Last checked at 26 Nov 2009 10:00
The Family Shari'ah Fund Limited
('FSF' or the 'Company')
Investing policy
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The Directors of The Family Shari'ah Fund Limited would like to issue clarification of their current investing policy in accordance with the revised AIM Rules dated 1 June 2009 and in particular the Notes for Investment Companies dated June 2009.
The Directors confirm that this investing policy has not materially changed from the investing policy as established and announced on Admission and that this announcement is for clarification purposes only. Further details regarding the investing policy and the administration of the Company can be found on the Company's website and in the Company's Admission Document. The full text of this investing policy can be found on the Company's website at www.familyshariahfund.com/investing_policy.html. It is the Company's intention to announce the investing policy annually in the Company's annual accounts. Any material changes to the investing policy will be subject to shareholder approval and, if passed, would be announced immediately thereafter.
The full text of the Company's current Investing Policy is as follows:
Investment objectives
The overriding principle
The Company's investment objective is to achieve long-term capital appreciation from a Shari'ah Compliant, diversified, investment portfolio characterised by a moderate level of risk. The Company operates under the overriding principle that all investments must be Shari'ah Compliant and that the Company's assets must be invested in accordance with the Shari'ah Screen. The Company's investment objectives have therefore been devised so as to provide investors with:
a diversified pool of Shari'ah Compliant assets;
consistent risk-adjusted returns over a market cycle via an active and diversified asset allocation programme;
geographic diversification of investments, predominantly outside the GCC; and
liquidity through trading of the Company's shares on AIM.
The portfolio of investments / assets
The Company seeks to invest its funds (through the Investment Manager) in Shari'ah Compliant economically-equivalent products for the majority of existing investment opportunities. The asset classes it may invest in are as follows:
Money market and cash
The Company may invest in assets under one or multiple Murabaha frameworks with different maturities and may hold cash from time to time.
Islamic income and leasing
The Company may invest in Shari'ah Compliant alternatives to income generating investments including:
Sukuk;
Ijarah;
Musharakah;
funds of various underlying structures holding a mix of the above assets; and/or
a leasing portfolio with a strategic partner.
Equities
The Company may build a portfolio of equity investments and actively managed baskets of securities by investing through a diversified basket of index-linked investments and through funds or managed accounts with selected fund managers. The Company may, therefore, allocate capital to:
equity funds;
managed accounts with active investment managers investing within the Shari'ah Screen;
publicly quoted equities;
ETFs tracking Islamic indices or their sub-indices e.g. Dow Jones Islamic Market Indexes™; and/or
ETFs tracking Shari'ah Compliant private equity investments.
Alternative investments
Upon satisfactory review by the SSB, the Company may invest in alternative investments and, in conjunction, may establish a variety of investment funds with specific mandates to satisfy this part of its investment objective. The Company may allocate capital to:
Hedge Fund managers through managed accounts on a Shari'ah Compliant brokerage platform; and/or
wrapper instruments that emulate conventional Hedge Fund returns in a Shari'ah Compliant manner.
Real Estate
The Company may invest in real estate including investments in:
real estate funds; and/or
a managed portfolio of direct properties in association with a selected partner or partners.
Private Equity
The Company may invest in private equity including investments in:
private placements; and/or
other private equity funds or co-investment opportunities (for example, the Co-Investment Fund).
Other
Alternative investments may also include currency and currency-linked products and investments driven by special situations and such other kinds of investment as the Investment Manager may determine from time to time acting through its Limited Discretion. The Investment Manager can also implement strategies through structured notes that are Shari'ah Compliant although it will not typically do so.
Investment Strategies
The Investment Manager is, in accordance with and subject to its Limited Discretion, responsible for devising investment strategies to satisfy the Company's investment objectives.
Investment Manager methodology
The Investment Manager, on behalf of the Company, seeks to achieve diversification of the Company's asset portfolio by investing in multiple asset classes in different geographical areas and engaging multiple third party portfolio managers. The Investment Manager may also achieve diversification by using Tactical Tilts to capture shorter term movements in the prices of assets and devising underlying strategies individual to each asset class or investment rather than adopting a single strategy across the portfolio. In addition, the Investment Manager may:
formulate strategic and tactical views on liquid asset classes, geographies or sectors to prudently exploit market opportunities;
analyse the various liquid asset classes in order to construct an efficiently diversified portfolio;
utilise the above views as inputs into the portfolio construction process; and
analyse the performance of illiquid assets including (at least) annual performance against budgets and the basis on which the initial investment was made.
