Samba Real Estate Fund Terms and Conditions. Supervised by Samba Islamic Banking Services Pursuant to the Decision of the Shariah Supervisory Board

Transcription

1 Samba Real Estate Fund Terms and Conditions Supervised by Samba Islamic Banking Services Pursuant to the Decision of the Shariah Supervisory Board

2 In the name of Allah, The Beneficent, The Merciful This is the Terms and Conditions of Samba Real Estate Fund ( the Fund ). Each of the following articles applies to the Fund and have been approved by the Shariah Supervisory Board. Article 1. Introduction a) The Fund will invest in real estate and related Shariah approved investment products denominated in Saudi Riyals of which Samba Financial Group, a joint stock company incorporated under the law of the Kingdom of Saudi Arabia with CR , of King Abdulaziz Road, P.O Box 833 Riyadh 11421, ( will be the fund manager (the Fund Manager ) Article 2. Definitions The following terms, when used herein, shall have the meaning attributed to them as below: Announcement Day shall mean the day on which the Net Asset Value per unit is announced. CMA shall mean the Capital Market Authority of Saudi Arabia. Impure Income shall mean the estimated amounts attributed to activities, which are not wholly in compliance with the principles of Shariah. Net Asset Value shall have meaning the set at in Article 15. SAMA shall mean the Saudi Arabian Monetary Agency. Samba shall mean Samba Financial Group. Participant shall mean each investor in the Fund. Valuation Day shall mean the day on which the Net Asset value of the Fund is determined for the purpose of purchase, redemption or switching of units. Article 3. General a) The Participant hereby requests and authorizes, along with other Participants, the Fund Manager to manage and invest the assets of the Fund in projects within Saudi Arabia for the acquisition and/or development of land, acquisition and/or development of residential, commercial, or industrial properties, for sale or rent, offering installment services, and buying/selling shares in real estate companies that has been approved by the Shariah Supervisory Board for a fee as defined in the Appendix hereto. b) The Participant also authorizes the Fund Manager to invest the assets of the Fund in other real estate funds, which invest in real estate in Saudi Arabia to the extent permitted by local laws and regulations at the sole discretion of the Fund Manager. c) The Participant expressly authorizes the Fund Manager to transfer and assign (for the Participant s account and risk), as the Fund Manager may deem appropriate, the duties and responsibilities of the Fund Manager to one or more other authorized entities engaged in investment management activities.

3 d) The Fund Manager will have the right to use the services of one or more developers who may undertake the development of the lands, properties or to lease the assets/buildings to third parties. e) The Participant hereby authorizes the Fund Manager to delegate, transfer or assign, as the Fund Manager may deem appropriate, its power and authority to one or more authorized entities (for the Participants account and risk) to provide, as the context requires, safekeeping and custodian services of the Fund s assets. f) The Fund Manager shall have the authority to deal and contract with such parties as the circumstances may permit from time to time. g) The Fund Manager will provide the Fund with the services of qualified persons to perform supervisory, administrative, accounting and clerical functions for the effective administration of the Fund, including maintenance of books and records, entering subscription and redemption orders of units, initiating money transfers, reconciliation of account information and balances, processing, investigating and responding to Participants inquiries and provision of statements. The Fund Manager is hereby authorized to delegate any of the above functions to an authorized third party. h) The Fund Manager may provide seed money when incorporating the Fund to the extent permitted by law. Such seed money shall be treated by the Fund as a subscription by Samba for units in the Fund and consequently, the provisions contained herein with regard to, inter alia, redemption shall also apply to such seed money. i) The Fund may hold all or part of its assets as liquid assets or acceptable short term Shariah Supervisory Board approved debt investments, in order to be able to meet redemption requests and expenses or to avail itself of market opportunities as they may arise. j) Part or all the Fund s liquid assets or short term Shariah Supervisory Board approved securities may be held from time to time with the Fund Manager, or any Connected Party, any financial institution, their branches, affiliates, subsidiaries, inside or outside of Saudi Arabia, and in any currency. All such deposits shall be for the account and risk of the Participant. k) The Fund Manager shall engage at least two independent professional evaluators with sufficient experience before buying or selling any real-estate (or properties) of the Fund. Article 4. Effective Date of Investment The investment by a Participant in the Fund will become effective on and will be based on forward pricing as at the earliest feasible Announcement Day. In case of payment by cheque, the investment will be valid only as from the Announcement Day immediately following receipt of cleared funds and provided that such cleared funds are received on or prior to the cut-off time specified in respect thereof in the Appendix hereto; if the funds are not received on or prior to such time, the investment will be valid only from the succeeding Announcement Day. Article 5. Impure Income a) For the portion invested in the shares and other investment funds, the Fund Manager, based on the decision of the Shariah Supervisory Board, will determine Impure Income

