TIDMEGP
THE EGYPT TRUST
Société d'Investissement à Capital FixeLuxembourgR.C.S.
Luxembourg B 55 584
Audited Annual ReportMarch 31st, 2011
Table of Contents
Organisation of the Fund2
General Information4
Chairman's Statement5
Responsibility Statement6
Investment Policy7
Manager's Review8
Principal Risks and Uncertainties12
Corporate Governance13
Report of the Réviseur d'Entreprises Agréé17
Statement of Net Assets19
Shareholders' Equity19
Statement of Operations20
Statement of Changes in Net Assets21
Statistical Information about the Fund21
Statement of Changes in Shares Outstanding21
Statement of Investments and Other Net Assets22
Currency, Geographical and Industrial Classification of the
Fund24
Notes to the Financial Statements25
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
(since August 17th, 2010) NBE Tower
Chairman of the Nomination Committee 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
Réviseur d'entreprises 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
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
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 London Stock
Exchange.
Chairman's Statement
Dear Shareholders,
The revolution that took place in Egypt on January 25th not only
changed the ruling regime in the country but also changed the
political and social landscape in Egypt and most likely had far
reaching effects on the larger Middle East. Investors should also
change the way they view Egypt: while in the short term, Egypt will
go through a transitional period that will see some setbacks, we
feel that Egyptians are determined to bring positive changes to the
country and, as a result, investors will likely change the way they
view Egypt.
According to the Manager, Egypt has the potential to become one
of the high growth countries over the coming few years once it
passes the transitional phase. While we are cautiously optimistic
about the future of Egypt, we should point out the obvious
short-term stalemate that the Egyptian Stock Exchange should
witness until the elections in September. Nevertheless, valuations
are relatively cheap and appear to be discounting most of the
uncertainties.
Respectfully Submitted,
Alexander E. ZagoreosChairman
Luxembourg, July 2011
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 March 31st, 2011 and for the financial year 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 Board
Alexander E. ZagoreosChairman
Luxembourg, July 22nd, 2011
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 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
Performance overview
April 2010 July 2010 - October January April 2010 -
- September 2010 - 2011 March 2011
June 2010 December - March
2010 2010 2011
Egypt 28.85 31.60 33.72 26.67
Trust:
NAV $
Egypt -11.2% 9.50% 6.74% -20.91% -17.86%
Trust:
Return
(Net)
IFC 221.96 247.78 263.24 200.29
Investable:
Value
IFC -13.67% 11.63% 6.24% -23.91% -22.10%
Investable:
Return
Source: KBL, Reuters
What started as demonstrations involving a few thousand on
January 25th, 2011 very quickly evolved into a popular revolt
across Egypt involving a few million leading eventually to the
ousting of the former regime and assumption of power by a military
council.
Needless to say, this revolution has rendered any discussion of
the economic conditions and performance figures prior to that date
irrelevant as the landscape has changed completely.
Currently, the military through the Supreme Council for the
Armed Forces ("Military Council") is leading the transitional phase
Egypt is going through representing essentially both the executive
and the legislative branches. The army was quick to assure that it
has no intentions of staying in power and that it will be handing
over power to an elected government within 6 months. The Military
Council initiated reforms that will essentially lead to proper
multi-candidate presidential elections scheduled by the end of this
year, preceded by parliamentary elections in September.
Meanwhile, many figures from the previous regime including the
ousted president and his sons are currently being investigated on
various financial and political corruption charges. This includes
some key executive and anchor shareholders in our investee
companies.
The stock market remained closed from January 28th, 2011 until
March 23rd, 2011; a decision which we do not believe was in the
best interests of the market as on top of the heightened political
risk, it added an increased operational risk as well. Given the
current uncertainties, it was only normal for the stock market to
drop significantly over the first few days of resuming trading.
The selling was indiscriminate and aside from Orascom Telecom,
which a few days before trading resumed announced the merger of its
parent company with Vimpelcom, every single stock traded limit down
in the first two days.
