BW20030814002072 20030814T171637Z UTC
( BW)(EGYPT-TRUST)(EGP) Audited annual report as at March 31st, 2003
Business Editors
UK REGULATORY NEWS
LUXEMBOURG--(BUSINESS WIRE)--Aug. 14, 2003--
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The audited annual report as at March 31st, 2003 replaces the preliminary draft of July 30th sent for the announcement.
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THE EGYPT TRUST
Societe d'Investissement a Capital Fixe
Luxembourg
R.C. no. B 55.584
Audited annual report
as at March 31st, 2003
Contents
Organisation of the Fund......................................................................................2
General Information...........................................................................................4
Chairman's Statement..........................................................................................5
Manager's Review..............................................................................................6
Auditor's Report.............................................................................................20
Statements of Net Assets.....................................................................................21
Shareholders' equity.........................................................................................21
Statements of Operations.....................................................................................22
Statements of Changes in Net Assets..........................................................................23
Statistical Information about the Fund.......................................................................23
Statement of Changes in Shares Outstanding...................................................................23
Statement of investments and other net assets................................................................24
Currency, Geographical and Industrial Classification of the Portfolio........................................26
Notes to the Financial Statements............................................................................27
Organisation of the Fund
Chairman DR. IBRAHIM AHMED KAMEL
8 Ahmed Nessim Street
Giza
EGYPT
Directors MICHAEL BECKETT
Northcroft
Dulwich Common
U.K. - London SE21 7EW
MOHAMED HASSANEIN
c/o NATIONAL BANK OF EGYPT
NBE Tower
1187 Corniche El-Nile
Dokki
Cairo
EGYPT
GAMAL HOSNY MUBARAK
9 Elsaada St. Roxy, 20th Floor, Suite 212
Heliopolis
Cairo
EGYPT
MICHAEL TAIT
c/o Oxford and Edinburgh Consultants
8 Chalcot Crescent
U.K. - London NW1 8YD
ALEXANDER E. ZAGOREOS
c/o Lazard Freres & Co. LLC
30 Rockefeller Plaza
U.S.A. - New York, NY 10020
Registered Office 11 rue Aldringen
L - 1118 Luxembourg
Manager Lazard Asset Management LLC
30 Rockefeller Plaza
U.S.A. - New York, NY 10020
Investment Adviser National Bank of Egypt
NBE Tower
1187 Corniche El-Nile
Dokki
Cairo
EGYPT
Advisory Board HERBERT GULLQUIST
Custodian and Paying Agent Kredietbank S.A. Luxembourgeoise
43 boulevard Royal
L - 2955 Luxembourg
Domiciliary, Registrar and Transfer Kredietrust Luxembourg S.A.
and Administrative Agent 11 rue Aldringen
L - 2960 LUXEMBOURG
Independent Auditor Ernst & Young S.A.
6 rue Jean Monnet
L - 2180 Luxembourg
General Information
1. Shareholders will be sent audited annual accounts relating to the
Company, 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 interim report covering the six-month period
ending September 30th in each year.
2. The Annual General Meeting is held in Luxembourg each year
(commencing in 1997) 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 objective of the Company is to achieve medium to
long-term capital growth through investment principally in the
equities of companies listed on the Egyptian Stock Exchange,
aiming to capitalize on low valuations and benefiting, in the
short-term, from the high dividend yields currently available in
the Egyptian market.
4. The Company 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 Company. The Articles of
incorporation provide that dividends shall not be paid out of
surpluses arising upon the realization 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 Company.
7. The Net Asset Value is expressed in US Dollars and is published on a weekly basis in the >.
8. The Shares are listed on the London Stock Exchange and the Luxembourg Stock Exchange. It is also
intended that an application will be made for the Shares to be admitted to listing on the Egyptian
Stock Exchange.
Chairman's Statement
It has been a turbulent year for the region, with the war in Iraq and
continued Palestinian Israeli violence. Regional politics cast a
damper on the Egyptian economy and the market, translating into lower
stock prices, although the Egypt Trust fared better on a relative
basis.
The war in Iraq is now over with a difficult re-construction
beginning. The US-sponsored "Road Map" now provides hope for an
Israeli/Palestinian settlement. With regional tensions abating, we
believe that any more downside to the market at this point appears
limited and that the market offers value at current levels.
During the past several months, efforts have been underway to
implement the redemption feature approved by the Board at its meeting
in October 2002. Though regulatory approval for the redemption feature
has not yet been secured, a positive dialogue with the Luxembourg
authorities is underway, and the current expectation is that the
feature will be in place for first redemptions by the end of the third
quarter (please see the proposed timetable on page 8). Great care has
been taken to assure that the redemption feature will in no way affect
the Trust's closed-end status.
I would like to thank my fellow board members, Lazard Asset
Management, LLC, the manager Dina Khayat and the National Bank of
Egypt. We look forward to a profitable year and the continued success
of the Egypt Trust.
Luxembourg, April 4th, 2003 Dr. Ibrahim Ahmed Kamel
Chairman
Manager's Review
Period Returns
Since
YTD 1 Year 3 Year 5 Year Inception
The Egypt Trust - NAV Total Return -6.6% -0.2% -16.5% -14.4% -4.1%
The Egypt Trust - NAV Total Return 9.5% 13.3% -9.6% -12.9% -5.3%
S&P/ IFC Global Egypt Total Return Index -8.3% -5.9% -29.0% -19.9% -8.1%
Performance is presented net of fees. Past performance is not indicative of future results.
Summary
2002 was a testing year for the Egyptian economy and market.
Geopolitical uncertainties muted investor sentiment, even while Egypt
undertook important reforms designed to stimulate long-term growth.
During the past year, the government announced the flotation of the
Egyptian pound, issued a new labor law and initiated a number of draft
laws governing customs and taxation.
For the twelve-month period ending March 2003, the Egyptian market, as
measured by the IFC Investable Egypt Index fell by 5.9 percent (in
Dollar terms), while the total net assets of the Egypt Trust fell by
0.2 percent (adjusting for dividend paid by the Trust during the
year), outperforming the market by nearly 570bps, owing to high cash
levels and fixed income positions. Valuations among Egypt Trust's
portfolio holdings are now approximately 6.0 times 2002 earnings, with
the weighted-average dividend yield at 3.7 percent. The Trust's share
price rose 13.3%, outperforming the IFC Egypt Global index by nearly
20 percentage points. Please refer to the `Period Returns' table above
for a summary of the Trust's historical total returns, which have been
adjusted for the payment of dividends.
