FALCOM MURABAHA FUND (SAUDI RIYAL) (the FUND )

Transcription

1 1 In the Name of Allah, the Most Gracious, the Most Merciful These are the Terms & Conditions of the Falcom Murabaha Fund (Saudi Riyal) (the Fund ) an open-ended collective investment scheme represents a contractual arrangement based on the Agency Contract between the Fund Manager and the participants. The Fund is registered under the Capital Market Authority (the CMA ) dated 02/05/1428 AH corresponding to 19/05/2007 AC. The Fund abides by the provisions of the Investment Funds Regulations issued by the Capital Market Authority, its amendments and directions issued by the CMA. FUND MANAGER FALCOM Financial Services ( FALCOM ) FALCOM is a Juridical Person, licensed by the Capital Market Authority under License No dated 29/04/1427 AH, in pursuant to the Licensed Persons Regulations issued by the CMA FALCOM MURABAHA FUND (SAUDI RIYAL) (the FUND ) [An open-ended investment Fund] PROSPECTUS (TERMS & CONDITIONS) THE CAPITAL MARKET AUTHORITY (THE CMA ) TAKES NO RESPONSIBILITY FOR THE ACCURACY OF THE STATEMENTS AND INFORMATION CONTAINED IN THIS PROSPECTUS OR FOR THE PERFORMANCE OF THIS FUND, NOR SHALL THE AUTHORITY HAVE ANY LIABILITY TO ANY PERSON, AN INVESTOR OR OTHERWISE, FOR ANY LOSS OR DAMAGE RESULTING FROM RELIANCE ON ANY STATEMENT OR INFORMATION CONTAINED HEREIN Prospective investors and Recipients of this Prospectus must carefully review the terms and conditions included therein, take the advice of their professional advisers and should inform themselves about and observe any applicable legal requirements prior investing in the Fund. The date of these Terms & Conditions: 19/05/2007 Revised on 01/12/2011

2 2 FUND GUIDELINES Fund s Name FALCOM Murabaha Fund (Saudi Riyal) Fund Manager FALCOM Financial Services Prince Mohammad Ben Abdul Aziz (Tahliya) Street P.O. Box 884 Riyadh Tel: (1) Fax: +966 (1) Custodian & Administrator FALCOM Financial Services Olaya Street P.O. Box 884 Riyadh Tel: (1) Fax: +966 (1) External Auditor PricewaterhouseCoopers King Faisal Foundation Bldg. Tel. No P.O. Box 8282, Riyadh 11482

3 3 FUND SUMMARY Fund s Name Falcom Murabaha Fund (Saudi Riyal) Risk Level: Low. Fund s Currency: Saudi Riyal. Benchmark: Saudi Riyal Inter-bank Offering Bid Rate (SIBID) for three months Investment Strategy: The Fund targets the money markets to achieve current income at high level of capital preservation contrast to other investments. To achieve the Fund s objectives the Fund will invest in Sharia Compliant Murabaha transactions. Minimum Participation: SAR 5 million Minimum Subséquent / Rédemption : SAR. 2,000 Days of receiving Subscription: Each business day. Days of Valuation: Each business day and the prices are published daily on FALCOM & Tadawul web-sites. Participation Fee: None. Management Fee: 0.50% of Net Asset Value annually. Disclosure Auditing & Follow-up Fee: SR. 7,500 annually Date of Placement: 02/06/2007 Initial Unit Price: 1 Saudi Riyal