4 and determine the appropriate proportion of such amounts, by reference to the Fund s percentage investment in each investee company and other investment funds for deduction from the Net Asset Value of the Fund as Impure Income. b) The Fund Manager will compute, on a quarterly basis, in respect of each investee company or fund, the amount of Impure Income to be deducted from the Net Asset Value of the Fund on the basis of the latest available information for which provision shall be made on each Valuation Day in the calculation of the Net Asset Value. The amount of Impure Income to be deducted from the Net Asset Value of the Fund will be communicated to Participants on a quarterly basis. Information as to the rates of provisions made may be obtained from the Fund Manager. c) The deducted amounts representing Impure Income will be donated by the Fund Manager to recognized humanitarian charities, which have been approved by the Shariah Supervisory Board. Article 6. Segregation and Custody of Fund s Assets a) The Fund Manager will maintain records and accounts with respect to the assets, liabilities and expenses pertaining to the Fund. Custody of the Fund s assets will be maintained by the custodian or at one or more custody departments at various locations of authorized institutions selected by the Fund Manager in its sole discretion (including without limitation a Connected Parties) but for the Participant account and risk. b) The Participant will own in respect of the Fund in which the Participant has invested, an undivided interest in the Fund s assets based on Net Asset Value of the Participant s units. c) The Fund Manager is entitled (subject to applicable regulation) to exercise all rights attached to any shares held by the Fund including, but not limited to, voting rights and the rights to attend general meetings of the company or other business entity concerned. Article 7. The Fiduciary nature of investment Funds The Participant fully understands the fiduciary nature of the Fund and that any decision or measure taken by the Fund Manager with respect to the assets held in the Fund from time to time under this Terms and Conditions will be for the Participant s account and risk. Except in the case of gross negligence or fraud by the Fund Manager. Article 8. Audited Financial Statements a) In accordance with the rules of the SAMA and/or CMA, the Fund Manager will prepare audited financial statement for the Fund as of the end of each Gregorian year and copies will be made available, upon request and without charge, to all Participants at all branches of Samba. Such statements shall be mailed to Participants upon their written request. The Fund Manager shall also prepare quarterly un-audited financial statements and these will be available for mailing to Participants upon their request. b) The audited annual financial statement will be available no later than 40 business days from the end of each Gregorian year.

5 Article 9. Information in Public Domain All investment decisions taken by the Fund Manager in relation to the Fund will be based solely on information that is available in the public domain. Article 10. Investment Policy and Objectives a) The main features and investment policy for the Fund are laid out in the Appendix hereto. The structure of Fund and its composition may vary from time to time based on market conditions and changes in portfolio value. Depending on market conditions or to ensure minimum liquidity requirements, the Fund Manager may, at its absolute discretion, maintain part or all of the Fund s assets in the form of cash or Shariah Supervisory Board approved short-term investments, as applicable, pending reinvestment by the Fund Manager. b) The Fund seeks medium/long-term capital growth. c) The assets of the Fund shall be invested mainly in: Projects of acquisition, development and selling of residential, commercial and industrial land. Acquisition, development and selling of existing building. d) The Fund shall do the following: Offer selling services of commercial, residential and industrial lands and buildings by installment. Offer rental services of commercial, residential and industrial lands and buildings. Invest in real estate companies shares that are listed in the local stock market Invest in privet equities. e) The Fund s share of legal ownership of the properties will be registered in the name of a special purpose vehicle company established for this purpose or any third party, which will be designated by the Fund Manager, as trustee. Article 11. Investment Risk The Participant is aware of the following Fund risks which, shall not be limited to:

