(3) Impairment of financial assets:

Assets recognised at amortised cost

The Company assesses, at end of reporting period, whether there is evidence that a financial assetor a group of financial assets is impaired.

Impairment of a financial asset or group of financial assets is recognised if an impairmentindicator exists as a result of one or more events that occurred after the initial recognition (a‘‘loss event’’) and if the loss event (or events) has an impact on the future cash flows of thefinancial asset or group of financial assets that can be reliably measured.

Evidence of impairment may include indications that the debtors or a group of debtors isexperiencing financial difficulty, default or delinquency in payments, the probability that they willenter bankruptcy or other financial reorganisation and where observable data indicate that thereis a decrease in the estimated future cash flows, such as future changes or economic conditionsthat correlate with the impairment evidence.

Financial assets’ impairment loss is measured at amortised cost, which is the difference betweenthe asset’s carrying amount and the present value of the estimated future cash flows (aftereliminating future losses that have not occurred) discounted at the original effective interest rate.The carrying amount of the asset is reduced and the amount of the loss is recognised in thestatement of income.

If, in a subsequent period, the amount of the impairment decreases and the decrease is related toan event occurring after the initial recognition (such as an improvement in the debtor’s creditrating), the reversal of the impairment is recognised in the statement of income.

F. Issued and paid up capital

Ordinary shares are classified as equity.

G. Legal Reserve

As required by the Company’s Articles of Association, 5% of the net profit shall be transferred to a legalreserve, and such transfer may be discontinued when the reserve equals 50% of the issued and paid upcapital. Whenever this reserve is lower than this percentage, the deduction should be continued. Thisreserve is not available for distribution.

H. Provisions

Provisions are recognised when the Company has a (legal or constructive) obligation as a result of pastevents; it is expected that this settlement will result in an outflow of the Company’s resources whichensures that economic benefits will arise; and it is probable that outflow resources will be required to settlethe obligation and a reliable estimate of the amount of this obligation can be made.

Provisions are measured at the present value of the expenditures expected to be required to settle theobligation using a pre-tax rate that reflects market assessments of the time value of money and the risksspecific to the obligation. The increase in the provision due to passage of time is recognised as interestexpense.

173






I. Suppliers and notes payables

Suppliers and notes payables are obligations to pay for goods and services that have been acquired in theCompany’s ordinary course of business. Suppliers and notes payables are initially recognised at fair valueof products and services received from third parties, whether they have been billed or not. Long termliabilities are recognised at their present value, suppliers and notes payables are subsequently shown atamortised cost using the effective interest method.

J. Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings aresubsequently carried at amortised cost using the effective interest method; any difference between theproceeds (net of transaction costs) and the redemption value is recognised in the statement of income overthe period of the borrowings using the effective interest method.

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifyingassets are capitalised as part of the costs of those assets. Borrowing cost to be capitalised is determinedbased on actual borrowing cost incurred by the Company during the year after deducting any revenuerecognised from temporary investing the borrowed fund.

Borrowings are classified as current liabilities unless the Company has an unconditional right to postponethe settlement of borrowings for a period not less than 12 months from the financial statements date

K. Employee benefits

(1) Employees’ share of profit

According to the Companies law, the Company pays 10% of its cash dividends to its employeesup to a maximum equal to the total salaries of the latest fiscal year before distribution.Employees’ share of profit is recognised as dividends in equity and as a liability when approved bythe Shareholders’ General Assembly. No liability is recognised for employees’ share of profitrelating to undistributed profits.

(2) Pension and insurance scheme

The Company pays contributions to the Public Authority for Social Insurance on a mandatorybasis in accordance with the rules of Social Security Law. The Company has no further paymentobligations other than those which have been paid. The regular contributions are recognised asperiodic costs for the year in which they are due and as such are included in staff costs.

L. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, including cash balancesand trade and notes payable for rendering medical services and sale of medicine throughout theCompany’s ordinary course of business, net of sales taxes, deductions or discounts.

The Company recognises revenue when the amount of revenue can be reliably measured; when it isprobable that future economic benefits related to the sale process or service provision will flow to theCompany; and when other specific criteria have been met for each of the Company’s activities as describedbelow. The revenue amount is not considered as reliably measurable unless all contingent liabilities aresettled. The Company bases its estimates on historical results, taking into consideration the type ofcustomer, the type of transaction and the specifics of each arrangement.

174







The Company, through Cleopatra Hospital, provides several medical services, including surgeries,accommodation, medical supervision, laboratories, tests, different types of radiology and outpatient clinics.Revenue from medical service is recognised when the service is rendered to the patient.


The Company sells medicine through the hospital pharmacy or uses them for treatments of inpatientsadmitted in the Hospital. Revenue is recognised once the medicine is received by the patient or usedduring the patient’s stay in hospital.

Interest income

Interest income is recognised on a time-proportion basis using the effective interest method. When areceivable generated from the recognition of interest is impaired, the carrying amount will be reduced toits recoverable amount.

M. Leases

Leases in which the risks and rewards of ownership are retained by the lessor are classified as operatingleases.

Payments made under operating leases net of any discounts received from the lessor are recognised asexpense in the statement of income on a straight-line basis over the period of the lease.

N. Current and deferred income tax

The income tax for the year is calculated based on the tax laws enacted at the balance sheet date.Management periodically evaluates the company tax situation through tax returns, taking into account thedifferences that may arise from some interpretations issued by administrative or regulatory authorities, andestablishes provisions where appropriate on the basis of amounts expected to be paid to the tax authority.

Deferred income tax is fully recognised, using the liability method, on temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the separate financialstatements. The deferred income taxes are not accounted for if it arises from initial recognition of an assetor liability other than those arising from a business combination that at the time of the transaction affectsneither accounting nor taxable income.

Deferred income tax is determined using tax rates in accordance with the law prevailing at the balancesheet date that are expected to apply when the deferred income tax asset is realised or the deferred incometax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will beavailable against which the temporary differences can be utilised.

O. Dividends

Dividends are recognised in the Company’s separate financial statements in the period in which thedividends are approved by the Company’s General Assembly of Shareholders.

P. Cash on hand and at banks

For the purpose of preparation of statement of cash flows, cash on hand and at banks include cash onhand, bank current accounts and term deposits with maturities of three months.

Q. Corresponding figures

Where necessary, corresponding figures have been reclassified to conform to changes in presentation inthe current year.

175





3. Financial risk management

3.1 Financial risk factors

The Company’s activities expose it to a variety of financial risks: market risk (including risks of fluctuationsin foreign currency and interest rates), credit risk and liquidity risk. The Company is not exposed to anyprice risk as it does not have financial assets at fair value through profit and loss. The Company’smanagement aims to minimise potential adverse effects of such risks on the financial performance of theCompany through monitoring by the Finance Department and the General Manager of the Company, andthe Finance Department and the Executive Committee at the level of the Parent Company.

The Company does not use any derivative financial instruments to hedge specific risks.

(A) Market risk

i. Risk of fluctuations in foreign currency rates

Foreign currency risk represents the fluctuations in foreign currency rates, which impact thepayments and receipts denominated in foreign currencies, as well as the evaluation of foreigncurrency assets and liabilities. Given the nature of the Company’s activities, the Companydoes not undertake transactions denominated in foreign currencies as it carries out allpurchases in Egyptian Pound. The Company’s very limited revenue in foreign currencies aregenerated from certain foreign embassies. Management is of the opinion that the foreigncurrency balances are considered immaterial.

At the end of the year, the net foreign currency financial assets denominated in EGP was asfollows:

2015 2014 2013

US Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,933 1,071,459 885,748Euros . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 118,678 130,680

ii. Fair value and cash flow interest rate risk

The Company obtained a long-term loan at interest rate corridor declared by the CentralBank of Egypt, and therefore it is exposed to cash flow risks. Management believe the effectis not material due to the amount and maturities of these balances.

(B) Credit risk

Credit risk arises from cash at banks, as well as credit exposures to customers. Credit risks aremanaged for the Company’s as a whole by its Executive Management, Central FinanceDepartment and Executive Committee at the Parent Company level.

For banks, the Company deals with banks with high credit ratings and creditworthiness that areregulated by the Central Bank of Egypt.

For customers, the Hospital’s Financial Director and General Manager perform analysis on thecredit risk for each potential credit customer in accordance with the Group’s policies, includingCleopatra Hospital or its subsidiaries. The Parent Company’s Executive Committee follows up onthe compliance with credit terms, and reviews default cases and debt ageing report to take thenecessary decisions whether to cancel the credit or to refer the defaulted customer to the LegalDepartment for their necessary actions. Note (9) to these financial statements provides moredetailed information with respect to this matter.

176





3. Financial risk management (Continued)

The management establishes a provision for impairment of 100% of customers defaulted formore than 150 days from the invoice date, in addition to a category-based provision at historicaldefault rates.

Balances exposed to credit risks are as follows:

2015 2014 2013

Cash at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,268,580 53,398,419 17,542,298Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,487,820 37,669,240 26,518,224

(C) Liquidity risk

The management makes cash flow projections on a monthly basis, which are discussed during theExecutive Committee’s meeting, and takes the necessary actions to negotiate with suppliers,follow-up the collection process and manage the inventory balances in order to ensure sufficientcash is maintained to discharge the Company’s liabilities.

The table below shows the Company’s liabilities at the balance sheet date by maturity:

Less than 3 months More than3 months to 1 year 1 to 5 years 5 years

Suppliers and notes payables . . . . . . . . . 12,538,630 461,097 — —Due to related parties . . . . . . . . . . . . . . 29,659,700 — — 54,095,303Borrowings . . . . . . . . . . . . . . . . . . . . . . — 40,600,000 162,400,000 —

3.2 Capital risk management

The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as agoing concern in order to provide returns for shareholders and benefits for other stakeholders and tomaintain an optimal capital structure to reduce the cost of capital consistent with other companiesoperating in the same field.

The Company’s management monitors capital on the basis of the net debt to total capital ratio. This ratiois calculated as net debt divided by total capital. Net debt is calculated as total borrowings and creditorsand other credit balances less cash on hand and at banks. Capital is represented by shareholder ‘equity’ asshown in the balance sheet plus net debt.

Net debt to total capital ratio as at 31 December 2015, 31 December 2014 and 31 December 2013 is asfollows:

2015 2014 2013

Creditors and other credit balances . . . . . . . . . . . . . . . . . . . 96,293,633 29,852,391 21,561,539Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,000,000 — —Less: Cash at banks and on hand . . . . . . . . . . . . . . . . . . . . . (38,557,392) (53,632,054) (17,542,298)

Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 260,736,241 (23,779,663) 4,019,241Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . 200,022,401 135,332,196 130,345,832

Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 460,758,642 111,552,533 134,365,073

Net debt to total capital ratio . . . . . . . . . . . . . . . . . . . . . . . 56.58% (21.32)% 3%

Significant change in the above ratio is due to acquisition of the term loan obtained during the year ended31 December 2015.

177






3.3 Fair value estimation

The fair value of current financial assets and liabilities approximates their carrying amounts after takinginto account the impairment. The Company obtained a long-term loan from an Egyptian bank, and themanagement believes that the fair value of the loan is equivalent to its carrying amount as it was issued at avariable rate linked to the interest rate corridor declared by the Central Bank of Egypt.

4. Critical accounting estimates, assumptions and judgements

Estimates and assumptions are evaluated based on historical experience and other factors, includingexpectations of future events that are believed to be reasonable under the circumstances.

The Company makes estimates and assumptions concerning the future. Due to the nature of the estimates,resulting accounting estimates will rarely equal the actual results.

(A) Provisions

Provisions are recognised when the Company has a (legal or constructive) obligation as a result of pastevents; it is expected that this settlement will result in an outflow of the Company’s resources whichensures that economic benefits will arise; it is probable that outflow resources will be required to settle theobligation and a reliable estimate of the amount of this obligation can be made. At end of each reportingperiod, the Company reviews and adjusts provisions in using external subject matter experts.

(B) Impairment of trade receivables

Impairment of trade receivables is estimated by monitoring ageing of receivables. The Company’smanagement examines the credit position and ability of debtors and customers to make payments for theirpast due debts. Impairment is recognised for amounts due from debtors and customers whose creditposition does not allow them to pay their dues as estimated by the management. Further appropriateallowance is made for losses incurred but not yet identified by reference to historical loss rate to theCompany and other companies within the group.

178

179

CL

EO

PAT

RA

HO

SPIT

AL

CO

MPA

NY

S.A

.E.

Ori

gina

lly

issu

ed i

n A

rabi

c

Not

es t

o th

e se

para

te f

inan

cial

sta

tem

ents

(C

onti

nued

)

For

the

year

end

ed 3

1D

ecem

ber

2015

, 20

14 a

nd 2

013

(All

am

ount

s in

the

not

es a

re s

how

n in

Egy

ptia

n P

ound

s un

less

oth

erw

ise

stat

ed)

5. F

ixed

ass

ets

Mac

hine

ry,

Pro

ject

seq

uipm

ent

&Fu

rnit

ure

&L

ease

hold

unde

rde

vice

sfi

xtur

esL

and

Bui

ldin

gsVe

hicl

esC

ompu

ters

impr

ovem

ent

cons

truc

tion

Tota

l 20

15

Bal

ance

at

1Ja

nuar

y 20

15..

....

....

....

63,3

02,3

464,

470,

834

14,9

67,0

0038

,024

,987

2,27

6,72

281

7,11

7—

5,53

2,87

012

9,39

1,87

6A

dditi

ons.

....

....

....

....

....

....

..3,

898,

311

864,

038

——

—44

4,89

838

6,95

3—

5,59

4,20

0D

ispo

sals

....

....

....

....

....

....

...

(226

,675

)(1

9,80

0)—

——

——

—(2

46,4

75)

Tran

sfer

s..

....

....

....

....

....

....

.—

——

5,53

2,87

0—

——

(5,5

32,8

70)

—F

ixed

ass

ets

wri

te-o

ff..

....

....

....

....

(155

,252

)(2

26,3

89)

—(2

,754

)(4

29)

(46,

253)

——

(431

,077

)

Bal

ance

at

31D

ecem

ber

2015

....

....

....

66,8

18,7

305,

088,

683

14,9

67,0

0043

,555

,103

2,27

6,29

31,

215,

762

386,

953

—13

4,30

8,52

4

Acc

umul

ated

dep

reci

atio

n at

1Ja

nuar

y 20

15.

50,8

57,6

673,

056,

303

—10

,854

,674

1,08

6,72

574

8,87

8—

—66

,604

,247

Acc

umul

ated

dep

reci

atio

n of

dis

posa

ls..

....

(199

,845

)(1

9,80

0)—

——

——

—(2

19,6

45)

Acc

umul

ated

dep

reci

atio

n of

ass

ets

wri

te-o

ff.

(85,

985)

(188

,869

)—

(1,8

31)

(214

)(2

9,19

1)—

—(3

06,0

90)

Cha

rge

for

the

year

....

....

....

....

...

2,17

9,28

498

3,14

8—

2,99

9,78

215

4,62

640

,247

68,8

58—

6,42

5,94

5

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r20

15..

....

....

....

....

....

....

...

52,7

51,1

213,

830,

782

—13

,852

,625

1,24

1,13

775

9,93

468

,858

—72

,504

,457

Net

boo

k va

lue

at 3

1D

ecem

ber

2015

....

...

14,0

67,6

091,

257,

901

14,9

67,0

0029

,702

,478

1,03

5,15

645

5,82

831

8,09

5—

61,8

04,0

67

180

CL

EO

PAT

RA

HO

SPIT

AL

CO

MPA

NY

S.A

.E.

Ori

gina

lly

issu

ed i

n A

rabi

c

Not

es t

o th

e se

para

te f

inan

cial

sta

tem

ents

(C

onti

nued

)

For

the

year

end

ed 3

1D

ecem

ber

2015

, 20

14 a

nd 2

013

(All

am

ount

s in

the

not

es a

re s

how

n in

Egy

ptia

n P

ound

s un

less

oth

erw

ise

stat

ed)

5. F

ixed

ass

ets

(Con

tinu

ed)

Mac

hine

ry,

Pro

ject

seq

uipm

ent

Furn

itur

e&

Lea

seho

ldun

der

and

devi

ces

fixt

ures

Lan

dB

uild

ings

Vehi

cles

Com

pute

rsim

prov

emen

tco

nstr

ucti

onTo

tal

2015

Bal

ance

at

1Ja

nuar

y 20

14..

....

....

....

61,7

66,5

044,

325,

294

14,9

67,0

0038

,024

,987

1,76

2,01

275

0,49

4—

5,53

2,87

012

7,12

9,16

1A

dditi

ons

....

....

....

....

....

....

...

2,56

1,20

522

0,31

0—

—62

0,64

066

,623

——

3,46

8,77

8D

ispo

sals

....

....

....

....

....

....

...

(1,0

25,3

63)

(74,

770)

——

(105

,930

)—

——

(1,2

06,0

63)

Bal

ance

at

31D

ecem

ber

2014

....

....

....

63,3

02,3

464,

470,

834

14,9

67,0

0038

,024

,987

2,27

6,72

281

7,11

7—

5,53

2,87

012

9,39

1,87

6

Acc

umul

ated

dep

reci

atio

n at

1Ja

nuar

y 20

14.

48,8

39,0

632,

500,

260

—7,

935,

390

1,02

2,53

233

7,15

8—

—60

,634

,403

Acc

umul

ated

dep

reci

atio

n of

dis

posa

ls..

....

(1,0

12,1

63)

(64,

782)

——

(105

,930

)—

——

(1,1

82,8

75)

Cha

rge

for

the

year

....

....

....

....

....

3,03

0,76

762

0,82

5—

2,91

9,28

417

0,12

341

1,72

0—

—7,

152,

719

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r20

14..

....

....

....

....

....

....

...

50,8

57,6

673,

056,

303

—10

,854

,674

1,08

6,72

574

8,87

8—

—66

,604

,247

Net

boo

k va

lue

at 3

1D

ecem

ber

2014

....

...

12,4

44,6

791,

414,

531

14,9

67,0

0027

,170

,313

1,18

9,99

768

,239

—5,

532,

870

62,7

87,6

29

181

CL

EO

PAT

RA

HO

SPIT

AL

CO

MPA

NY

S.A

.E.

Ori

gina

lly

issu

ed i

n A

rabi

c

Not

es t

o th

e se

para

te f

inan

cial

sta

tem

ents

(C

onti

nued

)

For

the

year

end

ed 3

1D

ecem

ber

2015

, 20

14 a

nd 2

013

(All

am

ount

s in

the

not

es a

re s

how

n in

Egy

ptia

n P

ound

s un

less

oth

erw

ise

stat

ed)

5. F

ixed

ass

ets

(Con

tinu

ed)

Mac

hine

ry,

Pro

ject

seq

uipm

ent

&Fu

rnit

ure

&un

der

devi

ces

fixt

ures

Lan

dB

uild

ings

Vehi

cles

Com

pute

rsco

nstr

ucti

onTo

tal

2015

Bal

ance

at

1Ja

nuar

y 20

13..

....

....

....

....

....

.63

,674

,230

5,35

7,52

414

,967

,000

38,0

24,9

871,

981,

776

697,

551

5,53

2,87

013

0,23

5,93

8A

dditi

ons

....

....

....

....

....

....

....

....

....

1,64

4,33

116

7,91

5—

—31

,250

52,9

43—

1,89

6,43

9A

djus

tmen

ts o

n co

st..

....

....

....

....

....

....

..(3

,213

,644

)(1

,200

,145

)—

—(1

1,77

0)—

—(4

,425

,559

)D

ispo

sals

....

....

....

....

....

....

....

....

....

(338

,413

)—

——

(239

,244

)—

—(5

77,6

57)

Bal

ance

at

31D

ecem

ber

2013

....

....

....

....

....

.61

,766

,504

4,32

5,29

414

,967

,000

38,0

24,9

871,

762,

012

750,

494

5,53

2,87

012

7,12

9,16

1

Acc

umul

ated

dep

reci

atio

n at

1Ja

nuar

y 20

13..

....

....

55,1

42,8

933,

450,

016

—7,

088,

127

1,22

9,11

152

8,34

9—

67,4

38,4

96A

ccum

ulat

ed d

epre

ciat

ion

of d

ispo

sals

....

....

....

...

(130

,099

)—

——

(215

,320

)—

—(3

45,4

19)

Acc

umul

ated

dep

reci

atio

n of

adj

ustm

ents

....

....

....

.(1

1,89

9,83

8)(1

,281

,283

)—

86,7

59(3

80,4

52)

(262

,209

)—

(13,

737,

023)

Cha

rge

for

the

year

....

....

....

....

....

....

....

5,72

6,10

733

1,52

7—

760,

504

389,

193

71,0

18—

7,27

8,34

9

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r 20

13..

....

..48

,839

,063

2,50

0,26

0—

7,93

5,39

01,

022,

532

337,

158

—60

,634

,403

Net

boo

k va

lue

at 3

1D

ecem

ber

2013

....

....

....

....

12,9

27,4

411,

825,

034

14,9

67,0

0030

,089

,597

739,

480

413,

336

5,53

2,87

066

,494

,758





6. Investments in subsidiaries

% Country 2015 2014 2013

Investment in Cairo Specialized Hospital . . . . . . . . . . . . . . 52.7 Egypt 107,042,452 — —Investment in Nile Badrawi Hospital . . . . . . . . . . . . . . . . . 99.92 Egypt 259,004,947 — —

366,047,399 — —

During the year of 2015, the Company pledged its whole interest in the Cairo Specialized Hospitalamounting to 52.7% of the total shares in favour of the Commercial International Bank as a security forthe borrowing granted to Cleopatra Hospital.

7. Held-to-maturity investments

Held-to-maturity investments comprise investments in public housing bonds (compulsory) issued by theMinistry of Finance in favour of the Central Bank, which shall be recoverable on 11 July 2015. Such bondshave been collected on 13 January 2016.

8. Inventories

2015 2014 2013

Medical supplies inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,767,528 5,206,952 6,951,692Medical supplies inventory-cardiac catheterization . . . . . . . . . . . . . 602,666 484,556 606,417Pharmacy inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 499,378 646,314 777,875

7,869,572 6,337,822 8,335,984

9. Trade receivables

2015 2014 2013

Due from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44,246,714 38,179,376 27,371,361Income / (prepayments) from inpatients . . . . . . . . . . . . . . . . . . 1,241,109 (510,136) (853,137)Less:Impairment of receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,552,647) (3,422,536) (3,427,021)

Net trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,935,176 34,246,704 23,091,203

The income from inpatients comprises the revenues that have not been billed at the balance sheet date fortheir stay because the procedures of the medical services have not been completed. Such income iscalculated net of amounts collected in advance during the period of their stay.

The movement of the provision for impairment is as follows:

2015 2014 2013

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,422,536 3,427,021 3,356,347Provision formed during the year . . . . . . . . . . . . . . . . . . . . . . . . . . 2,282,745 555,915 143,576Provisions no longer required . . . . . . . . . . . . . . . . . . . . . . . . . . . . (152,634) (560,400) (72,902)

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,552,647 3,422,536 3,427,021

• Trade receivable balances, which have not been due till the balance sheet date and for which noimpairment indicators have existed, amounted to EGP 35,433,463 (2014: EGP 29,062,479).

182





9. Trade receivables (Continued)

• At the balance sheet date, the balances that were past due but not impaired amounted toEGP 4,547,741 (2014: EGP 5,694,361) regarding customers or transactions with no history of default.The analysis of the ageing of these balances as follows:

2015 2014 2013

Less than one month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,593,436 1,888,459 2,813,690From one to five months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 954,305 501,996 937,897

10. Debtors and other debit balances

2015 2014 2013

Due from employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,785,832 6,785,832 4,767,358Withholding taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,788,548 3,016,415 2,693,214Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,439,113 441,235 102,782Advances to suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279,250 220,263 4,800Deposits with others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,293 69,629 69,549Due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,730 24,622,611 46,011,430Sundry debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 838,425 23,599 101,847

13,258,191 35,179,584 53,750,980

11. Cash on hand and at banks

2015 2014 2013

Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202,262 233,634 138,353Current accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,355,130 32,583,452 17,403,945Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000,000 20,814,968 —

38,557,392 53,632,054 17,542,298

Term deposits are held with local banks in EGP and have maturity from 3 to 6 months from the date ofplacement with fixed rate ranging from 7% to 9% (2014: 7% to 9%).

Current accounts are maintained with banks regulated by Central Bank of Egypt.

For the purpose of preparation of statement of cash flows, cash and cash equivalents balance comprises of:

2015 2014 2013

Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,557,392 53,632,054 17,542,298Deposits with a maturity of more than 3 months from the date

of placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,000,000) — —

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,557,392 53,632,054 17,542,298

183





12. Provisions

2015 2014 2013

Provision for claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,065,668 2,758,668 —Provision against employees benefits . . . . . . . . . . . . . . . . . . . . . . . . . 910,057 552,484 712,888Provision for stamp duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,200 56,200 48,200Employees leave provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,092 — —

6,179,017 3,367,352 761,088

The movement of provisions during the year is as follows:

2015

Balance at Provision Utilised Balance at1 January made during balance during 31 December

2015 the year the year 2015

Provision for claims . . . . . . . . . . . . . . . . . . . . . . . 2,758,668 2,307,000 — 5,065,668Provision against employees’ benefits . . . . . . . . . . 552,484 519,413 (161,840) 910,057Employees leave provision . . . . . . . . . . . . . . . . . . — 147,092 — 147,092Provision for stamp duty . . . . . . . . . . . . . . . . . . . . 56,200 — — 56,200

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,367,352 2,973,505 (161,840) 6,179,017

2014



Provision for claims . . . . . . . . . . . . . . . . . . . . . . . . — 2,758,668 — 2,758,668Provision against employees’ benefits . . . . . . . . . . . 712,888 120,234 (280,638) 552,484Provision for stamp duty . . . . . . . . . . . . . . . . . . . . 48,200 8,000 — 56,200

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761,088 2,886,902 (280,638) 3,367,352

2013



Provision against employees’ benefits over 60 years . — 712,888 — 712,888Provision for stamp duty . . . . . . . . . . . . . . . . . . . . — 48,200 — 48,200

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 761,088 — 761,088

184





13. Creditors and other credit balances

2015 2014 2013

Due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,095,303 — —Suppliers and notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . 12,999,727 10,033,842 8,847,321Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,899,406 4,736,837 3,287,749Doctor fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,732,694 7,541,479 5,844,975Payroll tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,596,817 5,519,768 263,188Social insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 551,895 434,449 397,710Sundry creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,417,791 1,586,016 2,927,981

96,293,633 29,852,391 21,568,924Less:Due to related parties- non-current portion . . . . . . . . . . . . . . . (54,095,303) — —

42,198,330 29,852,391 21,568,924

Due to related parties is repayable to the Parent company and a subsidiary. In accordance with anundertaking given by the Parent company and the subsidiary, these amounts are not repaid until five yearsafter the balance sheet date, provided that sufficient cash shall be maintained. Such amounts do not carryinterest.

14. Borrowings

The Company obtained a loan facility of EGP 203,000,000 from the Commercial International Bank tofinance 100% of acquisition cost of Cairo Specialized Hospital. The loan will be due for repaymentthrough ten equal semi-annual instalments commencing 30 June 2016 until 31 December 2020 at aninterest rate of 2.4% in addition to the interest rate corridor declared by the Central Bank of Egypt.

The borrowing balance is as follows:

2015 2014 2013

Total loan amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,000,000 — —Less: Current portion of borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,600,000) — —

Non-current portion of borrowing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,400,000 — —

Main guarantees

• The Company has pledged its shares represents 52.7% in the Cairo Specialized Hospital S.A.E. infavour of the Commercial International Bank.

• Care Healthcare Ltd pledged 51% of its shares in Cleopatra Hospital Company in favour of theCommercial International Bank.

• Subsequently on 19 January 2016, The Company obtained another loan from the CommercialInternational Bank amounting to EGP 230 million. Care Healthcare Ltd pledged the rest of its ownedshares as a guarantee to the loan. The total pledged percentage reached 99.99%.

• In addition, Cleopatra Hospital Company pledged its share in Al Shorouk Hospital Company as aguarantee to the same loan.

185





15. Issued and paid up capital

The Company’s issued and paid up share capital comprise 8 million shares of EGP 10 each, totallingEGP 80 million. The share capital was subscribed as follows:

Percentage Number of shares Nominal value

Ahmed Mohamed Mahmoud Lashin . . . . . . . . . . . . . . . . . . 15.75% 1,260,000 12,600,000Mahmoud Mohamed Mahmoud Lashin . . . . . . . . . . . . . . . . 15.75% 1,260,000 12,600,000Mohamed Mahmoud Lashin . . . . . . . . . . . . . . . . . . . . . . . . 12.9% 1,032,000 10,320,000Huda Mohamed Mahmoud . . . . . . . . . . . . . . . . . . . . . . . . . 7.87% 630,000 6,300,000Somaia Mahmoud Hassan . . . . . . . . . . . . . . . . . . . . . . . . . . 5.62% 450,000 4,500,000Mohamed Sameh Mahmoud Hassan . . . . . . . . . . . . . . . . . . 5.25% 420,000 4,200,000Mahmoud Ahmed Mahmoud . . . . . . . . . . . . . . . . . . . . . . . 5.25% 420,000 4,200,000Sameh Mahmoud Hassan . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3% 344,000 3,440,000Ahmed Mohamed Younis Lashin . . . . . . . . . . . . . . . . . . . . 4.3% 344,000 3440,000Amal Ahmed Mahmoud . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.62% 210,000 2,100,000Dalia Mohamed Mahmoud . . . . . . . . . . . . . . . . . . . . . . . . . 2.62% 210,000 2,100,000Lobna Mohamed Mahmoud . . . . . . . . . . . . . . . . . . . . . . . . 2.62% 210,000 2,100,000Ola Sameh Mahmoud . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.62% 210,000 2,100,000Walaa Sameh Mahmoud . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.62% 210,000 2,100,000Doaa Sameh Mahmoud . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.62% 210,000 2,100,000Sohir Mohamed Abdel Magid . . . . . . . . . . . . . . . . . . . . . . . 1.87% 150,000 1,500,000Magda Mohamed Said El Gamal . . . . . . . . . . . . . . . . . . . . 1.87% 150,000 1,500,000Ahmed Wael Abdel Kader Ahmed . . . . . . . . . . . . . . . . . . . 1% 80,000 800,000Amr Ahmed Wael Abdel Kader . . . . . . . . . . . . . . . . . . . . . 1% 80,000 800,000Ragaa Mahmoud Younis . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.5% 40,000 400,000Manal Ahmed Wael Abdel Kader . . . . . . . . . . . . . . . . . . . . 0.5% 40,000 400,000Noha Ahmed Wael Abdel Kader . . . . . . . . . . . . . . . . . . . . . 0.5% 40,000 400,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 8,000,000 80,000,000

Number of NominalPercentage shares value

Care Healthcare ltd . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.99% 7,999,998 79,999,980Amr Abdul Kareem Tawheed Hilal . . . . . . . . . . . . . . . . . . . . . . . . 0.05% 1 10Walid Fayez Said Bakr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.05% 1 10

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000 80,000,000

16. Reserves

Legal Reserve

In accordance with the Law No. 159 of 1981 and the Company’s Articles of Association, 5% of the netprofit for the year shall be transferred to the legal reserve. As proposed by the Board of Directors, thistransfer may be partially discontinued if the legal reserve reaches 50% of the issued capital. This reserve isnot available for distribution to shareholders.

