Minister of Investment Decision No. 209 of 2007 Amending the Executive Regulations of the Capital Market Law No. 95 of 1992

Ministry of Investment Minister

Decision Minister of Investment Decision No. (9/2007) amending certain provisions of the Executive Regulations of the Capital Market Law No. 95 of 1992 issued by Decision of the Minister of Economy and Foreign Trade No. 135 of 1993

Minister of Investment Having reviewed the Capital Market Law issued by Law No. 95 of 1992 and its amendments, and the Presidential Decision No. 231 of 2004 regarding the organization of the Ministry of Investment, and the Decision of the Minister of Economy and Foreign Trade No. 135 of 1993 issuing the Executive Regulations of the Capital Market Law and its amendments, and based on the proposal presented by the Chairman of the General Authority for the Capital Market.

Decided

(Article One) The Second Chapter of the Third Chapter of the Executive Regulations of the Capital Market Law issued by Decision of the Minister of Economy and Foreign Trade No. 135 of 1993 is replaced by a new chapter titled "Chapter Two" attached to this Decision under the title "Investment Funds," starting from Article No. (140) and ending at Article No. (183).

(Article Two) The provisions of this Decision shall apply to the investment funds mentioned in the attached Second Chapter from the date of its implementation, without prejudice to the legal status of existing funds.

(Article Three) This Decision shall be published in the Egyptian Gazette and shall be enforced from the day following its publication, and any provision contrary to it is repealed.

Minister of Investment Dr. Mahmoud Mohieldin

Dated: 24/7/2007 Marwa Zaki

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Chapter Two Investment Funds

First Section General Provisions

Article (140) Scope of Application of the Provisions of this Chapter The provisions of this Chapter shall apply to investment funds established in accordance with the provisions of the Capital Market Law.

Article (141) Definitions

• Investment Fund: A common investment vehicle aimed at providing investors with the opportunity to participate collectively in investing in the fields mentioned in these Regulations, managed by an investment manager for a fee.
• Investment Document: A security representing the holder's share in the net asset value of the Fund.
• Net Asset Value: The market value of the assets of an open fund, minus liabilities.
• Qualified Investors: Investors with financial solvency according to the controls set by the Authority, and legal entities such as financial institutions, pension funds, investment companies and funds, and other companies and institutions specialized in investing in securities.
• Investment Manager: The company responsible for managing the assets and liabilities of the Fund.
• Portfolio Manager: The person responsible at the investment manager for managing the Fund's investments.
• Affiliated Investment Funds: Investment funds established or managed by the investment manager or any of the persons affiliated with it.
• Independent Member: A board member who has no employment or contractual relationship with the Fund's company, the investment manager, the custodian, or any related parties, and does not hold a board membership in any of them.
• Developer: A specialized company responsible for implementing the technical aspects of the Fund's real estate projects and achieving its objectives pursuant to the service contract concluded between it and the investment manager.
• Management Services Company: A specialized company that handles the registration of issuance and redemption of investment documents of open funds, as well as the preservation of documents and documents of the assets of real estate funds, in addition to other purposes stipulated in these Regulations.
• Real Estate Management Company: A specialized company that manages and maintains the real estate projects owned by the real estate investment fund and achieves its objectives pursuant to the service contract concluded between it and the investment manager.
• Valuation Expert: A person or company licensed by the General Authority for Real Estate Financing Affairs to provide real estate valuation services.
• Related Parties: All parties associated with the activity of the investment fund, including but not limited to:
  • Investment Manager.
  • Custodian.
  • The bank where the Fund's funds are deposited or which finances the Fund's real estate assets.
  • The Developer.
  • Management Services Company.
  • The brokerage company through which investment documents are sold and redeemed.
  • Real Estate Management Company.
  • Valuation Expert.
  • Auditors.
  • Legal Advisor.
  • Board members or any of the executives or employees of any of the above parties.
  • Any document holder whose ownership exceeds 5% of the net assets of the investment fund.
• Affiliated Persons: Natural persons and any of their relatives up to the second degree, and legal entities, entities, unions, associations, and financial groups composed of two or more persons, where the majority of their shares or capital shares are owned directly or indirectly by the other party, or where the owner is a single person. Also considered affiliated persons are those subject to the actual control of another person.

