riyad reit - الرياض المالية · pdf filethe admission and listing of the units in...

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The admission and listing of the units in Riyad REIT has been approved by the Saudi Arabian Capital Market

Authority dated 8/2/1438H (corresponding to 8/11/2016G).

TERMS AND CONDITIONS

"ـتـــــري " الرياضصندوق

Riyad REIT

RIYAD REIT

(a real estate investment traded fund listed on the Saudi Arabian Stock Exchange)

RIYAD CAPITAL

FUND MANAGER

November 2016 G.

Capital: SAR [500,000,000]

Price Per Unit: SAR 10

Units Issued on Listing Date: [50,000,000]

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Important Notice

These Terms and Conditions contain detailed information relating to the Riyad REIT (the “REIT”) and the offering

of units in the REIT. When purchasing units in the REIT, investors will be treated as relying solely on the basis of

the information contained in these Terms and Conditions, copies of which are available for collection from the

website of Riyad Capital (www.riyadcapital.com) or the Saudi Arabian Stock Exchange (“Tadawul”) at

(www.tadawul.com.sa).

Prospective investors must read the entirety of these Terms and Conditions before purchasing units in the REIT.

An investment in the REIT involves certain risks and may not be suitable for all investors. Investors must be willing

to assume the risks associated with an investment in the REIT, which are described in Section 2.7 of of Part 2 of

these Terms and Conditions.

These Terms and Conditions have been prepared by Riyad Capital (the “Fund Manager”), a Saudi Arabian limited

liability company with Saudi Arabian commercial registration no. 1010239234, and an Authorized Person licensed

by the Saudi Arabian Capital Market Authority (the “CMA”) under license no. 07070-37, in accordance with the

provisions of the Real Estate Investment Funds Regulations issued by the Board of the CMA pursuant to Resolution

No. 1–193-2006, dated 19/06/1427H (corresponding to 15/07/2006G) based on the based on the Capital Market

Law issued under Royal Decree No. M/30 dated 2/6/1424H (corresponding to 31/07/2003G) (the “Real Estate

Investment Funds Regulations”) and the provisions of the Real Estate Investment Traded Funds Instructions issued

by the CMA pursuant to its resolution number 6-130-2016 dated 23/1/1438H (corresponding to 24/10/2016G (the

“REIT Regulations”).

These Terms and Conditions include information that has been presented in compliance with the requirements for

registration and admission to listing of the units of the REIT on the Saudi Arabian Stock Exchange (the “Tadawul”)

in accordance with the Real Estate Investment Funds Regulations and the REIT Regulations.

The offering of units in the REIT has been approved by the CMA on 8/2/1438H (corresponding to 8/11/2016G).

The Fund Manager has submitted an application to the CMA for the registration and admission to listing of the

Units on Tadawul. All relevant regulatory and corporate approvals required to establish and offer the REIT have

been granted, including approvals pertaining to the publication of these Terms and Conditions and all supporting

documents have been submitted to the CMA. These Terms and Conditions have been prepared so that investors

may consider the opportunity to purchase units in the REIT. The use of these Terms and Conditions for any other

purpose is prohibited.

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The Fund Manager accepts full responsibility for the accuracy of the information contained in these Terms and

Conditions, and affirms that according to the best of its knowledge and belief, and after making all possible

reasonable enquiries, there are no other facts or omissions from these Terms and Conditions that would make any

statement contained herein misleading. Investors should not treat the Fund Manager’s opinions in these Terms

and Conditions as a recommendation to purchase units in the REIT.

The CMA does not bear any responsibility for the contents of these Terms and Conditions and does not opine or

provide any warranties regarding the accuracy or completeness of these Terms and Conditions. Further, the CMA

shall not be responsible for any financial loss resulting from any provision contained in these Terms and

Conditions or any reliance thereon.

Prospective investors should consult with their own representatives, including accountants and legal advisers,

with respect to legal, tax and other matters pertaining to the REIT or an investment therein.

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1. Introduction................................................................................................................................................................................................. 15

2. Terms ............................................................................................................................................................................................................. 15

2.1 Name and Type of The Fund ................................................................................................................................................... 15

2.2 Address of the Head Office of the Fund Manager ......................................................................................................... 15

2.3 Fund Period ................................................................................................................................................................................... 15

2.4 Fund Objectives ........................................................................................................................................................................... 16

2.5 Fund’s Investment Objectives ............................................................................................................................................... 16

2.6 Summary of Fund Strategies .................................................................................................................................................. 16

2.7 Risks of Investing in the Fund ................................................................................................................................................ 18

2.8 Subscription .................................................................................................................................................................................. 27

2.9 Fees, Charges and Commissions ........................................................................................................................................... 27

2.10 Evaluating Fund Assets ............................................................................................................................................................. 30

2.11 Trading of Units ........................................................................................................................................................................... 31

2.12 Termination and Liquidation of the Fund ......................................................................................................................... 31

2.13 Fund Board ..................................................................................................................................................................................... 31

2.14 Fund Manager .............................................................................................................................................................................. 35

2.15 Custodian ....................................................................................................................................................................................... 37

2.16 Auditor ............................................................................................................................................................................................ 38

2.17 Financial Statements ................................................................................................................................................................. 38

2.18 Conflicts of Interest ................................................................................................................................................................... 38

2.19 Reporting to Unitholders ......................................................................................................................................................... 39

2.20 Other Information ...................................................................................................................................................................... 41

2.21 Amendments to Terms & Conditions .................................................................................................................................. 43

2.22 Governing Law and Dispute Resolution ............................................................................................................................ 44

Schedules Schedule A – Certain Definitions Schedule B – Summary Financial Disclosure

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DIRECTORY

NAME OF FUND Riyad REIT

MANAGER Riyad Capital

Head Office Building

Prestige Center

Takhassusi Street

P.O. Box 21116

Riyadh 11475

Kingdom of Saudi Arabia

www.riyadcapital.com

CUSTODIAN KSB Capital

AUDITOR Ibrahim Al Bassam and Abdul Mohsen Al Nemr Chartered Accountants

SHARI’AH BOARD

The Shari’ah Board of Riyad Capital:

Sheikh Abdullah Bin Salman Bin Manie (Chairman)

Sheikh Dr. Abdullah Bin Mohammed Al Mitlaq (Member)

Sheikh Dr. Mohammed Bin Ali Al Qari (Member)

REAL ESTATE VALUATORS

Colliers International and Barcode Ltd.

LEGAL COUNSEL The Law Office of Mohammad Al-Ammar

(in affiliation with King & Spalding LLP)

http://www.riyadcapital.com/

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In the name of Allah, the most merciful, the most gracious

PART 1:

Executive Summary

This summary should be read as an introduction to these Terms and Conditions and is qualified in its entirety by the more

detailed information included in these Terms and Conditions, including the terms and conditions contained in Part 2. Any

decision to invest should be based on a consideration of these Terms and Conditions as a whole. Certain terms used herein

but not defined, when mentioned in these Terms and Conditions shall have the meaning given in Schedule A.

Overview

Riyad REIT is a closed-ended a Shari’ah-compliant real estate investment traded fund. The REIT operates in accordance

with Real Estate Investment Funds Regulations and REIT Regulations issued by the CMA. The REIT is listed on the Tadawul

and units of the REIT shall be on traded on the Tadawul in accordance with its rules and regulations. The Capital of the REIT

is SAR [500,000,000]. The REIT has a term of 99 years, which is extendable in the discretion of the Fund Manager with the

prior approval of the CMA.

Investment Objectives and Strategy

The primary investment objective of the REIT is to provide Unitholders with current income by investing in income-

producing real estate assets in Saudi Arabia. The Fund Manager is targeting to distribute to Unitholders an annual cash

dividend of no less than 90% of the REIT’s Net Profits. It is expected that the amount of such annual dividend will increase

over the REIT’s term as the number of income-producing properties in the REIT’s portfolio increases.

While the REIT will primarily invest in developed real estate assets which are ready for use, the REIT, however, may invest in

real estate development projects; provided that (i) at least 75% of the REIT’s total assets are invested in developed real

estate assets which generate periodic income and (ii) the REIT may not invest in vacant land.

The targeted returns contained in these Terms and Conditions are based upon a number of estimates and assumptions that

are inherently subject to change. Accordingly, actual results during the periods covered may vary from the targeted returns,

and those variations may be material and adverse.

Manager

The REIT is managed by Riyad Capital. Riyad Capital is a Saudi Arabian limited liability company with Saudi Arabian

commercial registration no. 1010239234, and an Authorized Person licensed by the CMA under license no. 07070-37 to

carry out investment businesses and financial services. Riyad Capital is the investment arm of Riyad Bank and is

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headquartered in Riyadh. Riyad Capital offers its clients a broad range of financial services and solutions including

financial advisory, arranging, custody, dealing and asset management.

Riyad Capital currently manages the Riyad Real Estate Income Fund, a private open-ended Shari’ah-compliant Saudi

Arabian real estate fund (the “Riyad Real Estate Income Fund”). The Riyad Real Estate Income Fund held its closing in

June 2015 with a capital of SAR 500,000,000 and its capital was fully deployed prior to listing the REIT. The REIT will be

listed on the Saudi Market Exchange under the name “Riyad REIT”.

Riyad REIT Investment Policy

The REIT seeks to own and manage a real estate portfolio with stable occupancy rates. It is targeted for such portfolio to

occupy strategic locations in major commercial areas in order to take advantage of their competitive edge.

The REIT may, a secondary basis, invest in development opportunities with profitable growth potentials that cater for

specific real-estate needs, previously unavailable in certain areas. An added value is expected, in the medium term, to be

created to Unitholders in such development projects.

In the long term, the REIT’s investment portfolio will continue to focus on attractive investment opportunities in different

real-estate sectors, including, but not limited to, offices, trade exhibitions, houses, hospitality facilities, warehouses, etc. in

order to build a real-estate base with diverse and stable income for Unitholders as well as achieve reasonable increase in

the portfolio value.

Summary of Investment Portfolio

The REIT’s investment portfolio consists of the following properties:

- Tamayouz Center, Riyadh;

- Izdihar Commercial Centre, Riyadh;

- Fursan Tower, Riyadh;

- Ascot Tahliya Tower, Jeddah;

- Alshati Tower, Dammam;

- Ascot Corniche Tower (under development), Al Khobar.

The fund has invested more than SAR 420,000,000 since its establishment on 9 June 2015. The REIT initially acquired three

properties in the city of Riyadh and has expanded its geographical reach through the acquisition of the Shati Towers in the

city of Dammam in the Eastern Province. As a result of the foregoing transaction, the REIT’s lease base expanded

significantly, as well as the average remaining lease period as a result of entering into a long-term in connection with the

Brera Hotel. The REIT is also focused on the hospitality sector in the city of Jeddah, and thus has acquired the Ascot Hotel in

Jeddah, which is the first hotel for the Ascot Company in Saudi Arabia.

