1. A.Rushdi Siddiqui, Global Director +1-212-597-5740 rushdi.siddiqui@dowjones.com Quest for Islamic REIT Index Islamic Real Estate Forum June 28-30 London

2. Defining REIT [Mahmoud El Gamal] Publicly traded companies that buy, develop, manage, maintain, and (rarely) sell real estate properties: –Must pay out at least 90% of net income as dividends – Low correlation with other asset classes offers diversification benefits: –REIT stocks’ correlation with S&P 500 (1/93—10/01) = 0.24 – Very few failures, mostly due to excessive debt- leveraging –Islamic debt-screening should reduce that risk Consistently high dividend yield (6-7%) + capital gains

3. Defining REIT [Mahmoud El Gamal] REITs are capital market vehicles for owning real estate, and deriving income thereof. They give investment (diversification, management) and tax advantages over direct investment in real estate. Investors own REITs for their dividends: share prices rise relatively slowly due to distribution of dividends. They form a less speculative part of investment portfolios. Almost all the assets of equity REITs are in the form of real estate, held to generate rental income dividends

4. Weightings

5. Market capitalization

6. Returns

7. Real Estate Investment Trust (REIT) Equity –Equity REITs purchase properties and then pay their shareholders income received from rents, or from capital gains on the sale of properties whose values have appreciated Mortgage –Mortgage REITs loan money to real estate developers and pay their shareholders money from interest income. Hybrid –Hybrid REITs mix equity and debt investments and pay their shareholders money from interest and income from rents in differing percentages, depending on the composition of their portfolios

8. Types of Equity REITs Office Buildings Shopping centers & Malls Medical Buildings/Nursing Homes Industrial Warehouses Hotels Apartments

9. Interest in Realty (YTD) Modern Islamic financial institutions, including Islamic banks and funds, invest in the real estate sector for two reasons. They purchase properties with the goal of long term capital appreciation, and they purchase properties for the purpose of earning income through ijarah leases. The rulings of the Shari`ah Supervisory Boards of these institutions in respect to ijarah shed light on a principle which may be of importance to the screening of REITs.

10. Leasing Fatawa (YTD) (In answer to a question as to whether or not the KFH may lease property to a foreign embassy.) The Board is of the opinion that it will be lawful to lease property to such an embassy. This is because the contract is for the use of the property as space for carrying out the embassy's business, and that is lawful. With regard to what certain of its occupants may be involved in on the property, whatever prohibited activities, the sin will be theirs alone and has nothing to do with the contract. This is something that occurs incidentally, and may as well be occasioned by any lessee, Muslim or non-Muslim. It is not a condition of ijarah that the lessee be a pious Muslim. Kuwait Finance House, Fatawa Shar`iyah, Question 235, p. 224

11. Leasing Fatawa (YTD) (In answer to a question as to whether or not the KFH may lease aircraft to airlines that serve alcohol to its passengers.) The Board considered the fatwa of the Ministry of Awqaf, no. 28A/89 and agreed with it. It is lawful for a company in possession of aircraft to lease its airplanes to other airlines if the purpose of the lease is a lawful one, like the transport of passengers or freight that is not haram. This will hold even if the lessor company learns that the lessee engages in the sale of liquor, or that its passengers carry it with them. The reason for this is that the legal presumption in regard to leasing is that it is lawful. The occurrence of [things like] the sale of liquor [is incidental] and not a part of the subject of the lease; and the sin will be the doer's. Kuwait Finance House, Fatawa Shar`iyah, Question 243, p. 230

12. Leasing Fatawa (YTD) What is the Shari`ah ruling in regard to leasing real estate to supermarkets, restaurants, hotels, or tourist shops whose products andservices may include Islamically prohibited items? It is not lawful to lease property to a business concern whose primary business is in prohibited goods or services. It is lawful, however, to lease property to a business concern whose primary business is in lawful goods or services even if these are supplemented by income from unlawful goods or services. Dallah Albaraka, Fatawa of the 2nd Seminar on Problems of Modern Banking, Question no. 1

13. Leasing Fatawa (YTD) Please explain the Shari`ah position in regard to the Jordan Islamic Bank's leasing certain of its properties to companies or institutions whose primary business is transacting by means of interest Since it is unlawful for a Muslim to aid or assist in the commission of sin, and since transacting by means of interest is sinful, and since the primary business of these companies and institutions is transacting by means of interest, then the best that can be said of the proposal in the question is that it involves assisting in the commission of sin and is therefore unlawful. Hence, I will advise that no lease be offered for the purpose mentioned. Jordan Islamic Bank, Fatawa Shar`iyah, vol. 2, p. 12

