prospectus al kawthar fund (a shariah compliant fund)

1

PROSPECTUS

AL KAWTHAR FUND (A SHARIAH

COMPLIANT FUND)

Open ended fund with perpetual life.

Sponsor / Investment Manager: National Investment Funds Co. SAOC

P.O. Box 3028, P.C. 112, Ruwi, Sultanate of Oman.

Number of issued Units: 1,000,000 (one million) units.

At a subscription price of: RO 1.020 per share. The 20 baisa is a issuance charge.

Custodian: National Bank of Oman SAOG

P.O. Box 751, P.C. 112, Ruwi, Sultanate of Oman.

Subscription to Units takes place in the following banks:

National Bank of Oman SAOG;

Bank Sohar SAOG; and

Ahli Bank SAOG.

Issue open: 2 June 2013

Issue close: 1 July 2013

2

This Prospectus has been prepared in accordance with the Executive Regulations of the

Capital Market Authority (CMA) Law and it has been approved by the CMA through

Administrative Decision number 44/2013 dated 16 May 2013.

The Capital Market Authority (CMA) assumes no responsibility for the accuracy and

adequacy of the statements and information included in this Prospectus nor shall it have any

liability for any damage or loss resulting from relying upon or using any part of the same by

any person.

3

IMPORTANT NOTICE All investors are requested to read the following notice carefully.

The aim of this Prospectus is to present material information that may assist investors to

make an appropriate decision as to whether or not to invest in the securities offered.

Prospective investors should not treat the contents of this Prospectus as investment, tax or

legal advice and must make their own investigation and evaluation of the opportunity to

invest in the ‘Fund’ and should consult with their own advisors with respect to the evaluation

of the risks of the investment and its suitability for their individual financial circumstances

and risk preferences.

The Prospectus includes all material information and does not contain any misleading

information or omit any material information.

The Fund's Board, Investment Manager, Issue Manager, and the Sponsor are responsible for

the provision of this material information and confirm that no material information has been

omitted, the omission of which would render this Prospectus misleading.

Please note that investments in investment funds are not guaranteed (except to the extent

expressly stated in the Prospectus); the value of the investment units change frequently and

past performances may or may not be repeated. All investors should examine and carefully

review the Prospectus in order to decide whether it would be appropriate to invest in the

securities offered by taking into consideration all the information contained in this Prospectus

in the context.

The CMA assumes no responsibility for the accuracy and adequacy of the statements and

information included in this Prospectus nor shall it have any liability for any damage or loss

resulting from relying upon or using any part of the same by any person.

Should copies of this Prospectus be produced in languages other than Arabic, the Arabic

language Prospectus is the only approved version.

4

CONTENTS

Definitions & Terminology ……………………………………………………………… 4

Fund Features (Summary Terms) ………………………………………………………… 6

Chapter 1: The Fund ……………………………………………………………………. 8

Chapter 2: Investment Objective, Process And Restrictions …………………………… 9

Chapter 3: Structure & Management of Fund ………………………………………….. 13

Chapter 4: The Investment Manager …………………………………………………… 16

Chapter 5: Service Providers …………………………………………………………… 18

Chapter 6: Fees & Expenses ……………………………………………………………. 21

Chapter 7: Risk Factors & Mitigations …………………………………………………… 23

Chapter 8: Taxation …………………………………………………………………….. 25

Chapter 9: Subscription and Redemption ……………………………………………... 26

Chapter 10: Unit Ownership …………………………………………………………... 32

Chapter 11: NAV Calculation ……………………………………………... ………… 36

Chapter 12: Regulatory Framework …………………………………………………… 38

Chapter 13: Articles of Association ……………………………………………………. 39

Chapter 14: Accounts and Accounting Policies ………………………………………. 40

Chapter 15: Dissolution and Liquidation of the Fund ………………………………... 42

Chapter 16: Undertakings……………………………………………………………… 44

5

DEFINITIONS & TERMINOLOGY

In this Prospectus, the terms and expressions listed below have the meanings set out

opposite them, except when the context requires otherwise:

Application Form The application form to subscribe for Units.

Articles of Association: The Articles of Association of the Fund that shall prescribe the

functions and powers of the Unit‐holders and lay out rules for the

operation of the Fund.

Auditors The external independent auditors of the Fund.

Back-end load It is a percentage paid by Unitholders at the time of redeeming part

or all of their Units

Board A committee having overall responsibility for the affairs of the

Fund.

Business Week: From Sunday to Thursday as per existing CBO rules for banking

days during a calendar week

Business Day: Any day on which commercial banks in Oman and MSM are open

for business.

CBO: Central Bank of Oman

CMA: Capital Market Authority, Sultanate of Oman.

Capital Market Authority Law:

Law and any relating to all capital market activities in Oman as

established by the Royal Decree 80/98 (as amended) and all

regulations issued thereunder.

Currency of the Fund: Rial Omani

Custodian: Entity responsible for safekeeping of assets of the Fund as per the

terms of the Custodian Agreement.

Custodian Agreement: Agreement signed between the Custodian and the Fund, represented

by the Board.

Fund: Al-Kawthar Fund

GCC The Gulf Cooperation Council.

IPO: Initial Public Offering

Initial Subscription Period The period from 2 June 2013 to 1 July 2013

Investment Management

Fee

Fees of the Investment Manager.

Investor An investor in the Fund.

Legal Jurisdiction: Omani Laws related to this matter

MCDC Muscat Clearing and Depository Company SAOC

Means of Payment: Any payment made by the Fund will be made in by electronic bank

transfer or by a cheque

MSM: Muscat Securities Market

NAV: The net asset value of the Fund

NIFCO: National Investment Funds Co. SAOC

Performance Fee The performance fee payable to the Investment Manager.

Prospectus: This document

Rial Omani “RO”: Rial Omani, the lawful currency of Oman.

Redemption Day: The last Business Day of the week on which the Investment

Manager will affect the redemption request

Shariah The law derived from the Quraan and from the teachings of

6

Prophet Mohammed (P.B.U.H)

Shariah Advisor Person or Group of Persons who will ensure adherence to Shariah

principles for all investments and activities of the Fund

Shariah Compliant Conforms with Shariah rules as determined by the Shariah board.

Outsourced Shariah

Advisory Services

The committee comprising of the eminent scholars who review the

structure and the operation of the Fund to ensure compliance with

the principles and precepts of Shariah.

Sponsor NIFCO

SPV A special purpose entity.

Subscription Day The last Business Day of the week on which Investment Manager

will process the subscription request

Units: Unit means each Unit in the Fund, having a nominal value of RO

1.000 (One Rial) each

Unitholders: Unit‐holders mean holder of Units in the Fund. May be natural or

legal person

Valuation Day: The day on which the Investment Manager calculates the NAV, i.e.

the last Business Day of the week

7

SUMMARY TERMS

Fund Name Al-Kawthar Fund (a Shariah compliant fund)

Fund Manager NIFCO

Fund Currency Rial

Issue Open 2 June 2013

Issue Close 1 July 2013

Structure Open ended fund with perpetual life

Investment Objective The Fund’s objective is to achieve capital appreciation primarily

through investments in equities listed on the regulated stock

markets of the member countries of the GCC as well as Murabaha

and Sukuks as per the Shariah principles as interpreted by the

Shariah Advisor and the Shariah guidelines stated herein.

The Fund will be managed by utilizing both a top down approach in

order to determine country and sector allocations and a bottom up

approach in order to make individual stock selections. The Fund

will also take advantage of price distortions and arbitrage

opportunities, which will require an active management style.

Geographic Focus GCC region

Minimum and

Maximum Investment

The minimum subscription shall be 100 (one hundred) Units with

multiples of 100 (one hundred) Units thereafter. There is no

maximum subscription to the Units.

Investment Management

Fees

1.5% per annum of the NAV of the Fund before the Investment

Management Fee and the Performance Fee of the Fund. The

Investment Management Fee will be calculated on daily basis and

paid monthly in arrears

Performance Fees In case the NAV of the Fund at the close of a financial year

appreciates by more than 10% compared to the beginning of the

year, the Investment Manager will be paid 15% of the amount

exceeding 10%. The Performance Fee shall be calculated on yearly

basis using the weighted average units in issue and shall be payable

to the Investment Manager at the end of each financial year

Shariah Advisor’s Fees The Shariah Advisor shall receive a one off lump-sum fixed amount

of noless than RO 12,000/- for advisory services relating to

procuring Shariah fatwa for proposed Islamic Fund product to be

classified as Shariah Compliant. In addition, the Shariah Advisor

shall receive no less than RO13,500/- paid annually for undertaking

security screening and quarterly audit fee for Shariah monitoring of

the security holding and review of Shariah Complaint process.