Top 10 Holdings Portfolio (%) Sector Allocation Portfolio (%)
Egyptian 7.33% Financials 18.63%
Int'l
Pharmaceuticals
Co.
National Societe 6.55% Materials 14.40%
Generale Bank
Telecom Egypt 5.93% Real Estate 11.98%
Talaat Moustafa 3.89% Telecom 9.50%
Group Holding
Alexandria Mineral 3.77% Consumer Discretionary 8.09%
Oils Company
Sidi 3.74% Industrial 8.02%
Kerir Petrochemicals
Orascom Construction 3.38% Healthcare 7.80%
Industries
Citadel Capital 3.38% Petrochemicals 7.51%
Company
Egyptian Financial 3.26% Cash and Other Net 14.07%
& Industrial Co. Current Assets
Oriental Weavers Co. 3.24%
TOTAL 44.47% TOTAL 100.00%
The Fund's portfolio concentration was reduced as the top 10
holdings represent 44.47% of NAV vs. 52% a year earlier. This was a
result of the larger drop in prices in particular stocks such as
real estate and stocks with significant foreign ownership while
others such as local petrochemicals and export oriented companies
started recovering better after the first few days of trading.
The most significant change in sector allocation on March 31st,
2011 was an increase in cash levels to 14.07% of NAV from 3.65% a
year earlier at the expense of all sectors except consumer
discretionary and healthcare. This was the result of attempting to
defend the portfolio by increasing cash and shares of companies
with a defensive nature.
This is in line with our investment strategy which is based on
investing in companies that have strong earnings-generation ability
but are inexpensively priced through a rigorous bottom-up
fundamental analysis process. The current environment has lowered
visibility and consequently raised risks high enough to affect our
valuation. We will be re-investing cash if either the stock(s) fall
too far that even with heightened risk it is "inexpensive" or of
course when risks return to "normal" and we have better
visibility.
The following chart shows the sector allocations on March 31st,
2011 compared to March 31st, 2010:
[GRAPH OMITTED]
On March 31st, 2011, no single issue was in breach of the 10%
single issuer limit and no sector was in breach of the 25% sector
limit.
The Economy
The popular revolution of January 25th, 2011 has changed our
view on the economic landscape in Egypt in both the short and long
terms:
In the short term, we think Egypt will suffer economically as
new investments - both local and foreign - are likely to stay at or
near zero. This is only natural as investors would rather wait
until a new stable government is elected.
During Q1 2011, which witnessed major disruption to the economy
through an imposed curfew and security apparatus collapse, GDP
contracted by 7%. We do not expect the coming quarters to be as
bad, but they will certainly witness lower economic activity. As a
result, it is safe to assume that in the short term, the budget
deficit will rise to more than 10% of GDP as a result of lower
economic activity reducing sovereign revenues, and the likelihood
of higher social spending by the government.
The current account deficit is likely to deteriorate further to
above 5% as tourism and Foreign Direct Investments decline, putting
pressure on the currency.
Additionally, inflation will probably edge higher on the back of
higher global commodity costs as well as possible devaluation of
the currency.
2011 will continue to be a very busy year politically with
parliamentary elections scheduled for September and presidential
elections later in the year. We believe the fear of the rise of
Islamite to power in Egypt is overrated, nevertheless, we believe
they are likely to win around 25% of the seats in the parliament
and, in the absence of strong opposition, they are likely to be the
single largest block.
Looking beyond 2011 and post elections, we are optimistic about
the performance of the Egyptian economy; we have repeatedly pointed
to the inefficiencies of the Egyptian economy (largely a result of
the corruption) that is preventing it from achieving its full
potential. Looking forward, we expect the cost of corruption to
decline paving the way for a more efficient and competitive
economy.
This should lead to a drop in the real cost of doing business in
Egypt and with its population size, central location and low
production costs, Egypt could be set for a long period of high
growth rates.