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The following is a profile acquired properties:

Tamayouz Center

This property is a combination of commercial showrooms and office space with net rentable area of approximately 6,500

square meters. The property is distinct for its strategic location on the intersection of Al-Imam Abdullah bin Saud bin

Abdulaziz and Khaled bin AlWaleed Street in Qurtoba District, which is considered to be a very central part of the wider

area. The occupancy percentage for this property is 86% of net rentable area.

Izdihar Commercial Centre

This property is a commercial property located on Othman Bin Affan Road, which is a main commercial area witnessing

increasing traffic and commercial activity in general. The total rentable area is equal to 4,400 square meters and the

property is fully occupied by various tenants.

Fursan Tower

This property is a commercial property with a net rentable area of 8,000 square meters. It is located on King Fahd Road in

the Olaya District of Riyadh. The property is distinct for its strategic location between the Kingdom Centre and Al Faisaliah

Towers in one of the main business hubs in Riyadh The property is situated closely to Al Anoud Towers (Novotel Hotel) and

Sulaiman Al Habib Hospital. The property is fully occupied and is generally considered ideal for office space and three or

four star hotels.

Ascot Tahliya Tower

This property consists of 22 floors and is located on Tahliya Street (Prince Mohammed bin Abdulaziz Street), which is one

of the most popular commercial streets in the city of Jeddah. The Hotel is the tallest commercial building on Tahliya Street

and also consists of showrooms in addition to the 125 hotel apartments, a business center and a health club. The Saudi

Telecom Company (STC) is the sole tenant of the property which is operated by Atyaf Company for a period of 15 years.

Shati Towers

This property is a newly built property with an estimated net rentable area of 13,300 square meters and is located on Prince

Mohammed Bin Fahd Street in the Beach District of Dammam. The occupancy level of this property is approximately 88%

occupied by about 25 tenants. The property has been renting 45% of the rentable area of the property to Hotel Brera (four

stars) under a long-term lease. In this regard, it is noted that the Beach District has become a popular area for the

construction of luxury housing, recreational activities, shopping and offices in Dammam.

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Portfolio Index

Existing Properties Properties under Development

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Total Acquisition Cost Amounts Paid for Development Projects

SAR 420,000,000 SAR 65,000,000

Rentable Area Areas Under Development

46,000 square meters 25,000 square meters

No. of Tenants Average Rent Period

84 Tenants 7.5 years

12 Months Current Leases Portfolio Operating Levels

SAR 34,000,000 94%

Percentage of Income Generating Assets from Total

Assets

Percentage of Development from Total Assets

84% 13%

A summary of the acquisition of the asset portfolio during the period prior to listing

The previous phase of the REIT's investment activities focused on building a diversified portfolio of real estate located in

popular commercial locations, which includes a wide variety of tenants and consists of various business sectors.

Commercial property located in popular locations and main roads as stronger occupancy potential in the long term

compared to less popular sites. In terms of asset size, the REIT has diversified its assets between multiple tenant medium-

sized properties (buildings and shopping centers) and single tenant medium-sized properties (such as hotels), in order to

minimize risk profile.

Net Rentable Space Distribution by Sectors Net Rentable Space Distribution by Property

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Portfolio Details:

Tamayouz Center Izdihar Centre

General View of the property General View of the property

Acquisition date August 2015 Acquisition date December 2015

Location Riyadh (Granada) Location Riyadh (Alizdihar)

Net leasable space 6,400 sqm Net leasable space 4,400 sqm

Occupation 86% Occupation 100%

Tenants 17 Tenants 19

Property Benefits Property Benefits

Located on main commercial intersection

Multiple tenants (i.e. Maghrabi Company,

Tadrees Company and Sinan Automotive Co)

Long term leasing contracts providing stable cash flows

Commercial property occupied with 100% of its capacity.

Located in popular commercial area

Located near Nakheel Mall

Property Location Property Location

Commercial property located on the intersection

of Imam Abdullah Bin Saud Bin Abdulaziz with

Khalid Bin Alwaleed.

Commercial property located on the intersection

of Othman Bin Affan with Osama Al-Ansari street

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Fursan Towers Shati Tower


Acquisition date March 2016 Acquisition Date February 2016

Location Riyadh (Olaya) Location Dammam (Alshati)


Occupation 100% Occupation 88%+

Tenants 14 Tenants 25

Property Benefits Property Benefits

Fully leased

Located near Dr. Suleiman Al-Habeeb Hospital

Located in central commercial area

New building currently leased

45% of the net rentable space is leased by Barbra Hotel

pursuant to a 15 years lease

Located on the main road of the Beach District, Prince

Mohammad Bin Fahd Road

The property is considered to be a main building in the

Beach District


Commercial property located on King Fahd Road near

Kingdom Tower and Al-Anoud Tower

Newly established complex containing commercial showrooms,

office space and a four-stars hotel

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Ascot Tahliya Tower Ascot Corniche Tower


Acquisition date August 2016 Acquisition date June 2015

Location Jeddah Location Khobar (Cornich)


Occupation 100% Occupation 172

Tenants 2 Tenants Second quarter of 2018

Property Benefits

Newly built

85% of the tower is leased to Atyaf Company (Operator of

Ascott Hotel), with a 15 years leasing contract

Located on the main road in Andalus District, Prince

Mohammad Bin Abdulaziz Road, Altahliya

The tallest building on Tahliya street.


New tower containing showrooms and a five-stars hotel, fully

leased building.

A project consisting of 18 floors to be operated by

international company specialized in hotel apartments.

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INVESTMENT PORTFOLIO SUMMARY

REIT Name and Type Riyad REIT, a closed-ended real estate investment traded fund established under

the laws and regulations of the Kingdom of Saudi Arabia (“Saudi Arabia”),

regulated by the Saudi Arabian Capital Market Authority (the “CMA”).

Investment Objective

The primary investment objective of the REIT is to provide its investors with

current income by investing in construction developed income-producing real

estate assets in Saudi Arabia. While the REIT will primarily invest in such assets,

the REIT may opportunistically invest in real estate development projects;

provided that (i) at least 75% of the REIT’s total assets are invested in developed

real estate assets which generate periodic income and (ii) the REIT may not invest

in vacant land.

REIT Capital SAR [500,000,000]

Unit Price SAR 10

Minimum Investment N/A

Fund Currency

Saudi Arabian Riyal (SAR).

Manager Riyad Capital (the “Fund Manager”), a Saudi Arabian limited liability company

with Saudi Arabian commercial registration no. 1010239234, and an Authorized

Person licensed by the CMA under license no. 07070-37, manages the REIT.

Fund Term

The REIT has a term of 99 years, which is extendable in the discretion of the Fund

Manager with the prior approval of the CMA.

Dividend Policy The Fund Manager is targeting to distribute to Unitholders an annual cash

dividend of no less than 90% of the REIT’s Net Profits.

Shari’ah Compliance The REIT will make its investments and conduct its affairs in a manner that is

compliant with Islamic Shari’ah and approved by the Shari’ah Board of Riyad

Capital.

Valuation Frequency

At least semi-annually (every six months) by two independent evaluators.

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Management Fee

1% per annum of the REIT’s total asset value.

Custody Fee SAR 100,000 annually.

Transaction Fee

The REIT will pay the Fund Manager a transaction fee of 1% of the purchase or

sale price of each real estate asset acquired or sold by the REIT.

Transaction Expenses The REIT will be responsible for all transaction costs, such as asset acquisition

costs and relating financing, advisory and legal costs.

Other Expenses The REIT shall be responsible for all fees related to transactions with third parties

as well as consulting and legal fees, compensation and allowances paid to Fund

Board members. Such expenses also include all services provided by third

parties, like legal and consulting services, real-estate consultants and related

insurance costs and any other professional expenses, including expenses of

listing Fund units. It is expected that such expenses shall not exceed 0.5% of the

total value of the REIT’s assets.

Trading Units shall be traded in the same way as shares listed on Tadawul. Hence,

Unitholders may sell or purchase units directly through Tadawul during the

hours of daily trading.

Notwithstanding any other provision, trading in the REIT’s units shall be free and

shall not be subject to prohibition stated in Article 16(A) of the Real Estate

Investment Funds Regulations concerning trading of “Related Parties” in the

REIT’s units.

Risk Factors Risk level is medium. There are certain risks related to the investment in the REIT.

These risks are described in Section 2.7 of the Terms and Conditions and must be

considered carefully prior to making an investment decision in relation to the

offer Units.

Governing Law The REIT shall be governed by the laws of Saudi Arabia and the regulations

implemented by the CMA. The investments of the REIT shall comply with the

Regulation of Ownership and Investment in Real Estate by Non-Saudis.

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Waivers A request for waiver has been made in connection with the registration

requirement of having a certain number and percentage of Unitholders from the

public as per article B(2) of Part 4 of the REIT Regulations. The Fund Manager

shall comply with the foregoing requirement within a period of one year from

the Listing Date.

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PART 2:

Riyad REIT

Terms & Conditions

1. Introduction

This document (the “Terms & Conditions”) sets out the terms and conditions of Riyad REIT, a real estate investment traded

fund established in the Kingdom of Saudi Arabia (“Saudi Arabia” or the “Kingdom”) under the Real Estate Investment

Funds Regulations and the REIT Regulations issued by the Saudi Arabian Capital Market Authority (the “CMA”). The REIT is

managed by Riyad Capital (the “Manager”), an Authorized Person licensed by the CMA under license number 07070-37.

Subject to the approval of the CMA, the REIT shall be listed on the Tadawul. Units in the REIT are denominated in Saudi

Arabian Riyals (SAR) and shall be traded on Tadawul.

2. Terms

2.1 Name and Type of The Fund

The name of the REIT is “Riyad REIT”.

The REIT is a real estate investment traded fund established in Saudi Arabia under the Real Estate Investment

Funds Regulations and the REIT Regulations.

2.2 Address of the Head Office of the Fund Manager

Name: Riyad Capital

Address: Head Office Building

Prestige Center

At Takhassusi Street

P.O. Box 21116

Riyadh 11475


Website: www.riyadcapital.com

2.3 Fund Period

The term of the REIT is 99 years from the date on which the Units are listed (the “Listing Date”) on the Saudi

Arabian Stock Exchange (“Tadawul”) and become available for trading (the “Fund Term”). The Fund Term shall

be renewable for additional periods in the discretion of the Fund Manager, subject to the prior approval of the

CMA.

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2.4 Fund Objectives

The primary investment objective of the REIT is to provide its Unitholders with current income by investing in

income-producing real estate assets primarily located in Saudi Arabia. The REIT intends to fund the acquisition

and operating costs through the Capital, Shari’ah-compliant financing as well as revenues from Fund investments.