186





17. Operating revenue

2015 2014 2013

Surgeries revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,772,580 56,476,361 47,919,249Outpatient clinics revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 63,421,381 49,733,100 41,941,137Inpatient and medical supervision revenue . . . . . . . . . . . . . . 59,279,340 52,961,487 45,254,639Laboratories revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,194,258 26,915,816 20,590,956Cardiac catheterization revenue . . . . . . . . . . . . . . . . . . . . . . 26,904,367 24,939,813 21,830,363Emergency revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,420,781 23,356,619 20,315,482Radiology revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,250,650 18,707,928 15,205,688Service charge revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,822,602 13,043,092 10,859,981Dentistry revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,294,276 8,603,861 7,127,631Pharmacy revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,463,251 5,478,787 5,098,483Physiotherapy revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,397,768 3,985,220 3,031,910Heart tests revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,154,537 3,937,833 2,956,912Endoscopy revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,626,908 2,154,897 1,160,721

332,002,699 290,294,814 243,293,152

18. Operating costs

2015 2014 2013

Doctor fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,387,514 67,449,039 56,457,439Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . 61,643,486 68,307,192 51,122,619Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . 50,034,811 48,054,531 43,521,387Food, beverage and consumables costs . . . . . . . . . . . . . . . . . 6,569,015 6,859,972 7,359,690Maintenance, spare parts and energy costs . . . . . . . . . . . . . . 6,323,971 5,320,526 4,742,534Fixed assets depreciation and write-off . . . . . . . . . . . . . . . . . 5,860,002 6,530,433 6,645,132Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,588,587 2,086,461 1,757,229

214,407,386 204,608,154 171,606,030

19. General and administrative expenses

2015 2014 2013

Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,159,347 16,200,474 12,456,109Impairment of customers’ balances . . . . . . . . . . . . . . . . . . . . . . 2,130,112 (4,485) 70,674Professional and consulting fees . . . . . . . . . . . . . . . . . . . . . . . . 1,731,886 189,522 49,039Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . 928,489 246,913 244,730Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 861,106 351,384 319,440Donations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,930 586,190 3,738,028Fixed assets depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690,926 622,286 633,219Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . . 580,527 432,889 441,310Government fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548,333 288,476 167,549Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,532,766 1,756,876 2,436,182

27,859,422 20,670,525 20,556,280

187





20. Other income

2015 2014 2013

Buffet income and cafeteria concession . . . . . . . . . . . . . . . . . . . . . . . . 772,107 361,687 311,039Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141,840 33,580 12,500Gift corner revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,225 216,862 235,480Sale of rags (scrap) revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,500 27,350 72,050(Loss) / gain on sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,970) 39,112 100,671Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,997 — —

1,028,699 678,591 731,740

21. Expense by nature

2015 2014 2013

Doctor fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,387,514 67,449,039 56,457,439Salaries, wages and benefits* . . . . . . . . . . . . . . . . . . . . . . . . 78,802,833 84,507,666 63,578,728Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . 50,034,811 48,054,531 43,521,387Food, beverage and consumables costs . . . . . . . . . . . . . . . . . 7,497,503 7,106,885 7,604,420Maintenance, spare parts and energy costs . . . . . . . . . . . . . . 6,904,499 5,753,414 5,183,844Fixed assets depreciation and write-off . . . . . . . . . . . . . . . . . 6,550,928 7,152,719 7,278,351Impairment of customers’ balances . . . . . . . . . . . . . . . . . . . 2,130,112 (4,485) 70,674Other expenses** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,958,608 5,258,910 8,467,467

242,266,808 225,278,679 192,162,310

* Salaries, wages and benefits

2015 2014 2013

Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55,116,933 65,175,930 53,575,703Social insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,291,978 3,509,394 4,281,331Employees’ benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,404,024 9,593,184 5,486,046Bonuses and incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,989,898 6,229,158 235,648

78,802,833 84,507,666 63,578,728

** Other expenses include EGP 50,000 (2014: EGP 75,000) Board of Directors Meeting allowance fees.

22. Finance income

2015 2014 2013

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000,274 2,068,573 1,538,525Gain on currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,958 18,078 34,180

5,104,232 2,086,651 1,572,705

188





23. Income taxes

Income tax for the year comprise of:

2015 2014 2013

Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,603,310 21,372,222 13,996,640Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (886,196) (283,107) (10,596)

19,717,114 21,089,115 13,986,044

The tax on profit before tax theoretically differs from the amount expected to be paid by applying theaverage tax rate applicable to the Company’s profits as follows:

2015 2014 2013

Net profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84,407,319 64,891,240 52,674,199

Income tax calculated based on the applicable local tax rate . . . . 18,991,646 19,417,372 13,168,550Add / (less):Expenses not deductible for tax purposes . . . . . . . . . . . . . . . . . 955,239 1,671,743 817,494Effect of change of applicable tax rate . . . . . . . . . . . . . . . . . . . (229,771) — —

Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,717,114 21,089,115 13,986,044

Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23.3% 32.5% 26.5%

2015 2014 2013

Current income tax liabilitiesBalance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,372,222 13,996,640 15,660,360Payments during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,372,222) (13,996,640) (15,660,360)Current tax incurred during the year . . . . . . . . . . . . . . . . . . . 20,603,310 21,372,222 13,996,640

20,603,310 21,372,222 13,996,640

24. Deferred tax

2015 2014 2013

Deferred tax assetsProvisions (other than claims provision) . . . . . . . . . . . . . . . . . . . 769,579 — —

Deferred tax liabilitiesDepreciation fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,181,095) (2,297,712) (2,580,819)

Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,411,516) (2,297,712) (2,580,819)

189





24. Deferred tax (Continued)

The movement on the deferred tax liabilities account is as follows:

2015 2014 2013

Deferred tax assetsBalance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —Charged on statement of income . . . . . . . . . . . . . . . . . . . . . . . . 769,579 — —

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 769,579 — —

Deferred tax liabilitiesBalance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,297,712) (2,580,819) (2,591,415)Charged on statement of income . . . . . . . . . . . . . . . . . . . . . . . . 116,617 283,107 10,596

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,181,095) (2,297,712) (2,580,819)

Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,411,516) (2,297,712) (2,580,819)

25. Earnings per share

Basic earnings per share is calculated by dividing the net profit for the year by the number of outstandingshares during the year, after excluding the employees share in dividends related to year ended31 December 2015, in accordance with the proposed dividends approved by the board of Directors.However in 2014, the employees dividends have been excluded in accordance with the General Assemblyof Shareholders, since that the board of directors did not propose dividends distribution for the year ended31 December 2014, the earnings per share is LE 8.09 (2014: LE 5.20).

2015 2014 2013

Net profit available for distribution . . . . . . . . . . . . . . . . . . . . . . 64,690,205 41,612,019 34,934,185Number of issued and paid shares (Note 15) . . . . . . . . . . . . . . . 8,000,000 8,000,000 8,000,000

Earnings per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.09 5.20 4.36

The company does not have dilutive potential shares to basic earnings per share.

190






The Company deals with certain related parties during the year. The balances with related parties at thedate of financial statements as well as the transactions during the years are as follows:

Balance sheet balances

31 December 31 DecemberNature of transaction 2015 2014

Related partiesCare Healthcare Ltd (Parent Company)Accounts and other payables (Note 13) . . . . . . . . . . Finance 47,379,723 —

Nile Badrawi Hospital (subsidiary)Accounts and other payables (Note 13) . . . . . . . . . . Finance 6,715,580 —

Cairo Specialized Hospital (subsidiary)Other receivables (Note 10) . . . . . . . . . . . . . . . . . . Salaries and wages 785,787 —

Employees incentive 179,500 —Rent expense 102,840 —

Other expenses 23,355 —Collected during the year (1,079,752) —Balance at 31 December 11,730 —

Cairo Specialized Hospital (subsidiary)Trade and other payables . . . . . . . . . . . . . . . . . . . . Medical services 4,640 —

27. Tax position

(1) Corporate tax

• The Company was inspected till 31 December 2013.

• Tax returns are regularly submitted on time.

• A tax clearance certificate was obtained from the tax authority up to 2013.

• The Company was not inspected for the years 2014 and 2015.

(2) Sales tax

• The Company was inspected till 31 December 2004.

• The Company was not inspected for the years from 2005 to 2015.

(3) Salaries tax

• The Company was inspected up to 31 December 2013, and settlement was made till the lastinspection for the year 2013.



(4) Stamp duty tax

• The Company was inspected till 31 July 2006 and settlement was made.

191





27. Tax position (Continued)

• The Company was inspected during the period from 1 August 2006 to 31 December 2013. TheCompany was notified, through a form No. 19s dated 23 April 2015, of tax assessment ofEGP 72.966 for this period. The Company filed an objection to the assessment. The internalCommittee is in the process of fixing a date to resolve this issue.


28. Subsequent events

On 24 January 2016, Cleopatra Hospital Company acquired of 99% stake in Al Shorouk HospitalCompany for an acquisition cost of EGP 280 million. Actual control over operational and financialperformance is transferred on 31 January 2016. The legal formalities to record this acquisition in thecommercial registration of Al Shorouk Hospital Company are under process. Accordingly financialstatements of Al Shorouk Hospital will be consolidated in the financial statements of Cleopatra HospitalCompany in the first consolidated financial statements after 31 January 2016.

192


Auditor’s report

To: The shareholders of Cairo Specialized Hospital Company S.A.E.

Report on the financial statements

We have audited the accompanying financial statements of Cairo Specialized Hospital Company S.A.E.which comprise the balance sheet as at 31 December 2015, 2014 and 2013 and the statements of income,changes in shareholders’ equity and cash flows for the fiscal year then ended, and a summary of significantaccounting policies and other explanatory notes.

Management’s responsibility for the financial statements

These financial statements are the responsibility of the Company’s management. Management isresponsible for the preparation and fair presentation of these financial statements in accordance withEgyptian Accounting Standards (EAS) and in light of the prevailing Egyptian laws. Managementresponsibility includes designing, implementing and maintaining internal control relevant to thepreparation and fair presentation of financial statements that are free from material misstatement,whether due to fraud or error. Management responsibility also includes selecting and applying appropriateaccounting policies and making accounting estimates that are reasonable in the circumstances.


Our responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with Egyptian Standards on Auditing and in light of the prevailing Egyptian Laws.Those standards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance that the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditor’s judgement, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to the Company’spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe Company’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by management, as well as evaluatingthe overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion on these financial statements.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of Cairo Specialized Hospital Company S.A.E. as at 31 December 2015, 2014 and 2013its financial performance, and its cash flows for the fiscal year then ended in accordance with the EgyptianAccounting Standards and in light of the related Egyptian laws and regulations.

Tamer Abdel TawabMember of Egyptian Society of Accountants & AuditorsMember of AICPAR.A.A. 17996Mansour & Co. PricewaterhouseCoopers

10 April 2016Cairo

193

CAIRO SPECIALIZED HOSPITAL COMPANY S.A.E.Originally issued in Arabic

Balance sheet

At 31 December 2015


RestatedNote 2015 2014 2013

Non-current assetsFixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 25,678,386 21,981,202 24,125,879Investment in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . — — 13,790

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . 25,678,386 21,981,202 24,139,669

Current assetsInventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 3,114,263 2,299,922 2,612,120Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 24,732,065 16,642,891 15,906,065Debtors and other debit balances . . . . . . . . . . . . . . . . . . 9 2,383,807 2,352,565 2,301,537Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . 10 52,563,224 44,458,748 35,612,492

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 82,793,359 65,754,126 56,432,214

Current liabilitiesProvisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 8,770,821 8,438,733 7,728,733Creditors and other credit balances . . . . . . . . . . . . . . . . . 12 24,183,362 17,598,369 13,146,648Current income tax liabilities . . . . . . . . . . . . . . . . . . . . . 19 7,387,426 8,688,849 7,006,480

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 40,341,609 34,725,951 27,881,861

Surplus in working capital . . . . . . . . . . . . . . . . . . . . . 42,451,750 31,028,175 28,550,353

Total investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,130,136 53,009,377 52,690,022

Financed as follows:Shareholders’ equityIssued and paid up capital . . . . . . . . . . . . . . . . . . . . . . . 13 27,000,000 27,000,000 27,000,000Treasury shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13/2 (3,615,822) (3,615,822) —Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 17,112,403 17,112,403 10,624,094Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,906,049 10,354,449 13,601,973

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . 66,402,630 50,851,030 51,226,067

Non-current liabilitiesDeferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 20 1,727,506 2,158,347 1,463,955

Total non-current liabilities . . . . . . . . . . . . . . . . . . . 1,727,506 2,158,347 1,463,955

Total funding of working capital and non-current assets . 68,130,136 53,009,377 52,690,022

Mr. Ahmed Abbas Dr. Hasan Shaker Dr. Mohamed Tarek ZahedFinance Manager CEO and Managing Director Chairman

2016Auditor’s report attached


194


Statement of income

For the year ended 31 December 2015


Note 2015 2014 2013

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 15 149,377,454 123,280,745 114,040,779Less:Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 (111,849,380) (90,405,164) (82,119,996)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,528,074 32,875,581 31,920,783Add / (Less)General and administrative expenses . . . . . . . . . . . . . 17 (14,207,273) (10,058,402) (7,794,833)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (6,945,188) (710,000) —Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 3,808,193 3,096,473 3,027,518

Profit for the year before finance income andincome tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,183,806 25,203,652 27,153,468

Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,021,134 2,704,661 2,259,506

Profit for the year before income tax . . . . . . . . . . . 24,204,940 27,908,313 29,412,974Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 (7,387,426) (8,688,849) (7,006,480)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 430,841 (694,392) (265,067)

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . 17,248,355 18,525,072 22,141,427


195





Treasury RetainedNote Share capital shares Reserves earnings Total

Balance at 1 January 2013 aspreviosuly issued . . . . . . . . . . . . 27,000,000 — 9,658,648 16,370,939 53,029,587

Effect of correction of prior yearserrors . . . . . . . . . . . . . . . . . . . . 23 — — — (6,613,100) (6,613,100)

Balance at 1 January 2013 asrestated . . . . . . . . . . . . . . . . . . . 27,000,000 — 9,658,648 9,757,839 46,416,487

Transfer to legal reserve . . . . . . . . . — — 915,446 (915,446) —Transfer to general reserve . . . . . . . — — 50,000 (50,000) —Dividends distribution for 2012 . . . . — — — (17,331,847) (17,331,847)Profit for the year . . . . . . . . . . . . . — — — 22,141,427 22,141,427

Balance at 31 December 2013 . . . . . 27,000,000 — 10,624,094 13,601,973 51,226,067

Balance at 1 January 2014 . . . . . . . 27,000,000 — 10,624,094 13,601,973 51,226,067Transfer to reserves . . . . . . . . . . . . — — 6,488,309 (6,488,309) —Purchase of treasury shares . . . . . . — (3,615,822) — — (3,615,822)Dividends distribution for 2013 . . . . — — — (15,284,287) (15,284,287)Profit for the year . . . . . . . . . . . . . — — — 18,525,072 18,525,072

Balance at 31 December 2014 . . . . . 27,000,000 (3,615,822) 17,112,403 10,354,449 50,851,030

Balance at 1 January 2015 . . . . . . . 27,000,000 (3,615,822) 17,112,403 10,354,449 50,851,030Dividends distribution for 2014 . . . . — — — (1,696,755) (1,696,755)Profit for the year . . . . . . . . . . . . . — — — 17,248,355 17,248,355

Balance at 31 December 2015 . . . . . 27,000,000 (3,615,822) 17,112,403 25,906,049 66,402,630


196





Note 2015 2014 2013

Cash flows from operating activitiesProfit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,204,940 27,908,313 29,412,974Adjustments to reconcile net income to cash flows from

operating activitiesFixed assets depreciation and write-off . . . . . . . . . . . . . 5 3,675,803 3,636,467 3,065,227Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 6,945,188 710,000 —Impairment of customers’ balances . . . . . . . . . . . . . . . 8 3,308,714 737,151 —Reversal of provision for doubtful debts . . . . . . . . . . . . 8 (626,233) — —Provision for impairment of investments . . . . . . . . . . . — 13,790 —

Operating profits before changes in working capital . 37,508,412 33,005,721 32,478,201Changes in working capitalChange in inventories . . . . . . . . . . . . . . . . . . . . . . . . . (814,341) 312,198 (605,073)Change in trade receivables . . . . . . . . . . . . . . . . . . . . . (10,771,655) (1,473,977) (5,244,887)Change in debtors and other debit balances . . . . . . . . . (31,242) (51,028) (678,549)Change in creditors and other credit balances . . . . . . . 6,584,993 4,451,721 2,021,738Provisions utilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (6,613,100) — —Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,688,849) (7,006,480) (5,129,195)

Net cash flows generated from operating activities . . . . 17,174,218 29,238,155 22,842,235

Cash flows from investing activitiesPayments to purchase fixed assets . . . . . . . . . . . . . . . . 5 (7,372,987) (1,491,790) (2,442,473)Deposits with a maturity of more than 3 months from

the date of placement . . . . . . . . . . . . . . . . . . . . . . . 10 (47,889,123) — —

Net cash flows used in investing activities . . . . . . . . (55,262,110) (1,491,790) (2,442,473)

Cash flows from financing activitiesDividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,696,755) (15,284,287) (17,331,847)Purchase of treasury shares . . . . . . . . . . . . . . . . . . . . . — (3,615,822) —

Net cash flows used in financing activities . . . . . . . . . . (1,696,755) (18,900,109) (17,331,847)

Change in cash and cash equivalents during the year . . (39,784,647) 8,846,256 3,067,915Cash and cash equivalents at the beginning of the year . 44,458,748 35,612,492 32,544,577

Cash and cash equivalents at the end of the year . . . . . 10 4,674,101 44,458,748 35,612,492


197


Notes to the financial statements



1. General Information

Cairo Specialized Hospital Company S.A.E. (the ‘‘Company’’) was incorporated on 31 December 1987 inaccordance with investments law No. 43 for 1974 and No. 159 for 1981, and was registered in commercialregister No. 249898 dated 31 December 1987 for the purpose of establishing and operating integratedhospitals, including internal medical and curative services.

The Company is located at 4 Abo Obaida Street, Roxy, Heliopolis, Cairo, Egypt.

The purpose of the Company is establishing, managing and operating the Cairo Specialized Hospital, andperforming all related services. The Company may have interest or participate in any manner in companiesor other firms which carry on similar activities in Egypt or abroad. The Company may also acquire suchentities or merge therewith as approved by GAFI, in addition to establishing laboratories & pharmacyattached to the hospital premises.

The Company’s authorised share capital amounted to EGP 50.000.000, and the Company’s paid up sharecapital amounted to EGP 27,000,000.

Cleopatra Hospital Company S.A.E (the Parent Company) holds a percentage of 52.7% of the issued sharecapital.

These financial statements have been approved for issuance by the management on 21 March 2016,considering the fact that the Shareholders’ Ordinary General Assembly have the authority to amend thefinancial statements after being issued.


The following are the accounting policies applied in the preparation of these financial statements:

A. Basis of preparation

The financial statements have been prepared in accordance with Egyptian Accounting Standards (EASs)and relevant laws, which have all been applied consistently throughout the fiscal year except whenotherwise indicated. The financial statements have been prepared under the historical cost convention.

The preparation of the financial statements in conformity with Egyptian Accounting Standards (EASs)requires the use of certain critical accounting estimates. It also requires management to exercise itsjudgement in the process of applying the Company’s accounting policies. The areas where the mostsignificant accounting estimates and judgements applied in preparation of the financial statements aredisclosed in note 4.

The EASs require the reference to the international financial reporting standard when there is no EAS, orlegal requirements that explain the treatment of specific balances and transactions.




Amendments applicable on the Group’s activities and financial statements are summarised in thepresentation and disclosure. According to the new standards balance sheet will be presented differentlyand working capital will not be presented in the financial statements. Results of operations will be

198


Notes to the financial statements (Continued)




presented in two statements; the first will present income and expenses for the year (statement of income),and the second will start by the net income (loss) for the year and will include income and expenses itemsrecognised in equity to present the comprehensive income (statement of comprehensive income). The newstandards will require more disclosure on the financial risk management.



Items included in the financial statements are measured using the currency of the primaryeconomic environment in which the Company operates (‘the functional currency’). The financialstatements are presented in Egyptian Pounds (‘‘EGP’’), which is the Company’s functional andpresentation currency.



C. Fixed assets



All repair and maintenance costs are charged to the statement of income during the fiscal year in whichthey are incurred. Major renovation costs are capitalised and included in the asset’s cost when they areexpected to raise the expected pattern of the Company’s future economic benefits beyond the estimatedoriginal benefits when the asset was acquired and the costs of such additions can be reliably measured.These costs will be depreciated at the lower of the asset’s remaining useful life or the expected useful lifeof these renovations.



Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5%Machinery, equipment and devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%Tools and instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25%Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15%Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25%

An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carryingamount is greater than its estimated recoverable amount.

199






Gains and losses on disposals are determined by comparing the realisable value with the net carryingamount, and the difference is recognised in the statement of income.

D. Inventories

Inventories are measured at the lower of actual cost or net realisable value. Cost is determined using theweighted average method and includes purchase cost and other direct costs. The net realisable valuecomprises the estimated selling price in the ordinary course of business, less selling expenses. Allowance ismade for slow moving inventories based on management’s assessment of inventory movements.

E. Financial assets

(1) Classification

The Company classifies its financial assets into loans and receivables at initial recognition. Thisclassification depends on the purpose for which the financial assets are acquired:





(2) Initial and subsequent measurement

• The financial assets are measured on acquisition at fair value plus transaction costs.

• The financial assets are derecognised when the right to receive cash flows from such assetshas expired or has been transferred and the Company has transferred substantially all risksand rewards of ownership.

• Loans and receivables are subsequently measured at amortised cost using the effectiveinterest method.






200






Fixed assets’ impairment loss is measured at amortised cost, which is the difference between theasset’s carrying amount and the present value of the estimated future cash flows (aftereliminating future losses that have not occurred) discounted at the original effective interest rate.The carrying amount of the asset is reduced and the amount of the loss is recognised in thestatement of income.

If, in a subsequent period, the amount of the impairment decreases and the decrease can berelated to an event occurring after the initial recognition (such as an improvement in the debtor’scredit rating), the reversal of the impairment is recognised in the statement of income.


Ordinary shares are classified as equity. Where the Company purchases its equity share capital (treasuryshares), the consideration paid, including any expenses directly attributable to the purchase (net of taxes),is deducted from equity until the shares are cancelled or reissued. Where such shares are reissued, theconsideration received, net of any expenses directly attributable to the issuance, is included in equity.Where treasury shares are written off, they are written off at their nominal value, and the difference isincluded in the reserves.

G. Legal reserve

As required by the Company’s articles of association, 5% of the net profit shall be transferred to a legalreserve, and such transfer may be discontinued when the reserve equals 20% of the issued and paid upcapital. Whenever this reserve is lower than this percentage, the deduction should be continued. Thisreserve is not available for distribution.

H. Provisions



I. Suppliers and notes payable

Suppliers and notes payable are obligations to pay for goods and services that have been acquired in theCompany’s ordinary course of business. Suppliers and notes payable are initially recognised at fair value ofproducts and services received from third parties, whether they have been billed or not. Long termliabilities are recognised at their present value, and suppliers and notes payable are subsequently shown atamortised cost using the effective interest method.

J. Employee benefits


According to the Companies Law, the Company pays 10% of its cash dividends to its employeesup to a maximum equal to the total salaries of the latest fiscal year before distribution.Employees’ share of profit is recognised as dividends in equity and as a liability when approved by

201






the shareholders’ general assembly. No liability is recognised for employees’ share of profitrelating to undistributed profits.


The Company pays contributions to the public authority for social insurance on a mandatorybasis in accordance with the rules of Social Security Law. The Company had no further paymentobligations once it discharged its obligations. The regular contributions are recognised as periodiccosts for the year in which they are due and as such are included in staff costs.

K. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, including cash balancesand trade and notes receivables arising from rendering medical services and sale of medicine throughoutthe Company’s ordinary course of business, net of sales taxes, deductions or discounts.


1. Medical services revenue

The Company, through Cairo Specialized Hospital, provides medical services, includingsurgeries, accommodation, medical supervision, laboratories, tests, different types of radiologyand outpatient clinics. Revenue from medical service is recognised when the service is renderedto the patient.

2. Sale of medicine revenue

The Company sells medicine through the hospital pharmacy or uses them for treatment ofinpatients admitted in the Hospital. Revenue is recognised once the medicine is received by thepatient or used during the patient’s stay in hospital.

3. Rental income

The Company leases out spaces to third parties, and such rental is recognised in the statement ofincome over the period of the lease.

4. Interest income

Interest income is recognised on a time-proportion basis using the effective interest method.When a receivable generated from the recognition of interest is impaired, the carrying amountwill be reduced to its recoverable amount.

L. Current and deferred income tax

The income tax for the year is calculated based on the tax laws enacted at the balance sheet date.Management periodically evaluates the company’s tax situation through tax returns, taking into accountthe differences that may arise from some interpretations issued by administrative or regulatory authorities,and establishes provisions where appropriate on the basis of amounts expected to be paid to the taxauthority.

202






Deferred income tax is fully recognised, using the liability method, on temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the financial statements. Thedeferred income taxes are not accounted for if they arise from initial recognition of an asset or liabilityother than those arising from a business combination that at the time of the transaction affects neitheraccounting nor taxable income.



M. Dividends

Dividends are recognised in the Company’s financial statements in the period in which the dividends areapproved by the Company’s general assembly of shareholders.

N. Cash and cash equivalents

For the purpose of preparation of statement of cash flows, cash and cash equivalents include cash on hand,bank current accounts and term deposits with maturities of three months from the date of placement, ifany.

O. Corresponding figures




The Company’s ordinary activities expose it to a variety of financial risks: credit risk and liquidity risk. TheCompany is not exposed to interest rate risk, price risk, or foreign currency risk as it has neither interestbearing financial assets and liabilities with long term maturities, financial assets at fair value through profitand loss, nor balances and transactions denominated in foreign currency. The Company’s managementaims to minimise potential adverse effects of such risks on the financial performance of the Companythrough monitoring by the finance department and the general manager of the Company, and the financedepartment and the executive committee at the level of the Parent Company.


(A) Credit risk

Credit risk arises from cash at banks, as well as credit exposures to customers. Credit risk ismanaged by its executive management, Central Finance Department and Executive Committee atthe Parent Company.

The Company deals with banks with high credit ratings and creditworthiness that are regulated bythe Central Bank of Egypt.

The hospital’s financial director and general manager perform analysis on the credit risk for eachpotential credit customer in accordance with the Parent Company’s policies. The ParentCompany’s Central Finance Department and Executive Committee follow up on the compliance

203






with credit terms, and review the debt ageing report to take the necessary decisions whether tocancel the credit or to refer the defaulted customer to the Legal Department for their necessaryactions. Note (8) to these financial statements provides more detailed information with respect tothis matter.

The management establishes a provision for impairment of 100% of customers defaulted formore than 150 days from the invoice date. In addition, the management makes a category-basedprovision for impairment at historical default rates of the Group.


2015 2014 2013


(B) Liquidity risk

The management makes cash flow projections on a monthly basis, which are discussed during theParent Company Executive Committee’s meetings, and takes the necessary actions to negotiatewith suppliers, follow-up the collection process and manage the inventory balances in order toensure sufficient cash is maintained to discharge the Company’s obligations when due. TheCompany does not depend on loans to discharge its obligations given the nature of its activity andthe appropriate rate of the cash receipts.

The table below shows the Company’s liabilities at the balance sheet date by contractual maturity:

Less than 3 months to3 months 1 year

Suppliers and notes payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,229,553 1,125,210Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,946,150 —


The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as agoing concern in order to provide returns for shareholders and benefits for other stakeholders and tomaintain an optimal capital structure to reduce the cost of capital. The Company does not have anyborrowings, and therefore, the Company funding depends entirely on equity.



The Company makes estimates and assumptions concerning the future. The resulting accounting estimateswill seldom equal the actual results.

A. Provisions

Provisions are recognised when the Company has a legal or constructive obligation as a result of pastevents; it is probable that outflow resources will be required to settle the obligation; and a reliable estimateof the amount of this obligation can be made. The Company reviews and adjusts the provision at eachbalance sheet date to present the current best estimate using an expert’s appropriate advisory expertise.

204





4. Critical accounting estimates, assumptions and judgements (Continued)

B. Impairment of trade receivables

Impairment of trade receivables is estimated by monitoring ageing of receivables. The Company’smanagement examines the credit position and ability of debtors and customers to make payments for theirpast due debts. Impairment is recognised for amounts due from debtors and customers whose creditposition does not allow them to pay their dues as estimated by the management.

205

206

CA

IRO

SP

EC

IAL

IZE

D H

OSP

ITA

L C

OM

PAN

YS.

A.E

.O

rigi

nall

y is

sued

in

Ara

bic

Not

es t

o th

e fi

nanc

ial

stat

emen

ts (

Con

tinu

ed)

For

the

year

end

ed 3

1D

ecem

ber

2015

, 20

14 a

nd 2

013

(All

am

ount

s in

the

not

es a

re s

how

n in

Egy

ptia

n P

ound

s un

less

oth

erw

ise

stat

ed)

5. F

ixed

ass

ets

Mac

hine

ryP

roje

cts

unde

req

uipm

ent

&To

ols

and

Furn

itur

e&

cons

truc

tion

Lan

dB

uild

ings

devi

ces

Vehi

cles

inst

rum

ents

fixt

ures

Com

pute

rs20

15 T

otal

Bal

ance

at

1Ja

nuar

y 20

15..

....

....

....

....

....

.—

1,45

9,63

514

,151

,099

41,3

00,2

9042

6,00

12,

171,

692

7,28

8,97

61,

406,

209

68,2

03,9

02A

dditi

ons

....

....

....

....

....

....

....

....

...

1,55

0,43

0—

—4,

272,

545

—13

,332

1,09

5,23

844

1,44

27,

372,

987

Fix

ed a

sset

s w

rite

-off

....

....

....

....

....

....

...

——

(2,0

27)

(54,

230)

—(2

6,74

2)(6

13,7

71)

(30,

688)

(727

,458

)

Bal

ance

at

31D

ecem

ber

2015

....

....

....

....

....

1,55

0,43

01,

459,

635

14,1

49,0

7245

,518

,605

426,

001

2,15

8,28

27,

770,

443

1,81

6,96

374

,849

,431

Acc

umul

ated

dep

reci

atio

n at

1Ja

nuar

y 20

15..

....

...

——

8,48

8,82

629

,040

,368

426,

000

2,14

4,86

44,

865,

479

1,25

7,16

346

,222

,700

Cha

rge

for

the

year

....

....

....

....

....

....

....

——

406,

700

2,14

0,87

6—

9,05

369

5,09

612

8,82

73,

380,

552

Acc

umul

ated

dep

reci

atio

n of

ass

ets

wri

te-o

ff..

....

....

——

(525

)(1

6,96

1)—

(8,0

91)

(383

,700

)(2

2,93

0)(4

32,2

07)

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r 20

15..

....

.—

—8,

895,

001

31,1

64,2

8342

6,00

02,

145,

826

5,17

6,87

51,

363,

060

49,1

71,0

45

Net

boo

k va

lue

at 3

1D

ecem

ber

2015

....