4 4 Terms & Conditions 1. Name of the investment FALCOM Murabaha Fund (Saudi Riyal) fund. 2. Address FALCOM Financial Services Prince Mohammed Ben Abdul Aziz (Tahliya) Street P.O. Box 884 Riyadh Tel: (1) Fax: (1) Commencement. The date of initial subscriptions was 11 August Regulator. These Terms and Conditions have been prepared in accordance with the provisions of the Investment Funds Regulations issued by the Capital Market Authority (CMA), the Regulator of the Fund. FALCOM is a Licensed Person under license No dated 29/4/1427 AH as issued by the CMA. 5. Date the Terms and The Terms and Conditions of the Fund were issued on 19 May 2007 Conditions Issuance and and last updated on 01/12/2011. last update. 6. Participation. The minimum participation amount is SR 5, (Five Thousand Saudi Riyals). The minimum subsequent participation amount or redemption is SR 2,000 (Two Thousand Saudi Riyals). The minimum required balance is SR 2,000 (Two Thousand Saudi Riyals). The Fund Manager reserves the right to amend the minimum subscription amount to the best interest of the investors. 7. Currency of the fund. Saudi Riyal is the base currency of the Fund. 8. Investment Objectives The Fund seeks to achieve current income, liquidity and capital preservation by investing in Murabaha transactions. 9. Principal investment strategies. The Fund offers alternative Sharia compliant investment that generates competitive returns in contrast to the conventional short term money market instruments. The Fund also seeks to achieve maximum capital preservation, high liquidity and mitigate potential exchange rate risk. This Fund offers the investors an opportunity to invest to achieve current income with steady capital appreciation and relatively high degree of capital preservation of their investments versus other investments. To achieve the Fund s objective, the Fund Manager invests the Fund s assets in Sharia compliant Murabaha transactions. Investment Approach: FALCOM Murabaha Fund (Saudi Riyal) gauges its performance against the Saudi Riyal Inter-bank Offering Bid Rate for three months (SIBID). FALCOM Asset Management team seeks to add value over the Benchmark through active management of Murabaha

5 5 investment transactions. Investment Strategy: FALCOM Murabaha Fund (Saudi Riyal) provides an Islamic alternative to conventional Money Market instruments. The Fund invests in Murabaha (Trade Finance) transactions to finance commercial transactions that comply with the Shariah guidelines. Murabaha is a kind of sale in Islam, where commodities are sold with a profit margin that is added to the principal cost price on deferred repayment basis. Murabaha has been applied by Islamic Banks as a financing tool where the Bank Financial Institution - buys the commodities on cash and sells them on behalf of the customer on deferred repayment basis for profit margin. All trading profits are reinvested in the Fund and will be reflected on the Fund unit price. The increasing volume of the Fund collective investments enables diversification and reducing impact of potential risk. The performance of the Fund is compared to the Saudi Riyal Three-Month Inter-bank Bid Rate SIBID (Specified Average Rate which is determined by Saudi Banks according to demand and supply). 10. Principal risks of investing in the Fund The Fund is considered to be a low risk investment because it trades only with institutions which have a good reputation and sound financial rating. Besides, the Fund will devote its investments to only Murabaha transactions. Investing in the Fund is not a deposit with any local bank that sponsors, sells or otherwise affiliated with the investment Fund. Below, are some of specific risks associated with investing in the Fund and may have an impact on the value of the investors money. The risk are listed in alphabetical order as follows: Default Risk: Default risk is the possibility that the counterparty to a Murabaha contract is unable or unwilling to repay, either on time or at all. In other words, this risk occurs when the other party of the Murabaha contract will be unable to honor its financial obligations. Interest Rate Risk; Morabaha rates are linked to Saudi Riyal interest rates and any fluctuations in interest rates can have an impact on Murabaha rates. Market Risk: The fluctuation of prices of commodities in the international markets can have an influence on the value and profits of the fund units. 11. Fees and expenses The Fund Manager is entitle to receive management fee, as stated in the Financial disclosure Summary, that will be calculated daily and

6 6 paid quarterly as arrears. The Fund Manager reserves the right to reimburse from the Fund, at any time, any accrued fees, commission, legal fees, and other expenses that are incurred by the Fund and pertaining to running the Fund, in conformity with the CMA regulations. The Fund bears the following fees: Subscription Fees or Redemption fee: Nil. Management Fees: 0.50% 12. Dealing costs Transactions related to the investments of the Fund, in underlying assets, are booked at cost. Any dealing cost, therefore, will be paid out of Fund assets. 13. Winding-up and appointment of a Liquidator 14. Fund Board of Directors The CMA reserves the right to appoint a Liquidator for the Fund according to Article 22 of the Investment Fund Regulations issued by the CMA. The Board of Directors of the Fund consists of the following members: 1. Mr. Adeeb A. Al-Sowailim (Chairman): Mr. Al-Sowailim is the Chief Executive Officer ( CEO ) and Board Member of Falcom Financial Services. He is also a board member of numerous companies, a member of Investment Committee of the Logistic Company and Founding Member of the Saudi Canadian Investment Group. He has above 15 years in the banking and investment industry. Formerly, Mr. Adeeb worked with the Saudi American Bank (SAMBA) and Banque De Saudi Fransi. He holds a Bachelor of Law degree from King Saud University, Riyadh, Saudi Arabia. 2. Mr. Saleh Abdullah Al-Henaki (Affiliate Member): Saleh Al-Henaki is presently Head of the Asset Management of FALCOM Financial Services. He holds a Bachelor of Arts in Quantitative Methods from King Saud University in Riyadh, Master Degree of Arts in Economics from University of Colorado in 1998 and a Master Degree of Financial and Actuarial Mathematics from University of Michigan in Saleh Al-Henaki has above 14 years of practical knowledge in investment banking, leasing and insurance with the Saudi Monetary Agency (SAMA), Al Rajehi Bank and FALCOM Financial Services. His experience comprises Portfolio Management and Capital Markets Analysis that covers Saudi market, GCC and USA. 3. Mr. Atta H. Al-Bayouk (Independent Member): Mr. Al-Bayouk has over 40 years of practical experience in the scope of accounting and auditing, Zakat and customs advisory,