2.5 Fund’s Investment Objectives

The REIT intends to invest in a portfolio of income-producing real estate assets in Saudi Arabia. The Fund

Manager is targeting to distribute to investors an annual cash dividend of no less than 90% of the REIT’s Net

Profits. It is targeted that such percentage shall increase over the REIT’s term as the number of income-producing

properties in the REIT’s portfolio increases.

2.6 Summary of Fund Strategies

The main objective of the REIT is to provide Unitholders with a consistent and growing cash distribution from its

real estate investment portfolio and to periodically distribute such amounts to Unitholders. The REIT will seek to

maximize shareholder value by (a) the reinvestment of retained income back into attractive real estate assets,

after distributing not less than 90% of its Net Profits, (b) the potential capital appreciation from improving yields

and (c) repositioning of the under-performing properties. The REIT also seeks to increase the value and returns to

Unitholders by improving net operating income through the reduction of expenses of the growing asset base

partly by taking advantage of the economies of scale.

Description of the Types of Assets the Fund will Invest In

The Fund Manager will buy and sell properties that fit within the REIT’s investment strategies. The REIT intends

to acquire and maintain a diversified portfolio of real estate properties by pursuing different strategies including

the following:

- Acquisition of high quality income-generating properties

- Acquisition and enhancements of underutilized income-generating properties

While the REIT will primarily invest in developed real estate assets which are ready to generate income, the REIT

may opportunistically invest in real estate development projects; provided that (i) at least 75% of the REIT’s total

assets are invested in developed real estate assets which generate periodic income and (ii) the REIT may not

invest in vacant land.

The REIT’s portfolio will initially consist of the following assets (which are described in detail in Part 1 above):

Investment Concentration Policies

The REIT will mainly target investments in locations within major cities in Saudi Arabia that are expected to

generate attractive return and value appreciation. These areas encompass positive demographic characteristics,

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strong growth in business activities, positive inflow of investment, favorable supply/demand dynamics and solid

infrastructure.

Although initial Fund investments are in Saudi Arabia, the REIT may diverse its investments by investing a

maximum of 25% of its total asset value in real estate located outside the Kingdom.

Subject to the restrictions on investments in development projects and investments outside the Kingdom, there

are no concentration or diversification requirements limiting the size of an investment or its proportional

percentage of the Capital of the REIT.

Borrowing Rights

The Fund Manager may leverage the REIT by utilizing Shari’ah-compliant financing. Such leverage shall not

exceed a ratio of fifty percent (50%) of the REIT’s total asset value. The amount of leverage incurred will depend

upon (a) the specific facts in connection with a particular financing and (b) prevailing market conditions.

Methods and Ways to Invest the Liquidity Available in the REIT

The REIT may make investments of available cash in Murabahas and other short-term Shari’ah-compliant

investments provided that such investments shall not exceed 25% of the total value of the REIT’s assets. Such

investments may be made with the Fund Manager or any bank regulated by the Saudi Arabian Monetary

Authority, including Riyad Bank, or with funds managed by the Fund Manager or any other manager, provided

that such funds include money market funds, trading funds and real estate income-producing funds.

Investment Decision Making Process

Studying real estate markets

The REIT will rely on the Fund Manager’s Asset Management Division and external advisors and consultants to

regularly assess the most attractive sectors in the real estate market. The Fund Manager will continuously

examine the trends and cycles in the real estate market as well as market fundamentals and sector characteristics

to capitalize on real estate market opportunities and sustain the the REIT’s long-term objectives.

Purchase of real estate:

In pursuing possible new opportunities in the real estate market, the Fund Manager will adopt a systematic

investment process to identify opportunities and efficiently execute transactions. Such process will be phased,

starting from exploring opportunities through sorting and evaluation and ending with adoption and

implementation.

Disposal of Real Estate

The REIT generally intends to hold properties on a long-term basis. However, the

Fund Manager will regularly evaluate every asset within the portfolio and recommend a strategy for each

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property, including disposition decisions. This will be made after an in-depth analysis considering, but not limited

to, the following factors:

a) sale price with respect to potential income;

b) the strategic fit of the property with respect to the overall portfolio;

c) the strategic fit of the property with respect to the allocation strategy by sectors; and

d) any change in market conditions affecting the Fund investments.

Prior to any disposal, the Fund Manager will seek valuations of the relevant asset from two independent

evaluators.

2.7 Risks of Investing in the Fund

Investment in the REIT involves significant risk factors and is suitable only for persons who can afford the

complete or partial loss of their investment. The below risks describe factors that could affect the REIT’s

investments and could affect the REIT’s Net Asset Value and investment proceeds. It is important that prospective

investors review and understand these risk factors before making an investment in the REIT. However, each

investor should note that the below risk factors are not an exhaustive list of the risks relating to an investment in

the REIT.

An investment in the REIT does not entail any guarantee that such investment shall be profitable or that an

investor shall not incur any loss. As such, each prospective investor shall take into account each of the

aforementioned risk factors prior to purchasing units in the REIT. Each investor bears full responsibility for any

financial loss resulting from an investment in the REIT unless such loss is due to the fraud, gross negligence or

wilful misconduct of the Fund Manager.

a. Risk Factors Related to the REIT

Nature of Investment Risk Investment in the REIT requires a commitment as described herein with no assurances of return on invested

capital. There can be no assurance that the REIT will be able to realize positive returns on its investments in a

timely manner, if at all. The REIT’s assets may not be able to be sold or otherwise disposed of or, if sold, may not

be able to be sold at a price perceived by the Fund Manager to represent fair value or in the timeframe desired by

the REIT. Accordingly, the REIT may never realize any return on its assets.

Limited Experience Risk

The Fund Manager has limited experience in managing real estate investment traded funds. Further, the REIT

Regulations have only been recently issued and as such their application is still untested in certain aspects.

Therefore, the Fund Manager may have to spend considerable time and effort to ensure the REIT complies with

19

the REIT Regulations and other applicable regulatory requirements implemented by the CMA and Tadawul. As

such, the Fund Manager’s focus and attention on the day-to-day management of the REIT’s assets would be

diverted and such may have a detrimental impact on the REIT’s operations, financial position and returns to

Unitholders.

Liquidity Risk

The Units of the REIT will be traded on the Tadawul. This can be taken as implying that there will be an active

liquid market for the Units or that it will develop or, if it does develop, that it will be maintained as it is. If a market

of high liquidity is not developed or maintained, the liquidity and trading price of the Units could be adversely

affected. In addition, if such a market does not develop, relatively small transactions may have a significant

impact on the Units and their price, and transactions may be difficult to execute at a stable price. A limited

number of Unitholders may result in reduced levels of liquidity which may adversely affect: (i) an investor’s

ability to realize some or all of its investment; and/or (ii) the price at which such Units trade in the secondary

market. In addition, a substantial proportion of the Units may be issued to a limited number of investors, which

could adversely affect the development of an active and liquid market for the Units.

Changes in Price Risks

General movement in local and international stock markets and real estate markets, prevailing and anticipated

economic conditions and profit rates, financing costs, investor sentiment and general economic conditions may

all affect negatively the market price of the Units. The market for the Units may fluctuate and a lack of liquidity

can have an adverse effect on the market value for the Units. Accordingly, the purchase of such Units is only

suitable for investors who can bear the risks associated with such investments.

Trading at a Discount Risks

The Units may trade at a discount to the offered price and Unitholders may not retrieve the full value of their

investment. The Units may trade at a discount to the offered price for a variety of reasons, including adverse

market conditions, a deterioration in investors’ perceptions of the merits of the REIT’s investment strategy and

investment policy or an excess of supply over demand in the Units.

Distributions Fluctuation Risks

Although the REIT is required to distribute to Unitholders at least 90% of its Net Profits on an annual basis, there

can be no assurance as to the actual amount of any distributions which will be made by the REIT. Furthermore,

and except for the foregoing amount to be distributed, the declaration, payment and amount of any dividends or

distributions by the REIT are subject to the recommendation of the Fund Manager and will depend upon, among

other things, the performance of the REIT, the REIT’s financial position and cash requirements and the ability of

the REIT to comply with the applicable legal requirements for paying distributions.

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Substantial Sale of Unit Risks

Subsequent sales by the Unitholders of a substantial number of Units may significantly reduce the Unit’s trading

price. Also, any rumors that such sales might occur, could materially and adversely affect the market price of the

Units and return to Unitholders.

Reflection of Underlying Value Risks

The traded market price of the Units may not reflect the value of the underlying investments of the REIT. Stock

exchanges, including the Tadawul, may experience extreme price and volume volatility from time to time, and

this, in addition to general economic, political and other conditions, may materially adversely affect the market

price for the Units. The price at which the Units may be quoted will be influenced by a number of factors many of

which are outside the REIT’s control whereby they have an effect on the real estate investment sector or equity

markets generally.

Distribution and Leverage Risks

Distribution requirements and leverage restrictions under the REIT Regulations may limit the REIT’s ability and

flexibility to pursue growth through acquisitions. The REIT is required is required to distribute to Unitholders at

least 90% of its Net Profits annually (not including disposition proceeds). Furthermore, in order to maintain its

status as a real estate investment traded fund, the REIT’s leverage must not exceed 50% of its total Capital. As a

result, the REIT has limited ability to make improvements to its property or pursue growth through acquisition of

additional properties.

Unit Liquidity Risks

Except upon termination of the REIT at the expiry of its term, Unitholders will only be able to realize their

investment through secondary transactions in the market and receiving annual returns from the REIT’s Net

Profits. Although the Units will be traded, the liquidity of Units in real estate investment traded funds may be less

than the market liquidity of shares of listed companies. It is possible that there may not be a liquid market in the

Units and Unitholders may have difficulty in selling the Units at the quoted market price and/or the prevailing

NAV per Unit, or otherwise. Further, the CMA has the right to suspend or limit trading in the Units of the REIT.

Any suspension or limitation on trading in the Units may affect the ability of Unitholders to realize their

investment.

Underlying Asset Liquidity Risks

The REIT’s portfolio consists of real estate assets. Real estate assets are generally illiquid and, as such, it may be

difficult or impossible for the REIT to sell any of its underlying assets for a particular price at any particular time. It

21

may be difficult for the REIT to sell its real estate assets (particularly at times of market downturn and specifically

those assets that are categorized as larger real estate assets), and the price achieved on any such realization may

be at a significant discount, especially if the REIT is forced to dispose of any of its assets in a short period of time.

This may reduce the value of the Units and adversely impact the performance of the REIT and return to

Unitholders.

Dilution Risks

If the REIT decides to increase its capital in the future, it may require further financing by issuing units in return for

in-kind contributions or a rights offering. Unless the existing Unitholders participate in such rights offering, the

rights offering may be dilutive to the REIT’s existing Unitholders as their proportionate ownership and voting

interest may be reduced and the percentage that their Units represent of the total Capital.

