ALKHABEER IPO FUND. Terms and Conditions

Transcription

1 ALKHABEER IPO FUND Terms and Conditions 17 April 2016

2 ALKHABEER CAPITAL CMA license CR Head Office Al Madina Road P.O. Box Jeddah Kingdom of Saudi Arabia Tel Fax Riyadh Branch Al-Jumaiah Commercial Center 3rd Floor P.O. Box 5000, Unit 4, Riyadh Kingdom of Saudi Arabia Tel Fax

3 This Fund is in compliance with the Investment Funds Regulations issued by the Board of Commissioners of the Capital Market Authority of the Kingdom of Saudi Arabia. Fund Manager ALKHABEER CAPITAL Fund Name ALKHABEER IPO FUND (Shari a Compliant Open-Ended Investment Fund) TERMS AND CONDITIONS Shari a Certificate Issued by the Shari a Advisor: AKC Investors should carefully read the Terms and Conditions before taking any investment decision regarding the Fund. If an investor has any doubt about the suitability of the Fund, he or she should contact an independent financial advisor. A person making an investment in the Fund does so entirely at his or her own risk and responsibility. Recipient s Name PPM Serial No

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5 IMPORTANT NOTICE 2 3 Potential investors should read this Terms and Conditions before making any investment decision regarding the Fund. The Fund will employ a high risk investment strategy and details regarding the associated risks can be found in the Principal Risks of Investing in the Investment Fund section of this Terms and Conditions. This is a Shari a compliant open-ended investment fund established in accordance with the Investment Funds Regulations issued by the Board of Commissioners of the Capital Market Authority of the Kingdom of Saudi Arabia. This Terms and Conditions contains full, true and plain disclosure of all material facts relevant to the Fund. Alkhabeer IPO FUND Potential investors should not consider the opinions and views of the Fund Manager as recommendations to invest in the Fund. Prospective investors should appreciate that as a result of changing law or practice as to how the Fund or the Unitholders will be regarded by tax authorities in different jurisdictions, they should consult their professional advisors about the possible tax consequences of subscribing, holding, redeeming, transferring, or selling of Units under the laws of their countries of citizenship, residence, ordinary residence, or domicile. The Unitholder shall be responsible for payment of tax, if any, on their investment in the Fund or on any capital appreciation derived therefrom. The payment of Zakat shall be the sole responsibility of the Unitholders. Any material change to this Terms and Conditions must be approved by the CMA and the Shari a Advisor and all Unitholders will be notified about the change. This Terms and Conditions was issued on 17 April 2016.

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7 FUND DIRECTORY 4 5 Fund Name ALKHABEER IPO FUND Alkhabeer IPO FUND Fund Manager, Administrator and Custodian Alkhabeer Capital P.O. Box Jeddah Kingdom of Saudi Arabia Tel: Fax: CR No: CMA License No: Shari a Advisor Shariyah Review Bureau W.L.L. P.O. Box Manama Kingdom of Bahrain Auditor KPMG Al Fozan & Al Sadhan P.O. Box Jeddah Kingdom of Saudi Arabia Legal Advisor The Law Office of Mohammad Al-Ammar (In affiliation with King & Spalding LLP) Kingdom Centre, 20th Floor King Fahad Road P.O. Box Riyadh Kingdom of Saudi Arabia

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9 TABLE OF CONTENTS 6 7 SUMMARY OF THE FUND 9 GLOSSARY 11 TERMS AND CONDITIONS OF THE FUND FUND NAME ADDRESS OF THE FUND MANAGER S HEAD OFFICE DATE OF COMMENCEMENT REGULATOR DATE OF THE TERMS AND CONDITIONS (ISSUED OR LAST UPDATED) PARTICIPATION CURRENCY OF THE FUND INVESTMENT FUND OBJECTIVE PRINCIPAL INVESTMENT STRATEGIES PRINCIPAL RISKS OF INVESTING IN THE INVESTMENT FUND FEES AND EXPENSES DEALING COSTS WINDING UP AND APPOINTMENT OF A LIQUIDATOR FUND BOARD FUND MANAGER CUSTODIAN AND ADMINISTRATOR AUDITOR ANNUAL AUDITED FINANCIAL STATEMENTS CHARACTERISTICS OF THE UNITS OTHER INFORMATION SHARI A BASED INVESTMENT FUNDS INTERNATIONAL INVESTMENT FUNDS INITIAL OFFER INVESTMENT BY THE FUND MANAGER IN THE FUND SUBSCRIPTION AND REDEMPTION PROCEDURES VALUATION OF THE ASSETS OF THE FUND DILUTION (EARLY REDEMPTION FEE) FUND TERMINATION REPORTING TO UNITHOLDERS CONFLICTS OF INTEREST VOTING RIGHTS POLICIES CHANGES TO THE TERMS AND CONDITIONS COMPLAINTS PROCEDURE GOVERNING LAW COMPLIANCE WITH REGULATIONS SUMMARY FINANCIAL DISCLOSURE SHARI A CRITERIA 33 Alkhabeer IPO FUND CONFIRMATION 35

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11 SUMMARY OF THE FUND 8 9 FUND NAME FUND MANAGER FUND TYPE FUND CURRENCY Alkhabeer IPO Fund Alkhabeer Capital Open-Ended Fund Saudi Arabian Riyal (SAR) Alkhabeer IPO FUND RISK LEVEL High Risk BENCHMARK Alkhabeer IPO Index FUND OBJECTIVE MINIMUM INITIAL SUBSCRIPTION MINIMUM ADDITIONAL SUBSCRIPTION To achieve capital gains primarily through investments in IPOs and publicly listed companies in Saudi Arabia, during their first three years of listing. The Fund may also invest a portion of its assets in IPOs and stocks listed in GCC capital markets for a period not exceeding three years. SAR 10,000 SAR 10,000 MINIMUM REDEMPTION SAR 10,000 MINIMUM INVESTMENT BALANCE HELD DAYS OF ACCEPTING SUBSCRIPTION / REDEMPTION REQUESTS CUT-OFF TIME FOR RECEIVING SUBSCRIPTION / REDEMPTION REQUESTS VALUATION DAY / DEALING DAY ANNOUNCEMENT DAY PAYMENT OF REDEMPTION PROCEEDS SUBSCRIPTION FEE MANAGEMENT FEE CUSTODIAN AND ADMINISTRATION FEE SAR 10,000 On any Business Day Before twelve noon on the Business Day preceding the Valuation Day Every Sunday and Tuesday (which are Business Days) of every week The day on which the Net Asset Value (NAV) per Unit is published on Tadawul s website, on the Business Day which follows every Valuation Day Before close of business on the third Business Day after the Valuation Day on which the redemption Unit price is determined Up to 1% of the subscription amount or additional subscription amount 1.75% per annum of the NAV 0.3% per annum of the NAV REDEMPTION FEE Early Redemption Fees of 1% of the redemption amount if any Units are redeemed within 30 Calendar days from the date on which they were issued AGGREGATE COMPENSATION TO INDEPENDENT FUND BOARD MEMBERS SHARI A ADVISOR FEE SAR 26,000 per annum SAR 15,000 per annum

12 Summary of The Fund AUDIT FEE REGULATOR FEE FEES FOR PUBLICATION OF FUND INFORMATION ON TADAWUL WEBSITE DEALING COSTS DATE OF COMMENCEMENT SAR 28,000 per annum SAR 7,500 per annum SAR 5,000 per annum The Fund shall bear all dealing expenses related to the purchase and sale of securities 1 November 2015 DATE OF INVESTMENT 3 December 2015 UNIT PRICE AT DATE OF INVESTMENT SAR 1,000