The Economy
The quick end to the war in Iraq appears to have spared the Egyptian
economy its worst-case scenarios, though some additional fallout is
anticipated for the volatile tourism sector. Travel receipts, which
are very sensitive to regional violence, have accounted for as much as
20 percent of Egypt's hard currency earnings in recent years. During
the first week of the war, occupancy rates were down to 40 percent
compared to 59 percent a year earlier. As a result, some forecasts for
tourist receipts show a 38 percent decline from a year ago, to reach
USD 2.25 billion, in 2003. But as in the past, tourism could recover
during the second half of the year, particularly if regional political
tensions subside.
Tourism aside, there are significant economic opportunities for Egypt
in the medium term. Among the more immediate opportunities are those
for the construction and building materials sectors with the
reconstruction of Iraq. Additionally, with the presentation of the
`Road Map' to the Israeli Government and the Palestinian Authority,
there is the prospect for significant reconstruction projects in the
Palestinian territories. In the immediate term, any progress in the
peace process will benefit the Egyptian economy, especially the
tourism sector. Should a comprehensive lasting settlement develop, the
implications for Egypt would be far broader and more substantial.
The reconstruction of Iraq and the restarting of the Palestinian -
Israeli peace talks are also expected to go a long way toward
reversing foreign investors' perception of the Middle East as an
unstable region, ultimately paving the way for increased foreign
direct investment into the market. Furthermore, democratic reforms and
the emergence of a functioning economy in Iraq should serve to remind
investors of the large market opportunity which the Middle East
represents. Egypt will likely be encouraged, if not expected to play a
critical role in the reconstruction of Iraq and a nascent Palestinian
state. Egypt's prominence in these developments would no doubt
illuminate the strength of its domestic economy and reach into the
region, providing a potential boon for the private sector, in
particular (in the case of Palestinian reconstruction) cement sales
and construction contracts.
Portfolio Overview
During the twelve-month period ending March 31st, 2003, the Egyptian
market rose dramatically in local currency terms, although a
significantly weaker pound translated into small losses in Dollar
terms. As a result, the USD denominated IFC Global Egypt Index fell
5.9 percent for the period under review. The Egypt Trust, inclusive of
dividends, outperformed the index (in USD terms), falling only 0.2
percent, largely due to a sizeable cash position all held in Dollars,
as well as a 10 per cent Dollar denominated position in the Egyptian
Eurobond issue, both of which mitigated foreign exchange losses. The
portfolio now consists of 22 holdings, and remains concentrated with
the top ten holdings constituting 62 percent of net assets.
The portfolio yield to the trust is projected to be 3.2% for the year
ending March 31st, 2004. For all dividend distributions, shareholders
have the option to reinvest their dividends should they elect to do
so. Under the Dividend Reinvestment Plan, participants will be issued
new shares at a price per share equal to the greater of (a) 103
percent of NAV per share; or (b) 95 percent of the middle market price
per share on that valuation date.1
Discount to NAV
Based on March 31st, 2003 NAV, the discount to net asset value of the
Egypt Trust was 7.0 percent. For the year, the Trust had an average
discount of 17.4 percent; with a high of 22 percent in September and a
low of 7 percent in March 2003. The discount has narrowed on news of
the quarterly redemption anticipated to be in effect by the end of
September, 2003 (The redemption feature was originally expected to be
in place by the end of June, however legal and regulatory
considerations in light of investors' desires to retain the closed end
structure have delayed its introduction. A new timetable is provided
below). The decision to allow for quarterly redemptions has done more
to narrow the discount than any of the share buybacks had done in the
past, where one year the Manager bought back over 500,000 shares but
the discount remained stubbornly over 20 percent.
Quarterly Redemptions
Shareholders voted for the continuation of the closed-end structure at
the Annual General Meeting, which took place on August 20th, 2002.
Meeting in October, the Board approved a change in the Trust's
structure to allow for up to a 10 percent quarterly redemption at the
net asset value, which would take effect in 2003 after regulatory
approval. When instituted, this redemption feature is likely to have a
narrowing effect on the fund discount.
Regulatory approval for the redemption feature has not yet been
secured. The feature is being implemented in a manner, which seeks to
retain the Trust's closed-end status while allowing redemptions. A
positive dialogue with the Luxembourg authorities is underway, and the
latest projected timetable indicates the quarterly redemption should
be available to shareholders for first redemptions by the end of the
third quarter. When the redemption feature is in place, the fund
should retain its closed-end fund status.
In June, Directors ratified final changes to the Articles of
Incorporation, and related submissions were made to the Luxembourg
authorities. In July notice was given to shareholders of the
Extraordinary General Meeting (most likely to coincide with the Annual
General Meeting) for ratifying said changes to the Articles. The
proposed timetable for the remaining milestones related to the
implementation of the quarterly redemption is as follows:
August
|X| AGM/EGM convened. Assuming quorum is achieved
shareholders vote on the proposed amendments to the
Articles of Incorporation.
|X| In the event Quorum is not achieved, subsequent EGM must
be convened allowing six weeks notice, would occur
September 23rd, 2003.
September
|X| First redemption date, September 26th, 2003.
Given the narrow timeframe between shareholder ratification, and the
first allowable redemption at the month-end in September, shareholders
will be allowed to make a special `conditional' notification of
intention to redeem shares. The required 30-day notice will be in
effect for the first redemption period. Said notice will be
conditioned upon the shareholder ratification of the redemption
feature in either the August AGM or, if necessary, the September EGM.
Detailed instructions for giving notice will be distributed to all
shareholders by the custodian.
Furthermore, the Board is contemplating the imposition of a 5%
redemption fee, to be paid to the fund for the benefit of remaining
shareholders. The Fee is intended to compensate for the loss of
liquidity in the funds shares, and for liquidation expenses related to
underlying security prices.
The timetable is based upon consultation with the Trust's legal
counsel and Luxembourg administrator. We believe that the timetable
set forth above is realistic, but acknowledge that there is the
potential for delay.
Top Ten Holdings
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Company Sector % of Total Assets
---------------------------------------------------------------- ----------------------- ------------------------
Egypt Sovereign Eurobond Fixed Income 10.72 %
Commercial International Bank (CIB) Banking 8.25 %
National Societe Generale Bank (NSGB) Banking 7.57 %
Egyptian Company for Mobile Services (MobiNil) Telecom 7.13 %
Orascom Construction Industries (OCI) Const/Bldg Mats 6.59 %
First Arabian Investment Tourism 6.57 %
Egyptian Int'l Pharmaceutical Company (EIPICO) Pharmaceuticals 5.01 %
Suez Cement Company Cement 4.67 %
Nasr City Housing Housing 2.36 %
Egyptian American Bank Banking 2.27 %
Top Ten Holdings as a Percentage of Net Assets 61.14 %
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Egypt's Sovereign Bonds
Issue: USD 1,000,000,000
Coupon: Fixed 8.75 %
Par Value: USD 1,000
Issue Date: July 12th, 2001
Term: 10 years
Maturity: July 11th, 2011
Payment Frequency: Semi-annual
Current Price (March 31st): 113.535
Yield-to-maturity: 6.60 %
Strengths
Provides a partial US dollar hedge for the fund.