Custodian Fees a) Custody fee: A minimum aggregate annual fee of 0.16% of the

NAV of the Fund.

b) Transaction fee: RO 15/‐ per transaction (including bank

charges if any). There is a ceiling of RO. 50,000/‐ on total

Custodian charges per annum inclusive of Custody Fee and

8

Transaction Fee payable to NIFCO. The Custodian charges will

be calculated daily on average daily NAV and paid monthly in

arrears.

All fees/costs payable to Sub‐custodian for the securities acquired

by the Fund in GCC countries other than Oman shall be paid by the

Fund at actual. All fees/charges ancillary to Custodian services

payable to stock exchanges, registrars, and MCDC, MSM, and

regulatory bodies shall be paid by the Fund at actual

Investment Manager NIFCO

Custodian: National Bank of Oman SAOG

P.O. Box 751, Postal Code 112, Ruwi, Sultanate of Oman.

Investment Manager’s

Auditor:

Deloitte & Touche (M.E.) & Co. LLC

P.O. Box 258, Postal Code 112, Ruwi, Sultanate of Oman

Fund Auditors: KPMG

HSBC building, CBD area, Ruwi, Sultanate of Oman.

Legal Advisor to the

Issue:

Trowers & Hamlins

Al Jawhara building, Al Muntazah Street, Shatti Al Qurum, Muscat.

Address of the

Al-Kawthar Fund

PO Box 3028 PC 112 Ruwi, Muscat, Sultanate of Oman, Tel: +968

2481 3143, Fax: +968 2481 3241

9

CHAPTER 1: THE FUND

1.1 The Fund

The Fund is open-ended investment fund established under the law of Oman. It is a

contractual arrangement between the Investors, and the Investment Manager, under which

investors acquire Units providing a pro-rata entitlement to the net assets of the Fund on a

divisible basis based on the terms and conditions described in this document. The Fund is

registered with CMA. For subscription and redemption process, please refer to chapter 9. The

Units are not capital guaranteed

1.2 Establishment & Governance

The Fund is an investment fund with a variable capital divided into units with nominal value

of RO 1.000. The affairs of the Fund will accordingly be governed by this Prospectus and the

Articles of Association which will serve as the constitution of the Fund. All provisions of the

CMA Law, the CMA Regulations and other directives issued by the CMA shall apply to the

Fund at all times.

1.3 Minimum Capital

The Fund is an open-ended fund and hence there shall be no maximum capital. The minimum

capital shall be RO 2 million. The fully paid up capital of the Fund at the time of the

establishment shall not be less than RO 2 million. The sponsor’s share shall not be less than

5% of this capital. The sponsor shall not sell or redeem its share except after three years from

the date of closure of initial subscription.

10

CHAPTER 2: INVESTMENT OBJECTIVES, PROCESS AND

RESTRICTIONS

2.1 OBJECTIVES OF THE FUND

The Fund’s objective is to achieve capital appreciation primarily through investments in

equities listed on the regulated stock markets of the member countries of the GCC in addition

to Murrabaha and Sukuks as per the Shariah principles as interpreted by the Shariah Advisor

and the Shariah guidelines stated herein.

The Fund will be managed by utilizing both a top down approach in order to determine

country and sector allocations and a bottom up approach in order to make individual stock

selections. The Fund will also take advantage of price distortions and arbitrage opportunities,

which will require an active management style.

2.2 INVESTMENT STRATEGY GUIDELINES AND POLICIES

The Fund invests primarily in the listed GCC stocks, within the criteria set by Shariah

Advisor of the Fund, in addition to Murrabaha and Sukuks The Fund manager will focus on

companies that enjoy strong fundamental factors and promising long-term growth after

conducting a comprehensive analysis.

Under normal market conditions, at least 80% of the Fund’s investments will be made in

listed securities including listed equities, SPVs, and Shariah compliant tradable income

generating instruments, including Sukuk, of issuers in member jurisdictions of the GCC

states. The Fund may also invest up to 20% of its assets in unlisted equities of companies in

these jurisdictions. Furthermore, the Fund may invest up to 20% of its assets in SPVs or

investment funds, which provide access to investments that would not otherwise be directly

available to the Fund. The Fund may from time to time invest in short-term instruments and

otherwise maintain ancillary liquid assets in order to ensure that it is in a position to meet

repurchase requests as and when they may arise.

The Fund would have a diversified asset allocation strategy as such strategy provides a better

risk/return profile. A more dynamic approach to asset allocation would be considered for

managing risk across various assets and then building portfolios that periodically adjust their

allocations to dynamic market conditions.

Distributions from the Fund will be made at the discretion of the Board. However, it is not

the current intention of the Board to declare distributions in respect of the Fund. Instead, net

income realized will be reinvested and will be reflected by an increase in the NAV of the

Units, which may be realized by Unitholders at such time as they redeem their Units. In any

case, distributions, if any, will be made from net realized income only.

2.3 SHARIAH GUIDELINES

The business of the Fund will be conducted in accordance with Shariah principles as

interpreted by the Shariah Advisor. The Investment Manager will pre-screen all investments

according to criteria agreed with the Shariah Advisor. The Fund will not invest in:

11

(i) Interest bearing investments;

(ii) Forward currency transactions;

(iii) Securities issued by companies whose income is derived from any of the

following activities:

(a) Manufacture or distribution of alcohol or tobacco products;

(b) Gambling;

(d) Production, processing, packaging, or any other business activity relating to

pork or pork products and other non-halal meats and poultry;

(e) Conventional banking, insurance or any other interest related financial

services activity;

(f) The production or distribution of pornographic materials; or

(g) Any other activity that is not permitted by Shariah principles as determined

by the Shariah Advisor.

(iv) Derivates, including futures, options and contracts for differences; and

(v) SPVs, investments trusts, unit trusts, mutual funds and other collective investment

schemes that do not adhere to Shariah principles as interpreted by the Shariah

Advisor.

The following will be considered as Shariah compliant:

(i) Revenue share from non-compliant activities: in certain cases, revenues from non-

compliant activities are tolerated, if they comply with the following threshold:

(non-permissible income other than interest income) / revenue < 5%

(ii) Accounting-based screens: after removing companies with non-compliant business

activities, the rest of the companies should be examined for compliance in financial ratios, as

certain ratios may violate compliance measurements.

(a) Leverage compliance: this compliance is measured as:

Debt / market value of equity (36 month average) < 33 %;

(b) Cash compliance: there are compliances with reference to cash holdings these are:

Accounts receivables / market value of equity (36 month average) < 49 %;

(Cash + interest bearing securities) / market value of equity (36 month average) <33%;

(c) Such accounting based screens are not applicable to companies which are run on a fully

Shariah compliant basis. Such companies may be characterized by (the list below is

indicative, non exhaustive and reviewed on a case to case basis):

• All transactions (business and financial) are in accordance with Shariah

principles

• Has a Shariah Supervisory Board

• Incorporated and managed in a fully Shariah compliant manner.

12

The proposed investments will be approved based on their compliance with the investment

rules and after obtaining approval from the Shariah Advisor. The Shariah Advisor will

prepare a list of the companies in which to invest in and will review the list quarterly. The

Shariah Advisor will also provide a certificate indicating that a business is Shariah complaint.

In addition, the Shariah Advisor will consider the Investment Manager’s proposal for

investing in companies not listed on the stock market. Where a company is removed after

such revision, the Fund will disinvest immediately if such disinvestment will be profitable

otherwise, the Fund will disinvest within one month if disinvestment will realise losses.

2.4 INVESTMENT RESTRICTIONS

In respect of the Fund's commitment to invest at least 75% of its capital to achieve its

objectives, policies and Shariah guidelines, the Fund shall comply with the following

investment restrictions in relation to its investments:

(i) The Fund shall not invest more than 50% of its assets, as calculated at the time that the

investment is made and using the starting NAV for the relevant valuation period, in any one

country.

(ii) The Fund shall not invest more than 50% of its assets, as calculated at the time that the


sector.

(iii) The Fund shall not invest more than 10% of its assets, as calculated at the time that the

investment is made and using the starting NAV for the relevant valuation period, in the listed

securities of any single corporate issuer.

(iv) The Fund shall not invest more than 5% of its assets, as calculated at the time that the


unlisted security and

(v) The Fund shall not invest more than 10% (in aggregate) of its assets, as calculated at the

time that the investment is made and using the starting NAV for the relevant valuation period,

in unlisted securities

(vi) The Fund shall not invest more than 5% of its assets, as calculated at the time that the


investment fund.