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Article (142) Types of Investment Funds

An open investment fund may be established, which is an investment fund whose documents are offered through public subscription. The capital of the open fund may be increased by issuing new documents or decreased by redeeming some of its documents.

A closed investment fund may also be established, which is an investment fund with fixed capital whose documents are offered for public subscription or through a private offering limited to qualified investors. Its documents may not be redeemed except at the end of the Fund's term, and its documents shall be listed and traded on the securities exchange.

The Authority shall set the controls and conditions for categories of investment funds.

Article (143) Establishment of the Fund

Without prejudice to the provisions of Article 173 of these Regulations, joint stock companies established in accordance with the provisions of this Law shall undertake the offering of one or more investment funds according to the controls set by the Authority.

Article (144) Licensing and Approval of Document Offering

Licensing for a company to conduct the activity of investment funds shall be in accordance with the provisions of the Capital Market Law, its executive regulations, and the controls set by the Authority in this regard. The Authority must issue its decision on the licensing request within the specified deadlines and according to the procedures stipulated in Article 28 of the Capital Market Law.

Documents of investment funds may not be offered for public subscription or private offering until the required information and documents are submitted to the Authority and its approval is obtained. The investment manager shall submit a request for approval of the offering of documents for public subscription or private offering to the Authority, attaching the following documents to the request:

1. The prospectus for the Fund's investment documents or the information memorandum, as applicable, attached with subscription and redemption forms.
2. The Fund management contract concluded with the investment manager.
3. Details of its organizational structure, including how investment decisions are made - and the name and function of any person participating in making these decisions as research analysts, investment portfolio manager, and investment committee members.
4. The name of the internal auditor.
5. Contracts for management services, custodian services, and investment document distribution contracts concluded with brokerage companies and underwriting companies.
6. The last audited financial report of the investment fund, if the fund is existing.
7. Proof of payment of fees and service charges determined by the Authority's board of directors.
8. Any other data requested by the Authority to enable it to issue its approval.

The private offering must be directed only to qualified investors.

The company may offer multiple issues of the investment fund according to the controls set by the Authority.

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Article (145) Advertising the Fund

The advertisement for the Fund must include the following information:

1. How to obtain a copy of the prospectus for the Fund's documents and its financial reports if the Fund is existing.
2. The purpose of the Fund, its capital, and its duration.
3. The Authority's approval number and date, in addition to other approvals and licenses issued by competent government authorities.
4. Definition of the type of investor targeted by the prospectus for the Fund's documents.
5. How to disclose the value of documents periodically.

The advertisement must not include any expectations about the Fund's future performance or any exaggerated or misleading data or information.

It is not permitted to advertise the establishment of the investment fund or the subscription to its documents before obtaining prior approval from the Authority for licensing the Fund and approving the prospectus.

Both the investment manager and the underwriting company are committed to the controls issued by the Authority regarding any advertisement, brochure, or any promotional or marketing prospectus for the offering and sale of investment documents before publication or distribution to investors.

Article (146) Formation of the Fund's Board of Directors and its Competencies

The company's management is undertaken by a board of directors, the majority of whose members are non-shareholders, as well as non-holders of documents or those dealing with them, or affiliated persons and related parties. The number of independent members must not be less than two. The board must be formed before offering the Fund's documents for subscription.

