FINANCIAL REGULATORY AUTHORITY

Chair of the Authority

Decision of the Board of Directors No. (145) for 2021 dated 29/09/2021 Regarding Regulations and Procedures for Public and Private Bond Issuance

Board of Directors of the Financial Regulatory Authority Having reviewed Law No. (159) of 1981 on Joint Stock Companies, Limited Partnerships by Shares, Limited Liability Companies, and One-Person Companies and its Executive Regulations; Having reviewed Law No. (95) of 1992 on the Capital Market and its Executive Regulations; Having reviewed Law No. (10) of 2009 on Regulating Supervision over Non-Banking Financial Markets and Instruments; Having reviewed FRA Board Decision No. (11) of 2014 regarding rules for listing and delisting securities at the Egyptian Exchange; Having reviewed FRA Board Decision No. (23) of 2016 regarding rules for issuing unclassified bonds and Sukuk, subscription rules, and listing regulations at the Egyptian Exchange; Having reviewed FRA Board Decision No. (172) of 2018 regarding rules and procedures for issuing and offering short-term bonds; Having reviewed FRA Board Decision No. (48) of 2019 regarding regulations and procedures for public and private offerings; And after approval by the FRA Board in its meeting held on 29/09/2021:

Resolved

(Article 1)

The regulations and procedures attached to this decision apply to companies and entities wishing to issue bonds in a public or private offering, without prejudice to any special provisions stipulated in FRA Board decisions regarding bond issuance or offering.

(Article 2)

This decision shall be published in the Egyptian Official Gazette, on the FRA's website, and on the Egyptian Exchange's website, and shall take effect from the day following its publication in the Egyptian Official Gazette.

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Chair of the Board of Directors
Dr. Mohamed Omran

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Smart Village, Building 167, Giza, Egypt
Postal Code: 110
Tel: +202 35345350
Fax: +202 35370066
WWW.FRA.GOV.EG

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Regulations and Procedures for Public and Private Bond Issuance

First: Types of Offerings

1. Public Offering:

A public bond offering involves the issuer presenting bonds to unspecified natural or legal persons in advance.

2. Private Offering:

A private bond offering involves the issuer presenting bonds to natural or legal persons meeting specific conditions at the time of issuance or thereafter.

Second: Parties to the Bond Offering Process

1. Issuing company or entity (Issuer).
2. Underwriting and subscription promotion/guarantee entities.
3. Qualified investor.
4. Auditor.
5. Subscription agent.
6. Egyptian Exchange.
7. Central Depository and Clearing Company (CDCC).
8. Credit rating agencies (if a credit rating is required).
9. Payment agent (for short-term bonds).

Third: Qualified Investor for Private Offering

The term "private investor" refers to financially sound individuals and financial institutions, as follows:

1. Natural persons with at least three years of experience in credit, asset management and investment, fund management, or working at any Egyptian or foreign bank, insurance company, or financial institution.

2. Natural persons owning securities or financial debt instruments valued at over 500,000 Egyptian pounds across two companies.

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Note:
(1) Article 4 of the Capital Market Law states: "The provisions of this law and its implementing decisions shall apply, with reference to the following criteria accompanying each:
Public offering: Offering securities or financial instruments to unspecified natural or legal persons.
Private offering: Offering securities or financial instruments to natural or legal persons meeting specific conditions, either at issuance or thereafter."

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3. Companies with paid-up capital of at least 1 million Egyptian pounds.