Balances the portfolio by adding an increased fixed income component.
High liquidity
Weaknesses
Bond yields are susceptible to the regional tensions and concerns over
the macroeconomic conditions in Egypt.
Commercial International Bank
Price: EGP 30.4 as of March 31st, 2003
Shares in issue: 65,000,000
Free Float: 74.6 % or 48,490,000 shares (includes GDRs)
------------------- ------------------- ------------- ----------------- ---------------- ----------------
Year-end Net Profit EPS PER Dividend Dividend
(EGP million) (EGP) (X) (EGP) Yield
------------------- ------------------- ------------- ----------------- ---------------- ----------------
Dec 2000 384.9 5.92 6.0 3.75 10.60 %
Dec 2001 401.8 6.18 4.7 3.75 13.04 %
Dec 2002 380.9 5.86 5.2 3.00 9.87 %
Dec 2003e 420.0 6.46 4.7 3.80 12.50 %
------------------- ------------------- ------------- ----------------- ---------------- ----------------
2000 and 2001 figures are based on capital structure and price in effect for each year.
Strengths
In the first quarter 2003, CIB witnessed a healthy 16.4 percent growth
in net interest income to EGP 143.1 million although net profit fell
5.5 percent year-on-year due to foreign exchange losses of EGP 52.9
million. The foreign exchange loss resulted from the revaluation of
foreign investments at cost while foreign currency liabilities were
revalued at the current exchange rate.
During the first quarter of 2003, CIB transferred foreign operating
capital accounts to loan loss provisions, which became USD
denominated, increasing the bank's loan loss provision balance with
the Egyptian pound depreciation. This will give the bank more tax
benefits and will strengthen CIB's balance sheet.
For the year 2002, CIB reported 15.8 percent growth in net interest
income, although net income fell as a result of a 63 percent decrease
in foreign exchange commissions. Net earnings came in at EGP 380.9
million, in 2002 versus EGP 401.8 million last year, representing a
decline of 5.2 percent.
CIB's asset quality continues to improve. The ratio of non-performing
loans to the total portfolio dropped from a high of 5.2 percent in
2001 to 3.5 percent in 2002 and again, to 3.3 percent in the first
quarter 2003.
Among peer group banks (NSGB, MI Bank and EAB), CIB is the largest
bank in terms of assets (EGP 19.8 billion) and net worth (EGP 1.7
billion). Furthermore, it has the largest branch network with 40
branches, as of the end of December 2002.
The bank is one of the most liquid and largest capitalization stocks
on the exchange with an average daily volume of 77,632 shares (last 12
months) and a market capitalization of EGP 1,976 million (USD 343
million).
CIB is trading at a price-to-book of 1.2 times. Based on 2002 earnings
the bank has an ROA and a ROE of 1.9 percent and 23.1 percent,
respectively.
Weaknesses
Given the current economic environment, CIB shows conservative lending
practices with a loan to deposit ratio down from 79.4 percent, in 2001
to 69.0 percent, in 2002, eroding the bank's interest margin on the
long run.
The current slowdown in economic activity combined with the recent
floatation of the Egyptian pound against the US dollar may increase
non-performing loans, as companies' servicing ability would be
negatively affected.
Egyptian Company for Mobile Services
(MobiNil)
Price: EGP 35.17 as of March 31st, 2003
Shares in issue: 100,000,000
Free float: 30.0 % or 30,000,000 shares
------------------- ----------------- ----------------- ---------------- ---------------- -----------------
Year-end Net Profit EPS PER Dividend (EGP) Dividend Yield
(EGP million) (EGP) (X)
------------------- ----------------- ----------------- ---------------- ---------------- -----------------
Dec 2000 289.1 2.89 26.1 0.00 0.00 %
Dec 2001 340.8 3.41 8.2 1.50 5.39 %
Dec 2002 422.3 4.22 8.3 2.50 7.11 %
Dec 2003e 480.0 4.80 7.3 2.50 7.11 %
------------------- ----------------- ----------------- ---------------- ---------------- -----------------
2000 and 2001 figures are based on capital structure and price in effect for each year.
Strengths
o As of the end of March 2003, Mobinil registered a healthy 29
percent growth in revenue, as a result of its growth strategy
initiated in 2002, focusing on high-end consumers. Net earnings
jumped 85 percent year-on-year to EGP 153 million. The company's
active subscribers reached 2.4 million.
o In 2002, MobiNil reported an 11 percent growth in revenue relative
to 2001. Net earnings came in at EGP 422.3 million, up from EGP
340.8 million in 2001, representing a 24.0 percent increase. The
company has a market share of approximately 54 percent.
o In April 2003, Mobinil implemented a more balanced tariff
structure, which is expected to improve post-paid ARPU by 7
percent to EGP 290, while pre-paid ARPU remains unchanged.
o MobiNil has the highest market capitalization and liquidity in the
Egyptian stock market, with a market cap of USD 607 million (EGP
3.5 billion) and an average daily volume (last 12 months) of
71,449 shares.
o There remains growth potential for mobile penetration as current
total subscribers in Egypt are around 4.2 million from an
estimated addressable market of over 14 million subscribers.
However, we expect a relatively slower subscriber growth due to
the slow economy.
o The company gets direct benefits from the technical assistance of
Orange as well as the marketing clout of Orascom.
Weaknesses
o The currency depreciation continues to put pressure on bottom line
results, as MobiNil has significant amounts of US dollar
denominated debt (USD 39 million non-hedged) and hard currency
denominated CAPEX needs, which have been averaging USD 110-125
million annually.
o With the majority of market demand in the low calling volume
pre-paid service, the overall average revenue per user had been
declining. However, the situation has improved somewhat in 2002,
with MobiNil's recent focus on higher value new subscribers, which
has raised blended ARPUs at around EGP 100, up from EGP 97.
o The entrance of the third mobile telephone operator (should it
happen), will likely slow growth.
o The company's tax exemption ends after 2003, resulting in a 42
percent tax rate going forward, which will have a dramatic impact
on earnings.