13 GLOSSARY BUSINESS DAY CALENDAR CMA Day on which banks and capital markets are open for business in the Kingdom of Saudi Arabia Gregorian Calendar The Capital Market Authority of the Kingdom of Saudi Arabia Alkhabeer IPO FUND CUSTODIAN AND ADMINISTRATOR Alkhabeer Capital MONEY MARKET INSTRUMENTS High liquidity low risk Murabahas and Trade Finance contracts DATE OF COMMENCEMENT 1 November 2015 DATE OF INVESTMENT 3 December 2015 FUND Alkhabeer IPO Fund FUND BOARD The board of directors of the Fund as indicated in the Terms and Conditions FUND MANAGER Alkhabeer Capital GCC Member countries of the Co-operation Council for the Arab states of the Gulf, namely: Saudi Arabia, Bahrain, Kuwait, Oman, Qatar and the United Arab Emirates. INITIAL OFFERING PERIOD The initial period for subscription in the Fund, which will commence on the Date of Commencement and end at 12 noon on the Business Day immediately prior to the Date of Investment IPO Initial Public Offering NAV Net asset value of the Fund NAV PER UNIT NAV divided by the number of Units TRADE FINANCE TRANSACTIONS Funds investing in low risk trade commodities with counterparties of high creditworthiness MURABAHA TRANSACTIONS Based on purchase and acquisition of commodities and subsequently selling them to another party on installment basis with a mutually agreed profit rate added to the sale price REDEMPTION FORM The notice, in the form specified by the Fund Manager, by a Unitholder to redeem Units REGULATIONS The Investment Funds Regulations issued by the Board of Commissioners of the CMA pursuant to its Resolution No dated 3/12/1427H (as may be amended or reenacted from time to time)

14 Glossary SAR Saudi Arabian Riyal SHARI A ADVISOR Shariyah Review Bureau W.L.L. SHARI A CRITERIA The Shari a guidelines for investment by the Fund, set forth in Clause 37 of the Terms and Conditions SUBSCRIPTION FORM The agreement issued by the Fund Manager, in the form specified by the Fund Manager, containing an irrevocable and unconditional offer to subscribe for Units TERMS AND CONDITIONS The terms and conditions of the Fund included in this Terms and Conditions UNIT A unit in the Fund, entitling its holder to a proportional interest in the assets of the Fund UNITHOLDER Holder of Units and Subscriber in the Fund in accordance with the Terms and Conditions VALUATION DAY Every Sunday and Tuesday (which are Business Days) of every week, when NAV is calculated ANNOUNCEMENT DAY The day on which the Net Asset Value (NAV) per Unit is published on Tadawul s website, on the Business Day which follows every Valuation Day

15 TERMS AND CONDITIONS OF THE FUND FUND NAME Alkhabeer IPO Fund. 2. ADDRESS OF THE FUND MANAGER S HEAD OFFICE Alkhabeer Capital Madinah Road P.O. Box Jeddah Kingdom of Saudi Arabia Alkhabeer IPO FUND 3. DATE OF COMMENCEMENT The Fund will begin to accept subscriptions on 1 November 2015 and will end on 1 December The date on which the Fund starts its operations shall be 3 December REGULATOR The Fund Manager is licensed and regulated by the CMA, under license no dated 04/07/2007G, to engage in (i) dealing as principal and as underwriter, (ii) arranging, (iii) advising, (iv) managing and (v) custody. 5. DATE OF THE TERMS AND CONDITIONS (ISSUED OR LAST UPDATED) 17 April PARTICIPATION The minimum initial subscription amount (exclusive of subscription fees) is ten thousand Saudi Arabian Riyals (SAR 10,000). Additional Units may be subscribed for in increments of ten thousand Saudi Arabian Riyals (SAR 10,000). The minimum redemption amount is ten thousand Saudi Arabian Riyals (SAR 10,000). If a Unitholder s investment in the Fund falls below ten thousand Saudi Arabian Riyals (SAR 10,000), the Fund Manager shall have the discretion to redeem all the remaining Units and return the value of those Units to the Unitholder. 7. CURRENCY OF THE FUND The currency of the Fund is Saudi Arabian Riyal. In case of subscription in another currency, the prevailing exchange rate will apply. The investor will bear any currency exchange fluctuation without any liability on the Fund Manager.

16 Terms and Conditions of the Fund 8. INVESTMENT FUND OBJECTIVE Alkhabeer IPO Fund is an open ended public fund, and its objective is to achieve capital gains primarily through investments in IPOs and publicly listed companies in Saudi Arabia, during their first three years of listing. The Fund may also invest a portion of its assets in IPOs and stocks listed in the GCC capital markets for a period not exceeding three years. The Fund may also invest in murabaha transactions, Shari a compliant money market instruments and funds, IPO funds, Shari a compliant capital protected products and trade finance funds. The Fund does not intend to concentrate its investments in a particular industry or sector. The Fund will not distribute dividends to its Unitholders and all realized profits will be reinvested by the Fund and thereby reflected in the Fund s Unit price (i.e. NAV per Unit). All investments of the Fund shall comply with the Shari a Criteria (as stated in Clause 37). 9. PRINCIPAL INVESTMENT STRATEGIES (A) TYPES OF SECURITIES IN WHICH THE FUND WILL INVEST The Fund s primary focus shall be investment in Shari a compliant IPOs of Saudi and GCC companies. The Fund shall also invest in the publicly listed Saudi and GCC companies, during the first three years of their listing, up to a maximum of 90% of the Fund s NAV. In addition, the Fund Manager may invest up to 70% of the Fund s liquidity in Murabaha transactions, Murabaha funds, other money market instruments and Shari a compliant trade finance funds, provided that the investment with any single counterparty does not exceed 25% of the Fund s NAV. The Fund may also invest up to 15% of its NAV in a group of similar IPO funds subject to investment limits as stipulated in Article 39 of the Investment Funds Regulations. (B) INVESTMENT CONCENTRATION The following table shows the Fund s investment concentration policy in relation to securities: ALLOCATION RANGE (% OF FUND ASSETS) ASSET CLASS ALLOCATION RANGE (% OF FUND ASSETS) IPOS AND PUBLICLY LISTED COMPANIES* 25% 90% MONEY MARKET INSTRUMENTS AND DIRECT MURABAHAS** 0% 70% MONEY MARKET INSTRUMENTS AND INDIRECT MURABAHAS*** 0% 70% IPO FUNDS**** 0% 15% CASH 0% 75% * Public companies listed in the stock market for less than three years. ** Includes: Shari a compliant money market instruments and Murabaha transactions denominated in Saudi Riyal and issued by Saudi Banks regulated by the Saudi Arabian Monetary Agency (SAMA); or by overseas banks regulated by approved regulatory authorities with a credit rating not lower than BBB by Standard & Poor s, Baa3 by Moody s or BBB by Fitch. In the absence of a credit rating, money market instrument issuers shall be selected based on the credit rating acceptable to the Fund Manager, as assigned by the Fund Manager internally, based on financial position, cash flows from operations and management team qualifications. *** Includes: Money market, Murahaba and trade finance funds licensed by the CMA or by other authorities when investing in other Shari a compliant overseas public funds, taking into consideration the fund s return on investment and historical performance as compared to other offered funds. **** Includes: CMA licensed Shari a compliant public IPO funds.