....

....

...

1,55

0,43

01,

459,

635

5,25

4,07

114

,354

,322

112

,456

2,59

3,56

845

3,90

325

,678

,386

207

CA

IRO

SP

EC

IAL

IZE

D H

OSP

ITA

L C

OM

PAN

YS.

A.E

.O

rigi

nall

y is

sued

in

Ara

bic

Not

es t

o th

e fi

nanc

ial

stat

emen

ts (

Con

tinu

ed)

For

the

year

end

ed 3

1D

ecem

ber

2015

, 20

14 a

nd 2

013

(All

am

ount

s in

the

not

es a

re s

how

n in

Egy

ptia

n P

ound

s un

less

oth

erw

ise

stat

ed)

5. F

ixed

ass

ets

(Con

tinu

ed)

Mac

hine

ryP

roje

cts

unde

req

uipm

ent

&To

ols

and

Furn

itur

e&

cons

truc

tion

Lan

dB

uild

ings

devi

ces

Vehi

cles

inst

rum

ent

fixt

ures

Com

pute

rs20

14 T

otal

Bal

ance

at

1Ja

nuar

y 20

14..

....

....

....

....

....

.—

1,45

9,63

514

,151

,099

40,5

80,9

0542

6,00

12,

145,

992

7,61

4,83

71,

350,

355

67,7

28,8

24A

dditi

ons

....

....

....

....

....

....

....

....

...

——

—1,

100,

360

—46

,390

265,

606

79,4

341,

491,

790

Fix

ed a

sset

s w

rite

-off

....

....

....

....

....

....

...

——

—(3

80,9

75)

—(2

0,69

0)(5

91,4

67)

(23,

580)

(1,0

16,7

12)

Bal

ance

at

31D

ecem

ber

2014

....

....

....

....

....

—1,

459,

635

14,1

51,0

9941

,300

,290

426,

001

2,17

1,69

27,

288,

976

1,40

6,20

968

,203

,902

Acc

umul

ated

dep

reci

atio

n at

1Ja

nuar

y 20

14..

....

...

——

8,07

1,65

027

,200

,796

426,

000

2,14

0,00

74,

556,

052

1,20

8,44

043

,602

,945

Cha

rge

for

the

year

....

....

....

....

....

....

....

——

417,

176

2,07

3,39

6—

9,43

465

5,24

562

,193

3,21

7,44

4A

ccum

ulat

ed d

epre

ciat

ion

of a

sset

s w

rite

off

....

....

..—

——

(233

,824

)—

(4,5

77)

(345

,818

)(1

3,47

0)(5

97,6

89)

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r 20

14..

....

.—

—8,

488,

826

29,0

40,3

6842

6,00

02,

144,

864

4,86

5,47

91,

257,

163

46,2

22,7

00

Net

boo

k va

lue

at 3

1D

ecem

ber

2014

....

....

....

...

—1,

459,

635

5,66

2,27

312

,259

,922

126

,828

2,42

3,49

714

9,04

621

,981

,202

208

CA

IRO

SP

EC

IAL

IZE

D H

OSP

ITA

L C

OM

PAN

YS.

A.E

.O

rigi

nall

y is

sued

in

Ara

bic

Not

es t

o th

e fi

nanc

ial

stat

emen

ts (

Con

tinu

ed)

For

the

year

end

ed 3

1D

ecem

ber

2015

, 20

14 a

nd 2

013

(All

am

ount

s in

the

not

es a

re s

how

n in

Egy

ptia

n P

ound

s un

less

oth

erw

ise

stat

ed)

5. F

ixed

ass

ets

(Con

tinu

ed)

Mac

hine

ryP

roje

cts

unde

req

uipm

ent

&To

ols

and

Furn

itur

e&

cons

truc

tion

Lan

dB

uild

ings

devi

ces

Vehi

cles

inst

rum

ents

fixt

ures

Com

pute

rs20

14 T

otal

Bal

ance

at

1Ja

nuar

y 20

13..

....

....

....

....

....

.30

6,30

21,

459,

635

14,0

40,2

3939

,388

,755

426,

001

2,13

9,56

56,

255,

683

1,27

0,17

165

,286

,351

Add

ition

s /

(tra

nsfe

rs)

....

....

....

....

....

....

..(3

06,3

02)

—11

0,86

01,

192,

150

—6,

427

1,35

9,15

480

,184

2,44

2,47

3

Bal

ance

at

31D

ecem

ber

2013

....

....

....

....

....

—1,

459,

635

14,1

51,0

9940

,580

,905

426,

001

2,14

5,99

27,

614,

837

1,35

0,35

567

,728

,824

Acc

umul

ated

dep

reci

atio

n at

1Ja

nuar

y..

....

....

...

——

7,71

4,38

525

,217

,535

376,

272

2,11

4,98

53,

956,

995

1,15

7,54

640

,537

,718

Cha

rged

for

the

yea

r..

....

....

....

....

....

....

.—

—35

7,26

51,

983,

261

49,7

2825

,022

599,

057

50,8

943,

065,

227

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r 20

13..

....

.—

—8,

071,

650

27,2

00,7

9642

6,00

02,

140,

007

4,55

6,05

21,

208,

440

43,6

02,9

45

Net

boo

k va

lue

at 3

1D

ecem

ber

2013

....

....

....

...

—1,

459,

635

6,07

9,44

913

,380

,109

15,

985

3,05

8,78

514

1,91

524

,125

,879





6. Investment in affiliates

The Company has a stake in Cairo Specialized Hospital for Cardiac Catheterization & Surgery amountingto 23.58%. The hospital received its entire share of capital of Cairo Specialized Hospital for CardiacCatheterization & Surgery as a result of the liquidation commenced 31 May 2012. Because there are noindicators of collection of the remaining balance of the investment in associates as at 31 December 2014amounting to EGP 13,790 of the hospital’s share in the residual value of net equity of the Cairo SpecializedHospital for Cardiac Catheterization & Surgery, a provision for impairment was made for the residualvalue until the completion of the liquidation.

7. Inventories

2015 2014 2013

Medical supplies inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,925,675 2,108,209 2,416,378Maintenance inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 188,588 191,713 195,742



2015 2014 2013

Due from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,259,121 18,104,660 15,494,612Income from inpatients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 574,971 457,463 703,834Trade notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 779,993 1,669,693

29,834,092 19,342,116 17,868,139Less:Impairment of receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,102,027) (2,699,225) (1,962,074)

24,732,065 16,642,891 15,906,065



2015 2014 2013

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,699,225 1,962,074 1,962,074Provision formed during the year . . . . . . . . . . . . . . . . . . . . . . . . . . 3,308,714 737,151 —Reversals during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (626,233) — —Write-off during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (279,679) — —


• Trade notes receivable comprise checks collected from customers that have not yet been deposited inbanks.

• Trade receivable balances, which are not past due as of the balance sheet date and for which noimpairment indicators exist, amounted to EGP 19,243,296 (2014: EGP 14,933,487)(2013: EGP 13,698,374).

209






• At the balance sheet date, the balances that were past due but not impaired amounted toEGP 5,719,750 (2014: EGP 651,294) (2013: EGP 535,274) regarding customers and transactions withno history of default. The analysis of the ageing of these balances as follows:

2015 2014 2013

Less than month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,861,673 651,294 535,274From one to five months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,858,077 — —


2015 2014 2013

Withholding tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,677,558 1,491,612 1,310,340Due from employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341,614 92,482 82,183Deposits with others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211,539 150,827 150,827Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,663 150,850 198,419Advances to suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,793 186,904 147,128Due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,640 — —Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 268,890 401,640Sundry debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 11,000 11,000

2,383,807 2,352,565 2,301,537


2015 2014 2013

Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,889,123 37,011,497 32,330,302Current accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,633,498 7,312,989 3,155,615Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,603 134,262 126,575

52,563,224 44,458,748 35,612,492

Current accounts are maintained with banks regulated by the central bank of Egypt.

Term deposits are held with local banks in EGP with fixed rate ranging from 8% to 9% (2014: 9%).

For the purpose of preparation of statement of cash flows, cash on hand and at banks balance comprisesof:

2015 2014 2013

Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,563,224 44,458,748 35,612,492Deposits with a maturity of more than 3 months from the date

of placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (47,889,123) — —

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,674,101 44,458,748 35,612,492

210





11. Provisions

UtilisedBalance at Provision balance Balance at1 January made during during 31 December


Provision for claims . . . . . . . . . . . . . . . . . . . . . . . . 7,428,733 6,000,000 (6,613,100) 6,815,633Provision for lawsuits . . . . . . . . . . . . . . . . . . . . . . . 760,000 600,000 — 1,360,000Employees leave provision . . . . . . . . . . . . . . . . . . . . 250,000 345,188 — 595,188

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,438,733 6,945,188 (6,613,100) 8,770,821



Provision for claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,428,733 — — 7,428,733Provision for lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 460,000 — 760,000Employees leave provision . . . . . . . . . . . . . . . . . . . . . . — 250,000 — 250,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,728,733 710,000 — 8,438,733



Provision for claims . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,428,733 — — 7,428,733Provision for lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . 300,000 — — 300,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,728,733 — — 7,728,733


2015 2014 2013

Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,129,446 7,559,930 4,924,063Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,946,150 6,249,655 4,779,120Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,225,317 2,211,313 2,017,325Insurance to others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 723,121 521,197 556,787Social insurance authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,636 144,692 103,663Due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,730 — —Sundry creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 997,962 911,582 765,690

24,183,362 17,598,369 13,146,648

211






13.1 Issued and paid-up capital

The Company’s issued and paid up share capital comprise 2,700,000 shares of EGP 10 each, totallingEGP 27 million. Prior to 30 September 2015, the share capital was subscribed as follows:

Number NominalPercentage of shares value

Cleopatra Hospital Company / Creed Healthcare ltd . . . . . . . . . . . 52.7% 1,423,348 14,233,480Mr. Hassan Mousa . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.1% 354,361 3,543,610Faisal Islamic Bank of Egypt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7% 181,242 1,812,420Mahmoud Kamel Mohamed Mohamed Abu Shouk . . . . . . . . . . . . 6% 162,836 1,628,360Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21.5% 578,213 5,782,130

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 2,700,000 27,000,000

Number NominalPercentage of shares value

El Sayed El Sayed Hassan Mousa . . . . . . . . . . . . . . . . . . . . . . . . . 15.36% 414,715 4,147,150Dr. Mohamed Tarek Hassan Zaher . . . . . . . . . . . . . . . . . . . . . . . . 12.90% 348,314 3,483,140Dr. Mahmoud Kamel Abo Shouk . . . . . . . . . . . . . . . . . . . . . . . . . 7.06% 190,688 1,906,880Faasel Islamic Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.53% 149,366 1,493,660Others* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59.15% 1,596,917 15,969,170

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 2,700,000 27,000,000

Pursuant to the decision taken in the ordinary general meeting dated 30 September 2015, CleopatraHospital Company acquired the shares of Creed Healthcare ltd, and the shareholders structure wasadjusted to reflect this step. Accordingly, Cleopatra Hospital Company became the Parent Company forCairo Specialized Hospital Company.

On 30 September 2015, Cleopatra Hospital Company pledged its whole interest in the Companyamounting to 52.7% of the total shares in favour of the Commercial International Bank as a security forthe borrowing granted to Cleopatra Hospital Company on 30 September 2015.

13.2 Treasury shares

Treasury shares are an entity’s own equity instruments that are maintained by the entity and deducted fromequity without recognising any gain or loss on purchase, sale, issue, or cancellation of the entity’s equityinstruments. The consideration paid or received is recognised directly in shareholders equity.

On 23 November 2014, the Company purchased 48.034 treasury shares amounting to EGP 3,615,822.Pursuant to the decision taken in the extra-ordinary general meeting convened on 30 September 2015, itwas decided to write off those shares as a result of passage of more than one year without being disposedof. The legal formalities to write off such shares and record this write-off in the Company’s commercialregistration are under process.

14. Reserves

14.1 Legal reserve

In accordance with the law no. 159 of 1981 and the Company’s Articles of Association, 5% of the net profitfor the year shall be transferred to the legal reserve. As proposed by the Board of Directors, this transfer

212





14. Reserves (Continued)

may be partially discontinued if the legal reserve reaches 20% of the issued capital. This reserve is notavailable for distribution to shareholders.

14.2 General reserve

As proposed by the board of directors in prior years and based on the General Assembly’s approval, ageneral reserve was made to prevent unexpected risks.

14.3 Capital reserve

Based on the instructions of the board of directors in prior years and the general assembly’s approval,capital reserve was formed for the future investment and development plans in the machinery andequipment of the hospital.

Balance at Reserves Balance at1 January made during 31 December

2013 the year 2013

Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,021,834 915,446 5,937,280General reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,550,000 50,000 4,600,000Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,814 — 86,814

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,658,648 965,446 10,624,094


2014 the year 2014

Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,937,280 1,088,309 7,025,589General reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,600,000 5,400,000 10,000,000Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,814 — 86,814

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,624,094 6,488,309 17,112,403


2015 the year 2015

Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,025,589 — 7,025,589General reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000,000 — 10,000,000Capital reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,814 — 86,814

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,112,403 — 17,112,403

213






2015 2014 2013

Surgeries revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,694,608 28,732,631 22,070,311Cardiac catheterization revenue . . . . . . . . . . . . . . . . . . . . . . 25,625,442 22,839,919 25,715,052Inpatient and medical supervision revenue . . . . . . . . . . . . . . 41,409,600 36,346,539 32,933,164Pharmacy revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 501,329 523,137 564,363Outpatient clinics revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 16,107,867 10,137,123 10,687,452Laboratories revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,659,647 8,730,869 8,352,883Service charge revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,203,295 7,214,014 5,949,613Radiology revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,937,632 3,685,624 3,807,311Emergency revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,295,281 1,797,500 1,645,845Heart tests revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,529,718 1,385,716 1,130,235Endoscopy revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,514,825 1,067,035 806,081Physiotherapy revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . 480,320 416,487 378,469Dentistry revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 417,890 404,151 —

149,377,454 123,280,745 114,040,779

16. Operating costs

2015 2014 2013

Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . . . 47,547,532 40,231,216 36,385,448Doctors’ fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,044,930 20,439,650 19,939,742Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . 23,467,926 16,378,222 13,716,014Fixed assets depreciation and write-off . . . . . . . . . . . . . . . . . . 3,643,267 3,603,093 3,036,646Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . 3,424,470 2,525,218 2,124,054Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . . 5,732,464 4,931,860 3,271,521Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,988,791 2,295,905 3,646,571

111,849,380 90,405,164 82,119,996


2015 2014 2013

Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,591,371 6,703,487 6,672,506Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . 2,682,481 737,151 —Professional and consulting fees . . . . . . . . . . . . . . . . . . . . . . . . . 1,821,669 1,531,339 102,702Maintenances, spare parts and energy costs . . . . . . . . . . . . . . . . . 235,892 205,458 104,812Fixed assets depreciation and write-off . . . . . . . . . . . . . . . . . . . . 32,536 33,374 28,581Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 843,324 847,593 886,232

14,207,273 10,058,402 7,794,833

214






2015 2014 2013

Salaries, wages and benefits* . . . . . . . . . . . . . . . . . . . . . . . . . 32,059,297 23,081,709 20,388,520Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . . 47,547,532 40,231,216 36,385,448Doctors’ fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,044,930 20,439,650 19,939,742Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . 5,968,356 5,137,318 3,376,333Fixed assets depreciation and write-off . . . . . . . . . . . . . . . . . . 3,675,803 3,636,467 3,065,227Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . 3,424,470 2,525,218 2,124,054Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . 2,682,481 737,151 —Professional and consulting fees . . . . . . . . . . . . . . . . . . . . . . 1,821,669 1,531,339 102,702Other expenses** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,832,115 3,143,498 4,532,803

126,056,653 100,463,566 89,914,829


2015 2014 2013

Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,730,079 18,893,890 16,954,830Social insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,159,030 959,921 788,313Employees’ benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,341,989 322,550 298,180Bonuses and incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,828,199 2,905,348 2,347,197

32,059,297 23,081,709 20,388,520

** Other expenses item includes an amount of EGP 47,000 (2014: EGP 60,500) which represents the meeting allowances fordirectors.

19. Income taxes

The income tax for the year comprises of:

2015 2014 2013

Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,387,426 8,688,849 7,006,480Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (430,841) 694,392 265,067

6,956,585 9,383,241 7,271,547

The tax on profit before tax differs from the amount expected to be earned by applying the average tax rateapplicable to the Company’s profits as follows:

2015 2014 2013

Net profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,204,940 27,908,313 29,412,974

Income tax calculated based on the applicable local tax rate . . . . 5,446,112 8,322,494 7,353,242Add / (less):Expenses not deductible for tax purpose . . . . . . . . . . . . . . . . . . 1,726,308 1,060,747 1,276,871Effect of change in applicable tax rate . . . . . . . . . . . . . . . . . . . (215,835) — —

— — (1,358,566)

Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,956,585 9,383,241 7,271,547

Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28.74% 33.62% 24.72%

215





19. Income taxes (Continued)

2015 2014 2013

Current income tax liabilitiesBalance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,688,849 7,006,480 4,073,745Payments during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,688,849) (7,006,480) (4,073,745)Current tax incurred during the year . . . . . . . . . . . . . . . . . . . . . 7,387,426 8,688,849 7,006,480

7,387,426 8,688,849 7,006,480

20. Deferred tax

Deferred income tax assets and liabilities are provided on temporary differences arising between the taxbases of assets and liabilities and their carrying amounts in the financial statements.

2015 2014 2013

Deferred tax assets:Provisions (other than provision for claims) . . . . . . . . . . . . . . . . 439,917 — —

439,917 — —

Deferred tax liabilities:Fixed assets depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,167,423) (2,158,347) (1,463,955)

(2,167,423) (2,158,347) (1,463,955)

(1,727,506) (2,158,347) (1,463,955)

2015 2014 2013

Deferred tax assets:Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —Charged to the statement of income . . . . . . . . . . . . . . . . . . . . . 439,917 — —

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 439,917 — —

Deferred tax liabilities:Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,158,347) (1,463,955) (769,563)Charged to the statement of income . . . . . . . . . . . . . . . . . . . . . (9,076) (694,392) (694,392)

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,167,423) (2,158,347) (1,463,955)

Net deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,727,506) (2,158,347) (1,463,955)

21. Other income

2015 2014 2013

Pharmacy rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,728,338 2,404,582 2,113,148Blood bank rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 456,000 376,000 333,000Cafeteria rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 229,000 219,500 226,000Hospital premises usufruct right (Kidney Department) . . . . . . . . . . 106,445 77,846 104,194Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288,410 18,545 251,176

3,808,193 3,096,473 3,027,518

216





22. Tax position

(1) Corporate tax

• The Company was inspected from inception till 2008 and all differences were settled.

• The Company was not inspected for the years between 2009 and 2015 and tax returns wereannually submitted on time.

(2) Salaries tax

• The Company was inspected from inception till 2009 and all differences were settled.

• The Company was not inspected for the years from 2010 till the end of 2015.

(3) Stamp duty tax

• The Company was inspected from inception till 31 July 2006 and all differences were settled.

• The Company was inspected from august 2006 till 2014, and filed an objection to the due date.No inspection took place for the year 2015.

(4) Withholding tax

• The Company was not inspected from inception till 2015.

23. Social insurance position

The Company contributes on a monthly and regular basis to the national organization for social insurance(Heliopolis Office).

24. Legal position

There are several lawsuits filed by/against the Company which are still pending before the courts. TheCompany charged the required provisions for several cases. However, the Company’s Legal Counselexpected that the other cases will not lead to any potential financial consequences.


The Company deals with the related parties in the normal course of business. The balances with relatedparties at the date of financial statements during the year are as follows:


Nature oftransaction 2015 2014 2013

Related partiesCleopatra Hospital Company (52.7% shareholding)Receivables and other debit balances . . . . . . . . . . . . . . . . . . . . . . . . Customer 4,640 — —Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Supplier 11,730 — —

217





25. Related party transactions (Continued)

The movement of related party accounts at the financial statements date during the year is as follows:

2015 2014 2013

Debtors and other debit balances:Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,640 — —

Total charge to the statement of income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,640 — —

2015 2014 2013

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — —Total charge to the statement of income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,640 — —

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,640 — —

2015 2014 2013

Creditors and other credit balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 785,787 — —Employee incentive expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,500 — —Rental expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102,840 — —Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,355 — —

Total charge to the statement of income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,091,482 — —

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —Total charge to the statement of income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,091,482 — —Repaid during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,079,752) — —

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,730 — —

26. Correction of material errors

The management did not previously make provisions against the additional taxes for the years from theinception to 2008 despite the claims raised by the tax authority in this regard.

During the year, the management has retrospectively corrected this error in accordance with EAS No. (5)‘‘Accounting Policies and Changes in Accounting Estimates and Errors’’ through making the provision inthe year in which the claim was received from the tax authority. Adjustment effects on balance sheet andretained earnings are as follows:

Balance before Balance afteradjustment adjustment

2013 Adjustment 2013

Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,115,633 6,613,100 7,728,733Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,029,587 (6,613,100) 46,416,487

218


Auditors’ report

To: The Shareholders of Nile Badrawi Hospital Company S.A.E.


We have audited the accompanying financial statements of Nile Badrawi Hospital Company S.A.E. whichcomprise the balance sheet as at 31 December 2015, 2014 and 2013 and the statements of income, changesin equity and cash flows for the fiscal year then ended, and a summary of significant accounting policiesand other explanatory notes.


These financial statements are the responsibility of the Company’s management. Management isresponsible for the preparation and fair presentation of these financial statements in accordance withEgyptian Accounting Standards (EASs) and in light of the prevailing Egyptian laws. Managementresponsibility includes designing, implementing and maintaining internal control relevant to thepreparation and fair presentation of financial statements that are free from material misstatement,whether due to fraud or error. Management responsibility also includes selecting and applying appropriateaccounting policies and making accounting estimates that are reasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with Egyptian Standards on Auditing and in light of the prevailing Egyptian laws.Those standards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance that the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditors’ judgement, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud or error.In making those risk assessments, the auditors consider internal control relevant to the Company’spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe Company’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by management, as well as evaluatingthe overall presentation of the financial statements.


Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of Nile Badrawi Hospital Company S.A.E. as at 31 December 2015, 2014 and 2013, itsfinancial performance, and its cash flows for the fiscal year then ended in accordance with the EgyptianAccounting Standards and in light of the related Egyptian laws and regulations.

Tamer Abdel TawabR.A.A 17996Mansour & Co. PricewaterhouseCoopers

14 April 2016Cairo

219

NILE BADRAWI HOSPITAL COMPANY S.A.E.Originally issued in Arabic

Balance sheet

At 31 December 2013, 2014 and 2015


Note 2015 2014 2013

Non-current assetsFixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 9,451,247 9,591,312 9,058,300Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 2,718,133 3,379,724 3,097,620Debtors and other debit balances—due from related

parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 6,715,580 — —

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . 18,884,960 12,971,036 12,155,920

Current assetsInventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 4,534,122 4,051,112 4,431,784Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 25,319,343 27,228,492 17,812,240Debtors and other debit balances . . . . . . . . . . . . . . . . . . 8 2,651,874 10,422,602 7,810,961Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . . 9 18,786,253 6,356,681 2,981,182

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 51,291,592 48,058,887 33,036,167

Current liabilitiesProvisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 4,940,959 722,700 —Creditors and other credit balances . . . . . . . . . . . . . . . . . 11 26,180,337 23,107,694 27,667,747Current income tax liabilities . . . . . . . . . . . . . . . . . . . . . 20 4,145,873 5,902,635 2,060,578

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . 35,267,169 29,733,029 29,728,325

Surplus in working capital . . . . . . . . . . . . . . . . . . . . . 16,024,423 18,325,858 3,307,842

Total investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,909,383 31,296,894 15,463,762

Financed as follows:Shareholders’ equityIssued and paid up capital . . . . . . . . . . . . . . . . . . . . . . . 12 20,000,000 20,000,000 15,000,000Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 5,105,247 5,105,247 4,719,765Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,804,136 6,191,647 (4,256,003)

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . 34,909,383 31,296,894 15,463,762

Total funding of working capital and non-current assets . . 34,909,383 31,296,894 15,463,762

Mr. Ahmed Nabeel Mr. Ahmed Ezz Dr. Nadia BadrawiFinance Director Managing Director Chairman

2016Auditors’ report attached


220


Statement of income



Note 2015 2014 2013

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 14 121,307,079 107,482,434 86,802,150Less:Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 (81,601,341) (76,120,070) (69,045,206)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,705,738 31,362,364 17,756,944Add / (Less)General and administrative expenses . . . . . . . . . . . . . 16 �28,072,750 (9,245,588) (10,286,049)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 �4,218,259 �722,700 —Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 1,856,750 3,460,673 871,475

Net profit for the year before finance income,currency translation differences and income tax . 9,271,479 24,854,749 8,342,370

Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — 11,312(Loss) / gain on currency translation differences . . . . . (6,087) 38,313 17,577

Profit for the year before income tax . . . . . . . . . . . 9,265,392 24,893,062 8,371,259Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 (4,991,312) (7,017,881) (2,060,578)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 �661,591 282,104 417,112

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . 3,612,489 18,157,285 6,727,793


221


Statement of changes in equity



Share RetainedNote capital Reserves earnings Total

Balance at 1 January 2013 as previouslyissued . . . . . . . . . . . . . . . . . . . . . . . . . . 15,000,000 4,345,512 7,343,857 26,689,369

Effect of correction of prior years errors . . . 23 — — (10,842,588) (10,842,588)

Balances at 1 January 2013 as restated . . . . 15,000,000 4,345,512 (3,498,731) 15,846,781Transfer to reserves . . . . . . . . . . . . . . . . . . — 374,253 (374,253) —Dividends distribution for 2012 . . . . . . . . . . — — (7,110,812) (7,110,812)Profit for the year as previously issued . . . . . — — 7,717,265Effect of correction of last year’s errors . . . . — — (989,472)Profit for the year as restated . . . . . . . . . . . — — 6,727,793 6,727,793

Balance at 31 December 2013 . . . . . . . . . . . 15,000,000 4,719,765 (4,256,003) 15,463,762

Balance at 1 January 2014 . . . . . . . . . . . . . 15,000,000 4,719,765 (4,256,003) 15,463,762Increase in share capital . . . . . . . . . . . . . . . 5,000,000 — — 5,000,000Transfer to reserves . . . . . . . . . . . . . . . . . . — 385,482 (385,482) —Dividends distribution for 2013 . . . . . . . . . . — — (7,324,153) (7,324,153)Profit for the year . . . . . . . . . . . . . . . . . . . — — 18,157,285 18,157,285Balance at 31 December 2014 . . . . . . . . . . . 20,000,000 5,105,247 6,191,647 31,296,894

Balance at 1 January 2015 . . . . . . . . . . . . . 20,000,000 5,105,247 6,191,647 31,296,894Profit for the year . . . . . . . . . . . . . . . . . . . — — 3,612,489 3,612,489Balance at 31 December 2014 . . . . . . . . . . . 20,000,000 5,105,247 9,804,136 34,909,383


222





Note 2015 2014 2013

Cash flows from operating activitiesProfit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,265,392 24,893,062 8,371,259Adjustments to reconcile net income to cash flows from

operating activitiesFixed assets depreciation and write-off . . . . . . . . . . . . . . 1,197,093 3,462,114 3,850,966Impairment of inventories . . . . . . . . . . . . . . . . . . . . . . . — 58,706 —Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,218,259 722,700 —Loss on sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . 176,567 — (49,900)Impairment (reversal of impairment) of customers’

balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,824,488 (103,859) 1,230,000Impairment of receivables and other debit balances . . . . 592,842 — —

Operating profits before changes in working capital . . 27,274,641 29,032,723 13,402,325Changes in working capitalChange in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . �483,010 321,966 (473,388)Change in trade receivables . . . . . . . . . . . . . . . . . . . . . . �9,915,339 (9,312,393) (3,477,837)Change in debtors and other debit balances . . . . . . . . . . 462,306 (2,611,641) (4,884,588)Change in creditors and other credit balances . . . . . . . . 3,072,643 350,037 7,864,319Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . �6,748,074 (3,175,824) (1,977,003)

Cash flow generated from operating activities . . . . . . . . 13,663,167 14,604,868 10,453,828

Cash flows from investing activitiesProceeds from sale of fixed assets . . . . . . . . . . . . . . . . . — — 49,900Payments to purchase fixed assets . . . . . . . . . . . . . . . . . (1,233,595) (3,995,126) (2,852,330)

Net cash flows used in investing activities . . . . . . . . (1,233,595) (3,995,126) (2,802,430)

Cash flows from financing activitiesDividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (7,324,153) (7,110,812)Payment for Capital Increase . . . . . . . . . . . . . . . . . . . . . — 89,910 —

Net cash flows used in financing activities . . . . . . . . . — (7,234,243) (7,110,812)

Change in cash and cash equivalents during the year . . . 12,429,572 3,375,499 540,586Cash and cash equivalents at beginning of the year . . . . . 6,356,681 2,981,182 2,440,596

Cash and cash equivalents at the end of the year . . . . . . 9 18,786,253 6,356,681 2,981,182


223

NILE BADRAWI HOSPITAL COMPANY S.A.EOriginally issued in Arabic





Nile Badrawi Hospital Company S.A.E was initially incorporated as a Limited Liability Company on1 January 1986 in accordance with Law No. (43) of 1974 as amended by Law No. (230) of 1989. Asapproved by the General Authority for Investment and Free Zones (GAFI), the Company’s legal form waschanged to an Egyptian Joint Stock Company by Resolution No. (6261) dated 9 September 1988.

The purpose of the Company is providing ultrasound treatment, neonatal treatment (prematuretreatment), gynaecological surgery, obstetrics, and general surgery.

Cleopatra Hospital Company S.A.E (the Parent Company) holds a percentage of 99.9% of the issued sharecapital.

The Company is located at Cornish El Nile St., Maadi, Cairo.

These financial statements have been approved for issuance by the management on 27 March 2016considering the fact that the Shareholders’ Ordinary General Assembly have the authority to amend thefinancial statements after being issued.





The preparation of the financial statements in conformity with EASs requires the use of certain criticalaccounting estimates. It also requires management to exercise its judgement in the process of applying thecompany’s accounting policies. The areas where the most significant accounting estimates and judgementsapplied in preparation of the financial statements are disclosed in Note 4.


Change in accounting policy

During the year, the Company has changed its accounting policy for inventory pricing from first-in first-out(FIFO) method to weighted average method to be consistent with the policies adopted by the ParentCompany ‘‘Cleopatra Hospital Company’’ and other group companies. This change has not resulted in anysignificant impact on inventories at the end of the accounting period or operating costs during the perioddue to the higher inventory turnover ratio.




Amendments applicable on the Group’s activities and financial statements are summarised in thepresentation and disclosure. According to the new standards balance sheet will be presented differently

224






and working capital will not be presented in the financial statements. Results of operations will bepresented in two statements; the first will present income and expenses for the year (statement of income),and the second will start by the net income (loss) for the year and will include income and expenses itemsrecognised in equity to present the comprehensive income (statement of comprehensive income). The newstandards will require more disclosure on the financial risk management.



Items included in the financial statements are measured using the currency of the primaryeconomic environment in which the Company operates (‘‘the functional currency’’). The financialstatements are presented in Egyptian Pounds (‘‘EGP’’), which is the Company’s functional andpresentation currency.



