LUXEMBOURG--(BUSINESS WIRE)--
THE EGYPT TRUST
Société d'Investissement à Capital Fixe
Luxembourg
R.C.S.
Luxembourg B 55 584
Unaudited Half-Yearly Report
September 30th, 2011
Table of Contents
Organisation of the Fund 2
General Information 4
Responsibility Statement 5
Investment Policy 6
Manager’s Review 7
Principal Risks and Uncertainties 9
Statement of Net Assets 10
Shareholders’ Equity 10
Statement of Operations 11
Statement of Changes in Net Assets 12
Statistical Information about the Fund 12
Statement of Changes in Shares Outstanding 12
Statement of Investments and Other Net Assets 13
Currency, Geographical and Industrial Classification of the Fund 15
Notes to the Financial Statements 17
Organisation of the Fund
Chairman |
||
ALEXANDER E. ZAGOREOS | Jermain Hill Lane | |
Eagle Bridge, NY 12057, U.S.A. | ||
Directors |
||
MOHAMED KAMAL EL-DIN BARAKAT * | 151 Mohamed Farid Street | |
Cairo, EGYPT | ||
MICHAEL BECKETT *+ |
Northcroft Dulwich Common | |
London SE21 7EW, U.K. | ||
ADEL HOSNI HUSSEIN HASSAN HOSNI+ |
NATIONAL BANK OF EGYPT | |
Chairman of the Nomination Committee NBE Tower | ||
1187 Corniche El Nil | ||
Boulak | ||
Cairo, EGYPT | ||
SHAKER ALBERT KHAYATT * | KHAYATT & COMPANY INC. | |
50 Broad Street, Suite 1609 | ||
New York, NY 10004, U.S.A. | ||
MICHAEL TAIT * | OXFORD AND EDINBURGH CONSULTANTS | |
Chairman of the Audit Committee 8 Chalcot Crescent | ||
London NW1 8YD, U.K. | ||
Registered Office |
11, rue Aldringen | |
L-1118 Luxembourg | ||
Manager |
LAZARD ASSET MANAGEMENT LLC | |
30 Rockefeller Plaza | ||
New York, NY 10112, U.S.A. | ||
Investment Adviser |
NATIONAL BANK OF EGYPT | |
NBE Tower | ||
1187 Corniche El Nil | ||
Boulak | ||
Cairo, EGYPT | ||
Custodian and Paying Agent |
KBL EUROPEAN PRIVATE BANKERS S.A. | |
43, boulevard Royal | ||
L-2955 Luxembourg | ||
Domiciliary, Registrar, Transfer |
KREDIETRUST LUXEMBOURG S.A. | |
and Administrative |
Agent 11, rue Aldringen | |
L-2960 Luxembourg | ||
Cabinet de révision agréé |
DELOITTE S.A. | |
560, rue de Neudorf | ||
L-2220 Luxembourg | ||
Financial Adviser and Broker |
WESTHOUSE SECURITIES LIMITED | |
One Angel Court | ||
London EC2R 7HJ, U.K. |
* Member of the Audit Committee
+ Member of the Nomination Committee
General Information
1. Shareholders will be sent audited annual accounts relating to THE EGYPT TRUST (the “Fund” or the “Corporation”), which will include a report by the Manager, made up to the last day of March in each year. Shareholders will also be sent an unaudited half-yearly report covering the six-month period ending September 30th in each year.
2. The Annual General Meeting of Shareholders is held in Luxembourg each year at 4 p.m. on the third Tuesday of August in each year (or, if such day is not a business day in Luxembourg, on the next following business day). Notices convening each annual general meeting, including agenda, time and place, and details of attendance, quorum and majority requirements under Luxembourg law, will be sent to the registered addresses of Shareholders together with the annual report and accounts not less than 21 days before the date of such meeting.
3. The investment policy of the Corporation is to achieve medium to long-term capital growth through investments principally in equity securities of Egyptian companies listed on the Egyptian Stock Exchanges as well as other exchanges.
4. The Corporation intends to distribute annually to Shareholders substantially all of its income (including dividends and interest) available for distribution after deducting fees and expenses.
5. Dividends will only be paid to the extent that they are covered by income received from underlying investments, shares of profits of associated companies being unavailable for this purpose unless and until distributed to the Corporation. The Fund’s Articles of Incorporation (the “Articles”) provide that dividends shall not be paid out of surpluses arising upon the realisation of investments.
6. A dividend declared but not claimed by a Shareholder after twelve years from the declaration thereof shall lapse and revert to the Corporation.
