FRA Board of Directors Decision No. (99) of 2015

Dated 6/9/2015
Rules and Regulations Governing the Management of Investment Portfolios of Private Insurance Funds 1 As per the last amendment dated 23/1/2022

Board of Directors of the General Authority for Financial Supervision Having reviewed the Constitution; And the Law on Private Insurance Funds No. (54) of 1975 and its Executive Regulations; And the Capital Market Law No. (95) of 1992 and its Executive Regulations; And the Central Depository and Registration of Securities Law No. (93) of 2000 and its Executive Regulations; And Law No. (10) of 2009 concerning the regulation of non-banking financial markets and instruments; And Presidential Decree No. (192) of 2009 issuing the Basic Statute of the General Authority for Financial Supervision; And FRA Board of Directors Decision No. (39) of 2015 issuing the Egyptian Valuation Standards; And the approval of the Board of Directors in its session held on 6/9/2015; Has decided:

(Article One)

Appointment of the Investment Manager
A private insurance fund with invested assets exceeding one hundred million Egyptian pounds must appoint a full-time investment manager licensed by the Authority, accompanied by a sufficient number of staff.
The fund's Board of Directors may contract with one or more licensed securities portfolio formation and management companies instead of appointing a full-time manager.
The fund's Board of Directors may also contract with one or more of the aforementioned companies even if the fund's invested assets do not exceed one hundred million Egyptian pounds.
All of the above shall be in accordance with the controls, requirements, and service performance requirements for investment services outlined in this Decision.

1 - Amended by FRA Board of Directors Decision No. (13) dated 23/1/2022.

Controls pertaining to full-time investment managers of private insurance funds

(Article Two)

Requirements for licensing a full-time investment manager The following requirements must be met to obtain a license to hold and perform the duties of a full-time investment manager for a private insurance fund:
a. Professional experience of no less than 10 years in activities related to investment management, directing investments, managing cash liquidity, and participating in formulating investment policies, with the experience including responsibility for making investment decisions for at least two years. The professional experience period may be reduced upon submission of evidence of obtaining professional certifications in the investment field or completing training programs, according to a list prepared by the Authority. b. The candidate must not practice any other executive role in any entity, except that they may hold a position in the entity that established the fund if it is a bank or financial institution.
c. The candidate must not have been convicted of a felony or a misdemeanor involving moral turpitude or breach of trust, unless their reputation has been restored, as confirmed by a signed declaration from the fund's Board of Directors Chairman under their responsibility.
The fund must, prior to appointing the full-time investment manager, submit the candidate's CV along with all supporting documents for qualifications, competence, and professional experience to the Authority to obtain the required license, along with the candidate's declaration of full-time commitment to work for the fund in light of paragraph (b) above.

(Article Three)

Controls on duties, responsibilities, and obligations of the full-time investment manager

1. The full-time investment manager is responsible for:
   a. Formulating the investment policy governing portfolio formation and management and supervising its implementation. They shall have all authorities to select, change, diversify, reduce, or liquidate investment instruments and securities within the portfolio, as well as reinvest returns from these investments, all within the fund's investment rules and limits, without prejudice to authorities granted by the fund's Board of Directors or any requirement by the Board or a committee thereof or the fund manager to consult regarding certain investment aspects or amounts exceeding specified limits. b. Complying with the limits and controls on deploying the fund's assets stipulated in the Executive Regulations of the Private Insurance Funds Law and all decisions issued by the Authority regarding them.
   c. Exercising the care of a prudent and specialized person in managing the fund's assets to achieve a suitable return on invested assets without exposing them to high risks, in accordance with the fund's bylaws and serving the purposes and benefits provided to its participants.
   d. Studying and analyzing various risks related to the market, yield, exchange rates, and operations, and seeking to mitigate them through diversification of fields, instruments, securities, maturities, and counterparties, and monitoring the financial position of companies issuing securities in which the fund invests. e. Studying the market, financial instruments, and various savings vehicles. f. Monitoring the portfolio and measuring performance periodically and making appropriate adjustments. g. Monitoring the collection of the fund's investment portfolio receivables, including returns and coupons. h. In case of contracting with one or more securities portfolio management companies, reviewing contract terms and monitoring performance, including compliance with limits and controls on deploying the fund's assets.
   i. Periodically evaluating the quality and speed of performance of financial institutions through which the fund manages liquidity and invests assets, and reviewing expenses and financial burdens related to executing the fund's transactions and their competitiveness.
2. The full-time investment manager must:
   a. Regularly inform the fund's Board of Directors about portfolio performance and components, and the investment policy to be followed in the coming period. b. Notify the Authority and the fund's Board of Directors of any breach of limits or controls on deploying the fund's assets stipulated in the Executive Regulations immediately upon occurrence, with rectification within a period not exceeding one week from the date of occurrence. The investment manager may extend this period if justified and accepted by the Authority.
   c. Provide all data and documents enabling registration in the register of assets owned by the fund, detailing all operations and changes affecting the fund's investments, as well as the expense register.
   d. Provide sufficient information, data, and documents related to the fund's investments required to prepare financial statements according to Egyptian accounting standards, and commit to providing all data and clarifications requested by the fund's auditor. e. Work with integrity and exercise the highest degree of care to achieve objectivity and avoid conflicts of interest. f. Coordinate with the fund's management to appoint a sufficient number of staff in the investment department commensurate with the size of the fund's investment portfolio, establishing a mechanism ensuring the fund's safe selection of employees in that department and verifying their good conduct, enabling the investment department to perform its duties and responsibilities effectively. g. Establish effective and necessary policies and procedures to identify, measure, and avoid all types of investment risks and hedge against them. h. Periodically evaluate the fund's portfolio, with financial asset valuation conducted in accordance with FRA Board of Directors Decision No. (130) of 2014.
   i. Comply with the general investment controls outlined in Article Six of this Decision.

