partnership agreement - commodities fund

7/29/2019 Partnership Agreement - Commodities fund

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INVESTMENT AGREEMENT

of the

Precious Metals Investors I

This AGREEMENT of INVESTMENT is made as of April 14th 2011 by and between the

undersigned investors.

I. FormationThe undersigned hereby form an Investment Fund (Fund).

II.NameThe name of the Fund shall be Precious Metals Investors I.

III. TermThis Agreement shall begin on April 14th 2011 and shall continue until majority of theinvestors agree to rescind it.

IV. PurposeThe purpose of this Agreement shall be to create a fund which will invest the assets ofthe investors in physical precious metals such as gold, silver, platinum etc (hereinafterreferred to as commodities) for the financial benefit of the investors.

V. UnitInvestment is to be made in a Unit or its multiples thereof. The initial value of a singleunit is KD 1,050. Subsequently, the value of the unit will equal the net asset value ofthe Fund to be calculated per clause XII of this Agreement.

VI. ManagerA manager is to be appointed from the investors that will take the responsibility ofmanaging the activities of the Fund, including, inter alia:

i) Tracking commodity markets and updating investors of any significant events inthe market

ii) Forming the trading strategy for the Fund and executing trades in the marketiii) Keeping books of financial and capital accountsiv) Monthly updating the members on the performance of the Fundv) Managing an online email group of all investorsvi) Keeping members updated, via email, on the performance the Fund and

gathering any consensus needed for decision making

vii) Any other matters as required from time to time for efficient management of theFund

The manager will be appointed through consensus of all the investors and in the event aconsensus cannot be reached, through voting of all investors with majority prevailing.

The appointed manager can relinquish his duties and/or can be replaced anytime by themajority of the votes of all investors. A relinquishing or a replaced manager willcontinue to perform his/her duties till such time as a new manager is appointed.


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The appointed manager will sign an undertaking, attached as Annexure A.

VII. CustodiansThere shall be two custodians for the Fund. The Manager can be one of the custodians.The custodians will be selected through consensus or majority votes if consensus notachieved. The custodians will take the custody responsibilities of the Fund, including,inter alia:

i) Jointly opening and operating a safe deposit box(es)ii) Jointly opening and operating a bank accountiii)Purchasing and selling commoditiesiv)Managing, safekeeping, custody of and having access rights to physical

commodities etc.v) Any other matters as required from time to time for efficient custodianship of the

assets of the Fund

The appointed custodian can relinquish his/her duties and/or can be replaced anytime bythe majority of the votes of all investors. A relinquishing or a replaced custodian willcontinue to perform his/her duties till such time as a new custodian is appointed.

The appointed custodians will sign an undertaking, attached as Annexure B.

VIII. CommunicationEmail is to be used as the main mode of communication with respect to the matters ofthe Fund. The Manager will create an e-mail group for the Fund containing the e-mailaddresses of all the investors. This e-mail group address will be used to communicatewith all the investors for all matters relating to the Fund.

It is the responsibility of every investor to ensure that the Manager has their updatedemail address(es) and to regularly check his or her email for communication.

If an investor is travelling, it is prudent practice to inform the Manager of their traveldates and the mobile number they can be reached at when abroad.

Any communication addressed to the Manager and having material affect on the value ofthe Fund should be copied to all investors.

IX. Capital ContributionsAt initiation, the investors will each make minimum investment of one unit. Any investormay make optional additional contributions in increments of one unit. Two or more

investors are allowed to pool in their capital to purchase a unit in the Fund. All suchinvestors jointly owning unit(s) shall be signatory to this Agreement and will be included

in all the communication pertaining to the Fund and this Agreement. However, only oneof them shall be designated to decide upon and vote on various matters pertaining tothe management of the Fund.

The date of investment, number of units owned, contribution per unit made, totalcontribution made by each investor and the designator investor in case of jointownership is attached as Annexure C. This Annexure shall be updated by the Manageranytime there is any change in the investment and units owned by the investors.