The Company's investments will be passive investments in that the Company, or the Investment Manager acting on its behalf, will not take an active role in the management or the board of directors of any such investment.
The implementation of the Investment Strategy
The Investment Manager will formulate its views based on the review of internal and external analysis that include, but are not limited to: top-down macro analysis, bottom-up analysis, sector reviews, fundamental and technical analysis, brokers' research material, third party managers' screening and reviews, conferences or events and thematic research.
The Investment Manager implements its views on the market through a mix of investment vehicles including direct investments in liquid markets (Sukuk, equities, ETFs), Fund of Funds (managed by the Investment Manager or by third parties) and pooling vehicles to generate economies of scale. On an ongoing basis, the Investment Manager will:
utilise a top-down portfolio construction process starting with asset allocation and then filtering the asset allocations down to regions, countries and/or sectors;
continually develop its views of the markets based on macroeconomic and micro components;
challenge its market views internally and always compare them against external research; and
aim to select and appoint the best managers (in relation to the specific economic climate and the desired risk, return and volatility requirement for that portion of the asset allocation).
Asset allocation
The Company targets a degree of risk above that of a conservative diversified portfolio, but below that of a long-only equities portfolio. The Company seeks to invest its assets in accordance with the Investment Manager's investment philosophy which incorporates quantitative risk control and portfolio construction tools to manage the return expectations effectively against the level of volatility and maximum acceptable loss to the Company over the investment timeframe, being a full market cycle.
The Investment Manager utilises its professionals and its tools in order to manage a portfolio of investments that is designed to achieve diversification through asset allocation. The Investment Manager's approach seeks to avoid concentrating the Company's assets in a single asset class, in a unique investment, or in a specific geographical area because it believes that doing so increases the risks on any portfolio. Organised and structured asset allocation can provide an attractive means of balancing the risks of investing and this approach represents one of the key objectives of the Company.
The Investment Manager has devised its allocation between each major asset class to fit the Company's investment objectives, taking into account the risk/return balance and the level of volatility required and accepted.
The Investment Manager is required to work within the target range of allocation levels for each asset class as set out in the diagram below to enable it to have a greater degree of flexibility in managing the Company's assets.
The target asset allocation ranges are as follows:
| Money market /cash | Islamic income /leasing | Equity* | Alternative investments | Real estate | Private equity | |
| Maximum | 100% | 40% | 40% | 20% | 15% | 15% |
| Range | 10%-100% | 0%-40% | 0%-40% | 0%-20% | 0%-15% | 0%-15% |
*It should be noted that investments in private equity ETFs are included within the equity proportion of the asset allocation.
The Investment Manager may, at its Limited Discretion, allocate different proportions of the Company's NAV outside these ranges where it believes doing so will achieve the Company's investment objectives and is in the best interests of Shareholders or to take advantage of short-term opportunities. Such active movements outside of these ranges requires prior approval by the Board whereas involuntary or passive movements as a result of, for example, the increase or decrease in value of a particular asset class due to its performance would require ratification at the first quarterly Board meeting following the date the range is breached.
The Investment Manager will use its best efforts to diversify holdings within each selected asset class without limitation and to avoid concentrating the Company's assets with a single manager, in a single investment or in a specific geographical area because it believes that this strategy will decrease the risks on the portfolio.
There is no intention to invest more than 20% of the Company's gross assets with a single fund manager or in a single investment vehicle. However, as the Company deploys funds initially, or as it reallocates them as a consequence of a significant policy change in the future, it is possible that more than 20% of the gross assets could temporarily be with a single fund manager or in a single investment vehicle. The risk associated with this is spread as a result of the overall diversified investment portfolio as outlined in the Company's investment objectives and strategy above.
Investment Restrictions
Shari'ah Compliance
The Company operates under the overriding principle that all investments must be Shari'ah Compliant. The SSB determines whether investments are Shari'ah Compliant as far as the Company is concerned.