First Arabian Investment & Development-Four Seasons
Price: USD 61.17 (EGP 352.49) as of March 31st, 2003
Shares in issue: 600,000
Free float: 0.00 %
------------------- ------------------- ------------- ----------------- ---------------- ----------------
Year-end Net Profit EPS PER Dividend (EGP) Dividend Yield
(USD million) (USD) (X)
------------------- ------------------- ------------- ----------------- ---------------- ----------------
Dec 2001 0.57 0.95 64 0.00 0.00 %
Dec 2002 (4.94) (8.23) N/A 0.00 0.00 %
Dec 2003e (6.5) (10.83) N/A 0.00 0.00 %
------------------- ------------------- ------------- ----------------- ---------------- ----------------
Strengths
o As the first "seven star" hotel to open in Cairo, with Four
Seasons management, First Arabian has at least 2 years over its
closest competition, a second Four Seasons Hotel.
o In spite of tough tourism environment, in 2002, revenue from the
hotel came in at USD 4.9 million, representing a 12.5 percent
year-on-year growth.
o The mall, which is leased to luxury boutiques, brings in an
additional USD 1.5 million per year in revenue.
o Revenues from La Gourmandise restaurant were up 21 percent in 2002, to USD 1.1 million
o The hotel caters to business travelers, who are comparatively less
price sensitive and more service and comfort oriented.
Weaknesses
o Tourism in Egypt was badly hit by the war on Iraq with occupancy
rates down to 40 percent compared to 59 percent a year earlier. As
a result, the project is not expected to show a profit before
2004.
o In the aftermath of September 11th, Ladbrokes did not renew its
casino contract, resulting in the loss of USD 4.7 million of
steady revenue. However, First Arabian is currently in the process
of finalizing a casino contract with the Russian "Ballo".
o There are concerns about the continuation of contracts of the mall
tenants. If the current business/tourism environment prevails, the
renegotiated of lease contracts will become more difficult.
o The project is highly leveraged with annual debt service in the
range of USD 9 million. Despite the losses, however, interest and
scheduled principal installments have been paid on time.
National Societe Generale Bank
Price: EGP 23.54 as of March 31st, 2003
Shares in issue: 40,000,000*
Free Float: 26.7 % or 10,680,000
------------------- ------------------- ------------- ----------------- ---------------- ----------------
Year-end Net Profit EPS PER Dividend Dividend
(EGP million) (EGP) (X) (EGP) Yield
------------------- ------------------- ------------- ----------------- ---------------- ----------------
Dec 2000 124.6 5.66 5.7 1.00 3.12 %
Dec 2001 142.1 4.74 4.8 1.00 4.36 %
Dec 2002 165.4 4.13 5.7 1.25 5.31 %
Dec 2003e 175.0 4.38 5.4 1.25 5.31 %
------------------- ------------------- ------------- ----------------- ---------------- ----------------
2000 and 2001 figures are based on capital structure and price in
effect for each year. *In 2000, NSGB had a capital increase, from 18
to 22 million shares, in 2001, from 22 to 30 million shares, and in
2002, from 30 to 40 million shares.
Strengths
o In order to increase retail-banking operations, NSGB has been
aggressive in expanding its branch network. The bank added 6
branches in 2002, increasing the total to 30 operating branches as
of December 2002. Furthermore, the bank has an ATM network
comprised of 42 ATMs.
o Despite the general economic slowdown, net earnings for 2002
reached EGP 165.4 million, up from EGP 142.1 million in 2001,
representing an increase of 16.4 percent, which is the highest
growth among its peers.
o The bank has a leading market position in trade finance,
particularly in the issuance of L/Cs and L/Gs for French and other
European companies conducting business in Egypt, which generate
high fees for the bank.
o NSGB has positioned itself as a leader in project finance,
especially in the energy sector in Egypt.
o As a majority-owned subsidiary of Societe Generale in Paris
(54.3%), the bank benefits from their technical support,
management training and global branch network. Furthermore,
Societe Generale in Paris reviews 80-85 percent of the loan
portfolio through its executive committee.
o NSGB is trading at a price-to-book value of 1.4 times. Based on
2002 earnings, the bank has an ROA and ROE of 2.3 percent and 26.9
percent, respectively.
Weaknesses
o As of December 31st, 2002, NSGB reported a significant increase in
operating expense of 25 percent, resulting from the bank's
aggressive expansion plan into retail banking operations.
o NSGB is one of the less liquid traded stocks.
Orascom Construction Industries
Price: EGP 33.49 as of March 31st, 2003
Shares in issue: 95,287,500*
Free float: 30.0 % or 28,586,250 shares
------------------- ----------------- ----------------- ---------------- ---------------- -----------------
Year-end Net Profit EPS PER Dividend (EGP) Dividend Yield
(EGP million) (EGP) (X)
------------------- ----------------- ----------------- ---------------- ---------------- -----------------
Dec 2000 279.2 3.72 13.0 0.00 0.00 %
Dec 2001 303.8 3.68 8.3 1.05 3.45 %
Dec 2002 363.9 3.82 8.8 1.00 2.99 %
Dec 2003e 415.0 4.36 7.7 1.10 3.28 %
------------------- ----------------- ----------------- ---------------- ---------------- -----------------
2000 and 2001 figures are based on capital structure and price in
effect for each year. *In 2001, OCI had a capital increase, from 75 to
82.5 million shares, in 2002 from 82.5 to 86.625 million shares and
from 86.6 to 95.3 million shares.
Strengths
o Orascom Construction Industries (OCI) is involved in construction,
infrastructure development and building materials manufacturing.
The company's construction group provides engineering and building
services for industrial, commercial, power, water/sewage and
railway projects. The building materials group manufactures basic
products used in contracting and construction such as cement,
paints and chemicals, fabricated steel, pipes, cement bags and
industrial gases.
o Egyptian Cement Company (ECC), which is 53.6 percent owned by OCI,
is one of the most efficient cement companies in Egypt. Benefiting
from Holderbank's technical expertise, the plants have reached
high capacity utilization levels in record time. ECC now has a
20.0 percent market share.
o For the year 2002, OCI achieved 20.3 percent growth in
consolidated revenue, to EGP 2,911 million and a 19.8 percent
increase in net earnings, to EGP 363.9 million from EGP 303.8
million last year. As of the end of December 2002, the company had
1.7 billion in un-billed backlog.
o OCI benefits from currency depreciation, as over 50 percent of
consolidated backlog is denominated in US dollars, as of December
31st, 2002. Additionally, in order to diversify country risk, OCI
plans on expanding in the region, targeting the derivation of 50
percent of revenues from sources outside of Egypt by 2005. In
2002, OCI generated around 18 percent of consolidated revenues
from outside Egypt.
o OCI's construction arm, Contrack International, a US based
construction company, which bids for international public works
and defense contracts initiated by the US government may benefit
from the reconstruction of Iraq.
o OCI has strong relationships with leading multinationals in
construction, engineering and building materials, many of which
are joint-venture partners with OCI.
o Inter-group synergism provides strong support for top-line growth
and economies of scale.
