Decision of the Minister of Finance dated January 31, 2002 Approving the Capital Market Authority Regulation on Debt Mutual Funds and Their Management Companies

1 Decision of the Minister of Finance dated January 31, 2002 concerning the approval of the Capital Market Authority's regulation on debt mutual funds and their management companies. The Minister of Finance, having reviewed Law No. 94-117 dated November 14, 1994, concerning the reorganization of the financial market, particularly Articles 29 and 31 thereof; and having reviewed the Collective Investment Undertakings Code issued by Law No. 2001-83 dated July 24, 2001, particularly Articles 35, 43, and 45 thereof; has decided as follows: Single Article: The Capital Market Authority's regulation on debt mutual funds and their management companies, attached to this decision, is hereby approved.

Appendix to the Decision concerning the approval of the Capital Market Authority's regulation on debt mutual funds and their management companies. The Capital Market Authority, having reviewed Law No. 94-117 dated November 14, 1994, concerning the reorganization of the financial market, particularly Articles 29 and 31 thereof; and having reviewed the Collective Investment Undertakings Code issued by Law No. 2001-83 dated July 24, 2001, particularly Articles 35, 43, and 45 thereof; has decided as follows:

Capital Market Authority Regulation on Debt Mutual Funds and Their Management Companies General Provisions (Chapter 1) Article 1: The provisions of this regulation apply to:

• Debt mutual funds,
• Management companies for debt mutual funds,
• Custodians of the assets of debt mutual funds,
• Stock exchange brokers and persons intervening in their professional capacity in accounting supervision or legal/financial structuring of securities/instruments issued to the public,
• Persons responsible for providing opinions on information directed to the public,
• The Depository and Clearing Company,
• Investors in securities and financial instruments,
• Persons receiving savings through public offering,
• Auditors,
• Distributors of debt mutual fund shares.

2 Title I: Management Companies for Debt Mutual Funds Part One: General Provisions (Chapters 2-3) Article 2: A management company must continuously possess adequate operational means compliant with applicable legislative and regulatory provisions. This obligation specifically entails:

• Necessary competence among the company's staff.
• Sufficient technical means.
• Adoption of an appropriate internal organization. Article 3: The registers used by the management company may be on electronic media, provided they meet the following conditions:
• Notifying the Capital Market Authority of all guidelines regarding the nature, technical characteristics, and location of planned equipment and software.
• Undertaking to notify the Capital Market Authority of any modifications made to deposited software.

Part Two: Licensing Conditions (Chapters 4-10) Article 4: The licensing file for management companies of debt mutual funds must contain the following documents:

1. Draft founding agreement of the management company,
2. A declaration form for the management company containing:

• The management company's share capital,
• Distribution of the management company's share capital,
• Names, titles, addresses, nationalities, dates and places of birth of legal representatives and agents, plus their CVs and a recent ID3 from the commercial register.
• Identity of each shareholder, whether natural or legal persons, holding directly or indirectly at least 5% of the share capital or voting rights. In case of close relationships between the company and other natural or legal persons, the Capital Market Authority grants the license only after confirming that these relationships do not impair its proper performance in supervision. "Close relationships" refers to the cases stipulated in Article 10 of Law No. 94-117 dated November 14, 1994. The company must declare any changes concerning persons closely related to it.
• Composition of the company's decision-making bodies and identity of board members or executive committee members and supervisory council.

3 Senior management responsible for the management activity must meet the following conditions:

• Residence in Tunisia,
• Enjoyment of civil and political rights,
• Physical and mental capacity to practice their activities,
• Possession of a bachelor's degree or equivalent certificate,
• Professional experience of at least 3 years in the financial field, or successful completion of a professional competence exam organized by an institution chosen and supervised by the Capital Market Authority. The file must include CVs of these senior managers, certified as true by the person in charge.
• Description of the management company's activity program, particularly its human resources, material means, data storage methods, and suitability of equipment relative to the managed amounts.
• Technical means provided by the management company: corresponding to the managed debt funds, mentioning current or potential managed amounts and number of mutual funds.

• Identity of the equipment owner,
• Statement on whether equipment is shared with another company for other functions,
• Characteristics of the management software used.

• Management and supervision elements: The file contains a detailed organizational structure showing responsibilities of activity managers. The file includes a presentation of management and supervision procedures compatible with the practiced activity. It specifies the frequency and nature of permanent and ad hoc supervision operations for the debt mutual fund. The file indicates the name(s) of person(s) responsible for internal supervision and their administrative hierarchy. It also states information notification procedures to company directors, decision-taking procedures in case of non-compliance discovered. The institution preserves documents proving care taken within internal supervision and, if necessary, measures adopted following non-compliance.