The company's board of directors shall oversee the Fund and its various issues and coordinate between related parties, specifically as follows:

1. Appointing the investment manager and ensuring its compliance with its responsibilities to achieve the interest of document holders according to the prospectus and the provisions of these Regulations.
2. Approving the prospectus for the Fund's documents and any modifications made to it before its approval by the Authority.
3. Approving the underwriting contract for the Fund's documents.
4. Ensuring the absence of conflicts of interest and resolving transactions that constitute conflicts of interest between related parties and the Fund when they occur.
5. Approving the appointment of the Fund's auditors from among those registered in the register prepared for this purpose by the Authority.
6. Meeting at least twice a year with the internal auditor at the investment manager to ensure compliance with the provisions of the Capital Market Law, its executive regulations, and decisions issued to implement them.
7. Adhering to the disclosure rules stipulated in Article "6" of the Capital Market Law and publishing annual and semi-annual reports submitted by the investment manager regarding the Fund's activity, specifically those related to the Fund's investments, returns, and profits distributed to document holders.
8. Ensuring the investment manager's compliance with disclosing fundamental information about the Fund to document holders and other related parties.
9. Ensuring the management services company's compliance with its duties.
10. Approving the Fund's financial statements.
11. The board of directors must exercise the care of a prudent man in doing everything that achieves the interest of the Fund and document holders.

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Article (147) Fund's Articles of Association

This articles of association must include the following:

1. The Fund's name and duration.
2. The Fund's capital.
3. Issuance of documents.
4. Subscription to investment documents.
5. Redemption of documents in cases where redemption is permitted.
6. Cases of temporary suspension of the document redemption process.
7. Method of evaluating the Fund's assets.
8. How to liquidate the Fund.
9. Statement of the names of the Fund's board of directors members and how they are appointed.
10. Name of the investment manager and how its fees and other fees due to related parties are determined, and how it is changed.
11. Disclosure rules.
12. Amendment of the Fund's articles of association.
13. Names of the Fund's auditors.
14. Name of the Fund's legal advisor.

Article (148) Amendment of Fund Data and Prospectus

The Fund's articles of association or the prospectus for documents may not be amended regarding the investment policy, the Fund's right to borrow, increasing management fees and service charges, and commissions, except after obtaining the approval of document holders. Other amendments shall be by a decision issued by the company's board of directors. These amendments shall not be effective until approved by the Authority.

Article (149) Fund's Investment Policy

The investment of the Fund's funds in securities shall be within the limits and according to the following controls:

1. The Fund's management shall work to achieve the investment objectives of the Fund stated in the prospectus.
2. Investment decisions must be consistent with wise investment practices, taking into account the principle of risk distribution and non-concentration.
3. The percentage invested in buying securities of a single company must not exceed 10% of the Fund's funds and must not exceed 15% of that company's securities.
4. The Fund may invest its funds in buying investment documents issued by other investment funds by a percentage not exceeding 20% of its total net asset value in a single fund and must not exceed 5% of the value of the invested fund.
5. It is not permitted to execute securities borrowing operations for the purpose of selling or buying on margin or acquisition through affiliated groups according to the provisions of Chapter Twelve of these Regulations.
6. The Fund is not permitted to own any asset in any legal entity where partners' liability is unlimited.
7. The percentage invested by the Fund in shares and bonds issued by an affiliated group must not exceed 20% of the Fund's funds.
8. The percentage invested in debt instruments, commercial papers, or other movable securities of a single company must not exceed 20% of the Fund's funds.

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Article (150) Maximum Limit of Funds Invested in the Fund and Required Liquidity

The maximum limit of funds invested in the Fund must not exceed fifty times its capital, which must not be less than five million Egyptian pounds paid in cash.

The Fund must keep a portion of its funds in liquid form to maintain the degree of risk associated with its portfolio. The Fund may invest these funds in low-risk investment channels convertible to cash on demand.

Article (151) Borrowing and Liability for Obligations

The Fund is not permitted to borrow from others except to meet redemption requests and up to 10% of the value of existing investment documents, and after obtaining the approval of the company's board of directors, provided that the term of the short-term loan does not exceed one year.

The Fund is only liable for obligations arising from its conduct of its activity, and document holders are not liable for the Fund's debts except to the extent of their shares.