17 14 15 The following table shows the Fund s investment geographical exposure policy: GEOGRAPHIC ALLOCATION RANGE (% OF FUND ASSETS) COUNTRY/REGION ALLOCATION RANGE (% OF FUND ASSETS) SAUDI ARABIA 0% 100% Alkhabeer IPO FUND GCC STATES EXCLUDING SAUDI ARABIA 0% 25% MENA 0% 70% The Fund does not intend to concentrate its investments in a particular industry or sector. (C) TYPES OF TRANSACTIONS, TECHNIQUES AND INSTRUMENTS THAT MAY BE USED FOR THE PURPOSE OF MANAGING THE FUND S PORTFOLIO OF INVESTMENTS 1. Investment in IPOs: Prior to entering into any IPO transaction in Saudi Arabia or in GCC capital markets, the Fund Manager will carry out comprehensive due diligence and may consider factors including, but not limited to, the following: - Strength and reputation of the company - Estimated amount of oversubscription - Recent IPO performance in comparable sectors - Track record of management team - Competitive positioning of the business - Utilization of IPO proceeds - Future business/sector outlook and market expectations The Fund Manager will constantly monitor positions of its portfolio investments. In case of IPO investments, the investment decision will depend on factors such as the size of the allocations received and opening price on listing. The Fund Manager may hold IPO allocations received up to a period of three years or exit positions on realization of the short-term price target. 2. Investment in listed equity securities during the first three years of their listing: The Fund manager will aim to invest in fundamentally strong companies at reasonable valuations listed in Saudi and GCC capital markets. Prior to investing in any listed equity security, the Fund Manager may consider factors including, but not limited to, the following: - Fundamental value relative to the stock price - Business competitiveness - Share relative valuation - Technical indicators - Seasonality of the business - Management team competitiveness 3. Murabahas and short term investments: The Fund manager will select investments in Murabahas and short term instruments at its absolute discretion, taking into consideration several factors including the return on investment, historical performance and fees.

18 Terms and Conditions of the Fund (D) TYPES OF SECURITIES WHICH MAY NOT BE INCLUDED IN THE PORTFOLIO The Fund will not invest in any securities other than the types of securities mentioned in Section (a) of Clause 9 of this Terms and Conditions. (E) INVESTMENT RESTRICTIONS The Fund will not invest in securities that do not comply with the Shari a Criteria. The Fund is also committed to the investment restrictions contained in Article 39 of the Regulations, as amended. (F) BORROWING POWERS The Fund Manager may arrange Shari a compliant leverage up to 10% of the Fund s NAV at the date of borrowing, subject to prior approval from the Fund Board and the Shari a Advisor. Leverage exceeding 10% of the Fund s NAV may be obtained to meet redemption requests from the Fund Manager or any of its affiliates. (G) SECURITIES MARKETS IN WHICH THE FUND IS GOING TO INVEST: The Fund will invest its assets primarily in Saudi Arabian and GCC IPOs and Saudi Arabian and GCC publicly listed companies during the first three years of their listing. (H) INVESTMENTS IN OTHER FUNDS The Fund shall have the right to invest up to a maximum of 70% of its NAV in other investment funds. Additionally, as per the investment restrictions contained in Article 39 of the Regulations, the Fund does not intend to invest more than 10% of its NAV in any single investment fund. The Fund may also invest its assets in other investment funds managed by the Fund Manager. (I) DERIVATIVES The Fund Manager shall not invest in derivative instruments. 10. PRINCIPAL RISKS OF INVESTING IN THE INVESTMENT FUND An investment in the Fund is not a deposit with any local bank sponsoring, selling or otherwise affiliated with the Fund, or a deposit with an investment bank specialized in finance and investment. The Unitholder bears the responsibility of loss of money as a result of investing in the Fund. The price of the Units may go down. Upon redemption an investor may not receive the full amount invested. All prospective investors are required to make their own determination or in consultation with their own financial and legal advisors, and evaluate all risks involved. The following list of risks does not purport to be a summary of all the risks associated with an investment in the Fund but rather comprises only certain risks to which the Fund may be subject to. 1. GENERAL RISKS AUTHENTICATION OF SECURITIES RISKS In instances involving the physical deliveries of unlisted and listed securities, there may be difficulties in establishing the authenticity of such securities. Accordingly, although the Custodian (or its appropriate sub-custodians) on behalf of the Fund will endeavor to evaluate the authenticity of any such instrument, no responsibility can be taken for verifying the validity or authenticity of any such instrument. As such, this may adversely affect the Fund s assets and performance, which would negatively reflect on the price of the Unit.

19 16 17 CONCENTRATION OF INVESTMENTS RISK The Fund mostly invests in IPOs of Saudi joint stock companies and newly listed companies on the Saudi stock market, during their first three years of listing. As a result, the number of companies that the Fund may invest in is limited and therefore certain companies may represent a significant portion of the Fund s investments. This may lead to a potential risk of limited diversification of the Fund s assets. As such, this may adversely affect the Fund s assets and performance, which would negatively reflect on the price of the Unit. Alkhabeer IPO FUND CONFLICT OF INTEREST RISK As a result of the wide variety of activities undertaken by the Fund Manager, its affiliates and members of the Fund Board, conflicts of interest between the various parties may arise. As such, this may adversely affect the Fund s assets and performance, which would negatively reflect on the price of the Unit. The Fund Board will endeavor to resolve any such conflict of interest the Fund Manager identifies as per the Regulations. CREDIT RISKS AND COUNTERPARTY RISKS The Fund may invest cash in short-term Shari a compliant money-market instruments including murabahas with various counterparties. The Credit risk is the risk that the counterparty to the Murabaha agreement fails to deliver its financial obligations on time, in full, or at all. This may adversely affect the Unit price, the Fund s performance and Unitholders. The Fund Manager shall attempt to mitigate this risk by transacting only with highly rated reputable financial institutions with sound financial backing. CURRENCY RISK The Fund may invest in securities denominated in SAR and other foreign currencies. Hence, with respect to foreign currency investments, the Fund s returns will bear the risk of adverse movements in the exchange rate against the SAR. This may adversely affect the Unit price, the Fund s performance and Unitholders. CUSTODY RISK In pursuit of its investment objectives, the Fund Manager may open accounts with third party institutions and instruct the Custodian to place cash and securities of the Fund in such accounts. In accordance with market practice, assets may be transferred from the effective and exclusive control of the Custodian and placed in trading accounts accessible by third party brokers. The Custodian will not be responsible for any cash, securities and/or other assets, held outside its control. In particular, the Custodian will not be responsible for any cash, securities and/or other assets placed with subcustodians, brokers or other financial institutions. As such, this may adversely affect the Fund s assets and performance, which would negatively reflect on the price of the Unit. GENERAL NATURE OF INVESTMENT AND MARKET CONDITIONS RISKS The value of an investment in the Fund can change because the assets in which the Fund will invest may be affected by global or specific market conditions and economic factors, such conditions and factors are not limited to market sentiment, inflation, unemployment and taxation, as well as government regulations and policies. Therefore, the Fund may not be able to realize positive returns on its investments. This may adversely affect the Unit price, the Fund s performance and Unitholders.