7. The Net Asset Value (the “NAV”) per Share is expressed in US Dollars (“USD”) and is published on a weekly basis in the “Financial Times”.
8. The Shares of the Fund are listed on the Official List of the UK Listing Authority and the Luxembourg Stock Exchange and traded on the London Stock Exchange and the Luxembourg Stock Exchange.
Responsibility Statement
We, the Directors of The Egypt Trust, confirm to the best of our knowledge that:
a) the financial statements which have been prepared in accordance with the applicable set of accounting standards (being the legal and regulatory requirements in Luxembourg relating to investment funds) give a true and fair view of the assets, liabilities, financial position and profit or loss of the Fund as at September 30th, 2011 and for the financial period then ended; and
b) the Manager’s Review includes a fair review of the development and performance of the business and the position of the Fund together with a description of the principal risks and uncertainties that it faces; and
c) the financial statements include a fair review of any related party transactions that have materially affected the financial position or the performance of the Fund and any changes to the related party transactions described in the Annual Report that could have a material effect on the financial position or performance of the Fund.
By order of the Board
Alexander E. Zagoreos
Chairman
Luxembourg, November 2011
Investment Policy
-
Asset Allocation:
- The Fund invests primarily in equity securities of Egyptian companies listed on the Egyptian Stock Exchange (formerly Cairo and Alexandria Stock Exchanges) as well as other exchanges.
- We use a bottom-up, fundamental company analysis to identify companies that have strong earnings-generation ability but are inexpensively priced.
- We continuously monitor potential and existing holdings in the Fund, in addition to the overall macro-economic environment in Egypt. The asset allocation and security selection changes accordingly.
-
Risk Diversification:
- The Fund runs a concentrated portfolio, subject to exposure limits detailed below, but in the meanwhile aims to provide broad exposure to the market through holding a diversified portfolio.
- The liquidity of the Egyptian market is limited compared to developed markets. When making an investment decision, liquidity concerns weigh in. We aim to keep 90% of the Fund’s NAV in highly liquid securities and cash. The remaining 10% would provide the flexibility to invest in attractively priced securities with low liquidity, or in pre-IPO companies.
- We seek to invest in undervalued assets trading at a discount (absolute and/or relative). Such discounts could limit the portfolio’s downside risk, and add more value during rising markets.
-
Exposure Limits:
- Maximum weighting in any single security should not exceed 10% of NAV - passive breaches should be brought back in line with the policy in a manner consistent with the best interests of the Shareholders, and
- Maximum weighting in any single sector should not exceed 25% of NAV. The Fund treats Real Estate & Property Development as a separate sector and not part of Financials.
- Gearing: The Fund’s Manager is not allowed to use gearing.
Manager’s Review
Portfolio Performance & Market Overview
(Price Only - Net of Fees) |
Q ending
September 30th, 2011 |
Q ending
June 30th, 2011 |
6 Months to September 30th, 2011 |
1 Year to September 30th, 2011 |
|||||
Egypt Trust Fund NAV | -14.58% | -3.22% | -17.33% | -29.95% | |||||
S&P IFC Egypt Investable USD* | -17.23% | -8.48% | -24.24% | -38.76% | |||||
MSCI Egypt | -20.71% | -3.18% | -23.20% | -38.56% |
The performance of the Egyptian exchange during the first half of the Fund’s fiscal year remains a reflection of the events of the January 25th, 2011 revolution and the complete lack of visibility that followed. During the six months ended September 30th, 2011, the S&P IFC Egypt Investable Index in USD lost 24.24% bringing the performance since January 1st, 2011 to -42.36%. By comparison, the Fund lost 17.33% and 35.44% in the six months and since the beginning of the year respectively.
Portfolio Structure
The Fund’s portfolio remains fairly concentrated with the top 10 holdings representing 48.72% of NAV. Stock selection is subject to our disciplined fundamental approach and the top 10 holdings represent our highest convictions at the report date. Details of the top 10 holdings can be found in the table below.
Top 10 Holdings | Portfolio (%) | ||
Orascom Telecom Holding | 8.17% | ||
Telecom Egypt | 6.15% | ||
Egyptian Intl Pharma Industries Co | 4.98% | ||
EFG-Hermes Holding | 4.52% | ||
Orascom Construction Industries | 4.42% | ||
National Société Générale Bank | 4.32% | ||
Arafa Holding | 4.28% | ||
Talaat Moustafa Group Holding | 4.22% | ||
Egypt Co. For Mobile Telecom ( MOBINIL) | 3.85% | ||
Commercial International Bank Egypt | 3.81% | ||
TOTAL | 48.72% |
Currently, no stocks exceed the 10% single issuer limit.
