TIDMEGP
THE EGYPT TRUST
Société d'Investissement à Capital FixeLuxembourgR.C.S.
Luxembourg B 55 584
Unaudited Half-Yearly Report
September 30th, 2010
THE EGYPT TRUST
Table of Contents Organisation of the Fund General Information
Responsibility Statement Investment Policy Manager's Review
Statement of Net Assets Shareholders' Equity Statement of
Operations Statement of Changes in Net Assets Statistical
Information about the Fund Statement of Changes in Shares
Outstanding Statement of Investments and Other Net Assets Currency,
Geographical and Industrial Classification of the Fund Notes to the
Financial Statements
Organisation of the Fund
Chairman
ALEXANDER E. ZAGOREOS Jermain Hill Lane
Eagle Bridge, NY 12057, U.S.A.
Directors
MICHAEL BECKETT * Northcroft Dulwich Common
London SE21 7EW, U.K.
SHAKER ALBERT KHAYATT * KHAYATT & COMPANY INC.
50 Broad Street, Suite 1609
New York, NY 10004, U.S.A.
MOHAMED KAMAL EL-DIN BARAKAT * 151 Mohamed Farid Street
Cairo, EGYPT
MICHAEL TAIT * OXFORD AND EDINBURGH CONSULTANTS
Chairman of the Audit Committee 8 Chalcot Crescent
London NW1 8YD, U.K.
ADEL HOSNI HUSSEIN HASSAN HOSNI NATIONAL BANK OF EGYPT
(since August 17th, 2010) NBE Tower
1187 Corniche El Nil
Boulak
Cairo, EGYPT
Advisory Board HERBERT GULLQUIST
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
* Member of the Audit Committee
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
Réviseur d'entreprises agréé DELOITTE S.A.
560, rue de Neudorf
L-2220 Luxembourg
Financial Adviser and Broker ARBUTHNOT SECURITIES LIMITED
Arbuthnot House
20, Ropemaker Street
London EC2Y 9AR, U.K.
THE EGYPT TRUST
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 the
equities of companies listed on the Egyptian Stock Exchange.
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 London 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, 2010 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.
By order of the BoardAlexander E. ZagoreosChairman
Luxembourg, November 2010
Investment Policy
-- Asset Allocations:
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 will run 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
September 30th, 2010
Portfolio Performance & Market Overview
(Price Only - Q ending Q ending 6 Months toSEP 30 1 Year to
Net of Fees) SEP 30 JUN 30 SEP 30
Egypt Trust 9.50% -11.20% -2.77% -2.41%
Fund NAV
S&P IFC Egypt 11.63% -13.67% -3.63% -1.59%
Investable
USD
MSCI Egypt 9.98% -14.2% -5.60% -2.24%
The performance of the Egyptian exchange continued to exhibit
high levels of volatility during the past six months as global
economic conditions and stock market performances remain unsettled.
During the quarter ending June 30th, 2010, global financial markets
remained shaken by the possibility of sovereign defaults in Europe
(mainly Greece, Spain, Portugal and Ireland) which overshadowed
positive economic and corporate earnings data locally.
[Graph omitted]
As European worries receded and investors returned once more to
fundamentals, the market was able to recover most of its losses in
the quarter to September 30th, 2010.
Portfolio Structure
The Egypt Trust's portfolio remains fairly concentrated with the
top 10 holdings, shown below, represents 51.07% of NAV. Stock
selection is subject to our disciplined fundamental approach.
Top 10 Holdings Portfolio (%)
National Société Générale Bank 7.73%
Egyptian Intl Pharm Industr Co 6.32%
Telecom Egypt 6.23%
Orascom Telecom Holding 6.14%
Orascom Construction Industries 5.15%
Talaat Moustafa Group Holding 4.81%
EFG-Hermes Holding 3.98%
Citadel Capital Co 3.89%
Sidi Kerir Petrochemicals 3.55%
Oriental Weavers Co 3.27%
TOTAL 51.07%
Currently, no stocks exceed the 10% single issuer limit.
