Itqan Fund for Murabahat & Sukuk. (An open-ended and Shariah-compliant Fund.)

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1 Itqan Fund for Murabahat & Sukuk (An open-ended and Shariah-compliant Fund.) AUDITORS SHARIAH ADVISOR

2 CONTENTS Seq Item Page 1 IMPORTANT NOTICE 2 2 FUND DIRECTORY 4 3 FUND SUMMARY 5 4 TERMINOLOGY 7 5 TERMS AND CONDITIONS The Fund Name The Fund Manager s Address Designated Date for Subscription Acceptance Fund Regulator Fund Terms and Conditions Issuing Date Subscription in the Fund Fund Currency Fund Investment Objectives Primary Investment Strategy Primary Investment Risks Fees and Expenses Dealing Costs Fund s Board of Directors Fund Manager The Custodian The External Auditor The Annual Audited Financial Statements Characteristics of Fund Units Other Information Compliance with Shariah Principles Initial Offering Investment by the Fund Manager in the Fund Subscription and Redemption Procedures Valuation of Fund s Assets Early Redemption Fees Fund s Winding-up and the Appointment of a Liquidator Fund Termination Reporting to Unit-holders Conflict of Interests Changes to the Terms and Conditions Complaint Submission Procedures Governing Law Compliance with Investment Fund Regulations Summary of the Financial Disclosure 22 6 APPENDIX 25

3 Itqan Murabahat & Sukuk Fund (An open-ended and Shariah-compliant Fund.) The Fund is governed and it adheres to the Investment Funds Regulations issued by the Capital Market Authority Council and it is managed by Itqan Capital. Terms and Conditions The prospective investors are advised to read the Fund s terms and conditions before taking any decision regarding investing in the Fund. The Capital Market Authority takes no responsibility regarding these terms and conditions and it gives no warranty for the accuracy of the statements and information contained herein. The Capital Market Authority, expressly discharge itself from any liability, whatsoever, for any loss or damage resulting from reliance on this prospectus or any part thereof. Original issue date of these terms and conditions is 02/07/2008. Last amended date of these terms and conditions is 19/07/2016.

4 2 1. IMPORTANT NOTICE ITQAN CAPITAL The prospective investors are advised to read the Fund s terms and conditions before taking any decision regarding investing in the Fund. Any investor interested to subscribe in this Fund must examine the accuracy of the information contained in the Fund s terms and conditions and should seek investment or legal advice from an independent party. The purchase of units of such type of funds is not same as placing cash on deposit with a local bank and the Fund Manager has no obligation to redeem the Fund s units at their offering value. The value of the Fund s units and their proceeds can increase or decrease. The Fund is categorized among low-medium risk funds. Anyhow, prospective investors must read details of risk factors outlined in article 10 of Fund s terms and conditions. The Fund is a Shariah-compliant, open-ended investment fund. The Fund Manager acknowledges and confirms that the Fund is governed by the Investment Funds Regulations issued by the Capital Market Authority. Fund legal entity: This investment fund is established by execution of a contract between Fund Manager and unit-holders. Such a contract shall be in form of terms and conditions as indicated in the format specified in the Investment Funds Regulations issued by the Capital Market Authority. Date of Capital Market Authority Approval to establish the Fund: CMA Letter # 560/RH dated 08/07/2008. Fund Manager s opinions contained in these terms and conditions do not represent recommendation from the Fund Manager to purchase Fund s units. Investing in the Fund is not the same as placing deposits with any local bank sponsoring, selling securities or otherwise affiliated with the investment fund. Unit-holders shall bear responsibility for any financial loss resulting from investing in this Fund.

5 3 ITQAN MURABAHAT & SUKUK FUND Date of last amendment made on these Terms and Conditions and Date of related CMA Approval: 19/07/2016 as per CMA Letter # AK/20/07/2016.

6 4 2. FUND DIRECTORY ITQAN CAPITAL Fund Manager and Custodian Fund External Auditor Shariah Advisor Itqan Capital Elite Al Shatea, Al Malik Road PO Box 8021, Jeddah Kingdom of Saudi Arabia Telephone: Toll Free: Fax: Website: Osama A. Elkhereiji & Partner PO Box 15046, Jeddah Kingdom of Saudi Arabia Telephone: Fax: Shariyah Review Bureau Yateem Centre, 2nd Floor, Phase II, Manama, P.O. BOX: 21051, Manama. Kingdom of Bahrain. Telephone: Fax:

7 5 ITQAN MURABAHAT & SUKUK FUND FUND SUMMARY 3

8 6 3. FUND SUMMARY ITQAN CAPITAL The Fund s Currency Risk Degree Benchmark Investment Strategy Minimum Amount for Subscription Minimum Amount for Addition Minimum Amount for Redemption Designated Days for the Acceptance of Subscription Applications Designated Time for Receiving Subscription/Redemption Applications Valuation Day Designated date for Payment of redemptions proceeds Subscription Fees Management Fees Other Fees Saudi Riyal (SAR). Low to Medium. SAIBID, three months Saudi Riyal Inter-Bank Rate of Return. In order to achieve its investment objectives, the Fund will primarily invest in the Saudi market in a diversified portfolio of high-quality Shariah compliant short to medium term investment instruments including: Commodity-based Murabaha Transactions. Various kinds of Sukuk. Units of similar investment funds that invest mainly in Murabaha transactions and/or Sukuk. Number of units which value is equivalent to SAR 50,000 for individuals and SAR 250,000 for institutions. Number of units which value is equivalent to SAR 10,000 for individuals and SAR 100,000 for institutions. SAR 10,000 for individuals and SAR 100,000 for institutions. Any official business day on which banks are officially open for business in the Kingdom of Saudi Arabia. For subscription: 12:00 noon of any official business day on which banks are officially open for business in the Kingdom of Saudi Arabia, to take the next NAV unit price. For redemption: 12:00 noon Thursday and Monday of each Calendar week, to take the next NAV unit price. Sunday and Tuesday of each calendar week. Within two business days from the respective Valuation Day. Not Applicable. 0.25%, of Fund net asset value per annum which shall be accrued and accumulated on a pro rata basis on each valuation day and shall be paid at each quarter as arrears. Saudi Riyals 10,000 per each financial year for the External Auditor. Launching date 19/07/2008 till 03/08/2008. Saudi Riyals 24,000 per each financial year for the remuneration of the two independent members of Fund s board of directors. Maximum 0.15% of Fund net asset value per annum representing administration and Fund unit registration services. Maximum 0.10% of Fund net asset value per annum representing other expenses (including legal fees etc.). 1.5% of Fund redeemed amounts being early redemption fees (during the initial offering period) and which shall be added to the benefit of the Fund not the Fund Manager. Unit Price during the Initial Offering Period SAR 10