6 a) The shares of the real estate companies are subject to price risk; b) The risk of land s value depreciation and lack of liquidity are subject to land market conditions in Saudi Arabia; c) The risk of lower rental income is dictated by prevailing market conditions; d) Inability by the developer to complete the project of project development. This risk may be mitigated by selecting a reputable developer with a good track record; e) Other risks resulting from government regulations including the division, registration and classification of land under development; f) The Fund is appropriate for Participants who are confident of their ability to tolerate lack of liquidity or potential loss on their capital; g) The Fund is subject to market fluctuations and consequently the price of such Fund s units may go down as well as up and a Participant may not receive upon redemption the full amount that he or she have invested. If payments for purchase of units are made in currency other than the Fund s denominated currency, the Participant also accepts that changes in rates of exchange between currencies may also result in the value of units increasing or decreasing, as the case may be; h) Investments by Participant in the Fund are not obligations guaranteed by the Fund Manager or Samba or any of its affiliates or subsidiaries. They are subject to investment risks; i) The Investment in the Fund carries significant risk, and investment should be regarded as medium/long term in nature and is only suitable for investors who understand the risks involved and who are able to withstand the loss of their invested capital; j) There being no assurance that the Fund will achieve its investment objective, there can be no assurance that on a redemption, or otherwise, Participants will receive the amount originally invested; k) Neither the Fund Manager nor Samba shall be liable for any claim or demands whatsoever for any loss of opportunity, or actual or incurred loss by the Participant except in the case of gross negligence or unlawful misconduct by the Fund Manager. Article 12. Fund Participation a) Participants wishing to purchase units in the Fund shall do so by completing and delivering to the Fund Manager, the Samba Investment Fund Application Form with either (I) an authorization to debit their account with Samba or (II) the necessary Funds for their participation. Participation in the Fund will be through purchase of units based on forward prices, as hereinafter defined. The Fund Manager reserves the absolute unlimited right to refuse participation by persons in the Fund, if, inter alia, such participation will result in violation of regulations applicable to the Fund that may from time to time be imposed by regulatory authorities. b) Valuations for units of the Fund, basis of valuation, valid application and prices applicable to such application are set out in the Appendix hereto. A valid application will be one where the necessary cleared Funds for the purchase of the Fund units are received by the Fund Manager at its Riyadh office and before the date specified with respect thereto in the Appendix hereto. c) If payment for units is made in a currency other than the denomination currency of the Fund, the payment currency will be converted to the denomination currency by the Fund Manager at Samba exchange rate then in effect and the purchase will become effective upon realization of the Funds in the denomination currency and based on the forward unit price (being applicable price on the Announcement Day, as hereinafter defined.) d) Any data, records or notices delivered by the Fund Manager are not intended to provide the basis of any advice or other evaluation and should not be considered as a

7 recommendation that any recipient and/or investor hereof should invest or purchase units of the Fund. the Fund Manager is not providing any advice to the Participant in relation to the Fund or the investment. Any recipient and/or investor is responsible for making its own independent investigation and appraisal of the creditworthiness of the Fund and the investment. e) The procedures for the handling of complaints will be made available to the Participant upon written request. Article 13. Borrowing Power The Fund Manager may, at its sole discretion to the extent permitted by law and after obtaining SAMA written approval, raise financing for use in connection with the Fund from Samba or any other party at the best rate available in the market. Such financing shall not exceed 10% of the Net Asset Value of the fund and shall be used for, inter alia, establishing the Fund and or to meet temporary liquidity shortages. Unless otherwise specified by the Fund Manager and approved by the regulators, all such financing is to be repaid within one year of their financing date. Such financing shall be Shariah compliant. Article 14. Switching Between Samba Funds a) Subject to Articles 12,15,16,17 and 28 the Participant may request to switch all or part of his investment in one Samba Fund into another Samba Fund. Such switching request will be treated as a separate redemption from the first and a subscription into the second provided that the Fund Manager may impose such restrictions as to, inter alia, frequency of switching provided and or imposing a switching fee (not exceeding the total aggregate sum of the redemption and subscriptions fees) as may be determined by the Fund Manager, from time to time. b) As a result of any request for switching, if the Participant s investment in the Fund would fall below the minimum initial participation amount specified, the Fund Manager, in accordance with Article 28, may treat such request as a request for switching the entire investment into the Samba Fund which the Participant has applied to switch to. c) If as a result of an application for switching the Participant s investment in the Fund is redeemed for investment in another Samba Fund and meanwhile or subsequent thereto the calculation and announcement of Net Asset Value of such Samba Fund is suspended (as stipulated in Article 17) then the net proceeds of such redemption will be held for and on account of the Participant and investment in the requested Samba Fund will be effective and will be based on forward pricing as at the earliest feasible Announcement Day of the Fund. Article 15 Valuation a) The Fund s unit purchase price or redemption price will be the Net Asset Value per unit announced on the Announcement Day as specified in the Appendix hereto. If banks in Saudi Arabia are not open for business on any Announcement Day, then the