20 Terms and Conditions of the Fund LIQUIDITY RISKS Market volatility and instability could make some assets more difficult to liquidate due to limited dealing. Any difficulty in selling the assets could lead to loss or lower returns for the Fund and that may negatively affect the Unit price. In addition, the Fund Manager shall bid for IPO allocations. The time period from making the bid until the final allocation IPO allocation is received is expected to be one month. During this period, the Fund is committed to an amount equivalent to the value of the bid. As a result, the Fund may have limited liquidity and may be unable to process redemption requests during periods when IPO bids have been made. This may adversely affect the Unit price, the Fund s performance and Unitholders. NO PARTICIPATION IN MANAGEMENT RISKS Investors have no power to participate in the management of the Fund or to influence any of the Fund s investment decisions. All management responsibilities will be entrusted to the Fund Manager. In the event the Fund Manager makes investment decisions which adversely affect the Fund s investments, the Fund s asset value and the Unit price may be reduced. TAXATION RISKS Prospective investors should appreciate that as a result of changing law or practice as to how the Fund or the Unitholders will be regarded by tax authorities in different jurisdictions, they should consult their professional advisors about the possible tax consequences of subscribing, holding, redeeming, transferring, or selling of Units under the laws of their countries of citizenship, residence, ordinary residence, or domicile. The Unitholders shall be responsible for payment of tax, if any, on their investments in the Fund or on any capital appreciation of those investments. This may adversely affect the Unit price, the Fund s performance and Unitholders. VALUATION RISK Forecasting the financial results of publicly listed companies involves assumptions. The Fund Manager will endeavor to make investments based on the fundamental and technical analysis. However, the stock prices may move contrary to the forecasted direction, impacting the returns of the Fund. In addition, there may be a delay in the valuation/liquidation of non-saudi securities due to some non-saudi markets being closed on Business Days. This may adversely affect the Unit price, the Fund s performance and Unitholders. 2. RISKS SPECIFIC TO INVESTING IN AN IPO COMPANY VALUATION RISK The IPO offer price is generally based on several factors, including the history of and prospects for the company s business, the industry in which it competes, assessment of the company s management, and financial results. Forecasting a prospective company s financials and determining its fair market value is among the many techniques to be employed by the Fund Manager in its decision making process while bidding for an IPO. These forecasts are prone to uncertainty, and the results may differ from predictions. Bidding for IPOs at overvalued prices may result in losses. ISSUER COMPANY RISK Companies issuing shares through an IPO may have a limited track record of operations. The IPO offering prospectus may contain incorrect data and material information may be omitted or misrepresented in the prospectus, leading to unfavorable investment decisions. In addition, some issuers may be operating in relatively new industries or lines of business and may be regarded as developmental stage companies without revenues or operating income.

21 18 19 REDUCED IPO ALLOCATION RISK The Fund will be competing with other institutional and retail investors for IPO allocations. There is no assurance that the Fund will be successful in receiving the requested share allocations and achieving its investment objectives, which may adversely affect the Fund's investment returns and negatively reflect on the Unit price. Alkhabeer IPO FUND RISKS OF INVESTING IN SMALL-CAP COMPANIES Share prices of the small market capitalization companies may increase or decrease more sharply compared to the shares of large capital companies. Therefore, investing in the small-caps may be associated with more risk than others which may negatively affect the Fund and the price of its Units. RISKS OF MARKETABILITY OF NEWLY ISSUED SHARES Prior to listing, there is no public market for the issued shares and there can be no assurance that an active trading market for the shares will develop or be sustained after listing. The absence of an actively traded market for the newly issued shares may negatively impact the securities liquidity and price. RISKS OF EQUITY MARKET VOLATILITY The Fund may encounter price volatility which may lead to fluctuation of the value of investments managed by the Fund. Moreover, the Fund s investments may be affected by certain changes in economic or political conditions, which may adversely affect the value of investments managed by the Fund and returns thereon. RISKS OF INVESTING IN INVESTMENT FUNDS These are all the risks mentioned in this Clause and that may affect other investment funds in which the Fund invests. This may lead to a decrease in the value of the Fund s Units. 11. FEES AND EXPENSES The Fund Manager, Custodian and Administrator are entitled to a fee based on the Shari a principle of Investment Agent (Wakala-Bil-Istismar), comprising the following: SUBSCRIPTION FEE A subscription fee of up to 1% of the subscription amount or additional subscription amount will be payable, as a non-recurring payment, to the Fund Manager. This fee will be exclusive of the subscription amount or additional subscription amount and will be paid at the time of subscription for Units. MANAGEMENT FEE The Fund Manager will be entitled to a management fee equal to 1.75% per annum of the NAV, calculated and accrued on each Valuation Day. The fee will be payable out of the Fund s assets within ten Business Days of each Gregorian month end. CUSTODIAN AND ADMINISTRATION FEE The Administrator and Custodian will be entitled to a fee equal to 0.3% per annum of the NAV, calculated and accrued on each Valuation Day. The fee will be payable out of the Fund s assets within ten Business Days of each Calendar month end.

22 Terms and Conditions of the Fund REDEMPTION FEE A redemption fee of 1% of the redemption amount will be payable by each investor to the Fund if any Units are redeemed within 30 Calendar days from the date on which they were issued. OTHER EXPENSES The Fund will be responsible for all expenses, fees, other costs and liabilities incurred in managing and operating the Fund. Such expenses include, but are not limited to, Shari a advisory, audit, remuneration of the independent Fund Board members, regulator fees, Tadawul website publication fees, benchmark fees and legal advisory fees. Such fees are not expected to exceed 1.5% of NAV per annum. For details on the fees and expenses, please refer to Clause 36: Summary Financial Disclosure. 12. DEALING COSTS The Fund shall bear all dealing expenses (brokerage) in securities in accordance with the prevailing market prices, to be paid from the Fund s assets upon executing the transactions. The value of the dealing expenses will be disclosed in Clause 36: Summary Financial Disclosure at the end of each year. 13. WINDING UP AND APPOINTMENT OF A LIQUIDATOR Subject to the conditions detailed in Article 22 of the Regulations, the CMA has the right to appoint a replacement fund manager or liquidator for the Fund or take any other appropriate action. If the Fund is terminated in accordance with Clause 28 herein, the Fund Manager shall appoint a liquidator for the Fund. 14. FUND BOARD Subject to CMA approval, the Fund Board has been appointed for an initial term of 3 years from the Date of Commencement by the Fund Manager. The Fund Board consists of three members, including two independent members (Mr. Farouq Bin Fouad Ghulam and Mr. Adil Bin Abdullah Samoum). Mr. Ahmed Bin Saud Ghouth has been appointed as the Chairman of the Fund Board. Set out below are brief biographical details of each of the members and their Fund Board Capacity: 1. MR. AHMED BIN SAUD GHOUTH (CHAIRMAN) Ahmed is the Deputy CEO at Alkhabeer Capital Since He possesses more than 15 years of experience in Corporate Banking, Islamic Finance, Asset Management and Private Equity. During his previous engagement with the National Commercial Bank NCB, he gained extensive expertise in debt portfolio management and Islamic facility structuring. His responsibility to oversee Asset Management at Alkhabeer has exposed him further to a variety of real estate development and income producing funds as well as equity funds. He holds a bachelor s degree in accounting from King Fahad University of Petroleum and Minerals, Dhahran, Saudi Arabia. 2. MR. FAROUQ BIN FOUAD GHULAM (INDEPENDENT MEMBER) Farouq is the Vice President and Chairman s Advisor of Rusd International Holding Group. He is engaged in the management of the group s domestic and international companies. In addition, he is actively involved in making risk and investment decisions related to the group. He has more than 20 years of comprehensive experience in legal, Islamic finance, investment funds and financial structuring.