Article 5: The Capital Market Authority may request supplementary information necessary to make its decision. The Capital Market Authority must respond to the licensing application within a maximum of three months from the date of depositing the request, accompanied by required documents. This period is suspended until the Capital Market Authority obtains the requested supplementary information and care measures.

Article 6: The minimum share capital of a management company for debt mutual funds must be fully paid in cash.

Article 7: The Capital Market Authority must be informed of any changes concerning elements of the original licensing file stipulated in Article 4. The Capital Market Authority assesses whether these changes may, if necessary, lead to withdrawal of the previously granted license or require informing holders of debt mutual fund shares. The Capital Market Authority determines the means of notification.

Article 8: The management company must submit to the Capital Market Authority, within three months following the end of the financial year, its audited financial statements, annual management report, and general and special audit reports.

Article 9: The Capital Market Authority must be informed of the management company's decision to permanently cease operations, and the Authority takes all measures to protect managed assets.

Article 10: If the Capital Market Authority decides to withdraw the license from a management company for debt mutual funds, its decision must be reasoned and notified by registered mail with acknowledgment of receipt. The Capital Market Authority informs the public via its official gazette. The decision specifies the timeframe and conditions for implementing the license withdrawal. Upon license withdrawal, the management company is prohibited from continuing activities other than those necessary to ensure ongoing management of entrusted debt mutual funds, until these funds are transferred to another management company under conditions stipulated in the last paragraph of this article. The custodian(s) of assets of debt mutual funds entrusted to a management company must, within two months, select one or more other management companies willing to ensure ongoing management of those funds, in agreement with the Capital Market Authority.

Part Three: Organization of Management Companies (Chapter 11) Article 11: The management company must conduct its activities independently and provide adequate guarantees regarding its organization, technical means, human resources, as well as the integrity and professional experience of its managers. The management company must have autonomous capacity to evaluate the development of debt positions acquired by entrusted debt mutual funds and to substantiate guarantees granted to these funds, if necessary. To ensure continuity of assigned tasks, the management company must have appropriate material and human means. However, a management company may enter into contracts with other institutions to provide equipment and staff for its tasks, provided these means are continuously allocated to that company's activity. A management company may also use external services to perform some of its tasks, provided it has sufficient means to supervise the completion of those tasks under its responsibility. Managers of the management company must respect professional standards and good conduct rules. They must also ensure compliance with these rules by staff working under their responsibility.

Part Four: Rules of Good Conduct Applicable to Management Companies (Chapters 12-26) Article 12: The management company must exercise its duties with the care of a prudent, knowledgeable, and honest professional. It must not disclose confidential information even after its duties end. Article 13: The management company must promote the interests of debt mutual fund share holders in its activities, prioritizing them over shareholders' interests. It must refrain from any initiative aimed at serving its own or affiliated interests to the detriment of share holders. Article 14: The management company must avoid and, if necessary, resolve conflicts of interest fairly, respecting the interests of share holders. It must take all necessary measures, particularly regarding separation of functions, to ensure management independence. Article 15: The management company must adopt an organization that limits conflict of interest risks. Complete separation between functions likely to cause conflicts of interest is required. Article 16: The management company must ensure equal treatment among share holders of the same class. Article 17: The management company must refrain from directly or indirectly benefiting from any unpublished information, whether for its own account or on behalf of others. It must also prevent improper leakage of unpublished information acquired through its functions. Article 18: The management company's leasing terms must contain clauses consistent with the priority interest of share holders. Article 19: Debt selection must be made independently and in the interest of share holders. Article 20: The management company must provide capabilities and procedures ensuring supervision of its activities. Internal supervision mainly involves verifying compliance with good conduct rules in all aspects of customer relations. Article 21: The management company's leasing must be free from any premium or element that could affect its independence. Article 22: The management company's organization must enable it to exercise its duties with integrity, care, and impartiality in the interest of share holders alone, within market credibility, transparency, and integrity. Article 23: The management company must establish an internal system for conducting its activity, specifying:

• Procedures taken by the management company to supervise operations ensuring transparency.
• Duties imposed on employees to prevent improper leakage or arbitrary use of confidential information. Article 24: Additional information must be provided to fund share holders regarding commissions and fees charged within management. Article 25: The management company must provide share holders with all necessary information related to the conducted management. Article 26: The management company must submit planned advertisements to the Capital Market Authority before publication, providing relevant forms and drafts according to adopted means. If advertising does not comply with this regulation, the Capital Market Authority issues a notice to suspend such advertising.

