Accumulation unit - a unit in a collective investment scheme or sub-fund where income and

gains roll up in the value of the unit and are not distributed to the holder.

Annual management charge – charge payable from scheme property to the CIS manager per
annum for ongoing operation of the scheme expressed as a percentage of the value of the
scheme or sub-fund.

Appointed independent expert – a person holding a professional qualification in valuation

of real estate that is independent of the CIS manager and its associates and the CIS
custodian and its associates that is not engaged in the finding of real estate for the scheme,
or finding the scheme for real estate.

Approved distribution agent – an approved institution licensed by the Authority to arrange

transactions in securities and advise on investing in securities appointed by the CIS
manager of a recognized collective investment scheme or foreign exempt scheme to
distribute units of that scheme in Lebanon and to provide the distribution services specified
in Article 8702 (5).

Approved institution – an entity licensed by the Authority to undertake securities markets

activity.

Approved collective investment scheme (‘approved scheme’) – a collective investment

scheme created under Law 706 and approved by the Authority under this Regulation for
public offer in Lebanon.

Associate – a controller of a CIS manager or CIS custodian, a person that has close links
with the CIS manager or CIS custodian, and in relation to an individual person who is a
controller of the CIS manager or CIS custodian, that person’s spouse, and any entities
controlled by that person.

Base currency – the currency in which a collective investment scheme’s annual reports and
accounts are prepared.

CIS annual report and accounts - a report on the operations, financial performance and
financial condition of a collective investment scheme (or sub-fund) over an accounting year
including the auditor’s report.

CIS custodian – an approved institution for the provision of custody acting in this capacity
to a collective investment scheme formed under Lebanese law.

CIS manager – an approved institution to manage collective investment schemes created

under Lebanese law including a CIS manager that is an Islamic institution.

CIS operator – where a collective investment scheme is formed under a foreign law, the
entity responsible for the operation of the scheme that includes the Board of Directors of a
scheme that is a corporate scheme.
CIS prospectus - a written statement that discloses the terms of the offering of an approved
and an exempt offer collective investment scheme.

CIS register – record of the holders of units in a scheme (or a sub-fund).

CIS records - all records of the operation of a collective investment scheme including
accounting for the scheme (or sub-fund); valuation of scheme (or sub-fund) assets;
calculation of the net asset value per unit of units in a scheme (or sub-fund) and of unit
prices; of the initial offer; for an open ended scheme and interval scheme or sub-fund, all
orders for and transactions in units of a scheme (or sub-fund); and of the portfolio and
portfolio transactions for the scheme (or sub-fund) and of the CIS register.

CIS short form annual report - abbreviated annual report for a licensed collective
investment scheme (or sub-fund).

CIS statute: founding document of a mutual fund formed under Law 706.

Close links – the relationship between an applicant or an approved institution and any of the
following persons:
1) a controller of an applicant or approved institution
2) a company controlled by an applicant or approved institution
3) a company controlled by a controller of an applicant or approved institution, or
4) a company controlled by any combination of the persons described in 1), 2) and
3) above.
Closed ended collective investment scheme (‘closed ended scheme’) – a collective
investment scheme whose capital is fixed and that has no obligation to redeem its units
from unitholders upon their request.

Closely related person – the direct ascendants, direct descendants and spouse of an insider
who share the same home with an insider.

Collective investment scheme (‘CIS’ or ‘scheme’) – an arrangement including a mutual

fund or investment company that enables a number of investors to pool their assets for
professional management and diversification of risk.

Constituting document – the founding document of a collective investment scheme: for a

mutual fund, the CIS statute of that fund.

Controller – a person who holds, directly or indirectly, 25% or more of the voting rights in a
company, or who has the right to appoint 25% or more of the board of directors or
governing body. “Controlled by” is construed accordingly.

Counterparty – a client that is one of:

1) an approved institution,
2) an institution licensed by Banque du Liban, or
 3) a foreign financial services entity that is properly licensed in its home country to
provide banking, securities or similar financial services to clients.

Custodian – an approved institution that has been licensed to provide the securities business
activity of custody.

Distribution – the process through which securities are offered to the public and subjected
to the control of the Authority.

Domestic collective investment scheme – a collective investment scheme formed under

Lebanese law.

Execution-only account – an account for a customer that the approved institution deals for
as agent, in accordance with instructions received from the customer, and does not provide
any advising services to.

Exempt CIS offer – subscription to a collective investment scheme offered only to

professional clients in Lebanon and that has a minimum subscription amount of $US
100,000 or the current equivalent in Lebanese or any other currency.

Foreign collective investment scheme (‘foreign scheme’) – a collective investment scheme

created in a foreign jurisdiction.