No Assurance of Investment Returns Risk There is no assurance that the REIT will be able to generate returns for its investors or that the returns will be

commensurate with the risks of investing in the REIT and the nature of the transactions described herein. It is

possible that the Units may fall in value or that investors might lose some or all of the capital they have invested.

There can be no assurance that returns for the REIT will be achieved.

Operating History Risk The fund was established in June 2015. Thus, the REIT has no long operating history itself upon which

Unitholders may evaluate its performance or any track record of success of the assets. Although Unitholders may

consider the Fund Manager’s real estate fund management experience (including the Riyad Real Estate Income

Generating Fund), the nature of, and the risks associated with the REIT’s future investments may differ

substantially from those investments and strategies undertaken historically by the Fund Manager (including

those of the Riyad Real Estate Income Generating Fund). Past results of the Fund Manager and the fund are not

necessarily indicative of future performance.

Changes in Market Conditions Risk

The future performance of the REIT would largely depend on changes in the supply and demand conditions of the

real estate sector, which may be affected by regional and local economic and political conditions, increased

competition thereby a decline in the value of real estate, potential limited availability of mortgage funds or an

increase in mortgage rates, and fluctuations of supply and demand. These changes could have a significant

adverse impact on the performance of the REIT by reducing rental income or decreasing the NAV of the REIT.

Dependence on Key Personnel Risk The success of the REIT will principally depend on the performance its management team, including the members

of the Fund Board. The loss of the services of any of the members of its management team, in general (whether

22

such loss is through resignation or otherwise), or the inability to attract and retain additional personnel, could

materially affect the REIT’s business and ability to acquire, dispose of and manage assets, hence reducing returns

to investors.

b. Risk Factors Related to the REIT’s Assets

Real Estate Investments Risk

An investment in the Units of the REIT is subject to certain risks associated with the ownership of real estate

related assets and the real estate industry in general. The value of the REIT’s investments may be adversely

affected by, among other things, declines in the value of real estate, illiquidity of an investment, risks related to

regional and local economic conditions, natural disasters, terrorism, environmental liability, increases in financing

costs, the financial condition of tenants, increases in real property taxes, changes in zoning laws and increase in

competition.

Availability of Appropriate Investments Risk

Some, but not all, of the investments of the REIT have been selected by the Fund Manager as of the date hereof,

and investors in the REIT will not have an opportunity to evaluate for themselves the relevant economic, financial

and other information regarding future investments. There can be no assurance that the Fund Manager will be

able to identify future investments that meet the REIT’s investment objectives, particularly in the current market

environment. The business of identifying and structuring investments suitable for the REIT is highly competitive

and involves a high degree of uncertainty. The Fund Manager’s inability to identify suitable investments may

adversely affect the ability of the REIT to produce the desired returns, hence reducing the dividends available to

investors and/or the NAV of the REIT.

Development Risks

While it is not intended that a large portion of the REIT’s portfolio will consist of development projects, the

development of real estate projects in Saudi Arabia presents several specific risks. The risks in building and

successfully marketing a new development include, but are not limited to: (i) delays in timely completion of

works; (ii) cost overruns; (iii) inability to generate lease agreements to forecast levels; and (iv) force majeure

resulting from factors beyond the REIT’s control and specific to the contracting industry (including adverse

weather and environmental conditions and lack of building material that would hinder the development and

construction works).

New project commencement also carries other risks such as the receipt of zoning, occupancy and other required

governmental approvals and permits and development costs in connection with projects that are not pursued to

completion. The successful completion of such projects will have a direct and significant impact on the value of

the Units and any failure to complete a project could reduce dividends and the NAV of the REIT.

Increase in Construction Costs Risk

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The construction costs for a property development may exceed forecasts for various reasons including, but not

limited to, delays due to industrial disputes, disputes with sub-contractors, an increase in the cost of building

materials, equipment and labor, inclement weather and unforeseen problems and circumstances. Any increase in

construction costs would reduce the net income of the REIT and as a result reduce the cash available for dividends

to the Unitholders.

If possible, cost overruns will be mitigated by entering into lump sum fixed time and price construction contracts

with contractors with appropriate provisions made for contingencies. However, there is no assurance that the

mitigating measures undertaken will be able to eliminate the risk of incurring substantial cost overruns that result

in losses to investors. In such instances, recourse to the contractors may be limited.

Infrastructure Risk

For the properties under development, the REIT will be relying on the Saudi government and relevant

municipality for providing all the necessary infrastructure to the development sites including sewage, electricity,

water and roads. If the government and municipality do not complete the infrastructure projects in a timely

fashion or as currently expected, this could delay the REIT’s ability to complete or operate the properties and

could detrimentally affect the performance of the REIT due to the delay in commencement of operation of the

properties as planned that would also adversely affect the returns to Unitholders.

Leverage Risk The assets of the REIT may be leveraged, which may adversely affect the income earned by the REIT or may result

in a loss of principal. Increases and decreases in the value of the REIT’s portfolio will be magnified when the REIT

uses leverage. For example, leverage may cause greater swings in the REIT’s Net Asset Value or cause the REIT to

lose more than it has invested. The use of leverage creates an opportunity for increased returns, but at the same

time involves a higher degree of risk and may increase the exposure of the REIT and its investments to factors

such as rising costs of leverage and downturns in the economy. Moreover, the assets of the REIT may be pledged

to a lender (in the interest of the Fund) and such lender may claim the assets upon an event of default (as

specified in the financing documents) by the SPV, the Fund Manager or the REIT.

Actions by Competitors Risk

The REIT competes with other owners, operators and developers of real estate in Saudi Arabia, some of which

may own properties similar to REIT’s properties in the same submarkets. If the REIT’s competitors lease

commercial and/or residential space similar to the REIT’s properties or sell assets similar to the REIT’s properties

at valuations below the REIT’s valuations for comparable assets, the REIT may be unable to lease or selling its

commercial and residential space all. Such may result in an increase in REIT expenses in connection with the

preservation and maintaining the property and also expose the REIT to loss of income from the property, and

hence a decrease in the levels of distribution to Unitholders.

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Potential Inability to Complete Divestitures on Advantageous Terms Risk

The REIT will divest itself of its properties and other assets when the Fund Manager believes it is the appropriate

time to sell. The REIT’s ability to dispose of properties on advantageous terms depends on factors beyond its

control, including competition from other sellers and potentially the availability of attractive financing for

potential buyers. If the REIT is unable to dispose of its assets on favorable terms or on the timing the Fund

Manager would otherwise dispose of the assets, then its financial condition, results of operations, cash flow and

ability to make distributions to the investors could be adversely affected.

Counterparty Default and Credit Risks

The REIT will be exposed to a credit risk of parties with whom it conducts business and may also bear risk of

settlement default. The REIT will, in certain circumstances, be fully subject to the default of a counterparty to

comply with contractual obligations, including the landowners, lending banks, property managers and/or

contractors. A default by a counterparty in its contractual obligations or payments due to the REIT could reduce

the income of the REIT and distribution to Unitholders.

Risk of Inability of Tenants to Meet Lease Obligations

The REIT’s results would be adversely affected if a significant number of the REIT’s tenants were unable to meet

their lease obligations. If a tenant seeks the protection of bankruptcy, insolvency or similar laws, such tenant’s

lease may be terminated in the process and result in a reduction of cash flow to the REIT. In the event of a

significant number of lease defaults and/or tenant bankruptcies, the REIT’s cash flow and ability to make

distributions to the investors would be adversely affected.

Risk of Possible Inability to Renew Leases or Re-let Space as Leases Expire

The REIT will derive most of its income from rent received from the tenants of the properties. Accordingly, the

REIT’s financial condition, results of operations, cash flow and its ability to make distributions to the investors

could be adversely affected if it is unable to promptly re-let or renew expiring leases, or if the rental rates upon

renewal or re-letting are significantly lower than expected. If a tenant experiences a downturn in its business or

other type of financial distress, then it may be unable to make timely rental payments or renew its lease. Further,

the REIT’s ability to rent space and the rents that it can charge are impacted, not only by tenant demand, but by

the number of other properties it has to compete with to appeal to tenants.

Risk of Uninsured Losses

The REIT will carry commercial liability, property and other types of insurance covering all the property that it

owns and manages in types and amounts that it believes are adequate and appropriate given the relative risks

applicable to the property, the cost of coverage and industry practice. Certain losses, such as those due to

terrorism, windstorms, floods or seismic activity, may be insured subject to certain limitations, including large

25

deductibles or co-payments and policy limits. The REIT may incur material losses in excess of insurance proceeds

and may not be able to continue to obtain insurance at commercially reasonable rates. If the REIT experiences a

loss that is uninsured or that exceeds its insured limits with respect to one or more of the properties, then it could

lose the capital invested in the damaged properties, as well as the anticipated future revenue from those

properties. Any such losses could adversely affect its financial condition, results of operations, cash flow and

ability to make distributions to the Unitholders.

Risk of Property Valuations

The Fund Manager may use internal valuations in several contexts in relation to the REIT. The valuations

performed by the Fund Manager will only be an estimate of the value of a property and are not a precise measure

of the value that may be obtained in connection with a sale of that property. Ultimate realization of the market

value of a property depends to a great extent on economic and other conditions beyond the control of the REIT

and the Fund Manager, including, without limitation, general market conditions. Further, valuations do not

necessarily represent the price at which a property could be sold given that market prices of the REIT’s properties

can only be determined by negotiation between a willing buyer and seller. If the REIT were to liquidate its assets,

the realized value may be more than or less than the estimated valuation of such assets. In periods of economic

volatility in which there is a perceived greater uncertainty as to value estimates and fewer comparable

transactions against which to measure value, the difference between the concluded value for a real estate asset

and the ultimate market value for that asset may increase. Further, relative uncertainty as to cash flows in a

distressed market can adversely affect the reliability of property value estimates and negotiations between a

buyer and seller, and potentially returns to Unitholders.

c. Other Risk Factors

Legal Status Risk

The REIT is a contractual arrangement between the Unitholders and the Fund Manager. Such contractual

arrangement is governed and supervised by the CMA. The REIT does not have its own legal personality as such

and the extent to which a Saudi government agency or a Saudi court would uphold such distinction between the

legal status of the REIT and that of the Fund Manager is unclear and to our best knowledge untested.

Legal, Tax and Regulatory Risks

The information herein is based on existing published legislation at the time of issuing these Terms and

Conditions. Legal, tax, zakat and regulatory change in the investment environment in the Kingdom, or otherwise,

may occur during the Fund Term which could have an adverse effect on the REIT, its investments, or individual

investors. Currently, no taxes are being assessed on mutual funds in the Kingdom, but there is no assurance that

the current tax regime in the Kingdom will not change.

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Government and Municipality Approvals Risk The REIT may fail to achieve its investment objective in case any applicable municipal approval or consent is

denied or not granted on acceptable terms. In such case, the REIT may not be able to complete an investment or

may not be able to complete the development of a real estate project.

