Bahrain-based Islamic retail bank Ithmaar has declared that its Turkey-based Shamil Bosphorus Modaraba (SBM) fund would not achieve its investment objectives and was unlikely that investors would have their entire capital returned.

Modaraba is a form of Islamic financial contract in which the investor (rab-ul-mal) entrusts money to a financial manager (modareb) and any profits and losses are shared between them in an agreed manner.

The bank said as modareb, it would be contacting investors to discuss the investor report and to explain available options.

The SBM is a $90 million investment fund that provided equity for the acquisition, development and sale of a diversified pool of assets that included land, property and development sites in Turkey.

Last year, the bank attempted to negotiate an exit from Turkey with its Turkish partners and more recently it has been conducting enquiries through its appointed advisers and consultants.

"The report issued to investors relays information the bank has gathered to date and the bank is very concerned by what it has recently learned as a result of the enquiries undertaken by its advisers and consultants," said Ithmaar Bank general manager for retail and private banking Abdulhakeem Al Mutawa.

"Ithmaar Bank has engaged the services of various advisers and consultants at its own expense, including Dechert (UK) and Hassan Radhi and Associates (Bahrain), to determine the reasons for the SBM not achieving its investment objectives.

"The bank's advisers and consultants are also reviewing the status of the financial position of the fund's assets and liabilities in order to determine the value of the SBM and available recourse," he said. "As modareb, Ithmaar Bank continues to operate in the best interests of all the SBM investors and will meet with investors to explain the report and available options," he added.-TradeArabia News Service