9 7 ITQAN MURABAHAT & SUKUK FUND TERMINOLOGY 4

10 8 4. TERMINOLOGY ITQAN CAPITAL Kingdom Capital Market Law CMA or Regulator or Authority Licensed Persons Regulations Anti-Money Laundering Legislation Fund Manager and Custodian Independent Board Member Person Licensed Person Investment Funds Regulations Shariah Advisor The Board of Directors Units Investor, Client, Unit-holder Open-ended Investment Fund The Kingdom of Saudi Arabia. Capital Market Law issued by the Royal Decree No. M/30 dated 02/06/1424H (as amended from time to time). Capital Market Authority, including where the context permits any committee, sub-committee, employee or agent to whom any function of the Authority may be delegated. The regulations of the same name made by the Authority pursuant to Capital Market Law. Anti-money laundering legislation issued by the Royal Decree number M/39 and dated 25/06/1424H Itqan Capital, a closed joint-stock Saudi company incorporated under the laws of Kingdom of Saudi Arabia as an investment company licensed pursuant to the Licensed Persons Regulations issued by the Capital Market Authority, (the CMA ), under license number pursuant to CMA Council s resolution number dated 21/03/1428H (corresponding to 9/4/2007) and commercial registration number dated 16/02/1428H and which headquarter is located at Elite Al Shatea, Al Malik Road, PO Box 8021, Jeddah 21482, Kingdom of Saudi Arabia, with telephone number: , toll free telephone: , and fax number: A fund board member who is not an employee or board member of the Fund Manager or any of its affiliates or Sub-Fund Manager or Fund Custodian and has no genuine business or contractual relation with the Fund Manager or Sub-Fund Manager or Fund. Any natural or legal person recognized as such under the laws of the Kingdom of Saudi Arabia. A person licensed to practise securities business pursuant to the regulations issued by CMA. Investment Funds Regulations issued by CMA Council. Fund Manager s Shariah Advisor. Itqan Murabahat and Sukuk Fund Board of Directors. Unit-holders share in the Fund which is divided into units, including part thereof. Each unit shall be treated as common ownership share in Fund s assets. Synonyms terms and each term is used interchangeably to refer to a person investing in and holding units in the Fund. An investment fund with variable capital, the units of which increase with the issue of new units and decrease with redemption by unit-holders of some or all of their units. Unit-holders are entitled to redeem their units at their net asset value on designated redemption days.

11 9 ITQAN MURABAHAT & SUKUK FUND Compliance Officer The Fund Underlying Investments Itqan Capital s Compliance Officer appointed pursuant to the Licensed Persons Regulations. Itqan Murabahat and Sukuk Fund. The Shariah compliant securities and/or instruments in which the assets of the Fund are invested. Initial Offering Period From 19/07/2008 to 03/08/2008. Commencement Date 04/08/2008. Participation / Subscription Application Net Asset Value (NAV) Terms and Conditions Calendar Business Day Quarter Participation / Subscription Day Valuation Day Calendar Day Appendix Investment Instruments Murabaha The Participation/Subscription Agreement and any documents required as per Capital Market Authority (the CMA ), Anti-Money Laundering and Terrorism Combating Legislation and any accompanying information executed by an Investor for the purpose of subscribing to the units in the Fund, subject to the approval of the Fund Manager. The monetary value of a single unit based on the total value of the underlying assets of the Fund minus its liabilities divided by the number of the outstanding units. The terms and conditions of Itqan Murabahat and Sukuk Fund as may be amended from time to time by the Fund Manager and as delivered to the Unit-holders accordingly. Gregorian year. An official working day on which the Fund Manager is open for business in the Kingdom of Saudi Arabia. A period of three months ending on the last day of March, June, September and December. The first quarter shall be that one which in the Commencement Day falls. Any business day in which the Fund Manager is officially operating. Sunday and Tuesday of each Calendar week. When any such day is not a Business Day, the Valuation Day is the immediate succeeding Valuation Day. Any day whether business day or not. The pages annexed to these terms and conditions and which are considered integral part thereof. Sukuk issued in the GCC countries or International Sukuk funds or units of investment funds denominated in GCC currency or US Dollar or investment in commodity transactions denominated by such currencies. This is a contract, whereby a financier buys goods, machinery, equipment etc. required by a customer and bought from a third party on favourable terms and resells to the customer at pre-determined profits mutually agreed upon. Under a Murabah agreement, the customer provides the financier with the specifications and the goods to be purchased. When the financier and the customer agree on the terms of the deal, the former purchases the goods or commodities and passes the title to the customer at a later date. The profit accruing to the financier is mutually agreed as mark-up on the cost of purchase.

12 10 ITQAN CAPITAL 4. TERMINOLOGY CONTINUED Mudarabah Istisnaa Salam This is a contract which involves two parties. One of them provides capital (Rab-al-Mal, the Capitalist) and the other exerts his efforts in managing the business (the Mudarib, Managing Trustee). Any profits thus accrued are shared between the two parties on a pre-arranged basis (conditions), while the loss is borne by the partner providing the capital. Istisnaa (sale on order) is a contract for pre-manufactured products where the manufacturer provides the finished product under his own materials and responsibilities to specific standards/specifications at a preagreed price, payable either prior to the work, or at the specified time or upon delivery. Is a sale of a commodity whose delivery will be in future date for a cash price, which means it is a financial transaction in which price is advanced in cash to the seller who abides the delivery of a commodity of determined specification on a definite due date. The deferred is the commodity sold and described on liability and the immediate is the price.

