The Official Gazette - No. 38 Repeated (A) on September 28, 2022

Prime Minister's Resolution No. 3467 of 2022

Amending Certain Provisions of the Executive Regulations of the Capital Market Law Issued by Resolution No. 136 of 1993 of the Minister of Economy and Foreign Trade

Prime Minister:

Having reviewed the Constitution; and Law No. 169 of 1981 on Joint Stock Companies, Limited Partnerships by Shares, Limited Liability Companies, and Single-Person Companies; and Law No. 102 of 1983 concerning Natural Trials; and Capital Market Law No. 96 of 1992; and Environmental Protection Law No. 4 of 1994; and Central Depository and Registration Law for Securities and Financial Instruments No. 93 of 2000; and Law No. 10 of 2009 Regulating Supervision over Non-Banking Financial Markets and Instruments; and Waste Management Organization Law No. 202 of 2020; and Presidential Resolution No. 279 of 2018 Transferring Certain Authorities to the Prime Minister; and Executive Regulations of the Capital Market Law No. 136 of 1993; and after obtaining the opinion of the General Authority for Financial Supervision; and based on what the State Council has deemed appropriate:

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RESOLVED:

(Article One)

The following texts are substituted for the content of Articles (161) definition of open-end and closed-end investment funds, Article (167) Paragraph One, Article (157) Paragraph Two, Item "11" - Item 170, ("2.1" - Repeated 183), (Repeated 167) of the Executive Regulations of the Capital Market Law referenced herein:

Article (161):

Open-End Investment Fund:

A fund whose size increases upon issuance of new investment certificates and decreases upon redemption of existing ones, with no fixed relationship between the fund's capital and its size as stipulated in Article (162) of these Regulations, and investment certificates are purchased and redeemed without requiring listing on the stock exchange, except for index funds.

Closed-End Investment Fund:

An investment fund whose certificates are issued through a private offering restricted to qualified investors, and whose certificates are not redeemed until the end of its term; however, redemption is permitted according to conditions approved by the Authority. The nominal value of investment certificates issued in one or multiple issuances allocated to the fund's capital must maintain the ratio stipulated in Article (162) of these Regulations. Its certificates may be offered via a public subscription, subject to listing and trading on the securities exchange.

Article (162) Paragraph One:

An investment fund shall take the form of a joint stock company established according to procedures and provisions for companies operating in the securities sector. The issued and paid-up capital of the company must not be less than (2%) of the fund's size after a maximum of five million Egyptian pounds or its equivalent in foreign currencies. The fund company may increase its issued capital beyond the aforementioned maximum limit.

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Article (167) Paragraph One:

The fund issues investment certificates of a single relative value in exchange for subscribers paying their full value in cash.

Article (157) Paragraph Two:

If subscription requests exceed the number of certificates offered, the value of funds to be invested may be adjusted to absorb excess requests, or the number of certificates offered to subscribers may be reduced proportionally to each subscription, with rounding up fractional allocations in favor of small subscribers. This is subject to notifying the Authority and disclosing to subscribers in the certificates, maintaining the ratio between the fund company's capital and the invested funds as stipulated in Article (162) of these Regulations.

Article (173) Paragraph Three - Item "11":

Approval of the fund company's financial statements prior to presenting them to the General Assembly, accompanied by the auditors' report.

Article (170) Item "2.1":

• 1- Semi-annual reports on its performance and operational results, containing complete and accurate financial position data based on the management services company's financial statements, and disclosing risk management measures taken by the investment manager. All in accordance with regulations set by the Authority.
• 2- Financial statements according to forms prepared by the Authority for this purpose, and a report from the fund company's board of directors and auditors one month prior to the General Assembly date. The Authority may examine the referenced certificates and reports or appoint a specialized entity, notifying the fund company's management of its observations. The board is requested to instruct the management services company to address them in line with inspection results. If the fund's board and management fail to comply, the fund bears the Authority's publication costs for its notices and requested amendments.

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Article (183) Repeated (7) Index Fund Certificate Coverage:

Subject to the ratio between the fund's capital and size as stipulated in Article (162), all or part of the certificates offered for subscription may be covered by the qualified fund entity alone or jointly with others through public subscription.