C. Fixed assets





Property, plant and equipment


Buildings and construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5%Machinery, equipment and devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%Tools and instrument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25%Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15%Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25%

225








D. Inventories


E. Financial assets

(1) Classification






(2) Initial and subsequent measurement

The financial assets are measured on acquisition at fair value plus transaction costs.

The financial assets are derecognised when the right to receive cash flows from such assets hasexpired or has been transferred and the Company has transferred substantially all risks andrewards of ownership.

Loans and receivables are subsequently measured at amortised cost using the effective interestmethod.

(3) Impairment of financial assets




Evidence of impairment may include indications that the debtors or a group of debtors isexperiencing financial difficulty, default or delinquency in payments, the probability that they will

226






enter bankruptcy or other financial reorganisation and where observable data indicate that thereis a decrease in the estimated future cash flows, such as future changes or economic conditionsthat correlate with the impairment evidence.





G. Legal reserve


H. Provisions



I. Suppliers and notes payable

Suppliers and notes payable are obligations to pay for goods and services that have been acquired in theCompany’s ordinary course of business. Suppliers and notes payable are recognised at fair value ofproducts and services received from third parties, whether they have been billed or not. Long-termliabilities are recognised at their present value, and suppliers and notes payable are subsequently shown atamortised cost using the effective interest method.

J. Projects under construction

Projects under construction are stated at cost and transferred to fixed assets when they meet all the fixedassets recognition conditions and ready for use. When the projects under construction cost exceed thevalue expected to be refundable, it is reduced to the expected refundable cost and the difference isrecognized directly to the statement of income.

227






K. Impairment of non-financial assets

Property, plant and equipment, and other non-current assets are reviewed for impairment whenever eventsor changes in circumstances indicate that the carrying amount may not be recoverable. An impairment lossis recognized for the amount by which the asset’s carrying amount exceeds its recoverable amount. Therecoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposesof assessing impairment, assets are grouped at the lowest level, for which there are separately identifiablecash flows. Non-financial assets that suffered impairment are reviewed for possible reversal of theimpairment at each balance sheet date.

L. Employee benefits


According to the Companies Law, the Company pays 10% of its cash dividends to its employeesup to a maximum equal to the total salaries of the latest fiscal year before distribution.Employees’ share of profit is recognised as dividends in equity and as a liability when approved bythe Shareholders’ General Assembly. No liability is recognised for employees’ share of profitrelating to undistributed profits.


The Company pays contributions to the Public Authority for Social Insurance on a mandatorybasis in accordance with the rules of Social Security Law. The Company had no further paymentobligations once it discharged its obligations. The regular contributions are recognised as periodiccosts for the year in which they are due and as such are included in staff costs.

M. Leases

(1) Finance lease

Leases contracted in accordance with Law number 95/1995 where: the leasee have the right topurchase the asset under lease at a specific amount on a specific date and is not obliged topurchase the asset after completion of the lease period, where the agreement is registered in therelated lease register in EFSA, where the lease period equals or more than 75% of the useful lifeof the asset, or the net present value of the lease period equals or more than 90% of the assetvalue, is classified as finance lease.

(2) Operating lease

Leases where the risks and rewards of ownership are retained by the lessor are classified asoperating leases.

Payments made under operating leases net of any discounts received from the lessor arerecognised as expense in the income statement on a straight-line basis over the period of thelease.

N. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, including cash balancesand trade and notes payable arising from rendering medical services and sale of medicine throughout theCompany’s ordinary course of business, net of sales taxes, deductions or discounts.

228








The Company, through Nile Badrawi Hospital, renders several medical services, including surgeries,accommodation, medical supervision, laboratories, tests, different types of radiology and outpatient clinics.Revenue from medical service is recognised when the service is rendered to the patient.


The Company sells medicine through the hospital pharmacy or uses them for treatments of inpatientsadmitted in the Hospital. Revenue is recognised once the medicine is received by the patient or usedduring the patient’s stay in hospital.

Interest income

Interest income is recognised on a time-proportion basis using the effective interest method. When areceivable generated from the recognition of interest is impaired, the carrying amount will be reduced toits recoverable amount.

O. Current and deferred income tax

The income tax for the year is calculated based on the tax laws enacted at the balance sheet date.Management periodically evaluates tax situation through tax returns, taking into account the differencesthat may arise from some interpretations issued by administrative or regulatory authorities, and establishesprovisions where appropriate on the basis of amounts expected to be paid to the tax authority.

Deferred income tax is fully recognised, using the liability method, on temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the financial statements. Thedeferred income taxes are not accounted for if it arises from initial recognition of an asset or liability otherthan those arising from business combination that at the time of the transaction affects neither accountingnor taxable income.



P. Dividends

Dividends are recognised in the Company’s financial statements in the period in which the dividends areapproved by the Company’s General Assembly of Shareholders.

229






Q. Cash and cash equivalents


R. Corresponding figures




The Company’s activities expose it to a variety of financial risks: market risk (including risks of fluctuationsin foreign currency), credit risk and liquidity risk. The Company is not exposed to interest rate risk or pricerisk as it has neither interest bearing financial assets and liabilities nor financial assets at fair value throughprofit and loss. The Company’s management aims to minimise potential adverse effects of such risks on thefinancial performance of the Company through monitoring by the Finance Department and the GeneralManager of the Company, and the Finance Department and the Executive Committee at the level of theParent Company.


(A) Market risk

Risk of fluctuations in foreign currency rates

Foreign currency risk represents the changes in foreign currency rates, which impact thepayments and receipts denominated in foreign currencies, as well as the evaluation of foreigncurrency assets and liabilities. Given the nature of the Company’s activities, the Company doesnot undertake transactions denominated in foreign currencies as it carries out all purchases inEgyptian Pound. The Company’s very limited revenue in foreign currencies are generated fromcertain foreign embassies. Management is of the opinion that the foreign currency balances areconsidered immaterial.


2015 2014 2013

US Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,783 28,991 120,600Euros . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,896 16,491 45,650

(B) Credit risk

Credit risk arises from cash at banks, as well as credit exposures to customers. Credit risks aremanaged for the Company’s as a whole by its Executive Management and the Central FinanceDepartment and Executive Committee at the level of the Parent Company.


For trade receivables, the Hospital’s Financial Director and General Manager perform analysison the credit risk for each potential credit customer in accordance with the Parent Company’s

230






policies. The Central Finance Department follows up the compliance with credit terms andcollection from customers, and manages the inventory balances, while the Parent Company’sExecutive Committee reviews the default cases and debt ageing report to take the necessarydecisions whether to cancel the credit or to refer the defaulted customer to the LegalDepartment for their necessary actions. Note (7) to these financial statements provides moredetailed information in respect of this matter.

The management establishes a provision for impairment of 100% for customers defaulted formore than 150 days from the invoice date, in addition to a category-based provision forimpairment at historical default rates.


2015 2014 2013


(C) Liquidity risk

Executive Committee’s meeting, and takes the necessary actions to negotiate with suppliers inorder to ensure sufficient cash is maintained to discharge the Company’s obligations. TheCompany does not depend on loans to discharge its obligations given the nature of its activity andthe appropriate rate of the cash receipts.


Less than 3 months to More than3 months 1 year 1 to 5 years 5 years

Suppliers and notes payable . . . . . . . . . . . . . 19,525,308 — — —


The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as agoing concern in order to provide returns for shareholders and benefits for other stakeholders and tomaintain an optimal capital structure to reduce the cost of capital. The Company does not have anyborrowings, and therefore, the Company funding depends entirely on equity.

4. Critical accounting estimates, assumptions and judgments



(A) Provisions

Provisions are recognised when the Company has a (legal or constructive) obligation as a result of pastevents; it is expected that this settlement will result in an outflow of the Company’s resources whichensures that economic benefits will arise; and it is probable that outflow resources will be required to settlethe obligation and a reliable estimate of the amount of this obligation can be made. At end of eachreporting period, the Company review and adjust provisions in using external subject matter experts.

231





4. Critical accounting estimates, assumptions and judgments (Continued)


Impairment of trade receivables is estimated by monitoring ageing of receivables. The Company’smanagement examines the credit position and ability of debtors and customers to make payments for theirpast due debts. Impairment is recognised for amounts due from debtors and customers whose creditposition does not allow them to pay their dues as believed by the management. Further appropriateallowance is made for loss incurred but not yet identified by reference to historical loss rate to theCompany and other companies within the group.

232

233

NIL

E B

AD

RA

WI

HO

SPIT

AL

CO

MPA

NY

S.A

.EO

rigi

nall

y is

sued

in

Ara

bic

Not

es t

o th

e fi

nanc

ial

stat

emen

ts (

Con

tinu

ed)

For

the

year

end

ed 3

1D

ecem

ber

2015

, 20

14 a

nd 2

013

(All

am

ount

s in

the

not

es a

re s

how

n in

Egy

ptia

n P

ound

s un

less

oth

erw

ise

stat

ed)

5. F

ixed

ass

ets

Pro

ject

sM

achi

nery

,un

der

Bui

ldin

gs&

equi

pmen

t&

Tool

s&

Furn

itur

e&

cons

truc

tion

Lan

dco

nstr

ucti

onde

vice

sVe

hicl

esin

stru

men

tfi

xtur

esC

ompu

ters

Tota

l

Bal

ance

at

1Ja

nuar

y 20

15..

....

....

....

....

....

.1,

442,

567

2,27

4,11

612

,766

,944

44,4

04,3

761,

356,

856

3,05

7,96

36,

693,

627

1,25

4,93

673

,251

,385

Add

ition

s..

....

....

....

....

....

....

....

....

.73

6,35

7—

—40

4,07

8—

53,0

416,

325

33,7

941,

233,

595

Tran

sfer

s...

....

....

....

....

....

....

....

....

.(1

,952

,866

)—

—1,

952,

866

——

——

—F

ixed

ass

ets

wri

te-o

ff..

....

....

....

....

....

....

.(1

76,5

67)

——

(213

,228

)—

(81,

149)

(56,

625)

—(5

27,5

69)

Bal

ance

at

31D

ecem

ber

2015

....

....

....

....

....

49,4

912,

274,

116

12,7

66,9

4446

,548

,092

1,35

6,85

63,

029,

855

6,64

3,32

71,

288,

730

73,9

57,4

11

Acc

umul

ated

dep

reci

atio

nB

alan

ce a

t 1

Janu

ary

2015

....

....

....

....

....

...

——

12,7

66,9

4440

,963

,193

1,29

0,95

62,

682,

480

4,82

0,73

71,

135,

763

63,6

60,0

73C

harg

e fo

r th

e ye

ar..

....

....

....

....

....

....

..—

——

568,

111

8,23

815

8,11

636

1,32

440

,493

1,13

6,28

2A

ccum

ulat

ed d

epre

ciat

ion

of a

sset

s w

rite

-off

....

....

..—

——

(184

,831

)—

(57,

104)

(48,

256)

—(2

90,1

91)

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r 20

15..

....

.—

—12

,766

,944

41,3

46,4

731,

299,

194

2,78

3,49

25,

133,

805

1,17

6,25

664

,506

,164

Net

boo

k va

lue

31D

ecem

ber

2015

....

....

....

....

.49

,491

2,27

4,11

6—

5,20

1,61

957

,662

246,

363

1,50

9,52

211

2,47

49,

451,

247

The

com

pany

has

rev

ised

the

use

ful l

ives

for

its’

fix

ed a

sset

s, b

ased

on

that

use

ful l

ife r

evis

ion

of s

uch

fixed

ass

ets.

Acc

ordi

ng t

o th

e E

gypt

ian

Acc

ount

ing

Stan

dard

No.

(5)

Acc

ount

ing

polic

ies

chan

ges

in a

ccou

ntin

g es

timat

es a

nd e

rror

s, T

he r

emai

ning

use

ful

lives

the

se a

sset

s th

e th

at r

esul

ted

in d

epre

ciat

ion

for

the

year

of

EG

P1,

624,

724

com

pare

d to

dep

reci

atio

n ca

lcul

ated

bas

ed o

n us

eful

liv

es b

efor

e th

e re

visi

on o

f us

eful

liv

es.

234

NIL

E B

AD

RA

WI

HO

SPIT

AL

CO

MPA

NY

S.A

.EO

rigi

nall

y is

sued

in

Ara

bic

Not

es t

o th

e fi

nanc

ial

stat

emen

ts (

Con

tinu

ed)

For

the

year

end

ed 3

1D

ecem

ber

2015

, 20

14 a

nd 2

013

(All

am

ount

s in

the

not

es a

re s

how

n in

Egy

ptia

n P

ound

s un

less

oth

erw

ise

stat

ed)

5. F

ixed

ass

ets

(Con

tinu

ed)

Pro

pert

y, p

lant

and

equ

ipm

ent

Pro

ject

sM

achi

nery

,un

der

equi

pmen

t&

Tool

s&

Furn

itur

e&

cons

truc

tion

Lan

dB

uild

ings

devi

ces

Vehi

cles

inst

rum

ent

fixt

ures

Com

pute

rsTo

tal

Bal

ance

at

1Ja

nuar

y 20

14..

....

....

....

....

....

.—

2,27

4,11

612

,766

,944

43,3

10,5

641,

356,

856

2,87

7,61

15,

560,

737

1,10

9,43

169

,256

,259

Add

ition

s..

....

....

....

....

....

....

....

....

.1,

442,

567

——

1,09

3,81

2—

180,

352

1,13

2,89

014

5,50

53,

995,

126

Bal

ance

at

31D

ecem

ber

2014

....

....

....

....

....

.1,

442,

567

2,27

4,11

612

,766

,944

44,4

04,3

761,

356,

856

3,05

7,96

36,

693,

627

1,25

4,93

673

,251

,385

Acc

umul

ated

dep

reci

atio

nB

alan

ce a

t 1

Janu

ary

2014

....

....

....

....

....

...

——

12,7

66,9

4438

,586

,163

1,25

6,67

82,

472,

864

4,11

5,97

799

9,33

360

,197

,959

Cha

rge

for

the

year

....

....

....

....

....

....

....

——

—2,

377,

030

34,2

7820

9,61

670

4,76

013

6,43

03,

462,

114

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r 20

14..

....

.—

—12

,766

,944

40,9

63,1

931,

290,

956

2,68

2,48

04,

820,

737

1,13

5,76

363

,660

,073

Net

boo

k va

lue

at 3

1D

ecem

ber

2014

....

....

....

...

1,44

2,56

72,

274,

116

—3,

441,

183

65,9

0037

5,48

31,

872,

890

119,

173

9,59

1,31

2

Pro

ject

sM

achi

nery

,un

der

equi

pmen

t&

Tool

s&

Furn

itur

e&

cons

truc

tion

Lan

dB

uild

ings

devi

ces

Vehi

cles

inst

rum

ent

fixt

ures

Com

pute

rsTo

tal

Bal

ance

at

1Ja

nuar

y 20

13..

....

....

....

....

....

.—

2,27

4,11

612

,766

,944

41,5

34,5

261,

434,

856

2,71

5,26

34,

743,

886

1,01

2,33

866

,481

,929

Add

ition

s..

....

....

....

....

....

....

....

....

.—

——

1,77

6,03

8—

162,

348

816,

851

97,0

932,

852,

330

Dis

posa

ls..

....

....

....

....

....

....

....

....

.—

——

—(7

8,00

0)—

——

(78,

000)

Bal

ance

at

31D

ecem

ber

2013

....

....

....

....

....

.2,

274,

116

12,7

66,9

4443

,310

,564

1,35

6,85

62,

877,

611

5,56

0,73

71,

109,

431

69,2

56,2

59

Acc

umul

ated

dep

reci

atio

nB

alan

ce a

t 1

Janu

ary

2013

....

....

....

....

....

...

——

12,7

66,9

4435

,728

,349

1,30

0,12

82,

186,

757

3,55

2,65

189

0,16

456

,424

,993

Cha

rge

for

the

year

....

....

....

....

....

....

....

——

—2,

857,

814

34,5

5028

6,10

756

3,32

610

9,16

93,

850,

966

Acc

umul

ated

dep

reci

atio

n of

ass

ets

wri

te-o

ff..

....

....

——

——

(78,

000)

——

—(7

8,00

0)

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r 20

13..

....

.—

—12

,766

,944

38,5

86,1

631,

256,

678

2,47

2,86

44,

115,

977

999,

333

60,1

97,9

59

Net

boo

k va

lue

at 3

1D

ecem

ber

2013

....

....

....

...

—2,

274,

116

—4,

724,

401

100,

178

404,

747

1,44

4,76

011

0,09

89,

058,

300





6. Inventories

2015 2014 2013

Medical supplies inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,236,102 2,853,269 3,080,087Pharmacy inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 829,418 781,118 787,117Literature and publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,762 163,924 202,366Hospitality and food inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . 232,442 219,653 278,127Maintenance inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,398 91,854 84,087

4,534,122 4,109,818 4,431,784Provision for obsolete, defective and slow-moving inventory . . . . . . . — (58,706) —

4,534,122 4,051,112 4,431,784

The movement of the provision for obsolete, defective and slow-moving inventory is as follows:

2015 2014 2013

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,706 — —(Write-off) / Provision during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58,706) 58,706 —

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 58,706 —


2015 2014 2013

Due from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,516,274 23,467,986 18,558,564Trade notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,318,639 5,894,307 1,040,287Income from inpatients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 506,532 63,813 514,862


25,319,343 27,228,492 17,812,240

• Trade notes receivable comprise checks collected from customers that have not yet been deposited atbanks.

• The income from inpatients comprises the revenues that have not been billed at the balance sheetdate for their stay because the procedures of the medical services have not been completed, suchincome is calculated net of amounts collected in advance during the period of their stay.


2015 2014 2013

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,197,614 2,301,473 1,071,473Provision formed / (reversed) during the year . . . . . . . . . . . . . . . . 11,824,488 (103,859) 1,230,000

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,022,102 2,197,614 2,301,473

• Trade receivable balances, which have not been due till the balance sheet date and no impairmentindicators have existed, amounted to EGP 16,504,839 (2014: EGP 12,105,090).

• At the balance sheet date, the balances that were past due but not impaired amounted toEGP 3,171,231 (2014: EGP 2,546,493) regarding customers and transactions with no history ofdefault.

235






• The analysis of the ageing of these balances is as follows:

2015 2014 2013

Less than one month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,712,395 1,605,801 4,494,487From one to five months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,458,836 940,692 4,134,907


2015 2014 2013

Due from related parties (Note 24) . . . . . . . . . . . . . . . . . . . . . . 6,715,580 6,770,596 1,918,933Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,523,129 1,849,167 2,484,126With-holding tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,207,015 1,055,552 958,534Advances to contractors and suppliers . . . . . . . . . . . . . . . . . . . . 399,083 601,913 2,192,579Deposits with others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143,198 143,198 138,998Due from employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115,123 109,414 155,699Sundry debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119,186 154,780 224,110

10,222,314 10,684,620 8,072,979Less:Due from related parties- non-current portion . . . . . . . . . . . . . . (6,715,580) — —Impairment of debtors and other debit balances . . . . . . . . . . . . . (854,860) (262,018) (262,018)

2,651,874 10,422,602 7,810,961

Due from related parties is due from the parent company will not be claimed before 5 years and passed onthe availability of cash of the parent and subject to an annual interest rate of 2.4% in addition to Corridorrate announced by the Central Bank of Egypt.

The movement of the provision for impairment during the year is as follows:

2015 2014 2013

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262,018 262,018 262,018Provision formed during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 592,842 — —

854,860 262,018 262,018


2015 2014 2013

Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310,994 344,461 388,905Current accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,475,259 6,012,220 2,592,277

18,786,253 6,356,681 2,981,182

Current accounts are maintained with banks regulated by the Central Bank of Egypt.

236





10. Provisions

2015 2014 2013

Provision for lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,925,000 — —Provision for claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,722,700 722,700 —Employees leave provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293,259 — —

4,940,959 722,700 —

The movement of provisions is as follows:

2015

ProvisionBalance at made during Utilised balance Balance at

1 January 2015 the year during the year 31 December 2015

Provision for lawsuits . . . . . . . . . . . . . . . . — 1,925,000 — 1,925,000Provision for claims . . . . . . . . . . . . . . . . . 722,700 2,000,000 — 2,722,700Employees leave provision . . . . . . . . . . . . — 293,259 — 293,259

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . 722,700 4,218,259 — 4,940,959

2014



Provision for claims . . . . . . . . . . . . . . . . . — 722,700 — 722,700

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 722,700 — 722,700

2013



Provision for claims . . . . . . . . . . . . . . . . . — — — —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — — —


2015 2014 2013

Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,505,665 8,832,938 9,333,290Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,019,643 7,458,721 4,595,258Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,514,610 4,684,626 4,024,253Payroll tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479,523 135,057 128,302Deposits from others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458,250 286,002 283,717Social insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409,939 18,569 108,452Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,300 98,000 82,788Dividends payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,217 250,468 5,951,872Due to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 216,271 192,237Sundry creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,462,190 1,127,042 2,967,578

26,180,337 23,107,694 27,667,747

237






The Company’s issued and paid up capital consists of 1.500.000 Shares of EGP 10 each, totalingEGP 15.000.000. At 20 November 2014, it has been decided by the president of Egyptian FinancialSupervisory Authority to increase the company’s capital by EGP 5.000.000; EGP 4.910.090 from retainedearnings and EGP 89.910 cash increase. Before the 7th of September 2015, Company’s capital structurewas as follows:


Mrs. Nafisa Hassan El Zeiny—Egyptian . . . . . . . . . . . . . . . . . . . . 16% 334,997 3,349,970Nile Badrawi Holding Company for Development &

Investment S.A.E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24% 473,637 4,736,370Dr. Hossam Hassan Badrawi—Egyptian national . . . . . . . . . . . . . . 18% 354,270 3,542,700Dr. Mohamed Hassan Hamdi Badrawi—Egyptian national . . . . . . . 6% 126,095 1,260,950Others—Egyptian Nationals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36% 711,001 7,110,010

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 2,000,000 20,000,000

Pursuant to the decision taken in the Extraordinary General Assembly Meeting dated 7 September 2015,the shareholders structure was amended to be as follows:


Cleopatra Hospital S.A.E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99.915% 1,998,392 19,983,920Mr. Mohamed Amro Mohamed Nabeel Lotfi—Egyptian National . . 0.084% 1,607 16,070Mrs. Nafisa Hassan El Zeiny—Egyptian National . . . . . . . . . . . . . 0.001% 1 10

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100% 2,000,000 20,000,000

13. Reserves

A. General reserve

The general reserve is established as approved by the Hospital’s General Assembly, and used based on adecision thereby and as proposed by the Board of Directors.

B. Legal reserve


The movement of other reserves is as follows:

Legal Generalreserve reserve Total

Balance at 1 January 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,219,765 2,500,000 4,719,765Provision made during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . 385,482 — 385,482

Balance at 31 December 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,605,247 2,500,000 5,105,247

238






2015 2014 2013

Inpatient and medical supervision revenue . . . . . . . . . . . . . . . 47,459,952 45,793,977 36,281,066Surgeries revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,318,203 17,005,313 21,178,096Outpatient clinics revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,056,386 13,507,921 6,619,667Laboratories revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,515,497 8,267,700 6,983,683Oncology Center revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,107,295 6,681,192 2,303,819Cardiac catheterization revenue . . . . . . . . . . . . . . . . . . . . . . . 7,322,274 5,370,882 4,393,052Service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,307,015 4,750,727 3,853,212Radiology revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,265,707 2,104,909 2,225,642Pharmacy revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,427,048 1,767,412 1,185,759Emergency revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,259,639 952,740 735,667Heart tests revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 315,258 269,054 206,349Physiotherapy revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273,002 331,906 332,193Other departments revenue . . . . . . . . . . . . . . . . . . . . . . . . . . 679,803 678,701 503,945

121,307,079 107,482,434 86,802,150

15. Operating costs

2015 2014 2013

Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . . . 34,319,399 31,755,309 27,938,499Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,995,133 13,809,733 12,762,168Doctor fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,242,475 11,990,166 9,292,737Maintenance, energy, communication and facilities costs . . . . . . 7,838,109 7,213,340 8,081,018Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,414,278 4,290,025 1,999,821Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . 3,486,074 3,455,318 3,766,427Fixed assets depreciation and write-off . . . . . . . . . . . . . . . . . . . 1,197,093 3,462,114 3,850,966Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,780 144,065 1,353,570

81,601,341 76,120,070 69,045,206


2015 2014 2013

Impairment of trade receivables and other debit balances . . . . . . 12,417,330 (103,859) 1,230,000Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,131,213 5,261,626 4,840,113Maintenance, energy, communication and facilities costs . . . . . . . 1,302,747 1,300,769 1,696,560Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . . 787,429 688,319 36,613Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 539,100 546,700 539,000Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,894,931 1,552,033 1,943,763

28,072,750 9,245,588 10,286,049

239





17. Other income

2015 2014 2013

Buffet income of cafeteria concession . . . . . . . . . . . . . . . . . . . . . . . . 870,593 1,010,747 446,035Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 565,887 253,857 97,200Gift corner revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,421 167,895 —Sale of rags (scrap) revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152,146 — —Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,703 2,028,174 328,240

1,856,750 3,460,673 871,475


2015 2014 2013

Salaries, wages and benefits* . . . . . . . . . . . . . . . . . . . . . . . . . 41,368,821 31,061,525 26,895,018Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . . . 34,319,399 31,755,309 27,938,499Impairment of trade receivables and other debit balances . . . . . 12,417,330 (103,859) 1,230,000Maintenance, energy, communication and facilities costs . . . . . . 9,140,856 8,514,109 9,777,578Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,953,378 4,836,725 2,538,821Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . 4,273,503 4,143,637 3,803,040Fixed assets depreciation and write-off . . . . . . . . . . . . . . . . . . 1,197,093 3,462,114 3,850,966Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,003,711 1,696,098 3,297,333

109,674,091 85,365,658 79,331,255


2015 2014 2013

Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,648,423 17,846,607 16,178,581Doctor fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,242,475 11,990,166 9,292,737Social insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,045,422 869,402 837,633Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 432,501 355,350 586,067

41,368,821 31,061,525 26,895,018

19. Income taxes

Income tax for the year comprises of:

2015 2014 2013

Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,991,312 7,017,881 2,060,578Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 661,591 (282,104) (417,112)

5,652,903 6,735,777 1,643,466

240






The tax on profit before taxation theoretically differs from the amount expected to be earned by applyingthe average tax rate applicable to the Company’s profits as follows:

2015 2014 2013

Net profit before . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,265,392 24,893,062 8,371,259

Income tax calculated based on the applicable local tax rate . . . . . 2,084,713 7,417,919 2,092,815

Add/ LessExpenses not deductible for tax purposes . . . . . . . . . . . . . . . . . . . 3,230,217 102,713 307,500Effect of change in applicable tax rate . . . . . . . . . . . . . . . . . . . . . 337,973 — (12,475)Prior years adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (784,855) (744,374)

Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,652,903 6,735,777 1,643,466

Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61.01% 27.06% 19.63%

Current income tax liabilities

2015 2014 2013

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,902,635 2,060,578 1,997,003Payments during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,748,074) (3,175,824) (1,997,003)Charge during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,991,312 7,017,881 2,060,578

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,145,873 5,902,635 2,060,578

20. Deferred tax

2015

Fixed assets Provisions Total

Balance at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . 3,379,724 — 3,379,724Movement during the year—(liability) / asset . . . . . . . . . . . . . . . . . (1,160,699) 499,108 (661,591)

Balance at the end of the year—(liability) / asset . . . . . . . . . . . . . . 2,219,025 499,108 2,718,133

2014


Balance at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . 3,097,620 — 3,097,620Movement during the year—asset . . . . . . . . . . . . . . . . . . . . . . . . . 282,104 — 282,104

Balance at the end of the year—asset . . . . . . . . . . . . . . . . . . . . . . . 3,379,724 — 3,379,724

2013


Balance at the beginning of the year . . . . . . . . . . . . . . . . . . . . . . . 2,680,508 — 2,680,508Movement during the year—asset . . . . . . . . . . . . . . . . . . . . . . . . . 417,112 — 417,112

Balance at the end of the year—asset . . . . . . . . . . . . . . . . . . . . . . . 3,097,620 2013 3,097,620

241





21. Commitments

(A) Capital commitments:

The capital commitments, which are related to the fixed assets at the end of the year and have not yet beendue, amounted to EGP nil (2014: EGP 517,310).

(B) Lease commitments

The lease commitments at the end of the year that have not yet been due comprise of:

2015 2014 2013

Less than 1year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,115,658 3,934,630 3,101,1911 to 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,083,019 4,553,413 5,478,886Over 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 766,112 2,841,404

22. Tax position

(1) Withholding tax

• Settlement was made till 2009 and all outstanding amounts till the end of 2009 were paid.

• The form 19 for the years 2010, 2011 and 2012 was issued under No. 13833 and sent to theCompany on 18 August 2015. The Company filed an objection within the due date. The internalCommittee is now in the process of resolving this issue.

• The Company has not been selected for tax inspection with respect to years from 2013 till 2015.

(2) Salaries tax

• The inspection was completed and settlement was made till 2011. No outstanding amounts forthe years till 2011 exist.

• Tax settlement for the years 2012, 2013 and 2015 is under process.

(3) Stamp duty tax

• The Company was inspected for the years till 2005 and settlement was made for the same years.

• The Company is being inspected for the years from 2006 till 2015.

23. Correction of material errors and changes in the application of accounting policies

During the year, management has corrected accounting errors related to prior periods were those errorshave been corrected after taking into account the tax effect in accordance with the requirements of theEAS (5) ‘‘Accounting policies, changes in accounting estimates and errors.’’ The errors that have beencorrected are as follows:

Fixed assets

Management did not calculate depreciation charge for some of the prior years in accordance to adopteddepreciation rates for those years. Management have corrected this error in the current year by revisingthe calculation of depreciation charge for these years as if the management have applied the accountingpolicy as appropriate with regards to these years, in addition to that, management have recognized some ofrepair and maintenance expenses as fixed assets the thing that contradicts with Egyptian accountingsstandards ‘‘10’’ ‘‘Fixed assets and depreciation’’, management have corrected this error by derecognizingthose assets with all related depreciation charges retrospectively.

242





23. Correction of material errors and changes in the application of accounting policies (Continued)

Debtors and other debit balances and other credit balances

During previous years, management has booked some post-dated checks issued in favor of certain partiesas prepaid expenses and equal amount to the notes payable.

Given that these checks do not represent prepaid expenses and do not meet the conditions to berecognized as assets in accordance to financial statement preparation and presentation, Also, thosepost-paid checks shall not be recognized as liabilities before the due date, management has have correctedthis error in the current year by derecognizing these assets and liabilities. In addition, some of the assetsowned by some of the shareholders have been recorded as assets owned by the hospital, this has beencorrected by management by delisting those assets and booked as due from shareholders.

Provisions

Management did not book provision for claims according to the Egyptian accounting standard ‘‘28’’‘‘provisions, assets and contingent liabilities’’ despite that the Company have actually received some claimsand evidences that require the booking of such provisions during prior years. During this year,management have recorded those provisions that are supported by strong evidence requires the booking ofthese provisions retrospectively.

Operating revenue

The management revised the presentation for some revenues to be presented gross of all related costs asmanagement have presented revenues net of related costs in the prior years the thing that contradicts withEgyptian accounting standard ‘‘11’’ ‘‘Revenue’’ that have resulted in the presentation of some revenues,also beginning balance of retained earnings have been adjusted to the reflect those changes after changingthe presentation of such revenue in the current year.