8 Announcement Day will be the immediately following day on which banks in Saudi Arabia are open for business. Valuation for the Fund shall be on the Valuation Day specified in the Appendix hereto with respect to the Fund. The unit valuation will be announced through the method determined by CMA from time to time, and/or in one or more (but not limited to) of the following methods: samba online, Samba Phone or Samba ATM. c) The Net Asset Value of the Fund for the purpose of purchase, redemption or switching of units, shall be determined by the Fund Manger by subtracting from the value of the total assets of the Fund the amount of the total liabilities of the Fund including without limitation the fees specified in Clause 21, The unit price is determined by dividing such resulting figure by the total number of outstanding Fund units on the relevant Valuation Day. Article 16. Description of Units The fund is an open-ended investment fund. The Fund Manager may, at its absolute discretion but without prejudice to the other terms of this Terms and Conditions, issue an unlimited number of units in the Fund, all of a single class. Each unit represents a proportional interest in the Fund equal to each other unit. If the Fund is liquidated, units are entitled to share pro rata in the net assets of the Fund available for distribution to Participants. Article 17. Temporary Suspension of net Asset Value Calculation and Announcement of Unit Price If for any reason, the Net Asset Value calculation cannot be conducted or is not possible, the Fund Manager may, with the prior approval of CMA, suspend temporarily the calculation announcement of the Net Asset Value, the issue, transfer, purchase and redemption of the Fund s units. Article 18. Dividends and distribution The Fund s net income will be reinvested in the Fund. Thus, the increased value of the Fund through reinvestment of income will improve the value and price of the units. Net income of the Fund will be determined in accordance with generally accepted financial and accounting principles. Article 19. Newsletter, Periodic Statements and Mailing Address a) Newsletter and Periodic Statements: Within three weeks after the end of each quarter, the Fund Manager will send to each Participant a statement of the Participant s investment in the Fund. A newsletter summarizing the Fund s performance and advising the Net Asset Value of a Unit as of the last day of each calendar quarter will be sent to Participants within six weeks after the end of each quarter. b) Mailing Address: All statements, advices and other written communications by the Fund Manager to the Participants in connection with the Fund shall be mailed to the Participants address as indicated in the Current Account Opening Form

9 c) The Participants shall be responsible for providing Samba with a correct mailing address at all times and for advising Samba promptly of any change of address. In the event that Participants do not provide Samba with a correct mailing address or specifically advise Samba that Participants do not wish to receive any mailings, including statements and advices, with respect to their Investment in the Fund, then the Participants agree to indemnify and hold Samba and the Fund Manager harmless in respect of, and to waive, all of the Participants rights or claims against Samba and the Fund Manager, Samba and Fund Manager arising directly or indirectly from the non-provision of statements, advices or other information relating to the Investment, or because of such non-provision, the Participants inability to respond to or seek rectification of any errors or alleged errors in any such statements, advices, or other information. Article 20. Conflict of Interest a) The Fund Manager or Samba or a director, officer or employee may not act as principal when dealing with the funds under his management. b) Taking into consideration the interest of the Fund. In connection to the listed securities investments. the Participant understands and accepts that the Fund Manager or Samba or a director, officer or employee of the Fund Manager or Samba may, from time to time: Have a position in, or underwrite any investment held, purchased or sold for or to the Fund provided that the same has been undertaken at fair market values; Purchase or sell such investments for its other customers; and Have banking relationships with companies whose securities are held, purchased or sold for or to the Fund. c) In connection to the listed securities investment. The Participant understands and accepts that the Fund Manager may, from time to time, deal in respect of the Fund with connected parties upon terms no less favorable to the Fund than as would be obtained from a nonaffiliated counterpart. Officers of the Fund Manager or Samba may be officers or directors of such companies d) The Fund Manger must avoid any kind of conflict of interest between the interest of the Fund Manager and the interest of the Participants. The Fund Manager shall not favor the interest of one set of investors over other investors within the Fund. e) Any conflict of interest shall be disclosed in the Annual Report of the Fund Manager and to the Fund Board. f) Any conflict of interest that may arise during the Fund operation must be reported to CMA. Article 21. Costs and charges