13 11 ITQAN MURABAHAT & SUKUK FUND TERMS AND CONDITIONS 5

14 12 5. TERMS AND CONDITIONS ITQAN CAPITAL 1. The Fund Name Itqan Murabahat and Sukuk Fund, an open-ended and Shariah compliant investment fund established as a contractual arrangement between the Fund Manager and the investors pursuant to Investment Funds Regulations issued by the Capital Market Authority. 2. The Fund Manager s Address Itqan Capital Elite Al Shatea, Al Malik Road, PO Box 8021, Jeddah 21482, Kingdom of Saudi Arabia. Telephone: Toll free: Fax: Website: 3. Designated Date for Subscription Acceptance The initial offering period of Fund s units shall start on 19/07/2008 and ends on 03/08/ Fund Regulator The Fund Manager is a licensed person pursuant to the Licensed Persons Regulations issued by the Capital Market Authority, (the CMA ), under license number pursuant to CMA Council resolution number dated 21/03/1428H (corresponding to 09/04/2007) and commercial registration number dated 16/02/1428H and the Fund is subject to CMA laws and regulations and it shall also be subject to any amendments and changes that occur to them in future. 5. Fund Terms and Conditions Issuing Date These terms and conditions have been issued on 02/07/2008 and last updated on 19/07/ Subscription in the Fund In order to achieve the Fund s targeted objectives, the Fund Manager will use the collected capital participations to apply the following strategy: Minimum Amount for Subscription: number of units which value is equivalent to SAR 50,000 for individuals and SAR 250,000 for institutions. Minimum Amount for Addition: number of units which value is equivalent to SAR 10,000 for individuals and SAR 100,000 for institutions. The Maximum Limit for the Investor: Not exceeding 10% of fund s net asset value. Minimum Amount for Redemption: SAR 10,000 for individuals and SAR 100,000 for institutions provided that the balance of the principal capital participation at any time should not be less than SAR 50,000 for individuals and SAR 250,000 for institutions. The minimum capital targeted to be raised for the operation of the Fund is Saudi Riyal 20 million. 7. Fund Currency Saudi Riyal (SAR). In case the participation/subscription amounts are paid in currencies other than the Saudi Riyal, the Fund Manager shall convert them into Saudi Riyal according to the prevailing rate of exchange. 8. Fund Investment Objectives Itqan Murabahat and Sukuk Fund aims at realizing Shariah compliant superior returns for Fund s investors in the short-medium term while preserving investor s capital participation, providing the investors with the facility of redemption upon need and with the best method of risk management. 9. Primary Investment Strategy In order to achieve its investment objectives, Itqan Murabahat and Sukuk Fund will primarily invest in the Saudi market in a diversified portfolio of high-quality Islamic short to medium term instruments including: I. Type(s) of financial instruments that the Fund will primarily invest in: Commodity Murabaha-based Transactions. Various kinds of Sukuk. Units of investment funds investing primarily in Murabaha transactions and/or Sukuk.

15 13 ITQAN MURABAHAT & SUKUK FUND The Fund will seek that the maturity and liquidation dates of the Murabaha transactions shall not exceed 12 months and the gap between the maturities dates shall not exceed 3 months. The Fund Manager may use up to 40% of Fund s net asset value by investing them in commodity Murabaha-based transactions or Sukuk issued in the GCC countries (which are the United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait) or investment units in international Sukuk funds denominated in US dollar or GCC currencies pursuant to the Fund s terms and conditions, with up to 10% of the Fund s net asset value that can be invested in the currency of each of these countries on the condition that the Fund s investments in Saudi Riyal in the Kingdom of Saudi Arabia does not fall below 60% of the Fund s net asset value. Sukuk selection criteria determines that Fund s Sukuk must be issued by sovereign or quasi sovereign entity or companies in which the government holds more than a 51% ownership or Sukuk of companies that the Fund Manager believes that they add value to Fund s investment portfolio and the Sukuk issued in the Kingdom of Saudi Arabia and GCC countries. The rating of Sukuk must be made by internationally recognized rating agencies which are Standard and Poor s, Moody s and Fitch. II. Policy concerning concentrating investment in a particular type of financial security or geography: The Fund s investments will be only in the markets of GCC countries, which are the United Arab Emirates, Bahrain, Saudi Arabia, Oman, Qatar and Kuwait, with up to 50% of Fund s net asset value that can be invested in each of these markets and without an upper limit for the Saudi Arabian market. The Fund will deal with those financial institutions that carry a minimum rating from international credit rating agencies as follows: Standard and Poor s (B-), Moody s (B3) and Fitch (B-). III. Type of transactions, strategies and instruments: The Fund manager will decide the optimal diversification for investing the Fund s monies in investment instruments such as Murabahat, Sukuk and investment in units of investment funds whose objectives are consistent with the Fund s own objectives. The Fund aims, through active management and diversification of its investments, at mitigating risks to the lowest possible level. The Fund s profits are accumulated and reinvested in the Fund and such profits will be reflected in the value and price of the Fund s units. IV. Type of financial instruments Fund is prohibited from investing in: The Fund shall not invest in business of conventional banks and insurance companies or any business related to interest or any activity prohibited by Shariah investment controls. The Fund shall not invest in any security where a call is to be made for any sum unpaid on that security unless that call could be met in full, through or cash or financial securities that can be easily converted into cash within (five) days. V. Investment Constraints: At any event, the Fund Manager shall adhere to the following restrictions: The Fund shall invest in commodity Murabaha-based transactions at a minimum of 30% and a maximum of 67% of the Fund s net asset value. The Fund shall invest in various types of Sukuk, specifically Musharakah, Murabaha, Ijara, Istisnaa and Salam Sukuk, directly and indirectly through investment in units of funds that invest in Sukuk that are consistent with the investment strategy specific to the Fund at a minimum of 33% and a maximum of 60% of the Fund s net asset value. The Fund shall not acquire units of another investment funds if the total acquired units exceed ten (10) per cent of its net assets value or 10% of the net assets value of the investee fund. The Fund shall invest in Sukuk categorized as investment-grade as defined by one of the three international credit rating agencies and rated as follows: Standard and Poor s (BBB-), Moody s (Baa3-) and Fitch (BBB-). The Fund can invest up to 30% of the total value of the Sukuk in the Fund in issuances of Sukuk that do not have a credit rating from the credit rating agencies. In such cases, investments shall be made in line with the Fund s internal risk management policy and criteria, which take into account the credit standing of the issuer, the Suk s profit rate, the sustainability in the issuer s profitability, and the Suk s tenure and time to maturity, among other relevant factors. The Fund shall not invest in Sukuk not issued by government or quasi-government entity or corporations of high capital adequacy.