Real estate took the worst hit following the revolution and the ousting of the former president Hosni Mubarak as many major shareholders in real estate development companies were connected to the regime and parts of their land bank are currently being disputed in courts. While financials weighting remained largely stable, we increased exposure to telecoms as we saw better value in the sector.
Sector Allocation | September 30th, 2010 | September 30th, 2011 | |||||||
Financial | 21.33 | % | 19.71 | % | |||||
Telecom | 13.59 | % | 18.17 | % | |||||
Real Estate | 14.37 | % | 10.06 | % | |||||
Material | 15.04 | % | 10.11 | % | |||||
Industrial | 7.62 | % | 8.66 | % | |||||
Petrochemicals | 7.46 | % | 7.28 | % | |||||
Healthcare | 6.76 | % | 4.99 | % | |||||
Consumer | 8.12 | % | 9.45 | % | |||||
Energy | 0.00 | % | 0.56 | % | |||||
Net Current Assets | 5.71 | % | 11.01 | % | |||||
TOTAL |
100.00 |
|
% |
100.00 | % |
Economic Overview & Outlook
As expected, the Egyptian economy suffered in the first nine months of 2011; after shrinking by 4.2% in Q1 2011, GDP in real terms started to grow again but our forecast for the full year 2011 remains around 1%.
The mix of near zero visibility and the interim government’s reluctance/inability to adopt a structural reform program meant that private investment took a tumble while FDI nearly dried up. In addition, the government has shown a tendency to adopt popular measures even if they make little or no economic sense. The net effect is widening budget deficit, balance of payment and current account deficits along with fast disappearing international reserves.
We are unable to provide what we believe would be a fairly realistic outlook as we believe the current government’s hands are tied to take any serious steps towards reform or kick starting the economy in general.
What Egypt needs is to get out of the political limbo as soon as possible. We view the parliamentary elections – currently scheduled to start at the end of November – as the first step towards putting Egypt on the right track. If that goes well, we will have better visibility and be able to have a more realistic outlook.
Subsequent Events
Demonstrations erupted again on November 19th, 2011 calling for the Supreme Council for Armed Forces to step down. There are doubts that parliamentary elections scheduled for
November 28th, 2011 would go through despite assurances by the army that it will. The market reacted very negatively dropping around 12% in the 3 days to November 22nd, 2011 which is about the same decline since September 30th, 2011.
Luxembourg November 2011 | Lazard Asset Management |
Note: The information in this report represents historical data and is not an indication of future results.
Principal Risks and Uncertainties
The success of the Fund may be affected by general economic and market conditions, such as widening discounts, interest rate changes, availability of credit, inflation rates, economic uncertainty, changes in laws, and national and international political circumstances. These factors may affect the level and volatility of securities that the Fund invests in. The Manager actively monitors these factors and, to the degree possible, attempts to mitigate their negative impact on the Fund.
The Fund invests in securities issued primarily by companies located in Egypt. The Egyptian securities markets can be extremely volatile. The Fund’s performance will be influenced by political, social and economic factors affecting companies in Egypt. As an emerging market country, Egypt can generally have an economic structure that is less diverse and mature, and a political system that is less stable than those of developed countries. Further, a fund, such as the Fund, that invests substantially all of its assets in securities of issuers in one country may experience significantly greater volatility than a fund that invests in a more geographically diverse portfolio.
The accompanying notes are an integral part of these financial statements.
