A) The purpose of these instructions is to regulate the offering and registration of traded closed-end investment fund units, their management, operations, and the supervision of all activities related to them in the Kingdom.

B) These instructions do not violate the provisions of the Capital Market Law and its executive regulations.

A) The term "Law" wherever it appears in these instructions refers to the Capital Market Law issued by Royal Decree No. (M/03) dated 2/6/1424 AH.

B) The words and phrases contained in these instructions shall have the meanings defined in the Law and in the glossary of terms used in the regulations and rules of the Capital Market Authority and in the Investment Funds Regulation unless the context of the text indicates otherwise.

C) For the purpose of applying the provisions of these instructions, the words and phrases listed below shall have the meanings specified next to each of them unless the context of the text indicates otherwise.

Net Assets of the Fund: The cash value based on the total value of the assets of the traded closed-end investment fund minus the liabilities.

Traded Closed-End Investment Fund: A closed-end investment fund whose units are publicly offered and traded on the main market.

Unit Holders from the Public: For the purpose of these instructions, it means anyone who owns one or more units in the traded closed-end investment fund, provided that they are not among the following:

• (1) Any unit holder who owns 5% or more of the fund's units.

• (2) The fund manager and their affiliates.

• (3) Members of the fund's board of directors.

a) The offering of the closed-end investment fund and its operations and management in the Kingdom must be in accordance with these instructions and the Investment Funds Regulation, to the extent that it does not conflict with the nature of the fund.

b) The purchase of any unit of the closed-end investment fund by a unit holder from the market constitutes a declaration of their awareness of the terms and conditions of the fund and their acceptance thereof.

c) Units of the closed-end investment fund must be registered with the Depository Center.

d) The total value of the fund's assets may be increased by accepting in-kind contributions or by accepting cash contributions, or both, according to the following mechanism:

• 1. The fund manager must obtain the approval of the Authority to offer additional units of the fund by accepting in-kind contributions or by accepting cash contributions, or both.

• 2. After obtaining the approval of the Authority referred to in subparagraph (1) of paragraph (d) of this item, the fund manager must obtain the approval of the unit holders - through an ordinary fund decision - to offer additional units of the fund by accepting in-kind contributions or by accepting cash contributions, or both.

• 3. If the increase in the total value of the fund's assets is through accepting cash contributions or both cash and in-kind contributions, the period for offering the new units shall be (5) days at a minimum, and this shall be within a period not exceeding (6) months from the date of the Authority's approval.

• 4. If the value of the units to be offered has been collected, the offered units must be allocated to the registered unit holders on the day of the unit holders' meeting first, and then the remaining units - if any - shall be allocated to the other participants, and any surplus shall be refunded to all participants in cash - if any - within a period not exceeding (51) days from the end of the offering period specified in the terms and conditions of the fund, provided that the ownership of the in-kind contribution to be acquired is transferred to the fund and that the new units are listed in the market within a period not exceeding (60) days from the end of the offering period, and the units allocated to the participants may not be disposed of in kind by (5%) or more through the process of increasing the total value of the fund's assets in accordance with paragraph (d) of this item during the first year of their trading.

• 5. If the increase in the total value of the fund's assets is through accepting in-kind contributions, the additional units shall be allocated to the participants in kind immediately after the approval of the unit holders referred to in subparagraph (2) of paragraph (d) of this item, provided that the ownership of the in-kind contribution to be acquired is transferred to the fund and that the new units are listed in the market within a period not exceeding (60) days from the date of the unit holders' approval, and the units allocated to the participants may not be disposed of in kind by (5%) or more through the process of increasing the total value of the fund's assets in accordance with paragraph (d) of this item during the first year of their trading.