Article (152) Issuance of Investment Documents

The Fund issues securities in the form of named investment documents with a single value in exchange for investors' funds.

An investment fund is not permitted to issue investment documents for in-kind or intangible shares of any kind.

The Fund determines the nominal value of the investment document at issuance so that it is not less than ten pounds and not more than one thousand pounds.

Investment documents may not be issued except after paying their value in cash according to the issuance price. These documents grant investors equal rights before the Fund. The holder has the right to participate in profits and losses resulting from the Fund's investments according to the percentage they own according to the conditions and procedures stated in the prospectus.

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Article (153) Document Holders' Assembly

An assembly of investment document holders is formed, and the rules and procedures for convening its meetings, quorum for attendance, and voting shall follow the provisions and rules stipulated in these Regulations regarding bondholders and holders of financing certificates and other securities. The Fund must provide the assembly representative with copies of the reports stipulated in Article (6) of the Capital Market Law and Article (58) of its executive regulations.

Article (154) Prospectus

The investment fund submits the prospectus for investment documents to the Authority for approval. The prospectus must be prepared according to the form prepared by the Authority and attached with supporting documents for the prospectus data.

The prospectus must include the following data:

1. Name of the Fund.
2. Purpose of the Fund.
3. Date and number of the license issued to the Fund.
4. Duration of the Fund.
5. Nominal value of the document.
6. Number of investment documents and their categories.
7. Name of the bank licensed to receive subscription requests.
8. Minimum and maximum number of documents that may be subscribed to.
9. Specified period for receiving subscriptions.
10. Names of the Fund's board of directors members.
11. Names of the Fund's auditors.
12. Name of the Fund's legal advisor and their approval of the prospectus.
13. Name of the investment manager and the Fund's portfolio manager, and a summary of their previous work.
14. Investment policies.
15. Definition of risks faced by the Fund and how to manage them.
16. Method of distributing annual profits.
17. Statement of whether the document value may be redeemed before the end of the Fund's term.
18. How to periodically disclose information related to the Fund's activity.
19. Fees of the investment manager and other related parties.
20. Any financial burdens borne by document holders.
21. Method of periodic evaluation of the Fund's assets.
22. Statement of banks, brokerage companies, and management services companies that sell and redeem documents.
23. Any other data the Authority deems fit.

Both the Fund and the investment manager are committed to updating the prospectus for existing funds annually from the date of the last prospectus approved by the Authority, as well as when documents are listed on the exchange. However, if basic items in the prospectus change, it must be updated upon the occurrence of those changes.

The Authority examines the prospectus for investment documents and attached documents. If the documents are complete, the Authority approves the prospectus. If the documents appear incomplete, the Authority notifies the concerned parties within fifteen days from the date of submission to complete them. In all cases, the Authority issues its decision within fifteen days from the date of submission of complete documents or from the date of completion, notifying the concerned parties of the decision within one week from the date of its issuance. The Authority's decision to approve the prospectus lapses if the subscription window is not opened within two months from the date of its issuance.

Article (155) Subscription Rules for Investment Documents

The underwriting of the Fund's documents is undertaken by a company licensed to underwrite and cover securities subscriptions. This is pursuant to a contract concluded between the two parties, which specifically includes the limits of the underwriting company's liability, the amount of its fees, and the conditions and duration of the subscription.

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Subscription to investment documents must be conducted through one of the banks licensed by the Central Bank of Egypt to receive subscriptions. The subscription to investment documents offered for public subscription must remain open for at least fifteen days, after which the subscription window may be closed if it is covered.

Subscription to investment documents constitutes acceptance by document holders of the Fund's articles of association, the formation of the document holders' assembly, and joining it.

Subscription to investment documents is conducted pursuant to a subscription certificate signed by the bank representative who received the subscription value, including the following:

1. Name of the Fund, the issuer of the documents.
2. Number and date of the license to conduct the activity.
3. Name of the bank that received the subscription value.
4. Name, address, nationality, and date of subscription of the subscriber.
5. Total value of documents offered for subscription.
6. Value and number of documents subscribed to in numbers and words.
7. Cases and conditions for redeeming the document value.