7 7 Administrative and liquidation Advisory. He is an associate of the Institute of Chartered Accountants in United Kingdom and Wales. Mr. Al-Bayouk olds a Bachelor degree in Accounting and Business Administration from King Saud University, Riyadh, Saudi Arabia. Mr. Al-Bayouk is currently managing his licensed auditing office in Riyadh that renders services of accounts auditing, legal advisory, Zakat and customs advisory, Administrative and liquidation Advisory. 4. Mr. Fahad S. Al-Musabahi (Independent Member): Mr. Al-Musabahi is an independent member of the Board of Directors of the Fund. Mr. Al-Musabahi has over 19 years of numerous experiences in the scopes of finance, budgeting and cost control. Presently, Mr. Al-Musabahi is the Financial Advisor of Saudi Oger Group. He holds a B.S. in Accounting from King Saud University in Riyadh, Saudi Arabia. Also, he is a member of the Saudi Accounting Association (S.A.A.) and a member of the Saudi Organization for Certified Public Accountants (S.O.C.P.A.). Independent Directors are entitled to a remuneration of SAR 3,000 per meeting, with a cap of SAR 5,000 per month in cases where there is more than one meeting in a month. The Fund s Board members are members in the following Funds: FALCOM Saudi Equity Fund. FALCOM Sukuk Fund. FALCOM Multi Asset Fund. FALCOM IPO Fund. FALCOM Saudi Equity ETF. FALCOM Petrochemical ETF. FALCOM Arab Markets Fund. The Fund s Directors responsibilities include the following: 1) Approval of all material contracts, reports and resolutions where the Fund is a counter party including, but not limited to, approval of third parties agreements, custody agreement, agreements with licensed persons for placing the Fund s units to prospective investors or for advisory services with regard to purchase of units in the Fund. 2) Overseeing and, where appropriate, ratifying any conflicts of interest the fund manager has identified. 3) Meeting at least twice annually with the Fund Manager s compliance officer and the Money Laundering Reporting Officer (MLRO) to ensure adherence to all regulations and applicable laws including, inter alia, those requirements set forth in Article 39 of the Investment Fund Regulations.

8 8 4) Approval of any recommendations made by an appointed Liquidator according to the Article 22 of the Investment Funds Regulations as relating to winding-up or the continuation of the operation of the Fund or the Fund Manager, except those recommendations related to any allegation raised by the Liquidator pertaining to any misconduct or negligence of the members of the Board of Directors. 5) Ensure completeness and conformity of the Fund s Terms and Conditions, or any other document either a contract or otherwise (that incorporates any disclosure pertaining to the Fund, the Fund Manager and/or its management services to the Fund) with the Investment Funds Regulations. 6) Ensure adherence of the Fund Manager to its responsibilities and duties to the best interest of the units holders in pursuant to the Fund s Terms and conditions and the provisions of the Investment Funds Regulations. 7) To act honestly to the best interest of the Fund and its units holders. 15. Fund manager The Fund Manager is FALCOM Financial Services an Authorized Person vide license number dated 24/4/1427 AH issued by the Capital Market Authority. Address of the Fund Manager: FALCOM Financial Services Prince Mohammed Ben Abdul Aziz (Tahliya) Street P.O.Box 884 Riyadh Tel: (1) Fax: +966 (1) Custodian & Administrator FALCOM Financial Services is the Custodian and Administrator of the Fund. Address of the Custodian of the Fund: FALCOM Financial Services Olaya Street P.O. Box 884 Riyadh Tel: (1) Fax: (1) Auditor Price water house Coopers King Faisal Foundation Bldg. Tel. No P.O. Box 8282, Riyadh 11482