Weaknesses
o The inter-locking nature of the businesses and their exposure to
the construction market in Egypt makes them vulnerable to economic
cycles.
o Multitude of inter-company accounts makes it difficult to assess
the extent of inter-company trading.
o The current over-supply situation in the Egyptian cement market
resulted in a price war among cement companies aiming to gain
market share. This has impacted ECC's EBITDA margins, which were
down from 56.4 percent as of December 31st, 2001, to 54.4 percent
in 2002. Somewhat mitigating further decline is the potential of
exporting cement. For the year 2002, OCI exported a total of
695,794 tons of cement to various African markets, Canary Islands
and Yemen and has already secured new export contracts for the
year 2003 of 1.7 million tons of cement.
Egyptian International Pharmaceutical Industries Company
(EIPICO)
Price: EGP 8.58 as of March 31st, 2003
Shares in issue: 72,124,000
Free Float: 63.5 % or 45,798,740 shares
------------------- ------------------- ------------- ----------------- ---------------- ----------------
Year-end Net Profit EPS PER Dividend Dividend
(EGP millions) (EGP) (X) (EGP) Yield
------------------- ------------------- ------------- ----------------- ---------------- ----------------
Dec 2000 97.5 23.21 5.9 16.00 11.76 %
Dec 2001* 100.7 1.40 6.2 1.00 11.53 %
Dec 2002 102.3 1.42 6.0 1.02 11.89 %
Dec 2003e 99.9 1.39 6.2 1.00 11.66 %
------------------- ------------------- ------------- ----------------- ---------------- ----------------
2000 and 2001 figures are based on capital structure and price in
effect for each year. *Underwent a capital increase and a 1 to 16
stock split in early 2001.
Strengths
o In spite of current macro economic conditions, revenue for the
year 2002 increased by 12 percent to EGP 481 million, relative to
EGP 428 million in 2001.
o The government has allowed a slight price increase in the lower
priced lines (under EGP 5), which should mitigate the effect of
the depreciation of the Egyptian pound on EIPICO's bottom line,
since imported raw materials represent 51 percent of COGS.
o As a member of the ACDIMA (Arab Company for Drug Industries and
Medical Appliances), EIPICO is exempt from custom duty on imported
raw materials.
o EIPICO has a broad distribution network distinguished by its
direct selling units (moving drugstores), which allow for on the
spot delivery of ordered items.
Weaknesses
o EIPICO is exposed to foreign exchange risk, as imported raw
materials represent 51 percent of the company's COGS. In view of
the recent Egyptian pound flotation, EIPICO's future operating
margin will likely be eroded by around 5 percent, bringing it down
to 27 percent by the end of 2003, despite exports representing 13
percent of sales.
o EIPICO spends only 3 percent of its revenues on research and
development, and even those are more a development activity for
generics rather than a research activity for new drugs.
o EIPICO has reached the mature phase of its life cycle. The company
needs to invest in new projects in order to diversify product
lines and realize further sales growth.
o With the onset of increasing competition from the multinationals
likely resulting from GATT and TRIPS, EIPICO will have to widen
the range of the generic product line in order to drive sales.
Suez Cement Company
Price: EGP 37.13 as of March 31st, 2003
Shares in issue: 64,000,000*
Free float: 28.0 % or 17,920,000 shares
------------------- ----------------- ----------------- ---------------- ---------------- -----------------
Year-end Net Profit EPS PER Dividend (EGP) Dividend Yield
(EGP million) (EGP) (X)
------------------- ----------------- ----------------- ---------------- ---------------- -----------------
Dec 2000 290.0 5.38 6.4 2.00 5.84 %
Dec 2001 166.0 2.59 12.5 1.50 4.62 %
Dec 2002 49.3 0.77 48.2 0.00 0.00 %
Dec 2003e 105.0 1.64 22.6 0.00 0.00 %
------------------- ----------------- ----------------- ---------------- ---------------- -----------------
2000 and 2001 figures are based on capital structure and price in
effect for each year. *In 2000, Suez had a capital increase, from 49
to 53.9 million shares and in 2001, from 53.9 to 64 million shares.
Strengths
o During 2002, Ciment Francais acquired an additional 9 percent
stake in Suez Cement Company, increasing its stake to 34 percent
and increasing their presence in the Egyptian market, which helps
affirm the fact that the future of the cement market in Egypt is
promising. Suez's long-term understanding of the Egyptian cement
market will be supplemented by Ciment Francais' expertise in
manufacturing and marketing.
o The Ciment Francais transaction injected over EGP 500 million (USD
108 million) in Suez, which was used to lower debt from the Torah
acquisition (EGP 1.2 billion), thereby reducing interest expense.
Debt to equity is now down to 0.5 from 1.8.
o The partial retirement of debt had a significant impact on
stand-alone earnings witnessed in 2002 results, resulting in a 38
percent drop in interest expense from EGP 160 million last year to
EGP 102 million in 2002.
o Suez benefits from a high quality image in the Egyptian market,
which allows the company to sell its product at a 5 percent
premium.
o The Suez/Torah entity is currently the largest cement producer in
Egypt with a current total annual capacity that exceeds 8 million
tons. The consolidated entity has a 23 percent market share.
Weaknesses
o Suez Cement was one of the most efficient and fastest growing
cement companies in Egypt. However, this growth was capped by the
acquisition of Torah, which affected the financial structure by
adding EGP 1.2 billion in long-term debt. On the consolidated
level, we have yet not seen any clear efficiency or cost saving
benefits accruing from the merger. The liability related to the
merger with Torah is much greater than the gain from it.
o Under current economic conditions, new entrants such as Egyptian
Cement, and new capacity among existing cement companies have
created an over-supply situation in the Egyptian market
contributing to a dramatic cement price war. This has led a
shrinking of margin's to their lowest levels.