Real estate continues to overtake Telecom as our third largest
sector as we find better value in that sector. Financials (banks
and non-banks) continue to be our largest sector as we find good
value in non-bank financials in particular.
Sector Allocation SEP 10 SEP 09
Financials 21.33 21.71
Materials 15.04 13.34
Real Estate 14.37 14.23
Telecom 13.59 11.74
Industrial 7.62 9.57
Petrochemicals 7.46 6.80
Consumer Discretionary 7.18 6.59
Healthcare 6.76 7.93
Cash & Other Net Current Assets 5.71 8.09
Food 0.94 0.00
TOTAL 100.00% 100.00%
Economic Overview
Egypt's real GDP growth figure for the quarter ending June 30th,
2010 and the whole FY 09/10 was revised downward to 5.4% and 5.1%
respectively from the previously stated figures of 5.9% and 5.3%.
While slightly lower than our projections of 5.4%, we still view
the figure as realistic and supportive of the stock market on the
near term.
The GDP outlook is also in line with our thesis of sustainable
domestic demand in Egypt causing GDP to continue to grow despite
the global financial crisis. On the other hand, domestic demand
alone could not help the economy to grow by more than 4-5%
annually. To achieve the 7-8% growth rates targeted by the
government, Egypt needs to attract more foreign direct
investments.
Another revised figure was the budget deficit which was revised
from 8.4% to 8.1% - slightly higher than our forecast of 8%; the
widening deficit was generally expected as government revenues took
a hit of around 26% while spending declined by around 6% only -
partly because of the stimulus package during the second half of
2009. FY 2010/11 should witness an improvement though we expect it
would be a slight improvement as the government is not likely to
tighten its fiscal policy particularly as both the parliamentary
and presidential elections are coming up in the next 12 months.
Inflation (both headline and core) remained high with CPI at
10.97% and core inflation at 7.59% by end of September. A positive
development however was an easing in the monthly inflation in
September after a sharp spike in August for both measures; CPI
recorded 1.69% in September vs. 2.85% in August while core
inflation was +0.22% vs. 2.82%.
Egypt's external position remained stable with a current account
deficit of 2.0% - a slight improvement over 08/09 of -2.5% of GDP.
External debt was a very comfortable 15.9% of GDP and only 8.8% of
it is short term. This partially explains the strong demand by
which Egypt's bond issue was received in the global financial
markets.
Overall, we believe Egypt's macro picture remains favorable
especially in light of what is going on the world following the
financial crisis. Decent GDP growth - thanks to steady private
consumption from un-levered consumers - and comfortable external
position (even as current account goes into deficit as expected)
are all helping encouraging factors.
Even the public debt, which we expect will exceed 86% of GDP at
the end of the fiscal year, remains manageable thanks mainly to an
overly liquid financial system. However, we do see medium term
challenges that could cause some headwind:
-- A low national savings rate makes Egypt highly dependent on FDI in
order to grow at 7%+ which is needed to create enough
employment
opportunities to reduce the unemployment rate.
-- The widespread poverty and income inequality makes Egypt vulnerable to
a high inflation environment.
-- The public finances need to improve especially as growth might not be
high enough to generate enough revenues (as well reduce the need
for
higher public spending) to reduce the deficit. The large
borrowing
needs of the government has crowded out the private sector.
Outlook
Despite the short term headwind, we remain bullish on the
prospects of Egyptian equities over the medium term and continue to
find value for several reasons, mainly:
-- Cheap valuation relative to Global Emerging Markets
-- Strong growth in corporate earnings (consensus forecast is 31%
increase in 2010 and 22% in 2011) along with healthy balance
sheets
and high quality earnings.
-- Steady domestic private consumption, low per capita income, and one of
the lowest incremental capital output ratios of any emerging
market,
leaves significant room for upside surprises.