Saudization Risk The Saudi Arabian government may require the employment of a high percentage of citizens of the Kingdom in

the development of the Kingdom’s real estate sector (Saudization). It is unclear at this point to what extent the

REIT and its investments will be required to implement Saudization polices. Saudization may require the hiring of

additional employees or additional training and other costs which would entail higher operating costs than

originally anticipated, which would be deducted from the REIT’s net income and thus reduce distributions

available to Unitholders.

Third-Party Litigation Risk

The activities of the REIT’s assets subject them to the risks of becoming involved in litigation by third parties. The

expense of defending against claims by third parties and paying any amounts pursuant to settlements or

judgments would be borne by the REIT and would reduce net assets and reduce potential distributions to

Unitholders.

Limitation/Specification of Liability and Indemnification Risk

The Terms and Conditions limit the circumstances under which Fund Manager, its shareholders, directors,

officers, employees, agents and affiliates, and the members of the Fund Board will be held liable to the REIT and

the Unitholders. As a result, Unitholders may have a more limited right of action in certain cases than they would

have in the absence of such provisions. In addition, the REIT may be liable for certain claims, losses, damages and

expenses of the Fund Manager, the Custodian, developers, property managers, their respective officers, directors,

employees and affiliates, the members of the Shari’ah Board and the members of the Fund Board for certain

claims, losses, damages and expenses arising out of their activities on behalf of the REIT, provided such person

acted in good faith and in a manner reasonably believed to be in the best interests of the REIT and was neither

grossly negligent nor engaged in fraud or willful misconduct. Such indemnification obligations could materially

impact the returns to Unitholders.

Forward-Looking Statements

This document may contain forward-looking statements relating to future events or the future performance of

the REIT or its expected assets. In some cases, forward-looking statements can be identified by terminology such

as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “plans,” “projects,” “should,” “will,” the

negative of such terms or other comparable terminology. These statements are only predictions. Actual events or

results may differ materially. In evaluating these statements, prospective investors should specifically consider

27

various factors, including the risks outlined herein. These factors may cause actual events or results to differ

materially from any forward-looking statement.

The foregoing does not purport to be a complete or exhaustive explanation and summary of all the risk factors

involved in an investment in Units in the REIT. It is strongly recommended that all potential investors seek

independent advice from their own professional advisors.

2.8 Subscription

The REIT is a closed-ended real estate investment traded fund with a Capital of SAR 500,000,000 divided into

50,000,000 Units of SAR 10 each.

Subscription for Units

The Capital has been fully allocated and the REIT will not be offering Units to members of the public prior to the

Listing Date.

Minimum Participation

There is no minimum limit for holding Units by a Unitholder in the REIT.

Capital Increase

If the Fund Manager determines that REIT requires an increase in its Capital, the REIT may increase its Capital and

raise equity funding through accepting cash contributions pursuant to the issuance of tradable rights as

applicable on license companies in accordance with the regulatory rules and procedures issued pursuant to the

Companies Law. In such case, existing Unitholders will have priority rights to participate in any rights offering.

Additionally, the REIT may increase its Capital through in-kind subscriptions and any such increase shall not be

considered to be rights issue.

2.9 Fees, Charges and Commissions

(a) Fees and Charges

The following is a summary of the main fees and charges to be paid by the REIT or by investors to the Fund

Manager and other advisors and service providers. Additional information is available in the Summary of

Financial Disclosure set forth in Schedule B hereto:

(i) Subscription Fees

Upon issuing new Units in the Fund, the Fund Manager may collect subscription fees of no more than 2% of the

subscription amount. There shall be no subscription fees payable upon the trading of Units, as trading of units is

subject to the fees prescribed by the Saudi Stock Exchange.

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(ii) Management Fee

The REIT will pay the Fund Manager an annual management fee (the “Management Fee”) equal to 1.2% of the

REIT’s total asset value. The Management Fee will be calculated and paid in arrears in semi-annual installments.

(iii) Custodian Fee

The REIT will pay the Custodian an annual fee (the “Custodian Fee”) of SAR 100,000 annually. The Custodian

Fee shall be calculated and paid in arrears in semi-annual installments.

(iv) Auditor Fee

The REIT will pay the auditor an annual fee of SAR 30,000.

(v) Financing Fees

The Fund shall bear all financing costs, fees, expenses and charges related to arrangement and structure of Sharia

complaint financing of the Fund, if any and such financing will be negotiated on an arm’s length basis.

(vi) Unit Registration and Listing Fees

The Fund shall pay certain fees in consideration for certain services rendered by Tadawul, as follows:

Registration fee:

- SAR 50,000 plus SAR 2 per unitholder, subject to a maximum of SAR 500,000 shall be paid to Tadawul in

return for setting up a register of unitholders.

- SAR 300,000 shall be paid to Tadawul in return for managing the register of unitholders.

Listing fee:

- SAR 50,000 as initial listing fees.

- 0.03% of the market value of the REIT (subject to a minimum of SAR 50,000 and a maximum of SAR

300,000) as listing fees.

(vii) Transaction Fee

The REIT will pay the Fund Manager a transaction fee (the “Transaction Fee”) of 1% of the purchase or sale price

of each real estate asset acquired or sold by the Fund in consideration of the Fund Manager conducting due

diligence, negotiating the purchase or sale terms and completing the transaction. The Transaction Fee shall be

payable after the closing of the purchase or sale of each real estate asset.

Other than the Transaction Fee, no fees will be paid to any Related Parties (as defined in the Real Estate

Investment Funds Regulations) in connection with the acquisition or disposition of any investments.

29

Additionally, the Fund may pay a real estate brokerage fee if a property is sold or bought through a real estate

broker. Such fee will depend on the broker efforts in consummating the transaction and in all cases such fee shall

be no more than 2.5% of the property price.

(viii) Property Management Fees

Each property manager will be paid fees negotiated on an arm’s-length basis. It is expected that each property

manager will be paid fees no more than 7% of the collected rental income from the relevant property.

(ix) Developer Fees

If the REIT invests in any development projects, the developer of each such project will be paid fees negotiated on

an arm’s-length basis. It is expected that any developer will be entitled to a development fee of no more than 7%

of construction costs.

(b) Expenses

The REIT shall be liable for all costs and expenses attributable to the activities and investments of the REIT. The

REIT will be responsible for all third party transaction costs, advisory and legal costs, allowances and

compensation of the Fund’s Board of Directors, in addition to all third party services such as legal, advisory,

consulting and related insurance costs and other professional services, including the costs of listing the Units. It is

expected such expenses will not exceed 0.5% of the REIT’s total asset value.

The Fund Manager will be responsible for all of its overhead expenses of managing the REIT, including the

compensation of its employees, the costs of the Shari’ah Board and the cost of its facilities and office space.

(c) Liability

The Fund Manager shall, to the best of his knowledge and belief, take all necessary steps in favor of the

Unitholders. The Fund Manager and its directors, officers, employees, agents, advisers, affiliates and personnel,

the Custodian, each developer, each property manager, the Shari’ah Board and the members of the Fund Board

shall not have any liability to the REIT or to any investor for any loss suffered by the REIT that arises out of any

acts or omissions of that party in connection with the conduct of the affairs of the REIT; provided that any party

seeking to rely on such provision has acted in good faith and in a manner reasonably believed to be in the best

interests of the REIT and was neither grossly negligent nor engaged in fraud or willful misconduct.

(d) Summary Financial Disclosure

The expected fees and expenses to be charged and incurred by the REIT are set forth in the Summary Financial

Disclosure set forth in Schedule B hereto.

(e) Dividends and Distributions

The Fund Manager is targeting to distribute to Unitholders an annual cash dividend of no less than 90% of the

REIT’s Net Profits. It is envisaged that the amount of the annual dividend will increase over the REIT’s term as the

number of income-producing properties in the REIT’s portfolio increases. The Fund Manager may distribute such

30

amounts more than once a year.

2.10 Evaluating Fund Assets

(a) Method of Evaluating the REIT’s Assets

The Fund Manager shall evaluate the REIT assets based on an evaluation prepared by two independent

evaluators. Under existing arrangements, as at the date of listing the Fund, the valuators, Colliers International

and Barcode Limited, shall value the assets in the REIT’s initial portfolio. The Fund Manager has the right to

change or appoint any new valuator for the REIT without any prior notice to the Unitholders. Such appointment

will be made considering the Fund Manager’s responsibility to the Unitholders.

The price of one Unit will be calculated by deducting total liabilities of the REIT, including any finance liabilities,

fees and expenses payable by the REIT during the relevant period, from REIT total assets, and the output will be

divided by the number of the REIT Units for the same period. Such price shall be an indicative price of the REIT’s

units.

The value of the REIT’s total assets is the sum of all real estate assets, cash and receivables and the market value of

all investments together with the current value of any other assets held. The Fund Manager shall exercise its

reasonable judgment in determining the values to be attributed to assets and liabilities, provided it is acting in

good faith in the interest of the REIT and Unitholders.

The net assets of the Fund shall be owned by the Unitholders, and the Fund Manager or Custodian shall not have

any interest in or claim against such assets. Creditors of the Fund Manager and the Custodian shall not have any

entitlement to the REIT assets.

(b) Number and Timing of Evaluation

The Fund Manager shall value the Fund’s assets by appointing two independent valuators accredited by the Saudi

Authority for Accredited Valuators, but not less than once every six months and at such other times as it

determines necessary (each such day, a “Valuation Day”). The Fund Manager may postpone the valuation of the

REIT’s assets after obtaining the approval of the CMA, in accordance with Article 22 of the Real Estate Investment

Funds Regulations.

In case of discrepancy between the valuations prepared by both valuators, the average of both amount shall be

adopted.

(c) Manner of Announcing the Unit Price

The Fund Manager shall announce the unit price of the REIT within sixty (60) Business Days from the respective

evaluation date. Such information shall also be made available on the website of the Tadawul and that of the

Fund Manager.

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2.11 Trading of Units

(a) The Units are traded in the same way as trading listed companies shares on Tadawul. Therefore,

Unitholders and investors can trade during the normal trading hours on all Business Days directly

through Tadawul.

(b) Notwithstanding any other provision, trading in the REIT’s units shall be free and shall not be subject to

prohibition stated in Article 16(A) of the Real Estate Investment Funds Regulations concerning trading

of “Related Parties” in the REIT’s Units.

(c) Subscription to or buying REIT’s Units shall be considered a perusal of these Terms and Conditions and

an implied approval of the Fund’s Terms and Conditions.

2.12 Termination and Liquidation of the Fund

The REIT may be terminated (a) at the end of the Fund Term, (b) if the REIT exits or sells all its assets and all

proceeds of such dispositions have been distributed to the Unitholders, (c) there is a change to the laws,

regulations or other legal conditions or there are material changes to the market conditions in Saudi Arabia and

the Fund Manager such as a justified reason to terminate the REIT or (d) if the termination of the REIT is required

pursuant to a decision by the CMA or under its regulations (each a “Termination Event”).