23 20 21 He was an Executive Partner and Head of Asset Management at Alkhabeer Capital. Prior to that, he was Head of Product Development and Operational Risk at NCB where he was responsible for launching and structuring funds. He holds an LLM degree, specializing in International Business and Trade Transactions from Washington College of Law, USA and a law degree from King Abdul Aziz University, Jeddah, KSA. Alkhabeer IPO FUND 3. MR. ADIL BIN ABDULLAH SAMOUM (INDEPENDENT MEMBER) Adil is the Chief Executive Officer at Samoum Financial Consultancy Office. He serves as Chairman of Zamalat Institute, President of Al-Aamal Training Institute and President of Dar Al-Tawteen National. He held several key financial positions at Saudi Arabian Airlines over a period of 23 years including Chairman of the privatization financial team and technical services CFO. He holds a bachelor s degree in Accounting from King Abdulaziz University, Jeddah, Saudi Arabia. The following Fund Board members are also Board members on other Alkhabeer public funds: NAME FUND CAPACITY Mr. Ahmed Bin Saud Ghouth Alkhabeer GCC Equity Fund Alkhabeer Liquidity Fund HASSEEN Alkhabeer Saudi Equity Fund Director (Employee of the Fund Manager) Alkhabeer GCC Equity Fund Mr. Farouq Bin Fouad Ghulam Alkhabeer Liquidity Fund HASSEEN Independent Member Alkhabeer Saudi Equity Fund The responsibilities of the Fund Board include but are not limited to the following: 1. Approving all material contracts, resolutions, policies and major reports relating to the Fund. 2. Overseeing and where appropriate, ratifying any conflicts of interest the Fund Manager has identified as per Article 19 of the Regulations. 3. Meeting at least twice annually with the Fund Manager s compliance officer, money laundering/ terrorist financing reporting officer and/or compliance committee, and overseeing the Fund Manager s compliance with all applicable laws and regulations. 4. Approving any recommendations made by a liquidator appointed according to Article 22 of the Regulations. 5. Acting with integrity and for the benefit of the Fund and the Unitholders at all times. Subject to the CMA approval, the Fund Manager has the discretion to amend the composition of the Fund Board. Independent Fund members are remunerated for their services from the Fund based on a three-year renewable agreement. Please see Clause 36: Summary Financial Disclosure for the Fund Board s compensation.

24 Terms and Conditions of the Fund 15. FUND MANAGER 1. Alkhabeer Capital is the Fund Manager. Address of the Fund Manager is as follows: Alkhabeer Capital Madinah Road P.O. Box Jeddah Kingdom of Saudi Arabia 2. Business activities and other interests: No business activities or interests of the Fund Manager or the Fund Board members are likely to conflict with their responsibilities to, or performance in, the Fund. If such activities or interests exist, they shall be disclosed. 3. Conflict of interest: No material conflict of interest on the part of the Fund Manager is likely to affect its performance in relation to its obligations to the Fund. 4. Delegation of a third party to perform any tasks related to the Fund: The Fund Manager has not delegated any key Fund investment management functions to a third party. The Fund Manager will be responsible for the overall Fund management and custody activities, as well as maintaining financial records and reports, cash transfers and communication with investors. 5. Authorized Person: Alkhabeer Capital is licensed by the Board of Commissioners of the Capital Market Authority of the Kingdom of Saudi Arabia, under license no dated G, to engage in (i) dealing as principal and as underwriter, (ii) arranging, (iii) advising, (iv) managing and (v) custody. 16. CUSTODIAN AND ADMINISTRATOR Alkhabeer Capital has been appointed as the Custodian and Administrator of the Fund, and it has the right to appoint a sub-custodian in markets where the Fund invests. Address of the Custodian and Administrator: Alkhabeer Capital Madinah Road P.O. Box Jeddah Kingdom of Saudi Arabia AUDITOR KPMG Al Fozan & Al Sadhan has been appointed as the Auditor for the Fund. Address of the Auditor: KPMG Al Fozan & Al Sadhan P.O. Box Jeddah Kingdom of Saudi Arabia

25 ANNUAL AUDITED FINANCIAL STATEMENTS The Fund Manager will prepare unaudited financial statements at least semi-annually and provide access to the Unitholders to view these financial statements within forty-five Calendar days of the end of the relevant period. In addition, audited financial statements for the Fund as of the end of each Gregorian year will be prepared within ninety Calendar days of the year end. Financial statements shall be prepared and examined in accordance with SOCPA accounting standards. Audited financial statements as of the end of each fiscal year will be made available at the Fund Manager s headquarters and shall be mailed to Unitholders upon their written request, free of charge. The audited financial statements will also be mailed to the CMA. The first annual financial statements will be prepared for the period beginning on the Date of Investment and ending on 31 December Alkhabeer IPO FUND 19. CHARACTERISTICS OF THE UNITS The Fund Manager may issue an unlimited number of Units. Each Unit will be of the same class, have the same rights and privileges and have no voting rights. Each Unit represents an equal common interest in the Fund and will be issued to the nearest four decimal places. Following a subscription, Unitholders will receive a written confirmation containing full details of the subscription. The Fund Manager will not issue certificates to evidence ownership of Units. The Fund Manager will maintain a register of all Unitholders. 20. OTHER INFORMATION Neither the Fund Manager nor any affiliate of the Fund Manager, nor any member of the Fund Board, nor any of the Fund Manager s employees or agents shall be liable to any Unitholder for any loss, damages, costs, expenses or other liabilities suffered by the Unitholder or the Fund s assets, unless such outcome is caused by such persons willful misconduct, bad faith or negligence. The Administrator will be responsible for the general administration of the Fund, which includes amongst other things, valuation of assets, calculation of fees, and monitoring and reporting of the un-invested cash of the Fund. In determining the NAV, the Administrator may accept, use and rely on prices received from third parties including stock exchanges, electronic processing services, brokers, market makers or intermediaries and the Fund Manager, without verification, and shall not be liable to the Fund, any Unitholder or any other person in doing so. 21. SHARI A BASED INVESTMENT FUNDS Shariyah Review Bureau W.L.L. has been appointed as the Shari a Advisor to the Fund. The Shari a Advisor is a specialized company that provides Shari a review and auditing services. It is an associated member of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and a member of the General Council for Islamic Banks and Financial Institutions. The Shari a Advisor is licensed by the Central Bank of Bahrain to carry out ancillary services. Address of the Shari a Advisor: Shariyah Review Bureau W.L.L. P.O. Box Al Manama Kingdom of Bahrain

26 Terms and Conditions of the Fund The Shari a Advisor has assigned the following two Shari a scholars to review and ensure the Shari a compliance of the Fund:- 1. SHEIKH DR. SALAH FAHAD AL-SHALHOOB: Sheikh Dr. Salah is an Assistant Professor at the Islamic and Arabic Studies College of Applied Studies at King Fahd University of Petroleum and Minerals, Dhahran, Kingdom of Saudi Arabia, and a Manager at Al-Tamauz Research Center for Islamic Banking and Finance. He is also a member of several committees including the investment and finance committee at the International Islamic Foundation for Economics and Finance, under Islamic World League. He holds a Ph.D. in Installment Sales in Islamic Law (Theory and Practice) from the University of Edinburgh, United Kingdom. 2. SHEIKH PROF DR. MUHAMMAD AKRAM LALDIN: Prof. Dr. Mohamad is currently the Executive Director of the International Shari ah Research Academy for Islamic Finance (ISRA). He is a member of several Shari a advisory boards financial institutions such as Bank Negara, Malaysia and HSBC, Singapore. He holds a B.A. (with honors) in Fiqh and Shari ah Legislation, from the University of Jordan, Amman, Jordan. He also holds a Ph.D. in Usool Al-Fiqh, from the University of Edinburgh, Scotland, United Kingdom. The eligibility of the Fund investments is based on the Shari a Criteria set forth in Clause 37 as recommended by the Shari a Advisor. The Shari a Advisor will conduct annual reviews so as to ensure that the Fund s operations and investments are in compliance with the Shari a Criteria. Please see Clause 37: Shari a Criteria for details. The Shari a Advisor will be remunerated from the Fund s assets for its services. Please see Clause 36: Summary Financial Disclosure for details. 22. INTERNATIONAL INVESTMENT FUNDS Not applicable. 23. INITIAL OFFER The Initial Offering Period for subscription in the Fund will commence on the Date of Commencement and end at 12 noon on the Business Day immediately prior to the Date of Investment. The minimum amount to initiate the Fund is five million Saudi Arabian Riyals (SAR 5,000,000). In case the Fund Manager is unable to raise this amount during the Initial Offering Period, the Fund Manager has the discretion to extend the offering period or cancel the offering. In the event of cancellation of the offering, the subscription amounts shall be returned to investors, plus returns, if any. During the Initial Offering Period, it is expected that the subscription amounts may be invested for the benefit of the investor in short term and low risk Shari a compliant money market instruments, including temporary direct investment in Murabaha transactions, in addition to public investment funds offered by the Fund Manager or any of its afiliates, or by other fund managers, provided that such investments are in the best interest of the Unitholders and in line with the Fund s investment strategy and defined selection criteria. These investments will mature five Business Days prior to the Date of Investment and the net accrued income will be added to the subscription amount for each Unitholder and invested in Alkhabeer IPO Fund.