9 9 18. Annual Audited Financial Statements FALCOM will prepare a semi-annual unaudited report within 45 days of the end of the period reviewed by the external auditor and an annual report, which includes financial statements prepared in accordance with the Saudi laws and regulations within 90 days from the fiscal year-end. The annual financial statements will be audited and certified by the external auditors and made available free upon request from any branch of FALCOM. The first financial year of the Fund ends on 31 December 2007, and by end of each calendar year thereafter. 19. Characteristics of the Units 20. Shariah-based Investment Funds The Fund Manager may issue an unlimited number of units of the FALCOM Murabaha Fund (Saudi Riyal), all of a single class. Each Unit represents a proportional share of equal value in the underlying investments of the Fund. FALCOM Shariah Board is the Sharia Advisors ( Sharia Board ) of the Fund. The Sharia Board of the Fund consists of the following Scholars: Shaikh Abdallah Ibn Sulaiman Almanie: Shaikh Abdullah Almanie has been a member of the Senior Ulema Board since its inception, Advisor of the Royal Council, was formerly the Chairman of the Cassation Court in Makkah Al Mukarramah. He is a Deputy Chairman of the Shariah Board of the Accounting and Auditing Organization for Islamic Financial Institutions. Shaikh Abdullah is also a member of Shariah Supervisory Committees of numerous Banks in Saudi Arabia and world-wide. He has written numerous books in the Field of Islamic Banking. Dr. Mohammed Ibn Ali Al Garie: Dr. Al-Garie is a Ph.D. holder in economics from the University of California. He is a professor of Islamic Economics at King Abdul Aziz University. He is an advisor in the Islamic Jurisprudence Academy of the Islamic World League. Dr. Elgari is a member of Shariah Boards of Islamic banking in numerous Banks. Dr. Hamad Ibn Abd Al Rahman Al Junaidil: Dr. Hamad is Associate Professor in the College of Shariah Department of Economics and Business Administration of Al Imam Mohammad Ben Saud University. All Fund s transactions and operations will be conducted in compliance with the Sharia principals, reviewed and verified by the Shariah-board on quarterly basis.

10 Initial offers The minimum amount required to commence operations of the Fund is SAR 50 million. 22. Investment by the FALCOM Financial Services in the capacity of the Fund Manager Fund Manager in the will invest seed money at inception that may gradually be decreased Fund. to a level deemed appropriate. 23. Subscription and Redemption Procedures. Subscription procedures: Investors wishing to purchase units in the Fund shall do so by completing, signing and delivering a Subscription Application Form to any FALCOM branch office, together with the investment amount. If payment is made in a form other than cash such as checks and drafts, investment in the fund will only be executed upon clearing of funds. If payment for units is made in a currency other than the denomination currency of the fund (i.e., Saudi Riyals), the payment currency will be converted into the Fund s currency by the Fund Manager at the prevailing exchange rate at the time and the purchase of units will become effective on the forward unit price. Regardless of the receipt of the signed subscription form or any other requirements, FALCOM reserves the right to decline any additional subscriptions from the Fund without giving any reason. In this case, FALCOM will refund the investor with the subscription amount without delay. Redemption procedures: Redemption transactions will be processed on the following valuation day on which the redemption requests are received. Investors may elect to redeem all or part of their holding of Investor Units. If any redemption would reduce a participant s investment in a fund to less than the minimum initial participation amount specified for the Fund, the total investment must be redeemed. FALCOM is not obliged to redeem more than 10% of the total number of units in the Fund on any valuation day. The remaining redemption will be paid on the next valuation date. If the valuation of the Fund is suspended, the redemption request of units of the Fund, submitted on the suspension date or after, may be redeemed on the next valuation date when FALCOM terminates suspension of valuation. 24. Valuation of the Assets of the Investment Fund (i) The unit value of the Fund is computed by dividing the Total Asset Value of the Fund plus all income including accrued income, less management fee and any expenses, by the total number of units outstanding at that time. (ii) FALCOM Murabaha Fund (Saudi Riyal) will be valued DAILY (Every Saudi Business Day). (iii) Subscription and Redemption applications will be processed on

