Region

Jurisdiction

Regulator

2014-01-01

Board of Directors Decision No. (63) of 2014 Regarding the Rules for Preparing Financial Statements for Investment Fund Companies

The General Authority for Financial Supervision (GAFS) issued Decision No. (63) of 2014 to establish mandatory accounting rules and standardized financial statement formats for investment fund companies in Egypt. The regulation mandates that investment documents be classified as equity instruments, requires specific transaction cost treatments, and dictates detailed presentation and disclosure requirements aligned with Egyptian Accounting Standards. It further prescribes illustrative balance sheets, income statements, and equity change statements to ensure consistent reporting and transparency for fund stakeholders.

Egypt

Financial Regulatory Authority Egypt

Board of Directors Decision No. (63) of 2014

Dated 27/4/2014

Regarding the Rules for Preparing Financial Statements for Investment Fund Companies

The General Authority for Financial Supervision (GAFS) Board

Having reviewed Law No. (159) of 1981 on Joint Stock Companies, Companies Limited by Shares, and Limited Liability Companies; And Law No. (95) of 1992 on the Capital Market and its Executive Regulations; And Law No. (10) of 2009 regulating supervision over non-Egyptian markets and financial instruments; And Presidential Decision No. (192) of 2009 issuing the Basic Statute of the General Authority for Financial Supervision; And Board of Directors Decision No. (53) of 2014 regarding the regularization of investment funds; And the approval of the Board of Directors in its session held on 27/4/2014;

Decided

(Article One)

Investment fund companies are required, when preparing their financial statements and accompanying notes, to comply with the rules attached to this Decision, and are also required to observe the illustrative financial statement models attached to these rules.

(Article Two)

Joint stock companies issuing investment funds are required, as of the effective date of Minister of Investment Decision No. (17) of 2014 containing the attached rules, to prepare and present an opening balance sheet for the purpose of regularization. The opening balance sheet of the fund company shall include the book values of assets and liabilities for both the company and the fund, based on financial statements prepared for each on that date in accordance with Egyptian Accounting Standards. When presenting the opening balance sheet, compliance with Item (2) of Article Two of the Authority's Board of Directors Decision No. (53) of 2014 shall be observed.

(Article Three)

This Decision shall be published in the Egyptian Gazette and on the websites of the Authority and the Egyptian Exchange, and shall take effect from the day following its publication in the Egyptian Gazette.

Chairman of the Board
Sherif Samy

Main Address: Smart Village, Building 15 - 84 B
Km 28, Cairo/Alexandria Desert Road
Giza Governorate, Postal Code: 12577
Tel: 02-225370040 - Fax: 02-225370041
Email: info@efsa.gov.eg
Website: www.efsa.gov.eg

Rules for Preparing Financial Statements for Investment Fund Companies

First: Some Related Definitions:

Investment Fund: A common investment vehicle taking the form of a joint stock company, aimed at providing investors with the opportunity to participate collectively in investments in the fields stipulated in this regulation, managed by an investment manager for a fee.
Investment Document: A security representing a common share of the document holder in the net asset value of the fund. Document holders share in the profits and losses arising from the fund's activities in proportion to their holdings.
Net Asset Value of the Fund: The market value of the fund's assets minus its liabilities and all accrued expenses.
Fund Company Capital: The issued and paid-up capital of the fund company shall not be less than five million Egyptian pounds or its equivalent in foreign currencies. The founders of the fund company shall pay the full capital in cash in proportion to their contributions, and it shall be used to subscribe to the documents issued by the fund.

Second: Accounting Treatment of the Investment Document (Financial Instrument) in the Fund Company's Financial Statements in Accordance with Egyptian Accounting Standards:

The investment document shall be classified upon issuance as an equity instrument, as follows:
- Egyptian Standard No. (25) "Financial Instruments: Disclosure and Presentation", Paragraph (11), defines an equity instrument as any contract that evidences a residual interest in the assets of an entity after deducting all of its liabilities.
- Paragraph (16) of the same standard stipulates the conditions required to determine whether a financial instrument at issuance is classified as an equity instrument or a financial liability.
- Applying the definitions and conditions for equity instruments in Egyptian Standard No. (25), the investment document must be classified upon issuance as an equity instrument. All subsequent transactions related to it, such as issuance, redemption, purchase, or sale, and any profits or losses arising from these transactions, shall be recognized directly in equity at their net value after deducting any related income taxes.

2. Both holders of investment documents and shareholders of the fund (through the use of the fund company's capital to subscribe to the fund's investment documents) participate in the periodic or annual profit distributions of the fund company (as specified in the prospectus), and these distributions are allocated directly from equity.

3. The fund company shall account for transaction costs incurred for the issuance or redemption of its own investment documents, such as registration fees, other official fees, amounts paid to legal and accounting advisors, printing costs, and stamp duties, etc., by deducting them from equity, to the extent that these costs are directly attributable to the transaction.

4. All requirements of Egyptian Accounting Standards related to equity instruments (primarily) shall apply to investment documents, treating them as equity instruments. The shares of the fund company's capital (equivalent to investment documents) shall be treated identically. The requirements of Egyptian Accounting Standard No. (22) "Earnings per Share" shall apply to investment documents, without applying the exception stipulated in Paragraph (2) of the said standard, so that the standard applies to all fund companies, whether their investment documents are listed on the Egyptian financial markets or not.