16 14 ITQAN CAPITAL 5. TERMS AND CONDITIONS CONTINUED The Fund shall invest in commodity Murabaha-based transactions at a maximum of 40 to 50% of the Fund s net asset value with each counterparty. The Fund shall not enter into commodity Murabaha-based transactions with counterparties that are not credit rated; only with those financial institutions that have a minimum rating from one of the three international credit rating agencies as follows: Standard and Poor s (B-), Moody s (B3) and Fitch (B-). The Fund shall not purchase units in investment funds that are not regulated by one of the capital market authorities. The Fund shall not hold in excess of 5% of the total amount of the securities offered for subscription by any individual issuer. The Fund s exposure to a single issuer shall not exceed 15% of its net asset value. The Fund, with the exception of the securities issued by the government of the Kingdom of Saudi Arabia, shall not hold more than 10% of its net asset value in any class of security issued by any single issuer. The Fund shall not lend any person but it may acquire debt instruments that are in conformity with its investment objectives and Shariah investment controls. VI. Permissible borrowing: The Fund shall not borrow any loan that exceeds 10% of its net asset value except such borrowing is from the Fund Manager to meet some redemption applications. VII. Eligible financial markets: The Fund shall transact with financial institutions that have a strong financial position and a credit rating from one of the three international credit rating agencies as follows: Standard & Poor s (B-), Moody s (B3) and Fitch (B-) and that conduct business in the Kingdom of Saudi Arabia and other GCC countries; United Arab Emirates, Bahrain, Oman, Qatar and Kuwait. VIII. Investment limits in each fund: The Fund manager can invest the Fund s assets in units of other investment funds, including investment funds managed by the Fund manager, that are open-ended, licensed by the Capital Market Authority (CMA) in the Kingdom of Saudi Arabia or the capital market authorities of other GCC countries, and that primarily invest in Murabahat and/or Sukuk. Total investments in such investment funds shall not exceed 30% of the Fund s net asset value. Also, the Fund shall not invest more than 10% of its net asset value in any one single fund or invest an amount that is more than 10% of the net asset value of these funds. Investment funds shall be chosen based on their consistency with the investment strategy specific to the Fund and the internal valuation conducted by the Fund manager which takes into account the funds realized sharia-compliant profits over the short to medium term, the level of risk, the option of daily, bi-weekly or weekly redemption (which increases the Fund s liquidity) and their track record relative to the relevant benchmarks, among other factors. IX. Dealing in derivative markets: The Fund shall not deal in derivative markets. 10. Primary Investment Risks Itqan Murabahat and Sukuk Fund is categorized among funds of low-medium level risk. The low risk profile is the result of the Fund s ability to invest in a diversified portfolio of short to medium term financial instruments that comply with the Shariah investment controls. The active management of Fund s portfolio pursuant to Shariah investment guidelines allows the Fund s Manager to skip between a variety of instruments and change weights of different instruments guided by the Fund s established investment strategy that aims at realizing superior returns while preserving capital participations. However, the Fund could be exposed to the following risks: Income Risk: The possibility that the Fund s income could decline because the Fund s income is based on short-term transactions, which can fluctuate over short periods. Rate of Return Risk: The profits of Fund Murabaha transactions are linked with the rate of return on the Saudi Riyal, accordingly any changes to the rate of return on the Saudi Riyal would have unexpected decline or increase of Fund units price. Currency Risk: All Fund s investments are in investment instruments launched in Saudi Riyals except with 40% of Fund s assets that may be invested in securities launched in US dollar and GCC currencies and whereas Fund s net asset value shall be valuated by Saudi Riyals, unit-

17 15 ITQAN MURABAHAT & SUKUK FUND holders may be exposed to the risk of exchange rate fluctuation of Saudi Riyal against US dollar which would affect Fund s unit price. Anyhow, this impact is very limited due to the limited percentage of Fund s investments launched in US dollar or GCC currencies which remain pegged to the US dollar such as the Emirati Dirham, Bahraini Dinar, Qatari Riyal and Omani Riyal and that the exchange rate of the Saudi Riyal against the US dollar is fixed. Market Risk: The market sometimes may be exposed to abrupt fluctuations and unexpected decline as a result of several intertwined factors such as fluctuations in interest rates, inflation, movements in Sukuk markets and those markets the Fund seeks to invest in. Therefore no guarantee or assurance would be given as to the market future performance. Risk of Investing in Other Investment Funds: Purchasing units in investment funds differs from depositing funds with a local bank in that the value and income from such units is liable to decrease due to a fall in the market value of the investments underlying them. Liquidity Risk: Whereas the Fund invests in medium term investment instruments this would limit quick and speedy liquidation of such instruments. To mitigate such risk, the Fund Manager shall seek to: 1) invest in numerous and small size Murabaha transactions and arrange their maturity dates to enable the Fund to promptly obtain liquidity, 2) invest in investments funds that provide the facility of daily, twice a week and weekly redemption to enable the Fund obtain quick and speedy liquidity and 3) if redemption requests exceed 10% of Fund s net asset value, the Fund Manager shall be entitled to scale down all such requests on a pro rata basis and carry forward any redemption requests that are not met on any one Redemption Day to the next Redemption Day and such redemption requests shall have the priority provided that the requests do not exceed 10% of Fund s Net Asset Value as on the preceding Valuation Day Concentration Risk: The Fund may invest a high percentage of its assets in one Suk and this would result in the risk of concentrating the Fund s assets with one entity. To mitigate this risk the Fund Manager shall diversify its investments in Sukuk and their issuers. Moreover, Murabaha transactions executed with banks inside the Kingdom of Saudi Arabia or other banks shall have minimum ratings from one of the three international rating agencies as follows: Standard & Poor s (B-), Moody s (B3) and Fitch (B-). Call Risk: In certain Sukuk, the issuer has the right to call the issued Suk and pay to the investor his invested capital together with returns lesser than the returns stated in the Suk. In this event, the Fund Manager shall act to optimize investment of the redeemed amounts. Shariah Risk: This involves the possibility that Fund Manager, based on inaccurate judgments, invests in non-shariah compliant investments which may compel him to dispose such investments at unsuitable timings and prices. Such risks shall be mitigated by the review and auditing of the Shariah Advisor and internal Shariah observance procedures. Credit Risk: The possibility of a Sukuk or Murabaha, or other financial instrument issuer will fail to meet its obligations in a timely manner, or that negative perceptions of the issuer s ability to make such payments will cause the price of such investment instruments to decline. However, the Fund Manager aims that credit risks should be very low for the Fund by transacting only with those financial institutions that have a strong financial position, as defined by one of the three international credit rating agencies, and that have a minimum rating as follows: Standard & Poor s (B-), Moody s (B3) and Fitch (B-) in addition to investing only in Shariah compliant investment instruments that are considered to be of high quality investment instruments or transactions carefully selected by Fund Manager. Political Risk: Global and regional political developments could rest in unstable conditions that could, in turn, directly or indirectly affect the performance of the Fund. * Registration of the Fund with CMA does not mean protection from loss when occurs. Potential investors should be aware that investing in the fund is not the same as placing deposits with any local bank sponsoring, selling or otherwise affiliated with the investment fund. * Unit-holders shall bear responsibility for any financial loss resulting from investing in the Fund. 11. Fees and Expenses The Fund will pay a management fee of 0.25% of Fund s Net Asset Value per annum to the Fund Manager in consideration for its management. The management fee will be calculated and accrued as at each valuation day based on the net asset value of the Fund and shall be paid quarterly in arrears. The fund shall bear other fees relating to fund management and which include: Administration and units registration fees. The expenses of publishing and distributing Fund annual reports. Legal fees and charges of the independent members of fund board of directors. External auditor fee of SAR 10,000 per financial year, based on daily rate and 365 days a year; paid every 6 months. Other fees and charges payable to other parties dealing in connection with fund management and operation. Article 34 of these terms and conditions provides summary of the financial disclosure.