Outlook
We believe pricing of Egyptian equities at the moment already
discounts the worst-case uncertainties making shares look
attractive. We do acknowledge however that because of very poor
visibility, we are not likely to see a strong rally before the
parliamentary elections.
Consequently, we are positioning the portfolio defensively
through a higher cash position, and focus on defensive shares. We
expect to gradually shift to a more aggressive approach as we grow
more confident in a favorable elections outcome.
Luxembourg, July 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.
Corporate Governance
Corporate Governance Principles
As a société d'investissement à capital fixe registered in
Luxembourg, the Fund was not, in the year under review, required to
comply with the requirements of the Combined Code on Corporate
Governance ("Combined Code") nor any other code of corporate
governance. The Fund is, however, committed to high standards of
corporate governance and it is the Fund's policy to comply with
best practices on good corporate governance. The main elements of
the Fund's practices and procedures which reflect its special
circumstances as an offshore investment company are set out
below.
The Board has noted the recent publication of the new UK
Corporate Governance Code, which will replace the Combined Code.
The Board has also considered the principles and recommendations of
the Association of Investment Companies' Code of Corporate
Governance (the "AIC Code"), which has been updated where relevant,
by reference to the AIC Corporate Governance Guide for Investment
Companies (the "AIC Guide"). The AIC Code, as explained by the AIC
Guide, addresses all the principles set out in Section 1 of the
Combined Code, as well as setting out additional principles and
recommendations on issues that are of specific relevance to
investment trusts. These new Codes are applicable for accounting
periods beginning on or after June 29th, 2010 and will be relevant
for the Fund's next Annual Report. The Board will be considering
its compliance with these new Codes during the forthcoming
year.
The Board
The Board comprises six non-executive directors all of whom are
considered to be independent and offer a wide range of skills and
experience to the Fund.
The Combined Code includes provisions relating to:
-- the role of the chief executive
-- executive directors' remuneration
-- the need for an internal audit function
For the reasons set out in the preamble to the Combined Code,
the Board considers these provisions are not relevant to the
position of the Fund, being an externally managed investment
company.
Mr. Alexander Zagoreos serves as Chairman of the Fund's Board.
He is deemed by his fellow independent Board members to be
independent and to have no conflicting relationships. Mr. Zagoreos
considers himself to have sufficient time to commit to the Fund's
affairs.
In accordance with the Listing Rules and taking into
consideration the AIC Code, the Board has reviewed the independent
status of each of its individual Directors and has determined that
they are all independent. Mr. Zagoreos, as a Senior Adviser to
Lazard Asset Management LLC, the Fund's Manager, is not deemed to
be independent under the terms of the AIC Code; however, the Board
believes that Mr. Zagoreos should be considered an independent
member and Chairman of the Board. Mr. Zagoreos demonstrates his
independence as a challenging member and Chairman of the Board and
continues to perform this role effectively.
In the Board's opinion, despite Mr. Alexander Zagoreos, Mr.
Michael Tait, Mr. Michael Beckett and Mr. Shaker Khayatt each
having served on the board of directors of the Fund for more than 9
years, they continue to qualify as independent directors despite
their length of service, as they are each, free from any business
or other relationships that could materially interfere with the
exercise of their respective judgment. In addition, the Directors
believe that continuity and experience adds significantly to the
strength of the Board. The aforementioned directors are also
independent of the Manager.
The Board is supplied in a timely manner with information in a
form and of a quality appropriate to enable it to discharge its
duties. Strategic issues and all operational matters of a material
nature are determined by the Board.
At every Annual General Meeting ('AGM') each director stands for
re-election, rather than retiring by rotation every three years as
provided for by the Combined Code.
The Board aims to meet at least three times a year to consider
the business and affairs of the Fund and at each meeting reviews
investment performance. Between these meetings the Board meets on
an ad hoc basis to consider specific matters of a transactional
nature. The Directors are kept fully informed of investment and
financial controls and other matters that are relevant to the
business of the Fund and should be brought to the attention of the
Directors. The Directors also have access, where necessary in the
furtherance of their duties, to professional advice at the expense
of the Fund.