Financial institutions, defined as:

1. Egyptian banks and foreign bank branches supervised by the Central Bank of Egypt.
2. Insurance or reinsurance companies.
3. Companies whose purpose is participating in establishing companies issuing securities or increasing their capital (investment banks).
4. Companies and entities operating stock exchanges.
5. Bond brokerage companies and major traders.
6. Venture capital companies.
7. Clearing, depository, and central registration companies.
8. Real estate financing or refinancing companies.
9. Financial leasing or factoring companies.
10. Consumer financing companies.
11. SME or micro-enterprise financing companies.
12. Investment funds.
13. Direct investment companies.
14. Foreign banks, and companies/entities operating non-banking financial activities abroad, subject to supervision by an authority exercising equivalent functions to the Central Bank or FRA.
15. Arab, regional, and international financial institutions.
16. National Post Authority.
17. Private insurance funds with invested assets exceeding 100 million Egyptian pounds.
18. SME Development Authority.
19. Egypt's Sovereign Wealth Fund (ESWF).
20. Egypt's Sub-Fund for Financial Services and Digital Transformation.

And any other ordinary or private companies/entities issued by FRA Board decisions.

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Fourth: Bond Offering Regulations

1. The nominal value of each bond must not be less than 100 Egyptian pounds or its equivalent in foreign currency.
2. Issuance shall be in Egyptian pounds, but may be in foreign currency if the issuer has sufficient foreign currency revenue to cover bondholders' claims at maturity.
3. Bonds must be deposited with the Central Depository and Clearing Company (CDCC) and settled according to applicable rules.
4. Issuance may be listed on the Egyptian Exchange in accordance with Article 12 of its listing/delisting rules, applying Part III disclosure requirements, provided listing occurs before the first coupon distribution date.
5. If bonds are not listed on the Egyptian Exchange, trading is restricted to qualified investors.
6. Bonds may be repurchased or redeemed before maturity according to guidelines in the prospectus, with any compensation due to subscribers clarified for each case.
7. Without prejudice to the regulations and documents required by FRA approval under Article 7 of the Executive Regulations of Law No. (95) of 1992, the issuer must obtain FRA approval for:

• 1. A summary of its cash flows, returns, liquidity/profitability ratios, financial structure, or other ratios requested by the FRA.
• 2. The auditor's report on future expectations according to Egyptian Auditing Standards.
• 3. A statement from the CDCC confirming compliance with bondholders' claims at maturity (if prior issuances exist).
• 4. A credit rating certificate from an FRA-approved agency, not lower than (BBB-) or its equivalent, as required by Article 34 of the Executive Regulations.
• 5. Any other data or documents the FRA deems necessary for approval.

Fifth: Subscription Regulations for Private Bond Offerings

1. The minimum subscription for financially sound individual investors is (50%) of the offering value or 1 million Egyptian pounds, whichever is lower.

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2. For financial institutions, the minimum subscription is (1%) of the offering value or 10 million Egyptian pounds, whichever is lower.

A share of at least (10%) of the total offered bonds must be allocated to natural or legal persons other than those in the first subscription tier, and these persons are not subject to the minimum subscription limit mentioned.

2. If a bond offering includes both public and private offerings, subscribers to the private portion cannot access the share allocated for the public offering, provided that subscription windows for both close on the same day.

3. The subscription period for the private offering is determined by the issuer, must be less than one week, and may close early if the offering is fully subscribed.

Sixth: Obligations of Parties to the Offering Process

The information must include a declaration and undertaking by the underwriting/promotion company confirming its responsibility for promotion activities, exercising due care, and clarifying whether it acts solely as offering manager or also as underwriter/guarantor.

Without prejudice to any provisions regarding parties to the bond offering process under Law No. (159) of 1981, Law No. (95) of 1992, and FRA decisions:

Issued in this regard, the obligations of parties to the offering process are as follows:

(A) Obligations of Underwriting/Promotion/Guarantee Entities

1. Contract with the issuer, specifying obligations, responsibilities, mechanisms, procedures, and notifying the FRA of a copy.
2. Subscribe to bonds if underwriting is committed.
3. Disclose the offering process and subscription results according to prevailing rules.
4. Ensure no false information regarding the offering process and subscription results.

(B) Obligations of the Offering Manager

1. Verify, authenticate, and maintain supporting records, as follows:
   (A) Statement of financial soundness for private offering clients meeting the definitions and specifications in the prospectus.