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X. Additional ContributionsFrom time to time, any investor may increase his/her investment in the Fund. Theadditional investment from an investor will be of minimum one unit or multiples thereof.The value of unit is to be calculated as on the date of transaction and shall equal theBuying Value of Unit as defined in clause XII. The investor interested in increasinghis/her investment will inform the Manager through e-mail while copying all theinvestors expressing his/her interest and the expected date of execution.

Once such additional contribution has been executed, the Manager will revise AnnexureC and circulate the amended Annexure to all investors.

XI. Additional Cash CallsIn the event the Fund may not have enough cash available to pay for expenses, whichare due to be paid imminently and the Fund does not intend to liquidate any of itsholding of commodities in time to be able to pay the outstanding liabilities, the Managerwill make a cash call on all the investors duly explaining the basis and requirements forthe call. The Manager shall also calculate the proportion of the total to be paid by eachinvestor, calculated in line with the units held by each investor. The cash call made by

the Manager shall be scrutinized by all investors and approved by a majority vote. Onceapproved, the cash call will be binding on all the investors and will have to be depositedin the Funds bank account within a maximum of 48 hours.

XII. Valuation of the Fund/Net Asset Value of unitThe value of the Fund is the current value of the assets of the Fund (which will becalculated as the current sellable value of commodities held by the Fund net offees/commissions in Kuwait, plus cash and any pre-paid expenses), less the currentvalue of the debts and liabilities (which include accrual of any expenses that are requiredfor managing the Fund such as bank fees, locker fees, management fees etc) of theFund. The value of a unit will be value of the Fund divided by number of outstanding

units. This will be known as Sellable Value of Unit.

Buying value of Unit also to be calculated wherein the unit value is to be derived byvaluing the commodities held by the Fund at the buying value of commodities includingany fees/commissions in Kuwait. Buying Value of Unit will only be used as thetransaction value for additional contribution by an existing investor or induction of a newinvestor investing in additional unit(s) to enter into Fund.

XIII. Capital AccountsThere shall be maintained a capital account in the name of each investor. Each investor'scontribution to, or capital withdrawn from, the Fund shall be credited or debited,respectively, to that investor's capital account.

XIV. Approval ProcessUnless mentioned that unanimous approval of all investors is required, approval ofvarious matter pertaining to the Fund will follow the below mentioned mechanism:

1. Each investor will have a vote in ratio of his/her investments i.e., one unit equalsone vote.

2. Decision to be taken with majority of votes.


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3. In case of equal votes on both sides, the decision will go to side which has largest

vote-holders i.e., investors.4. In case of stalemate at point (3) above, investor who holds the largest number of

votes will cast a deciding vote.

A decision requiring voting will be circulated by the Manager and will carry a time limit tovote. Votes are to be submitted through email by copying all the investors within thetime limit and shall be compiled by the Manager. Decision to be taken based onsubmitted votes. Non submitted votes or votes sent in after the time limit, for whateverreason, will be considered abstained.

XV. Trading StrategyWhenever the Manager deems it appropriate to sell partly or wholly the commoditiesheld by the Fund for cash, the Manager will communicate to the investors laying out hiscase for such a recommendation. In the event of a partial sale, the Manager will ensurethat the remaining holding of the commodities within the Fund shall be such that it canphysically be divided amongst all the outstanding units.

Similarly, in the event the Fund has cash, the Manager when he deems it appropriate,

may recommend buying commodities for the Fund. The Manager will communicate toinvestors laying out his case for such a recommendation ensuring that the recommendedquantity to buy shall be such that it can physically be divided amongst all theoutstanding units of the Fund.

In addition to the Manager recommending the trading strategy for the Fund, he shallalso recommend the distribution of any interim dividend to all investors fully explaininghis reasoning to do so.

Due to the nature of the commodity markets, investors are to be allowed 24 hours toreply. In case, investors are not present in Kuwait, an SMS (short messaging service) tobe sent to their given mobile number to check their emails. After the passage of 24

hours of Manager sending out his email, all votes received via email to be collated anddecision taken as per the approval process.

XVI. NotificationReport and any notification are deemed to be issued when email is circulated to allinvestors via the group e-mail. In case of notification regarding decisions that requirevoting with the exception of trading strategy as identified above, email to be sent outpreferably 15 days before the decision is to be acted upon.