If the specified subscription period ends without subscribing to all documents offered, the Fund may modify the value of funds to be invested by relying on the covered documents, provided that it does not be less than 50% of the total documents offered for subscription. In this case, all Fund documents must be changed to match the value of the subscribed documents.

If subscription requests exceed the number of documents offered, the Fund's company may modify the value of funds to be invested to absorb the excess subscription requests. If this modification results in exceeding the maximum limit of funds to be invested in the Fund stipulated in Article (150) of these Regulations, the offered documents shall be distributed to subscribers according to the percentage they subscribed to. Fractions arising from the allocation process shall be forced in favor of small subscribers.

The Fund's license lapses if it is not modified according to the previous paragraph or if the documents subscribed to become less than 50%. The bank that received amounts from subscribers must return these amounts in full upon request, including issuance expenses.

Article (156) Listing and Trading of Investment Documents

Documents issued by the Fund are considered securities.

Documents of closed funds are listed on the securities exchange according to the rules and procedures determined by the Authority.

Documents of open funds are also traded by sale or purchase through banks and management services companies, in addition to brokerage companies licensed by the Authority. These companies are committed to providing the necessary automatic linkage between them, the investment manager, and the management services company.

The investment manager and the management services company are committed to taking all necessary measures to facilitate the trading, transfer of ownership, and registration of investment documents.

The investment manager may sell or redeem documents that were subscribed to throughout the Fund's term within the minimum limit specified in the prospectus.

Article (157) Disclosure

The investment manager must provide sufficient information to enable new investors and document holders to make their investment decisions, especially what is contained in the prospectus regarding the Fund's investment objectives, conditions, and associated risks.

Management services companies are committed to providing document holders with a report every three months containing the following data:

1. Net asset value of the Fund.
2. Number of documents and their net value for each of the Fund's document holders.
3. Statement of any profit distributions made after the date of the previous report sent to document holders.

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The investment manager is also committed to immediate disclosure of fundamental events that occur during the Fund's conduct of its activity to both the Authority and document holders.

The Fund's board of directors must submit semi-annual reports to the Authority regarding its performance and work results. These reports must include data that fully and accurately disclose the Fund's financial position and the measures taken by the investment manager to manage risks associated with the Fund, all according to the controls set by the Authority.

Article (158) Conflict of Interest

All related parties are committed to avoiding conflicts of interest. The Fund is not permitted to invest its funds in other funds established by any of the related parties, except for investment in money market funds.

The investment manager is not permitted to engage in any work that involves:

1. Conflict between the interest of the Fund it manages and its own interest.
2. Conflict between the Fund's interest and the interest of any other investment fund it manages.
3. Conflict of interest between document holders, shareholders, and holders of the Fund's company shares and those dealing with it.

In all cases, the investment manager is committed to prior and immediate disclosure to the Fund's board of directors and related parties of any action involving a conflict of interest and obtaining their prior approval to undertake this action.

Article (159) Redemption of Investment Documents and Payment of Consideration

The Fund is not permitted to return the value of documents to document holders or distribute returns to them contrary to the issuance conditions. The Fund is committed to redeeming investment documents upon request and in accordance with the provisions of this Article.

Redemption operations or proportional payment may be suspended whenever exceptional circumstances arise that justify this suspension and the interest of document holders requires it, according to the conditions specified in the Fund's articles of association and prospectus. The investment manager must notify the Authority of its decision to suspend after approval by the Fund's board of directors.

The following cases are considered exceptional circumstances justifying the suspension of redemption operations:

1. Synchronization of exit requests from the Fund reaching a level where the investment manager cannot respond to exit requests.
2. The management company's inability to convert securities listed in the Fund's portfolio into cash outside its will.
3. Decrease in the value of securities forming the Fund's portfolio due to a sudden drop in their prices, leading to a significant decrease in the value of the Fund's assets.
4. Force majeure cases.