Foreign exempt offer collective investment scheme (‘foreign exempt offer scheme’) - a
collective investment scheme created in a foreign jurisdiction offered only to professional
clients in Lebanon and that has a minimum subscription amount of $US 100,000 that has
registered that exempt offer with the Authority.

Fund of funds – a collective investment scheme investing only in units or shares of other
collective investment schemes and deposits.

Income unit – a unit in a collective investment scheme (or sub-fund) in respect of which
income and realized gains are periodically distributed to the unitholder.

Independent director – a member of the board of directors who:

1) is a non-executive director,
2) is not a shareholder who owns, directly or indirectly, more than 5% of the issued
shares of any class, or of the voting rights in such shares,
3) does not currently have, and has not had during the two years prior to his election as
a director, a business relationship with the issuer, with the senior management of
the issuer, or with any shareholder who owns, directly or indirectly, more than 5%
of the issued shares of any class, or of the voting rights in such shares, and
4) is not a parent, child or spouse of any member of senior management of the issuer
or of any shareholder who owns, directly or indirectly, more than 5% of the issued
shares of any class, or of the voting rights in such shares.
Insider –
1) A director (or member of the governing body), member of senior management,
employee, shareholder or auditor of an issuer,
2) A closely related person of a person included in 1), and
3) A person who obtains inside non-public information through a business relationship
with the issuer of a security or with a person who is an insider of that issuer by
virtue of 1).
Interval collective investment scheme (‘interval scheme’) – a scheme that is obliged to
redeem its units from holders at a price related to net asset value of the scheme property on
a regular periodic basis at least twice per annum.

Investment objective - the priority of a collective investment scheme to provide capital

growth, income, a combination of capital growth and income, or capital preservation as
stated in its constituting document and offering document.

Investment policy - the policy of a collective investment scheme to achieve its investment
objective specified as levels of exposure to particular asset classes, geographical regions,
sectors of the economy or institutions as stated in its constituting document and offering
document.

Islamic scheme – a collective investment scheme that is managed by a CIS manager (the
Mudarib) that is an Islamic institution and that operates and invests in conformity with
Shari’a requirements.

Issuer – A legal entity (in public or private law) or a collective investment scheme that
issues or proposes to issue any traded security to the general public.

Key information document – abbreviated CIS prospectus as defined in Annex 1 (Note: this
follows the European standard - the UCITS Directive requires a ‘key investor information
document’ which is essentially a short form prospectus with key information only, which is
more likely to be read by unitholders than full prospectuses.)

Midclear – The Custodian and Clearing Center of Financial Instruments in Lebanon and the
Middle-East, a Lebanese joint-stock company established pursuant to Law 139 of
November 26, 1999, that acts as the exclusive central depository of financial instruments
and securities that are traded in any regulated capital market in Lebanon.

Mid-market basis - the mid-market value of a security between the bid price and the offer
price.

Money market collective investment scheme (‘money market scheme’) (or money market
sub-fund) - an open ended scheme (or sub-fund) whose primary objective must be to
maintain the net asset value of the scheme (or sub-fund) at the value of the unitholders’
initial capital plus earnings.
Money market instrument - a debt security that gives the owner the unconditional right to
receive a stated, fixed sum of money on a specified date and is issued at a discount
dependent upon the interest rate and the time remaining to maturity including treasury bills,
commercial and financial paper, bankers’ acceptances and negotiable certificates of deposit
with original maturities of one year or less, and short-term notes issued under note issuance
facilities.

Net asset value - the aggregate value of the assets of a collective investment scheme (or
subfund) less the total amount of the liabilities of that collective investment scheme (or
subfund) at the time of the calculation.

Net asset value per unit - the net asset value of the collective investment scheme (or
subfund) divided by the number of units in issue in the scheme (or sub-fund) at the time of
the calculation of the net asset value.

Offering document – document setting out the terms of the offer of a collective investment
scheme including a CIS prospectus.

Open ended collective investment scheme (‘open ended scheme’) – a collective investment
scheme that is obliged to redeem its units from holders upon their request at a price related
to net asset value of the scheme property not less frequently than twice a month at regular
intervals.

Operational expense ratio (“OER”) - the total annual expenses of a collective investment
scheme (or sub-fund), that are all costs paid out of the scheme (or sub-fund) in the most
recent audited financial year excluding only taxes and costs directly associated with the
acquisition and disposal of scheme property (or sub-fund property), expressed as a
percentage of the scheme’s (or sub-fund’s) average net asset value for that year. (Note:
calculation information is given in Annex 2.)