(vii) The Fund shall not hold any commodities or right or interest therein, in activities that are

outlined at paragraph 2.3 above (Shariah guidelines).

(viii) The Fund shall not acquire any interest in land.

(ix) The Fund shall not invest in unlimited liability obligations.

(x) The Fund shall not take legal or management control in any of its investments.

(xi) The Fund shall not borrow more than 10% of its NAV

(xii) The Fund shall not own greater than 10% of securities from any source.

(xiii) The Fund's investments in securities, issued by a single source, shall not exceed 10% of

the Fund's NAV.

The Investment Manager may not perform any of the following transactions for the account

of the Fund:

13

• Granting loans

• Short selling

• Granting collaterals and guarantees

• Acting as principal guarantor of issues

• Trading in commodities

• Trading in real estate.

• Discounting cheques.

• Borrowing on behalf of the Fund with the exception of the cases mentioned above.

• Any transaction in contradiction with Islamic Shariah provisions.

2.5 PURIFICATION

Returns derived from the Fund's investments may comprise an amount which is attributable

for Shariah purposes to impure income earned or received. If this is the case, the amount of

any return which is so attributable shall be calculated by the Investment Manager or notified

to the Investors in accordance with the Shariah guidelines approved by the Shariah Advisor.

The amount earned in such cases will be donated periodically by the Fund to charitable

organisations or Islamic organisations with no direct or indirect benefit accruing to the Fund

or any of its investors.

The following ratio will be provided to investors for purification purposes, it is calculated as:

(Non permissible revenue including interest income / total revenue)

Non permissible revenue including interest income is computed on an annual basis using the

annual published financial statements.

2.6 FINANCING

The Fund shall have the power to utilize Shariah compliant financing. Financing will only be

used for short term liquidity purposes to finance redemptions in the normal course of Fund

operations and not for leverage. The Board shall restrict the financing so as to ensure that the

maximum amount financed does not at any time exceed ten percent of the NAV. All

financing will be in accordance with the principles of Shariah as interpreted by the Shariah

Advisor.

2.7 WAIVER OR AMENDMENT

The investment policies of the Fund, described above, may be amended by a special

resolution of the Unitholders on the recommendation of the Board, in consultation with the

Investment Manager and the Shariah Advisor.

The general investment restrictions, described above, may be amended by an ordinary

resolution of the Unitholders in consultation with the Investment Manager and the Shariah

Advisor.

14

CHAPTER 3: STRUCTURE & MANAGEMENT OF THE

FUND

3.1 THE FUND ORGANIZATION

The Fund is incorporated as an open ended fund in the Sultanate of Oman. The registered

office of the Fund is at Muscat International Centre, Penthouse, P.O.Box 3028, Postal Code

112, Ruwi, Sultanate of Oman.

3.2 THE BOARD

The Fund shall be managed and supervised by a Board elected by the general meeting in

accordance with the provisions of the Articles of Association. The Board will comprise of

five (5) members.

In accordance with the Articles of Association, the term of office of the Board shall be five

years from the date of formation, except in case of the first Board which shall be appointed

by the Sponsor for a period of up to the first general meeting from the date of registration.

Members of the Board are liable before the Investors and CMA, to supervise and oversee the

Investment Manager and other service providers and to safeguard the interests of the Fund

and Investors in accordance with the law.

The management of the Fund is restricted to the terms of this Prospectus and hence no party

beyond the authority of this Prospectus and the Articles of Association is entitled to interfere

in the Fund’s Management.

3.3 MEMBERSHIP CRITERIA OF BOARD

The members of the Board shall satisfy the following criteria:

1. Having good conduct and sound reputation.

2. Not convicted in any crime or an offence involving dishonesty or breach of honesty or

trust or a crime stipulated in the Capital Market Law, Commercial Companies Law

(RD 4/47) or Oman Commercial Law (RD/55/90) unless rehabilitated.

3. Not declared as bankrupt.

Members of the Board: The following are the members of the first Board having a

maximum term of one year, subject to re-election.

1. Sayyidah Rawan Ahmed Al Said: She holds a Bachelors of Economics from the

American University, Cairo, a Higher Diploma in Investment Analysis from the University of

Sterling, a Masters in Economic and Finance from Loughborough University in Great Britain.

She has experience of working in investment for more than 23 years in both the public and

private sectors. She is currently the Chief Executive Officer (CEO) of ONIC Holding and

15

was Deputy CEO of the State Reserve Fund. She is also currently a director of a number of

financial institutions in the Sultanate of Oman and the GCC.

2. Sayyid Amjad Mohammed Al Busaidy: He holds a Masters degree in Business

Administration from the University of Southern Cross, Australia and is currently the CEO of

Diwan of Royal Court Employees’ Pension Fund. He is a director of a number of companies

in the Sultanate of Oman and is also the Chairman of Nawras Telecommunication SAOG.

3. Abdullah Humaid Al Mamary: He holds a Bachelors degree in Business Administration

from the University of Lincoln in Great Britain. He is currently the Manager of the Sultan’s

Special Force Pension Fund. He is a director of a number of companies in the Sultanate of

Oman and is also the Vice Chairman of Bank Sohar, Hotels Management Company and the

Middle East IT College.

4. Colonel Said Abdullah Al Harthy: He holds a Diploma in Business Administration,

Diploma in Finance and a Bachelors degree in Military Sciences. He is a chartered

accountant and is currently the Director of Finance at the Ministry of Defence.

5. Abdullah Salim Al Harthy: He holds a Bachelors degree in Accounting and Finance from

Sultan Qaboos University, Oman. He is a member of the Certified Financial Analysts

Institute in the USA. He is currently Director of Business Strategy for the State General

Reserve Fund and a director of a number of companies including Dubai Mercantile

Exchange, Oman and Vietnam Investment Fund, Oman and Libya Investment Fund and

National Aluminum Products Company.

Where an office in the Board becomes vacant prior to the end of the term the Board may elect

a substitute until the end of the term.

3.4 MEETINGS OF BOARD

Meetings of the Board shall observe the following:

1. The number of attending members shall not be less than two thirds of the total

strength

2. The members shall not take part in discussion and/or voting on matters if he or his

spouse or relatives up to second degree have interest

3. Approval of resolutions shall need support from majority of the members

4. Objection by a member to any resolution shall be recorded in the minutes of the

meeting

5. The Board shall meet at least four times per year with a maximum gap of four months

between any two consecutive meetings

16

3.5 ROLE OF BOARD

The Board shall carry out oversight and supervision of the Fund’s business and shall

undertake the following:

1. Evaluation of the Fund’s investment performance compared to the benchmark

2. Ensure Fund’s compliance with the Prospectus, Articles of Association and statutory

requirements.

3. Evaluation of the performance of the Investment Manager and other service providers.

4. Ensure adequacy of the Fund’s systems to safeguard its assets and ensuring that

adequate accounting controls are in place.

5. Ensure that Investment Manager’s system and controls are adequate to ensure

compliance with the interests of the Fund and Investors.

6. Avoidance of conflicts of interests and ensuring that adequate procedures are in place

to resolve any conflict of interest in the best interest of the Fund and Investors.

7. Ensure segregation of function when one company is acting as provider of more than

one service to the Fund.

8. Approve the transactions with related parties and disclose the same.

9. Approve the annual report, financial statements and other information and disclose to

the public and Investors to ensure that the disclosure is fair, timely, transparent and

not misleading.

10. Appointment and removal of service providers and determining their fees.

11. To take specific decisions in relation to the gains, Investors who hold at least 5% of the Fund's Units, may apply to the Board to overturn

any decisions that are made by the Board and that may harm the Fund or its investors.

17

CHAPTER 4: THE INVESTMENT MANAGER

4.1 INVESTMENT MANAGER

The Investment Manager of the Fund is NIFCO, a close joint company incorporated in the

Sultanate of Oman pursuant to Royal Decree 81/98, having its registered office and

headquarters at Muscat International Centre, Penthouse, P.O. Box 3028, Postal Code 112,

Ruwi, Sultanate of Oman.

The purpose of the Investment Manager is to establish and manage a number of investment

funds, in order to derive profits for and on behalf of the investors in those funds. The

shareholders in the Investment Manager are the State General Reserve Fund, the Public

Authority for Social Insurance and a number of civil and military pension funds in the

Sultanate of Oman. The Investment Manager has been formed and will be managed in

accordance with the Oman Commercial Companies Law. The Articles of Association of the

Investment Manager are available for inspection at the offices of the Investment Manager.

The Investment Manager is managed by the board which has been appointed by the

shareholders in accordance with its articles of association.