18 16 ITQAN CAPITAL 5. TERMS AND CONDITIONS CONTINUED 12. Dealing Costs The expenses relating to Fund dealing in securities, if any, shall be recorded and paid from Fund s assets: 13. Fund s Board of Directors The Fund shall be supervised by a Board of Directors to be appointed by the Fund Manager and approved by CMA. Fund board of directors shall comprise a chairman and two members including two independent members to be appointed by the Fund Manager. Members of Fund Board of Directors The board members shall be appointed initially for a two-year term starting from Fund commencement date and the independent members shall be remunerated in consideration for their services. Board Members comprise the following:. Mr. Adil Saud Dahlawi Mr. Dahlawi is the chairman of the Fund Board of Directors, and he is currently board member, Managing Director and CEO of Itqan Capital. Mr. Dahlawi holds Bachelor degree from King Saud University-Faculty of Applied Biomedical Sciences, and he has over 16 years experience in banking, finance and investment. Mr. Dahlawi worked as Assistant Chief Executive Officer for Investment Affairs at Dallah AlBaraka Group for 4 years and he also worked at Investment and Corporate Finance Department at Samba Financial Group and Corporate Finance Department at Banque Saudi Fransi. Mr. Dahlawi is also Chairman Board of Directors/Safwat Abhur Real Estate Fund and REIF-1 Real Estate Income Fund, both of which are investment funds launched by the Fund Manager, member board of directors and member risk management committee of AlBaraka Islamic Bank- Bahrain. Mr. Mohammed Assem AbulSaud Mr. Mohammed Assem AbulSaud is an independent member of the Fund board of directors and he holds Bachelor of Science from King Abdul-Aziz University, Jeddah-Kingdom of Saudi Arabia. Mr. AbulSaud has over 25 years experience in banking business and he worked as Deputy Manager/ Treasury Corporate Services at Banque Saudi Fransi up till 2008 and Head/Money Market Division at SAMBA. Mr. Ahmed AlGhamidi Mr. Ahmed Mohammed AlGhamidi is an independent member of the Fund board of directors and he was Senior District Manager/Branch Network at SAAB-Western District. He holds professional certificates in business administration and management information system and has over 30 years experience in banking business. He occupied leading positions in different Saudi banks. The Responsibilities of the Board of Directors The responsibilities of the board of directors include but are not limited to the following: 1. Approval of all contracts, decisions and essential agreements which the fund is party thereof. 2. Monitor and when necessary approve any conflict of interest disclosed by Fund Manager pursuant to Investment Funds Regulations. 3. Meet, at least twice annually, with Fund Manager Compliance Officer (Compliance Committee) and Anti-Money Laundering and Terrorism Combating Officer to ensure that the Fund Manager is in complete compliance with the established regulations and laws. 4. Approve any recommendation submitted by the liquidator when appointed. 5. Ensure full compliance with Fund terms and conditions and Investment Funds Regulations. 6. Ensure that Fund Manager is performing his duties and responsibilities for the interest of the unit-holders according to Fund s terms and conditions and Investment Funds Regulations. 7. Act with fairness and honesty for the interest of the Fund and unit-holders. 14. Fund Manager Itqan Capital is the Fund Manager. Itqan Capital, a closed joint-stock Saudi company incorporated under the laws of Saudi Arabia as specialized Shariah compliant investment company to practise asset management business, pursuant to the Licensed Persons Regulations issued by the Capital

19 17 ITQAN MURABAHAT & SUKUK FUND Market Authority, (the CMA ), under license number pursuant to CMA Council resolution number dated 21/03/1428H (corresponding to 09/04/2007) and commercial registration number dated 16/02/1428H corresponding to 09/04/2007 and which headquarter is located in Jeddah and postal address: Itqan Capital Elite Al Shatea, Al Malik Road, PO Box 8021, Jeddah 21482, Kingdom of Saudi Arabia. Telephone: Toll free: Fax: Website: The Custodian Itqan Capital is the Fund Custodian. Itqan Capital, a closed joint-stock Saudi company incorporated under the laws of Kingdom of Saudi Arabia as an investment company licensed to practise custody business, pursuant to the Licensed Persons Regulations issued by the Capital Market Authority, under license number pursuant to CMA Council resolution number dated 21/03/1428H (corresponding to 09/04/2007) and commercial registration number dated 16/02/1428H and which headquarter is located in Jeddah and postal address: Itqan Capital Elite Al Shatea, Al Malik Road, PO Box 8021, Jeddah 21482, Kingdom of Saudi Arabia. Telephone: Toll free: Fax: Website: The External Auditor Osama A. Elkhereiji & Partner has been appointed as an external auditor to the Fund and which address is as follows: Osama A. Elkhereiji & Partner PO Box 15046, Jeddah Kingdom of Saudi Arabia Telephone: Fax: The Annual Audited Financial Statements The Fund Manager shall prepare and make available audited financial statements for the Fund as at the end of each calendar year within a period not exceeding ninety (90) calendar days from the end of the Fund s financial year. The Fund Manager shall also prepare and make available reviewed interim statements semi-annually within a period not exceeding forty five (45) calendar days from the respective period s end. The financial statements will be provided free of charge upon request and shall be available on the Fund Manager s Website. These financial statements may be requested by or from any branch of the Fund Manager. The first annual audited financial statement for the first financial year ending on 31 December 2009 shall also be provided. 18. Characteristics of Fund Units The Fund Manager may issue unlimited number of units in the Fund, all of same class. Each unit represents an equal common interest in the Fund. Fund Units have no voting rights and may be redeemed only from the Fund Manager. The Fund Manager maintains a record of all unit-holders. Following every transaction, the investor will receive a confirmation containing full details of the transaction. Each unit-holder owns an undivided interest in Fund assets based on the net assets value. If and when the Fund is liquidated, all its units shall be entitled to a proportionate share in the net assets available for distribution to unit-holders.