In the short term however, performance of the stock market will
continue to be influenced by volatility in global markets as well
as the Parliamentary elections in November 2010 and the
Presidential election in 2011. More fundamentally, we think the
current environment of high inflation and large budget deficits
will negatively affect the sustainability of growth unless dealt
with through concerted action between the fiscal and monetary
policies.
For these reasons, we continue to position the Fund's portfolio
defensively; and believe that our first line of defense lies in our
disciplined investment strategy to invest in fundamentally
undervalued shares.
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.
Luxembourg, November 2010 Lazard Asset Management
Note: The information in this report represents historical data
and is not an indication of future results.
Statement of Net Assets
(in USD)
The accompanying notes are an integral part of these financial
statements.
September 30th, 2010 March 31st, 2010
ASSETS
Securities' portfolio 60,414,060 63,862,228
at market value
Cash at banks 4,064,775 3,128,164
Income receivable on portfolio 430,818 88,621
Interest receivable 328 145
on bank accounts
Prepaid expenses 3,036 1,003
Total assets 64,913,017 67,080,161
LIABILITIES
Bank liabilities 683,287 388,356
Payable on repurchases of Shares 34,390 140,499
Expenses payable 99,507 262,620
Total liabilities 817,184 791,475
Net Assets at the End 64,095,833 66,288,686
of the Period/Year
Number of Shares outstanding 2,028,646 2,041,277
Net Asset Value per Share 31.60 32.47
Shareholders' Equity represented by(in USD)
September 30th, 2010 March 31st, 2010
Capital: 8,513,347 17,026,694 17,026,694
Shares at USD 2.00
Share Premium 73,633,306 73,633,306
Legal Reserve 1,702,669 1,702,669
Profit brought forward 64,952,884 68,699,528
Cost of 1,663,837 Shares -15,939,917 -15,939,917
held in treasury
Repurchase of 4,820,864 -73,660,405 -73,280,536
Shares at the request
of Shareholders
Total Capital and Reserves 67,715,231 71,841,744
Net realised gain/loss 3,178,251 -3,746,644
for the period/year
Unrealised depreciation -6,797,649 -1,806,414
on securities
Total Shareholders' Equity 64,095,833 66,288,686
Statement of Operations(in USD)
From April 1st, 2010to From April 1st, 2009to
September 30th, 2010 September 30th, 2009
INCOME
Dividends, net 2,118,280 2,266,510
Interest on bank 2,773 7,315
accounts
Received commissions 19,049 318,969
Total income 2,140,102 2,592,794
EXPENSES
Management fees 317,567 346,205
Advisory fees 79,392 86,551
Custodian fees 12,037 13,169
Bank and financial 72,662 88,987
services
Central 32,670 35,068
administration
costs
Audit 24,803 30,574
and supervisory
fees
Printing and 29,082 10,741
publication
expenses
Subscription 15,760 17,187
duty ("taxe
d'abonnement")
Interest paid 26 -
Directors' fees 43,933 155,991
and expenses
Other expenses 26,073 49,468
Total expenses 654,005 833,941
NET INVESTMENT 1,486,097 1,758,853
INCOME
NET REALISED
GAIN/LOSS
- on sale of 791,251 -60,309
securities
(-1 year)
- on sale of 918,408 599,427
securities
(+1 year)
- on foreign -17,505 -33,902
exchange
REALISED GAIN 3,178,251 2,264,069
CHANGE
IN
NET
UNREALISED
APPRECIATION/DEPRECIATION
- on securities -4,991,235 24,898,241
INCREASE/DECREASE -1,812,984 27,162,310
IN NET ASSETS
AS A RESULT OF
OPERATIONS
Statement of Changes in Net Assets(in USD)
From April 1st, 2010to From April 1st, 2009to
September 30th, 2010 September 30th, 2009
Net Assets at the 66,288,686 51,567,921
Beginning
of the Period