4.2 ROLE OF THE INVESTMENT MANAGER

The Investment Manager will be responsible for identifying investment opportunities and

entering into transactions consistent with the objectives and investment guidelines of the

Fund. After an investment is made, the Investment Manager will be responsible for

monitoring the investment until the time of exit. The Investment Manager will be responsible

for monitoring the portfolio structure, investment performance and compliance with the asset

allocations. The Investment Manager manages the Fund in line with the Prospectus, the

Articles of Association and any applicable laws or regulation at the time being in force.

The Investment Manager shall undertake the following:

1. Manage the portfolio of the Fund in the best interest of the investment objectives of

the Fund as stipulated in the Articles of Association

2. Take all investment decisions or other decisions in the best interest of the Fund and

Investors

3. Accurately record all purchase and sale transactions undertaken in favour of the Fund

and in keeping with their time sequence

4. Shall have an accounting system to classify, monitor and check all transactions in the

Fund’s portfolio which are entered into the system and adjust to the cash and

securities accounts opened in the name of the Fund with the Custodian

5. Provide liquidity for the Fund to discharge any obligations.

6. Safeguard the Fund from any unnecessary investment risks.

7. Disclose to Unitholders, organising bodies and supervisory bodies, on demand, fatwas

and reports received from the Shariah Advisor.

18

These administrative activities may include the following administrative functions:

� Calculation of the NAV including the calculation of the Fund's income and expense

accruals and the pricing of securities at current market value.

� Preparation of quarterly, semi-annual and annual financial reports to Unitholders.

� Maintenance and filing of the fund's financial books and records as the fund

accountant, including reconcilement of holdings with custody and broker records.

� Payment of fund expenses.

� Settlement of daily purchases and sales of securities, ensuring collection of dividends

and receivables.

� Calculation and payment to the transfer agent of dividends and distributions (if

required).

� Preparation and filing of the fund's prospectus.

� Preparation and filing of other CMA filings/reports.

� Calculation of the total returns and other performance measures of the Fund.

� Monitoring investment compliance with CMA, prospectus or other regulatory

requirements.

� Supervision of the orderly liquidation and dissolution of the Fund (if required)

� Preparation of a summary of the Fund's activities at the end of each financial year.

19

CHAPTER 5: SERVICE PROVIDERS

5.1 SHARIAH ADVISOR

Rating Intelligence Partners LLP has been appointed as the Shariah Advisor to the

Fund.

A supervisory committee (the "Fund's Outsourced Shariah Advisory Services") would be

appointed by the Board to advise the Investment Manager on matters pertaining to the

Shariah. The role of the Fund's Outsourced Shariah Advisory Services is to provide ongoing

and continuous supervision and make final decisions in all matters pertaining to the Shariah

for the Fund.

The Outsourced Shariah Advisory Services will review the structure and the proposed

operation of the Fund as described in this Prospectus, and would provided a certification

(“Fatwa”) that they are in compliant with the principles and precepts of Shariah.

The role of the Shariah Advisor is as follows:

1. To conduct quarterly reviews to identify securities in which the Fund can invest

whilst complying with Shariah, and identify those which should be excluded for non-

compliance with Shariah.

2. The Outsourced Shariah Advisory Services would serve in an advisory capacity only,

and will not have the power to make any investment decisions for the Fund. The

Fund, in agreement with the members of the Outsourced Shariah Advisory Services,

intends to retain such members for the life of the Fund, although there can be no

assurance that any of them will remain a member of the Outsourced Shariah Advisory

Services throughout the term of the Fund.

The members of the Shariah Board shall be permanently appointed throughout the term of

the Fund, however, no continuation is guaranteed and Rating Intelligence Partners LLP was

appointed as Shariah Advisor who will in turn appoint the Shariah Supervisory Board

comprising of:

1. Dr. Mohammed Ali Al Ghari: He is an Associate Professor and Deputy Director of at

the Economic Research Centre of King Abudlaziz University in Jeddah and a member

of the Academic Committee of the Islamic Development Bank in Jeddah. He is a

member of the Islamic Jurisdiction Committee in Jeddah, the Editor of the Islamic

Economic Magazine, London, and a member of the shariah supervisory board for a

number of financial institutions such as the Saudi American Bank, Saudi British Bank

and Dow Jones Islamic Index.

2. Dr. Abdulsattar Abu Ghadah: He is a Shariah advisor for a number of financial

institutions and private and government banks. He is an advisor for the Islamic Law

20

Knowledge Department in Kuwait, and a member of the sharia supervisory board, for

Al Barakah Islamic Investment Bank, Bahrain.

3. Dr. Nazih Hammad: He is a former professor at Um Al Qura University, Makkah, a

member of the Islamic Jurisprudence Academy, Jeddah, a member of the sharia

supervisory board at the City Islamic Bank and at Bermal Asset Management

Company.

4. Dr. Mohammed Ali Qattan: He is a former sharia supervisor, for Al Mal Islamic

Investment Company and an Islamic economy researcher in the Emiri Diwan, Kuwait.

He is an author of books in Islamic economy and a member of Sharia supervisory

boards of several financial institutions in Kuwait, Kenya, Great Britain, Switzerland

and the USA.

A copy of the agreement with the Shariah Advisor is available for inspection at the office of

the Investment Manager

5.2 CUSTODIAN

National Bank of Oman SAOG is the Custodian for the assets held by the Fund. The

Custodian may appoint a sub-custodian to keep the assets located within and outside the

Sultanate of Oman. Appointment of sub-custodian shall not exonerate the Custodian of any of

its obligations.

Written consent of the Board shall be obtained for all contracts concluded with the sub-

custodian and such contracts shall provide adequate protection for the assets on terns and

conditions consistent with the contract with the Custodian.

All contracts concluded with the Custodian shall at least cover:

1. Requirements that enable the Fund to exercise all the rights pertaining to the assets

kept with the Custodian

2. Requirements pertaining to the location where the Fund’s assets are kept

3. Method of holding the assets

4. Care and liability for loss

5. Review and compliance reports

6. Fees, method of payment and timing of payment

No contract concluded with the Custodian shall provide for creation of any encumbrance of

the assets of the Fund, except for claims of payment of fees and charges to the Custodian for

acting in such capacities. The contracts shall not contain any provision that would require the

payment of fees or expenses to the Custodian in the form of transfer of ownership of assets

belonging to the Fund.

The assets of the Fund, wherever required or deemed necessary, shall be registered in the

name of the Custodian or sub-custodian or their respective nominee with an account number

21

or other designation in the records of the Custodian or sub-custodian or the nominee, to

establish that the ownership of the assets is vested with the Fund.

The Custodian shall exercise due diligence in keeping the assets of the Fund and shall protect

the interests of the Fund in every act, and they shall be liable for any loss to the Fund’s assets

resulting from any omission or wrongful act by them or their respective employees directors

or managers.

5.3 AUDITORS

KPMG have been appointed as the first Auditors of the Fund. Their address is P.O. Box 258,

Postal Code 112, Ruwi, Sultanate of Oman.

The Board of Directors of the Fund will appoint external auditors that are accredited and will

give the auditor access to the books of the Fund and allow the auditor to request data,

clarifications and verification of assets and liabilities. The auditor will thereon report to the

Board of Directors of the Fund.

The auditor of the Fund cannot be the same as the external auditor to the Investment Manager

of the Fund.

The external auditor of the Fund will be appointed for one financial year. An accounting firm

shall not be appointed for more than four consecutive years, and can be appointed again only

after the passage of two consecutive years.

5.4 LEGAL COUNSEL

Trowers & Hamlins are the Legal Counsel to the Fund. Trowers & Hamlins is a branch office

of an English firm and its address in Muscat is P.O. Box 2991, Postal Code 112, Muscat,

Sultanate of Oman.

Inspection of Documents

The Articles of Association of the Fund and the material contracts that have been entered into

by the Fund can be inspected by bona fide potential Investors at the office of the investment

manager

22

CHAPTER 6: FEES AND EXPENSES

The Fund will bear and be charged all expenses related to establishment and running of Fund.

6.1 INVESTMENT MANAGER FEES

Pursuant to the terms and conditions of the investment management agreement, the Fund will

pay to the Investment Manager;

a) Investment Management Fee: 1.5% per annum of the NAV of the Fund before the

Investment Management Fee and the Performance Fees of the Fund. The Investment

Management Fee will be calculated on daily basis and paid monthly in arrears;

b) Performance Fee: In case the NAV of the Fund at the close of a financial year

appreciates by more than 10% compared to the beginning of the year, the Investment

Manager will be paid 15% of the amount exceeding 10%.