Controls on contracting with one or more licensed companies for securities portfolio formation and management

(Article Four)

Rules and controls on contracting between a private insurance fund and an investment management company

1. Conditions to be met in the company contracted to manage a private insurance fund's investments:
   a. The investment manager under contract must be one of the companies licensed by the Authority to conduct securities portfolio formation and management activities, and must not have been suspended from practicing the activity during the year preceding the contract. b. The contracted company must have practiced the activity for at least three full years, and the average value of portfolios it managed in the year preceding the contract must not be less than 200 million Egyptian pounds. The Authority may exempt from the three-year condition and reduce it to one year based on the managing director's and team's prior experience at the company.
   c. Continuation of the contract with the company is conditional upon the company's continued compliance with all conditions referenced upon approval.
2. Contracting conditions and contract validity between the private insurance fund and the investment management company:
   a. The fund's Board of Directors is authorized to approve contracting with a securities portfolio formation and management company to manage its investments, based on a detailed proposal from the applying company. The proposal must include the company's investment management methodology, prior work, investment volume managed, and the experience of the proposed team to manage all or part of the fund's investment portfolio. b. The contract must include the following:

• Identification of the responsible manager for managing the fund's investment portfolio at the securities portfolio formation and management company.
• Disclosure of all fees and commissions the company will receive for managing the fund's investment portfolio.
• Clarification of investment rules and limits regarding investment fields, maximum allocation percentages for each financial instrument, concentration limits, in compliance with the investment channels outlined in Article 14 of the Executive Regulations of Law No. 54 of 1975 and the controls accompanying each.
• Identification of reports related to portfolio investments and performance to be provided to the fund, as well as their issuance frequency.
• Disclosure of all circumstances that may give rise to conflicts of interest.
• Clarification of circumstances and procedures for recovering or liquidating part or all of the portfolio.
• Determination of the contract duration and clarification of circumstances and procedures for changing the investment manager and any associated contract termination or rescission.
• Stipulation of both parties' commitment to the controls, requirements, and service performance requirements issued by the Authority's Board of Directors.
• Determination of the remaining obligations of both parties.
  c. The Authority must be notified of a certified copy of the contract concluded with the investment manager within two weeks of contract completion, accompanied by a copy of the Board of Directors' minutes approving the contract and identifying the person at the fund responsible for monitoring all aspects related to contract execution and associated obligations. The Authority must also be notified of any amendments made to this contract subsequently and upon its expiration.

2 - The phrase "and the contract and its amendments shall not take effect until obtaining the Authority's approval" was deleted from clause (c) of paragraph 2 of Article Four by FRA Board of Directors Decision No. (13) dated 23/1/2022.