14. DJIM Screens Debt/market Capitalization* <33% Cash + Interest Bearing securities/Market Capitalization* <33% Accounts Receivable/Assets <45% –*Rolling 12 month average

15. REITs & Leverage (June ‘04) OFFICE REITD/MCD/A EQUITY OFFICE101%47% BOSTON PROPERTIES 10958 TRIZEC PROPERTIES 13455 MACK CALI REALTY 7043 ARDEN REALTY 7249 SL GREEN REALTY 8550 HRPT PROPERTIES 13946 CARRAMERICA REALTY 11060 PRENTISS PROPERTIES 7847 BRANDYWINE REALTY 8547

16. REITs & Leverage Industrial REITsD/MCD/A Prologis54%46% Amb Property99%47 Catellus Development6053 Centerpoint Properties 5058 First Industrial Realty 10954

17. REITs & Leverage Shopping CentersD/MCD/A Kimco Realty45%46% Developers Diversified8252 Weingarten Realty 7863 Regency Centers 6246 Chelsea Property5561

18. REITs & Leverage Regional MallsD/MCD/A Simon Property 106%65% General Growth 12069 Rouse Co11268 Macerich Co 11464 Mills Corp 10665

19. REITs & Leverage ApartmentsD/MCD/A Equity Residential67%46% Archstone-Smith7643 Avalonbay Comm6947 Apartment Invt & Mgmt 19061 United Dominion 9860 Camden Property 9257 Bre Properties RE 7453 Essex Property 6048 Home properties 12054 Post Properties11253

20. REITs & Leverage Self StorageD/MCD/A Public Storage 3%3% Shurgard Storage 6849 Sovran Self Storage 5337

21. REITs & Leverage Equity HealthcareD/MCD/A Health Care Ppty 46%46% Ventas Inc 3878 Health Care 6546 Healhcare Realty 3938 Nationwide Health 7253 Senior Housing 5640

22. NO DJIM REIT Index Leverage Issue Office Tenant Revenue Breakdown But …….

23. Proposed Islamic Realty Fund ProductLend Lease SICAV Global Liquid Real Estate Fund SponsorLend Lease Corporation ManagerHoulihan Rovers AdministratorBrown Brothers Harriman (Luxembourg) CustodianBrown Brothers Harriman (Luxembourg) DomiciledLuxembourg Launch date3Q-4Q-2004 Shariah BoardSh N. Yaquby & Sh. Y. Talal DeLorenzo FeesSales Charge up to 5% »Institutional Adm Fee.05% LiquidityWeekly NAV CalculationWeekly

24. Proposed Islamic Realty Fund Shari'ah Investment Criteria Houlihan Rovers commits to managing the first Shari’ah compliant Global ‘Liquid’ Real Estate Fund along the following Islamic Investment guidelines: Universe Equity REITs or real estate operating companies only Only companies where we possess a complete description of all the business divisions

25. Proposed Islamic Realty Fund Prohibited Industries The investment manager will examine all aspects companies’ business description, stock by stock, and eliminate the companies whose business activities are greater than 5% in the following areas: Meat Pork Beef Supermarkets/Grocery Convenience Stores Wine/Alcohol/Liquor Food (non-vegetarian) Restaurants

26. Proposed Islamic Realty Fund The following are also prohibited industries: Operating gambling casinos, manufacturing of gambling machines Creating, publishing or distributing pornography Operating hotels Financial services, including banks, brokerage firms and insurance companies

27. Proposed Islamic Realty Fund Financial Screens –Three financial screens have been used for Shari'ah compliance testsNo investments shall be made by the Fund in companies with capital structures, financial ratios or investment structures that do not comply with respect to principles and precepts to Islamic Shari'ah. Business Activities –No investments shall be made by the Fund in companies that are involved in prohibited activities or industries not compatible with Shari'ah as interpreted by the Shari’ah Supervisory Board.

28. Proposed Islamic Realty Fund Characteristics Total Equity Market Cap> US$100B Number of Companies+/- 100 Dividend Yield+/- 5.0 %

29. Sector Comparison Weightings Conventional Universe –Office 29% –Retail27 –Residential 10 –Diversified19 –Industrial8 –Storage.5 –Healthcare1 Islamic Universe –Office 12% –Retail25 –Residential 37 –Diversified3 –Industrial7 –Storage5 –Healthcare5

30. Country Comparison Weightings Conventional Universe –US51% –HK10 –AU9 –JAP8 –UK9 Islamic Universe –US61% –HK15 –AU4 –JAP.3 –UK7

31. Performance (April 30, 2004)

32. Conclusion Equity REIT Index Constraints: –Leverage –Revenue breakdown Suggestions: –Sought after asset class –Transparency --> Accountability --> Confidence –Performance –Fees –Marketing/PR & Distribution Channels