The following summary is qualified in its entirety by the detailed information included elsewhere in this Prospectus and should be read in conjunction with the full text of this document.

The Offer
The Offer is an invitation to prospective investors to offer to subscribe for the Units, subject to the terms of this Prospectus and the Subscription Agreement. The Investment Company is seeking to raise an initial amount of US$400,000,000 by inviting prospective investors to offer to subscribe for 40,000,000 Units at US$10 each, following which additional Units in the Fund will be offered on a continuous basis monthly. The Subscription Amount and the Subscription Fee must be paid in full upon subscription.

The Fund
The Fund is an open-ended, investment vehicle. The Fund has been established by the Investment Company, which is established under the laws and regulations of Bahrain and has the principal purpose of creating and managing collective investment schemes including the Fund.

The Investment Company
The Al Khaleej Funds & Investment Company, a Bahraini mutual fund investment company approved by the Bahrain Monetary Agency and incorporated as a closed joint stock company with Commercial Registration No. 56962, whose registered address is 14th Floor Al Salam Tower, P.O. Box 10006, Manama in Bahrain.

The Investment Objectives
The objective of the Fund is to achieve medium to long-term capital appreciation through investing primarily in issued securities of companies listed on stock exchanges in GCC countries which satisfy the Shari’ah Investment Guidelines. The Fund may also invest in shares of non-listed Shari’ah compliant companies up to 10% of it’s Net Asset Value.

The Investment Managers
GFH and KFIC will jointly act as the Investment Managers of the Fund pursuant to the terms and conditions of the Investment Management Agreement signed between the Investment Company and the Investment Managers.

Fund Sponsors and Placement Agents
Each of GFH, KFIC and QIB will act as Placement Agents of the Fund pursuant to the terms and conditions of their respective Placement Agent Agreements signed with the Investment Company.

Placement Agents
Each of GFHCB, ADCB and GB will act as Placement Agents of the Fund pursuant to the terms and conditions of their respective Placement Agent Agreements signed with the Investment Company.

Custodian, Administrator, Registrar and Transfer Agent
Gulf Clearing Company or such other entity appointed to act in such capacity from time-to-time by the Investment Company.

Auditor
Ernst & Young, Bahrain or such other entity appointed to act in such capacity from time-to-time by the Investment Company.

Currency
The Fund is denominated in US Dollars.

Life & Liquidation of the Fund
Liquidation of the Fund, whether voluntary or otherwise, requires the prior approval of the BMA and the MoC, as stipulated in the Memorandum and Articles of Association of the Fund. The Fund has been established for a period of 25 years but the Directors may, at any time, subject to the prior approval of the BMA, propose to dissolve the Fund at an extraordinary general meeting of shareholders.

Minimum Subscription
The minimum subscription by an Applicant for the Units is US$10,000 and any additional amounts subscribed for shall be in multiples of US$3,000.

Payment of Capital
Each Applicant shall pay the Subscription Amount plus the Subscription Fee by bank transfer in accordance with this Prospectus and the Subscription Agreement. The Investment Company reserves the right to reject, for whatever reason or for no reason at all, any offer to subscribe for the Units.

Offer Period
The offer to offer to subscribe for Units in the Fund pursuant to the Prospectus and the Subscription Agreement will commence on October 9, 2005 and will terminate on November 2, 2005.

Subsequent Subscriptions
Subsequent to the Offer, there will be continuous offering of Units on Valuation Days based on the NAV per Unit.

Redemption
Units will not be redeemed during the 2 months following the Closing Date. Thereafter, upon application to the Transfer Agent in writing and subject to ten Business Days notice, Units will be redeemed by the Fund on the next Valuation Day at the NAV per Unit prevailing.

Distributions
At the sole discretion of the Investment Managers a portion of the net investment income (income from dividends and profit from short-term Islamic products) may be distributed as dividends on the Units on an annual basis. Such dividends may be in the form of cash or additional units in the Fund.

Subscription Fee
An amount up to 3% of the Subscription, calculated based on the participation level, shall in addition to the Subscription Amount be paid to the Placement Agents. Prospective investors are referred to the section headed “EXPENSES & FEES RELATED TO THE FUND” for further details.