• 6. Subject to what is stated in subparagraph (3) of paragraph (d) of this item, if the minimum required amount specified in the terms and conditions of the fund is not collected, the fund manager must cancel the offering and return the participants' funds without any deduction within a period not exceeding (5) days from the end of the offering period.

e) The in-kind contributions referred to in paragraph (d) of this item must be evaluated by independent valuers from the fund manager, after ensuring that they have obtained the necessary approvals and licenses to carry out their work and activities from the relevant government authorities.

f) The unit holder has the right to exercise all rights associated with the units, including - but not limited to - the right to vote in the meetings of the unit holders.

g) The fund manager must publish all information required to be disclosed under item ten of these instructions on its website and the website of the market, and that this information is complete, clear, accurate, and not misleading.

h) In the event of a violation of any of the restrictions stipulated in these instructions or the terms and conditions of the fund due to a change in circumstances beyond the control of the fund manager or the sub-manager, and if the violation is not rectified within (5) days from the date of its occurrence, the fund manager must notify the Authority immediately in writing, indicating the action taken and the time required to rectify the violation, and the Authority may, at its discretion, change that period.

i) A percentage of the total offering shall be specified in the terms and conditions of the fund to be allocated to institutional investors.

j) Subject to what is stated in paragraph (c) of Article fifty-six of the Investment Funds Regulation, the fund manager must announce on its website and the website of the market the details of the fundamental changes in the terms and conditions of the fund at least (10) days before the change takes effect.

k) The Authority may exempt any person subject to these instructions from applying any of its provisions in whole or in part based on a request received from them or on its own initiative.

l) Notwithstanding the provisions of paragraph (f) of Article seventy-one of the Investment Funds Regulation, the fund manager may not provide each unit holder with data on the net asset value of the units they own and their transaction record in the fund's units.

m) No person or group of persons who show in the terms and conditions of the fund at its establishment that they own (5%) or more of the fund's units - through in-kind contributions - may dispose of the units they subscribed to during the first year of trading the relevant fund units.

n) To achieve the independence of a board member, the following must be adhered to:

• 1. The independent board member of the fund must be able to perform their duties, express their opinions, and vote on decisions objectively and impartially, which assists the board in making sound decisions that contribute to achieving the interests of the fund.

• 2. The board of directors of the fund must conduct an annual assessment of the extent of the member's independence and ensure that there are no relationships or circumstances that affect or may affect them.

• 3. Subject to the definition of an independent board member of the investment fund as stated in the Investment Funds Regulation and the glossary of terms used in the Capital Market Authority's regulations and rules, the following are inconsistent with the necessary independence required for an independent board member of a closed-end investment fund - including but not limited to:

  • a. Owning (%5) or more of the fund's units or units of another fund managed by the same fund manager or having a first-degree relative who owns this percentage.

  • b. Representing a legal person that owns (%5) or more of the fund's units or units of another fund managed by the same fund manager.

  • c. Representing a legal person that owns (%5) or more of the shares of the fund manager or is affiliated with the fund manager or custodian or affiliated with the custodian.

  • d. Having a first-degree relative relationship with any of the board members in the fund or any other fund managed by the same fund manager.

  • e. Having a first-degree relative relationship with any of the employees of related parties to the fund.

  • f. Being employed or having been employed in the past two years by the fund manager or any related party to the fund, or owning controlling shares in any of those parties during the past two years.

  • g. Receiving financial amounts from the fund in addition to the board membership fee.

The following must be fulfilled when submitting a request to issue units of the fund:

• 1) Type of Fund: The investment fund must be of the closed-end type.

• 2) Minimum Fund Establishment: The minimum total value of the fund's assets at the time of establishment must not be less than (300) million Saudi Riyals.

• 3) Nominal Value of the Unit: The nominal value of the unit must be (10) Riyals.

• 4) Subscription Fee: The subscription of unit holders from the public must be in cash only.

• 5) Subscription Limit: The minimum subscription limit must not exceed (1000) units for each unit holder.

Without prejudice to the provisions of Article Forty of the Investment Funds Regulation, the closed-end traded investment fund must adhere to the following provisions:

• 1. Notwithstanding the provisions of paragraph (b) of Article Forty of the Investment Funds Regulation, the fund manager may not invest the fund's money and assets in the field of real estate investment.

• 2. Notwithstanding the provisions of paragraph (g) of Article Forty of the Investment Funds Regulation, the closed-end traded investment fund may invest the fund's money and assets in private funds, provided that this does not exceed (%25) of the net asset value of the fund, and neither the feeder fund nor the closed-end traded holding fund may invest in private funds.