6.2 SHARIAH ADVISOR FEE

Fees and annual remuneration of the Shariah Advisor would be R.O. 12,000. In addition to an

amount of R.O. 13,500 for the Shariah advisor's quarterly reviews. These fees are fixed for

the first year and they may be revised by a resolution issued in a General Meeting.

6.3 CUSTODIAN CHARGES

a) Custody Fee: A minimum aggregate annual fee of 0.16% of the NAV of the Fund.

b) Transaction Fee: RO 15/‐ per transaction (including bank charges if any). There is a

ceiling of RO. 50,000/‐ on total Custodian charges per annum inclusive of Custody

Fee and Transaction Fee payable to NIFCO. The Custodian charges will be

calculated daily on average daily Net Assets and paid monthly in arrears.

6.4 ADMINISTRATIVE FEE

The Investment Manager will be paid an annual fee of 0.3% of the NAV of the Fund with a

maximum amount of RO 50,000/‐. The administrative fee will be calculated daily on average

daily NAV and paid monthly in arrears.

6.5 Distribution Charges

NIFCO has been appointed as Distributor of the Fund. The distributor is responsible for

marketing and promotion of the fund. The distributor is expected to do the following :

(i) Develop extensive marketing strategy and campaigns

(ii) Sell the Fund to the prospective investors

(iii) Develop marketing material including presentations for the prospective investors

23

(iv) Seek sub-intermediaries to widen the investors reach

A fee of 1% would be payable for initial and subsequent subscription to the Fund. A copy of

the distribution agreement is available for inspection at the office of the Investment Manager.

6.6 SITTING FEES & EXPENSES

Chairperson and each member of the Board shall be entitled to a sitting fee of RO 350/- and

RO 300/‐ per meeting respectively. In addition each member may charge out of pocket

expenses incurred solely for the purpose of carrying out their duties for the Fund. The total

amount under the head of ‘sitting fee’ and ‘out of pocket expenses’ for each of the members,

however, shall not exceed RO 5,000 (five thousand only) each year.

6.7 OTHER EXPENSES

In addition to the above specific recurring expenses the Fund will also incur the following

expenses;

a) CMA regulatory fees:

b) Accounting / record keeping expenses

c) Audit fees;

d) Brokerage commission, and other ancillary charges related to assets of the Fund.

e) Taxes, if any;

f) NAV publishing and expenses related to dispatch of statement of account ;

g) Printing and distribution expenses related to annual accounts and Unitholders

meetings;

h) Any losses incurred as a result of dealing in securities held on behalf of the Fund;

i) Any other expenses directly related to the Fund.

6.8 REDEMPTION FEE

Redemptions made within one (1) year of the purchase by the Unitholder will carry an Back-

end load of 3% of the redemption value. Redemptions made after completion of one (1) year

but before completion of two (2) years from the date of purchase by the Unitholder will carry

an Back-end load of 1.5% of the redemption value. Redemptions made after completion of

two (2) years from the date of purchase by the unitholder will not bear any Back-end load.

24

CHAPTER 7: RISK FACTORS & MITIGATIONS

Investors should carefully consider the risks described below in addition to all other

information presented in the Prospectus before deciding to invest in the Fund. Investors are

warned that there are risks involved with investing in the Fund, which may affect the Fund’s

performance, including but not limited to the risks listed below. Investors may note that the

risk factors mentioned below are the Sponsor’s opinion based on current knowledge and

information available with it. The actual risks and their impact could be materially different

from that mentioned herein.

Specific Risk Factors:

7.1 MARKET RISK

Market risk refers to potential losses that may arise from changes in the market prices of the

investments of the Fund. Prices of securities that the Fund invests in, fluctuate in response to

various factors, for example, events or news that relates to securities as well as general

market or economic conditions.

Mitigation: The Investment Manager's team will consist of professional and experienced

research team which will conduct thorough investment research and analyze performance and

prospects of various securities before selecting a particular investment. The team will also

endeavor to adequately diversify the portfolio to spread and minimize risk.

7.2 EXCHANGE AND CURRENCY RISK

The Fund expects to invest in securities denominated in currencies other than OMR. Though

these currencies are pegged to the USD, any change to the peg or changes in exchange

control regulations will have an impact on the NAV.

Mitigation: The Fund will continuously monitor and review the currency scenario in its

investible markets. It will take necessary steps, if required, from time to time to hedge the

foreign exchange risk of the currencies other than OMR

General Risk Factors:

7.3 POLITICAL & ECONOMIC RISKS

The value of the Units and the income generated by the Fund may be affected by

uncertainties such as diplomatic developments, changes in government policies, taxation and

interest rates, currency repatriation and other political and economic developments in law and

regulations and, in particular, the risk of expropriation, nationalization and confiscation of

assets and changes in legislation relating to the level of foreign ownership.

Mitigation: Political risk in GCC is relatively low compared with other regions in Middle

East. However, it is a risk factor that cannot be eliminated completely.

25

7.4 LEGAL RISKS

The laws and regulations governing the Fund are subject to change. The legislation can

change in countries where the Fund may invest. Such legislation may have an adverse effect

on the investments held by the Fund.

Mitigation: The Investment Manager will continuously monitor and review any legal and

regulatory issues arising, with its legal and compliance advisors

7.5 TAXATION RISKS

The Fund is exempt from tax as per the prevailing regulations applicable in Oman, but may

be subject to local taxations to the extent income is derived from other jurisdictions.

Accordingly, it is possible that the Fund could be subject to taxation in the countries in which

the Fund may invest that is not anticipated either at the date of this document or when

investments are made, valued or disposed of.

7.6 OTHER RISKS

The foregoing list of risk factors is not comprehensive. Investment in the Fund should be

regarded as long-term in nature. Prospective Unitholders should consult their own advisors

before deciding to subscribe for Units.

26

CHAPTER 8: TAXATION

8.1 TAX POSITION OF THE FUND

As per the Royal Decree No. 28/2009 (as amended), the income of Funds are exempt from

Income Tax. The income earned by the Fund is therefore exempt from Omani taxation but

may be subject to local taxation to the extent income is derived from other jurisdictions.

8.2 UNITHOLDER TAXATION

There is no Omani tax on the receipt of dividends from the Fund, or on the proceeds of any

disposal of Units. Unit‐holders may be subject to taxation if they are subject to taxation in

any other jurisdictions. Prospective Investors should consult their own counsel regarding tax

laws and regulations of any other jurisdiction which may be applicable to them. The tax and

other matters described in this memorandum do not constitute, and should not be considered

as, legal or tax advice to prospective Investors.

27

CHAPTER 9: SUBSCRIPTION AND REDEMPTION

9.1 INITIAL SUBSCRIPTION

The subscription for the Units of the Fund shall be open to Omani and non‐Omani individuals

as well as to Omani and non‐Omani corporate institutions.

9.1.1 Application Forms for Subscription:

The Prospectus and Application Forms for subscription can be obtained from the branches of

the collecting banks.

9.1.2 Mode of Subscription:

1. The subscribers shall be responsible for furnishing all their particulars, ensuring

correctness and validity of the information provided in the Subscription Forms.

Depending on what is required in the Application Forms, the banks receiving the

subscriptions have been instructed to accept the Application Forms that comply with

all the requirements as provided for in the Application Form and in this Prospectus.

2. The subscribers shall be required to carefully read the Prospectus and the terms and

conditions of the subscription.

3. The subscribers shall be required to submit the complete Application Form and

furnish all their particulars as required in the form,

4. The subscribers applying for Units during the Initial Subscription Period shall be

required to submit the duly completed Application Form to the bank receiving the

subscriptions (as referred to in the Prospectus) and make payment towards the value

of Units as specified in the Prospectus, ensuring that all the documents in support of

the information referred to above are enclosed.

5. In case of payment of the value of Units being subscribed is made through

cheque/demand draft or remittance, it shall be in favour of "Al-Kawthar Fund."

9.1.3 Subscription on behalf of minor children

a. For the purpose of initial subscription, any person below 18 years of age as on the last

subscription date will be treated as a minor.

b. Only the father may subscribe on behalf of his minor children.

c. If the subscription is made on behalf of a minor by any person other than the father,

he/she shall be required to attach a valid legal power of attorney issued by the

competent authorities authorizing him/her to deal in the minor’s funds through sale,

purchase and investment.

28

9.1.4 Initial Subscription Price

The initial subscription price is RO 1.000 (one Rial) per Unit and in addition to that, the

issuance fee is RO 0.020 (twenty baisas).

9.1.5 Minimum Subscription

The minimum initial subscription shall be 100 (one hundred) Units for each subscriber and in

multiples of 100 (one hundred) Units) thereafter.