Statement of Net Assets
(in USD)
September 30th, 2011 |
March 31st, 2011 |
||||||
ASSETS | |||||||
Securities' portfolio at market value | 35,910,688 | 42,422,274 | |||||
Cash at banks | 5,908,800 | 8,520,220 | |||||
Receivable on sales of securities | - | 2,364,027 | |||||
Income receivable on portfolio | 53,891 | - | |||||
Interest receivable on bank accounts | 413 | 42 | |||||
Prepaid expenses | 3,039 | 1,053 | |||||
Total assets | 41,876,831 | 53,307,616 | |||||
LIABILITIES | |||||||
Bank liabilities | 1,435,775 | 1,492,744 | |||||
Payable on purchases of securities | - | 547,256 | |||||
Payable on treasury transactions | - | 2,313,554 | |||||
Payable on repurchases of Shares | - | 36,753 | |||||
Expenses payable | 88,244 | 240,333 | |||||
Total liabilities | 1,524,019 | 4,630,640 | |||||
Net Assets at the End of the Period/Year | 40,352,812 | 48,676,976 | |||||
Number of Shares outstanding | 1,823,125 | 1,825,006 | |||||
Net Asset Value per Share | 22.13 | 26.67 |
Shareholders’ Equity
(in USD)
September 30th, 2011 |
March 31st, 2011 |
||||||
Capital: 8,513,347 Shares at USD 2.00 | 17,026,694 | 17,026,694 | |||||
Share Premium | 73,633,306 | 73,633,306 | |||||
Legal Reserve | 1,702,669 | 1,702,669 | |||||
Profit brought forward | 69,479,916 | 64,952,884 | |||||
Cost of 1,663,837 Shares held in treasury | -15,939,917 | -15,939,917 | |||||
Repurchase of 5,026,385 Shares at the request
of Shareholders |
-80,568,717 |
-80,515,842 |
|||||
Total Capital and Reserves | 65,333,951 | 60,859,794 | |||||
Net realised gain/loss for the period/year | -922,584 | 4,527,032 | |||||
Unrealised depreciation on securities | -24,058,555 | -16,709,850 | |||||
Total Shareholders’ Equity | 40,352,812 | 48,676,976 |
Statement of Operations
(in USD)
From April 1st, 2011 to September 30th, 2011 |
From April 1st, 2010 |
|||
INCOME | ||||
Dividends, net | 1,647,939 | 2,118,280 | ||
Interest on bank accounts | 4,970 | 2,773 | ||
Received commissions | 2,652 | 19,049 | ||
Total income | 1,655,561 | 2,140,102 | ||
EXPENSES | ||||
Management fees | 237,213 | 317,567 | ||
Advisory fees | 59,303 | 79,392 | ||
Custodian fees | 10,563 | 12,037 | ||
Bank and financial services | 86,675 | 72,662 | ||
Central administration costs | 38,165 | 32,670 | ||
Audit and supervisory fees | 22,905 | 24,803 | ||
Printing and publication expenses | 31,639 | 29,082 | ||
Subscription duty (“taxe d’abonnement”) | 11,449 | 15,760 | ||
Interest paid | 423 | 26 | ||
Directors’ fees and expenses | 10,315 | 43,933 | ||
Other expenses | 72,181 | 26,073 | ||
Total expenses | 580,831 | 654,005 | ||
NET INVESTMENT INCOME | 1,074,730 | 1,486,097 | ||
NET REALISED GAIN/LOSS | ||||
- on sale of securities (-1 year) | -589,296 | 791,251 | ||
- on sale of securities (+1 year) | -1,344,179 | 918,408 | ||
- on foreign exchange | -63,839 | -17,505 | ||
REALISED GAIN/LOSS | -922,584 | 3,178,251 | ||
CHANGE IN NET UNREALISED DEPRECIATION | ||||
- on securities | -7,348,705 | -4,991,235 | ||
DECREASE IN NET ASSETS AS A RESULT OF OPERATIONS | -8,271,289 | -1,812,984 |
Statement of Changes in Net Assets
(in USD)
From April 1st, 2011 to September 30th, 2011 |
From April 1st, 2010 |
||
Net Assets at the Beginning of the Period | 48,676,976 | 66,288,686 | |
Net investment income | 1,074,730 | 1,486,097 | |
Net realised gain/loss on sale of securities (-1 year) | -589,296 | 791,251 | |
Net realised gain/loss on sale of securities (+1 year) | -1,344,179 | 918,408 | |
Net realised loss on foreign exchange | -63,839 | -17,505 | |
Net realised gain/loss for the period | -922,584 | 3,178,251 | |
Repurchases of Shares at the request of Shareholders | -52,875 | -379,869 | |
Change in unrealised depreciation on securities | -7,348,705 | -4,991,235 | |
Net Assets at the End of the Period | 40,352,812 | 64,095,833 |
Statistical Information about the Fund
(in USD)
September 30th, 2011 | March 31st, 2011 | March 31st, 2010 | |||||
Net Assets | 40,352,812 | 48,676,976 | 66,288,686 | ||||