The Board has responsibility for ensuring that the Fund keeps
proper accounting records which disclose with reasonable accuracy
at any time the financial position of the Fund. The Board is also
responsible for safeguarding the assets of the Fund and for taking
reasonable steps for the prevention and detection of fraud and
other irregularities. However, certain functions have been
delegated by the Board to third parties, as further described
below.
An appraisal system has been agreed by the Board for evaluation
of the Board, the Committees, the Chairman and the individual
Directors, encompassing both quantitative and qualitative measures
of performance. This takes the form of a detailed questionnaire
followed by discussions to identify how the effectiveness of the
Board's activities, including its committees, policies or processes
might be improved.
The Fund has maintained appropriate directors' liability
insurance cover throughout the year.
Audit Committee
The Audit Committee, which is chaired by Mr. Michael Tait and
also comprises Mr. Michael Beckett, Mr. Shaker Khayatt and Mr.
Mohamed Barakat, examines the effectiveness of the Fund's internal
control systems, the annual and half-yearly financial reports, the
interim management statements, the auditor's remuneration and
engagement, as well as the auditor's independence and any non-audit
services provided by them.
The Audit Committee meets at least twice annually, being before
the Board meets to consider the Fund's half-yearly and annual
financial reports. The Audit Committee operates within clearly
defined terms of reference and provides a forum through which the
Fund's external auditors report to the Board.
The Audit Committee has considered the independence and
objectivity of the Auditors and has conducted a review of non-audit
services which the Auditors have provided. It is satisfied in these
respects that Deloitte S.A. has fulfilled its obligations to the
Fund and its Shareholders.
The external auditor is invited to attend all Audit Committee
meetings and has the opportunity to meet with the committee without
representatives of the Manager being present.
The Fund does not have its own internal audit function, as all
the administration is delegated to the Manager. The matter is kept
under annual review.
Nomination Committee
The Board previously operated without a Nomination Committee but
has since put in place a Committee chaired by Mr. Hosni and also
comprises Mr. Beckett. The Directors recognize the importance of
the progressive refreshing of, and succession planning for, company
boards. The Board is of the view that length of service does not
necessarily compromise the independence or contribution of
Directors of an investment fund, where continuity and experience
can add significantly to the strength of the Board.
Internal Controls
The Board is responsible for the Fund's system of internal
control and for reviewing its effectiveness. The Board confirms
that there is an ongoing process for identifying, evaluating and
monitoring the significant risks faced by the Fund.
The Board and the Manager have agreed clearly-defined investment
criteria, specified levels of authority and exposure limits.
Reports on these issues, including performance statistics and
investment valuations, are submitted to the Board at each meeting.
The Manager's evaluation procedure and financial analysis of the
companies within the portfolio include detailed research and
appraisal. The Board recognizes that these control systems can only
be designed to manage, rather than eliminate the risk of failure to
achieve business objectives and to provide reasonable, but not
absolute, assurance against material misstatement or loss. It
relies on the operating controls established by the Manager.
Delegation of Responsibilities
The Directors of the Fund clearly define the duties and
responsibilities of their agents and advisors. The appointment of
agents and advisers is conducted by the Board after consideration
of the quality of the parties involved and the Board monitors their
ongoing performance and contractual arrangements. The Board has
also specified which matters are reserved for a discussion by the
Board and which matters may be delegated to its agents and
advisers.
The Board has delegated a number of areas of responsibility,
outlined below.
Management and Administration
The management of the investment portfolio has been delegated to
the Manager and although the Fund does not operate a management and
engagement committee, the Board regularly reviews the performance
of the Fund's Manager and its terms of appointment. The Directors
continue to believe that in light of the Fund's performance, the
appointment of the Manager on the terms set out below is in the
interests of the Fund's Shareholders as a whole.