All Termination Events require the approval of the Fund Board and the CMA. Unitholders and the CMA will be

notified within thirty (30) days of the occurrence of a Termination Event.

If the REIT is terminated, following written notice to the CMA, the listing of the Units will be cancelled and a time

schedule of liquidation will be announced then the liquidation measures will take place. The Fund Manager shall

appoint a liquidator who shall cause the REIT to be wound down with assets of the REIT distributed to the

Unitholders. For the avoidance of doubt, the Fund Manager may act as the liquidator, and the assets of the REIT

may be distributed to the Unitholders in-kind in case the disposal of the REIT assets was impossible or the Fund

Manager considered so to be in the best interests of the Unitholders.

2.13 Fund Board

The Fund Manager will appoint the Fund Board to provide oversight over certain actions of the REIT and to act as

a fiduciary for the benefit of the REIT and its Unitholders. The Fund Board will work with the Fund Manager to

ensure the success of the REIT.

(a) Composition and Member Qualifications

The Fund Board will be composed of 5 members appointed by the Fund Manager, from which 2 are independent.

Any amendment to the composition of the Fund Board shall be announced on the Fund Manager’s and the

Tadawul’s websites.

The Fund Board comprises the following members:

32

Mr. Ali Abdul Rahman Al Quwaiz (Chairman)

Mr. Al Quwaiz is currently the CEO of Riyad Capital. He has a Bachelor degree in Business Administration from

Portland University. He obtained one-year on-the-job training at Chase Manhattan Bank in NY, in addition to

cumulative management training at Harvard Business School and INSEAD. He has more than 25 years of

experience in banking and finance, ten years in the Project Financing Department in SIDF and 15 years in

Merchant Banking and capital markets in local banks.

Mr. Adel Ibrahim Al Ateeq (Member)

Mr. Al Ateeq is currently the Head of Asset Management at Riyad Capital. He holds an MBA in finance and

investment from Pittsburgh University. He is also a certified Personal Financial Planner and a Certified Wealth

Manager. He has more than 15 years of experience in financial markets and fund management. Prior to joining

Riyad Bank, he worked at the Saudi Arabian Monetary Authority (SAMA).

Mr. Raed Ghaith Barakati (Member)

Mr. Barakati currently serves as the Director of the Individual Investments Department within Riyad Capital.

Previously, Mr. Barakati served as Director of Investment Banking within Riyadh Capital. Mr. Barakati has more

than 15 years’ experience in investment banking and corporate banking and holds a Master's degree in Business

Administration from Suffolk University in 2001. Mr. Barakati received a Bachelor's degree in Business

Administration from King Fahd University of Petroleum and Minerals.

Mr. Faisal Abdullah Aldheim (Independent)

Mr. Aldheim is the founder of the Office of Faisal Aldhim Advocates and Legal Consultants, which was founded in

2008. Mr. Aldheim is a certified arbitrator of the Ministry of Justice and a member of the Lawyers Committee in

Riyadh Chamber of Commerce and member of the advisers to the Minister of Justice. Mr. Aldheim is also member

of many private and governmental committees and participated in a number of conferences and workshops as

speaker and lecturer. Mr. Aldheim is author of several newspaper articles and a founder of companies operating

in different sectors. Mr. Aldhrim holds a Bachelors degree in Law from King Saud University in 2004.

Mr. Mohammed Abdel-Hamid Al-Mubarak (Independent)

Mr. Al-Mubarak currently serves as Director of Real Estate Investments within MAS Holdings. Mr. Al-Mubarak

had previously served as Portfolio Manager at Riyad Capital and also spent almost eight years before that within

the Corporate Finance and Mutual Funds Department within the Saudi Arabian Capital Markets Authority. Mr. Al-

Mubarak holds a Bachelor's degree in Finance from King Faisal University and a Master's degree in Finance from

the University of Cambridge.

Member Suitability

The Fund Manager represents that in relation to each member of the Fund Board, such member:

33

(b) is not subject to any bankruptcy or liquidation proceedings;

(c) has not previously committed any fraudulent, dishonest or untrustworthy act; and

(d) has the requisite skills and expertise that would render him to qualify to be a member of the Fund

Board.

The Fund Manager represents that each independent director is in compliance with the definition of an

independent director as mentioned in the Glossary of Defined Terms Used in the Regulations and Rules of the

Capital Market Authority.

(b) Remuneration

The independent members of the Fund Board shall be entitled to SAR 3,000 annually. The non-independent

members of the Fund Board will not receive any remuneration. However, the REIT will bear all actual travel and

accommodation expenses incurred by each Fund Board member to attend meetings.

Meetings

The Fund Board shall meet at least once every six months. Also, the Fund Board may meet as and when requested

by the Fund Manager or as otherwise determined necessary. All Fund Board resolutions shall be adopted with

the approval of the majority of the Fund Board members present at any meeting at which a quorum is present.

Quorum for attendance purposes shall be satisfied by the attendance of the majority of Fund Board members and

any action or decision that can be taken by the Fund Board at a meeting can also be taken by separate out-of-

meeting written consent signed by a majority of the members of the Fund Board. Such approval may be sent via

email.

(c) Responsibilities and Services

The members of the Fund Board shall have the following responsibilities:

(a) ensuring that the Fund Manager carries out its responsibilities in a manner that would achieve the

overall interest of Unitholders in accordance with these Terms and Conditions and the Real Estate

Investment Funds Regulations and the REIT Regulations;

(b) approving all material contracts, decisions and reports involving the REIT, including but not limited to

development agreements, custody agreements, marketing agreements and valuation reports.

(c) approving these Terms and Conditions and any amendments thereto;

(d) approving any conflict of interest disclosed by the Fund Manager;

(e) approving the appointment of the auditor nominated by the Fund Manager;

(f) meeting at least twice annually with the compliance officer of the Fund Manager and AML/counter-

terrorism reporting officer to ensure that the Fund Manager is in compliance with all applicable rules

34

and regulations;

(g) ensuring that the Fund Manager discloses all material information to Unitholders and other

stakeholders; and

(h) working in good faith, reasonable care and diligence to achieve the overall interests of the REIT and

Unitholders.

The Fund Manager shall provide all necessary information regarding the affairs of the REIT to all Fund Board

members in order to enable them to carry out their duties.

(d) Other Funds Managed by members of the Fund Board

None of the Fund Board members currently manage any other investment public investment fund in Saudi Arabia

(including real estate investment traded funds), except for Mr. Ali Al Quwaiz and Adel Ateeq who are board

members of the following funds:

1. Riyad Money Fund (USD)

2. Al Shamekh Fund

3. Al Shuja’a Fund

4. Al Mokdam Fund

5. Al Hadi Fund

6. Riyad Equity Fund 2

7. Riyad Gulf Fund

8. Global Equity Fund

9. Commodity Trading Fund (SAR)

10. Commodity Trading Fund (USD)

11. Balanced Income Fund

12. Al Shamekh Sharia Compliant Fund

13. Al Shuja’a Sharia Compliant Fund

14. Al Mokdam Sharia Compliant Fund

15. Global Property Fund

16. Natural Resources Part


18. American Stock Fund

19. European Stock Fund

20. Japan Stock Fund

21. South East Asia Fund

22. British Stock Fund

23. International Fund

24. Technology Fund

25. Telecommunication Fund

26. Future Equity Fund

27. US Dollar Bond Fund

28. International Bond Fund

29. Riyad Money Fund (SAR)

30. Riyad Small and Medium Cap Fund

31. Riyad Real Estate Fund - Burj Rafal

Riyad - Technology Fund


33. Emaar Fund

(a) The Fund Manager may, on its own initiative, call for a meeting of the Unitholders.

(b) The Fund Manager must call for a meeting of Unitholders within 10 days from receiving such written request

from the Custodian.

(c) The Fund Manager shall call for a meeting of Unitholders by announcing the invitation on its website and that of

Tadawul, and by sending a notice in writing to all Unitholders and the Custodian giving a minimum of 10 days’

notice and a maximum of 21 days’ notice of the meeting. The announcement and notice must specify the date,

35

place and time of the meeting and the proposed agenda. The Fund Manager must at the same time as sending a

notice to Unitholders regarding any meeting, provide a copy of any such notice to the CMA.

(d) The Fund Manager must call for a meeting of Unitholders within 10 days of receiving a written request from a

Unitholder or more who individually or collectively hold at least 25% of the Fund Units.

(e) The quorum required to conduct a meeting of the Unitholders shall be such number of Unitholders holding

collectively at least 25%of the value of the Fund Units.

(f) If the quorum requirements set out in paragraph (e) above are not met, the Fund Manager shall call for a second

meeting by announcement on its website and that of Tadawul and shall send a notice in writing to all Unitholders

and the Custodian giving not less than 5 days' notice of the second meeting. At the second meeting, any number

of Unitholder(s) holding any number of Units present in person or represented by a proxy shall be deemed to

satisfy quorum.

(g) Every Unitholder shall be entitled to appoint a proxy to represent such Unitholder at a meeting of the Unitholders.

(h) Each Unit held by a Unitholder shall represent one vote at the meeting of Unitholders.

(i) The Unitholders meetings and its deliberations and voting on decisions may be conducted through tele-

conference in accordance with requirements set out by the CMA.

(j) A resolution of the Unitholders is enforceable subject to the consent of Unitholders owning %50 of the total Fund

Units who attend the meeting either in person, proxy or via tele-conference.

2.14 Fund Manager

(a) Name and Address of the Fund Manager

Name: Riyad Capital

Address: Head Office Building

Prestige Center

Takhassusi Street

P.O. Box 21116

Riyadh 11475



(b) Fund Manager as an Authorized Person

Riyad Capital is a Saudi Arabian limited liability company with Saudi Arabian commercial registration no.

1010239234, and an Authorized Person licensed by the CMA under license no. 07070-37 to carry out investment

36

businesses and financial services. Riyad Capital is the investment arm of Riyad Bank and is headquartered in

Riyadh.Riyad Capital offers its regional and international institutional and high-net worth clients a broad range of

financial services and solutions including financial advisory, arranging, custody, dealing and asset management.

(c) Fund Manager Services

The Fund Manager shall appoint an investment portfolio manager registered with the CMA in accordance with

the Authorized Persons Regulations issued by the CMA to overlook management of the REIT assets.

