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Pharos Fund I

Q&A
What is Pharos Fund I?

Pharos Fund I is an open-ended equity fund that aims at long-term capital


appreciation through investments in listed equities, primarily in Egypt & their
respective GDRs listed on foreign stock markets, and with a maximum of 20%
exposure in MENA markets.

Who is the investment manager?

The investment manager is Pharos Asset Management, a wholly owned


subsidiary of Pharos Holding Company. Pharos Holding’s issued and paid- in
capital is EGP 123 million. Dr. Mohamed Taymour founded Pharos Holding in
2005.

The asset management team has an extensive experience in the field of financial
services, specifically asset management.

Who should invest in the fund?

The fund is open to all investors interested in investing in the stock market.
However it is particularly suited for both investors that do not have the technical
expertise to invest in the market or those that do have the expertise but do not
have the time to follow the markets closely.

Is now the right time to invest?

Research has proven that investors cannot time the markets, and equity markets
outperform fixed income over the long term. In the last 12 months the global
economy was hit by both a meltdown in financial system and a global recession.
Reforms implemented in the Egyptian banking sector starting the early 2000s
have protected the local market from the grave impacts of the global financial
crisis, leaving Egypt suffering only the impact of reduced aggregate demand.
However in the last 12 months the Egyptian stock market was among the worst
hit by the global financial crisis. Currently Egypt is among the cheapest
emerging markets and hence it is expected to perform well in the coming period.
The fund also has the flexibility to invest up to 20% in markets in the region that
Pharos believes is undervalued.

How are investment decisions taken in the fund?

An investment committee comprised of the top management of the company


meets quarterly to analyze the investment themes and those sectors most affected.
A weekly meeting follows up on any changes in the strategy and performance.
The fund also has a dedicated fund manager that additionally follows the markets
on a daily basis.
Economic and company analysis is based on research from all investment banks
that pharos deals with, in addition the asset management team conduct their own
primary research and meetings with the management of companies we are
interested to invest in.

How is pharos fund different from a fund issued by a bank?

From a compliance and operational perspective there is no difference.

The pharos fund I, is issued by Pharos Fund Company, whose board is


comprised of 3 members two of which are independent members (Dr. Nabil El
Araby and Mr. Sameh Sabour). The Fund, as all other funds, is regulated by the
Capital Markets Authority.

The bank that receives all the subscription and redemption requests and has any
cash owned by the fund is Arab African International Bank.
The assets are all held by an independent custodian, in this case Arab African
International Bank. While the registry of all the certificate holders as well as
calculating the NAV daily is done by Arab African International Bank
administrative services.

Finally all trading transactions are settled on a delivery versus payment system to
eliminate any risk from brokers.

What is the Net Asset Value (NAV) of a certificate?

Pharos Fund I price per certificate is the EGP amount of the fund calculated by
dividing the total value of all the assets in its portfolio less any liabilities, divided
by the number of fund certificates outstanding.

The NAV per certificate is calculated at the closing prices of the securities in the
fund and the certificate price (NAV) will be announced at the end of each
business day.

Who calculates the NAV of the fund?

A separate entity, in charge of the administrator role, will calculate the NAV.
Arab African International Bank will act as the fund’s administrator.

Where does my money go?

At any point in time, the bank account held at Arab African International Bank in
the name of the fund will hold cash and/or shares purchased in the name of the
fund and held with the custodian (which is Arab African International Bank).
The administrator will keep track of all investors in the fund and their respective
number of certificates.
Is there risk in broker bankruptcy?

The fund will settle all accounts with brokers using DVP settlement (delivery
versus payment). As the fund purchases shares in the market, the fund will only
pay cash to the broker once the shares are bought and then settled in the fund’s
name two days later. Moreover, as the fund sells shares, cash is deposited in the
fund’s account prior the release of the shares.

What is the size of the fund?