Operating costs

The management adjusted the presentation of some expenses as they were presented as net, which resultedin adjustments to the operating revenue and costs, in order to be shown separately.

1. Adjustments effect on balance sheet

Balance Balancebefore after

adjustment adjustment2013 Adjustment 2013

Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,397,952 (17,339,652) 9,058,300Investments in affiliates . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120,000 (120,000) —Debtors and other debit balances . . . . . . . . . . . . . . . . . . . . . 13,523,705 (5,712,744) 7,810,961Creditors and other credit balances . . . . . . . . . . . . . . . . . . . . (33,946,925) 6,279,178 (27,667,747)Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (848,292) 3,945,912 3,097,620Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,175,824) 1,115,246 (2,060,578)Retained earnings at 1 January 2014* . . . . . . . . . . . . . . . . . . (7,343,857) 10,842,588 3,498,731

243





23. Correction of material errors and changes in the application of accounting policies (Continued)

2. Adjustments effect on statement of income

Balance Balancebefore after

adjustment adjustment2013 Adjustment 2013

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (57,810,606) (28,991544) (86,802,150)Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,755,391 31,289,815 69,045,206General and administrative expenses . . . . . . . . . . . . . . . . . . . 10,249,459 36,590 10,286,049Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,175,824 (1,115,246) 2,060,578Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (186,969) (230,143) (417,112)

* The effect correction of material errors and changes in the application of accounting policies on the retained earnings isillustrated as follows:—

Adjustment

Retained earnings balance at 1 January 2013 as previously stated . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,343,857)

Adjustments effect on depreciation expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,384,346Adjustments effect on revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,825,989)Adjustments effect on deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,715,769)

Gross effect of retrospective adjustments on retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,842,588

Profit after income tax after adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,498,731

The effect on the results is as follows:

2013

Profit after income tax as previously stated as at 31 December 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,717,265Correction of material errors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (989,472)

Profit after income tax after adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,727,793

3. Comparative figures

Comparative figures have been re-classed to be in line with parent’s classification, reclassificationconducted neither affected the net assets of the company nor the Company’s net income.

244






The Company deals with the related parties in an arm’s length transaction. The balances with relatedparties at the date of financial statements during the year are as follows:


Nature of transaction 2015 2014 2013

Related partiesDebtors and other debit balancesCleopatra Hospital (Parent Company) . . . . . . . . . . . Parent Company 6,715,580 — —Medicare Company . . . . . . . . . . . . . . . . . . . . . . . . Owned by one of — 1,138,992 1,009,991

the shareholdersThe Egyptian Company for Contracting . . . . . . . . . . Owned by one of — 444,528 444,528

the shareholdersShareholders’ current accounts . . . . . . . . . . . . . . . . Owned by one of — 5,187,076 464,414

the shareholders

6,715,580 6,770,596 1,918,933

Nature of transaction 2015 2014 2013

Related partiesTrade and other payablesShareholders’ current accounts . . . . . . . . . . . . . . . . . . . Shareholder — 216,271 192,237

— 216,271 192,237

Below is an illustration of transactions with related parties in the date of financial statements during theyear:—

2015 2014 2013

Debtors and other debit balancesFinance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,715,580 — —Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 382,992 97,200Withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,722,662 400,673Medical services revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 5,575,174 5,324,974Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (5,829,165) (5,881,425)

6,715,580 4,851,663 (58,578)

Movement on debtors and other debit balances is represented as follows:—

2015 2014 2013

Balance as of 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 1,918,933 1,977,511Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,715,580 — —Total charged to income statement . . . . . . . . . . . . . . . . . . . . . . . — 5,958,166 5,422,174Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (5,829,165) (5,881,425)Total withdrawals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 4,722,662 400,673

Balance as at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,715,580 6,770,596 1,918,933

245





24. Related party transactions (Continued)

2015 2014 2013

Creditors and other credit balancesDoctor fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 578,519 425,582Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (554,485) (314,555)

— 24,034 111,027

Movement creditors and other credit balances is represented as follows:—

2015 2014 2013

Balance as of 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 192,237 81,210Total charged to income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 578,519 425,582Total paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (554,485) (314,555)

Balance as at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 216,271 192,237

246


Auditor’s report

To: The Shareholders of Al Shorouk Hospital Company S.A.E.


We have audited the accompanying financial statements of Al Shorouk Hospital Company S.A.E. (theCompany) which comprise the balance sheet as at 31 December 2013, 2014 and 2015 and the statements ofincome, changes in equity and cash flows for the fiscal year then ended, and a summary of significantaccounting policies and other notes.


These financial statements are the responsibility of the Company’s management. Management isresponsible for the preparation and fair presentation of these financial statements in accordance withEgyptian Accounting Standards and in light of the prevailing Egyptian laws. Management responsibilityincludes designing, implementing and maintaining internal control relevant to the preparation and fairpresentation of financial statements that are free from material misstatement, whether due to fraud orerror. Management responsibility also includes selecting and applying appropriate accounting policies andmaking accounting estimates that are reasonable in the circumstances.


Our responsibility is to express an opinion on these financial statements based on our audit. We conductedour audit in accordance with Egyptian Standards on Auditing and in light of the prevailing Egyptian laws.Those standards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance that the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditor’s judgement, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud or error.In making those risk assessments, the auditor considers internal control relevant to the Company’spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe Company’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by management, as well as evaluatingthe overall presentation of the financial statements.


Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of Al Shorouk Hospital Company S.A.E. as at 31 December 2013, 2014 and 2015, itsfinancial performance, and its cash flows for the fiscal year then ended in accordance with the EgyptianAccounting Standards and in light of the related Egyptian laws and regulations.

Tamer Abdel TawabMember of Egyptian Society of Accountants &Auditors Member of AICPAR.A.A. 17996Mansour & Co. PricewaterhouseCoopers

21 April 2016Cairo

247

AL SHOROUK HOSPITAL COMPANY S.A.E.Originally issued in Arabic

Balance sheet

At 31 December 2015


Note 2015 2014 2013

Non-current assetsFixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 50,782,837 51,132,018 51,285,593Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 2,163,446 1,965,066 1,935,314

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . 52,946,283 53,097,084 53,220,907

Current assetsInventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 8,712,196 8,349,492 6,953,594Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 20,287,040 17,028,372 11,106,807Debtors and other debit balances . . . . . . . . . . . . . . . . . . 8 2,350,332 2,759,573 2,940,032Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . . 9 4,089,819 4,758,669 4,205,873

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 35,439,387 32,896,106 25,206,306

Current liabilitiesProvisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 12,070,124 7,000,000 7,000,000Creditors and other credit balances . . . . . . . . . . . . . . . . . 11 19,294,023 19,117,460 17,875,947Current portion of borrowings . . . . . . . . . . . . . . . . . . . . . 12 9,477,471 5,546,003 5,544,706Current income tax liabilities . . . . . . . . . . . . . . . . . . . . . 20 4,108,178 5,241,563 3,388,327

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . 44,949,796 36,905,026 33,808,980

Deficit in working capital . . . . . . . . . . . . . . . . . . . . . . (9,510,409) (4,008,920) (8,602,674)

Total investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43,435,874 49,088,164 44,618,233

Financed as follows:Shareholders’ equityIssued and paid up capital . . . . . . . . . . . . . . . . . . . . . . . 13 25,000,000 25,000,000 25,000,000Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 10,215,019 9,229,950 8,667,170Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,329,073 12,986,218 7,417,089

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . 42,544,092 47,216,168 41,084,259

Non-current liabilitiesNon-current portion of borrowings . . . . . . . . . . . . . . . . . 12 891,782 1,871,996 3,533,974

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . 891,782 1,871,996 3,533,974

Total funding of working capital and non-current assets . . 43,435,874 49,088,164 44,618,233


248


Statement of income



Restated RestatedNote 2015 2014 2013

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 138,642,178 117,592,072 98,524,206Less:Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 (99,913,207) (85,850,554) (76,035,389)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,728,971 31,741,518 22,488,817Add / (Less)General and administrative expenses . . . . . . . . . . . . . . 17 (25,581,868) (17,078,570) (14,540,905)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,070,124) — (6,676,913)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 1,231,343 1,189,322 1,072,690

Profit for the year before finance income andincome tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,308,322 15,852,270 2,343,689

Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 128,342 113,062 72,973Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,333,834) (55,125) (20,861)

Profit for the year before income tax . . . . . . . . . . . . 8,102,830 15,910,207 2,395,801Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 (4,108,178) (4,491,563) (2,638,327)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 198,380 29,752 172,330

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . 4,193,032 11,448,396 (70,196)


249





Share RetainedNote capital Reserves earnings Total

Balance at 1 January 2013 as previouslyissued . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,000,000 7,682,468 16,774,793 49,457,261

Effect of correction of prior years errors . . . . 23 — — (1,483,644) (1,483,644)

Balance at 1 January 2013 as restated . . . . . 25,000,000 7,682,468 15,291,149 47,973,617Transfer to reserves . . . . . . . . . . . . . . . . . . . — 984,702 (984,702) —Dividends distribution for 2012 . . . . . . . . . . — — (6,819,162) (6,819,162)Profit for the year as previously issued . . . . . — — 5,627,800 5,627,800Effect of correction of last year’s errors . . . . — — (5,697,996) (5,697,996)Profit for the year as restated . . . . . . . . . . . . — — (70,196) —

Balance at 31 December 2013 . . . . . . . . . . . 25,000,000 8,667,170 7,417,089 41,084,259

Balance at 1 January 2014 . . . . . . . . . . . . . . 25,000,000 8,667,170 7,417,089 41,084,259Transfer to reserves . . . . . . . . . . . . . . . . . . . — 562,780 (562,780) —Dividends distribution for 2013 . . . . . . . . . . — — (5,316,487) (5,316,487)Profit for the year . . . . . . . . . . . . . . . . . . . . — — 11,448,396 11,448,396


Balance at 1 January 2015 . . . . . . . . . . . . . . 25,000,000 9,229,950 12,986,218 47,216,168Transfer to reserves . . . . . . . . . . . . . . . . . . . — 985,069 (985,069) —Dividends distribution for 2014 . . . . . . . . . . — — (8,865,108) (8,865,108)Profit for the year . . . . . . . . . . . . . . . . . . . . — — 4,193,032 4,193,032



250





Note 2015 2014 2013

Cash flows from operating activitiesProfit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,102,830 15,910,207 2,395,801Adjustments to reconcile net income to cash flows from

operating activitiesFixed assets depreciation and write-off . . . . . . . . . . . . . . 3,995,216 4,889,082 5,151,374Loss on sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . 318,419 11,496 1,134Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,070,124 — 6,823,071Impairment of customers’ balances . . . . . . . . . . . . . . . . . 4,329,857 — 34,679Provisions no longer required . . . . . . . . . . . . . . . . . . . . — — (255,195)Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,333,834 55,125 20,861Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,263) (67,862) (72,973)

Operating profits before changes in working capital . . 23,126,017 20,798,048 14,098,752Changes in working capitalChange in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . (362,704) (1,395,898) (1,551,118)Change in trade receivable . . . . . . . . . . . . . . . . . . . . . . (7,588,525) (5,921,565) 9,140,140Change in debtors and other debit balances . . . . . . . . . . 409,241 180,459 140,827Change in creditors and other credit balances . . . . . . . . . 176,563 1,241,513 (1,044,651)Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,241,563) (2,638,327) (3,673,461)Provisions utilized . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — — (2,523,071)

Net cash flows generated from operating activities . . . . . 10,519,029 12,264,230 14,587,418

Cash flows from investing activitiesProceeds from sale of fixed assets . . . . . . . . . . . . . . . . . 27,662 10,030 6,182Payments to purchase fixed assets . . . . . . . . . . . . . . . . . (3,992,116) (4,757,033) (2,205,492)Finance income received . . . . . . . . . . . . . . . . . . . . . . . . 24,263 67,862 72,973

Net cash flows used in investing activities . . . . . . . . . . (3,940,191) (4,679,141) (2,126,337)

Cash flows from financing activitiesDividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,865,108) (5,316,487) (6,819,162)Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . . . 2,951,254 (1,660,681) (3,542,774)Finance costs paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,333,834) (55,125) (20,861)

Net cash flows used in financing activities . . . . . . . . . (7,247,688) (7,032,293) (10,382,797)

Change in cash and cash equivalents during the year . . . (668,850) 552,796 2,078,284Cash and cash equivalents at the beginning of the year . . 4,758,669 4,205,873 2,127,589Cash and cash equivalents at the end of the year . . . . . . 9 4,089,819 4,758,669 4,205,873


251






Al Shorouk Hospital Company S.A.E. is incorporated as an Egyptian Joint Stock Company in accordancewith the provisions of law No. 8 of 1997 concerning Investment Guarantees and Incentives, Law No. 95 of1992, and the Company’s Memorandum and Articles of Association. The Company was incorporatedpursuant to the Decision No. 56661 of the Chairman of the General Authority for Investment and FreeZones’ No. 190 of 1997 issued on 10 July 1997 under the Commercial Registration—Giza Investment.

The Company’s head office is located at 3 and 5 Bahr El Ghazal St. Ahmed Orabi, Mohandeseen, Cairo.

The purpose of the Company is establishing a hospital to provide treatment for patients, and performsurgeries, radiology, physical therapy, laboratories, and dehydration treatment. The Hospital has aNeonatal Department to offer treatment for children not fully developed, along with General MedicalExamination. Also, the Hospital consists of the following departments: ICU, artificial kidney, obstetricsand gynaecology, laparoscopic surgery, kindergartens, central sterilization, medical gas systems,3 operating theatres, urological procedures, otolaryngology (ENT), eye surgery, vascular surgery, cerebralsurgery, neurosurgery and plastic surgery. In addition, the Hospital includes a specialized unitdepartments, such as dental, conjunctivitis, ENT, obstetrics and gynaecology, orthopaedic, and internalmedicine.

These financial statements have been approved for issuance by the management on 13 April 2016,considering the fact that the Shareholders’ Ordinary General Assembly have the authority to amend thefinancial statements after being issued.





The preparation of the financial statements in conformity with EASs requires the use of certain criticalaccounting estimates. It also requires management to exercise its judgement in the process of applying thecompany’s accounting policies. The areas where the most significant accounting estimates and judgementsapplied in preparation of the financial statements are disclosed in Note 4.





Amendments applicable on the Group’s activities and financial statements are summarised in thepresentation and disclosure. According to the new standards balance sheet will be presented differentlyand working capital will not be presented in the financial statements. Results of operations will bepresented in two statements; the first will present income and expenses for the year (statement of income),

252






and the second will start by the net income (loss) for the year and will include income and expenses itemsrecognised in equity to present the comprehensive income (statement of comprehensive income). The newstandards will require more disclosure on the financial risk management.



Items included in the financial statements are measured using the currency of the primaryeconomic environment in which the Company operates (‘the functional currency’). The financialstatements are presented in Egyptian Pounds (‘‘EGP’’), which is the Company’s functional andpresentation currency.



C. Fixed assets






Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5%Machinery, equipment and devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15%Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25%



253






D. Inventories


E. Financial assets

(1) Classification





Loans and receivables include trade receivables, cash on hand and at banks and due from relatedparties.

(2) Initial and subsequent measurement:

• The financial assets are measured on acquisition at fair value plus transaction costs.

• The financial assets are derecognised when the right to receive cash flows from such assetshas expired or has been transferred and the Company has transferred substantially all risksand rewards of ownership.

• Loans and receivables are subsequently measured at amortised cost using the effectiveinterest method.






Fixed assets’ impairment loss is measured at amortised cost, which is the difference between theasset’s carrying amount and the present value of the estimated future cash flows (after

254






eliminating future losses that have not occurred) discounted at the original effective interest rate.The carrying amount of the asset is reduced and the amount of the loss is recognised in thestatement of income.


F. Issued and paid capital


G. Legal reserves

As required by the Company’s Articles of Association, 5% of the net profit shall be transferred to a legalreserve and another 5% to be transferred to general reserve. Once the financial statements are approvedby the Company’s Ordinary General Assembly Meeting. Transfers to legal reserve may be discontinuedwhen the reserve equals 50% of the issued and paid up capital. Whenever this reserve is lower than thispercentage, the deduction should be continued. This reserve is not available for distribution.

H. Provisions



I. Suppliers and notes payables

Suppliers and notes payables are obligations to pay for goods and services that have been acquired in theordinary course of business. The suppliers and notes payables are recognised at fair value of products andservices received from others, whether they have been billed or not. Long term liabilities are recognised attheir present value, and suppliers and notes payables are subsequently shown at amortised cost using theeffective interest method.

J. Borrowings

Borrowings are recognised initially at the amount of the proceeds received, net of transaction costsincurred. Borrowings are subsequently stated at amortised cost using the effective interest method; anydifference between proceeds (net of transaction costs) and the redemption value is recognised in theconsolidated statement of income over the period of the borrowings using the effective yield method.

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifyingassets are capitalised as part of the costs of those assets. The cost of borrowing, which is capitalised, isdetermined based on actual borrowing costs, which are incurred by the Group during the year due toborrowing process, less any income realised from the temporary investment of funds borrowed.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defersettlement of the liability for at least 12 months after the date of the financial statements.

255






K. Employee benefits


According to the Companies Law, the Company pays 10% of its cash dividends to its employeesup to a maximum equal to the total salaries of the latest fiscal year before distribution.Employees’ share of profit is recognised as dividends in equity and as a liability when approved bythe Shareholders’ General Assembly. No liability is recognised for employees’ share of profitrelating to undistributed profits.


The Company pays contributions to the Public Authority for Social Insurance on a mandatorybasis in accordance with the rules of Social Security Law. The Company had no further paymentobligations other than those have been paid. The regular contributions are recognised as periodiccosts for the year in which they are due and as such are included in staff costs.

L. Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, including cash balancesand trade and notes payable arising from rendering medical services and sale of medicine throughout theCompany’s ordinary course of business, net of sales taxes, deductions or discounts.

Revenues are recognised when the amount of revenue can be reliably measured; when it is probable thatfuture economic benefits related to the sale process or service provision will flow to the Company; andwhen other specific criteria have been met for each of the Company’s activities as described below. Therevenue amount is not considered as reliably measurable unless all contingent liabilities are settled. TheCompany bases its estimates on historical results, taking into consideration the type of customer, the typeof transaction and the specifics of each arrangement.

(1) Medical services revenue

The Company, through Al Shorouk Hospital, renders several medical services, includingsurgeries, accommodation, medical supervision, laboratories, tests, different types of radiologyand outpatient clinics. Revenue from medical service is recognised when the service is renderedto the patient.

(2) Sale of medicine revenue

The Company sells medicine through a hospital pharmacy or uses them for treatment of patientsadmitted in the Hospital. Revenue is recognised once the medicine is received by the patient orused during the patient’s stay in hospital.

(3) Interest income


M. Leases

Leases in which the lessor retains the risks and rewards of ownership are classified as operating leases.

Payments made under operating leases net of any discounts received from the lessor are recognised asexpense in the statement of income on a straight-line basis over the period of the lease.

256






N. Current and deferred income tax

The income tax for the year is calculated based on the tax laws enacted at the balance sheet date.Management periodically evaluates tax situation through tax returns, taking into account the differencesthat may arise from some interpretations issued by administrative or regulatory authorities, and establishesprovisions where appropriate on the basis of amounts expected to be paid to the tax authority.

Deferred income tax is fully recognised, using the liability method, on temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the financial statements. Thedeferred income taxes are not accounted for if it arises from initial recognition of an asset or liability otherthan those arising from business combination that at the time of the transaction affects neither accountingnor taxable income.



O. Dividends

Dividends are recognised in the Company’s financial statements in the period in which the dividends areapproved by the Company’s General Assembly of Shareholders.

P. Cash and cash equivalents


Q. Corresponding figures




The Company’s activities expose it to a variety of financial risks: market risk (including risks of fluctuationsin foreign currency), credit risk and liquidity risk. The Company is not exposed to interest rate risk or pricerisk as it has neither interest bearing financial assets and liabilities nor financial assets at fair value throughprofit and loss. The Company’s management aims to minimise potential adverse effects of such risks on thefinancial performance of the Company through monitoring by the Finance Department and the GeneralManager of the Company, and the Finance Department and the Executive Committee at the level of theParent Company.


257






(A) Market risk

i. Risk of fluctuations in foreign currency rates

Foreign currency risk represents the changes in foreign currency rates, which impact thepayments and receipts denominated in foreign currencies, as well as the evaluation of foreigncurrency assets and liabilities.

Given the nature of the Company’s activities, the Company does not undertake transactionsdenominated in foreign currencies as it carries out all purchases in Egyptian Pound. TheCompany’s limited revenue in foreign currencies are generated from certain foreignembassies. Management is of the opinion that the foreign currency balances are consideredimmaterial.


2015 2014 2013

US Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,597,835 1,727,106 383,162British Pounds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,189 14,266 12,824

There are not financial liabilities denominated in foreign currencies as at 31 December 2015.

ii. Fair value and cash flow interest rate risk

The Company obtained a long-term loan from one of the lease companies and bankoverdraft facilities at interest rate linked to the corridor declared by the Central Bank ofEgypt, and therefore, it is exposed to cash flow risks. Management believe the effect is notmaterial due to the amount and maturities of those balances.

(B) Credit risk

Credit risk arises from cash at banks, as well as credit exposures to customers. Credit risks aremanaged for the Company’s as a whole by its Executive Management, Central FinanceDepartment and Executive Committee at the level of the Parent Company (Cleopatra HospitalCompany S.AE.).


For customers, the Hospital’s Financial Director and General Manager perform analysis on thecredit risk for each potential credit customer in accordance with the Parent Company’s policies.The Central Finance Department follows up the compliance with credit terms and collectionfrom customers, and manages the inventory balances, while the Parent Company’s ExecutiveCommittee reviews the default cases and debt ageing report to take the necessary decisionswhether to cancel the credit or to refer the defaulted customer to the Legal Department for theirnecessary actions. Note (7) to these financial statements provides more detailed information inrespect of this matter.

The management establishes a provision for impairment of 100% for customers defaulted formore than 150 days from the invoice date, in addition to a category-based provision forimpairment at historical default rates.

258







2015 2014 2013


(C) Liquidity risk

The management makes cash flow projections on a monthly basis, follows up the collectionprocess and manages the inventory balances, which are discussed during the ExecutiveCommittee’s meeting, and takes the necessary actions to negotiate with suppliers, follow-up thecollection process and manage the inventory balances in order to ensure sufficient cash ismaintained to discharge the Company’s liabilities.


Less than 3 months to3 months 1 year 1 to 5 years

Suppliers and notes payables . . . . . . . . . . . . . . . . . . . . . . 9,773,357 — —Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,497,257 980,214 891,782


The Company’s objectives when managing capital are to safeguard the Company’s ability to continue as agoing concern in order to provide returns for shareholders and benefits for other stakeholders and tomaintain an optimal capital structure to reduce the cost of capital as is the case for other companiesoperating in the same field.

The Company’s management monitors capital structure using the net debt to total capital ratio. Net debtratio is calculated as total borrowings, creditors and other credit balances less cash on hand and at banks.Capital is represented by ‘total equity’ as shown in the balance sheet plus net debt.

Net debt to total capital ratio as at 31 December 2015, 31 December 2014 and 31 December 2013 is asfollows:

2015 2014 2013

Creditors and other credit balances . . . . . . . . . . . . . . . . . . . . . . 19,294,023 19,117,460 17,875,947Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,369,253 7,417,999 9,078,680Less: Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . . (4,089,819) (4,758,669) (4,205,873)

Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,573,457 21,776,790 22,748,754Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,544,092 47,216,168 41,084,259

Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,117,549 68,992,958 63,833,013

Net debt to total capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . 37.54% 31.56% 35.64%

3.3 Fair value estimation

The fair value of current financial assets and liabilities approximates their carrying amounts after takinginto account the impairment. The Parent Company availed a long-term loan from an Egyptian bank, andthe management believes that the fair value of the loan approximates its carrying amount as it was issuedat a variable rate linked to the interest rate corridor declared by the Central Bank of Egypt.

259








(A) Provisions

Provisions are recognised when there is a present legal or constructive obligation as a result of past events,and it is more likely than not that an outflow of resources will be required to settle the obligation; and theamount has been reliably estimated. The Company reviews the provision at each balance sheet date, andadjusts it to reflect the current best estimate by using the appropriate advisory experience of experts.


Impairment of trade receivables is estimated by monitoring ageing of receivables. The Company’smanagement examines the credit position and ability of debtors and customers to make payments for theirpast due debts. Impairment is recognised for amounts due from debtors and customers whose creditposition does not allow them to pay their dues as believed by the management. Further appropriateallowance is made for loss incurred but not yet identified by reference to applicable historical loss rate.

260

261

AL

SH

OR

OU

K H

OSP

ITA

L C

OM

PAN

YS.

A.E

.O

rigi

nall

y is

sued

in

Ara

bic

Not

es t

o th

e fi

nanc

ial

stat

emen

ts (

Con

tinu

ed)

For

the

year

end

ed 3

1D

ecem

ber

2013

, 20

14 a

nd 2

015

(All

am

ount

s in

the

not

es a

re s

how

n in

Egy

ptia

n P

ound

s un

less

oth

erw

ise

stat

ed)

5. F

ixed

ass

ets

Mac

hine

ry,

Furn

itur

eP

roje

cts

equi

pmen

t&

and

unde

rL

and

Bui

ldin

gsde

vice

sfi

xtur

esVe

hicl

esC

ompu

ters

cons

truc

tion

Tota

l

Bal

ance

at

1Ja

nuar

y 20

15..

....

....

....

....

....

....

..24

,286

,415

29,2

09,9

4635

,787

,311

8,92

3,14

946

7,02

62,

193,

074

979,

396

101,

846,

317

Add

ition

s...

....

....

....

....

....

....

....

....

....

..—

—3,

109,

138

603,

872

65,4

5017

7,85

635

,800

3,99

2,11

6D

ispo

sals

....

....

....

....

....

....

....

....

....

....

.—

—(7

05,1

79)

(155

,492

)—

(1,3

60)

—(8

62,0

31)

Fix

ed a

sset

s w

rite

-off

....

....

....

....

....

....

....

....

—(2

,933

)(2

43,1

35)

(380

,041

)(1

,675

)(7

4,47

5)—

(702

,259

)

Bal

ance

at

31D

ecem

ber

2015

....

....

....

....

....

....

..24

,286

,415

29,2

07,0

1337

,948

,135

8,99

1,48

853

0,80

12,

295,

095

1,01

5,19

610

4,27

4,14

3

Acc

umul

ated

dep

reci

atio

n at

1Ja

nuar

y 20

15..

....

....

....

.—

15,3

13,4

5226

,609

,503

6,56

6,18

245

9,97

41,

765,

188

—50

,714

,299

Cha

rge

for

the

year

....

....

....

....

....

....

....

....

.—

534,

340

1,88

9,21

41,

142,

405

7,89

626

8,37

6—

3,84

2,23

1A

ccum

ulat

ed d

epre

ciat

ion

of d

ispo

sals

....

....

....

....

....

——

(363

,712

)(1

50,8

79)

—(1

,359

)—

(515

,950

)A

ccum

ulat

ed d

epre

ciat

ion

of a

sset

s w

rite

-off

....

....

....

...

—(2

,359

)(1

79,7

33)

(307

,718

)(1

,675

)(5

7,78

9)—

(549

,274

)

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r 20

15..

....

....

...

—15

,845

,433

27,9

55,2

727,

249,

990

466,

195

1,97

4,41

6—

53,4

91,3

06

Net

boo

k va

lue

at 3

1D

ecem

ber

2015

....

....

....

....

....

.24

,286

,415

13,3

61,5

809,

992,

863

1,74

1,49

864

,606

320,

679

1,01

5,19

650

,782

,837

Dur

ing

the

curr

ent

year

, th

e C

ompa

ny r

evie

wed

and

cha

nged

use

ful

life

of f

ixed

ass

ets.

In

acco

rdan

ce w

ith E

AS

5 ‘‘A

ccou

ntin

g po

licie

s, c

hang

e in

acc

ount

ing

estim

ates

and

err

ors’

’ ch

ange

d re

mai

ning

use

ful

lives

of

thos

e as

sets

. A

ccor

ding

ly,

depr

ecia

tion

expe

nse

for

the

year

is

repo

rted

at

EG

P1,

818,

856

low

er t

hat

the

depr

ecia

tion

if ch

arge

d in

acc

orda

nce

with

the

sam

e us

eful

liv

es b

efor

e ch

ange

.

262

AL

SH

OR

OU

K H

OSP

ITA

L C

OM

PAN

YS.

A.E

.O

rigi

nall

y is

sued

in

Ara

bic

Not

es t

o th

e fi

nanc

ial

stat

emen

ts (

Con

tinu

ed)

For

the

year

end

ed 3

1D

ecem

ber

2013

, 20

14 a

nd 2

015

(All

am

ount

s in

the

not

es a

re s

how

n in

Egy

ptia

n P

ound

s un

less

oth

erw

ise

stat

ed)

5. F

ixed

ass

ets

(Con

tinu

ed)

Mac

hine

ry,

Furn

itur

eP

roje

cts

equi

pmen

t&

and

unde

rL

and

Bui

ldin

gsde

vice

sfi

xtur

esVe

hicl

esC

ompu

ters

cons

truc

tion

Tota

l

Bal

ance

at

1Ja

nuar

y 20

14 (

rest

ated

)..

....

....

....

....

..24

,286

,415

29,2

09,9

4631

,699

,589

8,71

8,10

646

7,02

61,

988,

939

859,

396

97,2

29,4

17A

dditi

ons.

....

....

....

....

....

....

....

....

....

....

——

4,12

2,39

028

6,18

8—

228,

455

120,

000

4,75

7,03

3D

ispo

sals

....

....

....

....

....

....

....

....

....

....

.—

—(3

4,66

8)(8

1,14

5)—

(24,

320)

—(1

40,1

33)

Bal

ance

at

31D

ecem

ber

2014

....

....

....

....

....

....

..24

,286

,415

29,2

09,9

4635

,787

,311

8,92

3,14

946

7,02

62,

193,

074

979,

396

101,

846,

317

Acc

umul

ated

dep

reci

atio

n at

1Ja

nuar

y 20

14..

....

....

....

.—

13,8

52,9

5524

,107

,508

5,95

7,86

445

4,10

61,

571,

391

—45

,943

,824

Cha

rge

for

the

year

....

....

....

....

....

....

....

....

.—

1,46

0,49

72,

521,

492

688,

977

5,86

821

2,24

8—

4,88

9,08

2A

ccum

ulat

ed d

epre

ciat

ion

of d

ispo

sals

....

....

....

....

....

——

(19,

497)

(80,

659)

—(1

8,45

1)—

(118

,607

)

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r 20

14..

....

....

...

—15

,313

,452

26,6

09,5

036,

566,

182

459,

974

1,76

5,18

8—

50,7

14,2

99

Net

boo

k va

lue

at 3

1D

ecem

ber

2014

....

....

....

....

....

.24

,286

,415

13,8

96,4

949,

177,

808

2,35

6,96

77,

052

427,

886

979,

396

51,1

32,0

18

263

AL

SH

OR

OU

K H

OSP

ITA

L C

OM

PAN

YS.