The Fund Manager will provide management and other services to the REIT, including but not limited to the

following:

(a) sourcing and executing acquisitions and dispositions for the REIT;

(b) setting out the decision-making procedures that should be followed when executing the business of the

REIT;

(c) informing the CMA of any material event or development that might affect the REIT’s business;

(d) complying with all laws and regulations valid in the Kingdom relating to the REIT’s business;

(e) managing the REIT’s assets for the benefit of the investors in accordance with the Terms and

Conditions;

(f) ensuring the legality and validity of all contracts concluded for the benefit of the REIT;

(g) implementing the REIT’s investment strategies described herein;

(h) arranging, negotiating and executing Shari’ah-compliant debt financing documentation on behalf of the

REIT;

(i) appointing the Shari’ah Board and securing their approval that these Terms and Conditions are in

compliance with Islamic Shari’ah;

(j) overseeing the performance of the REIT’s contractual counterparties;

(k) arranging the liquidation of the REIT upon its termination;

(l) providing the Fund Board all necessary information relating to the REIT to enable the Fund Board

members to perform their responsibilities completely; and

(m) consulting with the Fund Board to ensure compliance with the CMA’s regulations and the Terms and

Conditions.

The Fund Manager shall be liable for any losses incurred by the REIT as a result of the Fund Manager’s gross

negligence or deliberate misconduct.

37

(d) Potential Conflicts between members of the Fund Board, Fund Manager and Fund

Potential conflicts of interest between the Fund Manager and the REIT are set forth in Section 2.18 herein.

The Fund Manager shall not have any interest in or claims against the REIT assets, except in its capacity as a

unitholder. Creditors of the Fund Manager shall not have any interest in any REIT assets.

(e) Material Conflicts of Interest

The Fund Manager declares that there is no conflict of interest which may have any impact on the Fund Manager

in carrying out its duties towards the REIT.

(f) Delegation to Third Parties

The Fund Manager shall be responsible for managing the REIT, and shall be liable for the appointment of any

third party for carrying out any of the foregoing responsibilities. The Fund Manager may solicit the services of

third parties (including providers of administrative services) in order to enhance the performance of the REIT.

The Fund Manager intends to appoint a developer on an arm’s-length basis for all development projects of the

REIT.

The Fund Manager will appoint a property manager for each property of the REIT.

As for the Ascot Corniche Tower, Ramla Real Estate Development Company has been appointed as developer to

carry out the development works. Ramla Real Estate Development Company was founded in 2014 and is

currently developing projects in various cities in the Kingdom totalling up to SAR 1,500,000,000. Among the most

prominent projects being developed by the company is Ramla Tower in Riyadh, along with Ascot Corniche

Tower.

(g) Investment in the REIT

The Fund Manager may be entitled to invest in Units in the REIT, whether through subscription or buying Units

from Tadawul. The Fund Manager shall disclose any investment it has in the REIT at the end of each financial

year in the summary of financial disclosure.

2.15 Custodian

Name: KSB Capital Company

Address: P.O. Box 395737, Riyadh 11375


The Custodian will form one or more Saudi Arabian limited liability companies (each an “SPV”) to hold title to the

assets of the REIT. Such structure shall maintain tax efficiency and regulatory compliance and provide maximum

legal protection for Unitholders. The assets of the REIT shall not be mortgaged by a third party. However, such

assets may be mortgaged in favour of or acquired by a Saudi bank pursuant to any financing arrangements.

38

2.16 Auditor

Name: Ibrahim Al Bassam and Abdul Mohsen Al Nemr Chartered Accountants

Address: P.O. Box 28355

Riyadh 11437


Tel: +966(11)2065333

Fax: +966(11)2065444

The Fund Manager may change the REIT’s auditor from time to time with the approval of the Fund Board. Notice

will be provided to all Unitholders and the CMA upon the replacement of the auditor.

2.17 Financial Statements

The Fund’s financial year (“Financial Year”) shall be from January 1 to December 31 each year. Financial

statements of the Fund will be prepared by the Fund Manager on both a semi-annual basis (unaudited) and an

annual basis (audited) in accordance with the standards of the Saudi Organization of Certified Public Accountants

(SOCPA). The annual financial statements shall be audited by the Fund’s auditor. Financial statements of the

Fund will be reviewed by the Fund Board and made available to the CMA as soon as they are approved and made

available to Unitholders within a maximum of 25 days from the end of the period covered by unaudited financial

statements and 40 days from the end of the period covered by audited financial statements, by publishing them

on the Fund Manager’s and Tadawul’s websites.

2.18 Conflicts of Interest

Conflicts of interest may exist or arise from time to time between the REIT on the one hand and, on the other

hand, the Fund Manager or its affiliates, directors, officers, employees and agents thereof, and other funds

sponsored or managed by them. If the Fund Manager has a material conflict of interest with the REIT, it will make

a full disclosure to the Fund Board as soon as practicable. The Fund Manager and the Fund Board will attempt to

resolve any conflicts of interest by exercising their good faith judgment considering the interests the REIT, its

Unitholders and all affected parties or entities taken as a whole.

The Fund Manager has initially identified the following potential conflicts of interest:

Similar Riyad Capital Vehicles Riyad Capital manages and expects to continue to manage its own proprietary account and other investments

and accounts with objectives similar in whole or in part to those of the REIT, including other collective investment

vehicles which may be managed or sponsored by Riyad Capital and in which Riyad Capital or its affiliates may

have an equity interest.

In addition, subject to the limitations set forth herein, Riyad Capital and its affiliates may in the future sponsor or

serve as fund manager, investment manager or general partner with respect to investment funds or other

collective investments, one or more of which may invest in properties similar to those in the REIT’s portfolio,

39

provided that such other activity does not impair the success of the REIT.

Conflicts of Interest Regarding Transactions with the Fund Manager and its Affiliates The REIT may engage in transactions with the Fund Manager or its affiliates or other entities in which Riyad

Capital has a direct or indirect interest. For example, certain affiliates of Riyad Capital may provide services to the

REIT. All transactions between the REIT and the Fund Manager, its affiliates and entities in which Riyad Capital

holds a direct or indirect interest will be disclosed to the Fund Board. However, the Fund Manager and Fund

Board shall use their good faith commercially reasonable efforts to cause the terms of the agreements between

the Fund Manager and its affiliates, on the one hand, and the REIT, on the other hand, to be prepared on an arm’s-

length basis.

Fund Board The Fund Board will oversee the resolution of conflicts of interests. As of the date of these Terms & Conditions,

the Fund Board is composed of appointees of the Fund Manager. The members of the Fund Board have fiduciary

duties to the Unitholders under the Real Estate Investment Fund Regulations and will use their best efforts to

resolve all conflicts by exercising their good faith judgment.

Related Party Transactions The REIT may from time to time enter into transactions with Related Parties, provided such arrangements are

disclosed to the Fund Board and are on market standard terms. In case a Related Party, including another fund or

collective investment vehicle established by the Fund Manager, wishes to enter into a transaction with the REIT,

the Fund Manager will obtain the approval of the Fund Board and the purchase price paid or received by the REIT

must be consistent with independent valuations.

The foregoing does not purport to be a complete or exhaustive explanation and summary of all the potential

conflicts of interest involved in an investment in Units in the REIT. It is strongly recommended that all potential

investors seek independent advice from their own professional advisors.

2.19 Reporting to Unitholders

The Fund Manager shall report and disclose the following information to the CMA and Unitholders without any

delay:

(a) any material development affecting the Fund assets, its counterparties, financial position or general

course of business of any other change that would result in the Fund Manager voluntarily resigning

from its position as fund manager, and which reasonably may affect the Unit price or have significant

effect on the Fund's ability to meet its commitments in respect of debt instruments;

(b) any transaction to purchase, sell, lease or mortgage a Fund asset at a price equal to or greater than 10%

of the Fund's total assets value in accordance with the latest reviewed interim financial statements or

audited annual financial statements, whichever is more recent;

40

(c) any losses equal to or greater than 10% of the Fund's Net Asset Value; according to the latest reviewed

interim financial statements or audited annual financial statements, whichever is more recent;

(d) any changes in the composition of the Fund Board committees;

(e) any dispute including any litigation, arbitration or mediation where the value involved is equal to or

greater than 5% of the Fund’s Net Asset Aalue according to the latest reviewed interim financial

statements or audited annual financial statements, whichever is more recent;

(f) any increase or decrease in the Fund’s Net Asset Value equal to or greater than 10% according to the

latest reviewed interim financial statements or audited annual financial statements, whichever is more

recent;

(g) the increase or decrease in the gross profit of the Fund, equal to or greater than 10% according to the

latest audited annual financial statements;

(h) any transaction between the Fund and a Related Party or any arrangement through which the Fund and

a Related Party invest in any project or asset or provide financing thereto in an amount equal to or

greater than 1% of the Fund’s gross revenue according to the latest audited annual financial statements;

(i) any interruption in the Fund’s core activities equal to or greater than 5% of the gross revenues

according to the latest audited annual financial statements;

(j) any change in the Fund’s auditor;

(k) an appointment of a replacement custodian for the Fund;

(l) the passing of any judgment, decision, order or declaration by a court or tribunal, whether at first

instance or at appeal, which may adversely affect the Fund's utilisation of any portion of its assets which

in aggregate value represents a value exceeding 5% of the Net Assets Value according to the latest

reviewed interim financial statements or audited annual financial statements, whichever is more recent;

and

(m) any suggested change to the Fund's capital.

In addition, the Fund Manager shall disclose the following information at least once every six months:

- any principal, material or significant changes that affect the operations of the Fund; and

- a statement of distributions showing the amounts distributed to Unitholders.

41

The Fund Manager shall prepare and submit annual reports to the Unitholders including the following

information:

(a) the underlying assets in which the Fund invests;

(b) the assets which the Fund is targeting to invest in;

(c) an illustration of the leased and unleased properties in relation to the total assets owned by the Fund;

(d) a comparative illustration covering the Fund's performance over the last three fiscal years (or since

inception of the Fund) explaining the following:

- the Net Asset Value of the Fund's assets at the end of each fiscal year;

- the Net Asset Value per Unit at the end of each fiscal year;

- the higher and lower Net Asset Value per unit for each fiscal year;

- the number of issued Units at the end of each fiscal year;

- the distribution of income per Unit; and

- the expense ratio of the Fund.

(e) a performance record showing the following:

- the total return for one, three and five years (or since inception of the Fund);

- the annual total return for each year of the past ten years (or since inception of the Fund);

- a table showing the fees and commissions incurred by the Fund in favour of third parties

throughout the year. In addition, the record shall disclose any circumstances that would call for

the Fund Manager to waive or reduce any fees.

(f) if fundamental changes have occurred during the relevant period which affected the performance of

the Fund;

(g) the Fund Board’s annual report that would include but not be limited to the topics discussed and

decisions issued by the Fund Board, including the issues regarding the performance of the Fund and its

achievement of its objectives;

(h) a statement about the special commissions earned by the Fund Manager during the relevant period,

stating clearly the purpose of the commissions and how they would be utilized.