Egyptian American Bank
Price: EGP 27.71 as of March 31st, 2003
Shares in issue: 14,400,000
Free Float: 27.0 % or 3,888,000 shares
------------------- ------------------- ------------- ----------------- ---------------- ----------------
Year-end Net Profit EPS PER Dividend Dividend
(EGP millions) (EGP) (X) (EGP) Yield
------------------- ------------------- ------------- ----------------- ---------------- ----------------
Dec 2000 72.5 5.03 6.7 3.00 8.88 %
Dec 2001 73.2 5.08 6.5 3.00 9.08 %
Dec 2002 50.0 3.47 8.0 3.00 10.83 %
Dec 2003e 67.0 4.65 6.0 3.00 10.83 %
------------------- ------------------- ------------- ----------------- ---------------- ----------------
2000 and 2001 figures are based on capital structure and price in
effect for each year.
Strengths
o As one of the leading and more innovative private banks in Egypt,
EAB provides a full range of banking services as well as trade
finance to multinational firms in Egypt. EAB caters to the top
tier clientele of Egypt.
o In spite of macro economic conditions, EAB managed to increase
total income by 18.3 percent to EGP 356 million in 2002 versus EGP
301 million in 2001. Earnings before provisions and taxes grew by
27 percent, reaching EGP 209 million, relative to EGP 165 million
the year before. EAB booked EGP 154 million in provisions (loan
loss and tax claims), with an extra EGP 65 million compared to
last year, which made its net earnings drop from EGP 73 million to
EGP 50 million. We believe that this higher provisioning should
ameliorate the bank's asset quality.
o Due to current economic conditions, EAB's footings grew very
conservatively in 2002. Loans declined 8 percent, while deposits
grew by 21 percent in 2002.
o As a majority-owned subsidiary of AMEX Holdings (40 percent), the
bank benefits from their technical support, management training
and global branch network.
o EAB is trading at a price-to-book value of 0.7 times.
o The main reason for holding this share is as an acquisition
target. Both American Express and Bank of Alexandria want to sell
the bank. Standard Chartered had put in a firm offer for this bank
earlier last year (at EGP 60 per share) but the transaction failed
on a disagreement over price.
Weaknesses
o EAB has witnessed some deterioration in asset quality due to
current economic conditions. Non-performing loans to total loans
reached 6.5 percent up from 3.5 percent as of the end of 2000.
Since then, management refused to disclose the bank's
non-performing loan balance.
o Based on 2002 earnings, the bank has an ROA and ROE of 0.64
percent and 9.6 percent, respectively, which is the lowest of the
peer group banks.
Nasr City Housing Company
Price: EGP 21.56 as of March 31st, 2003
Shares in issue: 16,000,000
Free float: 75.0 % or 12,000,000 shares
------------------- ----------------- ----------------- ---------------- ---------------- -----------------
Year-end Net Profit EPS PER Dividend (EGP) Dividend Yield
(EGP million) (EGP) (X)
------------------- ----------------- ----------------- ---------------- ---------------- -----------------
June 2000 70.0 4.38 6.2 3.25 11.95 %
June 2001 52.7 3.29 6.6 2.00 9.19 %
June 2002 50.1 3.13 6.3 2.00 10.22 %
June 2003e 50.5 3.16 6.8 2.00 9.28 %
------------------- ----------------- ----------------- ---------------- ---------------- -----------------
2000, 2001 and 2002 figures are based on capital structure and price
in effect for each year.
Strengths
o For the first half of the 2003 fiscal year, Nasr City Housing
witnessed a 13.7 percent decline in revenue to EGP 27.7 million.
However, if we normalize revenue somewhat by deducting an
unusually large (EGP 12 million) sale to the military forces in
the same period last year, Nasr City Housing would have achieved a
37.0 percent growth in revenue.
o Despite the economic slowdown, Nasr City Housing achieved 77.5
percent growth in revenue for 2002, to EGP 58.2 million, as a
result of the important sales transaction mentioned above as well
as implementing aggressive sales incentives.
o Nasr City Housing is one of the largest real estate development
companies in Egypt and the first company to be majority privatized
(75%) in Egypt.
o The company is the developer of "Nasr City" one of Cairo's largest
districts, with a total area of approximately 45 million square
meters.
o The company has virtually no competition in the Nasr City area and
has a well diversified product line consisting of luxury, upper
and middle-income housing, which serves to mitigate demand swings
due to fluctuations in the economy.
o The company's land bank, granted by the government at zero cost,
stands at 9.3 million square meters, which should fulfill
development needs for the next 15 years.
o In efforts to improve efficiency, the company acquired two
contracting companies, Nasr Civil Works and Nasr Infrastructure.
As the companies were sub-contractors to Nasr City, the
acquisition allowed for better-cost control, while yielding
dividends of around EGP 12.3 million or 25 percent of total net
earnings, in 2002.
o The new mortgage law, which will allow for mortgages of up to 30
years and foreclosures for non-payment of installments, as well as
the new law permitting non-Egyptians to own real estate, should
help to revitalize the residential and commercial real estate
market in Egypt over the long run.
Weaknesses
o The Civil Aviation Authority has frozen new development in areas
that are close to Cairo International Airport until the plans for
the new runway are completed. This area represents around 38% of
the company's total land bank.
o The economic slowdown in Egypt has affected sales and the payment
of unit installments, with the percentage of uncollected
installments increasing from 16.1 percent in 2001 to 21.1% in
2002.
o The current economic situation in the country have led Nasr City
housing to reduce purchase down payments from 50 percent to 30 to
40 percent, thereby increasing default risk.
Luxembourg, April 4th, 2003 Lazard Asset Management
Auditor's Report
To the Shareholders of
The Egypt Trust:
We have audited the financial statements, which consist of the
statement of net assets and the statement of investments and other net
assets of The Egypt Trust (a Luxembourg close-ended investment
company) (the "SICAF") as at March 31st, 2003, the related statement
of operations for the year then ended, the statement of changes in net
assets, the statement of changes in shares outstanding and the notes
to the financial statements for the year then ended. These financial
statements are the responsibility of the Board of Directors of the
SICAF. 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. Those Standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by the Board of
Directors of the SICAF in preparing the financial statements, as well
as evaluating the overall financial statements presentation. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the attached financial statements described above
give, in conformity with the legal and regulatory requirements in
Luxembourg, a true and fair view of the financial position of The
Egypt Trust as at March 31st, 2003 and the results of its operations
and changes in its net assets for the year then ended.
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. We have no observation to make concerning such
information in the context of the financial statements taken as a
whole.