Third: Assets and Liabilities of the Fund Company:

Egyptian Accounting Standards shall apply to the recognition, initial and subsequent measurement, or derecognition of the fund company's assets and liabilities of all types, as well as the specific disclosure and presentation for each. It should be noted that a fund company dealing in real estate investments, when applying Egyptian Accounting Standard No. (34) "Investment Property", must choose the fair value model as an accounting policy for subsequent measurement, and this policy must be applied to all its real estate investments.

Fourth: Presentation of Financial Statements for the Fund Company:

The financial statements of the fund company shall include the following:
- (a) Statement of Financial Position (Balance Sheet).
- (b) Statement of Profit or Loss.
- (c) Statement of Changes in Equity.
- (d) Statement of Cash Flows.
- (e) Accompanying notes, including a summary of significant accounting policies and other explanatory notes.
Egyptian Accounting Standard No. (1) "Presentation of Financial Statements" shall apply when presenting the fund company's financial statements, particularly Paragraph "1.76(a)" of the same standard, clarifying changes in each class of equity interests during the period, including rights, privileges, and restrictions associated with each class of equity interests, whether investment documents or shares (equivalent to investment documents). Egyptian Accounting Standard No. (30) "Interim Financial Reporting" shall also apply when presenting the complete periodic financial statements of the fund company.
The fund company shall present an analysis of its expenses in the statement of profit or loss using a classification based on the nature of expenses, as stipulated in Paragraph (92) of Egyptian Standard No. (1).
The statement of changes in equity for the fund company must include, as a minimum, changes in the following items as separate line items:
- (a) Capital – at par value (equivalent in investment documents).
- (b) Other investment documents – at par value.
- (c) Legal reserve.
- (d) Other reserves.
- (e) Current period profits (losses).

Fifth: Required Notes to the Financial Statements of the Fund Company:

In addition to all notes required in accordance with Egyptian Accounting Standards, the fund company is required to disclose in its annual and periodic financial statements, either within the statements themselves or in the accompanying notes, the following:

(a) The name of the fund taking the form of a joint stock company, its type, duration, address, date and number of the issued license, and the name of the sponsor, if any.
(b) The objective of the fund, its investment policies, and the type of investor it targets.
(c) The system for issuing documents and the subscription method, redemption terms in permissible cases, and circumstances affecting the redemption process.
(d) Procedures for offering subsequent issuances of investment documents for exempted funds.
(e) The net asset value of the fund as of the financial statement date, based on the periodic valuation conducted by the management service company, upon which the document value is calculated.
(f) The methodology used by the management service company for the periodic valuation to determine the fund's net asset value.

XXXX Investment Fund Company

Established in accordance with the provisions of the Capital Market Law Balance Sheet as of December 31, ............

Note	2014 Egyptian Pounds	2013 Egyptian Pounds
Assets
Investment Portfolio (according to fund nature)
Cash and cash equivalents
Other assets
Total Assets
Equity
Paid-up Capital – (used to subscribe to ... investment documents of the Fund)
Other investment documents
Total Issued and Paid-up Investment Documents
Legal Reserve
Other Reserves
Current Period Profits (Losses)
Total Equity
Liabilities
Accrued Liabilities and Expenses
Provisions
Dividends Payable to Document Holders
Current/Deferred Income Tax Liabilities
Total Liabilities
Total Equity and Liabilities

Notes from ..... to ..... attached hereto form an integral part of these financial statements and should be read therewith.

XXXX Investment Fund Company

Established in accordance with the provisions of the Capital Market Law Statement of Profit or Loss for the Financial Year Ended December 31, ............

Note	2014 Egyptian Pounds	2013 Egyptian Pounds
Investment Revenues and Profits/(Losses) (according to fund nature)
Other Revenues
Total Revenues
Less: Expenses
Investment Manager Fees
Securities Custody and Execution Commissions
Other Expenses
Total Expenses
Net Operating Profit Before Income Tax
Income Tax
Net Operating Profit After Income Tax
Document Share in Profits

Notes from ..... to ..... attached hereto form an integral part of these financial statements and should be read therewith.

XXXX Investment Fund Company

Established in accordance with the provisions of the Capital Market Law Statement of Changes in Equity For the Financial Year Ended December 31, 2014

	Capital*	Investment Documents	Legal Reserve	Other Reserves	Current Period Profits/(Losses)	Total
	(equivalent in investment documents)
	EGP	EGP	EGP	EGP	EGP	EGP
Balance at beginning of 2013
Transferred to Reserves
Dividends
Documents Issued during the Year
Documents Redeemed during the Year
Net Profit for 2013
Balance at end of 2013
Transferred to Reserves
Dividends
Documents Issued during the Year
Documents Redeemed during the Year
Net Profit for 2014
Balance at end of 2014

Investment documents cannot be transferred throughout the fund's duration except with the approval of the General Authority for Financial Supervision.

Notes from ..... to ..... attached hereto form an integral part of these financial statements and should be read therewith.