2.20 Other Information

a. Voting Rights

The Fund Manager acknowledges that Unitholders are entitled to exercise all rights associated with their Units

including, but not limited to, the right to vote at Unitholder meetings, increase of capital by way of rights issuance

or accepting in-kind contributions. In addition, the approval of the Unitholders shall be obtained in relation to any

fundamental change to the Fund, and for this purpose, either of the following changes shall be considered to be a

‘fundamental change’:

42

- an important change in the nature of the Fund or its objectives;

- a change that may have an adverse and material effect on the Unitholders or their rights with respect to

the Fund.

- a change that has an impact on the Fund’s risk profile; and

- an increase in the capital of the Fund.

b. Shari’ah Board

The REIT will make its investments, finance its investments and conduct its affairs in a manner that is compliant

with Islamic Shari’ah. The Shari’ah Board of Riyad Capital (the “Shari’ah Board”) has reviewed and approved

these Terms & Conditions, including the REIT’s structure and investment strategies.

The Shari’ah Board includes the following members:

Sheikh Abdullah bin Sulaiman AI Manea (Chairman)

He is a member of the Council of Senior Scholars in the Kingdom and the former chairman of Mecca courts. He

was appointed as general deputy of the chairman of the Committee for Scientific Research and Ifta, Da'wah and

Guidance in 1396H and he is an advisor of many Islamic financial institutions around the world. He has authored

many books and papers on Islamic banking.

Sheikh Dr. Abdullah Bin Mohammed Al Mitlaq (Member)

He is a member of the Council of Senior Scholars in the Kingdom of Saudi Arabia and a member of the Standing

Committee for Ifta. He is also the former head of the Comparative Fiqh Section at the High Judicial Institute and

an advisor of many Islamic financial institutions. He has authored many books and papers on Islamic financial

transactions.

Sheikh Dr. Mohammed Bin Ali Al Qari (Member)

He is a professor at King Abdul Aziz University, Islamic Economics Section in Jeddah and the former chairman of

the Islamic Economics Research Centre at the University. He is an expert at the Fiqh Society at the Islamic

Conference Organization in Jeddah and is an advisor of many Islamic financial institutions around the world. He

has authored many publications and papers on Islamic banking.

c. Developers

The Fund Manager shall contract with a developer for each property, as needed, in case there is a property

developed by the REIT. The developer shall prepare the master plan for each project, secure and maintain all

necessary approvals and contracts with the consultants and design and oversee the project. It shall contract with

the contractors required for the completion of the project in accordance with the project design approved by the

Fund Manager. Further, it shall take delivery of the completed project from the contractors and initiate the

marketing and sales campaigns for the project. The Fund Manager may change the property developer from time

43

to time based on its performance.

d. Property Managers

The Fund Manager shall appoint a manager for each property. The property manager shall be responsible for the

administrative affairs of the property, including the development of management rules and policies, the

permanent follow-up of the property and the affairs of its tenants, the follow-up of the collection of rents, the

follow-up of periodic maintenance and the exploitation of property to effectively achieve the best returns. The

Fund Manager shall change the property manager for any property from time to time subject to its performance.

e. Complaint Proceedings

If during the Fund Term a Unitholder has any questions or complaints relating to the operations of the REIT, such

Unitholder should contact:

Quality and Complaint Division

Riyad Capital

Head Office Building

Prestige Center

At Takhassusi Street

P.O. Box 21116

Riyadh 11475


E-mail: [email protected]

Tel: 9200012299

8001240010


2.21 Amendments to Terms & Conditions

The Fund Manager shall modify these Terms and Conditions after obtaining the approval of the Unitholders on

any proposed fundamental change. After obtaining the approval of the Unitholders, the Fund Manager shall also

obtain the approval of the CMA on the relevant change. In this regard, any of the following changes shall be

considered to be fundamental:

(a) an important change in the nature of the Fund or its objectives;

(b) a change which may have an adverse and material effect on the Unitholders or their rights with respect

to the Fund;

(c) a change that has an impact on the Fund’s risk profile;

(d) an increase in the Fund's capital.

44

The Fund Manager shall provide updated Terms and Conditions to the CMA within 10 days from any change, in

addition to the Custodian as soon as they are updated.

The Fund Manager shall publish a copy of the Terms and Conditions on its website and that of Tadawul, and must

also announce any updated Terms and Conditions on its website and that of Tadawul, within (10) days from any

updates, including the annual updates on the Fund’s performance.

The Fund Manager shall announce on its website and that of Tadawul any details regarding the fundamental

changes to the Terms and Conditions, prior to 10 days from the entry into force of the change.

2.22 Governing Law and Dispute Resolution

These Terms and Conditions form a legally binding contract between the Fund Manager and each Unitholder.

Subscribing for and purchasing Units in the REIT is a deemed consent to these Terms and Conditions.

These Terms and Conditions shall be governed and construed in accordance with the laws and regulations

applicable in the Kingdom.

The Fund Manager and each investor will seek to resolve amicably any dispute arising out of or in connection

with these Terms and Conditions and the matters contemplated herein. In the event that a dispute cannot be

settled amicably, it may be referred by either party to the Committee for the Settlement of Securities Disputes

established by the CMA.

A-1

Schedule A

“Transaction Fee” shall have the meaning set forth in Clause 2.9(a)(vii) herein;

“Authorized Persons Regulations” means the regulations of the same name made by the CMA under Resolution Number

1-83-2005 on 21/05/1426H (corresponding to 28/06/2005G) as amended or re-enacted from time to time;

“Business Day” means a day on which banks are open for business in Riyadh, Saudi Arabia.

“CMA” shall have the meaning set forth in Clause 1 herein;

“Custodian” means the authorized person in name of one of its subsidiaries the REIT’s real estate assets are registered;

“Custodian Fee” shall have the meaning set forth in Clause 2.9(a)(iii) herein;

“REIT” shall have the meaning set forth in Clause 1 herein;

“Fund Board” means the board of directors of the REIT;

“Fund Manager” shall have the meaning set forth in Clause 1 herein;

“Fund Term” shall have the meaning set forth in Clause 2.3 herein;

“Capital” means the Unitholders’ share capital in the REIT;

“Real Estate Investment Funds Regulations” means the regulations of the same name made by the CMA under

Resolution Number 1-193-2006 dated 19/6/1427H (corresponding to 15/7/2006G), as amended, restated or

supplemented from time to time;

“Kingdom” shall have the meaning set forth in Clause 1 herein;

“Management Fee” shall have the meaning set forth in Clause 2.9(a)(ii) herein;

“Listing Date” shall have the meaning set forth in Clause 2.3 herein;

“Net Asset Value” or “NAV” means the net asset value of the REIT as determined pursuant to Clause 2.10 herein;

“Net Profits” means the cyclical generated profits from the operation and leasing of real estate after deducting

administrative, banking and general depreciation and finance costs and tax deductions. Such profits shall not include

capital gains or losses arising from the sale of real estate or other investments.

“Offering” means the public offering of Units hereunder;

“Related Party” means any of the following:

(a) the Fund Manager;

(b) the Custodian;

A-2

(c) any developer appointed by the REIT;

(d) any property manager appointed by the REIT;

(e) any valuation company retained by the REIT to value the REIT’s assets;

(f) the REIT’s auditor;

(g) each member of the Fund Board;

(h) any Unitholder owning more than 5% of the REIT’s Units;

(i) any individual or entity that controls or who is an affiliate of one of the aforementioned parties; and

(j) any of the executive managers or any employees of one of the abovementioned parties.

“Riyad Capital” shall have the meaning set forth in Clause 1 herein;

“SAR” means a Saudi Arabian Riyal, the lawful currency of the Kingdom;

“Saudi Arabia” shall have the meaning set forth in Clause 1 herein;

“Shari’ah Board” shall have the meaning set forth in Clause 2.20(b) herein;

“SPV” shall have the meaning set forth in Clause 2.15 herein;

“Subscription Fee” shall have the meaning set forth in Clause 2.9(a)(i) herein;

“Tadawul” means the Saudi Arabian Stock Exchange;

“Terms & Conditions” shall have the meaning set forth in Clause 1 herein;

“Transaction Fee” shall have the meaning set forth in Clause 2.9(a)(viii) herein;

“Unit” means a unit in the REIT;

“Unitholder” means an investor investing in and holding one or more Units;

B-3

Schedule B

Summary Financial Disclosure

A real estate investment traded fund Fund Class

The primary investment objective of the REIT is to provide its investors with current

income by investing in income-producing real estate assets primarily located in Saudi

Arabia. The REIT intends to fund the acquisition and operating costs through the Capital,

Shari’ah-compliant financing as well as revenues from REIT investments.

Fund Objectives

Annually 90% of the REIT’s Net Profits Targeted Dividends

Closed Ended Closed / Open

99 years from the date on which Units are admitted and listed in the Saudi Stock

Exchange (Tadawul) and made available for trading. Fund Term

Riyad Capital Fund Manager

KSB Capital Custodian

Saudi Riyals (SAR) Base Currency of the Fund

Upon issuing new units in the REIT, the Fund Manager may collect subscription fee no

more than 2% of the subscription amount. Subscription fee shall not be applied upon the

units traded in the REIT, as trading of units is subject to the fees prescribed by the Saudi

Stock Exchange.

Subscription Fee

The REIT will pay the Fund Manager an annual management fee (the “Management

Fee”) equal to 1.2% of the total asset value of the REIT. The Management Fee will be

calculated and paid in arrears in semi-annual installments.

Management Fee

The REIT will pay the auditor an annual fee of SAR 30,000. Auditor Fee

The REIT shall bear all financing costs and fees, costs and expenses related to arranging

and structuring the Shari’ah-compliant financing for the REIT, if any. The financing shall

be negotiated on an arm’s-length basis.

Financing Fee

Registration fee:

- SAR 50,000 plus SAR 2 per unitholder, subject to a maximum of SAR 500,000 shall

be paid to Tadawul in return for setting up a register of unitholders.

- SAR 300,000 shall be paid to Tadawul in return for managing the register of

unitholders.

Listing fee:

- SAR 50,000 as initial listing fees.

- 0.03% of the market value of the REIT (subject to a minimum of SAR 50,000 and a

maximum of SAR 300,000) as listing fees.

Unit Registration and Listing

Fees

A-4

The REIT will pay the Custodian an annual fee (the “Custodian Fee”) of SAR 100,000.

Such fee shall be payable on a semi annual basis. Custodian Fee

The negotiated Property Management Fees will be paid on an arm’s-length basis. It is

expected that each property manager will be paid fees no more than 7% of the collected

rental income from the relevant property.

Property Management Fees

If the REIT invests in any development projects, the developer of each such project will

be paid fees negotiated on an arm’s-length basis. It is expected that the developer will

deserve an amount of no more than 7% of construction costs.

Developer Fees

1% of the purchase or sale price of each property asset Transaction Fee

No more than 0,5% of the total asset value of the REIT on annual basis. Other Expenses

riyad reit - الرياض المالية · pdf filethe admission and listing of the units in...

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