The Manager was appointed on August 2nd, 1996 and under the
terms of the agreement with the Fund either party may terminate the
agreement by giving three months' prior written notice. Pursuant to
this agreement, the Manager is entitled to an annual management fee
of 1 per cent. of the value of the gross assets of the Fund,
payable monthly in arrears. Under the terms of the agreement the
Fund has also agreed to indemnify the Manager from and against any
and all liabilities, losses, damages, court costs and reasonable
expenses, arising from the act or omission of the Manager, except
to the extent that such liability results from a breach of the
Manager's fiduciary obligation with respect to the Company or from
fraud, willful default or negligence in the performance or non
performance by the Manager of its obligations or duties under the
agreement.
Custody and settlement services are undertaken by KBL European
Private Bankers S.A. and the appointed Domiciliary Registrar,
Transfer and Administrative Agent is Kredietrust Luxembourg
S.A..
The Board has delegated the exercise of voting rights attaching
to the securities held in the portfolio to the Manager. The Manager
follows a proxy voting policy when voting which provides for
certain matters to be reviewed on a case by case basis.
The Board regularly reviews the delegated functions to ensure
their continued competitiveness and effectiveness, including the
Manager, although no formal management and engagement committee has
been established.
Dialogue with Shareholders
All holders of Shares in the Fund have the right to receive
notice of, and attend, all general meetings of the Fund. The
Directors are always available to enter into dialogue with
shareholders and make themselves available for such purpose
whenever required. The Fund believes such communication to be
important.
Remuneration Committee
It is not considered necessary for the Fund to establish a
separate Remuneration Committee. It is therefore the practice for
the Board as a whole to consider and approve the Directors'
remuneration.
Report of the Réviseur d'Entreprises Agréé
To the Shareholders of
THE EGYPT TRUST
Following our appointment by the general meeting of the
shareholders, we have audited the accompanying financial statements
of THE EGYPT TRUST, which comprise the statement of net assets and
the statement of investments and other net assets as at March 31st,
2011 and the statement of operations and the statement of changes
in net assets for the year then ended, and a summary of significant
accounting policies and other explanatory notes to the financial
statements.
Board of Directors of the Fund's responsibility for the
financial statements
The Board of Directors of the Fund is responsible for the
preparation and fair presentation of these financial statements in
accordance with the Luxembourg legal and regulatory requirements
relating to the preparation of the financial statements and for
such internal control as the Board of Directors of the Fund
determines is necessary to enable the preparation of financial
statements that are free from material misstatement, whether due to
fraud or error.
Responsibility of the réviseur d'entreprises agréé
Our responsibility is to express an opinion on these financial
statements based on our audit. We conducted our audit in accordance
with International Standards on Auditing as adopted for Luxembourg
by the Commission de Surveillance du Secteur Financier. Those
standards require that we comply with ethical requirements and plan
and perform the audit to obtain reasonable assurance whether the
financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence
about the amounts and disclosures in the financial statements. The
procedures selected depend on the judgment of the réviseur
d'entreprises agréé, including the assessment of the risks of
material misstatement of the financial statements, whether due to
fraud or error. In making those risk assessments, the réviseur
d'entreprises agréé considers internal control relevant to the
entity's preparation and fair presentation of the financial
statements in order to design audit procedures that are appropriate
in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity's internal control.
An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of accounting
estimates made by the Board of Directors of the Fund, as well as
evaluating the overall presentation of the financial
statements.
We believe that the audit evidence we have obtained is
sufficient and appropriate to provide a basis for our audit
opinion.
Opinion
In our opinion, the financial statements give a true and fair
view of the financial position of
THE EGYPT TRUST as of March 31st, 2011, and of the results of
its operations and changes in its net assets for the year then
ended in accordance with the Luxembourg legal and regulatory
requirements relating to the preparation of the financial
statements.