A.E

.O

rigi

nall

y is

sued

in

Ara

bic

Not

es t

o th

e fi

nanc

ial

stat

emen

ts (

Con

tinu

ed)

For

the

year

end

ed 3

1D

ecem

ber

2013

, 20

14 a

nd 2

015

(All

am

ount

s in

the

not

es a

re s

how

n in

Egy

ptia

n P

ound

s un

less

oth

erw

ise

stat

ed)

5. F

ixed

ass

ets

(Con

tinu

ed)

Mac

hine

ry,

Furn

itur

eP

roje

cts

equi

pmen

t&

and

unde

r31

Dec

embe

r 20

13L

and

Bui

ldin

gsde

vice

sfi

xtur

esVe

hicl

esC

ompu

ters

cons

truc

tion

Tota

l

Bal

ance

at

1Ja

nuar

y 20

13..

....

....

....

....

....

....

...

24,2

86,4

1529

,209

,946

30,5

38,6

938,

566,

612

457,

726

1,81

0,53

440

1,44

195

,271

,367

Add

ition

s..

....

....

....

....

....

....

....

....

....

...

——

1,23

7,43

921

1,95

89,

300

179,

803

566,

992

2,20

5,49

2D

ispo

sals

....

....

....

....

....

....

....

....

....

....

..—

—(7

6,54

3)(6

0,46

4)—

(1,3

98)

—(1

38,4

05)

Fix

ed a

sset

s w

ritt

en-o

ff..

....

....

....

....

....

....

....

..—

——

——

—(1

09,0

37)

(109

,037

)

Bal

ance

at

31D

ecem

ber

2013

....

....

....

....

....

....

...

24,2

86,4

1529

,209

,946

31,6

99,5

898,

718,

106

467,

026

1,98

8,93

985

9,39

697

,229

,417

Acc

umul

ated

dep

reci

atio

n at

1Ja

nuar

y 20

13..

....

....

....

..—

12,3

92,5

3221

,510

,203

5,33

8,37

243

5,17

01,

354,

621

—41

,030

,898

Cha

rge

for

the

year

....

....

....

....

....

....

....

....

..—

1,46

0,45

82,

666,

499

678,

371

18,9

3621

8,07

3—

5,04

2,33

7A

ccum

ulat

ed d

epre

ciat

ion

of a

sset

s w

rite

-off

....

....

....

....

—(3

5)(6

9,19

4)(5

8,87

9)—

(1,3

03)

—(1

29,4

11)

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r 20

13..

....

....

....

—13

,852

,955

24,1

07,5

085,

957,

864

454,

106

1,57

1,39

1—

45,9

43,8

24

Net

boo

k va

lue

at 3

1D

ecem

ber

2013

....

....

....

....

....

.24

,286

,415

15,3

56,9

917,

592,

081

2,76

0,24

212

,920

417,

548

859,

396

51,2

85,5

93





6. Inventories

2015 2014 2013

Pharmacy inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,217,512 4,879,660 3,551,702Medical supplies inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,494,684 3,469,832 3,401,892

8,712,196 8,349,492 6,953,594


Restated Restated2015 2014 2013

Due from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,871,885 19,287,805 13,512,731Income from inpatients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482,460 478,015 331,524


20,287,040 17,028,372 11,106,807




Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,737,448 2,737,448 2,702,769Provision formed during the year . . . . . . . . . . . . . . . . . . . . . . . . . . 4,329,857 — 34,679

7,067,305 2,737,448 2,737,448



Withholding tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 903,563 753,289 616,049Due from employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 751,046 518,684 504,068Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 339,351 261,262 288,954Advances to suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,100 218,050 128,020Deposits with others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,575 104,075 104,075Due from related parties—shareholders . . . . . . . . . . . . . . . . . . . . . — 59,470 95,739Sundry debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 293,431 1,055,477 1,413,861

2,561,066 2,970,307 3,150,766Impairment of debtors and other debt balances . . . . . . . . . . . . . . . (210,734) (210,734) (210,734)

2,350,332 2,759,573 2,940,032

264






2015 2014 2013

Current accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,985,142 4,664,617 4,151,022Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,677 94,052 54,851

4,089,819 4,758,669 4,205,873

Current accounts are deposited with local banks, which are regulated by the Central Bank of Egypt.

10. Provisions


Provision for claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,370,000 6,500,000 6,500,000Provision for lawsuits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500,000 500,000 500,000Employees leave provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,124 — —

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,070,124 7,000,000 7,000,000


Balance at Provision Provision Balance at1 January made during utilised during 31 December


Provision for claims . . . . . . . . . . . . . . . . . . . . . . . 6,500,000 4,870,000 — 11,370,000Provision for lawsuits . . . . . . . . . . . . . . . . . . . . . . 500,000 — — 500,000Employees leave provision . . . . . . . . . . . . . . . . . . — 200,124 — 200,124

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000,000 5,070,124 — 12,070,124



Provision for claims . . . . . . . . . . . . . . . . . . . . . . . 6,500,000 — — 6,500,000Provision for lawsuits . . . . . . . . . . . . . . . . . . . . . . 500,000 — — 500,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,000,000 — — 7,000,000



Provision for claims . . . . . . . . . . . . . . . . . . . . . . . 2,200,000 6,823,071 (2,523,071) 6,500,000Provision for lawsuits . . . . . . . . . . . . . . . . . . . . . . 500,000 — — 500,000

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,700,000 6,823,071 (2,523,071) 7,000,000

265







Supplies and notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,773,357 10,403,824 11,088,720Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,464,370 6,706,513 4,958,647Due to related parties (Note 22) . . . . . . . . . . . . . . . . . . . . . . . 117,206 1,151,809 740,949Sundry creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 939,090 855,314 1,087,631

19,294,023 19,117,460 17,875,947

12. Borrowings

BankBurrowing overdraft Total

2015Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 980,214 8,497,257 9,477,471Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 891,782 — 891,782

2014Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 890,596 4,655,407 5,546,003Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,871,996 1,871,996

2013Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,543,740 1,000,966 5,544,706Non-current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,533,974 — 3,533,974

On 25 November 2014, the Company sold their land and buildings (Plot No. 11, Area C) as per apreliminary contract with the International Company for Finance Lease (Incolease). This sale contract cannot be executed unless a lease agreement over the land takes place.

On the same date, the Company entered a lease contract for 3 years—where the Company has the right tobuy the asset after the end of the lease period with 1 EGP.

The amounts due to Faisal Bank, which represent the remaining amount of the total land price amountingto 2,902,945 were paid by Incolease and leased back to Al Shorouk Hospital Company for 3 years with apredetermined net amount equalling the amount paid to Faisal Bank after calculating the interest for3 years.

Due to the substance of this transaction, it is not considered a sale and instead considered as a loanguaranteed by the asset. Such a transaction is outside of the scope of the Egyptian Accounting Standard 20‘‘Finance Lease’’.

Accordingly, the transaction was not considered as a sale and lease-back agreement but it was consideredas a loan from Incolease for 36 months—where each monthly instalment amounts to 93,160 EGP with avariable interest based on the corridor rates announced by the Central Bank of Egypt.

The average interest rate on bank overdrafts in EGP was 10% (2014: 9.5%).


The issued and paid up capital comprises 25,000 shares of EGP 100 each, totalling EGP 25 million.

266





14. Reserves

Legal General Balance at thereserve reserve end of the year

Balance at 1 January 2013 restated . . . . . . . . . . . . . . . . . . . . . . 5,058,647 2,623,821 7,682,468Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492,351 492,351 984,702

Balance at 31 December 2013 restated . . . . . . . . . . . . . . . . . . . . 5,550,998 3,116,172 8,667,170

Balance at 1 January 2014 restated . . . . . . . . . . . . . . . . . . . . . . 5,550,998 3,116,172 8,667,170Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 281,390 281,390 562,780

Balance at 31 December 2014 restated . . . . . . . . . . . . . . . . . . . . 5,832,388 3,397,562 9,229,950

Balance at 1 January 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,832,388 3,397,562 9,229,950Additions during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 492,535 492,534 985,069

Balance at 31 December 2015 . . . . . . . . . . . . . . . . . . . . . . . . . . 6,324,923 3,890,096 10,215,019

Legal reserve

In accordance with the Law No. 159 of 1981 and the Company’s Articles of Association, 05% of the netprofit for the year shall be transferred to the legal reserve. As proposed by the Board of Directors, thistransfer may be partially discontinued if the legal reserve reaches 50% of the issued capital. This reserve isnot available for distribution to shareholders.

General reserve

As proposed by the Board of Directors recommendation and in accordance with the Company’s Articles ofAssociation, 05% of the net profit for the year shall be transferred to the general reserve.



Inpatient and medical supervision revenue . . . . . . . . . . . . . . . 48,405,311 42,987,097 38,517,410Surgeries revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,867,090 24,026,725 18,159,094Outpatient clinics revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,838,567 15,129,358 13,419,969Service revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,744,266 8,534,629 6,768,528Laboratories revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,682,656 9,240,787 7,458,511Radiology revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,916,306 5,528,323 4,032,742Pharmacy revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,475,139 5,279,496 4,605,209Emergency revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,268,115 2,959,402 2,278,642Endoscopy revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,839,168 1,477,311 1,431,641Dialysis revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,385,343 1,322,977 1,113,036Physiotherapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 749,230 554,825 319,234Dentistry revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470,987 551,142 420,190

138,642,178 117,592,072 98,524,206

267





16. Operating costs


Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . . . 43,977,641 39,022,064 34,725,575Physician fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,808,150 19,244,771 14,823,979Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,602,524 15,904,924 15,719,894Fixed assets depreciation and write-off . . . . . . . . . . . . . . . . . . . 3,794,141 4,757,639 5,042,337Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . . 2,986,078 2,819,231 1,998,245Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . 2,648,821 2,338,918 2,087,328Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 522,859 — —Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,572,993 1,763,007 1,638,031

99,913,207 85,850,554 76,035,389



Consultancy and legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,851,110 4,198,167 3,700,069Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,203,627 3,476,122 2,329,751Impairment of customers’ balances . . . . . . . . . . . . . . . . . . . . . . 4,329,857 — 34,679Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . 3,395,730 2,745,407 2,317,886Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . . 1,733,091 1,673,736 1,317,162BOD meeting allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,475,000 777,000 652,500Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 607,264 714,443 669,881Fixed assets depreciation and write-off . . . . . . . . . . . . . . . . . . . 48,090 131,444 —Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,938,099 3,362,251 3,518,977

25,581,868 17,078,570 14,540,905

18. Other income


Buffet income and cafeteria concession . . . . . . . . . . . . . . . . . . . . . 1,333,135 998,246 908,608Loss on sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (318,419) (11,496) (1,134)Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 216,627 202,572 165,216

1,231,343 1,189,322 1,072,690

268







Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . . 43,977,641 39,022,064 34,725,575Physician fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,808,150 19,244,771 14,823,979Salaries, wages and benefits* . . . . . . . . . . . . . . . . . . . . . . . . . 21,806,151 19,381,046 18,049,645Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . 6,044,551 5,084,325 4,405,214Consultancy and legal fees . . . . . . . . . . . . . . . . . . . . . . . . . . 5,851,110 4,198,167 3,700,069Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . 4,719,169 4,492,967 3,315,407Impairment of customers’ balances . . . . . . . . . . . . . . . . . . . . 4,329,857 — 34,679Fixed assets depreciation and write-off . . . . . . . . . . . . . . . . . . 3,842,231 4,889,083 5,042,337BOD meeting allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,475,000 777,000 652,500Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,130,123 714,443 669,881Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,511,092 5,125,258 5,157,008

125,495,075 102,929,124 90,576,294



Salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,435,003 15,799,878 14,717,177Bonuses and incentives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,656,209 1,448,917 1,383,695Employees’ benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,403,273 1,068,169 865,943Social insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,311,666 1,064,082 1,082,830

21,806,151 19,381,046 18,049,645

20. Finance income


Gains on currency translation differences . . . . . . . . . . . . . . . . . . . . . . . . 104,079 45,200 21,147Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,263 67,862 51,826

128,342 113,062 72,973

21. Income taxes

Income tax for the year is comprises of:

2015 2014 2013

Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,108,178 4,491,563 2,638,327Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (198,380) (29,752) (172,330)

3,909,798 4,461,811 2,465,997

269






The tax on profit before taxation theoretically differs from the amount expected to be earned by applyingthe average tax rate applicable to the Company’s profits as follows:

2015 2014 2013

Net profit before taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,317,555 15,910,207 2,395,801

Income tax calculated based on the applicable local tax rate . . . . . 1,871,450 3,579,797 539,055Add / (less):Non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,038,348 882,014 1,926,942

Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,909,798 4,461,811 2,465,997

Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47% 28% %

2015 2014 2013

Current income tax liabilityBalance at the beginning of the year . . . . . . . . . . . . . . . . . . . . . 5,241,563 3,388,327 4,423,461Income tax for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,108,178 4,491,563 2,638,327Tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,241,563) (2,638,327) (3,673,461)

Balance at the end of the year . . . . . . . . . . . . . . . . . . . . . . . . . . 4,108,178 5,241,563 3,388,327

22. Deferred tax

Balance at Movement for Balance at1 January the year 31 December

2015 (asset) (asset) 2015 (asset)

Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,965,066 40,852 2,005,918Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 157,528 157,528

1,965,066 198,380 2,163,446



Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,935,314 29,752 1,965,066

1,935,314 29,752 1,965,066



Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,762,984 172,330 1,935,314

1,762,984 172,330 1,935,314

270






Nature of Nature of Volume ofrelationship transaction transaction 2015 2014 2013

Cairo SpecializedHospital . . . . . . . . . . . Under same Administrative 15,124,404 13,997 1,084,513 523,144

management expensesIbn Sina . . . . . . . . . . . . . Under same Purchases 4,351,661 103,209 67,296 217,805

management

117,206 1,151,809 740,949

24. Tax position

(1) Corporate tax

• The Company was inspected, and differences were settled from inception till 31 December 2004.The limitation period was applied to the years from 2005 till 2009. The inspection of the yearsfrom 2010 to 2014 is in progress.


(2) Income tax

• The Company was inspected till 31 December 2004

• There are tax differences for the years 2001 till 2004 which are still disputed. Such differences arebeing considered by the Committee of Appeal.

• The inspection for the years from 2005 till 2013 is now in progress.

• No inspection took place for the years 2014 and 2015

• The Company makes payments for different periods, but not in accordance with the fixed legalschedule.

(3) Stamp duty tax

• The Company was inspected till 31 July 2006, and settlement was made.

• No inspection took place for the years from 2007 till 2015

• The Company regularly submits the tax returns on time.

25. Correction of prior years’ errors

During the year, management corrected accounting errors related to prior periods net of tax as required bythe Egyptian Accounting Standard EAS 5 ‘‘Accounting policies, change in accounting estimates anderrors’’. Errors corrected during the year are as follows:

Fixed assets, receivables and other debit balances, other credit balances, general and administrativeexpenses, and interest expenses

During prior years, management recognised the agreement with the International Company for FinanceLease (Incolease) to settle the remaining value of Plot No 11’s sale price acquired from Faisal Bank byrecording the whole amount as debit and credit balances and amortizing the amount on the incomestatement instead of recognizing these amounts as loans and fixed assets. This does not comply with the

271





25. Correction of prior years’ errors (Continued)

Egyptian Accounting Standards 10 ‘‘Fixed assets and depreciation’’ and 20 ‘‘Finance Lease’’. This had amaterial impact on the above mentioned accounts.

Provisions

Management did not recognise claims provision for income tax inspection differences, while receivedclaims and evidences requires such provisions which is not in compliance with Egyptian AccountingStandard 28 (Provisions and contingent assets and liabilities).

Income tax

Managements records the differences identified by the corporate tax inspection on 2014 incomestatements, and this amount has been adjusted to be reflected on prior year retained earnings.

Projects under progress

Management did not make impairment for projects under construction for the Dialysis Center Projectwhile it was clear that this project will not continue because appropriate authorities approvals were notobtained. Accordingly, it was evidenced that the expected residual value from usage or sale of the fixedasset had exceeded the net book value. The mentioned treatment does not comply with requirements ofEgyptian Accounting Standards 31 ‘‘Impairment of assets’’.

Debtors and other debit balances

Management did not make a provision for impairment of withholding tax receivables while it was clearduring the prior periods that such balances are uncollectable due to lack of supporting documents, whichdoes not comply with requirements of Egyptian Accounting Standards 31 ‘‘Impairment of assets’’ and 26‘‘Financial instruments, recognition and measurement’’.

272






Other

All other adjustments are reclassification between balances and items of the balance sheet and statementof income, to agree of current year presentation.

Balance at Balance at31 December 31 December2013 before 2013 after

Adjustments effect on balance sheet: adjustment Adjustment adjustment

Fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,426,198 859,395 51,285,593Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,334,103 (1,334,103) —Projects under construction . . . . . . . . . . . . . . . . . . . . . . . . . . 3,856,635 (916,603) 2,940,032Debtors and other debit balances . . . . . . . . . . . . . . . . . . . . . . 9,651,823 1,454,984 11,106,807Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (3,388,327) (3,388,327)Current income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,195,935) 1,195,935 —Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,306,521) 11,306,521 —Suppliers and notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . (18,748) 18,748 —Advances from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,498,723) (8,377,224) (17,875,947)Trade and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (5,544,706) (5,544,706)Current portion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (3,533,974) (3,533,974)Non-current portion of borrowings . . . . . . . . . . . . . . . . . . . . . (4,543,740) 4,543,740 —Long-term notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,533,974) 3,533,974 —Provision for claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (7,000,000) (7,000,000)Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (8,667,170) (8,667,170)General reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,116,172) 3,116,172 —Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,550,998) 5,550,998 —Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,598,729) 7,181,640 (7,417,089)

273






The effect on retained earnings is as follows:

2013

Total adjustments on prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,483,644Adjustments on 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,697,996

Net adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,181,640

Balance at Balance at31 December 31 December2013 before 2013 after

Adjustments effect on statement of income: adjustment Adjustment adjustment

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (98,757,786) 233,580 (98,524,206)Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,982,173 5,053,216 76,035,389General and administrative expenses . . . . . . . . . . . . . . . . . 13,634,428 906,477 14,540,905Selling and marketing expenses . . . . . . . . . . . . . . . . . . . . . 116,585 (116,585) —Fixed assets depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . 5,042,338 (5,042,338) —Depreciation of Intangible assets . . . . . . . . . . . . . . . . . . . . 652,500 (652,500) —Finance lease expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 134,450 (134,450) —Board of Directors allowance . . . . . . . . . . . . . . . . . . . . . . — 6,676,913 6,676,913Donations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 323,071 (323,071) —Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,679 (34,679) —Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (184,245) (888,445) (1,072,690)Gains on currency translation differences . . . . . . . . . . . . . . (51,826) (21,147) (72,973)Reversal of Impairment of assets’ value . . . . . . . . . . . . . . . (21,147) 21,147 —Capital gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 983 (983) —Finance expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 20,861 20,861

The effect on the business results is as follows:

2013

Net profit after income tax as previously issued at 31 December 2013 . . . . . . . . . . . . . . . . 5,627,800Prior years adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,623,041)

Net profit after income tax after adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (995,241)


On 24 January 2016, Cleopatra Hospital Company acquired of 99% stake in Al Shorouk HospitalCompany for an acquisition cost of EGP 280 million. Actual control over operational and financialperformance is transferred on 31 January 2016. The legal formalities to record this acquisition in thecommercial registration of Al Shorouk Hospital Company are under process. Accordingly financialstatements of Al Shorouk Hospital will be consolidated in the financial statements of Cleopatra HospitalCompany in the first consolidated financial statements after 31 January 2016.

274

Cleopatra Hospital Company and its subsidiaries

Auditor’s report

To: The Shareholders of Cleopatra Hospital Company S.A.E. and its subsidiaries

Report on the consolidated financial statements

We have audited the accompanying consolidated financial statements of Cleopatra Hospital CompanyS.A.E. and its subsidiaries (the ‘‘Group’’), which comprise the consolidated balance sheet as at31 December 2015 and the consolidated statements of income, changes in equity and cash flows for thefiscal year then ended, and a summary of significant accounting policies and other notes.

Management’s responsibility for the consolidated financial statements

These consolidated financial statements are the responsibility of the Group’s management. Management isresponsible for the preparation and fair presentation of these consolidated financial statements inaccordance with Egyptian Accounting Standards and in light of the prevailing Egyptian laws. Thisresponsibility includes designing, implementing and maintaining internal control relevant to thepreparation and fair presentation of financial statements that are free from material misstatement,whether due to fraud or error. Management responsibility also includes selecting and applying appropriateaccounting policies and making accounting estimates that are reasonable in the circumstances.


Our responsibility is to express an opinion on these consolidated financial statements based on our audit.We conducted our audit in accordance with Egyptian Standards on Auditing and in light of the prevailingEgyptian laws. Those standards require that we comply with ethical requirements and plan and performthe audit to obtain reasonable assurance that the consolidated financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe consolidated financial statements. The procedures selected depend on the auditor’s judgement,including the assessment of the risks of material misstatement of the consolidated financial statements,whether due to fraud or error. In making those risk assessments, the auditor considers internal controlrelevant to the Group’s preparation and fair presentation of the consolidated financial statements in orderto design audit procedures that are appropriate in the circumstances, but not for the purpose of expressingan opinion on the effectiveness of the Group’s internal control. An audit also includes evaluating theappropriateness of accounting policies used and the reasonableness of accounting estimates made bymanagement, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for ouraudit opinion on these consolidated financial statements.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all materialrespects, the consolidated financial position of Cleopatra Hospital Company S.A.E. and its subsidiaries asat 31 December 2015, its consolidated financial performance, and its consolidated cash flows for the fiscalyear then ended in accordance with the Egyptian Accounting Standards and in light of the related Egyptianlaws and regulations.

Tamer Abdel Tawab Ahmed Gamal Hamadallah El-AtreesMember of Egyptian Society of Accountants & Member of Egyptian Society of Accountants &Auditors AuditorsMember of AICPA Member of the Egyptian Tax SocietyR.A.A. 17996 R.A.A. 8784Mansour & Co. PricewaterhouseCoopers EFSA Registration 136

Mansour & Co. PricewaterhouseCoopers

6 April 2016Cairo

275

CLEOPATRA HOSPITAL COMPANY S.A.E. AND ITS SUBSIDIARIESOriginally issued in Arabic

Consolidated balance sheet

At 31 December 2015


Note 2015 2014

Non-current assetsFixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 267,049,952 62,787,629Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 97,195,020 —

Total non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 364,244,972 62,787,629

Current assetsHeld-to-maturity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 38,080 38,080Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 15,517,957 6,337,822Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 89,986,584 34,246,704Debtors and other debit balances . . . . . . . . . . . . . . . . . . . . . . . . . . 11 18,282,142 35,179,584Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 109,906,869 53,632,054

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,731,632 129,434,244

Current liabilitiesProvisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 19,890,797 3,367,352Creditors and other credit balances . . . . . . . . . . . . . . . . . . . . . . . . . 14 92,550,296 29,852,391Current portion of borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 40,600,000 —Current income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 32,136,609 21,372,222

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,177,702 54,591,965

Surplus in working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,553,930 74,842,279

Total investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 412,798,902 137,629,908

Financed as follows:Shareholders’ equityPaid-up capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 80,000,000 80,000,000Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 (62,303,508) 11,637,554Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108,270,052 43,694,642

Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125,966,544 135,332,196

Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 33,250,055 —

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,216,599 135,332,196

Non-current liabilitiesNon-current portion of borrowings . . . . . . . . . . . . . . . . . . . . . . . . . 15 162,400,000 —Creditors and other credit balances—due to related parties . . . . . . . 14 47,379,723 —Deferred income taxes liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 43,802,580 2,297,712

Total non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 253,582,303 2,297,712

Total funding of working capital and non-current liabilities . . . . . . . 412,798,902 137,629,908


276


Consolidated statement of income



Note 2015 2014

Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 409,589,789 290,294,814Less:Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 (269,828,593) (204,608,154)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,761,196 85,686,660Add / (Less)General and administrative expenses . . . . . . . . . . . . . . . . . . . . . . 21 (40,673,242) (20,670,525)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (3,422,585) (2,886,902)Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 2,521,355 678,591

Profit for the year before finance income and income tax . . . . . . 98,186,724 62,807,824Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 6,253,536 2,086,651finance expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 (8,487,998) (3,235)

Profit for the year before income tax . . . . . . . . . . . . . . . . . . . . . 95,952,262 64,891,240Current tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 (24,889,872) (21,372,222)Deferred tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 (2,166,243) 283,107

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,896,147 43,802,125

Distributed as follows:Equity of the parent’s shareholders . . . . . . . . . . . . . . . . . . . . . . . . 66,765,516 43,802,125Minority Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 2,130,631 —

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,896,147 43,802,125


277


Consolidated statement of changes in shareholders’ equity



Retained Shareholders MinorityShare capital Reserve earnings equity interest Total equity

Balance at 1 January 2014 . . . . . 80,000,000 9,594,619 40,751,213 130,345,832 — 130,345,832Transfer to reserves . . . . . . . . . . — 2,042,935 (2,042,935) — — —Dividends distribution for 2013 . . — — (38,815,761) (38,815,761) — (38,815,761)Profit for the year . . . . . . . . . . . — — 43,802,125 43,802,125 — 43,802,125

Balance at 31 December 2014 . . . 80,000,000 11,637,554 43,694,642 135,332,196 — 135,332,196

Balance at 1 January 2015 . . . . . 80,000,000 11,637,554 43,694,642 135,332,196 — 135,332,196Transfer to reserves . . . . . . . . . . — 2,190,106 (2,190,106) — — —Share of minority interests from

the acquisition of subsidiaries . . — — — — 31,119,424 31,119,424Acquisition reserve . . . . . . . . . . — (76,131,168) — (76,131,168) — (76,131,168)Profit for the year . . . . . . . . . . . — — 66,765,516 66,765,516 2,130,631 68,896,147

Balance at 31 December 2015 . . . 80,000,000 (62,303,508) 108,270,052 125,966,544 33,250,055 159,216,599


278


Consolidated statement of cash flows



Note 2015 2014

Cash flows from operating activitiesProfit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,952,262 64,891,240Adjustments to reconcile net income to cash flows from operating

activitiesFixed assets depreciation and write-off . . . . . . . . . . . . . . . . . . . . . . 6 9,410,849 7,152,719Loss / (gain) on sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . 15,970 (39,112)Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 3,422,585 2,886,902Impairment in customers’ balances . . . . . . . . . . . . . . . . . . . . . . . . . 21 7,852,192 555,915Provisions no longer required . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (560,400)Finance Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,487,998 —Finance income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,160,009) (2,068,573)

Operating profits before changes in working capital . . . . . . . . . . 118,981,847 72,818,691Changes in working capitalChange in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,003,182) 1,998,163Change in trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,425,803) (11,151,016)Change in debtors and other debit balances . . . . . . . . . . . . . . . . . . 29,038,137 18,573,585Change in creditors and other credit balances . . . . . . . . . . . . . . . . . 67,405,516 8,281,299Provisions utilised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (6,774,940) (280,638)Income tax paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 (21,372,222) (13,996,640)

Net cash flows generated from operating activities . . . . . . . . . . . . 172,849,353 76,243,444

Cash flows from investing activitiesProceeds from sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . 10,859 62,300Payments to purchase fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . (10,398,432) (3,468,799)Payments to acquisition of subsidiaries . . . . . . . . . . . . . . . . . . . . . . (306,858,975) —Deposits with a maturity of more than 3 months from the date of

placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (62,889,123) —Finance gain collected . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,160,009 2,068,573

Net cash flows used in investing activities . . . . . . . . . . . . . . . . (373,975,662) (1,337,926)

Cash flows from financing activitiesDividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — (38,815,761)Proceeds from borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,000,000 —Finance cost paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,487,998) —

Net cash flows generated from / (used in) financing activities . . . . 194,512,002 (38,815,761)

Change in cash and cash equivalents during the year . . . . . . . . . . . (6,614,307) 36,089,757Cash and cash equivalents at the beginning of the year . . . . . . . . . . 53,632,054 17,542,298

Cash and cash equivalents at the end of the year . . . . . . . . . . . . . . 12 47,017,747 53,632,055


279


Notes to the consolidated financial statements



1. Introduction

Cleopatra Hospital (Lashin & Co.) is a limited partnership company incorporated on 19 July 1979.

On 27 June 2005, a resolution no. 4092 of 2005 was issued by the Chairman of the General Authority forInvestment (GAFI) to authorize the Cleopatra Hospital (Lashin & Co.) ‘‘Limited Liability Company’’ totransform its legal form to Cleopatra Hospital Company S.A.E. in accordance with the provisions of lawNo. 8 for 1997 and law No. 95 for 1992.

The purpose of the Company is establishing a private hospital with the aim to offer modern and highquality medical services and provide medical care and treatment for patients. The Company may haveinterest or participate in any manner in companies or other firms, which carry on similar activities in Egyptor abroad. The Company may acquire such entities or merge therewith.

The Company is located at 39 Cleopatra Street, Masr Al Jadidah, Cairo.

The parent Company is Care Healthcare Ltd., which owns 99.99% of the Company’s share capital.

On 16 September 2015, Cleopatra Hospital Company S.A.E. acquired 52.7% of the total shares of CairoSpecialized Hospital.

On 22 September 2015, Cleopatra Hospital Company S.A.E. acquired 99.92% of the total shares of NileBadrawi Hospital.

These consolidated financial statements have been approved for issuance by the management of the ParentCompany on 6 April 2016, considering the fact that the Shareholders of the Company have the authority toamend the consolidated financial statements after being issued.


The following are the accounting policies applied in the preparation of these consolidated financialstatements:

A) Basis of preparation of consolidated financial statements

The consolidated financial statements have been prepared in accordance with Egyptian AccountingStandards (EASs) and relevant laws, which have all been applied consistently throughout the fiscal yearexcept when otherwise indicated. The consolidated financial statements have been prepared under thehistorical cost convention.

The preparation of the consolidated financial statements in conformity with EASs requires the use ofcertain critical accounting estimates. It also requires management to exercise its judgement in the processof applying the Group’s accounting policies. The areas where the most significant accounting estimates andjudgements applied in preparation of the consolidated financial statements are disclosed in Note 4.

The EAS’s require the reference to the International Financial Reporting Standards when there is no EAS,or legal requirements that explain the treatment of specific balances and transactions.




280


Notes to the consolidated financial statements (Continued)




Amendments applicable on the Group’s activities and financial statements are summarised in thepresentation and disclosure. According to the new standards balance sheet will be presented differentlyand working capital will not be presented in the financial statements. Results of operations will bepresented in two statements; the first will present income and expenses for the year (statement of income),and the second will start by the net income (loss) for the year and will include income and expenses itemsrecognised in equity to present the comprehensive income (statement of comprehensive income). The newstandards will require more disclosure on the financial risk management.

B) Basis of consolidation

1. Subsidiaries

Subsidiaries are the companies (including special purpose entities) over which the Group has thepower to govern the financial and operating policies, by usually having more than one half of thevoting rights. The effect of potential voting rights that are currently exercisable or convertible areconsidered when assessing the extent of the Group’s control.

The Group uses the acquisition method of accounting to account for the acquisition ofsubsidiaries from entities not under common control. The consideration transferred for theacquisition of a subsidiary is the fair values of assets transferred, equity instruments issued,liabilities incurred by the Company, and/or the liabilities accepted on behalf of the acquiree at thedate of exchange plus any costs that are directly attributable to the acquisition. Identifiable assetsacquired and liabilities assumed in a business combination are initially measured at fair value atthe acquisition date. The excess of the cost of acquisition over the fair value of the Group’s shareof the identifiable net assets acquired is recorded as goodwill. If the cost of acquisition is less thanthe fair value of the mentioned net assets, the difference is recognised directly in the statement ofincome.