9.1.6 Maximum Subscription

As per the relevant regulations, there is no maximum limit on the Unit-holding by a single

investor

9.1.7 Minimum size for Initial Subscription

The Fund will not be established and all applications received for initial subscription shall be

refunded unless valid subscriptions are received for a minimum of 2,000,000 (two million)

Units during the Initial Subscription Period.

9.2 ACCEPTANCE OF THE APPLICATIONS:

The collecting bank shall neither receive nor accept the Application Forms for subscription

under the following circumstances:

1. If the Application Form does not bear the signature of the subscriber;

2. In case of failure to pay the full value of the Units subscribed in accordance with the

conditions provided for in the Prospectus;

3. If the value of the Units subscribed is paid through cheque and if the same is

dishonored for whatever be the reason;

4. If the request is made in joint names.

5. If the supporting documents referred to in the Prospectus and the Application Form

for Subscription are not enclosed with the Application Form;

6. If the subscription form does not contain all the particulars of the bank account of the

subscriber;

7. If any particulars of the bank account held by the subscriber as provided for in the

Application Form are noted to be incorrect;

8. If the particulars of the bank account provided for in the Application Form are found

to be not relevant to the subscriber, with the exception of the applications submitted in

the name of minor children, who are allowed to make use of the particulars of the

bank accounts held by their father;

29

9. In case of failure to have the power of attorney attached with the Application Form as

provided for in this Prospectus in respect of the person who subscribes and signs on

behalf of another person (with the exception of a father who subscribes on behalf of

his minor children);

10. If any legal or regulatory requirements are not met.

All subscription applications as per the procedure stated in this Prospectus would be fulfilled

for allotment of Units since there is no fixed capital and the ‘Fund’ is an open‐ended fund.

9.3 ENQUIRY & COMPLAINTS

Subscribers who intend to seek clarification or file complaints with regard to the issues

related to their applications must contact the branch of the bank where the subscription was

made as detailed below:

Bank Contact

National Bank of Oman SAOG

Bank Sohar SAOG

Ahli Bank SAOG

Ms. Koukab Ali Said Al Hasni

PO Box 751, Ruwi, PC 112, Sultanate of

Oman

Phone: +968 24778757 Fax: +968 24778993

Email: [email protected]

Ms. Nadia Yousuf Yacoob Al Balushi

PO Box 44, Jibroo, PC 114, Sultanate of

Oman

Phone: +968 24730221, Fax: +968 24730010

Email: [email protected]

Mr. Sulaiman Ali Al Hinai

PO Box 545, Mina Al Fahal, PC 116,

Sultanate of Oman

Phone: +968 24567841 Fax: +968 24577081

Email: sulaiman.AlHinai@ahlibank-

oman.com

Should a inquiry or complaint be made and no response is received from the bank, the

Investment Manager shall be contacted at the following address:

National Investment Fund Company, Muscat International Centre, Penthouse, Ruwi, Tel. No.

+96824813143, Fax No. +96824813241.

30

9.4 SUBSEQUENT SUBSCRIPTION OF UNITS

Post initial subscription period and re-opening of the fund for subsequent subscription,

application Forms may be submitted to the Investment Manager’s office during its official

working hours on any Business days. The Investment Manager reserves the right not to

accept any Application Form that reaches its office after the official working hours on any

given Business Day or at any time on a day, which is not a Business Day. The Investment

Manager shall accept the Subscription Forms after confirmation of compliance with the

procedure in line with the requirements as provided for in the Prospectus.

All subscription requests through the accepted Application Forms shall be fulfilled on the

following Valuation Day at a subscription price based on the NAV of the Fund at that

Valuation Day. Application Forms received on any Valuation Day will not be entertained on

that particular day.

The minimum subscription will be at least 100 units (One hundred units only). Money will

have to be deposited with the Application Form. The Fund will entertain only such

subscription request as per the prescribed procedure (provided on Application Form) for

which the monies have been received in its bank account.

Existing Unitholders may choose the option to request reinvestment of any cash dividend that

may be declared by the Fund.

The Investment Manager will issue Units of the Fund within two (2) Business days from the

relevant valuation day.

Following is the address and contact details of the Investment Manager for obtaining and

submission of the Application Forms for post initial subscription:

NATIONAL INVESTMENT FUNDS CO. SAOC

PO Box 3028, Ruwi, 112, Muscat, Oman

Tel.: +968 24813143

Fax: +968 24813241

Documents required from subscribers:

1. Individuals: copy of the identity card (if Omani) or a copy of the passport (if non-Omani)

of the individual along with their bank statement outlining their bank account number.

2. Companies and other corporations: copy of the corporate documents of the entity,

decree or decision establishing the entity along with a list of authorised signatories and copies

of their identity cards along with their bank statement outlining their bank account number.

31

9.5 REDEMPTION

9.5.1 Voluntary Redemptions:

Redemptions made within one (1) year of the purchase by the Unitholder will carry an Back-

end load of 3% of the redemption value. If redemptions made after completion of one (1)

year but before completion of two (2) years from the date of purchase by the Unitholder will

carry an Back-end load of 1.5% of the redemption value. Redemptions made after completion

of two (2) years from the date of purchase by the Unitholder will not bear any Back-end load.

Units of the Fund may be redeemed only once a week on the Redemption Day provided that:

The Investment Manager may refuse or defer redemption in the following cases:

a) if the total of all the Unit Holder's redemption requests to be satisfied on any one dealing

day amount to 10% or more of the Net Asset Value of the Fund; or

b) if there has been a public holiday or suspension of dealing on the relevant stock exchange

in which the securities and or other assets held by the Fund, then the Redemption Day will be

on the following Business Day; or

c) if there has been more than two days of public holiday or suspension of dealing on the

relevant stock exchange in which the securities and or other assets held by the Fund, then the

redemption requests would be entertained on the Redemption Day of the following week.

The aggregate Units to be redeemed by the Fund on each Redemption Day in connection with

all voluntary redemptions of Units must not exceed 10% of the total issued Units of the Fund

on that Redemption Day. In case the aggregate issued Units to be redeemed by the Fund to

effect validly requested redemptions would exceed 10% of the total Units of the Fund, then

the Fund will fulfill such requests on a partial, pro‐rata basis. Unfulfilled redemption requests

will be carried forward to the next Redemption Day. Such carried forward redemption

requests will be aggregated with the following week’s redemption request and will be treated

pari passu with the new requests.

9.5.2 Redemption Price

The redemption price per Unit shall be based on NAV per unit calculated as at the

Redemption Day (less any Back-end load applicable).

9.5.3 Procedure for Redemption

a) The request for redemption of Units has to be a minimum of 100 (one hundred) Units

per applicant except in cases where a Unitholder is requesting to redeem his entire

holding.

32

b) In case a calendar week is shortened by more than one Business Day due to declared

holidays or for any reasons resulting in closure of Banks or MSM the Fund will not

entertain request for redemptions in that particular week. The applications received in

that particular shortened week will be carried forward to next week.

c) In order to redeem Units on a Redemption Day, a Unitholder must provide a duly

completed and signed request for redemption, in a specified form, to the Investment

Manager at least 5 Business Days prior to the relevant Redemption Day.

d) Redemption requests will not be revocable without the consent of the Investment

Manager and Units in respect of which Redemption requests have been received will

not be transferable.

e) Payment of the redemption price in respect of voluntary redemptions will normally be

made by electronic bank transfer or by a cheque within 3 business days from

Redemption Day, except that such payment may be delayed in circumstances where

the determination of NAV has been delayed for material reason. Settlement proceeds

may be subject to bank charges payable by the person requesting for redemption.

9.5.4 Redemption “in‐‐‐‐specie”: Units shall only be redeemed for cash. There shall be no Redemption in exchange for the

transfer of interests in the securities and other assets of the Fund.

9.5.5 Suspension of Redemption:

The Fund may not suspend the right of the investor to redeem the value of his units except:

1. For any period during which trading is suspended on securities representing at least

51% of the total assets of the Fund.

2. In accordance with any limits or provisions clearly stated in the Articles of

Association of the Fund.

3. In exceptional circumstances approved by CMA.

The Fund after suspending redemption shall, within the next Business Day after the date of

suspension, send a notice to CMA and shall disclose the same.

9.5.6 Redemption on Termination:

The Board may recommend to the extraordinary general meeting, that the Fund be dissolved

or liquidated, for any reason including:

1. Accomplishment of the objective for which the fund was established pursuant to the

Articles of Association and the Prospectus.