Emphasis of matters
Without qualifying our opinion, we draw your attention to note
12 of the financial statements which indicates that each of the
Major Shareholders of the Fund has communicated to the Board of
Directors their wish to seek an exit for their respective
investments in the Fund, which might take the form of a liquidation
of the Fund.
Other matter
Supplementary information included in the annual report has been
reviewed in the context of our mandate but has not been subject to
specific audit procedures carried out in accordance with the
standards described above. Consequently, we express no opinion on
such information. However, we have no observation to make
concerning such information in the context of the financial
statements taken as a whole.
For Deloitte S.A., Cabinet de révision agréé
P. Lenges, Réviseur d'entreprises agrééPartner
July 22nd, 2011560, rue de NeudorfL-2220 LUXEMBOURG
The accompanying notes are an integral part of these financial
statements.
Statement of Net Assets(in USD)
March 31st, 2011 March 31st, 2010
ASSETS
Securities' portfolio at market value 42,422,274 63,862,228
Cash at banks 8,520,220 3,128,164
Receivable on sales of securities 2,364,027 -
Income receivable on portfolio - 88,621
Interest receivable on bank accounts 42 145
Prepaid expenses 1,053 1,003
Total assets 53,307,616 67,080,161
LIABILITIES
Bank liabilities 1,492,744 388,356
Payable on purchases of securities 547,256 -
Payable on treasury transactions 2,313,554 -
Payable on repurchases of Shares 36,753 140,499
Expenses payable 240,333 262,620
Total liabilities 4,630,640 791,475
Net Assets at the End of the Year 48,676,976 66,288,686
Number of Shares outstanding 1,825,006 2,041,277
Net Asset Value per Share 26.67 32.47
Shareholders' Equity(in USD)
March 31st, 2011 March 31st, 2010
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 64,952,884 68,699,528
Cost of 1,663,837 Shares -15,939,917 -15,939,917
held in treasury
Repurchase of 5,024,504 -80,515,842 -73,280,536
Shares at the request
of Shareholders
Total Capital and Reserves 60,859,794 71,841,744
Net realised gain/loss for the year 4,527,032 -3,746,644
Unrealised depreciation on securities -16,709,850 -1,806,414
Total Shareholders' Equity 48,676,976 66,288,686
Statement of Operations(in USD)
Year Ended Year Ended March 31st, 2010
March 31st, 2011
INCOME
Dividends, net 2,535,268 2,698,364
Interest on bank accounts 4,752 14,537
Received commissions 362,626 607,796
Total income 2,902,646 3,320,697
EXPENSES
Management fees 609,879 686,833
Advisory fees 152,470 171,708
Custodian fees 23,836 25,983
Bank and financial 155,196 200,783
services
Central administration 79,475 75,211
costs
Audit and supervisory fees 46,853 58,189
Printing and publication 60,303 28,823
expenses
Subscription duty ("taxe 30,370 33,018
d'abonnement")
Interest paid 26 26,836
Directors' fees 242,943 201,217
and expenses
Other expenses 49,411 80,079
Total expenses 1,450,762 1,588,680
NET INVESTMENT INCOME 1,451,884 1,732,017
NET REALISED GAIN/LOSS
- on sale of securities 1,416,505 -368,905
(-1 year)
- on sale of securities 1,701,732 -5,044,926
(+1 year)
- on foreign exchange -43,089 -64,830
REALISED GAIN/LOSS 4,527,032 -3,746,644
CHANGE
IN
NET
UNREALISED
APPRECIATION/DEPRECIATION
- on securities -14,903,436 30,622,015
INCREASE/DECREASE -10,376,404 26,875,371
IN NET ASSETS
AS A RESULT OF OPERATIONS
Statement of Changes in Net Assets(in USD)
Year Ended Year EndedMarch 31st, 2010
March 31st, 2011
Net Assets at the 66,288,686 51,567,921