ERNST & YOUNG
Societe Anonyme
Independent Auditors
Bernard LHOEST
Luxembourg, May 23rd, 2003
Statements of Net Assets
(in USD)
The accompanying notes are an integral part of these financial statements
March 31st, 2003 March 31st, 2002
ASSETS
Securities' portfolio at market value 29,602,994 33,182,821
Cash at bank 12,237,116 13,189,018
Receivable on sales of securities - 8,787
Receivable on treasury transactions - 1,000
Income receivable on portfolio 626,467 106,078
Interest receivable on bank accounts 5,003 9,994
Prepaid expenses 2,543 2,582
---------------- --------------------
Total assets 42,474,123 46,500,280
LIABILITIES
Bank liabilities - 332,539
Payable on purchases of securities - 2,126,883
Interest payable on bank accounts - 1,197
Expenses payable 127,188 190,497
---------------- --------------------
Total liabilities 127,188 2,651,116
--------------- --------------------
NET ASSETS at the end of the year 42,346,935 43,849,164
=============== ====================
Number of Shares outstanding 6,849,510 6,849,510
Net Asset Value per Share 6.18 6.40
Shareholders' equity represented by
(in USD)
March 31st, 2003 March 31st, 2002
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 786,253 786,253
Profit brought forward -2,946,638 16,362,462
--------------
----------------
Total Capital and Reserves 88,499,615 107,808,715
Cost of 1,663,837 Shares held in Treasury -15,939,917 -15,939,917
Net realised gain/loss for the year -3,273,670 -17,170,252
Unrealised appreciation/depreciation on securities -25,500,696 -28,710,534
Dividend -1,438,397 -2,138,848
---------------- ----------------
Total Shareholders' Equity 42,346,935 43,849,164
================ ================
Statements of Operations
(in USD)
The accompanying notes are an integral part of these financial statements
March 31st, 2003 March 31st, 2002
INCOME
Dividends, net 2,501,584 2,030,770
Interest on bonds and other debt securities 462,246 182,402
Interest on bank accounts 181,294 396,713
----------------------- -----------------------
Total income 3,145,124 2,609,885
EXPENSES
Management fees 443,396 507,348
Advisory fees 110,849 126,890
Custodian fees 17,213 17,861
Bank and financial services 48,000 156,129
Central administration costs 46,206 28,871
Audit and supervisory fees 25,866 20,343
Printing and publication expenses 35,037 30,447
Subscription duty ("taxe d'abonnement") 21,976 28,760
Interest paid 2,350 1,197
Directors' fees and expenses 100,969 56,754
Other expenses 1,159 117,481
Extraordinary expenses 59,899 -
----------------------- -----------------------
Total expenses 912,920 1,092,081
----------------------- -----------------------
NET INVESTMENT INCOME 2,232,204 1,517,804
NET REALISED GAIN / LOSS
- on sale of securities (-1 year) -2,959,525 -6,335,745
- on sale of securities (+1 year) -2,512,053 -11,804,826
- on foreign exchange -34,296 -547,485
----------------------- -----------------------
REALISED GAIN / LOSS -3,273,670 -17,170,252
CHANGE IN NET UNREALISED APPRECIATION/DEPRECIATION
- on securities 3,209,838 8,603,905
----------------------- -----------------------
Decrease in Net assets as a Result of Operations -63,832 -8,566,347
======================= =======================
Repurchase of Shares - -2,677,747
Dividend paid -1,438,397 -2,138,848
----------------------- -----------------------
TOTAL CHANGE IN NET ASSETS -1,502,229 -13,382,942
TOTAL NET ASSETS AT THE BEGINNING OF THE YEAR 43,849,164 57,232,106
-----------------------
-----------------------
TOTAL NET ASSETS AT THE END OF THE YEAR 42,346,935 43,849,164
=======================
=======================
Statements of Changes in Net Assets
(in USD)
March 31st, 2003 March 31st, 2002
Net Assets at the Beginning of the Year 43,849,164 57,232,106
Net investment income 2,232,204 1,517,804
Net realised gain/loss on exchange -34,296 -547,485
Net realised gain/loss on sale of securities (-1 year) -2,959,525 -6,335,745
Net realised gain/loss on sale of securities (+1 year) -2,512,053 -11,804,826
----------------
-----------
Net realised gain/loss for the Year -3,273,670 -17,170,252
Repurchase of Shares - -2,677,747
Change in unrealised appreciation/ 3,209,838 8,603,905
depreciation on securities
Dividend paid -1,438,397 -2,138,848
--------------- -----------------
Net Assets at the End of the Year 42,346,935 43,849,164
=============== =================
Statistical Information about the Fund
(in USD)
March 31st, 2003 March 31st, 2002 March 31st, 2001
---------------- ---------------- ----------------
Total Net Assets 42,346,935 43,849,164 57,232,106
Net Asset Value per Share 6.18 6.40 7.91
Statement of Changes in Shares Outstanding
For the Year ended March 31st, 2003
Number of Shares Outstanding at the Beginning of the Year 6,849,510
Number of Shares repurchased -
---------------
Number of Shares Outstanding at the End of the Year 6,849,510
---------------
Statement of investments and other net assets
March 31st, 2003
(in USD)
The accompanying notes are an integral part of these financial statements
------------ ------------------ ------------------------------------------------------ -- ---------------- --- ---------
Currency Number / nominal Description Cost Market value % of
value total
net
assets
------------ ------------------ ------------------------------------------------------ -- ---------------- --- ---------
INVESTMENTS IN SECURITIES
TRANSFERABLE SECURITIES ADMITTED TO AN OFFICIAL STOCK EXCHANGE LISTING
Shares
Banks, finance and credit institutions
EGP 661,996 Commercial Intl Bank Ltd 5,525,807 3,492,352 8.25
EGP 199,499 Egyptian American Bank Reg 1,414,499 959,326 2.27
EGP 1,350 Misr Exterior Bank 626,577 226,315 0.53
EGP 69,510 Misr Intl Bank 497,537 195,291 0.46
EGP 784,405 National Societe Generale Bank Reg 4,232,211 3,204,320 7.57
------------ ---------------- ---------
------------ ---------------- ---------
12,296,631 8,077,604 19.08
Chemical industry
EGP 72,369 Egyptian Financial & Indust Co Reg 575,290 534,118 1.26
Construction and civil engineering
EGP 480,021 Orascom Construction Industrie Reg 4,161,441 2,789,745 6.59
EGP 306,738 Suez Cement Co 2,609,656 1,976,431 4.67
------------ ---------------- ---------
------------ ---------------- ---------
6,771,097 4,766,176 11.26
Electric machinery and appliances
EGP 54,816 Misr Refrig & Air Cond Manu 750,547 303,070 0.72
Energy
EGP 12,570 Egypt Gas 1,102,603 172,893 0.41
Food industry
EGP 925 Al Nasr for Dehydrating Prod 12,056 1,011 0.00
Insurance
EGP 115,000 Delta Insurance 723,353 239,479 0.57
EGP 168,531 Mohandes Insurance 2,129,761 379,908 0.90
------------ ---------------- ---------