XVII.Sharing of Profits and LossesNet profits and losses of the Fund shall inure to, and be borne by, the investors, in

proportion to the value of each of their capital accounts.

XVIII. Book of AccountBooks of Account of the transactions of the Fund shall be kept and at all times beavailable and open to inspection and examination by any investor.

At each month end the Manager shall send to all investors, Fund accounts including theIncome Statement for the month and the Balance Sheet with capital accounts of each


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investor at the month end. Such accounts will be prepared on the sellable price of thecommodities held by the Fund.

XIX. Information ReportsPeriodic email reports to be issued as determined by the investors mentioning the valueof the Fund, composition of commodities in the Fund, number of units, value of unitsand value of each investors investment.

XX. Locker AccountThe Fund may select a bank for the purpose of opening a locker account to hold thecommodities owned by the Fund. Locker is to be operated jointly by the two custodiansas appointed under this Agreement.

XXI. Bank AccountThe Fund will open a bank account in an Islamic bank and if that is not possible then anon-interest bearing account in a conventional bank to hold and manage the cash ownedby The Fund. Bank account is to be operated jointly by the two custodians as appointedunder this Agreement.

XXII.Custody All commodities shall be purchased in the name of the Fund, where possible, and

if not possible by the custodians in their name on behalf of the Fund whileinforming all the investors.

All commodities shall be kept in the Fund locker. The two custodians as appointed under this Agreement to act as joint custodians

of commodity.

XXIII. Compensation for ManagementFor the services rendered, Manager of the Fund is to be compensated as follows:

i. Management feesManagement fees of 1% per annum of value of the Fund to be accrued onmonthly basis based on the value of Fund at the end of the month. The fees willbecome due for payment on yearly basis i.e., the manager can withdrawmanagement fees on every 12th month of accrual. In case liquidation of Fundbefore reaching the management fees due date, the management fee will becomedue to manager on liquidation. In the event the management is replaced forwhatever reason before the end of the 12th month, all the accrued fees till thedate of replacement shall be paid to him/her

ii. Incentive feesIncentive fee is to be calculated as 5% of the realized profit. Profit on a unit is to

be calculated as sellable value of unit less the cost of the unit i.e., buying value ofunit. Incentive fees becomes payable only when profits are realized i.e., on(partial or full) withdrawal of investors holding or liquidation of the Fund. In caseof an investor having multiple units at different buying values, FIFO (first in firstout) approach will be used to calculate the profit. In the event a Manager isreplaced prior to the full exit/liquidation of the Fund, any incentive fee that may


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accrue on exit will be divided amongst all the managers appointed during theholding period in proportion to their time managing the Fund.

XXIV.Additional InvestorsAdditional Investors may be admitted at any time, upon the unanimous consent of allthe investors. The new investor will enter into the Fund by purchasing either new unit(s)or unit(s) held by existing investors. The value of new unit will be the Buying Value of

Unit as defined above. An investor can decide to sell his/her interest in the Fund to aperson who is not an investor, in which case a unanimous consent from the remaininginvestors will be required. If approved by all investors, the selling investor will sell theunit to the new investor at the Sellable Value of Unit and payment will be made in cashto the selling investor with information to all remaining investors. Incentive fee, ifapplicable, will be deducted from the payment being made to selling investor.

A new investor upon purchasing unit(s) in the Fund shall sign an undertaking attachedas Annexure D to this Agreement, the original of which shall be maintained by theManager while a copy to be circulated to all investors. The Manager accordingly willrevise Annexure C and circulate to all the investors.

XXV. Voluntary Withdrawal (Partial or Full) of an InvestorAny investor may withdraw a part or all of the value of the investor s capital account inthe Fund. The withdrawal transaction to take place in unit or multiples thereof. Theinvestor withdrawing a part or all of the value of such capital account shall give notice ofsuch intention by email to all the investors.

The Fund shall pay the investor who is withdrawing a portion or all of the value of hiscapital account in the Fund in accordance with the Terms of Payment section below inthis Agreement.