11 11 forward prices. Subscription and Redemption requests Should be received at twelve o clock of each business day. (iv) FALCOM Murabaha (Saudi Riyal) Fund s prices will be published daily at Tadawul and FALCOM websites. 25. Termination If the Fund Manager observes that 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 an appropriate reason for terminating the Fund, the Fund Manager may, upon giving notice to the participants and after CMA approval, terminate the fund after giving 60 days notice to the unit holders. In such case, 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 issued. 26. Reporting to Unit Holders Investors will receive within 30 days from the end of each quarter a quarterly report showing the status of their investments, number and value of units by end of period. The report will be available free of cost. 27. Conflicts of Interest. The Investor understands and accepts that FALCOM, the Fund Manager, a Delegated Party or a Connected Party or Director, Officer or Employee may, from time to time, have a position in, or underwrite any investment held in the Fund, purchase or sell such investments for its other customers, have banking relationships with companies with which the fund is dealing. FALCOM, Delegated Party or the Fund Manager may, from time to time, deal on the Fund s behalf with a connected party upon terms no less favorable to the Fund than would be obtained from a nonaffiliated counter party. FALCOM, Delegated Party or Fund Manager may hold, purchase, or sell for the Fund securities unless this action is construed as favoritism. 28. Changes to the Terms and Conditions The Investor agrees that the Fund Manager may at any time and in its sole discretion amend these Terms and Conditions, provided that it obtains the prior approval of CMA. It is also required that the Fund Manager notifies investors by mail of the proposed changes and furnishes them with a copy of the amended text. The amendments will become effective 30 days from the date of any such notice. 29. Complaints Procedure. If an investor has any complaint regarding the Fund, it should be addressed to: Head of Compliance Department FALCOM Financial Services P.O. Box 884 Riyadh 11421

12 12 Tel : (1) Fax: 966 (1) All the procedures of compliance will be available to the CMA on its request. 30. Governing Law (A) The Fund is regulated by laws of Saudi Arabia, regulations and directions issued by Capital Market Authority, their amendment from time to time and comply with the Islamic principals that are approved by its Sharia Board.. (B) Any disputes may arise between the parties of this Agreement (Terms and Conditions of the Fund) shall be referred to the Disputes Settlement Committee of the CMA. 31. Compliance with regulations The terms and conditions and other Fund s documentation comply with the Investment Funds Regulations issued by CMA. They contain fair and accurate disclosures of all material facts pertaining to the investment fund.

13 Summary of Financial Disclosure: APPENDIX 1 1 Subscription Fees None 2 Redemption Fees None 3 Management Fees 0.50% of NAV annually. 4 Audit Fees SAR 23,000 5 Disclosure Auditing & Follow-up Fee 7,500 Saudi Riyal annually. 6 Dilution Fees None 7 Borrowing Charges According to rates prevailing at the time of transaction. 8 Independent Fund Board Member Remuneration SAR 3,000 per meeting, capped at SAR 5,000 per month in cases where there are more than one meeting in a month. Summary of Financial Disclosure (Continuation) Continuing APPENDIX 1 1 Minimum Initial Subscription SAR 5,000 2 Minimum for Additional Subscription and Redemption SAR 2,000 3 Minimum Balance SAR 2,000 4 Dealing Day Every Business Day 5 Valuation Day Every Business Day 6 Redemption Payment Period from Valuation Day 7 Risk profile Low 2 Business Days 8 Unit Price at Inception SAR Currency of Fund Saudi Riyal

14 14 Signatures By signing these terms and conditions, I/We hereby acknowledge that I/We have received a copy of these terms and conditions which incorporate the terms and conditions of Falcom Murabaha Fund (Saudi Riyal, its appendixes, I/We have reviewed them, understood the contents and hereby providing our contest by signing these document. Name of the Investor:. Signature of the Investor: Date: / / Type of Identity:. Number of Identity:.. Place of Issue:... Date of Issue: / / Representation of FALCOM Financial Services: Name:.. Occupation:.. Office:... Date: / /