20 18 ITQAN CAPITAL 5. TERMS AND CONDITIONS CONTINUED 19. Other Information A. Anti-Money Laundering and Terrorism Financing The Unit-holder hereby acknowledges that the subscription amounts are not generated from suspicious or unlawful sources. If the Fund Manager suspected the sources of the funds relating to the clients transaction, the Fund Manager shall be obliged to suspend or reject execution of the transaction and accordingly start investigation, advise the supervisory authorities concerned with combating money laundering and terrorism and forward any information or documents required by the authority to proceed with the investigation. The Fund Manager is not allowed, by law, to inform the investors with the suspected transactions. B. Confidentiality The information pertaining to the Fund transactions shall be treated as confidential, except to the extent that information is disclosed: 1. Pursuant to any applicable law, regulation or code of conduct, or 2. By order of a court of law, or 3. In response to an inquiry by a regulatory or governmental authority concerning information reasonably required by them in the course of their official duties, and subject to assurances that such information will be used only for the purposes specified and will otherwise in all circumstances be kept confidential. The Fund Manager may disclose details of the unit-holder s relationship with the Fund Manager to licensed third parties with whom the Fund Manager deals in the performance of the agreed investment services on behalf of the unit-holder, for their confidential and internal use and/or as a requirement of processing transactions on behalf of the unit-holder C. Limitation of the Fund Manager s Liabilities Neither the Fund Manager nor any of its employee or agents or any other third party contracted with Fund Manager shall be liable to the unitholder for any losses, damages, costs, expenses or other liabilities incurred by the unit-holder or the Fund s assets except those resulting from such persons negligence, omission or default. Anyhow, and under no circumstances, they will not be liable to the unit-holder for indirect or consequential losses, including any failure to realize any profit, advantage or opportunity. Accordingly, the unit-holder expressly acknowledges and agrees that: 1. The Fund Manager makes no representation or warranty as to the performance or profitability of any underlying investments in the Fund and the Fund Manager shall have no liability or responsibility for any decline in the value of an underlying investment or the value of the Fund s assets; 2. The Fund Manager shall be entitled to rely, in the performance of its obligations hereunder, on the opinion and statements of licensed third party professional advisors who will be selected with reasonable care and instructed in good faith and shall not be liable to the unit-holder for any adverse effect of having relied thereon; D. Force Majeure The Fund Manager shall not be in breach of its obligations under these terms and conditions and shall not be liable to the unit-holder for any loss caused directly or indirectly by Force Majeure, including, without limitation, acts of government, exchange or market regulations, suspension of trading, inability to communicate with market makers for whatever reason, breakdown of the computer systems of third parties or other equipment failure, impediments to the supply of facilities or any other conditions or circumstances beyond the control of the Fund Manager; If any Event of Force Majeure occurs, the date(s) for performance of the obligation(s) affected shall be postponed until such Event of Force Majeure cease to exist. The Fund Manager shall use all reasonable endeavors to minimize the effects of any Event of Force Majeure. E. Sharing of Information Information necessary to open the unit-holder s account, processing of his transactions and to comply with applicable laws will be shared to the extent required between the Fund Manager and third parties (banks and agents) selected by the Fund Manager. The unit-holder also agrees that such information may also be shared with regulatory and supervisory authorities. F. Language These terms and conditions have been produced in Arabic and shall be provided free of charge upon request. These terms and conditions are produced in English as well. In case of any difference in meaning between the English and Arabic texts, the Arabic text shall prevail. 20. Compliance with Shariah Principles

21 19 ITQAN MURABAHAT & SUKUK FUND The Shariah Advisor, Shariyah Review Bureau, appointed by the Fund Manager shall ensure that the Fund will comply with Shariah investment guidelines and controls. The Shariah Advisor has a track record in overseeing compliance with Shariah investment controls for all types of financial and investment transactions. The Shariah Advisor Shariyah Review Bureau W.L.L. has been appointed by Itqan Capital as the Shariah Advisor to supervise and advise on the Shariah commissioning processes while overseeing the consultation, certification and compliance development. Shariyah Review Bureau W.L.L. is a Middle East based firm with an international scholarly platform of 29 reputable Shariah scholars covering the major global Shariah compliant markets including Malaysia, Kingdom of Saudi Arabia, Algeria, Egypt, Qatar, UAE, Sudan and Kingdom of Bahrain. Licensed by the Central Bank of Bahrain, the Shariyah Review Bureau provides ancillary services covering Shariah review, structuring, compliance certificates (fatwa), and Shariah supervisory audit services. It is an associated member of the Account and Auditing Organization for Islamic Financial Institutions (AAOIFI) and a member of the General Council for Islamic Banks and Financial Institutions. The Shariah Advisor will conduct periodical Shariah compliance audits on Itqan Murabahat and Sukuk Fund business activities so as to confirm its operations and investments are in alignment with the Shariah principles and guidelines. The Shariah Committee of the Shariyah Review Bureau consist the following prominent scholars: 1. Sheikh Dr. Fahad Salah Alshalhub Dr. Alshalhub has a vivid experience in Islamic investment and finance industry. He is the author of several books in subjects relating to this industry e.g. Joint-Stock Companies in Islamic Jurisprudence, Sale on Instalments in Islamic Jurisprudence, Securitisation etc. Dr. Alshalhub is associate professor of Islamic Finance at King Fahad University of Petroleum and Minerals (KFUPM), Manager of Islamic Banking and Finance Research Center/ KFUPM and member of the International Islamic Organization for Economy and Finance of the Investment and Finance Committee belonging to the Muslim World League and he has a Ph.D. in Islamic Finance from University of Edinburgh, UK. 2. Sheikh Mohammed Ahmed Sheikh Mohammed Ahmed has over 10 years experience in Shariah advisory and academic fields connected with Islamic banking and finance and specially restructuring of conventional investment products and investment funds for banks, insurance companies, asset management and securities companies. Mr. Mohammed Ahmed holds Ph.D. from Dar-al-Uloom University, managed by Mufti Taqi Othmani and Ph.D. in Islamic Jurisprudence and its Fundamentals from Ahsan al-uloom University. The Shariyah Review Bureau shall not take any fee and will be responsible in particular for the following activities: 1. Studying and reviewing these terms and conditions, the Fund s investment objectives and policies to ensure their compliance with Shariah investment guidelines; 2. Advising the Investment Manager regarding compliance with Shariah; 3. Determining suitable criteria for the selection of investment instruments in which the Fund may invest; 4. Providing suitable criteria for the Investment Manager to make purification deductions; 5. Monitoring the underlying investments against the Shariah criteria prescribed to the Investment Manager; and 6. Providing an opinion on the Fund s compliance with Shariah investment controls for inclusion in the Fund s annual financial report. Shariah Parameters The Fund has been approved by the Shariah Advisor according to the following Shariah parameters: 1. The Fund shall invest most of its assets in Commodity Murabaha-based Transactions that bear no interest. 2. The commodities and metals traded in the Murabaha transactions must be Shariah compliant. It is not permitted to trade in gold and silver using Murabaha contract. 3. The Murabaha contract must be accurately and properly executed by two independent parties. The seller in the Murabaha contract must have