• 3. Notwithstanding the provisions of paragraph (h) of Article Forty of the Investment Funds Regulation, the fund's borrowing may not exceed (%30) of its net asset value.

Taking into account the relevant provisions stated in Article 41 of the Investment Funds Regulation, the following provisions apply to the closed-end traded investment fund:

• 1. Notwithstanding the provisions of paragraph (a) of Article 41 of the Investment Funds Regulation, it is permissible to invest an amount exceeding (10%) of the net asset value of the fund in illiquid assets.

• 2. Notwithstanding the provisions of paragraph (1) of this section, the fund manager may not invest an amount exceeding (25%) of the net asset value of the fund in a single illiquid asset.

• 3. Notwithstanding the provisions of paragraph (2) of this section and the provisions of subparagraph (1) of paragraph (g) of Article 41 of the Investment Funds Regulation, it is permissible to invest an amount exceeding (35%) of the net asset value of the fund in debt instruments issued by the Government of the Kingdom or by any sovereign entity.

Taking into account the provisions of Articles Sixty-Six and Sixty-Seven of the Investment Funds Regulation, the fund manager must publish the net asset value of each unit within a period that is consistent with the nature of the fund's assets, provided that it does not exceed six months at most.

A) The fund manager wishing to offer units of the closed-end investment fund and list them on the market must submit their application to the Authority.

B) In addition to the requirements stated in Article Fifty-Four of the Investment Funds Regulation, the terms and conditions of the fund must include all necessary information to enable potential unit holders to make an informed decision based on sufficient information regarding the investment being offered to them, in addition to the following information:

• 1. Important dates and initial subscription procedures: This section must include the following information:

  • A. A timeline indicating the expected dates for the initial offering.

  • B. How to apply for the initial subscription.

  • C. The mechanism that the fund manager will follow to allocate units to subscribers.

• 2. A mechanism for increasing the total value of the fund's assets by accepting in-kind contributions or by accepting cash contributions, or both.

• 3. A letter issued by a licensed legal consultant practicing in the Kingdom regarding the legal due diligence report, in the format provided in Appendix No. (1) of these instructions.

• 4. A letter issued by the fund manager regarding the professional due diligence report, in the format provided in Appendix No. (2) of these instructions.

C) When submitting the offering application, the fund manager must provide the Authority with any contracts related to the fund or the management of the fund's assets.

D) When submitting the offering application, the fund manager must provide the Authority with the names of at least two receiving parties.

E) The fund manager wishing to register and offer units of a closed-end investment fund must submit an application to the Authority that includes the information required under these instructions, and simultaneously submit a request to the market for the listing of those units in accordance with the listing rules.

F) The fund manager may not publicly offer the fund's units before making the necessary arrangements to list those units on the market in accordance with the listing rules.

G) The following conditions must be met for the Authority to approve the offering application:

• 1. The Authority receives a notification from the market confirming the issuance of the market's conditional approval for the listing application submitted under the listing rules.

• 2. The market does not withdraw its conditional approval referred to in subparagraph (1) of paragraph (G) of this item.

• 3. The Authority is convinced that the information contained in the terms and conditions is complete and meets the requirements stipulated in the law and its executive regulations.

Taking into account the provisions of Article 56 of the Investment Funds Regulation, any amendment to the total value of the fund's assets is considered a fundamental change.

A) Declaration of Material Developments:

• 1. The fund manager must declare to the authority and unit holders without delay any material developments that fall within the scope of its activities and are not publicly available, which may affect the fund's assets and liabilities or its financial position or the general course of its business, and may:

  • a) lead to a change in the price of the listed unit, or;

  • b) significantly affect the fund's ability to meet its obligations related to debt instruments.

• 2. To determine the development that falls within the scope of this paragraph, the fund manager must assess whether it is likely that any prudent unit holder would consider that development when making their investment decision.

B) Declaration of Specific Events

• The fund manager must declare to the authority and unit holders without delay any of the following developments (whether material according to paragraph (A) of this item or not):

  • 1. Any transaction for the purchase, sale, mortgage, or lease of an asset at a price equal to or exceeding (10%) of the net assets of the fund according to the latest audited preliminary financial statements or annual audited financial statements, whichever is more recent.