2. Reduction of the NAV of the fund to less than RO 500,000

3. The Fund stops carrying out its business without legitimate reason.

33

4. Reduction in the NAV to the extent that expenses incurred by the fund are

unreasonably high.

5. On recommendation by the Investment Manager.

6. On request by CMA.

Following commencement of Redemption on termination of the Fund, the Investment

Manager shall make no further purchases on behalf of the Fund, shall sell/dispose‐of all

securities and other assets held on behalf of the Fund, shall not receive further requests for

redemption/subscription of Units, shall pay all outstanding expenses of the Fund and shall

arrange for preparation of a final set of audited accounts for the Fund.

34

CHAPTER 10: UNIT OWNERSHIP

10.1 Unitholders Rights:

All Units shall carry equal rights. A Register of Unitholders shall be maintained by the

Investment Manager and shall include full particulars and details of the Unitholders and their

addresses, fax, telephone numbers, email and mobile number (if available), other contact

details, number of units held by each Unitholder and the details of serial numbers of the Unit

certificates evidencing the ownership of Units.

All Unitholders shall have the following rights inherent in the ownership of the Units,

namely:

1. The right to one (1) vote for each Unit;

2. The right to receive dividends, if and when, declared from time to time by the Board;

3. The right to share in the distribution of the Fund’s assets upon liquidation of the Fund;

4. The right to inspect the annual balance sheet, profit and loss statement and cash flow

statement and the other financial books of accounts and records including

Unitholder’s Register;

5. The right to redeem their Units in the Fund subject to the provisions of this

Prospectus;

6. The right to receive notice of and the right to participate and vote in any meeting of

the Unitholders by person or by proxy;

7. The right to apply for the annulment of any decision by a meeting of the Unitholders

or the Board or the Investment Manager which is contrary to the law of the Sultanate

of Oman or this Prospectus;

8. The right to institute actions against the Board, the Investment Manager or the

Auditors of the Fund on behalf of the Unitholders; and

9. Unitholders who hold at least 5% of the Units may request the Board to cancel any

resolution adopted by the Board or in the general meeting as the case may be, if such

resolution is detrimental to the Fund or Investors. The request shall be referred to the

Board which has issued the resolution, to decide on it.

10.2 Limits of Liability:

Liability of the Unitholders for obligations of the Fund is limited only to the extent of their

commitments and any undistributed profits. No Unitholder will be obligated to make any

payment in excess of its commitment for any liability or for the discharge of the obligations

of the Fund.

10.3 Transfer of Units:

The Units will not be transferable unless by way of inheritance or court order The transfer of

ownership shall be registered free of charge within three days from the date of receipt of the

necessary documents.

Units in respect of which a redemption request has been received will not be transferable

unless the redemption request is revoked with the consent of the Fund.

35

10.4 Ownership of Assets:

The assets of the Fund will be kept separate from the assets of the Investment Manager.

10.5 General Meetings:

a. The general meeting is the supreme authority of the Fund and shall comprise of all

Unitholders.

b. Every Unitholder or his proxy carrying a written authorization may attend the general

meeting and shall have one vote for every Unit held by him.

c. The general meeting shall be held in accordance with the Articles of Association. The

extraordinary general meeting may be held if the Fund’s interest so requires or in

accordance with the law or regulation or on request by one or more Unitholders who

hold 10% or more of the Fund’s Units. However, in case of all of the following issues,

the extraordinary general meeting shall be convened to consider:

• Amendment to the Articles of Association.

• Change of main investment objectives of the Fund.

• Change in the frequency of calculation of NAV or NRV.

• Reducing the frequency or limits on redemption.

• Change of the Fund’s status such as a merger, spinoff or conversion etc.

• Dissolution and liquidation of the Fund.

d. Where the Board fails to convene the general meeting the Investment Manager shall

convene it. Notice to attend the general meeting shall not be valid unless it also

includes the agenda. Notice to attend the general meeting shall be published, after

approval by CMA, in at least two daily newspapers for two consecutive days. The

notice shall be sent to the Unitholders by ordinary post or delivered by hand or to his

representative after recording his signature, at least two weeks prior to the date of the

meeting together with authorization form, agenda, memos and documents to be

discussed by the meeting.

e. The Board shall establish the agenda of the general meeting or it may be established

by the Investment Manager if the meeting is convened by the Investment Manager.

The agenda shall also include proposals by any Unitholder who holds at least 5% of

the Units of the Fund, if these are proposed at least two weeks prior to the date of

sending the notice to the Unitholders to attend the meeting. The general meeting shall

not consider any issues that are not included in the agenda.

f. Unitholders and proxies who hold all the Units of the Fund may hold a general

meeting without regard to the rules stipulated for such meeting. The meeting may

adopt any resolutions within the authority of the general meeting.

g. The general meeting shall be valid if attended by Unitholders or proxies representing

at least 50% of the Units in case of an ordinary general meeting and at least 60% for

36

extraordinary general meetings. Where the required quorum is not present, a second

general meeting shall be called within one month from the date of the first meeting.

The notice shall be published in two daily newspapers at least one week prior to the

date of the meeting. The second ordinary general meeting shall be valid regardless of

the percentage of attendance. The second extraordinary general meeting shall require

attendance by investors holding at least 50% of the Units.

h. Resolutions of the ordinary general meeting shall be adopted by absolute majority.

i. The general meeting shall be chaired by the chairman of the Board or its vice

chairman and by the Investment Manager if it has called for the general meeting but

the chairman and vice chairman are absent. The meeting shall appoint a secretary to

record the minutes including deliberations, resolutions and votes. Every investor shall

have the right to access the minutes.

j. The CMA may send an observer to attend all general meetings, supervise its

procedures and ensure that resolutions are adopted in accordance with the law. The

minutes signed by the secretary and approved by the chairman of the meeting, Auditor

and the legal advisor, shall be filed with CMA within fifteen days from the date of the

meeting.

10.6 Income Distribution

The Unitholders are entitled to the net income realized by the Fund after deducting all

liabilities, including fees, expenses and taxes. However, the Investment Manager has the

discretion to distribute the net income in cash / Units or reinvest such profits without

distributing them to the Investors. However, it is not the current intention of the Board to

declare distributions in respect of the Fund. Instead, net income realized will be reinvested

and will be reflected by an increase in the NAV of the Units, which may be realized by Units

at such time as they redeem their Units. In any case, distributions, if any, will be paid from

net realized income only.

10.7 Distribution Announcements and Payment:

Distribution announcements will be published in two daily newspapers in Oman, one in

English and one in Arabic. Distributions will be paid to the Unitholders in Rial unless

otherwise specifically requested. In the event that the distribution payments are requested to

be paid in a currency other than Rial, the Investment Manager will perform the necessary

foreign exchange transactions and any expenses incurred in connection with such transactions

will be borne by the requesting Unitholder. In such situations, Unitholders should be aware

that the value of the distribution payments may be adversely affected by fluctuations in

currency exchange rates.

37

Unitholders may elect in writing to receive distribution either by cheque or payment by

electronic bank transfer, net of bank charges. In absence of any instruction the distribution

payment will be sent through cheque to the address specified by the Investor.

10.8 Voting Rights:

Each Unitholder has a right to exercise a vote at any meeting of Unitholders. Each Unit will

represent one vote.

10.9 Proxy:

A Unitholder may give a written proxy to another person to attend the general meeting and

vote on its resolutions. The Unitholder may revoke such proxy at any time.

38

CHAPTER 11: NAV CALCULATION

11.1 NAV CALCULATION

The Investment Manager shall calculate the NAV of the Fund on the Valuation Day. The

NAV per Unit is the NAV divided by the number of Units in issue. The NAV is the value of

the assets attributable to the Fund (including accrued income) less the attributable liabilities

(including accrued charges and expenses and provisions for contingent liabilities as

appropriate). The value of the assets attributable to the Fund and the attributable liabilities are

determined by the Board in accordance with the following:

A) The assets attributable to the Fund are deemed to include the following:

i. All cash in hand, or on deposit, or on call, including any income accrued thereon;

ii. All bills, demand notes, promissory notes and accounts receivable;

iii. All bonds, shares, stock, debenture stock, subscription rights, warrants, options and

other investments and securities owned or contracted on behalf of the Fund other than

Units and rights to Units;

iv. All other assets of the Fund of every kind and nature, including prepaid expenses as

valued and defined from time to time by the Board;

B) Any expense or liability attributable to the Fund may be capitalized and amortized over

such period as the Board may determine (and the Board may from time to time

determine to lengthen or shorten any such period) and the unamortized amount thereof at

any time will also be deemed to be an asset.