22 20 ITQAN CAPITAL 5. TERMS AND CONDITIONS CONTINUED owned the commodity or the metal of the underlying Murabaha contract before selling it. 4. The Fund shall invest in Murabaha Sukuk. Investing in Ijara (lease) Sukuk shall be made after obtaining the approval of the Shariah advisor. 5. It is not permitted to invest in Sukuk based on purchasing and selling of debts and Sukuk based on Sale of Appearances (bay alina) 21. Initial Offering In order that Fund Manager be able to raise the minimum amount of Fund capital determined to be twenty (20) million Saudi Riyals prior to Fund s operation, Fund s units will be offered during the Initial Offering Period, starting form 19/07/2008 up to 03/08/2008, at a face value of SAR 10 per unit. During the Initial Offering Period, the Fund Manager may temporarily invest the subscription amounts for the benefit of the investors in short term Shariah compliant investment funds and instruments which may include products offered by Itqan Capital and other companies approved by the Fund Manager. The Fund Manager may extend the Initial Offering Period for an additional period to raise the minimum targeted capital necessary for Fund s operation subject to the consent and approval of CMA. 22. Investment by the Fund Manager in the Fund The Fund Manager may also, with the approval of the Capital Market Authority, invest in Fund s units at or after launching of the Fund. Such investment shall be treated by the Fund Manager as a subscription for units in the Fund and consequently, the provisions contained herein with regard to, inter alia, redemptions shall also apply to such investment. The total amount of such investment shall be disclosed at the end of each financial year. 23. Participation/Subscription and Redemption Procedures A. Participation/Subscription Procedures: Investors wishing to purchase Fund units are required to complete Participation/Subscription Application, sign these terms and conditions relating to participation/subscription in the Fund and deliver them to the Fund Manager, along with the receipt of participation/subscription amount deposit in the designated bank account, in any Business Day. Investors may deliver the completed Application by mail, by courier or hand, or transmit it via authorized electronic media. The Subscription Application received by the Fund Manager on or before the specified deadline for applications receipt shall be approved. Subscription applications received after the specified deadline (12:00 noon) shall be executed on the next Valuation Day. Subscription to the Fund units shall be through purchase of units on the basis of the next Valuation Day following deadline for receipt of applications. The Fund Manager reserves the right to reject any subscription application by any investor if, inter alia, such subscription would result into violation of Fund s terms and conditions or the regulations applicable to the Fund and which may be imposed, from time to time, by the Capital Market Authority and other regulatory authorities. B. Redemption Procedures Unit-holders may redeem part or all their units by completing and signing a Redemption Application and delivering the completed redemption application by mail, by courier or hand, or transmit via authorized electronic media using approved Investor s user ID and password. All completed redemption applications received at the specified deadline, e.g. 12:00 noon of Thursday and Monday of each week, will be executed on the relevant Valuation Day (Sunday and Tuesday consecutively, or on the next business day if any of these days is not a business day). Redemption proceeds will be made available to the investors within two Business Days after the relevant Valuation Day. The maximum redemption amount permitted on any one Redemption Day is 10% of Fund s Net Asset Value as on the preceding Valuation Day. If redemption requests exceed this amount, the Fund Manager shall be entitled to scale down all such requests on a pro rata basis and redeem units accordingly. Redemption requests that are not met on any one Redemption Day shall be carried forward to the next Redemption Day and shall have priority provided that the requests do not exceed 10% of the Net Asset Value as on the preceding Valuation Day. The Fund Manager may, at its discrete decision, postpone any redemption and/or transfer applications if there has been a suspension of trading on the principal market in which the securities or other assets held by the Fund are traded, either in general or in relation to Fund assets that the Fund Manager reasonably believes to be essential for computation of the net asset value of the Fund. If any redemption would reduce a unit-holder s participation to be lower than the minimum participation amount then the unit-holder s total participation shall be redeemed. Redemption proceeds will be paid in Fund currency by crediting the proceeds to the account specified by the unitholder. In the events and circumstances that may lead to suspension of computation of the net asset value, Fund Manager and upon its discrete decision

23 21 ITQAN MURABAHAT & SUKUK FUND may temporarily suspend subscription, addition and redemption of units. Unit-holder may request to receive redemption proceeds by wire transfer in favor of his personal account and the charges pertaining to such transfer shall be deducted from the redemption amount. 24. Valuation of Fund s Assets Fund unit price shall be computed each Sunday and Tuesday (Valuation Day) every week based on the market closing prices of the underlying assets on the Valuation Day. In the event that the Valuation Day is not a Business Day, the valuation will be based on the following Valuation Day. The Net Asset Value per Unit, for the purpose of subscription or redemption of units, will be calculated using the following formula: (a) the total assets of the Fund less the total liabilities including any accrued and unpaid fees and expenses divided by (b) the total number of outstanding Units of the Fund prior to such Valuation Day. The Fund Unit Price shall be posted on the website of the Fund Manager at the closing of Sunday and Tuesday each week. The Unit Price shall also be posted on the website of Tadawul. Fund Manager may temporarily suspend dealings with Fund units if he deems that valuation of fund assets is not possible. 25. Early Redemption Fees Early redemption is permitted during Fund initial offering period i.e. 19/07/2008 up to 03/08/2008 or any extension thereof in consideration of early redemption fees of 1.5% of the redemption proceeds and which shall be added for the benefit of the Fund not for the benefit of the Fund Manager. Redemption shall thereafter be permitted without redemption fees. 26. Fund s Winding-up and the Appointment of a Liquidator CMA shall have the authority to appoint a replacement fund manager or a liquidator or take any action it deems suitable pursuant to the Investment Funds Regulations. 27. Fund Termination In the event that the Fund Manager deems that Fund s assets are not sufficient for Fund operation or in case of any other circumstances, the Fund Manager reserves the right to terminate the Fund by giving at least sixty (60) calendar days notice to unit-holders after obtaining CMA approval. In such event the Fund s assets will be liquidated, its liabilities will be discharged and the funds remaining after such liquidation shall be distributed to the unit-holders in proportion with their units to the total outstanding units as determined by Fund Manager. 28. Reporting to Unit-holders The Fund Manager will provide a periodic report at the end of each calendar quarter showing the unit-holder s transactions during the quarter and the number and value of units held by him as at the quarter-end. The report will be sent to the mailing address provided by the unit-holder on the subscription application form; unless a notification of an address change has been provided in writing. In case of any error or any other enquiry, the Fund Manager should be advised within sixty (60) days from the statement date otherwise the statement will be considered as correct. The previous year s actual fees and expenses as well as Fund performance data will also be available on the Fund Manager s website and at the branches of the Fund Manager. All references to a period of time in these Terms and Conditions shall be according to the Gregorian calendar. The unit-holder shall be responsible for providing the Fund Manager with his current contact particulars including mailing address, electronic mail) ), fixed and mobile telephone numbers at all times and for advising the Fund Manager promptly of any change therein All statements, notifications and other written communications by the Fund Manager shall be mailed, or ed, to the unit-holder s mailing/ electronic address stated in the subscription application or to such other address as shall have been furnished by the investor to the Fund Manager in writing In the event that the unit-holder does not provide the Fund Manager with a correct mailing and/or electronic mail address or specifically advises the Fund Manager that he does not wish to receive any correspondence, including notifications and account statements, concerning his investments, then the unit-holder is deemed to have agreed to indemnify and hold the Fund Manager harmless in respect of, and to waive, all of his rights or claims against the Fund Manager arising directly or indirectly from the non-provision of the notifications and account statements or other information relating to the investment or from the unit-holder s inability to respond or verify accuracy of information or seek rectification of any errors or