10 a. The Participant hereby agrees to pay to the Fund Manager, a Management Fee equivalent to the amount set out in the Appendix for the administration of the Fund, which shall be applied from time to time. The Management Fee shall be payable in quarterly installments in arrears, calculated and accrued on the basis of the Fund s Net Asset Value during each quarter as determined on each Valuation Day during the relevant quarter. b. Further and in addition to the Management Fee, the Participant agrees to pay to the Fund Manager all costs in relation to the organization and the operation of the Fund and the investment of its assets. Such operational and ongoing costs shall include, but not limited to, cost of dealing in such securities forming part of the assets of the Fund, legal and audit expenses, advisory, safe-keeping and custodianship fees and costs, board member remuneration and other transactional charges. c. The Participant agrees to pay to the Fund redemption fees (for redeeming units) as set out in the Appendix. The fee will be credited to the Fund and not to the Fund Manager. Article 22. Power of Attorney The Participant hereby irrevocably appoints the Fund Manager as its attorney-in-fact, with full power of delegation and substitution to execute and deliver any documents which may be deemed by the Fund Manager to be necessary in order to acquire or sell any of the Fund s assets or to invest any of the Fund s cash or to transfer any of the Fund s assets into the name of a nominee of the Fund Manager or to exercise any of the powers or discretion given herein above to the Fund Manager, by the Fund Manager or to perform any of the Fund Manager s obligations in respect of the Fund. Any document to be executed by this power may be executed by an authorized officer of the Fund Manager. The Participant hereby agrees that the Participant shall do and execute or procure to be done and execute all necessary acts, deeds, documents and other things within his power to give effect to this Terms and Conditions and in particular to this Article. Article 23. Force Majeure Notwithstanding anything to the contrary herein, the Fund Manager shall not be deemed to be in default of any provision of the Terms and Conditions or be liable to a Participant or to any third parties for any delay, error, failure in performance or interruption of performance due to any act of God, terrorism, war, insurrection, riot, boycott, strike, interruption of power service, interruption of communications service, labor or civil disturbance, act of any other person not under the control or direction of either parties or other similar cause. The Fund Manager shall give the Participant reasonable written notification of any material or indefinite delay due to such causes. Article 24. Governing Law All transactions in the Fund shall be subject to all applicable laws and regulations in force from time to time in Saudi Arabia. Any dispute hereunder shall be referred to CMA Committee for the Resolution of Securities Disputes. The Participant recognizes and accepts that the purchase and sale of Fund assets, investment and property shall also be subject to all applicable laws and

11 regulations in the respective jurisdictions where such transactions are executed or where such assets, investments or properties are located without violating Shariah laws. Article 25. Amendments to the Terms and conditions The Fund Manager may at any time and in his sole discretion amend these terms and conditions for the benefit of the Fund, provided that it first obtains the approval of SAMA and CMA for any such amendments and provided further that it notifies the Participants by mail of the proposed change and furnishes them with a copy of the amended text. The amendments will become effective 30 days from the date of such notice. Article 26. The Participant The Participant can be a natural person (one or more e.g. joint) or legal entity. In the event that the Participant is two or more persons then unless indicated otherwise, any investment made in the Fund shall be considered the joint property of such persons and such persons authorize the Fund Manager to act upon written instructions of all, both, or any one of such persons. In the event that the Participant is a legal entity then, prior to such a Participant being allowed to make investments in the Fund, such Participant shall furnish to the Fund Manager a copy of such Participant s Commercial registration, Articles of Association, Partnership Agreement and, if appropriate, corporate resolutions all in a form satisfactory to the Fund Manager. Article 27. Succession The terms hereof shall, if the Participant is an individual, be binding upon the heirs, executors, administrators, personal representatives, trustees and successors of the Participant and the Participant s Agreement to these Terms and Conditions, shall not be terminated automatically upon the death or disability of the Participant. In the event that the Participant is a legal entity, this Terms and Conditions shall not terminate automatically on the death, disability, insolvency or dissolution of any partner or shareholder therein. Notwithstanding the foregoing, however, the Fund Manager shall be entitled, at its sole discretion, to suspend any dealings in connection herewith pending receipt by the Fund Manager of a court order, power of attorney or other evidence satisfactory to itself of the authority of any heirs, executors, administrators, personal representatives, trustees or successors to permit such dealings. Article 28. Redemption a) Redemption requests must be made on the Samba s Redemption Request Application Form or other alternative channels (e.g. Samba Phone, Samba Online etc), subject to redemption amounts not exceeding certain limits as specified by the Fund Manager from time to time. b) The Participant may only redeem units in the minimum amounts specified by the Fund. Redemptions in the Fund will only be permitted subject to the conditions set out in the Appendix hereto, including those relating to receipt of Redemption Request Applications and applicable redemption charges if any.