C) The assets attributable to the Fund are valued as follows:

i. All listed securities will be valued at market value. Investments listed or quoted on the

market shall be valued at the closing prices on the relevant Valuation Day provided;

however, that if such investments shall be listed on or dealt in upon more than one

stock exchange, the Board may in its discretion select one stock exchange which the

Board believes reflects the most accurate value.

ii. Investments for which, in the Board's opinion, no appropriate market price is readily

available, or in case of a listed security that has not been traded during ninety working

days preceding to the Valuation Day, are valued at their market value as determined by

one or more independent professional appraisers, at the sole discretion of the Board, in

coordination with the Investment Manager;

iii. Any currency other than Rial shall be converted into Rial at the prevailing official

bank rate for conversion with reference to Oman or, in the absence of an official bank

rate, at the rate (whether official or otherwise) which the Board shall in its absolute

discretion deem, after consulting with the Investment Manager.,

iv. Cash held by the Fund shall be valued at its full nominal value.

D) Notwithstanding the foregoing, where, at the time as of which the assets of the Fund are

being valued, any investment has been realized or contracted to be realized, there shall

be included in the assets of the Fund in place of such investment the net amount

receivable by the Fund in respect thereof, provided that, if the net amount receivable is

not payable until some future time after the time at which the assets are being valued, the

Board may make such allowance as it considers appropriate.

39

E) Any valuations made pursuant to this Prospectus will be binding on all persons; and

F) The liabilities attributable to the Fund will be determined to include all of its liabilities

(including such amount as the Board determines in respect of contingent liabilities) of

whatever kind and nature except liabilities represented by Units. In determining the

amount of such liabilities, the Board may calculate any liabilities on an estimated figure

for yearly or other periods in advance and accrue the same in equal proportions over any

such period. Where applicable, liabilities shall be accrued from day to day. In all cases

the standard accounting practice IRFS will be applicable on NAV calculation.

11.2 SUSPENSION OF CALCULATION OF NAV

The Investment Manager in consultation with the Board may suspend the determination of

the NAV on any Valuation Day for the whole or any part of a period during which; a

breakdown occurs in any of the means normally employed by the Investment Manager in

ascertaining the NAV; or circumstances considered to be abnormal market conditions exist as

result of which, in the opinion of the Investment Manager, it is not reasonably practical for

the Fund to determine the NAV.

11.3 CURRENCY OF NAV

The NAV of the Fund and NAV per unit will be expressed in Rial.

11.4 PUBLICATION

NAV per Unit will be published, at the end of every week, in either the newspapers or

magazines or by way of electronic media.

40

CHAPTER 12: REGULATORY FRAMEWORK

The Fund will be governed by the Capital Market Law, its Executive Regulation and all other

applicable laws of the Sultanate of Oman.

41

CHAPTER 13: ARTICLES OF ASSOCIATION

The Fund shall have Articles of Association that will govern various operational aspects of

the Fund. Investors to the Fund shall have the right to inspect the Articles of Association

prior to investment and by investing in the Fund, are deemed to have accepted and consented

to all the provisions of the Articles of Association.

42

CHAPTER 14: ACCOUNTS AND ACCOUNTING POLICIES

14.1 GENERAL

� The Fund shall have a financial liability independent from the Investment Manager

and the Board.

� An independent and separate bank account for the Fund shall be maintained by the

Custodian in the Sultanate where necessary outside the Sultanate, for making

withdrawals and deposits on behalf of the Fund.

� The Fund shall be treated, in respect of all sales and purchases and other transactions,

as an independent entity and shall be credited in case of sales and debited in case of

purchases. All costs related to the Fund shall be directly paid from the assets of the

Funds.

� Accounting records for the Fund shall be maintained independently from the records

of the Investment Manager and shall be audited by the Auditors approved or

nominated by the Board. The Board has the power to remove or change the Auditors

of the Fund during the life of the Fund. The appointment of Auditors will be notified

to the CMA.

� The financial year of the Fund is from 1st January to 31

st December. Except in the first

year of commencement, for which the financial year will be from the date of

commencement to the end of December of the following year.

14.2 ACCOUNTING POLICY

The accounts are to comply with International Financial Reporting Standards and as required

by Omani Law.

14.3 REVENUE AND EXPENDITURE OF THE FUND

Revenue of the Fund shall consist of:

a. Profits earned as a result of dealing in securities held on behalf of the Fund;

b. Income received from assets of the Fund;

c. Any other revenue directly linked to the Fund and resulting from the investment of the

assets of the Fund.

Expenditure of the Fund shall consist of:

a) Fees of the Investment Manager;

b) Administrative fees;

c) Fees of the Custodian and sub‐custodian if any;

d) Fees of the Outsourced Shariah Advisory Services;

e) Fees charged by the regulators in jurisdictions where the Fund has investments;

f) Sitting fees of the Board;

43

g) Expenses in respect of maintaining accounting records and auditing fees;

h) Brokerage commission and banking fees paid in connection with the sale and

purchase of securities held on behalf of the Fund;

i) Any losses incurred as a result of dealing in securities held on behalf of the Fund;

j) Any technical, legal or professional fees relating to the acquisition, maintenance and

disposal of assets of the Fund;

k) Any expenditure related to the exercise of rights and duties in respect of the assets of

the Fund;

l) Cost of preparing, printing, publishing and distributing public notices, annual and

interim reports, valuations, accounts and price lists and such other reports or

documents as may be allowed or required under the applicable laws or regulations of

Oman and any other communications to Unitholders;

m) Costs of printing any certificates or proxies;

n) Cost of preparing and filing all official documents concerning the Fund, including

registration statements and offering circulars with all authorities having jurisdiction

over the Fund or the offering of Units;

o) Cost of holding any meeting of Unitholders;

p) Legal fees;

q) Taxation; and

r) Any other expenditure directly related to the Fund.

14.4 REPORTS & ACCOUNTS

The Investment Manager will prepare or cause to be prepared by the Auditors and disclose

the same after approval by the Board the following:

1. The quarterly unaudited (but reviewed) results of the Fund, for the previous three

months within 30 days from the end of each quarter. Audited accounts will be sent to

the MSM and the Unitholders by mail within 60 days of the closing of each financial

year; and

2. The annual report for the Fund, and audited accounts or audited consolidated returns

(including the Auditors’ report) for the Fund for each Financial Year, within 60 days

from the end of the Financial Year.

The accounts will be sent to the MSM and to the Unitholders by mail within 60 days of the

closing of each financial year .

The Fund will also issue a simplified financial statement each Financial Year in accordance

with applicable laws in addition to the Annual Report of the Fund.

44

CHAPTER 15: DISSOLUTION AND LIQUIDATION OF THE

FUND

The Board may recommend to the Unitholders at the extraordinary general meeting to

dissolve and liquidate the Fund for any reason including;

1. Expiration of the term of the Fund

2. Accomplishment of the objective for which the Fund was established pursuant to the

Articles of Association and this Prospectus.

3. Reduction of NAV of the Fund to less than RO 500,000

4. The Fund stops carrying out its business without legitimate reason.

5. Reduction in the NAV to the extent that expenses incurred by the fund are unreasonably

high.

6. On recommendation by the Investment Manager; and

7. On request by CMA.

45

CHAPTER 16: Undertakings

Firstly: Al-Kawthar Fund

The Board will collectively and individually abide by all of the provisions of the Capital

Market Law, the Executive Regulation of the Capital Market Law issued under Ministerial

Decision No. 1/2009 and all other legislation and regulations relevant and applicable in the

Sultanate of Oman.

Signed by:

46

Secondly: Legal advisor

Trowers & Hamlins confirms that all procedures relating to the preparation of the Prospectus

and issuing of the Units is in conformity with the provisions of the Capital Market Law and

the Executive Regulation of the Capital Market Law issued under Ministerial Decision No.

1/2009.

Stamp and signature

47

Thirdly: Issue Manager

The Issue Manager confirms the following:

1. All information relating to the subscription for the Units of Al-Kawthar Fund as

included in the Prospectus is conformant with all of the documents and other material

relating to the offer.

2. The information contained within the Prospectus is complete and correct and does not

omit any material information, the omission of which would render the Prospectus

misleading.

3. The Prospectus and the offer to which it relates, is conformant with all the rules and

terms of disclosure as stipulated in the Capital Market Law and the Executive

Regulation of the Capital Market Law issued under Ministerial Decision No. 1/2009,

and that the prospectus model is approved by the CMA.

4. The information contained in this Prospectus in Arabic (and the unofficial translation

into English thereof) is true, sound and adequate to assist the applicants to make the

decision as to whether or not to invest in the Fund.

National Investment Funds Co. SAOC

Issue Manager