27 INVESTMENT BY THE FUND MANAGER IN THE FUND The Fund Manager and any of its affiliates and funds managed by the Fund Manager may invest in the Fund from time to time at their discretion. Any such investment shall be treated as a subscription by the Fund Manager for Units in the Fund and consequently, the provisions contained in the Terms and Conditions shall also apply to such investments and these investments, if any, will be disclosed at the end of each fiscal year. Alkhabeer IPO FUND 25. SUBSCRIPTION AND REDEMPTION PROCEDURES 1. DEALING DAYS ON WHICH UNITS MAY BE SOLD AND REDEEMED: Fund Units are sold and redeemed on Sundays and Tuesdays of every week, excluding holidays. If the dealing day falls on a holiday, Fund Units shall be sold and redeemed on the next dealing day, provided it is a business day. 2. DEADLINE FOR SUBMISSION OF INSTRUCTIONS RELATED TO THE PURCHASE AND REDEMPTION OF UNITS: The deadline for submission of subscription requests is twelve noon on the Business Day immediately prior to the relevant Valuation Day, provided that a completed Subscription Form with cleared subscription monies along with the relevant Subscription Fee, is received by the Fund Manager before the aforementioned deadline. If the Subscription Form with cleared subscription monies along with the relevant Subscription Fee are received after the deadline, it will be treated as a request for subscription on the following Valuation Day. The deadline for submission of redemption requests is twelve noon on the Business Day immediately prior to the relevant Valuation Day, provided that a completed Redemption Form is received by the Fund Manager before the aforementioned deadline. If the Redemption Form is received after the deadline, it will be treated as a request for redemption on the following Valuation Day. 3. PERIOD OF TIME BETWEEN THE SUBSCRIPTION AND INVESTMENT IN THE FUND: If the Subscription Form with cleared subscription monies along with the relevant Subscription Fee are received before twelve noon on the Business Day immediately prior to the relevant Valuation Day, then the subscription amount will be invested on that Valuation Day. If the Subscription Form with cleared subscription monies along with the relevant Subscription Fee are received after the deadline mentioned above, the subscription amount will be invested on the following Valuation Day. Subscribers must note that on non-business Days or between Valuation Days, new subscription monies shall remain un-invested until the upcoming Valuation Day. During the Initial Offering Period, subscription monies may be invested in low risk short term public money market funds or Murabaha transactions, as described in Clause 23 above, prior to the relevant Valuation Day. 4. THE PROCEDURES FOR SUBMITTING INSTRUCTIONS TO PURCHASE OR REDEEM UNITS: - THE PROCEDURES FOR SUBMITTING INSTRUCTIONS TO PURCHASE UNITS: Each investor intending to purchase Units in the Fund must complete and sign the Subscription Form, deposit the required investment amount in the Fund s account and provide all identification documents specified in the Subscription Form.

28 Terms and Conditions of the Fund - THE PROCEDURES FOR SUBMITTING INSTRUCTIONS TO REDEEM UNITS: Units may be redeemed by the Unitholder on any Dealing Day by submitting a completed and signed Redemption Form to the Fund Manager by twelve noon on the Business Day immediately prior to the relevant Valuation Day. Redemptions must be for a minimum value of ten thousand Saudi Arabian Riyals (SAR 10,000). If a Unitholder s investment in the Fund reaches below ten thousand Saudi Arabian Riyals (SAR 10,000), the Fund Manager shall have the discretion to redeem all the Unitholder s remaining Units and return the balance of the investment to the Unitholder. Redemption requests that are not met on any one Valuation Day shall have priority over new redemption requests on the following Valuation Day. Upon completion of a subscription or redemption, the investor will receive a confirmation containing full details of the transaction. 5. MAXIMUM PERIOD OF TIME BETWEEN THE REDEMPTION AND PAYMENT OF THE REDEMPTION PROCEEDS TO THE UNITHOLDERS: Redemption proceeds will be remitted by wire transfer to the bank account designated by the Unitholder on the Redemption Form before close of business on the third business days following the relevant Valuation Day. 6. THE MINIMUM NUMBER OR VALUE OF UNITS TO BE HELD, SOLD OR REDEEMED BY A UNITHOLDER: - MINIMUM SUBSCRIPTION / REDEMPTION: The minimum initial subscription is ten thousand Saudi Arabian Riyals (SAR 10,000) The minimum additional subscription is ten thousand Saudi Arabian Riyals (SAR 10,000) The minimum redemption is ten thousand Saudi Arabian Riyals (SAR 10,000) - MINIMUM OUTSTANDING INVESTMENT AMOUNT: The minimum outstanding investment amount is ten thousand Saudi Arabian Riyals (SAR 10,000). If a Unitholder s investment in the Fund reaches below ten thousand Saudi Arabian Riyals (SAR 10,000), the Fund Manager shall have the discretion to redeem all the Unitholder s remaining Units and return the balance of the investment to the Unitholder. 7. AUTHORITY OF THE FUND MANAGER AND CIRCUMSTANCES IN WHICH HE MAY SUSPEND, DEFER OR REFUSE A SUBSCRIPTION OR REDEMPTION: Each investor must provide all identification documents specified in the Subscription Form. The Fund Manager is responsible for implementing anti-money laundering, counter-terrorist financing and know your customer procedures and reserves the absolute right to require further verification of the identity of the subscriber, or that of the person or entity on whose behalf the subscriber is subscribing for Units, and/or the source of funds. Pending the provision of verification or evidence required by the Fund Manager, the allotment of Units may be postponed. The Fund Manager at its sole discretion reserves the right to reject any subscription for Units in line with Article 51 of the Regulations, in which event the subscription proceeds will be returned without any income earned thereon, or charges deducted therefrom, within three Business Days of the date of such rejection. The Fund Manager reserves the right to share relevant information of the investors, for the purposes of satisfying compliance, anti-money laundering and counter-terrorist financing procedures, with the entities with which the fund transacts business, including the Custodian and Administrator, and the CMA and other applicable regulatory authorities.