Beginning
of the Year
Net investment income 1,451,884 1,732,017
Net realised gain/loss 1,416,505 -368,905
on sale
of securities (-1 year)
Net realised gain/loss 1,701,732 -5,044,926
on sale
of securities (+1 year)
Net realised loss on -43,089 -64,830
foreign exchange
Net realised gain/loss 4,527,032 -3,746,644
for the Year
Repurchase of Shares -7,235,306 -12,154,606
at the
request of Shareholders
Change -14,903,436 30,622,015
in
unrealised
appreciation/depreciation
on securities
Net Assets at the 48,676,976 66,288,686
End of the Year
Statistical Information about the Fund(in USD)
March 31st, 2011 March 31st, 2010 March 31st, 2009
Net Assets 48,676,976 66,288,686 51,567,921
Net Asset Value 26.67 32.47 21.23
per Share
Statement of Changes in Shares OutstandingFor the Year ended
March 31st, 2011
Number of Shares Outstanding at the Beginning of the Year 2,041,277
Number of Shares repurchased held in treasury -
Number of Shares repurchased at the request of Shareholders -216,271
Number of Shares Outstanding at the End of the Year 1,825,006
Statement of Investments and Other Net AssetsMarch 31st, 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 750,000 Credit Agricole Egypt 1,424,669 1,434,684 2.95
EGP 500,000 National Société Générale Bank Reg 712,085 3,200,772 6.58
2,136,754 4,635,456 9.53
Capital goods
EGP 130,000 El Sewedy Elec Co 1,756,599 848,997 1.74
EGP 40,000 Orascom Construction Industrie 968,705 1,651,548 3.39
2,725,304 2,500,545 5.13
Consumer durables and apparel
EGP 250,000 Olympic Group Fin Inv Co SAE 1,629,534 1,430,070 2.94
EGP 300,000 Oriental Weavers Co 2,113,513 1,585,200 3.26
3,743,047 3,015,270 6.20
Diversified financial services
EGP 1,750,000 Citadel Capital Co 3,074,379 1,650,306 3.39
EGP 425,000 EFG-Hermes 3,782,667 1,561,792 3.21
EGP 2,250,000 Pioneers Holding 2,963,687 887,239 1.82
9,820,733 4,099,337 8.42
Energy
EGP 200,000 Alexandria Mineral Oils Co 2,733,130 1,842,772 3.79
USD 120,000 Maridive & Oil Serv 344,160 399,600 0.82
3,077,290 2,242,372 4.61
Hotels, restaurants and leisure
EGP 2,500,000 Talaat Moustafa Group Holding 3,611,993 1,900,327 3.90
Insurance
EGP 375,000 Delta Insurance 746,842 362,447 0.74
Investment companies
USD 2,325,388 Al Arafa Inv & Consulting 2,039,665 1,418,487 2.91
Materials
GBP 500,000 Centamin Egypt Ltd 851,744 1,088,619 2.24
EGP 600,000 Egyptian Fin & Industrial Co Reg 1,697,502 1,591,744 3.27
EGP 650,000 Ezz Steel 2,117,044 1,137,595 2.34
EGP 150,000 Paint and Chemical Ind 987,794 1,034,986 2.13
EGP 750,000 Sidi Kerir Petrochemicals 2,762,250 1,824,818 3.75
EGP 200,000 Suez Cement Co 1,915,604 1,364,880 2.80
EGP 125,000 Tourah Cement Co 1,311,897 815,085 1.67
11,643,835 8,857,727 18.20
Pharmaceuticals and biotechnology
EGP 597,413 Egyptian Intl Pharm Industr Co 1,910,422 3,582,774 7.36
EGP 50,845 Memphis Pharmaceutic Chem Ind 527,052 230,357 0.47
2,437,474 3,813,131 7.83
Real estate
EGP 300,000 Heliopolis Housing & Dev SA 4,293,479 1,030,959 2.12
EGP 125,000 Namaa Dév Real Estate InvestCo 292,053 216,461 0.45
EGP 150,000 Nasr City Housing & Dev SA 870,810 556,255 1.14
EGP 2,500,000 Palm Hills Devlopments SAE 2,564,804 1,082,306 2.22
EGP 100,000 Sixth of Octob Dev & Inv Co SA 2,453,577 1,064,015 2.19
10,474,723 3,949,996 8.12
Retailing
EGP 100,000 B-Tech 61,514 44,467 0.09
Telecommunication services
EGP 25,000 Egyptian Co for Mobile Com 718,095 661,423 1.36
USD 295,000 Orascom Telecom Holding spons GDR Reg repr 5 Shares Reg-S 1,523,980 1,087,075 2.23