Net Asset Value per Share | 22.13 | 26.67 | 32.47 |
Statement of Changes in Shares Outstanding
For the period
ended September 30th, 2011
Number of Shares Outstanding at the Beginning of the Period | 1,825,006 | |
Number of Shares repurchased held in treasury | - | |
Number of Shares repurchased at the request of Shareholders | 1,881 | |
Number of Shares Outstanding at the End of the Period | 1,823,125 |
Statement of Investments and Other Net Assets
September
30th, 2011
(in USD)
Currency | Number / nominal value | Description | Cost | Market value | % of total net assets | ||||||||||||
Investments in securities | |||||||||||||||||
Transferable securities admitted to an official stock exchange listing | |||||||||||||||||
Shares | |||||||||||||||||
Banks | |||||||||||||||||
EGP | 400,000 | Commercial Intl Bank Ltd | 1,759,884 | 1,536,901 | 3.81 | ||||||||||||
EGP | 1,000,000 | Credit Agricole Egypt | 1,839,015 | 1,329,366 | 3.29 | ||||||||||||
EGP | 450,000 | National Société Générale Bank Reg | 711,956 | 1,743,347 | 4.32 | ||||||||||||
4,310,855 | 4,609,614 | 11.42 | |||||||||||||||
Capital goods | |||||||||||||||||
EGP | 195,000 | El Sewedy Elec Co | 1,888,062 | 721,780 | 1.79 | ||||||||||||
EGP | 50,000 | Orascom Construction Industrie | 1,653,019 | 1,784,670 | 4.42 | ||||||||||||
3,541,081 | 2,506,450 | 6.21 | |||||||||||||||
Consumer durables and apparel | |||||||||||||||||
EGP | 250,000 | Oriental Weavers Co | 1,866,000 | 1,257,282 | 3.12 | ||||||||||||
Diversified financial services | |||||||||||||||||
EGP | 2,000,000 | Citadel Capital Co | 2,765,506 | 1,203,638 | 2.98 | ||||||||||||
EGP | 650,000 | EFG-Hermes | 4,436,871 | 1,824,064 | 4.52 | ||||||||||||
7,202,377 | 3,027,702 | 7.50 | |||||||||||||||
Energy | |||||||||||||||||
EGP | 150,000 | Alexandria Mineral Oils Co | 2,055,709 | 1,422,992 | 3.53 | ||||||||||||
USD | 120,000 | Maridive & Oil Serv | 344,160 | 225,600 | 0.56 | ||||||||||||
2,399,869 | 1,648,592 | 4.09 | |||||||||||||||
Food and beverage | |||||||||||||||||
EGP | 1,000,000 | Juhayna Food Industries | 900,342 | 772,809 | 1.91 | ||||||||||||
Hotels, restaurants and leisure | |||||||||||||||||
EGP | 2,750,000 | Talaat Moustafa Group Holding | 3,733,064 | 1,701,102 | 4.22 | ||||||||||||
Insurance | |||||||||||||||||
EGP | 375,000 | Delta Insurance | 875,830 | 314,949 | 0.78 | ||||||||||||
Investment companies | |||||||||||||||||
USD | 3,600,000 | Al Arafa Inv & Consulting | 2,453,085 | 1,728,000 | 4.28 | ||||||||||||
Materials | |||||||||||||||||
GBP | 500,000 | Centamin Egypt Ltd | 851,744 | 744,182 | 1.84 | ||||||||||||
EGP | 715,000 | Egyptian Fin & Industrial Co Reg | 1,957,052 | 1,172,239 | 2.90 | ||||||||||||
EGP | 1,000,000 | Ezz Steel | 2,664,960 | 989,062 | 2.45 | ||||||||||||
EGP | 150,000 | Paint and Chemical Ind | 987,795 | 959,809 | 2.38 | ||||||||||||
EGP | 750,000 | Sidi Kerir Petrochemicals | 2,762,250 | 1,516,282 | 3.76 | ||||||||||||
EGP | 100,000 | Suez Cement Co | 877,607 | 466,200 | 1.16 | ||||||||||||
EGP | 125,000 | Tourah Cement Co | 1,311,897 | 737,396 | 1.83 | ||||||||||||
11,413,305 | 6,585,170 | 16.32 | |||||||||||||||
Pharmaceuticals and biotechnology | |||||||||||||||||
EGP | 375,000 | Egyptian Intl Pharm Industr Co | 1,460,955 | 2,011,651 | 4.98 | ||||||||||||
Real estate | |||||||||||||||||
EGP | 250,000 | Heliopolis Housing & Dev SA | 3,547,581 | 549,013 | 1.36 | ||||||||||||
EGP | 78,462 | Medinet Nasr Housing | 398,152 | 150,078 | 0.37 | ||||||||||||
EGP | 125,000 | Namaa Dév Real Estate InvestCo | 292,053 | 278,278 | 0.69 | ||||||||||||
EGP | 3,500,000 | Palm Hills Devlopments SAE | 2,894,429 | 733,414 | 1.82 | ||||||||||||
EGP | 297,725 | Sixth of Octob Dev & Inv Co SA | 2,271,111 | 648,330 | 1.61 | ||||||||||||
9,403,326 | 2,359,113 | 5.85 | |||||||||||||||
Retailing | |||||||||||||||||
EGP | 100,000 | B-Tech | 61,514 | 54,985 | 0.14 | ||||||||||||
Telecommunication services | |||||||||||||||||
EGP | 100,000 | Egyptian Co for Mobile Com | 2,248,761 | 1,554,000 | 3.85 | ||||||||||||