In case the acquisition process is carried out by an entity under joint control, subsidiaries are fullyconsolidated from the date on which control is transferred to the Group using the predecessoraccounting method. Under this method, assets and liabilities are transferred at book values of theconsolidated financial statements of highest consolidating entity. If this is not possible, assets andliabilities are transferred at the same book value stated in the transferred company’s accountingrecords. The difference between the carrying value of the net assets and the cost of acquisition isrecognised in equity.

Subsidiaries are fully consolidated from the date on which control is transferred to the group.They are de-consolidated from the date that control ceases. Transactions, balances and unrealisedgains on transactions between Group companies are excluded. Unrealised losses are eliminated,and will be considered as an indication of the impairment of the transferred assets.

Subsidiaries including, companies which were under common control before businesscombination, are consolidated in these financial statements from date of acquisition. Accordingly,comparative figures reflects the Parent Company only.

Accounting policies of subsidiaries are changed, where necessary, to ensure consistency with thepolicies adopted at the Group’s level.

281






The consolidated financial statements include the financial statements of the followingsubsidiaries:

Country of Percentage ofincorporation Ownership

Nile Badrawi Hospital Co. S.A.E. . . . . . . . . . . . . . . . . . . . . . . . . . Egypt 99.92%Cairo Specialized Hospital Co. S.A.E. . . . . . . . . . . . . . . . . . . . . . Egypt 52.7%

2. Sale, acquisition and minority interests

The Group recognises sales and acquisitions made with the minority, as transactions with partiesoutside the Group. Gains or losses on disposal of equity to the minority, are recognised in theconsolidated equity. Where purchase is made from minority, the difference between theconsideration paid and the carrying value of the share purchased in the subsidiary’s assets isrecognised as a reserve in the consolidated equity.

If the share of minority interest in the retained losses of a subsidiary exceeded their equity in thatsubsidiary, such increase is stated within majority’s equity, except for those losses, which theminority is obliged to cover, provided they have the ability to make additional investments tocover such losses. If the subsidiary subsequently made profits, these profits are added to theequity of the majority to the extent of covering the losses that have already been covered by themajority’s on behalf of the minority.

3. Associates

• Associates are entities over which the Group has significant influence but not control,generally accompanying a shareholding in these entities of between 20% and 50% of thevoting rights.

• Investments in associates are accounted for using the equity method of accounting.Investments are measured on initial recognition at cost.

• Goodwill arising from investment in associates is stated within investment cost net ofaccumulated impairment.

• The Group’s share of its associates’ post-acquisition profit and loss is recognised in thestatement of income, and its share of post-acquisition movements in reserves is recognised inreserves. The carrying value of investment is adjusted against the Group’s share inpost-acquisition changes in equity.

• When the Group’s share of losses in associates equals or exceeds its interest in the associate,including any other unsecured receivables, the Group does not recognise further losses,unless it has incurred legal or constructive obligations or made payments on behalf of theassociate.

• Unrealised gains on transactions between the Group and its associates are eliminated to theextent of the Company’s interest in the associates. Unrealised losses are also eliminatedunless the transaction provides evidence of an impairment of the asset transferred.Accounting policies applied in the associates are adjusted when necessary to ensureconsistency with the policies adopted by the Group.

282






C) Segment reporting

Business segments are reported in line with the reports provided internally to the senior management,which makes decisions related to resources allocation and evaluation of segments’ performance in theGroup. The senior management is represented in Group’s executive management committee. The segmentreports are provided to the Group based on each company, as each subsidiary is considered a separatebusiness segment.

D) Foreign currency translation


Items included in the consolidated financial statements are measured using the currency of theprimary economic environment in which the Group operates (the ‘‘functional currency’). Theconsolidated financial statements are presented in Egyptian Pounds (‘‘EGP’’), which is theGroup’s functional and presentation currency.


Foreign currency transactions during the year are translated into the functional currency usingthe exchange rates prevailing at the dates of the transactions. Foreign exchange gains and lossesresulting from the settlement of such transactions and from the revaluation of monetary assetsand liabilities denominated in foreign currencies at the consolidated balance sheet date arerecognised in the consolidated statement of income.

E) Fixed assets



All repair and maintenance costs are charged to the statement of income during the fiscal year in whichthey are incurred. Major renovation costs are capitalised and included in the asset’s cost when they areexpected to raise the expected pattern of the Company’s future economic benefits beyond the estimatedoriginal benefits when the asset was acquired and the costs of such additions can be reliably measured.These costs will be depreciated at the lower of the asset’s remaining useful life or the expected useful lifeof these renovations, the net carrying amount of the disposed part is eliminated.

The straight-line method is used to calculate the depreciation by reducing the asset’s value to its salvagevalue over the estimated useful life except the land that is not considered a depreciable asset. The fixedassets’ salvage value and useful life are reviewed annually, and adjusted, if appropriate.


Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5%Machinery, equipment and devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15%Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10%Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25%

283






An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carryingamount is greater than its estimated recoverable amount. Gains and losses on disposals are determined bycomparing the realisable value with the net carrying amount, and the difference is recognised in thestatement of income.

F) Intangible assets

1) Goodwill

Goodwill results from the acquisition of subsidiaries and represents the excess of the cost ofacquisition of shareholding in subsidiaries over the fair value of the Group’s share of the netassets of the acquired associate at the date of acquisition. Goodwill resulting from the acquisitionof a subsidiary is included within intangible assets.

The Group’s management conduct analysis annually or at shorter intervals, where there is anindication for impairment, to estimate whether the carrying value of goodwill is expected to befully recovered, and reduce the carrying value of goodwill if it is higher than the expectedrecoverable amount. Any losses resulting from impairment of goodwill are charged to the incomestatement, and cannot be reversed subsequently.

Profits and losses resulting from the disposal of investments in subsidiaries or associates comprisethe carrying value of the goodwill related to the investment.

Goodwill is allocated to cash generating units for the purpose of measurement of impairment.Allocation is made on cash generating units or a group of cash generating units that are expectedto directly benefit from goodwill.

2) Trade name

The trade name is included within intangible assets, represented in the name of Nile BadrawiHospital Co. S.A.E., which result from the acquisition at fair value at the date of acquisition.

G) Inventories


H) Financial assets

1) Classification

The Company classifies its financial assets into the following categories at initial recognitiondepending on the purpose for which the financial assets were acquired: The management of theCompany has classified its financial assets within the group of loans and receivables.

Loans and receivables



284






This category includes trade receivables, cash on hand and at banks, and due from related parties.

2) Initial and subsequent measurement:

1—Financial assets are measured on acquisition at fair value plus transaction costs.

2—Financial assets are derecognised when the right to receive cash flows from such assets hasexpired or has been transferred and the Company has transferred substantially all risks andrewards of ownership.

3—Loans and receivables are subsequently measured at amortised cost using the effectiveinterest method.

3) Impairment of financial assets:







I) Impairment of non-financial assets:

Intangible assets that have an indefinite useful life, and so are not depreciated, are reviewed forimpairment whenever events or changes in circumstances indicate that the carrying amount may not berecoverable. An impairment loss is recognised in the statement of income for the amount by which theasset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’sfair value less costs of disposal and value in use. For the purposes of assessing impairment, assets aregrouped at the lowest levels for which there are largely independent cash inflows.

Reversal of impairment losses recognised in prior years is recorded when there is an indication thatimpairment losses recognised for the asset no longer exist or have decreased. Loss of impairment, whichshould not exceed the fair value that will be determined (net of depreciation), is reversed. Such reversal isrecognised in the statement of income, excluding goodwill.

285






J) Issued and paid up capital


K) Legal reserve

As required by the Company’s Articles of Association, 5% of the net profit shall be transferred toconstitute the legal reserve, once the financial statements are approved by the Company’s ordinary generalassembly meeting. Such transfer may be discontinued when the reserve equals 50% of the issued and paidup capital. Whenever this reserve is lower than this percentage, the deduction should be continued. Thisreserve is not available for distribution.

L) Provisions

Provisions are recognised when the Company has a (legal or constructive) obligation as a result of pastevents; it is expected that this settlement will result in an outflow of the Company’s resources, whichensures that economic benefits will arise; and it is probable that the resource usage will be required tosettle the obligation and a reliable estimate of the amount of this obligation can be made.


M) Suppliers and notes payables

Suppliers and notes payables are obligations to pay for goods and services that have been acquired in theordinary course of business. Suppliers and notes payables are initially recognised at fair value of productsand services received from others, whether they have been billed or not. Long term liabilities arerecognised at their present value, and suppliers and notes payables are subsequently shown at amortisedcost using the effective interest method.

N) Borrowings

Borrowings are recognised initially at the amount of the proceeds received, net of transaction costsincurred. Borrowings are subsequently stated at amortised cost using the effective interest method; anydifference between proceeds (net of transaction costs) and the redemption value is recognised in theconsolidated statement of income over the period of the borrowings using the effective yield method.

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifyingassets are capitalised as part of the costs of those assets. The cost of borrowing, which is capitalised, isdetermined based on actual borrowing costs, which are incurred by the Group during the year due toborrowing process, less any income realised from the temporary investment of funds borrowed.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defersettlement of the liability for at least 12 months after the date of the financial statements.

O) Employees’ benefits


According to the Companies Law, the Group pays 10% of its cash dividends to its employees upto a maximum equal to the total salaries of the latest fiscal year before distribution. Employees’share of profit is recognised as dividends in equity and as a liability when approved by the

286






Shareholders’ General Assembly. No liability is recognised for employees’ share of profit relatingto undistributed profits.


The Group pays contributions to the Public Authority for Social Insurance on a mandatory basisin accordance with the rules of Social Security Law. The Group has no further paymentobligations other than those that have been paid. The regular contributions are recognised asperiodic costs for the year in which they are due and as such are included in staff costs.

P) Revenue recognition

Revenue is measured at the fair value of the consideration received or receivable, including cash balances,trade and notes payable for rendering medical services and sale of medicine throughout the Group’sordinary course of business, and bet of sales taxes, deductions or discounts.

Revenues are recognised when the amount of revenue can be reliably measured; when it is probable thatfuture economic benefits related to the sale process or service provision will flow to the Group; and whenother specific criteria have been met for each of the Group’s activities as described below. The revenueamount is not considered reliably measurable unless all contingent liabilities are settled. The Group basesits estimates on historical results, taking into consideration the type of customer, the type of transactionand the specifics of each arrangement.

(1) Medical services revenues

The Group renders several medical services, including surgeries, admission, medical supervision,analyses, investigations, x-rays and outpatient services. Revenue from medical service income isrecognised when the service is rendered to the patient.

(2) Sale of medicine revenues

The Group sells medicine through the hospital pharmacy or when giving them to inpatientsadmitted in the hospital. The Group recognises the revenues of medicines when the patientreceives the medicine or when the medicine is used for the treatment of inpatients.

(3) Rental income

The Groups rents spaces to others. Such rental is recognised in the statement of income over theperiod of the lease.

(4) Interest income


Q) Leases

1) Finance lease

Leases are accounted for in accordance with Law 95 for the year 1995 if the leasee is not obligedto purchase the asset at the end of the lease term; the lease is registered in the register of theEFSA’s register; the lease grants the leasee the right to purchase the assets at a definite date anda definite amount; and the contract period represents at least 75% of the expected useful life of

287






the asset, at least, or the present value of the total lease payments represents at least 90% of thevalue of the asset.

The cost of lease, including the cost of maintenance of the leased assets are recognised as anexpense in the consolidated statement of income for the period in which they occurred. If theGroup decides to exercise the right to purchase the leased assets, the cost of the right to purchaseis capitalised as a fixed asset, which is depreciated over the useful life of the expected remaininglife of the asset in the same method followed with similar assets.

2) Operating lease

Leases in which the lessor retains the risks and rewards of ownership are classified as operatingleases.

Payments made under operating leases net of any discounts received from the lessor arerecognised as expense in the statement of income on a straight-line basis over the period of thelease.

R) Current and deferred income tax

The income tax for the year is calculated based on the tax laws enacted at the balance sheet date.Management periodically evaluates tax situation through tax returns, taking into account the differencesthat may arise from some interpretations issued by administrative or regulatory authorities, and establishesprovisions where appropriate based on amounts expected to be paid to the tax authority.

Deferred income tax is fully recognised, using the liability method, on temporary differences arisingbetween the tax bases of assets and liabilities and their carrying amounts in the consolidated financialstatements. The deferred income taxes are not accounted for if it arises from initial recognition of an assetor liability other than those arising from business combination that at the time of the transaction affectsneither accounting nor taxable income.

Deferred income tax is determined using tax rates in accordance with the law prevailing at the consolidatedbalance sheet date that are expected to apply when the deferred income tax asset is realised or thedeferred income tax liability is settled.

Deferred income tax assets are recognised to the extent that it is probable that future taxable profit will beavailable, against which the temporary differences can be utilised.

S) Dividends

Dividends are recognised in the Company’s consolidated financial statements in the period in which thedividends are approved by Company’s General Assembly of Shareholders approves the dividends.

T) Cash and cash equivalents

For the purpose of preparation of consolidated statement of cash flows, cash and cash equivalents includescash in hand, bank current accounts, and term deposits with maturities of three months of the date ofplacement.

288






(1) Financial risk factors

The Group’s activities expose it to a variety of financial risks; market risk (including the risk of fluctuationsin foreign currency, and risk of change in interest rate), credit risk and liquidity risk. The Group is notexposed to price risk, as it does not have financial assets at fair value through profit and loss. The Group’smanagement aims to minimise potential adverse effects of such risks on the financial performance of theGroup by the monitoring process performed by the Finance Department and General Manager of eachcompany, and the Executive Committee at the level of the Parent Company.

The Group does not use any derivative financial instruments to hedge specific risks.

(A) Market risk

i) Risk of fluctuations in foreign currency rates

Foreign currency risk represents the changes in foreign currency rates, which impact thepayments and receipts denominated in foreign currencies, as well as the evaluation of foreigncurrency assets and liabilities. Given the nature of the Group’s activities, the Group does notundertake transactions denominated in foreign currencies as it carries out all purchases inEgyptian Pound. The Group’s very limited revenue in foreign currencies are generated fromcertain foreign embassies. Management is of the opinion that the foreign currency balancesare considered immaterial.


2015 2014

US Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,716 1,071,459Euros . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,896 118,678

ii) Fair value and cash flow interest rate risk

The Parent Company obtained a long-term loan at interest rate linked to the corridordeclared by the Central Bank of Egypt, and therefore, it is not exposed to cash flow risks.Management believe the effect is not material due to the amount and maturities of thesebalances.

(B) Credit risk

Credit risk arises from cash at banks, as well as credit exposures to Group’s customers. TheExecutive Management of each Company, Central Finance Department and ExecutiveCommittee at the level of the Parent Company manage the credit risks for the Group as a whole.


For customers, the Financial Director and the General Manager of each hospital performanalysis on the credit risk for each potential credit customer in accordance with the Group’spolicies, including Cleopatra Hospital or subsidiaries. The Parent Company’s ExecutiveCommittee follows-up the compliance with credit terms, and reviews default cases and debtageing report to take the necessary decisions whether to cancel the credit or to refer thedefaulted customer to the Legal Department for their necessary actions.

289






The management establishes a provision for impairment of 100% for defaulted customers formore than 150 days from the invoice date, in addition to a provision based on the historicaldefault rates.


2015 2014

Cash at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,353,010 53,398,420Trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,340,748 38,179,376

(C) Liquidity risk

The management makes cash flow projections on a monthly basis, which are discussed during theExecutive Committee’s meeting, and takes the necessary actions to negotiate with suppliers,follow-up the collection process and manage the inventory balances in order to ensure sufficientcash is maintained to discharge the Group’s liabilities.


Less than 3 months to More than3 months 1 year 1 to 5 years 5 years

Trade and notes payables . . . . . . . . . . . . 44,293,491 1,586,307 — —Due to related parties . . . . . . . . . . . . . . — — — 47,379,723Borrowings . . . . . . . . . . . . . . . . . . . . . . — 40,600,000 162,400,000 —

(2) Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a goingconcern in order to provide returns for shareholders and benefits for other stakeholders and to maintainan optimal capital structure to reduce the cost of capital as is the case for other companies operating in thesame field.

The Parent Company’s management monitors capital on the basis of the net debt to total capital ratio. Thisratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings andcreditors and other credit balances less cash on hand and at banks. Total capital is represented in net debtplus total equity as shown in the balance sheet.

Net debt to total capital ratio as at 31 December 2015 and 31 December 2014 is as follows:

2015 2014

Creditors and other credit balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,930,019 29,852,391Borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,000,000 —Less: Cash in hand and at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (109,906,869) (53,632,054)

Net debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233,023,150 (23,779,663)Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159,216,599 135,332,196

Total capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392,239,749 111,552,533

Net debt to total capital ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59% (21,32)%

Net debt to total capital ratio changed due to the loan obtained by the Company during the financial yearended 31 December 2015.

290






(3) Fair values estimation

The fair value of current financial assets and liabilities approximates their carrying amounts after takinginto account the impairment. The Parent Company availed a long-term loan from an Egyptian bank, andthe management believes that the fair value of the loan approximates its carrying amount as it was issuedat a variable rate linked to the interest rate corridor declared by the Central Bank of Egypt.



The Group makes estimates and assumptions concerning the future. The resulting accounting estimateswill seldom equal the actual results.

(1) Provisions

Provisions are recognised when there is a present legal or constructive obligation as a result of past events,and it is more likely than not that an outflow of resources will be required to settle the obligation; and theamount has been reliably estimated. The Group reviews the provision at each balance sheet date, andadjusts it to reflect the current best estimate by using the appropriate advisory experience of experts.

(2) Impairment of goodwill

The Group’s management evaluates goodwill annually to determine any impairment in goodwill. Thecarrying amount of goodwill is reduced if it is higher than the expected recoverable amount. Any losses as aresult of impairment of goodwill is charged to the statement of income, and cannot be reversedsubsequently.

(3) Impairment of trade receivables

Impairment of trade receivables is estimated by monitoring ageing of receivables. The Group’smanagement examines the credit position and ability of debtors and customers to make payments for theirpast due debts. Impairment is recognised for amounts due from debtors and customers whose creditposition does not allow them to pay their dues as believed by the management. Further appropriateallowance is made for losses incurred but not yet identified by reference to historical loss rate.

5. Segment reporting

Business segments are reported in line with the reports provided internally to the senior management,which makes decisions related to resources allocation and evaluation of segments’ performance in theGroup, represented in Group’s executive management committee. The segment reports are provided tothe Group based on each company, as each subsidiary is considered a separate business segment.

291





5. Segment reporting (Continued)

Below is a summary of each segment, which is presented for one full year for each segment:

CairoCleopatra Specialised Nile BadrawiHospital Hospital HospitalCompany Company Company

Balance sheet:Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427,851,466 25,678,386 18,884,960Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,658,411 82,793,359 51,291,592

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527,509,877 108,471,745 70,176,552

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,580,657 40,341,609 35,267,169Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,906,819 1,727,506 —

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327,487,476 42,069,115 35,267,169

Statement of income:Operating revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 332,002,699 149,377,454 121,307,079Operating costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (214,407,386) (111,849,380) (81,601,341)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117,595,313 37,528,074 39,705,738

Other expense and revenues . . . . . . . . . . . . . . . . . . . . . . . (52,905,108) (20,279,719) (36,093,249)

Profit for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64,690,205 17,248,355 3,612,489

Other itemsCapital expenditure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,594,200 7,372,987 1,233,595Fixed assets depreciation . . . . . . . . . . . . . . . . . . . . . . . . . 6,425,945 3,380,552 1,136,282

292

293

CL

EO

PAT

RA

HO

SPIT

AL

CO

MPA

NY

S.A

.E.

AN

D I

TS

SUB

SID

IAR

IES

Ori

gina

lly

issu

ed i

n A

rabi

c

Not

es t

o th

e co

nsol

idat

ed f

inan

cial

sta

tem

ents

(C

onti

nued

)

For

the

year

end

ed 3

1D

ecem

ber

2015

(All

am

ount

s in

the

not

es a

re s

how

n in

Egy

ptia

n P

ound

s un

less

oth

erw

ise

stat

ed)

6. F

ixed

ass

ets

Mac

hine

ryP

roje

cts

Equ

ipm

ent

Furn

itur

e&

unde

rTo

tal

and

devi

ces

fixt

ures

Lan

dB

uild

ings

Vehi

cles

Com

pute

rsco

nstr

ucti

on20

15

Bal

ance

at

1Ja

nuar

y 20

15.

..

..

..

..

..

..

..

..

..

..

..

..

.63

,302

,346

4,47

0,83

414

,967

,000

38,0

24,9

872,

276,

722

817,

117

5,53

2,87

012

9,39

1,87

6A

cqui

red

asse

ts o

n bu

sine

ss c

ombi

natio

n.

..

..

..

..

..

..

..

.10

9,98

8,03

514

,812

,050

54,2

97,6

3513

1,08

4,51

42,

320,

195

3,06

8,66

448

5,39

831

6,05

6,49

0A

dditi

ons

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

7,72

0,11

01,

079,

284

—38

6,95

3—

490,

496

1,55

0,43

011

,227

,273

Dis

posa

ls.

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

.(2

53,4

17)

(19,

800)

—(2

,026

)—

—(4

35,9

07)

(711

,150

)Tr

ansf

ers

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

——

—5,

532,

870

——

(5,5

32,8

70)

—F

ixed

ass

ets

wri

te-o

ff.

..

..

..

..

..

..

..

..

..

..

..

..

..

..

.(4

4,50

5)(8

39,9

15)

—(2

,754

)(4

29)

(46,

253)

—(9

33,8

56)

Bal

ance

at

31D

ecem

ber

2015

..

..

..

..

..

..

..

..

..

..

..

..

180,

712,

569

19,5

02,4

5369

,264

,635

175,

024,

544

4,59

6,48

84,

330,

024

1,59

9,92

145

5,03

0,63

4

Acc

umul

ated

dep

reci

atio

n at

1Ja

nuar

y 20

15.

..

..

..

..

..

..

50,8

57,6

673,

056,

303

—10

,854

,674

1,08

6,72

574

8,87

8—

66,6

04,2

47A

cqui

red

asse

ts o

n bu

sine

ss c

ombi

natio

n.

..

..

..

..

..

..

..

.76

,558

,602

10,4

04,7

64—

21,5

58,3

871,

723,

118

2,51

0,05

0—

112,

754,

921

Acc

umul

ated

dep

reci

atio

n of

dis

posa

l an

d as

sets

wri

te-o

ff.

..

.(1

69,2

90)

(588

,809

)—

(1,8

31)

(214

)(2

9,19

1)—

(789

,335

)C

harg

e fo

r th

e ye

ar.

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

3,48

4,94

71,

269,

198

—4,

412,

275

174,

166

70,2

63—

9,41

0,84

9

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r 20

15.

..

..

..

..

..

130,

731,

926

14,1

41,4

56—

36,8

23,5

052,

983,

795

3,30

0,00

0—

187,

980,

682

Net

boo

k va

lue

at 3

1D

ecem

ber

2015

..

..

..

..

..

..

..

..

..

.49

,980

,643

5,36

0,99

769

,264

,635

138,

201,

039

1,61

2,69

31,

030,

024

1,59

9,92

126

7,04

9,95

2

Bal

ance

at

1Ja

nuar

y 20

14.

..

..

..

..

..

..

..

..

..

..

..

..

.61

,766

,504

4,32

5,29

414

,967

,000

38,0

24,9

871,

762,

012

750,

494

5,53

2,87

012

7,12

9,16

1A

dditi

ons

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

2,56

1,20

522

0,31

0—

—62

0,64

066

,623

—3,

468,

778

Dis

posa

ls.

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

.(1

,025

,363

)(7

4,77

0)—

—(1

05,9

30)

——

(1,2

06,0

63)

Ass

ets

cost

at

31D

ecem

ber

2014

..

..

..

..

..

..

..

..

..

..

..

63,3

02,3

464,

470,

834

14,9

67,0

0038

,024

,987

2,27

6,72

281

7,11

75,

532,

870

129,

391,

876

Acc

umul

ated

dep

reci

atio

n at

1Ja

nuar

y 20

14.

..

..

..

..

..

..

48,8

39,0

632,

500,

260

—7,

935,

390

1,02

2,53

233

7,15

8—

60,6

34,4

03A

ccum

ulat

ed d

epre

ciat

ion

of d

ispo

sals

..

..

..

..

..

..

..

..

..

(1,0

12,1

63)

(64,

782)

——

(105

,930

)—

—(1

,182

,875

)C

harg

e fo

r th

e ye

ar.

..

..

..

..

..

..

..

..

..

..

..

..

..

..

..

3,03

0,76

762

0,82

5—

2,91

9,28

417

0,12

341

1,72

0—

7,15

2,71

9

Acc

umul

ated

dep

reci

atio

n at

31

Dec

embe

r 20

14.

..

..

..

..

..

50,8

57,6

673,

056,

303

—10

,854

,674

1,08

6,72

574

8,87

8—

66,6

04,2

47

Net

boo

k va

lue

at 3

1D

ecem

ber

2014

..

..

..

..

..

..

..

..

..

.12

,444

,679

1,41

4,53

114

,967

,000

27,1

70,3

131,

189,

997

68,2

395,

532,

870

62,7

87,6

29





7. Business combination and intangible assets

2015Cost Goodwill Trade name Total

Cost of intangible assets arising from business combination . . . . 75,853,020 21,342,000 97,195,020

Goodwill

To calculate goodwill, Nile Badrawi Hospital Company S.A.E. was considered as a cash-generating unit,and goodwill resulting from acquisition was allocated to the company as a one unit.

Recoverable amount of cash-generating unit is estimated by calculating the value in use, using pre-tax cashflows based on financial budgets approved by management, which cover a period of five years maximum.The management determines the specific assumptions of cash flow forecasts based on past experience andexpectations of the market.

Trade name

The fair value of the trade name is estimated by using relief from royalty method. This method determinesthe value by referring to the nominal royalty payments, which are provided when acquiring the assetcompared with the license of the asset and trade name by a third party.

a) Acquisition of Nile Badrawi Hospital Company S.A.E.

On 22 September 2015, Cleopatra Hospital Company S.A.E. acquired 99.92% of the total shares of NileBadrawi Hospital Company S.A.E. This acquisition resulted in increase of the cost of acquisition over thefair value of the net assets of the acquired company, which were recognised as intangible assets, asindicated in the table above.

The Groups expects that the acquisition will result in increase of its market share and to achieve futureeconomic benefits, and upgrade the services offered to patients of the Group’s hospitals. The goodwillamounting to approximately EGP 75 million, resulting from the acquisition, is attributed to the list ofcustomers, relations with insurance companies and the available medical experience of the hospital’semployees.

The fair value of the net liabilities, which represents the net of assets and liabilities, excluding intangiblenon-current assets, is calculated after taking into consideration the contingent liabilities at the date ofacquisition and the provisions for the impairment of doubtful receivables.

The revenue recognised in the consolidated statement of income, which is contributed by Nile BadrawiHospital since the date of acquisition, amounted to approximately EGP 36 million, and the net profits forthis period amounted to approximately EGP 1.4 million.

Nile Badrawi Hospital Company S.A.E. was included in the consolidated financial statements starting from1 October 2015, which is the date on which the acquirer actually established control over the subsidiary and

294





7. Business combination and intangible assets (Continued)

the power of control on the financial and operating policies was transferred to the Group. Net acquiredassets and goodwill is as follows:

EGP

Cost of acquisition:Paid-up cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257,004,947Direct costs of acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,000,000Minority interests at the date of acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130,200

Total cost of acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259,135,147Fair value of acquired assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (161,940,127)

Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,195,020

Assets and liabilities resulting from the acquisition of Nile Badrawi Hospital Company S.A.E. weredetermined on the basis of fair value at 30 September 2015 as follows:

EGP

Lands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,838,000Buildings and constructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,770,472Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,921,515Vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 597,077Projects under construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 485,398Computers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129,207Kits and tools . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 266,213

Total Fair value of intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,007,882Net liabilities at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20,067,755)

Net fair value of acquired assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 161,940,127

b) Acquisition of Cairo Specialised Hospital

On 16 September 2015, Cleopatra Hospital Company S.A.E. acquired 52.7% of the total shares of CairoSpecialised Hospital Company S.A.E. These are the shares owned by Creed Healthcare Co. Ltd., at thattime. The acquisition is made for a consideration of approximately EGP 107 million, the same value CreedHealth Care Ltd. paid to acquire Cairo Specialised Hospital during June 2014. As this transaction tookplace between parties under common control (because Care Health Care Ltd., the owner of CleopatraHospital Company is itself 100% owned to Creed Health Care Ltd.) to restructure ownership of the groupcompanies, predecessor accounting method is applied for the business combination of Cairo SpecialisedHospital within the consolidated financial statements of Cleopatra Hospital Company.

The difference between the values of acquisition amount to approximately EGP 107 million and the bookvalue of the net assets of Cairo Specialised Hospital at the date of acquisition amounting to approximatelyEGP 62 million after taking into account the minority interests amounting to approximately EGP 31million pounds at the acquisition date, is recognised as acquisition reserve amounting to approximatelyEGP 76 million.

The revenue recognised in the consolidated statement of income, which is contributed by Cairo SpecialisedHospital S.A.E. since the date of control transfer, amounted to approximately EGP 41.5 million, and thenet profits for this period amounted to approximately EGP 4.5 million.

295





8. Held-to-maturity investments

Held-to-maturity investments comprise investments in public housing bonds (compulsory) issued by theMinistry of Finance in favour of the Central Bank, which shall be recoverable on 11 July 2015. Such bondswere collected on 13 January 2016.

9. Inventories

2015 2014

Medical supply inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,929,305 5,206,952Pharmacy inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,328,796 646,314Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,259,856 484,556

15,517,957 6,337,822


2015 2014

Due from customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,022,109 38,179,376Income / (prepayments) from inpatients . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,322,612 (510,136)Trade notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,318,639 —Less:Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,676,776) (3,422,536)

89,986,584 34,246,704

The income from inpatients comprises the revenues that have not been billed at the balance sheet date fortheir stay because the procedures of the medical services have not been completed, net of amountscollected in advance during the period of their stay.

Trade notes receivables represent the checks collected from customers, and those, which are not depositedin banks for subsequent collection.


2015 2014

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,422,536 3,427,021Provision formed during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,457,898 555,915Write-offs of provision for receivables during the year . . . . . . . . . . . . . . . . . . (279,679) —Provisions no longer required . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (778,867) (560,400)Effect of acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,854,888 —

Balance at 31 December . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,676,776 3,422,536

Trade receivable balances, which have not been due till the balance sheet date and have no impairmentindicators, amounted to EGP 71,181,598 (2014: EGP 29,062,479).