Investment Management Fee
2.25% per annum of the NAV of the Fund accruing monthly and shall be payable to the Investment Managers quarterly in arrears. A Performance Fee may also be payable, condition to the Investors achieving the 10% per annum Hurdle Rate. The Performance Fee is equal to 10% of the appreciation in the NAV of the Fund which exceeds the 10% per annum Hurdle Rate. Such fees shall be calculated and accrued on a monthly basis using the weighted average units in issue and shall be payable to the Investment Managers at the end of each financial year. If the Hurdle Rate is not achieved, the Investment Managers will not receive the Performance Fee.

Custody, Administrator, Transfer Agent and Registrar Fee
An annual fee, calculated at the following rates of the NAV of the Fund, shall be paid to Gulf Clearing Company as Custodian, Administrator, Registrar and Transfer Agent of the Fund quarterly in arrears:

a) 0.125% for initial US$100 million NAV of the Fund.

b) 0.1% for initial value of the Fund if the NAV of the Fund is between US$100 million and US$200 million.

c) 0.075% for initial value of the Fund if the NAV of the Fund is more than US$300 million.

d) If the annual fees as set out above fall below US$50,000, the annual fees for the services provided by Gulf Clearing Company will be subject to a fixed minimum fee of US$50,000 per annum.

Other Fees and Expenses
The Fund will pay other expenses incurred in connection with the operation of the Fund including, but not limited to, auditing fees, Shari’ah advisory fees, the annual listing fees, and brokerage costs and other transaction related expenses. The Fund will also pay a share of the annual expenses related to the registration and other expenses due to supervisory authorities of Al Khaleej Funds & Investment Company. The accounting treatment for such expenses will depend on their nature and will either be accrued for the calculation of the NAV or amortized. These pre-incorporation expenses are capped at US$150,000, which will be amortized over a period of 6 months and the annual expenses are estimated at $25,000.

Investment Features
Several factors are conniving to create an increasingly attractive investment climate in the GCC region. Foremost among these factors is the strong economic performance of the region on the back of resurgent oil prices, generally lower interest rates, good financial results by most listed banks and companies, growing discipline and transparency in the market, reduced geopolitical uncertainties, and investor concerns about the negative performance of the US and other major stock markets over the last three years. Arab investors, like many wealthy investors around the world, have been diversifying their investments in response mainly to the tumbling of the international equity markets - the Fund stands ready to attract this capital back to the home front.

Faced with the challenges of growth and globalization, the six members of the GCC are, to varying degrees, implementing comprehensive structural reforms over the medium term that will facilitate sustained growth and reinforce the investment environment in the region. The strategy includes the following elements:

• Fiscal consolidation and reforms aimed at enhancing the efficiency of the entire tax system, improving the public expenditure management systems so that more expenditures can be redirected toward capital formation, reducing subsidies, and insulating the economy against terms of trade shocks;
• Privatization of state-owned enterprises and the expansion of the private sector through legal and institutional reforms;
• Liberalization of restrictions on foreign capital inflows so that the needed capital and associated technologies to support privatization and private sector development could be made available. Of particular concern is the constraint on investment environment posed by the relatively undeveloped capital market;
• Labor market reforms to prevent unemployment pressures from derailing the reform effort; and
• Closer integration of the GCC economies and coordination of policies.There is evidence that the foregoing positive developments in the region are encouraging local, Arab and international investors.
  Nevertheless, there is no assurance that these trends will continue into the future. Investors are strongly advised to carefully review the section headed “PRINCIPAL RISK FACTORS” prior to making an investment decision.

Principal Risk Factors
Investment in the Fund will involve certain risks and should only be made by Applicants who understand the risks involved and are able and willing to withstand the risk of the loss of the entire amount invested. No assurance can be given that the Fund’s investment objective will be achieved. Prospective investors are referred particularly to the section headed “PRINCIPAL RISK FACTORS”.

Identification
In accordance with the Bahraini legal and regulatory requirements and those requirements of any jurisdiction into which an offer to subscribe for Units is made, Applicants, whether corporate or individuals, will be required to present (amongst other things) suitable forms of identification as determined by the relevant authorities at the time of making an application to subscribe for the Units.

Governing Law
The Fund shall be governed by and construed in accordance with the Laws of Bahrain and the Principles of Supervision, Operation and Marketing of Collective Investment Schemes under BMA Circular No. OG/356/92 of November 18, 1992, as well as by all relevant laws and regulations of other applicable countries.

This Offer and the Subscription Agreements will be governed by, and construed in accordance with, the laws of Bahrain. Each Investor irrevocably submits to the jurisdiction of the Bahraini courts in respect of these matters. This does not prevent an action being taken against an Investor in any other jurisdiction.