(Article Two)

The following new articles are added to the Executive Regulations of the Capital Market Law referenced herein, numbered (35 Repeated), (36 Repeated), and (167 Paragraph One - Item "5"):

Article (35 Repeated):

The following bonds may be issued to finance projects and activities related to the following areas:

Sustainable Development:

• 1- Sustainability Bonds: A type of bond dedicated exclusively to financing sustainable development goals, with proceeds used for selected projects and social development initiatives.
• 2- Sustainability-Linked Bonds: A type of bond structurally linked to achieving sustainable development goals, not requiring financing specific sustainable projects but funding the overall performance of an issuer with clear sustainability targets. They can be issued as any type of sustainability bond, such as those linked to a key performance index or sustainable development goals.
• 3- Social Bonds: A type of bond whose proceeds finance or refinance new or existing social initiatives.

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Article (35 Repeated):

• 4- Women Empowerment Bonds: A type of social bond structurally linked to achieving women's empowerment across all fields and promoting gender equality. At least (50%) of the bond's board members must be women, or one or more women must own at least (61%) of its capital. Alternatively, it may promote gender equality in the workforce or work environment, or develop and offer at least one-third of its products/services to improve women's quality of life.
• 5- Climate Bonds: A type of bond dedicated to financing and refinancing environmentally friendly projects aimed at reducing carbon emissions and mitigating climate change and global warming. Issuance requires a report from an accredited environmental auditor confirming compliance with climate bond standards.
• 6- Environmental (Transition) Bonds: A type of bond financing environmentally polluting activities seeking to transition and develop operations for lower environmental impact. Issued by non-qualified entities engaged in environmental activities (e.g., industrial, aviation/shipping, chemical, oil/gas, pollution reduction projects, greenhouse gas emission reduction, air pollution mitigation, water waste reduction, and energy-benefiting projects). The issuer must present a clear plan with specific objectives to justify issuance even if targets are not fully met.

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Article (35 Repeated):

Without prejudice to provisions and procedures governing bond issuance in the Law and these Regulations, bonds referenced in Article (35 Repeated) may be issued according to the following rules and procedures:

First - Bond Issuance Procedures:

• 1- Obtaining Authority approval.
• 2- Selecting an authorized investment bank and auditors.
• 3- Obtaining a credit rating under Article (34) of these Regulations.
• 4- Issuing a report from an independent auditor registered with the Authority regarding target project alignment with issuance purposes, along with a report from a consulting firm.
• 5- Registering bonds and determining their yield.

Second - Authorized Bond Issuers:

Subject to Article (6) of the Law, the following entities may issue bonds referenced in Article (35 Repeated), adhering to categories specified for each bond type:

• 1- Egyptian companies, entities, and authorities.
• 2- International and regional companies/institutions if bonds finance projects within Egypt.

Third - Target Projects Financed by Bond Proceeds:

Without prejudice to Item (6) of Article (35 Repeated), bonds finance projects and activities related to sustainable development, including:

• 1- Women empowerment across all fields and gender equality.

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Article (35 Repeated):

• 2- Basic infrastructure at affordable costs (e.g., clean drinking water, sanitation, transport, energy).
• 3- Access to basic services (including education, vocational training, healthcare, financing, and financial services).
• 4- Affordable housing provision.
• 5- Job creation and unemployment-reduction programs.
• 6- Food security and sustainable food systems.
• 7- Pandemic response and health aspects.
• 8- Improved water resource sustainability, marine life conservation, coastal preservation, maritime tourism, fisheries/aquatic activities, and offshore raw material extraction.

Fourth - Issuer Obligations:

The issuer must use bond proceeds to finance or refinance projects/activities related to sustainable development goals, following clear procedures indicating environmental and/or social benefits. Periodic reports must be submitted to the Authority throughout the issuance term, accompanied by an auditor's report. For sustainability-linked bonds of all types, proceeds must finance the issuer's operational activities and financial obligations, provided at least one key performance indicator clearly reflects procedures/policies achieving sustainable development goals. The issuer must submit periodic reports to the Authority throughout the term, accompanied by an auditor's report, with disclosure of these indicators in annual reports to bondholders.