In case an investor decides to withdraw by selling all or part of his interest to an existing

investor in the Fund, the selling investor will sell the unit to the buying investor at theSellable Value of Unit and payment will be made in cash to the selling investor withinformation to all remaining investors. Incentive fee, if applicable, will be deducted fromthe payment being made to selling investor.

Upon partial or full exit by the investor, an undertaking attached as Annexure E will haveto be signed, the original of which shall be maintained by the Manager while a copy tobe circulated to all investors.

XXVI.Death or Incapacity of an InvestorIn the event of the death or incapacity of an investor, receipt of notice shall be treated

as a notice of full withdrawal and payment shall be made to the heir as soon as possible.

XXVII. Terms of PaymentWithdrawal is allowed only in unit or multiples thereof.

Payments can be made either in cash or commodities or combination of both at thechoice of withdrawing investor. Payment will be made at the convenience of custodiansbut not exceeding 15 days from the date of notification by the withdrawing investor.

Cash payment to be made at Sellable Value of Unit less incentive fees if any.


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If payment is made in commodities, the payment will be in the ratio that comprises thecomposition of a unit. A different compositional payment may be allowed based on theapproval of remaining investors.

If payment or part thereof is made in commodities, the withdrawing investor is requiredto settle, before taking possession of the commodities, accrued fees on his capitalaccount i.e., management fees, incentive fees (which will be calculated according to the

sellable price net of all fees and commissions as at the date of withdrawal), etc.

XXVIII. Forbidden ActsNo investor shall:

Have the right or authority to bind or obligate the Fund to any extent whatsoeverwith regard to any matter outside the scope of the Funds purpose.

Except as provided in this Agreement, without the unanimous consent of all theother investors; assign, transfer, pledge, mortgage, or sell all or part of his or herinterest in the Fund to any other investor or other person whomsoever, or enterinto any agreement as the result of which any person or persons not an investor

shall become an interested party in the Fund. All purchase and sales transactions by the manager/custodians on behalf of Fund

to be arms length transaction unless approved by all the investors. Use the Funds name, credit, or property for other than Funds purposes. Do any act detrimental to the interests of the Fund or any act that would make it

impossible to carry on the business or affairs of the Fund.

XXIX.Dispute Resolution:Any dispute arising between investors should be resolved through the following process:

1. Negotiations between the aggrieved investor(s) and the accused investor(s) toresolve their differences, while keeping the remaining investors abreast of alldevelopments;

2. In the event negotiations fail to resolve the dispute, then the remaining investorsnot a party to the dispute shall mediate between the disputing parties to resolvethe issue;

3. If the mediation also fails or there are no investors that do not belong to either ofthe disputing parties, arbitration by independent arbitrators in Pakistan under thelaws of Pakistan will be sought whose decision shall be final and binding.

This Agreement of investment shall be binding upon the respective heirs, executors,administrators, and personal representatives of the investors.

The investors have caused this Agreement of investment to be executed on the datesindicated below, effective as of the date indicated above.


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Investor Name & Contact Details) Date Signature

WITNESSED BY:

ABCD WXYZTel: +1234 5678 Tel: +1234 5678


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ANNEXURE A

Undertaking by the Manager

I, [name of manager], appointed as Manager on [date] to manage the affairs of thePrecious Metals Investors I in line with duties outlined and assigned under theAgreement duly signed by all investors on [date].

I hereby undertake that I have fully understood my duties and responsibilities and shallfulfill them with full diligence and honesty. I will be paid in-line with compensationformula outlined in the Investment Agreement. I also understand that I can be replacedanytime with the consent of the majority of investors.

At the time of signing of this undertaking, I understand that the Precious MetalsInvestors I has [number] investors having [number] units with the following assets:

Item Quantity

Silver

Gold

Cash

Details of these are presented in Annexure C of the Investment Agreement, the monthly

financial statements and the bank statements of the Fund. The latest updated copy ofeach of these is attached with this undertaking for reference.