12 c) If the total aggregate requests for redemption and or switching, on any valuation cycle, received in respect of a number of units of the Fund, exceeds 10% of the total number of units outstanding on the previous Valuation Day, the Fund Manager may, at its discretion, defer any redemption and switching requests in whole or in part, so that the 10% level is not exceeded. Any redemption and switching requests so reduced will be effected in priority to subsequent redemption and switching requests received in respect of the next valuation cycle, subject always to the 10% limit. This limit will be used only during such period when unusually heavy redemption and/or switching requests would create a liquidity constraint to the detriment of the remaining Participants or to the Fund. d) If any redemption would reduce a Participant s investment in the Fund to less than the minimum initial participation amount specified by the Fund, the entire investment will be redeemed without referring back to the Participant. The proceeds of all redemptions will be paid in the denomination currency of the Fund by crediting the Participant s account with Samba by draft or telex transfer in accordance with the Participant s instruction on the Redemption Application Form. The Fund Manager's charges will be deducted for drafts and telex transfers. e) The redemption of the Participant s units and the discharge of any of the Fund s liabilities will be satisfied out of the assets of the Fund without any right of recourse whatsoever to the assets of the Fund Manager except in the case of gross negligence or fraud by the Fund Manager. Article 30. Replacement of the Fund Manager and Termination of Fund a. The Fund Manager may with the prior approval of CMA and SAMA resign or be replaced as a fund manager of the Fund. b. If, in the opinion of the Fund Manager, the value of the Fund s assets under management is insufficient to justify continued operation of the Fund, or if, due to any change in law, regulation or other circumstances that the Fund Manager may deem appropriate reason for terminating the Fund, the Fund Manager may, upon giving notice to the Participants and after SAMA s and CMA s approval, terminate the Fund. In such case, subject to the appointment of a liquidator, the Fund s assets will be liquidated, its liabilities discharged and the remaining proceeds of such liquidation distributed to the Participants within 30 days of such notice in the proportion which their units bear to the total units then ascertained by the Fund Manager to be in issue. Article 31. The Fund Shariah Supervisory Board Investment Guidelines The following guidelines are for the purposes of determining the types of companies in which the assets of the Fund may be invested.

13 a) Asset of the Funds will only invest in companies, which derive their main source of revenue from real estate development and any other related sectors that comply with Shariah rules. b) Companies with: Outstanding interest-bearing debt greater than 33% of their market capitalization (12 month rolling average); Non-operation gross interest income greater than 5% of operating income; or Accounts receivable and cash greater than 49% of total balance sheet assets, will be excluded. c) Investment in shares offering a priority return on distribution or liquidation will be avoided. d) The following investments will be avoided: Fixed income securities; Collective investment schemes not approved by the Shariah Supervisory Board; Future contracts and forwards; Options contracts; Short sales; and Transaction with deferred payment terms for the sale and purchase of currencies, gold or silver. e) This Prospectus shall be updated to reflect any amendment to these guidelines. f) A list of the Fund s portfolio of investments will be presented to the Shariah Supervisory Board on a quarterly basis for review. Article 32. Document This Terms and Conditions contain 31 Articles, Appendix and 13 pages.