------------ ---------------- ---------
2,853,114 619,387 1.47
Pharmaceuticals
EGP 1,423,636 Egyptian Intl Pharma Invest 5,246,583 2,119,704 5.01
EGP 22,598 Memphis Pharmaceutic Chem Ind 526,635 193,608 0.46
------------ ---------------- ---------
------------ ---------------- ---------
5,773,218 2,313,312 5.47
Post and telecommunication
EGP 494,859 Egyptian Co for Mobile Com 5,076,707 3,020,250 7.13
Real estate
EGP 266,780 Madinet Nasr City Housing 4,208,217 998,139 2.36
Steel industry
EGP 8,617 Alexandria Iron & Steel 801,871 148,459 0.35
Tourism
EGP 537,047 Orascom Proj Touristic Dev Reg 4,034,952 172,414 0.41
------------ ---------------- ---------
------------ ---------------- ---------
Total shares 44,256,303 21,126,833 49.92
Participating shares
Banks, finance and credit institutions
USD 51,150 Commercial Intl Bank Ltd GDR repr 1 Reg Share 594,582 247,055 0.58
------------ ---------------- ---------
------------ ---------------- ---------
Total participating shares 594,582 247,055 0.58
Bonds
Countries and governments
USD 4,000,000 Egypt 8.75% 01/11.07.11 3,880,000 4,541,400 10.72
Steel industry
EGP 5,000,000 Arab Factory for Iron 11% 98/26.07.05 1,468,004 859,436 2.03
------------ ---------------- ---------
------------ ---------------- ---------
Total bonds 5,348,004 5,400,836 12.75
OTHER TRANSFERABLE SECURITIES
Shares
Banks, finance and credit institutions
EGP 3,939 Misr Exterior Bank Emission 02 59,295 47,849 0.11
Hotels and restaurants
USD 45,454 First Arabian Hotels & Resorts 4,845,506 2,780,421 6.57
------------ ---------------- ---------
------------ ---------------- ---------
Total shares 4,904,801 2,828,270 6.68
------------ ---------------- ---------
------------ ---------------- ---------
TOTAL INVESTMENTS IN SECURITIES 55,103,690 29,602,994 69.93
CASH AT BANKS 12,237,116 28.88
OTHER NET ASSETS/(LIABILITIES) 506,825 1.19
---------------- ---------
---------------- ---------
TOTAL 42,346,935 100.00
================ =========
Currency, Geographical and Industrial Classification of the Portfolio
March 31st, 2003
(in percentage of net assets)
The accompanying notes are an integral part of these financial statements
Currency Classification
Egyptian Pound 52.06 %
US Dollar 17.87 %
-------------
-------------
TOTAL INVESTMENTS IN SECURITIES 69.93 %
Egyptian Pound 1.58 %
US Dollar 27.30 %
-------------
TOTAL CASH AT BANKS 28.88 %
OTHER ASSETS AND RECEIVABLES 1.19 %
=============
-------------
TOTAL 100.00 %
=============
Geographical Classification
Egypt 69.93 %
-------------
-------------
TOTAL INVESTMENTS IN SECURITIES 69.93 %
OTHER ASSETS AND RECEIVABLES 30,07 %
=============
-------------
TOTAL 100,00 %
=============
Industrial Classification
Banks, finance and credit institutions 19.77 %
Construction and civil engineering 11.26 %
Countries and governments 10.72 %
Post and telecommunication 7.13 %
Hotels and restaurants 6.57 %
Pharmaceuticals 5.47 %
Steel industry 2.38 %
Real estate 2.36 %
Insurance 1.47 %
Chemical industry 1.26 %
Electric machinery and appliances 0.72 %
Energy 0.41 %
Tourism 0.41 %
-------------
-------------
TOTAL INVESTMENTS IN SECURITIES 69.93 %
OTHER ASSETS AND RECEIVABLES 30,07 %
=============
-------------
TOTAL 100,00 %
=============
Notes to the Financial Statements
March 31st, 2003
NOTE 1 - GENERAL
The Egypt Trust (the > or the >) is a closed-end
investment company incorporated as a investment company under the laws
of the Grand Duchy of Luxembourg and qualified as a 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 objective is to achieve medium to long term
capital growth through investment principally in the equities of
companies listed on the Egyptian Stock Exchange, aiming to capitalize
on low valuations and benefiting, in the short-term, from the high
dividend yields currently available in the Egyptian market.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
a) Presentation of Accounts
The financial statements are presented in accordance with the
Luxembourg regulations relating to investment funds. The Fund
keeps its books and records in USD.
b) Valuation
1) The Net Asset Value per Share is calculated in accordance
with Article 22 of the Articles on each Valuation Date (as
defined in the Articles). > means the date
fixed by 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 Net Asset Value 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 Net Asset Value, income and expenditures
are treated as accruing from day to day and the Articles of
incorporation 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 investment 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; and
(iv) assets or liabilities expressed in terms of
currencies other than US dollars will be translated
into US dollars 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 of Directors of
the Fund 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 rates of exchange
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 0.1735358
1 EUR Euro 1.0910500
c) Income Recognition
Interest and dividend income is recorded on an accrual basis,
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.
e) Comparatives
The Directors of the Fund have decided with a view to better describe
the expenses of the Fund, to allocate and disclose some types of
expenses differently according to their nature. In order to allow
comparability between both years, some analytical reclassifications
have been done between the expenses accounts in the statement of
operations. These reclassifications have no impact on the total of
expenses as of March 31st, 2002. The concerned items were the
following: printing and publication expenses, directors' fees and
expenses as well as other expenses.
NOTE 3 - MANAGEMENT AND ADVISORY FEES
The Fund pays to Lazard Asset Management, the Manager, annual
management fees of 1.00 per cent, of the value of the gross assets of
the Company, payable monthly in arrears and to National Bank of Egypt,
the Investment Advisor, 0.25 per cent, per annum, of the value of the
gross assets of the Company, payable monthly in arrears.
NOTE 4 - EXTRAORDINARY EXPENSES
In 2003, at the request of the Manager, a review was undertaken of
interest-related transactions in the cash accounts for the Egypt
Trust. In the ensuing review, it was discovered that during 2002
Kredietbank had erroneously credited excess interest to the Fund in
the amount of USD 59,899. In order to reverse this otherwise 'undue'
interest, an extraordinary expense has been realised in the current
accounts.
NOTE 5 - 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 law of March 30th, 1988, the Fund is subject to
Luxembourg subscription duty (