EGP | 1,000,000 | Orascom Telecom Holding | 676,871 | 556,557 | 1.38 | ||||||||||||
USD | 1,000,000 | Orascom Telecom Holding spons GDR Reg repr 5 Shares Reg-S | 3,951,475 | 2,740,000 | 6.79 | ||||||||||||
EGP | 1,000,000 | Telecom Egypt | 3,470,533 | 2,482,712 | 6.15 | ||||||||||||
10,347,640 | 7,333,269 | 18.17 | |||||||||||||||
Total investments in securities | 59,969,243 | 35,910,688 | 88.99 | ||||||||||||||
Cash at banks | 5,908,800 | 14.64 | |||||||||||||||
Bank liabilities | -1,435,775 | -3.56 | |||||||||||||||
Other net assets and liabilities | -30,901 | -0.07 | |||||||||||||||
Total net assets | 40,352,812 | 100.00 |
Currency, Geographical and Industrial Classification of the Fund
September
30th, 2011
(in percentage of net assets)
Currency Classification
Egyptian Pound | 75.52 % | |
US Dollar | 11.63 % | |
Pound Sterling | 1.84 % | |
Total investments in securities | 88.99 % | |
US Dollar | 14.64 % | |
Total cash at banks | 14.64 % | |
Egyptian Pound | -0.01 % | |
US Dollar | -3.55 % | |
Total bank liabilities | -3.56 % | |
Other net assets and liabilities | -0.07 % | |
Total net assets | 100.00 % |
Geographical Classification
Egypt | 87.15 % | |
Australia | 1.84 % | |
Total investments in securities | 88.99 % | |
Cash at banks | 14.64 % | |
Bank liabilities | -3.56 % | |
Other net assets and liabilities | -0.07 % | |
Total net assets | 100.00 % |
Industrial Classification
Telecommunication services | 18.17 % | |
Materials | 16.32 % | |
Banks | 11.42 % | |
Diversified financial services | 7.50 % | |
Capital goods | 6.21 % | |
Real estate | 5.85 % | |
Pharmaceuticals and biotechnology | 4.98 % | |
Investment companies | 4.28 % | |
Hotels, restaurants and leisure | 4.22 % | |
Energy | 4.09 % | |
Consumer durables and apparel | 3.12 % | |
Food and beverage | 1.91 % | |
Insurance | 0.78 % | |
Retailing | 0.14 % | |
Total investments in securities | 88.99 % | |
Cash at banks | 14.64 % | |
Bank liabilities | -3.56 % | |
Other net assets and liabilities | -0.07 % | |
Total net assets | 100.00 % |
Notes to the Financial Statements
September 30th, 2011
NOTE 1 - GENERAL
THE EGYPT TRUST (the “Fund” or the “Corporation”) is a closed-end investment corporation incorporated as an investment corporation under the laws of the Grand Duchy of Luxembourg and qualifies as a “société d’investissement à capital fixe” under the law of December 17th, 2010
(the “2010 Law”) regarding undertakings for collective investments and the law of August 10th, 1915, as amended regarding commercial companies. The Fund is governed by Part II of the Luxembourg 2010 Law.
The Fund was incorporated in Luxembourg on July 23rd, 1996 for an indefinite period.
The Articles have been published in the “Mémorial, Recueil des Sociétés et Associations” and they have been filed with the Registrar of the Luxembourg District Court, where copies thereof may be obtained. In addition, a legal notice concerning the issue of the Shares is on file with the Registrar of the Luxembourg District Court.
The Fund’s investment policy is to achieve medium to long-term capital growth through investments principally in equity securities of Egyptian companies listed on the Egyptian Stock Exchange as well as other exchanges.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a) Presentation of Accounts
The financial statements are presented in conformity with Luxembourg legal and regulatory requirements relating to investment funds. The Fund keeps its books and records in USD.
b) Valuation
1) The NAV per Share is calculated in accordance with Article 22 of the Fund’s Articles on each Valuation Date (as defined in the Articles). “Valuation Date” means the date fixed by the Board of Directors (the “Board”) for the valuation of the Shares being Friday of each week (or, if that day is not a business day in Luxembourg, on the next business day).
The NAV per Share is determined by dividing the Net Assets of the Fund, being the value of its assets less liabilities, by the number of Shares then outstanding.