I also understand that the Fund shall indemnify me and hold me harmless from andagainst any loss, liability, expense, judgment, settlement cost, fees and relatedexpenses (including reasonable attorneys fees and expenses), costs or damages arising

out of or in connection with any act taken or omitted to be taken in respect of the affairsof the Fund or any investor, unless such act or omission constitutes fraud, grossnegligence, willful misconduct or breach of fiduciary duty on my part, or a materialbreach by me of my obligations under this agreement.

Truly,

[Name]

[Date]


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ANNEXURE B

Undertaking by the Custodians

We, [name of custodians], are appointed as Custodians on [date] to administer theaffairs of the Precious Metals Investors I in line with duties outlined and assigned underthe Investment Agreement duly signed by all investors on [date].

We hereby undertake that we have fully understood our duties and responsibilities andshall fulfill them with full diligence and honesty. We understand that these services willnot be compensated for. We also understand that we can be replaced anytime with theconsent of the majority of investors.

At the time of signing of this undertaking, we understand that the Precious MetalsInvestors I has [number] investors having [number] units with the following assets:

Item Quantity

Silver

Gold

Cash

Details of these are presented in Annexure C of the Investment Agreement, the monthlyfinancial statements and the bank statements of the Fund. The latest updated copy ofeach of these is attached with this undertaking for reference.

We also understand that the commodities are placed in Locker number(s) [numbers] at

[name of branch and bank] and the cash is in account titled [name of account],number [number of account] at [name of branch and bank] and that the Fund willensure that we become the signatories to the lockers and the bank account on behalf ofthe Fund and subsequent to this we shall hold and manage these locker(s) and bankaccount on behalf of Fund.

We also understand that the Fund shall indemnify us and hold us harmless from andagainst any loss, liability, expense, judgment, settlement cost, fees and relatedexpenses (including reasonable attorneys fees and expenses), costs or damages arisingout of or in connection with any act taken or omitted to be taken in respect of the affairsof the Fund or any investor, unless such act or omission constitutes fraud, gross

negligence, willful misconduct or breach of fiduciary duty on our part, or a material

breach by us of our obligations under this agreement.

Truly,

[Name of 1st Custodian] [Name of 2nd Custodian]

[Date]


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ANNEXURE C

Details of Investors Holdings

Name of Investor Date of

Investment

Number of

Units

Cost per Unit Total

Investment


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ANNEXURE D

Undertaking by New Investor

I, [name], hereby declare that I have purchased [number] units of investment in thePrecious Metals Investors I on [date] by paying [amount] per unit totaling [amount].By virtue of this investment, I have become an investor in Precious Metals Investors I

with my interests in the Fund equaling the proportion of the units invested in by me tothe total units outstanding of the Fund.

Therefore, I duly undertake that I have read and fully understood the InvestmentAgreement signed on [date] and that by signing this undertaking I agree with and amlegally bound by all terms, conditions and clauses of the Investment Agreement. Iunderstand that by signing this undertaking I will be treated as an investor equal to theoriginal signatories to the Investment Agreement from the signing date of this

undertaking onwards.

I also understand that I will not be entitled to any profits/returns earned by the Fundand I will not be liable for any costs, expenses or liabilities incurred by the Fund prior to

the date of signing of this undertaking.

Truly,

[Name]

[Date]


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ANNEXURE E

Undertaking by Exiting Investor

I, [name], hereby declare that I have sold [number] units of investment out of[number] units held by me in the Precious Metals Investors I on [date]. By virtue ofthis sale, my investment in Precious Metals Investors I ceases to exist from the date of

sale of the units/my interest in the Fund has reduced equaling the proportion of theremaining units held by me to the total units outstanding of the Fund.

[Therefore, I understand that from the date of sale onwards, I am no more bound by theterms, conditions and clauses of the Investment Agreement and I also indemnify andhold harmless the Fund from and against any loss, liability, expense, judgment,settlement cost, fees and related expenses (including reasonable attorneys fees andexpenses), costs or damages arising out of or in connection with any act taken or

omitted to be taken by me]

I also understand that I will be entitled to any profits/returns earned by the Fund and Iwill be liable for any costs, expenses or liabilities incurred by the Fund prior to the date

of sale of my units, in the proportion of total units held by me prior to the sale.

Truly,

[Name]

[Date]

partnership agreement - commodities fund

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