Sukuk Nation in This Issue Singapore Has Had Its Fair Share of Challenges Global Equities Reveals That As the Economy IFN Rapid

Vol 7 Issue 34 25th August 2010 The World’s Global Islamic Finance News Provider

ALERT Register now - It’s free S Sukuk nation In this issue Singapore has had its fair share of challenges global equities reveals that as the economy IFN Rapid ...... 2 but it marks a re-entry into the Islamic recovers, executives globally are building up Islamic Finance News ...... 3 bond market with the recent issuance of cash for M&A activities. Takaful News ...... 10 Khazanah’s Sukuk, the country’s fi rst since Rating News ...... 11 2008. Khazanah’s Sukuk issuance alone has The next sector report by OSK Investment IFN Reports: propelled the island state forward by taking a Bank says that Shariah compliant M&As Islamic banks to increase liquidity .....12 10% share of the global Sukuk issuance as are essentially similar to its conventional Shariah funds grow ...... 12 compared to 1% before the issue. counterpart with the exception of the incorporation of basic Islamic laws. Microfi nance to alleviate poverty ...... 13 Details of Khazanah’s Sukuk are reviewed in Sukuk to turnaround the market ...... 13 our case study by DBS Bank, who were tasked To take advantage of the global debt Articles: with marketing the deal, and Islamic Bank of crisis, Islamic fi nance requires a varied Sukuk Innovation ...... 14 Asia, who managed the structuring aspect of perspective on strategies, asset class and Islamic Investment Funds in the deal. product development. Our market report by Singapore ...... 16 Econophy says that it is imperative to accept Singapore’s Sukuk Market — Where It In June, Singapore established the world’s that different environments have different Adds Value ...... 18 fi rst Shariah compliant data centre fund, levels of risk tolerance. A fi rm must be able Global Equities — Mergers and Securus Data Property Fund which is detailed to offer innovative products to serve different Acquisitions on the Rise ...... 20 in our country report. With an initial closing Shariah compliant products to different Classifi cations of Mergers and Acquisitions ...... 22 of US$100 million, it indicates that Islamic communities. Islamic Accounting — Exclusivity, Harmo- funds could provide a catalyst for Singapore nization or Convergence? ...... 24 to be a leading provider of Shariah compliant One way around this is to ensure that Islamic Has the Global Debt Crisis Made Islamic fi nancial services in the region. accounting does not remain in exclusivity as Banking Less Competitive? ...... 26 it can lead to arbitrage. Our focus section Khazanah Nasional’s US$1.1 billion In another fi rst, the innovative Sukuk ALIm by recommends the harmonization of both Sukuk issued in Singapore ...... 28 Cagamas is featured via an interview with Al Islamic and conventional accounting to ensure Rajhi Malaysia and in our termsheet section. the positive development of Islamic fi nance. Meet the Head ...... 31 Armando O Samia, Chairman and CEO of The launch saw Al Rajhi move into its fi rst This would mean that fi nancial reporting Al-Amanah Islamic Investment Bank of the Sukuk involvement as ALIm was formulated standards would have to accommodate Philippines (AAIIBP) to meet the Saudi Arabian bank’s Shariah Shariah principles. Termsheet ...... 32 requirements, forming a benchmark Sukuk Cagamas Variable Rate Sukuk Commodity Murabahah for those targeting the Middle Eastern market. Low levels of familiarity with Islamic banking even among Muslims, makes the business Moves ...... 33 Islamic bonds have also had success in challenging. This is true in the Philippines, Deal Tracker ...... 34 the UK. One of our IFN reports looks at says Armando Samia, chairman and CEO of Eurekahedge Funds Tables ...... 35 International Innovative Technologies’ Al Amanah Islamic Investment bank of the S&P Shariah Indexes ...... 36 successful raising of US$10 million via the Philippines who is put in the spotlight in our issuance of Sukuk Musharakah. It marks the Meet the Head section. Dow Jones Shariah Indexes ...... 37 UK’s foray into Islamic bonds and a revival in Dealogic League Tables ...... 38 the UK’s Islamic fi nance industry which was Our remaining three IFN reports feature Thomson Reuters League Tables ...... 41 believed to be on the downtrend. Afghanistan’s plans to issue Islamic banking Events Diary...... 44 licenses, Guernsey’s recently launched On the uptrend however are mergers and World Shariah Funds and Syria’s plans in Company Index ...... 45 acquisitions (M&As). Our fi rst sector report on microfi nance. Subscription Form ...... 45 A round-up of all this week’s news IFN RAPID www.islamicfi nancenews.com