At the balance sheet date, the balances that were past due but not impaired amounted to EGP 13,438,722(2014: EGP 2,390,455) regarding customers and transactions with no history of default. The analysis ofthese balances’ useful lives is as follows:

2015 2014

Less than 1 month . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,167,504 3,303,806One to five months . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,271,218 2,390,455

296






2015 2014

Due from employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,242,569 6,785,832Withholding taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,673,121 3,016,415Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,069,905 441,235Advances to suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 719,126 220,263Refundable deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 470,030 69,629Due from related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,640 24,622,611Sundry debtors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957,611 23,599Impairment in other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (854,860) —

18,282,142 35,179,584


2015 2014

Balance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — —Provision formed during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 173,161 —Effect of acquisition of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681,699 —

854,860 —


2015 2014

Cash on hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553,859 233,634Current accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,463,887 32,583,452Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,889,123 20,814,968

109,906,869 53,632,054

Term deposits are held with local banks in the EGP and have maturity of up to 6 months from the date ofplacements with fixed rate ranging from 7% to 9% (2014: 7% to 9%).

2015 2014

Cash on hand and at banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109,906,869 53,632,054Deposits with a maturity of more than 3 months from the date of placement (62,889,123) —

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,017,746 53,632,054

13. Provisions

2015 2014

Provision for claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,889,001 2,758,668Provision against employees’ benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 910,057 552,484Employees leave provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,035,539 —Provision for stamp duty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56,200 56,200

19,890,797 3,367,352

297





13. Provisions (Continued)


2015

Effect of Provision UtilisedBalance at acquisition of made during during the Balance at

1 January 2015 subsidiaries the year year 31 December 2015

Provision for claims . . . . . . . . . 2,758,668 19,436,433 2,307,000 (6,613,100) 17,889,001Provision against employees’

benefits . . . . . . . . . . . . . . . . 552,484 — 519,413 (161,840) 910,057Employees’ leave provision . . . . — 439,367 596,172 — 1,035,539Provision for stamp duty . . . . . . 56,200 — — — 56,200

Total . . . . . . . . . . . . . . . . . . 3,367,352 19,875,800 3,422,585 (6,774,940) 19,890,797

2014

Provision UtilisedBalance at made during during the Balance at

1 January 2014 the year year 31 December 2014

Provision for claims . . . . . . . . . . . . . . . . . . . . — 2,758,668 — 2,758,668Provision against employees’ benefits . . . . . . . . 712,888 120,234 (280,638) 552,484Provision for stamp duty . . . . . . . . . . . . . . . . . 48,200 8,000 — 56,200

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 761,088 2,886,902 (280,638) 3,367,352


2015 2014

Due to related parties (Note 27) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,379,723 —Suppliers and notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,879,798 10,033,842Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,360,166 4,736,837Doctor fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,732,694 7,541,479Tax Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,076,340 5,519,768Sundry creditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,877,940 1,586,016Social insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,111,470 —Deferred Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 181,300 —Cash dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149,217 —Deposits from others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,181,371 434,449

139,930,019 29,852,391Less:Due to related parties—non-current portion . . . . . . . . . . . . . . . . . . . . . . . . (47,379,723) —

92,550,296 29,852,391

Due to related parties is repayable to the Parent Company and a subsidiary. In accordance with anundertaking given by the Parent Company, these dues are not repaid before five years after the balancesheet date, provided that sufficient cash is maintained. These dues do not carry interest.

15. Borrowings

The Company obtained a loan facility of EGP 203,000.000 from the Commercial International Bank tofinance 100% to finance the acquisition of Cairo Specialized Hospital Company. The loan is repayable in

298





15. Borrowings (Continued)

ten equal semi-annual instalments commencing 30 June 2016 until 31 December 2020 and carry an annualinterest rate of 2.4% in addition to the interest rate of corridor declared by the Central Bank of Egypt.

The borrowing balance is as follows:

2015 2014

Total loan amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203,000,000 —Less: Current portion of borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,600,000) —

Non-current portion of borrowings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162,400,000 —

Main guarantees:

• The Group has pledged its shares in the Cairo Specialized Hospital Company S.A.E. of 52.7% of thetotal shares in favour of the Commercial International Bank.

• The Company has also pledged 51% of its shares held by the ultimate Parent Company (CareHealthcare Ltd.) in favour of the Commercial International Bank.

• Subsequently, On 19 January 2016, Cleopatra Hospital Company obtained another loan ofEGP 230 million from the Commercial International Bank. Care Healthcare Ltd. pledged itsremaining shares as a guarantee for the bank’s loan, accordingly total mortgage reached 99.99%.

• Cleopatra Hospital Company pledged the entire shares it owned in Al Shorouk Hospital as aguarantee for the same loan.

16. Share capital

The issued and paid up capital comprises 8 million shares of EGP 10 each, totalling EGP 80 million. Theunderwriting was as follows:

Number of Nominalshares value

Care Healthcare Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,999,998 79,999,980Amr Abdul Kareem Tawheed Hilal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 10Walid Fayez Said Bakr . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 10

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,000,000 80,000,000

17. Reserves

a. Legal reserve

In accordance with the Law No. 159 of 1981 and the Company’s Articles of Association, 5% of the netprofit for the year shall be transferred to the legal reserve. As proposed by the Board of Directors, thistransfer may discontinued if the legal reserve reaches 50% of the issued capital. This reserve is notavailable for distribution to shareholders.

b. Acquisition reserve

This reserve represents the difference between the value of the acquisition by Cleopatra HospitalCompany S.A.E. and the book value of the net assets and liabilities of Cairo Specialized HospitalCompany S.A.E. at the acquisition date, as the two companies are under common control. The reason for

299





17. Reserves (Continued)

the acquisition is restructuring of the Group companies. Therefore, the assets and liabilities of thesubsidiary were transferred at historical cost.

c. Below is the movement on reserves during the year:

2014

Balance at Provision made Balance at1 January 2014 during the year 31 December 2014

Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,594,619 2,042,935 11,637,554

2015

Balance at Provision made Balance at1 January 2015 during the year 31 December 2015

Legal reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,637,554 2,190,106 13,827,660Acquisition reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . — (76,131,168) (76,131,168)

18. Minority interest

Share ofMinority

interests onShare Legal Retained settlement ofcapital reserve earnings acquisition Total

Share of minority interests in theacquisition of subsidiaries . . . . . . . . . 12,787,080 8,098,271 10,130,813 103,260 31,119,424

Profit for the year . . . . . . . . . . . . . . . . — — 2,130,631 — 2,130,631

Balance at 31 December 2015 . . . . . . . 12,787,080 8,098,271 12,261,444 103,260 33,250,055

19. Operating revenues

2015 2014

Surgeries revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,223,585 56,476,361Outpatient clinics revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,723,297 49,733,100Admission and medical supervision revenues . . . . . . . . . . . . . . . . . . . . . . . 101,998,867 52,961,487Laboratories revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,738,522 26,915,816Cardiac catheterization revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,724,685 24,939,813Emergency revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,269,411 23,356,619Radiology revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,246,087 18,707,928Service charge revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,106,628 13,043,092Pharmacy revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,045,715 5,478,787Dentistry revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,334,904 8,603,861physiotherapy revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,639,463 3,985,220Heart tests revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,683,712 3,937,833Endoscopy revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,069,576 2,154,897Revenues of oncology Centre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,458,596 —Other departments revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 326,741 —

409,589,789 290,294,814

300





20. Operating costs

2015 2014

Doctor fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,212,405 67,449,039Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,434,676 68,307,192Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,156,375 48,054,531Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . . . . . . . . . . 12,322,784 5,320,526Fixed assets depreciation and write-off . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,232,637 6,530,433Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,773,367 6,859,972Rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 722,225 —Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 974,124 2,086,461

269,828,593 204,608,154


2015 2014

Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,451,843 16,200,474Impairment of trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,852,192 (4,485)Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . . . . . . . . . . . . 1,441,132 432,889Professional and consulting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,763,297 189,522Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,215,690 246,913Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,057,351 351,384Donations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 695,930 586,190Government fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 548,333 288,476Fixed assets depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 699,253 622,286Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,948,221 1,756,876

40,673,242 20,670,525

22. Other income

2015 2014

Buffet income and cafeteria concessions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,010,748 361,687Rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 994,574 33,580Gift corner revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 206,646 216,862Sale of rags (scrap) revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,500 27,350(Loss)/ gain on sale of fixed assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,970) 39,112Miscellaneous income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 302,857 —

2,521,355 678,591

301





23. Expenses by nature

2015 2014

Salaries, wages and benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,886,519 84,507,666Doctor fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,212,405 67,449,039Medical and pharmaceutical supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72,156,375 48,054,531Food, beverage and consumables costs . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,989,057 7,106,885Fixed assets depreciation and write-off . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,931,890 7,152,719Maintenance, spare parts and energy costs . . . . . . . . . . . . . . . . . . . . . . . . 13,763,916 5,753,414Impairment of customers’ balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,852,192 (4,485)Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,709,482 5,258,918

310,501,836 225,278,687

24. Financing income and finance cost

2015 2014

Finance incomeInterest Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,160,009 2,068,573Gain on currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,527 18,078

6,253,536 2,086,651

Finance costInterest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,487,998) (3,235)

Net finance income / (cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,234,462) 2,083,416

25. Income taxes

Income tax expense as shown in the statement of income is as follows:

2015 2014

Current income tax for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,889,872) (21,372,222)Deferred tax (Note 26) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,166,243) 283,107

(27,056,115) (21,089,115)

The tax on profit before tax theoretically differs from the amount expected to be paid by applying theaverage tax rate applicable to the Group’s profits as follows:

2015 2014

Net profit before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,952,262 64,891,240

Income tax calculated based on the applicable local tax rate . . . . . . . . . . . . . 21,589,259 19,417,372Add/ (less):Expenses not deductible for tax purposes . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,696,627 1,671,743Effect of applicable tax rate adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . (229,771) —

Income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,056,115 21,089,115

302






2015 2014

Current income tax liabilitiesBalance at 1 January . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,372,222 13,996,640Effect of acquisition of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,246,737 —Payments during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,372,222) (13,996,640)Current tax incurred during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,889,872 21,372,222

32,136,609 21,372,222

26. Deferred tax

Change in tax assets and liabilities during the year is as follows:

Effect of (Expense)/acquisition of income charged

Balance at subsidiaries to the statement Balance at1 January 2015 Asset/ of income 31 December

(liability) (liability) during the year 2015 (liability)

LiabilitiesFixed assets . . . . . . . . . . . . . . . . . . . . . . . . (2,297,712) 4,144,261 (3,976,042) (2,129,493)Fixed assets—effect of fair value . . . . . . . . . — (38,680,936) 101,195 (38,579,741)Intangible assets—effect of fair value . . . . . . — (4,801,950) — (4,801,950)

Total liabilities . . . . . . . . . . . . . . . . . . . . . . (2,297,712) (39,338,625) (3,874,847) (45,511,184)

AssetsProvisions, excluding claims . . . . . . . . . . . . . — — 1,708,604 1,708,604

Net deferred tax—liability . . . . . . . . . . . . . (2,297,712) (39,338,625) (2,166,243) (43,802,580)

(Expense)/income

charged to theBalance at statement of Balance at

1 January 2014 income during 31 December(liability) the year 2014 (liability)

Fixed assets—effect of accelerated depreciation . . . . . . . . . (2,580,819) 283,107 (2,297,712)


During the year, the Group made transactions with certain related parties. The Balances with relatedparties at the financial statements date as well as the transactions during the years are as follows:

Balances of balance sheet:

Nature oftransaction 2015 2014

(Related parties)Care Healthcare Ltd. (Parent Company)Accounts and other payables (Note 14) . . . . . . . . . . . . . . . . . . . . . . . . financing 47,379,723 —

303





28. Tax position

Cleopatra Hospital Company S.A.E.

(1) Corporate taxes




• Years from 2014 to 2015 were not inspected.

(2) Sales taxes



(3) Salaries tax

• The Company was inspected up to 31 December 2013, and settlement was made till the lastinspection for the year 2013.



(4) Stamp duty

• The Company was inspected till 31 July 2006 and settlement was made.

• The Company was inspected during the period from 1 August 2006 to 31 December 2013. TheCompany was notified, through a form No. 19 dated 23 April 2015, of tax assessment ofEGP 72,966 for this period. The Company filed an objection to the assessment on 3 May 2015.The internal committee is in the process of fixing a date to resolve this issue.


Cairo Specialized Hospital Co. S.A.E.

(1) Corporate tax

• The Company was inspected since the inception of activity to 2008, and all entitlements werepaid.

• The Company was not inspected from the years 2009 to 2015. Tax returns were filed annually inthe legal due dates.

(2) Salaries tax

• The Company was inspected since the inception of activity to 2009, and all entitlements werepaid.

• The Company was not inspected from the year 2010 till the end of the year 2015.

(3) Stamp duty

• The Company was inspected since the inception of activity to 31 July 2006, and all entitlementswere paid.

304





28. Tax position (Continued)

• The Company was assessed on presumptive basis from August 2006 to 2015, and appeal was filedin the legal due date.

(4) Withholding tax

• The Company was not inspected since the beginning of activity until 2014.

Nile Badrawi Hospital Co. S.A.E.

(1) Corporate tax

• Years to 2009 were settled, and all dues were paid until the end of 2009.

• Form No.19 for 2010, 2011 and 2012 was issued under No.13833 on 18 August 2015. Appeal wasfiled against the legal due date. The internal committee is currently taking the necessary action.

• No samples were issued for the Years 2013/ 2015 to date.

(2) Salaries tax

• Years up to 2011 were inspected and settled. No tax is due for the years up to 2011.

• Tax settlement is in progress for the years from 2012 to 2015.

(3) Stamp duty

• Years up to 2005 were inspected and settled.

• Years from 2006 to 2015 are currently inspected.

29. Commitments

a.) Capital commitments

Capital commitments related to fixed assets at financial year end, which are not yet due, amounted to nil(2014: EGP 517.310).

b.) Rental liabilities

Rental liabilities at financial year-end, which are not yet due, are as follows:

2015 2014

Less than 1 Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,115,658 3,934,6301 to 5 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,083,019 4,553,413Over 3 years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . — 766,112


On 24 January 2016, the Group acquired 99% of Al Shorouk Hospital Company S.A.E. Actual control onfinancial and operating policies was transferred to the Group on 31 January 2016. The cost of acquisitionof investment amounted to EGP 280 million, thus Al Shorouk Hospital Company turned into a subsidiaryof Cleopatra Hospital Company S.A.E. Until the date of the preparation of the consolidated financialstatements, procedures of conveyance have not been made to Cleopatra Hospital Company S.A.E. It isnoteworthy that Al Shorouk Hospital Company will be fully consolidated within the first consolidatedfinancial statements to be prepared after 31 January 2016.

305





30. Subsequent events (Continued)

The fair value of tangible assets of Al Shorouk Hospital Company S.A.E amounted as follows:

EGP

Lands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,903,626Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53,807,254Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,168,000Net other assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,530,553

Net fair value of acquired assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,409,433

306

PART 15Definitions

The following definitions apply throughout this Offering Memorandum unless the context requiresotherwise:

‘‘2010 PD Amending Directive’’ . . . . . Directive (2010/73/EU)

‘‘Abraaj NAH’’ . . . . . . . . . . . . . . . . . Abraaj NAH Limited, an exempted company incorporatedunder the laws of the Cayman Islands with limited liability(registered number MC-286462)

‘‘Al Shorouk’’ . . . . . . . . . . . . . . . . . . the hospital run by Al Shorouk Hospital Company

‘‘Al Shorouk Hospital Company’’ . . . . Al Shorouk Hospital Company S.A.E.

‘‘Board’’ . . . . . . . . . . . . . . . . . . . . . . the board of directors of the Company

‘‘BMI’’ . . . . . . . . . . . . . . . . . . . . . . . Business Monitor International

‘‘CAGR’’ . . . . . . . . . . . . . . . . . . . . . compound annual growth rate

‘‘Cairo Specialized Hospital’’ . . . . . . . the hospital run by Cairo Specialized Hospital Company

‘‘Cairo Specialized HospitalCompany’’ . . . . . . . . . . . . . . . . . . Cairo Specialized Hospital Company S.A.E.

‘‘Capital Market Law’’ . . . . . . . . . . . the Egyptian Law No. 95 of 1992

‘‘CAPMAS’’ . . . . . . . . . . . . . . . . . . . the Central Agency for Public Mobilization and Statistics ofEgypt

‘‘Care Healthcare’’ . . . . . . . . . . . . . . Care Healthcare Limited

‘‘CCO’’ . . . . . . . . . . . . . . . . . . . . . . The Curative Care Organization

‘‘Cleopatra’’ . . . . . . . . . . . . . . . . . . . the hospital run by Cleopatra Hospital Company

‘‘Cleopatra Hospital Company’’ or‘‘Company’’ . . . . . . . . . . . . . . . . . . Cleopatra Hospital Company S.A.E.

‘‘Closed Subscription’’ . . . . . . . . . . . . the offer to the Selling Shareholder by the Company, followingcompletion of the Combined Offer, of the right to subscribe forup to 40,000,000 new Shares at the Offer Price

‘‘Closed Subscription Shares’’ . . . . . . the new Shares to be offered to the Selling Shareholder by theCompany pursuant to the Closed Subscription

‘‘CMA’’ . . . . . . . . . . . . . . . . . . . . . . the Egyptian Capital Market Authority

‘‘Combined Offer’’ . . . . . . . . . . . . . . the Egyptian Retail Offer and the International Offer

‘‘Commencement of Trading’’ . . . . . . commencement of trading in Shares on the EGX, expected totake place on 2 June 2016

‘‘Companies Law’’ . . . . . . . . . . . . . . Egyptian Law No. 159 of 1981 and its Executive Regulations, asamended

‘‘DEG’’ . . . . . . . . . . . . . . . . . . . . . . DEG-Deutsche Investitions-und Entwicklungsgesellschaft mbH,a private limited company incorporated under the laws ofGermany

‘‘Directors’’ . . . . . . . . . . . . . . . . . . . the Executive Directors and the Non-Executive Directors

‘‘EAS’’ . . . . . . . . . . . . . . . . . . . . . . . Egyptian Accounting Standards

‘‘EBRD’’ . . . . . . . . . . . . . . . . . . . . . European Bank for Reconstruction and Development, aninternational organisation formed by treaty

‘‘EEA’’ . . . . . . . . . . . . . . . . . . . . . . . the European Economic Area

‘‘EEAA’’ . . . . . . . . . . . . . . . . . . . . . . the Egyptian Environmental Affairs Agency

307

‘‘EFG Hermes’’ . . . . . . . . . . . . . . . . EFG Hermes Promoting and Underwriting

‘‘EFSA’’ . . . . . . . . . . . . . . . . . . . . . . Egyptian Financial Supervisory Authority

‘‘EGP’’ . . . . . . . . . . . . . . . . . . . . . . . Egyptian pounds, the lawful currency of Egypt

‘‘Egyptian Income Tax Law’’ . . . . . . . Income Tax Law No. 91 of 2005 as amended by Law no. 53 of2014 and Law no. 96 of 2015

‘‘Egyptian Retail Offer’’ . . . . . . . . . . the offering of Egyptian Retail Offer Shares by the Company ina domestic retail offering in Egypt

‘‘Egyptian Retail Offer Shares’’ . . . . . the Shares to be offered in the Egyptian Retail Offer

‘‘EGX’’ . . . . . . . . . . . . . . . . . . . . . . the Egyptian Exchange

‘‘Environmental Law’’ . . . . . . . . . . . . the Law No. 4 for the year 1994 and its executive regulations

‘‘ERP’’ . . . . . . . . . . . . . . . . . . . . . . . enterprise resource planning system

‘‘Egypt’’ . . . . . . . . . . . . . . . . . . . . . . the Arab Republic of Egypt

‘‘ESMA’’ . . . . . . . . . . . . . . . . . . . . . The European Securities and Markets Authority

‘‘ESMA/2013/319’’ . . . . . . . . . . . . . . European Union Regulation 809/2004 and the content of therecommendation issued by ESMA for the consistentimplementation of the regulation

‘‘EU’’ . . . . . . . . . . . . . . . . . . . . . . . . the European Union

‘‘Executive Directors’’ . . . . . . . . . . . . the executive directors of the Company

‘‘FPO’’ . . . . . . . . . . . . . . . . . . . . . . . the Egyptian law Article 19(5) of the Financial Services andMarkets Act 2000 (Financial Promotions) Order 2005, asamended

‘‘GAMCA’’ . . . . . . . . . . . . . . . . . . . . Gulf Approved Medical Centres Association

‘‘GAFI’’ . . . . . . . . . . . . . . . . . . . . . . General Authority for Investment and Free Zones, an affiliate ofthe Egyptian Ministry of Investment

‘‘GDP’’ . . . . . . . . . . . . . . . . . . . . . . gross domestic product

‘‘Group’’ . . . . . . . . . . . . . . . . . . . . . Cleopatra Hospital Company, Cairo Specialized HospitalCompany, Nile Badrawi Hospital Company and Al ShoroukHospital Company

‘‘Historical Financial Information’’ . . . the audited consolidated financial statements of the Companyand its subsidiaries as at and for the year ended 31 December2015 and the audited financial statements of Cleopatra HospitalCompany, Cairo Specialized Hospital Company, Nile BadrawiHospital Company and Al Shorouk Hospital Company as at andfor the three years ended 31 December 2015, 2014 and 2013

‘‘ICU’’ . . . . . . . . . . . . . . . . . . . . . . . intensive care unit

‘‘IFA’’ . . . . . . . . . . . . . . . . . . . . . . . . an independent financial adviser

‘‘IFRS’’ . . . . . . . . . . . . . . . . . . . . . . International Financial Reporting Standards as issued by theInternational Accounting Standards Board

‘‘IMF’’ . . . . . . . . . . . . . . . . . . . . . . . International Monetary Fund

‘‘International Offer’’ . . . . . . . . . . . . the offering of International Offer Shares by the Company tocertain institutional investors in a number of countries, includingEgypt but excluding the United States

‘‘International Offer Shares’’ . . . . . . . the Shares to be offered in the International Offer

‘‘Investment Law’’ . . . . . . . . . . . . . . . the Egyptian Investment Guarantees and Incentives Law No. 8of 1997, as amended

308

‘‘ISO’’ . . . . . . . . . . . . . . . . . . . . . . . International Organization for Standardization

‘‘JCI’’ . . . . . . . . . . . . . . . . . . . . . . . . Joint Commission International

‘‘KPI’’ . . . . . . . . . . . . . . . . . . . . . . . key performance indicator

‘‘Labour Law’’ . . . . . . . . . . . . . . . . . the Law No. 12 for the year 2003

‘‘Lashin’’ . . . . . . . . . . . . . . . . . . . . . Lashin for Plastic Industries S.A.E.

‘‘Listing’’ . . . . . . . . . . . . . . . . . . . . . the Shares being listed on the EGX, which occurred on 13 April2016

‘‘Local Custodian’’ . . . . . . . . . . . . . . a local custodian within Egypt authorised by EFSA

‘‘LOGIC Report’’ . . . . . . . . . . . . . . . the report prepared by LOGIC Market Research, a marketresearch company, for the Group

‘‘LTIP‘‘ . . . . . . . . . . . . . . . . . . . . . . an employee long term incentive plan

‘‘Mandatory Lock-Up’’ . . . . . . . . . . . the restriction required by the EGX Listing Rules pursuant towhich the Company is required to lock-up 51 per cent. of theShares held by the Selling Shareholder until the later of (i) thepublication of the second annual financial statements followingCommencement of Trading or (ii) 24 months followingCommencement of Trading

‘‘MCDR’’ . . . . . . . . . . . . . . . . . . . . . Misr for Central Clearing, Depositary and Registry

‘‘Medical Establishments Law’’ . . . . . the Egyptian Law No. 51 for the year 1981 and its executiveregulations, as amended from time to time

‘‘MoHP’’ . . . . . . . . . . . . . . . . . . . . . the Egyptian Ministry of Health and Population

‘‘Nile Badrawi’’ . . . . . . . . . . . . . . . . . the hospital run by Nile Badrawi Hospital Company

‘‘Nile Badrawi Hospital Company’’ . . . Nile Badrawi Hospital Company S.A.E.

‘‘Non-GAAP Financial Measures’’ . . . net debt, total capital, capital expenditure, gearing ratio,working capital, adjusted operating costs, adjusted gross profit,adjusted general and administrative expenses, EBITDA margin,adjusted EBITDA margin, EBITDA, pro forma EBITDA, proforma net debt, adjusted EBITDA and adjusted profit for theyear, each as defined in ‘‘Non-GAAP financial measures’’ inPart 2 (Presentation of Financial and Other Information)

‘‘Offer Price’’ . . . . . . . . . . . . . . . . . . the price at which each Share is to be issued pursuant to theCombined Offer

‘‘Offer Price Range’’ . . . . . . . . . . . . . between EGP 8.75 and EGP 11.88 per Share

‘‘Offer Shares’’ . . . . . . . . . . . . . . . . . the Egyptian Retail Offer Shares, together with theInternational Offer Shares

‘‘Offering Memorandum’’ . . . . . . . . . this international offering memorandum

‘‘Operational License’’ the license issued by the relevant governor once a hospitalobtains approval from the Medical Permanent Committee, isregistered with the Egyptian Medical Syndicate and has satisfiedall conditions and requirements of the Medical EstablishmentsLaw

‘‘Promotion Order . . . . . . . . . . . . . . Article 19(5) of the Financial Services and Markets Act 2000(Financial Promotion) Order 2005, as amended

‘‘Pricing Statement’’ . . . . . . . . . . . . . the pricing statement to be published on or about 26 May 2016by the Company detailing the Offer Price and related disclosures

309

‘‘Proparco’’ . . . . . . . . . . . . . . . . . . . . Societe de Promotion et de Participation pour la CooperationEconomique S.A., a societe anonyme incorporated under thelaws of France

‘‘Public Offering Notice’’ . . . . . . . . . . the document to be issued in connection with the EgyptianRetail Offer

‘‘Qualified Investors’’ . . . . . . . . . . . . persons who are ‘‘qualified investors’’ within the meaning ofArticle 2(1)(e) of the Prospectus Directive

‘‘Relevant Member State’’ . . . . . . . . . each member state of the EEA which has implemented theProspectus Directive

‘‘Regulation S’’ . . . . . . . . . . . . . . . . . Regulation S under the U.S. Securities Act

‘‘Repatriation Fund’’ . . . . . . . . . . . . . the mechanism re-instituted by the Central Bank of Egypt in2013 that allows foreign investors who access the Egyptianmarket through the Central Bank of Egypt to convert, withoutdelay, the proceeds and dividends from their Egyptianinvestments to foreign currency through registered banks

‘‘Revolution’’ . . . . . . . . . . . . . . . . . . the 25 January 2011 revolution in Egypt

‘‘Right of Reallocation’’ . . . . . . . . . . the right of the Company and the Sole Global Coordinator toreallocate Offer Shares from the International Offer to theEgyptian Retail Offer

‘‘SEC’’ . . . . . . . . . . . . . . . . . . . . . . . the U.S. Securities and Exchange Commission

‘‘Selling Shareholder’’ . . . . . . . . . . . . Care Healthcare

‘‘Shareholders’’ . . . . . . . . . . . . . . . . . the holders of Shares in the capital of the Company

‘‘Shares’’ . . . . . . . . . . . . . . . . . . . . . the ordinary shares of the Company, having the rights set out inthe Statutes

‘‘Sole Global Coordinator’’ . . . . . . . . EFG Hermes Promoting and Underwriting

‘‘Stabilisation’’ . . . . . . . . . . . . . . . . . the option for EFG Hermes, or any of its agents, to effecttransactions in the Shares with a view to supporting ormaintaining the market price of the Shares at a level higher thanthat which might have otherwise prevailed in the open market

‘‘Stabilisation Fund’’ . . . . . . . . . . . . . the stabilisation account into which EFG Hermes will deposit upto 15 per cent. of the gross proceeds of the Combined Offerpursuant to Stabilisation

‘‘Stabilisation Period’’ . . . . . . . . . . . . the period starting on the date of Commencement of Tradingand ending 30 days thereafter

‘‘Statutes’’ . . . . . . . . . . . . . . . . . . . . the Statutes of the Company

‘‘Surtax’’ . . . . . . . . . . . . . . . . . . . . . . effective from the 2014 tax year, an additional five per cent.income tax in Egypt being levied temporarily for three years,which has now been abolished from 2015

‘‘THIO’’ . . . . . . . . . . . . . . . . . . . . . . The Teaching Hospitals and Institutes Organization

‘‘U.K.’’ . . . . . . . . . . . . . . . . . . . . . . . the United Kingdom of Great Britain and Northern Ireland

310

‘‘Unaudited Pro Forma ConsolidatedFinancial Information’’ . . . . . . . . . the unaudited pro forma consolidated financial information

prepared for illustrative purposes only to show the effect of theCompany’s ownership of Al Shorouk Hospital Company as if theacquisition of that company had occurred on 31 December 2015from a balance sheet perspective and to show the effect of theCompany’s ownership of Cairo Specialized Hospital Company,Nile Badrawi Hospital Company and Al Shorouk HospitalCompany as if the acquisition of each of those companies hadoccurred on 1 January 2015 from a statement of incomeperspective

‘‘Underwriting Agreement’’ . . . . . . . . the underwriting agreement to be entered into on or about thedate of the Pricing Statement among the Company, the SellingShareholder and the Sole Global Coordinator described underthe heading ‘‘Underwriting Arrangements’’ in Part 12 (Details ofthe Combined Offer)

‘‘Unified Code’’ . . . . . . . . . . . . . . . . a unique, personalised stock exchange code for the EGX

‘‘United States’’ or ‘‘U.S.’’ . . . . . . . . . the United States of America, its territories and possessions, anyState of the United States of America, and the District ofColumbia

‘‘U.S. Securities Act’’ . . . . . . . . . . . . the United States Securities Act of 1933, as amended

‘‘WHO’’ . . . . . . . . . . . . . . . . . . . . . . World Health Organization

311

CLEOPATRA HOSPITAL COMPANY S.A.E.

39–41 Cleopatra StreetHeliopolis

CairoEgypt

SELLING SHAREHOLDER

Care Healthcare Limited85 St. John Street

VallettaVLT 1165

Malta

SOLE GLOBAL COORDINATOR AND BOOKRUNNER

EFG Hermes Promoting and UnderwritingB129, Phase 3

Smart Village, Km 28Cairo Alexandria Desert Road

Egypt

LEGAL ADVISERS TO THE COMPANYAND TO THE SELLING SHAREHOLDER

As to US and English law As to Egyptian lawFreshfields Bruckhaus Deringer LLP Zulficar & Partners

65 Fleet Street Nile City Building, South TowerLondon EC4Y 1HS Eighth Floor, 2005 A Cornich El Nil

United Kingdom Ramlet Beaulac, Cairo, Egypt 11221

LEGAL ADVISERS TO THE GLOBALCOORDINATOR AND BOOKRUNNER

As to US and English law As to Egyptian lawShearman & Sterling (London) LLP Matouk Bassiouny

9 Appold Street 12 Mohamed Ali GenahLondon EC2A 2AP Garden City

United Kingdom Cairo, Egypt

MANAGER

Pharos Holding7 Abu El Feda Street

Zamalek 11211Cairo, Egypt

AUDITORS OF THE COMPANY

Mansour & Co. PricewaterhouseCoopers(PricewaterhouseCoopers)

Plot No 211, Second Sector, City CenterNew Cairo 11835

PO Box 170 New CairoEgypt

Merrill Corporation Ltd, London16ZBC43301

electronic transmission disclaimer …resources.inktankir.com/clho/prospectus.pdfcleopatra hospital...

Documents