2) In calculating the NAV per Share, income and expenses are treated as accruing from day to day and the Fund’s Articles provide, inter alias, that:
(i) unquoted investments will initially be valued at cost price, which will include any expenses relating to their acquisition;
(ii) a revaluation of unquoted investments to a value in excess of or below cost may be made where, in the opinion of the Board, or in the opinion of the Fund’s Manager (where the Board has delegated its powers), it is justified. Factors affecting such revaluations may include: the prices at which further issues of capital or dealings between third parties take place, the market value of comparable companies (making appropriate adjustments for such factors as limitation of marketability) or the price at which any agreement has been entered into, or is reasonably contemplated, for the sale of the investments;
(iii) securities which are listed on an official stock exchange or traded on any other regulated market will be valued at the last available price on the principal market on which such securities are traded, or by a pricing service approved by the Board;
(iv) assets or liabilities expressed in terms of currencies other than USD will be translated into USD at the prevailing market rate for such currencies at the Valuation Date.
3) First-in first-out method: Purchases of securities are recorded at cost. Realized gains and losses on securities sold are computed on the first-in first-out basis.
4) The value of cash in hand or on deposit, bills and notes payable on presentation, accounts due, prepaid expenses and dividends and interest declared and fallen due but not yet received consists of the nominal value of such assets, except, however, in the event that it seems improbable that such value can be realized, in which event the value is determined by deducting a sum which the Board considers appropriate to reflect the realizable value of such assets.
5) Foreign currencies monetary assets and liabilities denominated in foreign currencies in the Statement of Net Assets are translated into USD at the exchange rates ruling at the date of the report. Transactions in foreign currencies are recorded in USD based on the exchange rates in effect at the date of transactions. The following significant exchange rates have been applied for the conversion as at the date of the report:
USD | |||||||
1 | EGP | Egyptian Pound | 0.1676376 | ||||
1 | EUR | Euro | 1.3648000 | ||||
1 | GBP | Pound Sterling | 1.5683500 |
c) Income Recognition
Interest income is recorded on an accrual basis and dividend income is recorded on the ex-date, net of any withholding taxes in the relevant country.
d) Net Realised Gain/Loss
The net realised gain/loss on sale of securities is split between two accounts depending on the fact that the securities have been owned during more than one year or not.
NOTE 3 - MANAGEMENT AND ADVISORY FEES
The Fund pays Lazard Asset Management LLC, the Manager, annual management fees of 1.00%, of the value of the gross assets of the Corporation, payable monthly in arrears and to National Bank of Egypt, the Investment Adviser, 0.25%, per annum, of the value of the gross assets of the Corporation, payable monthly in arrears.
NOTE 4 - TAXES
As a Luxembourg investment company, under present laws the Fund is not subject to income taxes in Luxembourg. Taxes may be withheld at the source on dividends and interest received on investment securities.
According to the Luxembourg 2010 Law, the Fund is subject to Luxembourg subscription duty (“taxe d’abonnement”) at the rate of 0.05% per annum of its Net Assets, such tax being payable quarterly on the basis of the Total Net Assets of the Fund at the end of the relevant quarter.
NOTE 5 - REPURCHASES OF SHARES HELD IN TREASURY
The Fund is not obliged to repurchase Shares at the request of Shareholders.
The maximum price at which Shares can be repurchased will be the NAV per Share. Under Luxembourg law, repurchases may only be made to the extent that the Corporation has distributable reserves available for the purpose, being Share premium or accumulated reserves.
Any Shares so repurchased will be held in treasury or will be cancelled by way of reduction of issued capital. The Shares held in treasury may be resold at any time, at the discretion of the Board, if a premium to the NAV per Share may be obtained. Details of such repurchases and sales will be communicated to all Shareholders as well as to the London and the Luxembourg Stock Exchanges and to the Egyptian Stock Exchange if the Shares are listed there.
The Fund did not repurchase any Shares held in treasury during the period ended
September 30th, 2011 and at this date, a total of 1,663,837 Shares are held in treasury for an amount of USD 15,939,917.
NOTE 6 - REPURCHASES AT THE REQUEST OF SHAREHOLDERS
Following to the Extraordinary General Meeting on November 17th, 2003 and to the circular resolution on December 24th, 2003, Shareholders may request the Corporation from December 29th, 2003 to redeem all or part of their Shares quarterly at a redemption price equal to the NAV per Share of the applicable Valuation Date, reduced by a redemption fee of up to 5% for the benefit of the Corporation to cover dealing charges. As of September 30th, 2011, such redemption fee amounts to USD 2,652 and is registered under the caption “received commissions” in the Statement of Operations. The Corporation shall redeem such Shares within the sole limitations set forth by law, the Fund’s Articles and the prospectus and subject to any event giving rise to suspension as referred in the prospectus.