Title II: Debt Mutual Funds (Chapters 27-39) Part One: Formation of the Debt Mutual Fund (Chapters 27-34) Article 27: The file deposited with the Capital Market Authority for licensing a debt mutual fund must contain:

• Management company license,
• License card (Appendix 1) containing fund identification, involved persons, investors concerned by management characteristics, and fund operation methods,
• Draft prospectus if fund shares are offered to the public, or draft explanatory memorandum if privately placed. The memorandum contains information on the debt mutual fund and its issued shares, as well as asset composition;
• Draft internal regulations of the debt mutual fund,
• Method adopted for issuing fund shares,
• Description of contractual relationships between various parties,
• Marketing methods for debt mutual fund shares,
• Information regarding the management company,
• Information regarding the custodian institution,
• Description of fund treasury management means,
• Description of methods for supervising the legality of the management company's decisions by the custodian;
• Valuation document. The Capital Market Authority must respond to the licensing request within a maximum of three months from depositing the request, accompanied by required documents. This period is suspended until the Capital Market Authority obtains requested supplementary information and care measures.

Article 28: A management company for a debt mutual fund, if using public offering, must publish in the Official Journal of the Tunisian Republic: date of licensing, date of public subscription opening, name and registered office of the custodian institution holding the fund's portfolio/assets, name of the management company and distributor, and their registered offices.

Article 29: A debt mutual fund may use public offering only after being notified of the license by the Capital Market Authority and preparing a prospectus according to the model in Appendix 2, countersigned by the Capital Market Authority under Article 2 of Law No. 94-117 and relevant regulations on public offering.

Article 30: The prospectus must contain the following statement: "This document contains important information and should be read carefully before subscribing to any investment."

Article 31: The prospectus must be made available to the public at the management company's registered office and delivered before each subscription. Investors may obtain it from the management company and can also obtain the fund's internal regulations free of charge.

Article 32: The prospectus includes names and functions of persons bearing responsibility for it. It contains information on the debt mutual fund's name, managing company, custodian, auditor, financial characteristics, and operation methods. The prospectus also stipulates debt acquisition rules, share issuance procedures, and risk coverage mechanisms borne by shares. Persons responsible for the prospectus certify that included data are true to the best of their knowledge and free from omissions likely to affect its scope. The valuation document must be attached to the prospectus.

Article 33: Distribution and advertising of the prospectus follow conditions stipulated in the Capital Market Authority's regulation on public offering. Advertising related to placement is subject to the same provisions.

Article 34: The custodian must submit to the Capital Market Authority a certificate of deposit of funds matching subscriptions.

Part Two: Issuance of Shares (Chapters 35-36) Article 35: Within one month from the date of notification by the Capital Market Authority and licensing of fund formation, a guarantee association or associations is formed, and the management company notifies the Capital Market Authority within the same period. Fund shares are placed with the public within one month from the formation of guarantee association(s) if issued to institutional investors only, or two months in other cases. Upon subscription period expiry, the management company acquires, on behalf of the fund, debts matching criteria in the prospectus. The management company must notify the Capital Market Authority of debt acquisition, and the fund is considered formed on the acquisition date.

Article 36: Within two weeks from subscription expiry, the management company must inform the Capital Market Authority of the total subscription amount. Upon subscription expiry, the management company may request the Tunis Stock Exchange to list debt mutual fund shares. Fund shares must be registered with the Clearing and Settlement Company.

Part Three: Documents Published by Management Companies (Chapters 37-39) Article 37: I. The management company must publish, within six weeks from the end of the first semester of the financial year in the Capital Market Authority's official gazette, for each fund it manages under custodian supervision, a semi-annual activity report containing:

• Asset inventory,
• Percentage of shares attributable to collective investment undertakings in securities;
• Amount and percentage of debts with early repayment conditions;
• Development of early repayment ratios;
• Average duration of the fund's debt portfolio;
• Amount and percentage of uncollected debts;
• Substantiation of guarantees;
• Development of listed share prices on the stock exchange;
• Any changes to the valuation document and distinctive elements of the prospectus. The auditor certifies the accuracy of information in the semi-annual report. II. For funds publicly placed, the management company must publish, within six weeks from the end of the first semester in the official gazette for each managed fund under custodian supervision, and after auditor review, the information specified in "I" of this article.