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(B) Consistency of all order data, signatures, and signatory status/identity. (C) List of persons/companies/entities notified about the private offering subscription.
2. Disclose any material or new information that may alter prospectus data.
3. Renew the target investor category with the issuer, and specify allocation ratios/methods for individuals and institutions per clause (1).
4. Notify the issuer of all private offering rules and legal/procedural requirements.

(C) Obligations of the Qualified Investor for Offering

1. Disclose and approve the prospectus, confirming accuracy of issuer data, guarantees, licenses, and other key offering terms for prospective investors.
2. Prepare the prospectus according to governing bond rules, attached with supporting data.

(D) Obligations of the Issuing Company/Entity

1. The issuer is responsible for at least:
   • Being responsible for the accuracy of data, information, and procedures submitted to the FRA, as well as data in the prospectus; confirming no omission by itself or related parties of any data/information affecting subscription decisions;
   • Taking legal actions per Capital Market Law for changes in prospectus/data;
   • Submitting all reports/information to the FRA and obtaining approval from the bondholders' committee;
   • Complying with detailed undertakements/declarations in the prospectus.

Seventh: Information and Data Required in the Prospectus

The prospectus must contain sufficient information about the issuance, specifically:

Issuer-Specific Data

1. Disclose legal form, corporate purpose, authorized/issued/paid-up capital.
2. Disclose shareholders holding ≥5% of capital and board members.

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3. Disclose issuer's asset insurance, existing mortgages/privileges, and tax position.
4. Disclose net asset value per latest audited financial statements.
5. Disclose major lawsuits against the issuer affecting its financing structure and specific provisions for such cases (if any).

Issuance-Specific Data

1. Disclose General Assembly resolution approving issuance and Board resolution (if delegated), or competent authority resolution for non-company issuers.
2. Disclose issuance terms: total value, number/lifespan/repayment schedule of bonds, repayment order in bankruptcy, yield rate/calculation method/distribution dates.
3. Disclose credit rating certificate for issuer and/or issued bonds.
4. Disclose issuance purpose and use of proceeds.
5. Disclose early repayment rules for bondholders, including any compensation due.
6. Disclose guarantees/insurance for bondholders.
7. Disclose all risks related to the issuer's issuance and hedging/mitigation methods.
8. Disclose bonds' status with CDCC and Egyptian Exchange.
9. Disclose subscription data: subscription agent, min/max limits, opening/closing dates, allocation method, and claim settlement.
10. Disclose issuer's financial data:

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(A) Financial statements per Egyptian Accounting Standards for the past three years or since inception,

(B) Summary of cash flows, returns, liquidity/profitability/structure ratios or other FRA-requested ratios

and auditor's report on future expectations per Egyptian Auditing Standards.

11. Issuer's undertakements/declarations regarding bond lifespan, default cases, and remedial actions.

The prospectus must align with legal regulations and bond nature, without prejudice to other required disclosures under the Executive Regulations of Law No. 95/1992.

Eighth: Disclosure Requirements to be Maintained Throughout the Bond Lifespan

Without prejudice to disclosure obligations under Law No. (159) of 1981 and Law No. (95) of 1992, the issuer must submit to the FRA and bondholders' committee at least:

1. Annual financial statements within 90 days of fiscal year-end, prepared per Egyptian Accounting Standards with auditor's report per Egyptian Auditing Standards.
2. Quarterly financial statements within 45 days of each fiscal quarter-end, prepared per Egyptian Accounting Standards with auditor's report per Egyptian Auditing Standards.
3. Auditor's letter specifying all financial ratios in the prospectus and confirming issuer compliance, attached to annual/quarterly statements.
4. Material events affecting the issuer's financing structure, bondholder claims, or adversely impacting operations, disclosed immediately upon occurrence.
5. Any amendments to the issuer's status or previously disclosed prospectus data, disclosed immediately upon occurrence.