المادة 49: Closed-Ended Investment Traded Fund

Article 49: Closed-Ended Investment Traded Fund

a. The offer, operations and management of a closed-ended investment traded fund in the kingdom must be in accordance with the provisions of this Part and these Regulations, to the extent that does not conflict with the nature of the fund.

b. The unitholder of a Closed-Ended Investment Traded Fund shall be deemed to have read and accepted the Fund's Terms and Conditions upon purchasing any unit of a Closed-Ended Investment Traded Fund from the Exchange.

c. The units of the closed-ended investment traded funds must be deposited with the Securities Depository Center.

d. The fund's total assets value may increase by accepting cash contributions or in-kind contributions, or both, through the following mechanism:

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

2. after obtaining the Authority's approval referred to in Subparagraph (1) of Paragraph

(d) of this Article, the fund manager must obtain the approval of the unitholders – by an ordinary fund resolution – to offer additional units of the fund by accepting cash contributions or in-kind contributions, or both.

3. if the fund total assets value is to increase by accepting cash contributions, or cash and in-kind contributions, the new units offering period shall be a minimum of (5) days within a period not later than (6) months from the date of the Authority's approval.

4. In the event that the value of the units to be offered has been collected, the offered units must be first allocated to the unitholders registered on the day of the unitholders' meeting, then allocate the remaining units (if any) to the remaining subscribers, within a period not exceeding (15) days after the end of the offering period, which is set out in the Fund’s Terms and Conditions. The ownership of the in-kind contributions that is to be acquired must be transferred for the interest of the fund, and the new units shall be listed on the Exchange within a period not exceeding

(60) days from the end of the offering period. It is not permissible to dispose of the units allocated to subscribers by in-kind contributions through the process of increasing the fund's total assets value in accordance with Paragraph (d) of this Article within the first year of their trading commencement.

5. where the fund's total assets value increase is made through accepting in-kind contributions, the additional units shall be allocated to the subscribers by in-kind contributions immediately after obtaining the unitholders’ approval referred to in Subparagraph (2) of Paragraph (d) of this Article, provided that the ownership of the in-kind contribution to be acquired is transferred for the interest of the fund, and the new units are listed on the Exchange within a period not exceeding (60) days after the end of the offering period. It is not permissible to dispose the units allocated to subscribers by in-kind contributions through the process of increasing the fund's total assets value in accordance with Paragraph (d) of this Article within the first year of their trading commencement.

6. With regards to Subparagraph (3) of Paragraph (d) of this Article, and where the minimum amount required to be raised and which is set out in the Fund’s Terms and Conditions was not fulfilled, the fund manager must cancel the offer and return the subscribers' money with no deduction within a period not exceeding (5) days of the end of the offering period.

e. In-kind contributions, referred to in Paragraph (d) of this Article, must be valuated by two accredited valuers independent from the fund manager after ensuring that such accredited valuers have obtained all the required licenses and authorisations from the related government entities to practice their profession.

f. The unitholder shall be entitled to exercise all rights in relation to the units including, but not limited to, the right to vote at the meetings of unitholders.

g. In the event of breaching any of the restrictions forth in these Regulations or in the Fund’s Terms and Conditions due to a change of circumstances that is beyond the control of the fund manager or the sub-manager and the breach has not been rectified within (5) days from the date of the occurrence of such breach, the fund manager shall immediately notify the Authority of such event in writing, indicating the action taken and the period of time required to rectify such violation. The Authority may at its absolute discretion vary the time limit for rectifying such breach.

h. The Fund's Terms and Conditions shall allocate a percentage of the total offer amount for institutional investors.

i. No person or group of persons having their names listed in the Fund’s Terms and Conditions that they, upon establishment, indicating their ownership of (5%) or more of the fund units (through in-kind contributions), may dispose any of the units in which they subscribed, during the first year of trading commencement of the relevant fund's units.

j. To achieve the independence of a member of the fund’s board of directors, the following must be complied:

1. an independent director of a closed-ended investment traded fund shall be able to perform his/her duties, express his/her opinions and vote on decisions objectively with no bias in order to help the board make correct decisions that contribute to achieving the interests of the fund.

2. the board of a closed-ended investment traded fund shall conduct an annual assessment of the member's independence and ensure that there are no relationships or circumstances that affect or may affect his/her independence.

3. with regards to the definition of "Independent Fund Director" in the Glossary of Defined Terms Used in the Regulations and Rules of the Capital Market Authority, cases that negate the independence requirement for an independent director in the board of a closed-ended investment traded Fund, include but are not limited to, the following:

a. if he/she holds (5%) or more of the fund's units or the units of another fund under the management of the same fund manager; or is a first degree relative of someone who owns such percentage.

b. if he/she is a representative of a legal person that holds (5%) or more of the fund's units or the units of another fund under the management of the same fund manager;

c. if he/she is a representative of a legal person that holds (5%) or more of the shares of the fund manager, an affiliate of the fund manager, the custodian or an affiliate of the custodian;

d. if he/she is a first degree relative of any member of the board of the fund or any other fund under the management of the same fund manager;

e. if he/she is a first degree relative of any employees of any related party of the fund.

f. if he/she is an employee or used to be an employee during the preceding two years, of the fund manager or any party related to the fund, or if he/she, during the preceding two years, held a controlling interest in any of these parties.

g. if he/she receives financial consideration from the fund in addition to the remuneration for his/her membership of the board.

k. In the event of offering the closed-ended investment traded fund units in the Parallel Market, the offering of those units shall be limited under the provisions of this Part to the categories of Qualified Investors on the Parallel Market.

l. A closed-ended investment fund may request to be listed on the Parallel Market after the issuance of a fund special resolution consented by the unitholders.

m. A closed-ended investment traded fund may invest its money and assets in private funds provided that it does not exceed (25%) of the fund net asset value. Further, a closed-ended investment traded feeder fund or fund of funds may not invest in private funds.

n. As an exception from the provisions of Paragraph (h) of Article (43) of these Regulations, the borrowing of a closed-ended investment traded fund in the Main Market may not exceed (30%) of the fund’s net assets value.

o. As an exception from the provisions of Paragraph (h) of Article (43) of these Regulations, the loans of a closed-ended investment traded fund in the Parallel Market may not exceed (100%) of the fund’s net assets value.

p. As an exception from the provisions of Paragraph (j) of Article (43) of these Regulations, a closed-ended investment traded fund may invest more than (10%) of its net asset value in illiquid assets, provided that investment in a single illiquid asset may not exceed (25%) of the fund’s net assets value