Article 38: I. The management company must publish, within six weeks from the end of each financial year in the official gazette for each managed fund under custodian supervision, an annual activity report containing:

• Annual financial statements prepared by the management company, noting auditor approval.
• A management report containing, in addition to information in "I" of Article 37:

• Detailed analysis of fund results and explanatory factors;
• Proportion of debts consumed from original assets;
• Amount and percentage of management fees and commissions applied during the financial year. The auditor certifies accuracy of information in the annual activity report. II. For publicly placed funds, the management company must publish, within six weeks from the end of each financial year in the official gazette for each managed fund under custodian supervision, an annual activity report containing:

• Annual financial statements prepared by the management company, noting auditor approval.
• A management report containing, in addition to information in "I" of Article 37:

• Detailed analysis of fund results and explanatory factors;
• Proportion of debts consumed from original assets;
• Amount and percentage of management fees and commissions applied during the financial year. The auditor certifies accuracy of information in the annual activity report.

Article 39: Documents stipulated in Articles 37 and 38 must be delivered to each requesting share holder and made available to the public at management company offices and institutions that collected subscriptions. A copy must be sent to the Capital Market Authority.

Title III: Custodians of Debt Mutual Fund Assets (Chapters 47-64) Part One: General Provisions (Chapters 47-51) Article 47: The custodian must exercise duties with the care of a prudent, knowledgeable, and honest professional. It must not disclose confidential information even after duties end. Article 48: The custodian institution providing deposit services for a debt mutual fund may have its managers simultaneously serve as managers of the management company. The custodian must be organizationally and structurally independent from the management company for which it provides deposit services. Article 49: Conditions for exercising custodian duties are stipulated by an agreement between the two parties, defining each party's powers and responsibilities, particularly regarding safekeeping of assets in the debt mutual fund, retrieval, notification duties, and supervision of management company decisions. The custodian must have adequate guarantees regarding organization, technical/financial means, and integrity/experience of its managers. It must take measures ensuring operational safety and independent action relative to the management company. Article 50: The organization, care, and means of the custodian are formulated in a document placed at the disposal of the Capital Market Authority. Each institution exercising custodian duties for debt mutual funds must appoint a responsible person coordinating tasks between various functions. This person verifies proper service delivery by the custodian. Article 51: Any institution wishing to exercise custodian duties must provide the Capital Market Authority with the name, appointment details, and CV of the responsible person.

Part Two: Functions of the Custodian (Chapters 52-63) Article 52: The custodian institution for a debt mutual fund performs the following functions:

• Safekeeping of assets,
• Supervision of management company decisions for the debt mutual fund,
• Intervention in certain stages of the debt mutual fund's activity.

Section 1: Asset Safekeeping Function (Chapters 53-58) Article 53: The debt mutual fund must open a cash account and a securities account with the custodian. Only one custodian may perform asset safekeeping functions. Article 54: The custodian bears the obligation to safely keep assets delivered by the debt mutual fund. It must exercise due care and verify correspondence between kept funds and securities recorded in share holders' accounts. Article 55: The custodian has the obligation to return delivered assets. Article 56: Upon request from the debt mutual fund, the custodian transfers deposited assets to another custodian according to prevailing regulations. Article 57: The custodian sorts operations and registers securities and funds in dedicated accounts. It must notify the debt mutual fund of operations concerning assets it holds on its behalf. Article 58: The custodian must inform the management company as soon as possible regarding:

• Execution of all operations concerning assets and funds,
• Events affecting debts upon becoming aware,
• Elements related to the tax system of held debts.

Section 2: Supervision of Management Company Decisions (Chapters 59-63) Article 59: The custodian must ensure the management company provides all necessary information for conducting supervision operations. It must be familiar with procedures and information systems used by the management company, capable of evaluating them within good conduct rules and party independence. Article 60: The custodian must review the debt mutual fund's accounting as often as necessary. Article 61: The custodian must be able at all times to evaluate the degree of correspondence between information provided by the accounting department and the debt mutual fund. Article 62: The custodian must determine the nature of its supervision operations and must at least perform:

• Supervision of the debt mutual fund's asset inventory according to legally determined frequency,
• Approval of the debt mutual fund's asset inventory after each financial year ends,
• Examination of the debt mutual fund's accounting organization and procedures. All these care measures must be included in an annual supervision plan prepared by the custodian and placed at the disposal of the Capital Market Authority. Article 63: Upon discovering irregularities or violations during supervision, the custodian must send to the management company a correction request,
• A notice if the correction request remains unanswered within 10 business days on the stock exchange.
• In all cases, it must inform the auditor and Capital Market Authority thereof.

Section 3: Role of Custodian During Fund Activity (Chapter 64) Article 64: The custodian must, upon establishing a debt mutual fund, prepare the internal regulations of the fund...