Net investment 1,486,097 1,758,853
income
Net realised 791,251 -60,309
gain/loss
on sale
of securities
(-1 year)
Net realised 918,408 599,427
gain on sale
of securities
(+1 year)
Net realised loss on -17,505 -33,902
foreign exchange
Net realised gain 3,178,251 2,264,069
for the period
Repurchases of -379,869 -6,394,748
Shares at the
request
of Shareholders
Change -4,991,235 24,898,241
in
unrealised
appreciation/depreciation
on securities
Net Assets 64,095,833 72,335,483
at the End
of the Period
Statistical Information about the Fund(in USD)
September 30th, 2010 March 31st, 2010 March 31st, 2009
Net Assets 64,095,833 66,288,686 51,567,921
Net Asset Value 31.60 32.47 21.23
per Share
Statement of Changes in Shares OutstandingFor the period ended
September 30th, 2010
Number of Shares Outstanding at the Beginning of the Period 2,041,277
Number of Shares repurchased held in treasury -
Number of Shares repurchased at the request of Shareholders -12,631
Number of Shares Outstanding at the End of the Period 2,028,646
Statement of Investments and other Net AssetsSeptember 30th,
2010(in USD)
Currency Number / nominal value Description Cost Market value % oftotal netassets
Investments in securities
Transferable securities admitted to an official stock exchange listing
Shares
Banks
EGP 750,000 Credit Agricole Egypt 1,424,669 1,709,995 2.67
EGP 750,000 National Société Générale Bank Reg 1,126,344 4,953,452 7.73
2,551,013 6,663,447 10.40
Capital goods
EGP 100,000 El Sewedy Cables Hg Co 1,756,599 1,243,281 1.94
EGP 75,000 Orascom Construction Industrie Reg 3,098,851 3,298,129 5.15
4,855,450 4,541,410 7.09
Consumer durables and apparel
EGP 250,000 Olympic Group Fin Inv Co SAE 1,629,534 1,186,106 1.85
EGP 361,897 Oriental Weavers Co 2,585,064 2,097,769 3.27
4,214,598 3,283,875 5.12
Diversified financial services
EGP 2,000,000 Citadel Capital Co 3,718,238 2,494,291 3.89
EGP 500,000 EFG-Hermes 4,568,119 2,554,014 3.98
EGP 2,250,000 Pioneers Holding 2,963,687 1,462,322 2.28
11,250,044 6,510,627 10.15
Energy
EGP 350,000 Alexandria Mineral Oils Co 3,582,012 2,505,884 3.91
USD 120,000 Maridive & Oil Serv 344,160 340,800 0.53
3,926,172 2,846,684 4.44
Hotels, restaurants and leisure
EGP 2,500,000 Talaat Moustafa Group Holding 4,279,070 3,082,733 4.81
Insurance
EGP 375,000 Delta Insurance 746,842 492,052 0.77
Investment companies
USD 2,000,000 Al Arafa Inv & Consulting 1,965,447 1,260,000 1.97
Materials
GBP 500,000 Centamin Egypt Ltd 851,744 1,394,406 2.18
EGP 600,000 Egyptian Financial & Indust Co Reg 1,697,502 2,019,322 3.15
EGP 450,000 Ezz Steel 1,767,715 1,521,605 2.37
EGP 200,000 Paint and Chemical Ind 1,282,264 2,037,590 3.18
EGP 1,000,000 Sidi Kerir Petrochemicals 3,557,373 2,276,480 3.55
EGP 200,000 Suez Cement Co 1,915,604 1,486,738 2.32
EGP 225,000 Tourah Cement Co 1,865,343 1,177,762 1.84
12,937,545 11,913,903 18.59
Pharmaceuticals and biotechnology
EGP 650,000 Egyptian Intl Pharm Industr Co 1,910,434 4,054,365 6.32
EGP 50,845 Memphis Pharmaceutic Chem Ind 527,052 275,794 0.43
2,437,486 4,330,159 6.75
Real estate
EGP 300,000 Heliopolis Housing & Dev SA 4,639,377 1,741,612 2.72
EGP 125,000 Namaa Dév Real Estate InvestCo 292,053 254,699 0.40
EGP 250,000 Nasr City Housing & Dev SA 1,452,326 1,360,443 2.12
EGP 1,132,165 Palm Hills Devlopments SAE 1,406,239 1,149,467 1.79
EGP 100,000 Sixth of Octob Dev & Inv Co SA 2,453,577 1,617,600 2.52
10,243,572 6,123,821 9.55
Retailing
EGP 100,000 B-Tech 61,514 56,912 0.09
Telecommunication services
EGP 25,000 Egyptian Co for Mobile Com 792,520 779,642 1.22