EGP 1,000,000 Telecom Egypt 3,470,533 2,896,216 5.95
5,712,608 4,644,714 9.54
Total shares 58,231,782 41,484,276 85.22
Other transferable securities
Shares
Food and beverage
EGP 1,000,000 Juhayna Food Industries 900,342 937,998 1.93
Total shares 900,342 937,998 1.93
Total investments in securities 59,132,124 42,422,274 87.15
Cash at banks 8,520,220 17.50
Bank liabilities -1,492,744 -3.07
Other net assets and liabilities -772,774 -1.58
Total net assets 48,676,976 100.00
Currency, Geographical and Industrial Classification of the
FundMarch 31st, 2011(in percentage of net assets)
Currency Classification
Egyptian Pound 78.95 %
US Dollar 5.96 %
Pound Sterling 2.24 %
Total investments in securities 87.15 %
Egyptian Pound 9.53 %
US Dollar 7.18 %
Pound Sterling 0.79 %
Total cash at banks 17.50 %
US Dollar -3.07 %
Total bank liabilities -3.07 %
Other net assets and liabilities -1.58 %
Total net assets 100.00 %
Geographical Classification
Egypt 84.91 %
Australia 2.24 %
Total investments in securities 87.15 %
Cash at banks 17.50 %
Bank liabilities -3.07 %
Other net assets and liabilities -1.58 %
Total net assets 100.00 %
Industrial Classification
Materials 18.20 %
Telecommunication services 9.54 %
Banks 9.53 %
Diversified financial services 8.42 %
Real estate 8.12 %
Pharmaceuticals and biotechnology 7.83 %
Consumer durables and apparel 6.20 %
Capital goods 5.13 %
Energy 4.61 %
Hotels, restaurants and leisure 3.90 %
Investment companies 2.91 %
Food and beverage 1.93 %
Insurance 0.74 %
Retailing 0.09 %
Total 87.15 %
Cash at banks 17.50 %
Bank liabilities -3.07 %
Other net assets and liabilities -1.58 %
Total net assets 100.00 %
Notes to the Financial StatementsMarch 31st, 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 0.1677993
1 EUR Euro 1.4191500
1 GBP Pound Sterling 1.6044500
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 year ended
March 31st, 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 March 31st, 2011, such
redemption fee amounts to USD 362,626 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 March 31st, 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 - 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 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.
As of March 31st, 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 71.2%
Banque Misr 391,384 21.4%
On July 19th, 2011, the Fund announced that as part of an
ongoing dialogue with the Major Shareholders, each of those
investors had indicated to the Board that they wished to seek an
exit for their respective investments in the Fund. The Board
therefore stated that it was 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.
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 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 15 - EVENT
Because of the political instability in Egypt and the closing of
the Egyptian Stock Exchanges, the Board resolved on February 1st,
2011, to suspend, according to Article 22 of the Fund's Articles,
the publication of the NAV per Share and the redemptions as long as
the Egyptian Stock Exchange is closed or, due to the political
events, the disposal of the assets of the Fund, or a substantial
part of them, is not reasonably or normally practicable without
being seriously detrimental to the interests of the
Shareholders.
The calculation of the NAV per Share resumed on March 25th,
2011.
Egypt Trust (LSE:EGP)
Historical Stock Chart
From Jun 2024 to Jul 2024
Egypt Trust (LSE:EGP)
Historical Stock Chart
From Jul 2023 to Jul 2024