The initial size of the fund is EGP 25,000,000 (twenty five million Egyptian
Pounds) divided into two hundred and fifty thousand certificates each with a par
value of EGP 100. Since the fund is an open ended fund, it allows investors to
subscribe and redeem daily without any cost. As such the, fund size would
increase as subscriptions increase. The fund company capital is currently EGP 5
Million pounds, as per the law, the fund can grow up to 50 times the said amount
prior to increasing the capital of the fund company, thus with current company
capital the fund may grow to EGP 250 Million before increasing capital.

What is the fund currency?

The certificate price is in Egyptian Pounds, as all assets and liabilities of the fund
are valued in Egyptian Pounds.

What are the fund’s investment guidelines?

The fund may invest a maximum of:


1. 95% of assets in equities
2. 25% of assets in GDRs
3. 20% of assets in MENA Equities
4. 30% of assets in one sector
5. 50% of assets in money market securities
6. 10% of assets in one company, provided that percentage does not exceed
15% ownership in that company
7. 20% of assets in other mutual funds, provided that percentage does not
exceed 5% ownership in that fund
8. 20% of assets in stocks or bonds in affiliated companies
9. 20% of assets in debt instruments in a given company

Additionally:
 The fund may not invest in fixed income securities with a credit rating
below BBB-
 The fund manager must work to achieve the investment objectives of the
fund
 The fund manager must apply the Prudent Investor Rule
 The fund may not use short selling or margin buying
 The fund may not invest in any company whereby the shareholders are not
subject to limited liability
How can I buy or sell certificates?

 The subscription of certificates during the subscription period may take


place during any business day in any of the Arab African International
Bank branches until 5 pm. Subscriptions and redemptions thereafter may
take place during all business days at any branch until 12 pm.

Subscription:
1. The client opens an account with the bank
2. The client then places the total amount required to be invested using the
last NAV available as a guide at any branch till 12 pm.
3. Based on the actual NAV that is released by the administrator at the end of
the subscription day, the exact number of certificates is calculated and the
remaining balance would then be deposited in the account.

Redemption:
1. The client in person or his attorney delivers a redemption request to
liquidate a number of certificates at any branch till 12 pm.
2. Based on the actual NAV that is released by the administrator on the date
of redemption, the actual amount is transferred to the client’s account
within two days from date of request.

What transaction fees do I need to pay to buy or sell certificates?

All subscriptions and redemptions are free of charge

What other fees are reflected in the NAV?

The published price of the certificate entails all the following fees:

Management fees:
0.65% of NAV per annum
Pharos Asset Management

Performance fees: 15% above a 12% hurdle rate accrued & paid
Pharos Asset Management yearly

Administration fees:
0.3% of NAV per annum
Arab African International Bank

Custody fees: 0.05% per transaction, 0.01% of coupon value, &


Arab African International Bank 0.01% of NAV per annum

Accounting & Legal fees:


Up to EGP 180,000 per annum
KPMG, Baker Tilly, Sarie-Eldin & Partners

Other Fees: Up to 2% of NAV per annum


When and where is the price published?

The certificate’s NAV will be published every Sunday in Al Ahram newspaper


and will be disclosed daily by the Arab African International Bank.

What is the minimum investment amount?

First time investors (during the subscription period or thereafter) must initially
invest in a minimum of five certificates and can then subscribe in increments of
one certificate.

How long do I need to hold a certificate before I can sell it?

Subscriptions and redemptions are daily; therefore there is no minimum holding


period.

Does the fund payout dividends?

Pharos Fund I will reinvest its profits and dividends in the fund. As such the fund
does not intend to distribute any dividends. All of the profits and dividends will
be reflected in the price of the certificate.

What is the fund’s financial year and who are its auditors?

Pharos Fund I’s fiscal year begins on January 1st and ends December 31st and the
financials will be revised by KPMG and Baker Tilly quarterly and audited
annually.

How can I access further details about the fund?

Pharos Fund I prospectus will be provided upon request and are available at all
branches of Arab African International Bank. For more information please call
Pharos on 00202 2739-3666 from outside Egypt or 16665 in Egypt, alternatively
call Arab African International Bank on 19555.