Professional client – a client that is one of:

1) a Lebanese collective investment scheme, pension fund or any other institution
whose main activity is to invest in securities and financial products,
2) a foreign collective investment scheme or pension fund that is properly licensed in
its home country,
3) a government, government agency or public authority of any country,
4) a joint stock company or an individual client that an approved institution has
determined, after making and documenting due enquiries,
i) has net investible assets equal of a value of at least $US 500,000; “Net investible
assets” means the client’s holdings of cash and securities, net of any amounts
owing on loans made for investment purposes, and
ii) has a minimum of 5 years of continuous experience investing in securities
markets and investments.
Public offer – offer of securities to the public as defined in the Offers of Securities
Regulation.

Recognized collective investment scheme (‘recognized scheme’) – a collective investment

scheme created in a foreign jurisdiction and approved by the regulator in that jurisdiction
for public offer that is recognized by the Authority as offering equivalent investor
protection to Law 706 and the Regulation and that is eligible for public offer in Lebanon.

Redemption – the repurchase of a unit in an open ended scheme (or sub-fund) or interval
scheme (or sub-fund) upon the request of the holder.

Redemption charge - the fee that may be charged to the holder of units in a scheme (or
subfund) by the CIS manager upon the redemption of those units.

Regulations – the implementing Regulations of the Authority, as approved by the Board of

the Authority and amended from time to time.

Scheme property – the assets of the scheme.

Securities exchange – a market, trading platform, place, electronic or information system

that systematically consolidates purchase and sale orders for, and processes transactions in,
securities of a listed issuer or commodities.

Securities advertisement – any form of verbal, electronic, broadcast or written

communication made in the course of business for the purpose of inviting or inducing a
person to engage in securities activity.

Security or securities – except in Part B of the Market Conduct Regulation, means any of
the following types of financial instruments:
1) Shares, debt securities or units issued by a public or private company or entity, or a
collective investment scheme,
2) Bonds, bonds, notes, certificates of deposit, depositary receipts and Treasury bills
and bonds,
3) Financial rights, options, futures and any other derivatives or structured financial
products, and
4) Other financial instruments authorized by the Authority or the Regulations, except
an instrument specifically excluded by the Law.

Sub-fund - a separate part of the scheme property of an umbrella scheme that is pooled,
managed and accounted for separately.

Sub-fund property - the assets of a sub-fund which are beneficially owned by the
unitholders in that sub-fund.
Subscription – purchase of units in a scheme (or sub-fund).

Subscription charge - the fee that may be charged to the purchaser of units in a scheme (or
sub-fund) by the CIS manager upon subscription for units.

Total return – returns earned both by the capital property and the income property of a
scheme (or sub-fund).

Traded security – a security that is traded on an organized financial market in Lebanon,

including over-the-counter (OTC) markets

Umbrella collective investment scheme (‘umbrella scheme’) – an open ended scheme or

interval scheme which, to the extent as may be approved and subject to such conditions as
may be applied by the Authority or a foreign equivalent may be divided into a number of
subfunds in which unitholders are entitled to exchange rights in one sub-fund for rights in
another. Where each part of the scheme property is segregated in the books of the umbrella
scheme and is a sub-fund:
(a) The property subject to the sub-fund is owned by the unitholders in that sub-fund and
must not be used to meet the liabilities of the unitholders in any other sub-fund;
(b) Any liability of the unitholders in the sub-fund arising from the purchase, management
or sale of the property subject to the sub-fund must be met solely out of that property;
(c) A unitholder in the umbrella scheme must not be liable for debts arising from the
purchase, management or sale of the property subject to a sub-fund in which the unitholder
has participations beyond the amount which, at the time when any debts are due to
be paid, is equal to the value at that time of the unitholder’s units in that sub-fund;
(d) The CIS manager (but no other person) of the sub-fund may on behalf of unitholders
in a sub-fund take and defend proceedings for the resolution of any matter relating to an
authorized contract and take action in relation to the enforcement of any judgment given
in such proceedings;
(e) The Authority may exercise its powers in relation to a sub-fund as if that sub-fund were
a stand-alone scheme.

Unit – right, participation or interest entitling the holder to a proportionate part of the
property of a collective investment scheme (or sub-fund). Fractional units may be issued.

Unitholder - a person who holds units in a collective investment scheme (or sub-fund).

Unit class – a group of units in a scheme (or sub-fund) differentiated from another group of
units in the same scheme (or sub-fund) either by its charging structure or by the currency in
which it is denominated.

Unit price – the single price at which a unit in a scheme (or sub-fund) may be purchased or
redeemed on any one dealing day based on the mid-market basis valuation of the portfolio1.

1
Written notification - notification in a letter or other communication on paper or by
electronic means.