Suspension or proportional payment and determination of these exceptional circumstances and others are conducted under the supervision of the Authority after obtaining its approval. This suspension is temporary until the reasons and circumstances necessitating it disappear.

The consideration for redeeming documents not listed on the securities exchange is determined by dividing the net market value of the Fund's assets by the number of existing documents at the end of the working day of the redemption request submission. The value requested for redemption is deducted from the Fund's assets as of the day following the submission of the redemption request. Expenses for liquidating the share must be deducted from the value due to the exiting investor, and the value of the documents requested for redemption must be paid within one working day from the date of the redemption request.

Article (160) Receiving Requests for Purchase of New Documents

Requests for purchasing new investment documents in open funds are received on all working days during the week, and their value must be paid on the first working day following based on their net value announced on the date of the request.

Article (161) Custodian

The investment manager keeps the securities in which the Fund invests its funds with one of the custodian companies from banks or companies licensed to conduct this activity, provided that the custodian is not a shareholder in the Fund or the investment manager or any of the companies affiliated with them, according to the controls set by the Authority. The custodian must provide the Authority with a periodic statement regarding these securities.

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Article (162) Management Services Company

The management services company handles the listing and settlement of transactions conducted on investment documents not listed on the exchange.

The company is committed to preparing and maintaining an automatic register of document holders. The document holders' register is a presumption of investors' ownership of the documents recorded therein. The company is also committed to recording the following data in this register:

1. Name and address of the document owner.
2. ID number, national ID number, passport number, or commercial registration number.
3. Nationality of the document holder.
4. Number of documents belonging to each of the Fund's document holders.
5. Date of registration of the document holder in the register.
6. Statement of purchase requests and sale offers for investment documents.
7. Conducting redemption and sale operations of documents according to the contract concluded with the investment manager of the open fund.

The company is committed to preparing a daily statement of the number of existing documents at the end of the working day after obtaining the necessary data through automatic linkage with brokerage companies through which documents are traded. It is also committed to calculating the net value of the document daily.

The company handles collecting profit distributions from securities in which the Fund participates, distributing the Fund's profits to document holders, and sending daily reports and document ownership data to document holders.

Article (163) Fund's Financial Positions

The Fund's financial statements are prepared according to Egyptian accounting standards, and the Fund's audit is undertaken by two auditors chosen from among those registered in the register prepared for this purpose by the Authority. They must adhere to Egyptian and international auditing standards when examining and reviewing the Fund's financial statements.

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The value of securities in which the Fund invests its funds is calculated at market value when preparing financial statements, and the investment manager may calculate provisions for shares that have not traded for more than 30 days.

The Authority is notified of the balance sheet, financial statements, and the board of directors' and auditors' reports one month before the scheduled date of the Fund's board of directors meeting. The Authority may examine the documents and reports mentioned in the previous paragraphs of this Article or assign a specialized entity to examine them. The Authority notifies the Fund's board of directors of its observations and requests reconsideration in accordance with the examination results. If the Fund's board of directors does not comply, the latter bears the expenses of publishing the Authority's observations and requested amendments.

The Fund's board of directors must publish a comprehensive summary of semi-annual reports and annual financial statements in two widely circulated daily newspapers, at least one of which is in Arabic.

Both of the Fund's auditors have the right to access the Fund's books, request data and explanations, and verify assets and liabilities. They must submit a joint report, and in case of disagreement between them, the report must clarify the differences and the opinion of each.

Auditors must be independent of the investment manager or any of the related parties.

Article (164) Authority's Supervision and Monitoring

The Authority has the right to supervise the Fund's activity and access and request data, documents, and other information necessary to verify the Fund's compliance with the provisions of the Law, its executive regulations, and decisions issued to implement them.

Both the Fund's board of directors and the investment manager's internal auditor must provide the Authority with semi-annual reports on the Fund's activity and work results. These reports must include data that disclose the Fund's financial position...