24 22 ITQAN CAPITAL 5. TERMS AND CONDITIONS CONTINUED alleged errors in such account statements, notifications or any other information. 29. Conflict of Interests The Fund Manager has no genuine interest that would affect his performance and obligations towards the Fund. The Fund Manager undertakes to work for the interest of the Fund and he shall exert his full efforts to deal with any conflict of interest in fair and equitable manner. In all the events, the parties involved with the Fund shall deal with any arising conflict of interest in fair and equitable manner taking into account their contractual obligations towards the Fund and other clients with complete transparency and disclosure. The procedures for addressing any arising conflict of interest shall be furnished upon request. 30. Changes to the Terms and Conditions The Fund Manager, without prejudice to Article 9 of Investment Funds Regulations, may amend these terms and conditions by sending to the unitholders written notice describing the relevant changes. Any material changes will be made after obtaining approval from the CMA and the Shariah advisor and will become effective after lapse of sixty (60) days from the date of sending the notice to the unit-holders. No amendment shall affect any outstanding orders, instructions or transactions or any financial entitlements or obligations which may already have been approved or initiated. 31. Complaint Submission Procedures In the event of a complaint about the services related to these terms and conditions, the unit-holder should contact the Customers Support Center of Fund Manager at the following address Attention: Customers Support Center Itqan Capital Elite Al Shatea, Al Malik Road, PO Box 8021, Jeddah 21482, Kingdom of Saudi Arabia. Telephone: Toll free: Fax: Website: Units-holders shall be apprised with the procedures relating to complaint addressing upon request. 32. Governing Law The Fund shall be governed by the laws applicable in the Kingdom of Saudi Arabia including Investment Funds Regulations issued by the Capital Market Authority in addition to these terms and conditions. In case of any dispute, it shall be referred to CMA Securities Dispute Settlement Committee. 33. Compliance with Investment Fund Regulations The Fund Manager, hereby, acknowledges that these terms and conditions and other documents of Itqan Murabahat and Sukuk Fund comply with the Investment Fund Regulations issued by the Capital Market Authority and he confirms that they contain full, true and plain disclosures of all material facts relevant to the Fund. 34. Summary of the Financial Disclosure Minimum Participation /Subscription Amount Minimum Addition / Redemption Amount Unit Price Ten Saudi Riyals (SAR 10). Number of units which value is equivalent to SAR 50,000 for individuals and SAR 250,000 for institutions. Number of units which value is equivalent to SAR 10,000 for individuals and SAR 100,000 for institutions. As a summary for the contents of article 11 of these terms and conditions, the following tables show Fund fees and expenses: First: Fees and Expenses to be borne by Unit-holders: Participation / Subscription Fees for Fund Units Not Applicable.

25 23 ITQAN MURABAHAT & SUKUK FUND Early Redemption Fees /Redemption Fees 1.5% of the redemption proceeds during the initial offering period. There shall be no redemption fees thereafter. Second: Fees and Expenses to be charged to Fund Assets: 1. Management Fee 0.25% per annum of Fund s net asset value shall be accrued and accumulated on a pro rata basis on each valuation day. 2. Fund Board of Directors Charges With maximum SAR 24,000 per financial year accrued on a daily basis and paid on every board (independent members) meeting. 3. External Auditor Charges Maximum SAR 10,000 per financial year accrued on a daily basis and paid every 6 months. 4. Administration and Units registration 0.15% of the Fund net asset value per annum and paid every 3 months. Charges 5. Other Expenses (legal charges and others). Maximum limit of 0.10% of the Fund net asset value per annum and paid when due. Total fees and expenses as a percentage of the net asset value of the fund are 0.28% as of 31/12/2015. In addition to the management fee, the fund manager expenses the above fees and costs on a pro rata basis on every valuation day, assuming 365 days in the year, and reviews the fees and costs that have been expensed on the fund on a quarterly basis. The fund has not incurred any fees or costs relating to dealing in financial securities during The Actual Fees and Expenses incurred in 2015 compared with Fund Standard Fees and Expenses: Fund Expenses during 2015 in Saudi Riyals Standard Actual Management Fee 77, ,465 Fund Board of Directors Charges (independent members) 24,000 12,000 External Auditor Charges 10,000 10,000 Administration and Units registration Charges 46,000 86,679 Other Expenses (legal charges and others) 29,334 84,345 A hypothetical table illustrates the calculation methodology for the fees and expenses based on the figures assumed below. Example clarifying the calculation method above assuming the Fund s asset value is SAR 35 million: Management Fee SAR 35,000,000 Daily Yearly Fees: Fund Board of Directors Charges (independent members only) 12, ,000 External Auditor Charges 10,000 27,40 10,000 Administration and Units Registration Charges 0.15% , Other Expenses (legal charges and others) 0.10% , Fund Net Asset Value before deducting Management Fee 34,999, ,893, Management Fee 0.25% , Fund Net Asset Value after deducting Management Fee 34,999, ,806, Annual Fees (%) 0.55% Example clarifying the calculation method above assuming the Fund s subscription (investment) value is SAR 50,000 : Management Fee Amount / % Daily Yearly

26 24 ITQAN CAPITAL 5. TERMS AND CONDITIONS CONTINUED Fund Board of Directors Charges (independent members only) 12, External Auditor Charges 10, Administration and Units Registration Charges 0.15% Other Expenses (legal charges and others) 0.10% , Fund Net Asset Value before deducting Management Fee SAR 49, Management Fee 0.25% Fund Net Asset Value after deducting Management Fee SAR 49, Past Performance Summary Comparison between the Fund s performance & Benchmark as of 31/12/2015 Year The Fund % Benchmark % Annual Performance One Year 3 Years 5 Years Since inception The Fund % Benchmark % Graphical Representation of the Fund vs. Benchmark performance since inception * Past performance of the Fund and the benchmark is not considered an indication of what it would be like in the future performance of the Fund. The Fund does not guarantee the performance of the unit holders of the Fund (or a comparative performance benchmark) will recur or be

27 25 ITQAN MURABAHAT & SUKUK FUND representative of the performance of the future. * The benchmark changed on April 3, 2013 from SAIBID 1 month to SAIBID 3 months. Appendix 6

28 26 6. Appendix ITQAN CAPITAL 1. The Agreement between Fund Manager and Unit-holders Itqan Murabahat & Sukuk Fund (An open-ended and Shariah-compliant Fund structured as a Public Fund pursuant to the Investment Funds Regulations issued by the Saudi Capital Market Authority.) The Agreement between Fund Manager and Unit-holders and Commencement Date: These terms and conditions represent a binding agreement between Fund Manager and unit-holders and they shall be valid and effective immediately upon signature of the unit-holder and his receipt copy thereof. I/we, the undersigned, have read these terms and conditions together with the relevant appendices, understood their contents, accept them, signed them and received copy thereof. Signature:... Name:... Capacity: Client/Unit-holder of Itqan Murabahat and Sukuk Fund Date: / /

29 27 ITQAN MURABAHAT & SUKUK FUND 2. Shariah Certificate