• Indonesia’s state bonds in 2010 hit • Al Hilal Bank extends auto fi nancing •NEWS US$111.5 billion repayments until January 2011 • Faisal Islamic Bank of Egypt plans to • Funds raised by participation banks • Gulf Finance House announces new establish a leasing fi rm in Turkey reach US$18.4 billion executive chairman • King & Spalding plans to establish • Kuveyt Turk Participation Bank • Local microfi nance bank Ibdaa Bank offi ce in Geneva issues fi rst Turkish Sukuk launches in Syria • Indonesia’s US$650 million global • Argyll Investment Services launches • Dubai keeps options open for Sukuk postponed to fi rst half of 2011 World Shariah Funds sovereign debt issue in late 2010 • Lembaga Tabung Haji to pass stake • Islamic Bank of Britain unveils two • Abu Dhabi Islamic Bank provides in BIMB Holdings to Bank Islam new products fi nancing to Al Jaber Energy Services • MARC withdraws Hytex Integrated’s • Barclays Capital launches Shariah • Al Baraka Banking Group plans to ratings compliant repurchase agreements venture into Saudi Arabia • Bank Negara Malaysia to ease laws • European investors considers Asia on foreign exchange transactions Pacifi c debt markets for fi nancing TAKAFUL • Afghanistan central bank to grant • Global Sukuk expected to hit US$30 • Takaful Ikhlas president and CEO licenses to three local Islamic banks million in 2010 quashes rumors of Etiqa Takaful takeover • Bank Islam Malaysia will not transact • Investors continue to show interest in dirham/dinar gold currency Sukuk despite falling yields • Prudential Assurance Malaysia achieves 39% hike in new business • Hong Leong Bank posts a 51% jump • Private equity funds attract least in net profi t for its fourth quarter Islamic funding in the middle east sales • Bank Indonesia considers request to • Sukuk Al-Ijara issued by Central Bank • Takaful Ikhlas plans to raise restructure fi nancing facilities of Bahrain oversubscribed by 630% US$207,763 in premiums monthly from Takaful Amani • Malaysia’s Celcom Axiata issues • Bahrain Financial Harbour Holding US$1.3 billion Sukuk fully repays US$134 million Sukuk • Prudential Indonesia plans to sustain • Cagamas issues US$319 million facility premium growth of Shariah unit tradable Sukuk al-Amanah Li al- • EFG Hermes acquires private bank • Hong Leong Tokio Marine Takaful to Istithmar introduce family products • Dubai Islamic Bank second quarter • AmIslamic Bank unveils close net profi t increases 50% • Muslim Aid Sri Lanka and Amana ended AmDaily Opportunities Islamic Takaful to provide a microfi nance Negotiable Instrument of Deposit • Al Khaliji Commercial Bank partners solution with Saad Buzwair Automotive to • Islamic Development Bank lists offer 2.99% fi nancing • The Roads and Transport Authority’s US$318.8 million 10-year Sukuk on Licensing Agency signs deal with Bursa Malaysia • Al Rajhi Bank to start operations in insurers Jordan in October 2010 • The Islamic Development Bank • Takaful House reports second hands US$20 million to Tuwairqi • HSBC Amanah launches premium quarter loss at US$1.3 million Shariah banking service Steel Mills • Dubai houses 80% of uninsured or • Malaysia Airports Holdings prices its • Al Baraka to sell its fi rst US$200 underinsured buildings million Sukuk before year end US$318.8 million Sukuk • Insurance Commission of Jordan • Maybank Islamic reports pre-tax • Amlak Finance records net loss of reports market growth profi t of US$170.4 million US$162,000 • Malaysia’ national fi nancier uses SAP • Gulf Finance House posts fi rst half RATINGS Islamic banking solution net loss of US$47.7 million for 2010 • Moody’s revises Azerbaijan’s outlook • Crescent Investments to tap • Markaz’s fi rst half net profi t to stable from negative Malaysia’s Islamic superannuation plummets more than 50% • JCR-VIS Credit Rating Company fund • BNY Mellon calls for Sukuk based assigns preliminary fund stability • Islamic scholar advises Otoritas Jasa mortgage law in Saudi Arabia rating of ‘AA (f)’ to ABL Islamic Cash Keuangan on role • Abu Dhabi Islamic Bank implements Fund • The Islamic Bank of Thailand talks service to collect Zakat • MARC affi rms WCT’s US$95 million with a Middle East bank on Nava • ICD and Al Baraka to jointly provide redeemable Sukuk at ‘AA-IS’ and Leasing Islamic fi nancing services Islamic commercial papers/medium term notes at ‘MARC-1ID/AA-ID’ • Bukopin Bank relaunches its BSB • Nakheel plans to issue 10% yield Haji iB savings product 5-year bonds for its creditors • RAM upgrades Midas Plantation’s Class C Sukuk Ijarah from ‘A2’ to • Kuwait Finance House (Malaysia) • Abu Dhabi Islamic Bank postpones ‘AA3’ uses light rail transit branding repayment plan in Ramadan Disclaimer: Islamic Finance news invites leading practitioners and academics to contribute short reports each week. Whilst we have used our best endeavors and efforts to ensure the accuracy of the contents we do not hold out or represent that the respective opinions are accurate and therefore shall not be held responsible for any inaccuracies. Contents and copyright remain with REDmoney.