Shari'ah Screen and Shari'ah Compliance
The Company's policies, activities and investments must be in compliance with the principles and precepts of Shari'ah, as determined by the SSB, and must always be conducted under the supervision of the SSB. The SSB also provides certain guidelines to the Investment Manager by means of the Shari'ah Screen, enabling the Investment Manager to make certain restricted and specific investments without requiring the prior approval of the SSB.
Further, the SSB provides advice, guidance and opinions by way of fatwas in relation to the Company's investments. The SSB will review material documents and instruments relating to the investments undertaken by the Investment Manager.
Other Investment Restrictions
Any variation to the Company's Investment Policy would require agreement by the Board under the supervision of the SSB and any material change would require Shareholder consent in accordance with the AIM Rules.
The Company may not invest directly in derivatives, financial instruments and/or currencies other than for the purposes of efficient portfolio management (i.e. solely for the purpose of reducing, transferring or eliminating investment risk in the underlying fund, but not for speculative targets).
Any pre-existing investments made by the Investment Manager (or any of its affiliates) that are offered or recommended to the Company shall be subject to both an external valuation and specific pre-approval by the Board.
The Company may not invest directly in physical commodities but may do so through Murabaha arrangements which can represent up to 100% of the Company's assets.
The Investment Manager will not typically invest in structured notes or products unless such vehicles are Shari'ah Compliant and are, in the view of the Investment Manager, the most efficient way to participate in given underlying assets.
There are no limits on the Company's level of leveraging.
The Company is not a property collective investment undertaking, however the Company may seek to invest in property from time to time.
The nature of returns to Shareholders
The Company's absolute return orientated portfolio construction approach focuses on generating returns independently of any benchmark and not relative to any benchmark. The Company aims to generate superior returns to those of normal cash returns over a full economic and business cycle with the objective of delivering consistent risk-adjusted returns over a market cycle via a diversified asset allocation programme of passive investments.
Definitions
In this document, where the context permits, the expressions set out below shall bear the following meanings:
| AIM | the AIM market of the London Stock Exchange. |
| AIM Rules | together, and as amended from time to time, the AIM Rules for Companies and the AIM Rules for Nominated Advisers, governing admission to and the operation of AIM, as published by the London Stock Exchange. |
| Board | the Board of Directors for the time being of the Company. |
| Co-Investment Fund | TFO Shari'ah Co-Investment Fund SPC. |
| Company or The Family Shari'ah Fund | The Family Shari'ah Fund Limited, an exempted Cayman Islands incorporated closed-ended fund company with company number SH-206066. |
| Depository | Computershare Investor Services plc or such other persons from time to time appointed by the Board on behalf of the Company as its depository. |
| Depository Interest or DI | the dematerialised depository interests representing Ordinary Shares in uncertificated form issued to a holder on the terms of the DI Deed Poll. |
| DI Deed Poll | the trust deed poll dated 8 May 2008 under which the Depository issues DIs to holders representing an interest in the underlying Ordinary Shares and holds the corresponding Ordinary Shares as bare trustee for the DI Holders. |
| DI Holders | the holder of a DI issued pursuant to the DI Deed Poll. |
| GCC | the Gulf Cooperation Council, also known as The Cooperation Council for the Arab States of the Gulf (CCASG), a trade bloc comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE. |
| Investment Manager | TFO. |
| Investment Management Agreement | the investment management agreement between the Investment Manager and the Company dated 18 July 2008. |
| Limited Discretion | at the discretion of the Investment Manager, subject to compliance with, inter alia, the Shari'ah Screen and the restrictions outlined in the Investment Management Agreement and associated Schedules. |
| London Stock Exchange | London Stock Exchange plc. |
| NAV | the total assets of the Company less its total liabilities (including accrued but unpaid fees) as determined by guidelines laid down by the Board from time to time. |
| Ordinary Shares or Shares | ordinary shares with a par value of US $0.01 each in the capital of the Company. |
| Shareholder | a holder of any legal or beneficial interest, whether direct or indirect, in one or more Ordinary Shares including DI Holders. |