If the total value of requests for redemption of Shares received on any specific redemption date exceeds 10% of the Total Net Asset Values of Shares in issue, the redemption requests will be reduced pro rata to the holdings of the Shareholders who applied for redemption.
NOTE 7 - CAPITAL
The authorized Share capital of the Corporation on incorporation of the Fund was USD 40,000,000 divided into 20,000,000 Shares with a par value of USD 2.00 each.
On December 12th, 1997, a capital increase of 8,490,847 Shares was registered with a par value of USD 2.00 each.
The Fund is required by Luxembourg law to transfer at least 5% of its yearly net profits to a non-distributable legal reserve until such reserve amounts to 10% of the Fund’s nominal Share capital. This reserve is not available for dividend distribution.
Following the Fund’s Annual General Meeting Minutes on August 16th, 2011, no dividend has been distributed.
NOTE 8 - CUSTODIAN FEES
The Custodian receives, under the terms of the Custodian Agreement, fees for its services at rates to be agreed from time to time between the Fund and the Custodian in accordance with Luxembourg practice.
NOTE 9 - DIRECTORS FEES
Each of the Directors shall be paid a fee at such a rate as the Board shall determine provided that the aggregate of such fees shall not exceed USD 200,000 per annum or such higher amount as may from time to time be decided by resolution of the Corporation.
The Directors shall also be entitled to reimbursement of all travelling, hotel and other expenses properly incurred by them in attending and returning from meetings or otherwise in connection with the business of the Corporation.
NOTE 10 - BENEFICIAL AND NON-BENEFICIAL INTEREST OF DIRECTORS IN THE SHARE CAPITAL
As of September 30th, 2011, the beneficial and non-beneficial interests of the Directors in the Share capital are the following:
Alexander E. Zagoreos | 2,500 Shares |
NOTE 11 - DIRECTORS’ INTEREST IN SIGNIFICANT CONTRACTS
Alexander E. Zagoreos was a Managing Director of Lazard Asset Management LLC through December 31st, 2005 and became a Limited Managing Director effective January 1st, 2006. He became a Senior Advisor on January 1st, 2008.
NOTE 12 - CHANGES OF THE INVESTMENT PORTFOLIO
The changes of the investment portfolio referring to the period of the report are available free of charge at the registered office of the Fund.
NOTE 13 - ADDENDUM TO THE PLACING MEMORANDUM
The Board resolved to amend the prospectus with a consolidated addendum to the prospectus dated August 2nd, 1996. The prospectus may not be distributed without the consolidated addendum dated December 2003.
NOTE 14 - SUBSTANTIAL SHAREHOLDINGS AND SUBSEQUENT EVENT
On June 7th, 2010, the Fund announced that it had become aware that, as a result of the quarterly share redemptions offered by the Fund, two of its shareholders, National Bank of Egypt and Banque Misr (the “Major Shareholders”) hold 1,501,315 ordinary shares and 391,384 ordinary shares, respectively, in the capital of the Fund, representing a combined holding of 92.7% of the Fund’s issued share capital. Listing Rule 6.1.19 states that at least 25% of a listed company's issued share capital must be held in public hands and that shares held by any person or persons in the same group or persons acting in concert who have an interest in 5% or more of the shares are not deemed to be in public hands. In accordance with Listing Rule 9.2.16, the Fund has informed the UK Listing Authority (“UKLA”) that, given the size of the combined shareholdings of the Major Shareholders, the Fund is currently not able to comply with the shares in public hands requirement and it remains in consultation with the UKLA regarding this issue. The Board confirmed to the market that it would be considering all possible and appropriate options for redressing the Fund’s current free float position.
Since that time, the Fund has examined a number of different options to restore its free float position above the 25% requirement. Unfortunately, this time coincided with a period of significant turbulence in both Egyptian and global markets.
As of September 30th, 2011, the Board was aware of the following interests in the Shares of the Fund:
Ordinary Shares |
Percentage of
Issued Capital |
||||
National Bank of Egypt | 1,299,703 | 71.29% | |||
Banque Misr | 391,384 | 21.47% |
On July 19th, 2011, the Fund announced that the Board had received indications from the Major Shareholders that they wished to seek an exit for their respective investments in the Fund. The Board confirmed that it is therefore seeking to formulate proposals, which may include a liquidation of the Fund, to be put to Shareholders at the earliest opportunity and that a further announcement will be made in due course.