Board of Directors Secretariat

Board of Directors Decision No. (65) of 2017

Dated 19/4/2017

Regarding Controls for Owning Shares of Companies Operating in the Securities Sector

The Board of Directors of the Financial Regulatory Authority

Having reviewed the Joint Stock Companies, Partnerships Limited by Shares and Limited Liability Companies Law issued by Law No. 159 of 1981 and its executive regulations; and the Capital Market Law issued by Law No. (95) of 1992 and its executive regulations and decisions issued in implementation thereof; and Law No. (10) of 2009 regarding the regulation of supervision over non-banking financial markets and instruments; and Presidential Decision No. (191) of 2009 regarding the rules organizing the Egyptian Exchange and its financial affairs; and Presidential Decision No. (197) of 2009 issuing the Statute of the Financial Regulatory Authority; and FRA Board Decision No. (11) of 2014 regarding rules for listing and delisting securities on the Egyptian Exchange and its amendments; and FRA Board Decision No. (77) of 2015 regarding criteria for reviewing and studying requests for transfer of ownership of shares of non-complex companies operating in the securities sector listed on the Egyptian Exchange; and FRA Board Decision No. (107) of 2016 regarding corporate governance rules for companies operating in the securities sector; and FRA Board Decision No. (135) of 2016 regarding controls for acquiring or controlling securities brokerage companies and investment fund management companies, and rules for documenting situations; on the memorandum from the Central Administration for Monitoring Trading Markets dated 19/4/2017; and upon the approval of the FRA Board of Directors in its session No. (4) of 2017 dated 19/4/2017.

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It Has Been Decided

(Article One)

Without prejudice to the provisions of Chapter Two of the Executive Regulations of the Capital Market Law and the provisions of FRA Board Decision No. (135) of 2016, the provisions of this Decision regarding the controls for ownership by a natural or

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(Article Two)

legal person – directly or indirectly, whether alone or through an affiliated group – in the capital or voting rights of any of the companies operating in the securities sector – whether listed on one of the Egyptian exchanges or unlisted – which conducts one or more of the activities stipulated in Article (77) of the Capital Market Law issued by Law No. 95 of 1992.

Any natural or legal person is prohibited from owning shares or convertible bonds in the capital of any of the aforementioned companies that would result in reaching or exceeding the percentage of their ownership in its capital or voting rights, directly or indirectly, whether alone or through an affiliated group, as stated below, without obtaining prior approval from the Authority:

• Ten percent (10%) of the capital or voting rights
• One quarter (25%) of the capital or voting rights
• One third (33.33%) of the capital or voting rights
• Half (50%) of the capital or voting rights
• Two thirds (66.66%) of the capital or voting rights
• Three quarters (75%) of the capital or voting rights

The requirement to obtain prior approval from the Authority for owning or exceeding 10% of the capital or voting rights is exempted for companies that conduct the "activity of investing in the establishment of companies that issue securities or in increasing their capital," provided that there is no actual control by the company over any of the companies operating in the securities sector, and subject to notifying the Authority within ten working days from completing the ownership.

The requirements of Chapter Two of the Executive Regulations of the Capital Market Law shall apply to companies listed on one of the Egyptian exchanges in cases subject to the provisions of this Chapter.

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(Article Three)

For the application of the provisions of this Decision, "affiliated group" refers to persons who have an agreement for the purpose of acquiring or exercising actual control over any of the companies subject to this Decision, including among them natural persons and their relatives up to the second degree, or legal persons if they are under the actual control of a natural or legal person, as well as a group of persons subject to the actual control of a natural or legal person, or who have an agreement to exercise their rights in the General Assembly or Board of Directors of the company in a manner that leads to actual control over either.

"Actual control" by a natural or legal person means owning any percentage that enables them to appoint the majority of the company's board of directors members, or control in any manner the decisions issued by its board of directors, or control the decisions issued by its general assembly.

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(Article Four)

For the application of the provisions of this Decision, "direct ownership" refers to cases where shares or convertible bonds in companies operating in the securities sector are owned in the name of the ownership applicant or their affiliated parties. "Indirect ownership" refers to cases where a percentage exceeding 50% of the capital or voting rights of an entity is acquired, which itself owns – alone or with its affiliated parties – a percentage in the capital or voting rights of any of the companies operating in the securities sector.

In all cases, ownership of American Depositary Receipts (ADRs) corresponding to the shares of the aforementioned companies falls under ownership control.

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(Article Five)

The application shall be submitted to the Authority by the acquirer or their legal representatives at least two weeks prior to the acquisition date, using the form prepared by the Authority, and the following shall be attached to the application:

1. A statement detailing the quantity and percentage of the securities or voting rights subject to the transaction.

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(Article Six)

When adjudicating requests for the Authority's approval for ownership, the following considerations shall be taken into account:

1. The extent to which the applicant possesses the elements of eligibility, competence, and practical experience in the company's field of work, especially in light of the required ownership percentage.
2. The extent of the ownership applicant's and their affiliated parties' contributions to the target company and other companies operating in the same activity, and the impact of that on competition and control in the capital market, especially in light of the required ownership percentage.
3. The extent to which final judicial rulings have been issued against the applicant for declaring bankruptcy, or convicting them of a crime involving moral turpitude or dishonesty, or of one of the freedom-restricting crimes stipulated in the Central Bank, Banking and Currency Law, or the Anti-Money Laundering and Combating the Financing of Terrorism Law, or the Competition Protection and Anti-Monopoly Law.

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(Article Seven)

Furthermore, when adjudicating requests for the Authority's approval for ownership of 50% or more of the capital or voting rights, in addition to the above, consideration shall be given to the existence of sanctions or measures by the regulatory authority to which the legal person applicant is subject, in case it is a foreign bank or foreign financial institution.

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(Article Eight)

If a person acquires ownership through inheritance, will, or a decision to increase or decrease the capital of a company operating in the securities sector, resulting in a percentage that requires approval from the Authority, they are required to either submit a request to the Authority according to the procedures stipulated in this Decision within one month from the date they become aware of it, in accordance with their plan to dispose of the securities or shares acquired or a portion thereof to lower their ownership percentage below the limits specified in the controls of this Decision, or submit a request to continue ownership subject to the Authority's approval.

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(Article Nine)

The competent administration at the Authority and the Egyptian Exchange shall implement what pertains to this Decision.
The Egyptian Exchange shall notify the competent administration at the Authority with a monthly report detailing all transactions announced as executed according to the share transfer mechanism for companies operating in the securities sector whose securities are not listed on the Egyptian Exchange.

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(Article Ten)

FRA Board Decision No. 77 of 2015 is repealed, and the phrase "or transfer of ownership of its shares by 5% or more of the capital" contained in item 1-2-4 of Part (1) General Provisions of FRA Board Decision No. 107 of 2016 regarding corporate governance rules for companies operating in the securities sector is repealed, as well as any provision conflicting with the provisions of this Decision.

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(Article Eleven)

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.

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Chairman of the Board of Directors
Samer Sarief