EGP 3,000,000 Orascom Telecom Holding 532,791 2,655,893 4.14
USD 295,000 Orascom Telecom Holding GDR Reg repr 5 Shares 1,523,980 1,280,595 2.00
EGP 1,300,000 Telecom Egypt 4,373,923 3,991,569 6.23
7,223,214 8,707,699 13.59
Total shares 66,691,967 59,813,322 93.32
Other transferable securities
Shares
Food, beverage and tobacco
EGP 600,000 Juhayna Food Industries 519,742 600,738 0.94
Total shares 519,742 600,738 0.94
Total investments in securities 67,211,709 60,414,060 94.26
Cash at banks 4,064,775 6.34
Bank liabilities -683,287 -1.07
Other net assets and liabilities 300,285 0.47
Total net assets 64,095,833 100.00
Currency, Geographical and Industrial Classification of the
FundSeptember 30th, 2010(in percentage of net assets)
Currency Classification
Egyptian Pound 87.58 %
US Dollar 4.50 %
Pound Sterling 2.18 %
Total investments in securities 94.26 %
US Dollar 5.75 %
Pound Sterling 0.59 %
Total cash at banks 6.34 %
Egyptian Pound -0.01 %
US Dollar -1.06 %
Total bank liabilities -1.07 %
Other net assets and liabilities 0.47 %
Total net assets 100.00 %
Geographical Classification
Egypt 92.08 %
Australia 2.18 %
Total investments in securities 94.26 %
Cash at banks 6.34 %
Bank liabilities -1.07 %
Other net assets and liabilities 0.47 %
Total net assets 100.00 %
Industrial Classification
Materials 18.59 %
Telecommunication services 13.59 %
Banks 10.40 %
Diversified financial services 10.15 %
Real estate 9.55 %
Capital goods 7.09 %
Pharmaceuticals and biotechnology 6.75 %
Consumer durables and apparel 5.12 %
Hotels, restaurants and leisure 4.81 %
Energy 4.44 %
Investment companies 1.97 %
Food, beverage and tobacco 0.94 %
Insurance 0.77 %
Retailing 0.09 %
Total investments in securities 94.26 %
Cash at banks 6.34 %
Bank liabilities -1.07 %
Other net assets and liabilities 0.47 %
Total net assets 100.00 %
Notes to the Financial StatementsSeptember 30th, 2010
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
amended law of December 20th, 2002 (the "2002 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 2002 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 the equities of
companies listed on the Egyptian Stock Exchange.
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 0.1756543
1 EUR Euro 1.3646500
1 GBP Pound Sterling 1.5756000
c)Income Recognition
Interest is recorded on an accrual basis, net of any withholding
taxes in the relevant country. 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 2002 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, 2010 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, 2010,
such redemption fee amounts to USD 19,049 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
17th, 2010, 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, 2010, 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 - SUBSTANTIAL SHAREHOLDINGS
As of September 30th, 2010, the Board was aware of the following
interests in the Shares of the Fund:
Ordinary Shares Percentage of
Issued Capital
National Bank of Egypt 1,501,315 74.0%
Banque Misr 391,384 19.3%
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 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 and will continue to engage with the Major
Shareholders in seeking a resolution.
NOTE 13 - 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 14 - ADDENDUM TO THE PLACING MEMORANDUM
The Board has 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.
The accompanying notes are an integral part of these financial
statements.
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