(Article Five)

Minimum obligations of the investment management company and fund management and service performance requirements

1. Obligations of the investment management company:
   a. Commitment to maintain and keep separate accounts for the fund's portfolio assigned to the company. b. Formulating the investment policy governing portfolio formation and management and supervising its implementation. The company shall have all authorities to select, change, diversify, reduce, or liquidate investment instruments and securities within the portfolio, as well as reinvest returns, all within the framework of the portfolio management contract signed with the fund, and in compliance with the general investment controls outlined in Article Six of this Decision.
   c. Exercising the care of a prudent and specialized person in managing the fund's assets to achieve a suitable return on invested assets without exposing them to high risks, in accordance with the fund's bylaws and serving the purposes and benefits provided to its participants.
   d. Studying and analyzing various risks related to the market, yield, exchange rates, and operations, and seeking to mitigate them through diversification of fields, instruments, securities, maturities, and counterparties, and monitoring the financial position of companies issuing securities in which the fund invests. e. Studying the market, financial instruments, and various savings vehicles. f. Monitoring the portfolio and measuring performance periodically and making appropriate adjustments. g. Monitoring the collection of the fund's investment portfolio receivables, including returns and coupons. h. Complying with the general investment controls outlined in Article Six of this Decision.
   i. Promptly responding to inquiries from the Authority or the fund and providing them with required reports and data.
2. Obligations of the private insurance fund management:
   a. The fund must deposit all securities included in the portfolio assigned to the securities portfolio formation and management company with one of the custodians licensed by the Authority, in the fund's name and for its account. Consultation with the company is required when contracting with a custodian, and the company must obtain a copy of the contract. A copy of the contract with the custodian must be submitted to the Authority. b. Commitment to open one or more bank accounts at banks supervised by the Central Bank of Egypt, where funds allocated for portfolio formation and management by the company will be deposited, and authorizing the company to transact on this account.
   c. Commitment to monitor the company's activities regarding the assigned portfolio to ensure proper management and verify compliance with contract terms, provisions of Law No. 54 of 1975 and its Executive Regulations, and in accordance with the fund's bylaws and controls issued by the Authority on this matter.

(Article Six)

General investment controls
General controls for those managing the investment portfolio of a private insurance fund Those managing the investment portfolio of a private insurance fund must comply with the following general controls:
a. Complying with the limits and controls on deploying the fund's assets stipulated in the Executive Regulations of the Private Insurance Funds Law and all decisions issued by the Authority regarding them. b. Investing the fund's assets in purchasing securities of companies under liquidation or declared bankrupt, or companies established outside Egypt, is prohibited, unless their securities are listed on an Egyptian exchange.
c. Investment in unlisted companies is permitted only under the following conditions:
-1 The company must take the form of an Egyptian joint-stock company.
-2 A detailed study on the feasibility of investing in the proposed company, associated risks, and the future exit plan for the investment must be prepared.
-3 A study prepared by an independent financial advisor registered with the Authority regarding the fair value of the investment must be attached.
-4 Written approval from the fund's Board of Directors for the proposed investment share and its value must be obtained, along with the aforementioned studies. d. Commitment to study the investment projects in which the fund participates, whether real estate or other activities. A comprehensive study must be prepared for each real estate investment the fund participates in, acquires, manages, or exits from, including all commercial, technical, financial, and legal aspects, expected cash flow calculations, and their impact on the fund's returns, utilizing one of the real estate valuation experts registered with the Authority and in accordance with the Egyptian Valuation Standards issued by the Authority's Board of Directors. Written approval from the fund's Board of Directors for the proposed investment project and its value must be obtained, along with the aforementioned studies. e. Commitment that the credit rating of bonds and securitized bonds in which the fund invests must not be less than investment grade (BBB). In all cases, the investment manager must rely only on the latest credit rating, which must not be older than one year. f. Commitment to preserve and trade securities through a custodian contracted by the fund's management from among those licensed by the Authority to conduct custodian activities. g. Engaging in any acts or transactions aimed solely at increasing commissions, expenses, or fees for entities executing buy/sell orders for the fund's investments, or achieving profit or advantage for the investment manager, is prohibited. h. Commitment not to provide false, incomplete, or unverified data or information, and not to withhold material information or data that affects the accuracy of registration in the register of assets owned by the fund and leads to financial statements not reflecting the fund's financial position and operational results.

(Article Seven)

Publication
This Decision shall be published on the Authority's website and in the Egyptian Gazette, and shall take effect from the day following its publication.

Chairman of the Board of Directors
Sherif Samy