29 26 27 In the event any Unitholder s investment results in a violation of the applicable regulations or laws, the Fund Manager reserves the right to completely or partially redeem the Unitholder s holdings in the Fund. The Unitholder will be notified in writing of such redemption. The Fund Manager will not be in any way liable to any Unitholder by reason of such mandatory redemption. Based on anticipated redemption requests, the Fund Manager will endeavor to maintain sufficient liquidity levels. However, if on any Valuation Day, total redemptions exceed 10% of the NAV, the Fund Manager may scale down all such redemption requests on a pro rata basis, provided that it shall notify the affected Unitholders. The time period from making the bid until the final IPO allocation is received is expected to be one month. As a result of the commitment arising from the bid submitted during that period, the Fund may have limited liquidity and may be unable to process all redemption requests during that period. In such an event, the Fund Manager shall notify affected Unitholders. Alkhabeer IPO FUND 8. EXCLUSION FROM THE PROVISION OF ARTICLE (50) PARAGRAPH (A) OF THE REGULATIONS: The Fund Manager may receive a subscription by any subscriber in a value exceeding 10% of the Fund s NAV, as an exclusion from the provision of Article (50) Paragraph (a) of the Regulations. 26. VALUATION OF THE ASSETS OF THE FUND 1. CALCULATION METHOD OF THE VALUE OF THE FUND S ASSETS The NAV per Unit on each Valuation Day will be calculated to the nearest four decimal places by the Administrator, using the following formula: total assets of the Fund less the total liabilities, divided by the total number of outstanding Units. Murabaha contracts will be valued at cost plus the accrued profit as of the Valuation Day. Units in other Shari a compliant money market funds will be valued based on the latest available NAV of the respective fund. Listed securities will be valued based on the closing market prices of the underlying securities on the Valuation Day. Unlisted securities shall be valued based on their contractual values. Subscription and redemption prices shall be based on the NAV of the applicable Valuation Day. 2. FREQUENCY AND TIME OF VALUATIONS The Fund s NAV shall be calculated as of the market close on every Valuation Day. The Unit price will be announced on the Business Day following the Valuation Day. If the Valuation Day happens not to be a Business Day, then the valuation of the Fund s assets will take place on the next Valuation Day. 3. CALCULATION METHOD OF THE SUBSCRIPTION AND REDEMPTION PRICES Subscription and redemption Unit prices shall be based on the NAV per Unit of the applicable Valuation Day on which the Units have been subscribed for or redeemed. The NAV per Unit is calculated by the Administrator, using the following formula: total assets of the Fund less the total liabilities, divided by the total number of outstanding Units. Total liabilities includes the fees and expenses specified in Clause 11 of this Terms and Conditions. The Unit price on the Date of Investment shall be one thousand Saudi Arabian Riyals (SAR 1,000). 4. PLACE OF PUBLICATIONS OF THE UNIT PRICE AND FREQUENCY OF PUBLICATIONS The NAV per Unit will be published on the Tadawul website and the Fund Manager s website ( on the Business Day following each Valuation Day.

30 Terms and Conditions of the Fund 27. DILUTION (EARLY REDEMPTION FEE) 1. An early redemption fee of 1% of the redemption amount will be payable by each investor to the Fund. 2. This fee is applicable if any Units are redeemed within 30 Calendar days from the date on which they were issued. Units redeemed after 30 Calendar days from the date on which they were issued are not charged this redemption fee. There are no circumstances where investors may be exempted from such Redemption Fees. 3. The redemption Units shall be assessed on a First-In First-Out (FIFO) basis. 28. FUND TERMINATION The Fund Manager reserves the right to terminate the Fund by giving at least sixty Calendar days written notice to the Unitholders, subject to obtaining prior approval from the Fund Board and the CMA. 29. REPORTING TO UNITHOLDERS Within thirty Calendar days from the end of each calendar quarter, Unitholders will be sent a statement of account by or mail, showing the NAV, NAV per Unit, the number and value of the Units held and a record of transactions. Audited and unaudited annual and semi-annual financial statements shall be made available at the Fund Manager s headquarters and mailed to Unitholders upon their written request, free of charge. 30. CONFLICTS OF INTEREST In case of any conflicts of interest, the Fund Manager will at all times have due regard to the duties it owes to the Fund and will treat each investor equally and will not give any preference to any individual investor. If the Fund Manager has a material conflict of interest with the Fund, it will make a full disclosure to the Fund Board. The Fund Board will endeavor to equitably resolve any conflicts between the Fund and other investment funds involving the Fund Manager or any of its affiliates. Related party transactions, if any, shall be conducted on an arm s-length basis. The procedure for dealing with conflicts of interest will be made available to Unitholders upon a written request to the Fund Manager, free of charge. 31. VOTING RIGHTS POLICIES Unitholders do not have any voting rights with regards to the investments of the Fund. The Fund Manager s compliance officer and/or compliance committee and the Fund Board shall agree on the general policies in relation to voting rights available to the Fund as a result of certain holdings. The Fund Manager shall have the right but not the obligation to exercise voting rights associated with the investments held by the Fund. The Fund Manager must consult with the compliance officer and/or compliance committee before exercising voting rights associated with the investments held by the Fund.

31 CHANGES TO THE TERMS AND CONDITIONS The Fund Manager may, at any time and at its sole discretion, amend the Terms and Conditions. In case of any material changes to the Terms and Conditions, the Fund Manager shall seek prior approval from the Fund Board, the Shari a Advisor and CMA. The Fund Manager will notify the Unitholders by mail of the proposed changes and furnish them with a copy of the amended text. Material amendments will become effective sixty Calendar days from the date of any such notice. Alkhabeer IPO FUND 33. COMPLAINTS PROCEDURE Complaints should be directed to the following address: Head of Compliance Alkhabeer Capital Madinah Road P.O. Box Jeddah Kingdom of Saudi Arabia The procedure for the handling of complaints will be made available to Unitholders upon a written request to the Fund Manager. If a settlement is not possible, the subscriber may lodge a complaint with CMA s Investors Complaints Department. The subscriber may also lodge a complaint with the Committee for the Resolution of Securities Disputes (CRSD) after 90 Calendar days from the date of filing a complaint with the CMA, unless the CMA notifies the complainant that the complaint may be filed with the CRSD earlier. 34. GOVERNING LAW (a) The Terms and Conditions of the Fund shall be subject to the applicable laws of the Kingdom of Saudi Arabia, and relevant regulations issued by the Board of Commissioners of the Capital Market Authority, as amended. (b) Any disputes which may arise in relation to the Fund s Terms and Conditions shall be referred by the parties to the CRSD in the Kingdom of Saudi Arabia. 35. COMPLIANCE WITH REGULATIONS This Terms and Conditions and other related documents contain accurate and complete disclosures of all material facts relevant to the Fund and comply with the Regulations.

32 Terms and Conditions of the Fund 36. SUMMARY FINANCIAL DISCLOSURE 1. Fund fees and expenses: FEES AND EXPENSES SUBSCRIPTION FEE MANAGEMENT FEE EARLY REDEMPTION FEE CUSTODIAN AND ADMINISTRATION FEE AGGREGATE COMPENSATION TO INDEPENDENT FUND BOARD MEMBERS SHARI A ADVISOR FEE AUDIT FEE EXPENSES INCURRED BY THE FUND FOR BORROWING MONEY EXPENSES OF UNIT REGISTRY OR OTHER ADMINISTRATIVE SERVICES FEES PAYABLE FOR THE PROVISION OF SERVICES IN RELATION TO THE REGISTER OF UNITHOLDERS DEALING COSTS REGULATORY FEES FEES FOR PUBLICATION OF FUND INFORMATION ON TADAWUL WEBSITE AMOUNT AND TERMS OF PAYMENT Up to 1% of the subscription amount or additional subscription amount payable as a non-recurring payment to the Fund Manager at the time of subscription or additional subscription 1.75% per annum of the NAV, to be divided by 365 days and calculated on a daily basis as accrued expenses. They shall be deducted out of the Fund s assets and paid within ten Business Days of each Gregorian month end 1% of the redemption amount if any Units are redeemed within 30 Calendar days from the date on which they were issued. Redemption fees will be retained by the Fund 0.3% per annum of the NAV, to be divided by 365 days and calculated on a daily basis as accrued expenses. They shall be deducted out of the Fund s assets and paid within ten Business Days of each Gregorian month end SAR 26,000 per annum, including annual compensation of SR 5,000 payable to each independent member, to be divided by 365 days and calculated on a daily basis as accrued expenses. They shall be deducted out of Fund assets and paid at the end of the fiscal year. In addition, an attendance fee of SR 4,000 for each meeting, shall accrue to each independent member after each meeting, to be paid within 30 business days after the date of the meeting SAR 15,000 per annum, to be divided by 365 days and calculated on a daily basis as accrued expenses. They shall be deducted out of Fund assets and paid semi-annually SAR 28,000 per annum, to be divided by 365 days and calculated on a daily basis as accrued expenses. They shall be deducted out of Fund assets and paid semi-annually Any borrowing costs will be borne by the Fund based on the prevailing financing cost rate at the time of borrowing 0% 0% The Fund shall bear all dealing expenses related to the purchase and sale of its investments, including, but not limited to, brokerage and any other regulatory or government fees or charges, levied from time to time. They shall be calculated as a percentage of the trading value as agreed with brokers, and paid upon execution of the trading transaction SAR 7,500 per annum, to be divided by 365 days and calculated on a daily basis as accrued expenses. They shall be deducted out of Fund assets and paid at the end of the fiscal year SAR 5,000 per annum, to be divided by 365 days and calculated on a daily basis as accrued expenses. They shall be deducted out of Fund assets and paid at the end of the fiscal year