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Fifth - Project Evaluation and Selection Procedures:

The issuer shall:

• 1- Evaluate and select sustainability projects, preparing a report from an Authority-approved consulting firm per bond type.
• 2- Provide a brief description of target projects, specifying the percentage of proceeds allocated to finance/refinance each project, accompanied by a report from an expert or approved consulting firm confirming consultation adoption and alignment with sustainable development goals.
• 3- Periodically disclose to bondholders environmental/social sustainability targets, evaluation/selection procedures, and risk management for target projects. An approved monitoring institution must verify procedure compliance.
• 4- Submit an annual report clearly detailing key environmental, social, and governance (ESG) information applicable to the bonds. The report discloses the issuer's comprehensive disclosure strategy, its extent and timing, and implementation timeframe. If the issuer fails to meet targets within the specified timeframe per the auditor's decision, it must compensate bondholders by increasing the yield on issued bonds as stated in the subscription circular or information memorandum.

Sixth - Bond Proceeds Management:

The issuer must open a sub-account to manage bond issuance proceeds, earmarked for investment in target projects.

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Seventh - Reports:

The bond issuer prepares the following reports:

• 1- Annual reports throughout the bond term until maturity, verifying implementation of financing steps/procedures for target projects from proceeds, accompanied by an auditor's report.
• 2- Annual reports on issuance proceeds usage and allocation to sustainability projects throughout the bond term, with disclosure of any project amendments, plus a brief description of designated projects and buildings and their expected impact.
• 3- Disclosure report on the issuer's comprehensive sustainability strategy.
• 4- Annual reports prepared by experts and approved consulting firms to evaluate target project alignment with international sustainability standards. Experts/firms are selected from the Authority's approved table. For climate change/global warming projects, an annual report from an accredited external auditor is required to verify bond compliance with climate/environmental bond standards/practices.
  For social, women empowerment, and sustainability-linked bonds, an accredited auditor verifies compliance with specified terms/conditions/regulations, preparing reports at issuance and throughout the bond term.

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Eighth - Obligations of Experts and Independent Consulting Firms:

Experts and independent consulting firms prepare periodic reports to evaluate/select target projects for environmental sustainability goals, determining alignment with international standards/principles per bond type. Experts/firms are selected from the register of independent environmental auditors - sustainability auditors.

Ninth - Obligations of the Auditor:

The auditor is responsible for:

• Preparing annual reports under Egyptian auditing standards.
• Assessing compliance of the bond issuer (Article 35 Repeated) with using proceeds for purposes/activities in the subscription circular or information memorandum, specifically:
  • 1- Implementation of financing steps/procedures for target projects from proceeds throughout the issuance term until maturity.
  • 2- Issuer compliance with disclosure report information regarding key ESG information related to bonds, alignment with issuer strategy and implementation timeframe.
  • 3- Key performance indicators (KPIs) verification, confirming alignment with the issuer's general strategy regarding sustainability-linked bonds of all types.

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Article (35 Repeated):

Transition bonds may be issued in fields related to projects referenced in Article (35 Repeated), provided local entities align with sustainable development principles, or meet criteria related to sustainable development goals, or financial rights are linked to projects targeting sustainable development. Sukuk may also be issued in these fields to finance beneficiary entities for sustainable development projects. The rules and procedures stipulated in Article (35 Repeated) apply to the issuance of transition bonds and sukuk referenced in the preceding paragraph.

Article (167) Paragraph One - Item "5":

Re-preparation of the fund's financial statements according to Egyptian accounting standards and submission to the fund company's board, subject to review by auditors registered with the Authority.

(Article Three)

Paragraph Three of Article (157) and Item (5) of Paragraph One of Article (183 Repeated) of the referenced Executive Regulations of the Capital Market Law are repealed.

(Article Four)

This Resolution is published in the Official Gazette and takes effect from the day following its publication, except for Article (167) Paragraph One - Item "5", which takes effect from the following financial year.

Date of Effectiveness
Issued by Cabinet Resolution on 2 Rabi' al-Awwal, 1444 AH (Corresponding to September 28, 2022 AD)

Prime Minister
Dr. Mostafa Kamal Madbouly