  • 2. Any losses equal to or exceeding (10%) of the net assets of the fund according to the latest audited preliminary financial statements or annual audited financial statements, whichever is more recent.

  • 3. Any change in the composition of the fund's board of directors.

  • 4. Any dispute, including any lawsuit, arbitration, or mediation if the amount in dispute or claim equals or exceeds (5%) of the net assets of the fund according to the latest audited preliminary financial statements or annual audited financial statements, whichever is more recent.

  • 5. An increase or decrease in the net assets of the fund equal to or exceeding (10%) according to the latest audited preliminary financial statements or annual audited financial statements, whichever is more recent.

  • 6. An increase or decrease in the total profits of the fund equal to or exceeding (10%) according to the latest annual audited financial statements.

  • 7. Any transaction between the fund and a related party or any arrangement whereby both the fund and a related party invest in any project or asset or provide financing for it if this transaction or arrangement equals or exceeds (1%) of the total revenues of the fund according to the latest annual audited financial statements.

  • 8. Any interruption in any of the fund's main activities equal to or exceeding (5%) of the total revenues of the fund according to the latest annual audited financial statements.

  • 9. Any change in the legal accountant.

  • 10. The issuance of a judgment, decision, announcement, or order from a court or judicial authority, whether at the preliminary or appellate stage, that may adversely affect the fund's exploitation of any part of its assets with a total value exceeding (5%) of the net assets of the fund according to the latest audited preliminary financial statements or annual audited financial statements, whichever is more recent.

  • 11. Any proposed change in the total value of the fund's assets.

C) Declaration Related to Transactions of Major Unit Holders

• 1. Any person must notify the market when they become a holder or have an interest in 5% or more of the fund's units within a period not exceeding the end of the third trading day following the execution of the transaction or the occurrence of the event that led to the realization of this ownership or interest, and the notice must include a list of persons who have an interest in the fund's units that they own or control.

• 2. The person referred to in subparagraph (1) of paragraph (C) of this item must notify the market upon any change to the list of persons referred to in subparagraph (1) of paragraph (C) of this item, whether as a result of an event that requires the addition of a person to that list or the exclusion of any persons previously included in it, within a period not exceeding the third trading day following the occurrence of the event that led to the relevant change.

• 3. For the purposes of this paragraph, when calculating the total number of units of the fund in which any person has an interest, a person is considered to have an interest in any of the fund's units owned or controlled by any of the following persons:

  • a. Relatives of that person.

  • b. A company controlled by that person.

  • c. Any other persons acting in concert with that person to acquire an interest in the fund's units.

• 4. The notice referred to in subparagraph (1) of paragraph (C) of this item must include at least the following information:

  • a. Names of the persons owning the fund's units, or entitled to act on them.

  • b. Details of the acquisition process.

  • c. Details of any material support from another person for the acquisition process or financing loans.

D) If the fund manager believes that disclosing a matter that must be disclosed under these instructions could cause unjustified harm to them and that it is unlikely that the failure to disclose that matter would mislead unit holders regarding the facts and circumstances that knowledge of which is necessary to evaluate the related securities, the fund manager may submit a request for exemption from disclosure or to delay its timing. In this case, a statement of the relevant information and the reasons for not disclosing that information at that time must be submitted to the authority in complete confidentiality, and the authority may approve or reject the request for exemption or delay. If the authority approves the request, it may at any time require the fund manager to announce any information related to the exemption or delay in question.

E) All information and material developments stipulated in this item are considered confidential until announced. The fund manager is prohibited - before announcing this information - from disclosing it to parties that do not have an obligation to maintain the confidentiality of the information and protect it. The fund manager must also take all necessary steps to ensure that none of the information and material developments leak before being announced in accordance with these instructions.

F) The fund manager must determine the extent of the need to publish a public announcement to respond to any rumors related to any material developments, and the authority may require the fund manager to do so as it sees fit.

G) The fund manager must comply with the provisions of the instructions regarding announcements of investment funds.