33 Method of calculating fees and expenses based on hypothetical numbers: Example for calculating the fees and expenses described above, assuming that the Fund s total assets at inception is SAR 10 million and the annual investment performance is 15%: TOTAL ASSETS OF THE FUND AT INCEPTION SAR 10,000,000 HYPOTHETICAL ANNUAL INVESTMENT PERFORMANCE 15% Alkhabeer IPO FUND TOTAL ASSETS OF THE FUND AFTER ANNUAL INVESTMENT PERFORMANCE SAR 11,500,000 ON AN ANNUAL BASIS (SAR) FEES AND EXPENSES AGGREGATE COMPENSATION TO INDEPENDENT FUND BOARD MEMBERS SAR 26,000 26, SHARI A ADVISOR FEE SAR 15,000 15, AUDIT FEE SAR 28,000 28, REGULATORY FEES SAR 7,500 7, FEES FOR PUBLICATION OF FUND INFORMATION ON TADAWUL WEBSITE NET ASSET VALUE OF THE FUND BEFORE DEDUCTING MANAGEMENT, CUSTODIAN AND ADMINISTRATION FEES (PER ANNUM) SAR 5,000 5, ,418, CUSTODIAN AND ADMINISTRATION FEE 0.30% 34, MANAGEMENT FEE 1.75% 199, NET ASSET VALUE OF THE FUND AFTER DEDUCTING ALL FEES AND EXPENSES (PER ANNUM) 11,184, ANNUAL EXPENSE RATE 2.82% 3. Calculation, collection and scheduling of payment of fees (as shown in the table above Fund fees and expenses ), were clearly disclosed. Unitholders and investors may contact the Fund Manager for further clarification. 4. Alkhabeer IPO Fund is not a fund of funds, and as such is not subject to the provisions of sub-paragraph (4) of paragraph (36) of Appendix (1) of the Regulations. 5. Independent Fund Board members compensation for the coming year is projected to be twenty six thousand Saudi Arabian Riyals (SAR 26,000), taking into account that Board members employed by the Fund Manager will not receive any compensation. 6. Alkhabeer IPO Fund is not a foreign fund, and therefore is not subject to foreign fund financial arrangements. 7. Early redemption fee is 1% of the redemption amount.

34 Terms and Conditions of the Fund 8. Actual Fees and Expenses for 2015 AMOUNT (SAR) % OF AVERAGE NAV* SUBSCRIPTION FEE % MANAGEMENT FEE 9, % EARLY REDEMPTION FEE % CUSTODIAN / ADMINISTRATION FEE 1, % AGGREGATE COMPENSATION TO INDEPENDENT FUND BOARD MEMBERS** % SHARI A ADVISOR FEE** 1, % AUDIT FEE** 12, % EXPENSES INCURRED BY THE FUND FOR BORROWING MONEY EXPENSES OF UNIT REGISTRY OR OTHER ADMINISTRATIVE SERVICES FEES PAYABLE FOR THE PROVISION OF SERVICES IN RELATION TO THE REGISTER OF UNITHOLDERS % % % DEALING COSTS 1, % REGULATORY FEES % FEES FOR PUBLICATION OF FUND INFORMATION ON TADAWUL WEBSITE** % OTHER EXPENSES % *Percentage of the Average Net Asset Value of the Fund for year 2015 ** Expenses borne by the Fund Manager. This is so that the Total Expense Ratio becomes in line with the market average (2.0% - 3.0%) 9. Historical Performance CUMULATIVE NET FUND RETURNS 31 DECEMBER 2015 ONE YEAR* THREE YEARS FIVE YEARS TEN YEARS SINCE INCEPTION* NET FUND RETURNS -3.26% % BENCHMARK RETURNS % % *The period from 02 December 2015 till 31 December 2015 ANNUAL NET FUND RETURNS 2015 NET FUND RETURNS -3.26% BENCHMARK RETURNS %

35 % -2.00% -4.00% -6.00% -8.00% % % % -3.26% % Alkhabeer IPO FUND Note: 2015 Net Fund Returns (%) Benchmark Returns (%) 1- Neither the past performance of the Fund nor the past performance of the Benchmark is an indication of how the Fund will perform in the future. 2- There is no guarantee for Unitholders that the Fund s absolute performance (or its performance relative to the Benchmark) will repeat or match past performance, as the Fund's investment returns are susceptible to volatility. 10. Investment by the Fund Manager in the Fund (As of 31 December 2015) AMOUNT (SAR) % OF NAV INVESTMENT BY THE FUND MANAGER 4,836, % 37. SHARI A CRITERIA The business of the Fund shall at all times be conducted in compliance with Shari a, as determined by the Shari a Advisor. The Shari a Advisor has approved the following criteria: SHARI A CRITERIA 1. The Fund shall not invest in companies involved in business activities related to the following: a. conventional banking or insurance or any other interest-related activity; b. the manufacturing or distribution of alcohol; c. the manufacturing or distribution of arms; d. gaming or gambling; e. the production, packaging, processing, or any other activity related to non-halal food and beverage products; f. entertainment (including cinema, music, pornography, and the production or sale or distribution of such entertainment, such as television channels and radio stations); and g. any other activities not permissible under Shari a, as determined by the Shari a Advisor.

36 2. Companies that engage in businesses in compliance with Shari a shall be subject to additional balance sheet analysis. Investments shall not be made in companies with the following financial ratios: a. total debt (interest bearing) divided by the average market capitalization that is equal to or greater than 33%; b. accounts receivables divided by the average market capitalization that is equal to or greater than 49%; c. the sum of cash plus interest-bearing securities divided by the average market capitalization that is equal to or greater than 33%; and d. non-permissible income equal to or greater than 5% of revenue. 3. Additional Shari a guidelines for equities investments: a. When screening new IPO s or those that have no trading history, financial screening for Shari a compliance will be performed using the Total Asset Methodology. b. Whereas companies that have been listed in the stock exchange for at least one quarter and have a trading history with market cap, then the financial screening for Shari a compliance will be performed using trailing average Market Cap Methodology. The Shari a Advisor will periodically review these Shari a Criteria and determine the Shari a investment universe. IMPURE INCOME Returns derived from the Fund s investments may comprise an amount that is attributable, for Shari a purposes, to impure income earned or received. In these cases, the amount of any return, which is so attributed, will be calculated in accordance with the Shari a principles approved by the Shari a Advisor. For purification purposes, the impure income will be donated to a charity approved by the Shari a Advisor and the Fund Board.

37 CONFIRMATION I/We have received, read and understood this Terms and Conditions and confirm my/our acceptance of the Terms and Conditions by signing a copy of this document. Date: Alkhabeer IPO FUND INDIVIDUAL INVESTOR INSTITUTIONAL / COMPANY INVESTOR NAME OF INDIVIDUAL NAME OF COMPANY/INSTITUTION SIGNATURE SIGNATURE NAME TITLE STAMP

38

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