| Shari'ah | the divine Islamic "law" as revealed in (i) the Qur'an, which is the holy book of Islam, (ii) the Sunna, or binding authority of the dicta and decisions of the Prophet Mohammed (peace be upon him), (iii) ijma, or "consensus" of the community of Islamic scholars, and (iv) the qiyas, or analogical deductions and reasoning of the Islamic scholars with respect to the foregoing. |
| Shari'ah Compliant or Shari'ah Compliance | compliant with, or in compliance with, the principles and precepts of Shari'ah as determined by the SSB. |
| Shari'ah Screen | the specified guidelines developed and applied by the SSB in accordance with Shari'ah (as determined by the SSB) from time to time in connection with the activities and business of the Company including those applicable to individual structural elements of investment, acquisition, disposition, operating and financing transactions engaged in by the Company. |
| SSB | the Shari'ah Supervisory Board appointed by the Company to oversee its operations and ensure its compliance with Shari'ah precepts (as determined by the SSB). |
| TFO | The Family Office Company B.S.C.(Closed), a Bahrain closed-ended stock company incorporated in Bahrain on 19 May 2004 with company registration number 53871. TFO's commercial name is The Family Office and it is licensed by the Central Bank of Bahrain as an Investment Business Firm - Category 1. |
| UAE | the United Arab Emirates. |
| US | the United States of America, its territories and possessions, any state of the United States of America and the District of Columbia. |
| US $ or USD | US dollars. |
Glossary
| ETF | exchange traded fund, a fund that tracks an index, a fund, a sector, a geography or a group of shares that is traded like a share on an open market. |
| Fund of Funds | an investment fund that uses an investment strategy of holding a portfolio of other investment funds rather than investing directly in securities. |
| Hedge Fund | a fund which is allowed to use aggressive strategies that may be unavailable to certain other funds, including selling short, leveraging, program trading, swaps, arbitrage, and derivatives. Hedge funds are generally highly speculative and are not, therefore, generally Shari'ah Compliant, unless tailored on specifically designed Islamic platforms. |
| Ijarah | an Islamic lease agreement. Ijarah allows the owner of the assets (often a bank) to earn profits by charging rentals on the asset leased to the customer. Ijarah-wa-iqtinah extends the concept of Ijarah to a hire and purchase agreement. |
| Murabaha | purchase and resale with a mark-up. The capital provider purchases the desired commodity at cost price from a third party and resells it at a predetermined higher price (which is the sum of the cost price and profit) to the capital user. |
| Musharakah | a partnership where profits are shared according to an agreed ratio whereas the losses are shared in proportion to the capital / investment of each partner. In a Musharakah, all partners to a business undertaking contribute funds and have the right, but not the obligation, to exercise executive powers in that project, which is similar to a conventional partnership structure and the holding of voting stock in a limited company. |
| Private equity | equity which is not traded on a public market. |
| Shari'ah Compliant Hedge Fund | a Hedge Fund which is allowed to use aggressive (Shari'ah Compliant) strategies that may be unavailable to certain other funds and invests in Shari'ah Compliant underlying assets. |
| Sukuk | certificates which represent proportionate undivided beneficial ownership rights in the underlying asset. There are several types of Sukuk. The more common Sukuk is the "Sukuk Ijarah". The asset will be leased to the client to yield the return on the investment. |
| UCITS | Undertakings for Collective Investment in Transferable Securities - the name given by the EU to pan-European investment funds which comply with the UCITS Directive. |
| Tactical Tilts | short-term investments or sets of investments grouped in a particular strategy and deployed so as to take advantage of a particular market situation or environment. |
<Investing Policy ends>
For further information, please contact:
| The Family Office | Tel: +973 (17) 221177 |
| Richard Joye, Head of Client Service | |
| Blomfield Corporate Finance (Nominated Adviser and Broker) | Tel: +44 (0)20 7444 0800 |
| James Pinner / Alan MacKenzie |
Notes to Editors
The Family Shari'ah Fund Limited is the first multi-asset class fund to gain admission to AIM and provides investors with exposure to a variety of Shari'ah Compliant investments predominantly outside of the GCC region.
The Company's investing policy, as defined by the AIM Rules, is available on the Company's website at www.familyshariahfund.com/investing_policy.html.