BIMB holds a 65.22% stake in Syarikat The last rating action for the company’s AFRICA Takaful Malaysia while Lembaga Tabung Haji MUNIF/IMTN was on the 28th July 2010, has a 9% stake in Bank Islam. where the notes were downgraded New leasing fi rm from ‘MARC-3ID’/‘BBB-ID’ to ‘MARC- EYGPT: Faisal Islamic Bank of Egypt is 4ID’/‘B+ID’. planning to set up an EGP500 million Marked off the list (US$88 million) leasing fi rm with the help MALAYSIA: Malaysian Rating Corporation of Misr Iran Development Bank and Islamic (MARC) has withdrawn Hytex Integrated’s Smoother foreign trade Development Bank, said Abdel Hamid Abu ratings of ‘MARC-4ID/B+ID’ for the RM100 MALAYSIA: Bank Negara Malaysia, the Mousa, its governor. million (US$32 million) Murabahah central bank, plans to ease administrative underwritten notes issuance facility/Islamic rules on foreign exchange transactions. Faisal Islamic is holding discussions with an medium term notes (MUNIF/IMTN). Arab investor to fund the leasing company, According to Zeti Akhtar Aziz, governor of and also intends to sell 30% of its shares MARC informed Islamic Finance news that Bank Negara Malaysia, these regulations are in an initial public offering to fi nance this the decision to withdraw the two Islamic relaxed to ensure international trade runs project. notes was due to the lack of clarity in Hytex smoothly in the country. Integrated’s debt restructuring exercise for a collateralized loan obligation. continued...

AMERICAS nnn%CXYlXe@9=:%dp Cross-border expansion

US: King & Spalding is planning to open an SONG BIRDS 9XYYc\ij#ki`cc\ij#n_`jkc\ijXe[kXkkc\ijZfeki`Ylk\k_\ì offi ce in Geneva, Switzerland to expand its gXikkfDXcXpj`XËjiXè]fi\jkfiZ_\jkiX%?\Xik_\d]ifd ale^c\ki\\kfgj#dXeîfm\jXe[_`ccj% international trade practice.

The Geneva ofﬁ ce will focus on World Trade Organization (WTO) counselling and negotiations, WTO dispute settlement proceedings, strategic international trade and investment counseling, and trade remedy proceedings.

This move comes two weeks after the law ﬁ rm applied to open an ofﬁ ce in Singapore.

ASIA J?8I@8?%K8B8=LC%JLBLB%@A8I8% Sukuk postponed A language we are most fluent in. INDONESIA: Agus Martowardojo, fi nance minister of Indonesia, announced that the Cfe^Y\]fi\fk_\iali`j[`Zk`fejle[\ijkff[@jcXd`Z]èXeZ\#CXYlXe@ek\ieXk`feXc9ljè\jjXe[ country has postponed its plan to issue a =èXeZ`Xc:\eki\nXjXci\X[p_`^_cpZfem\ijXekn`k_jlZ_èki`ZXk\k\idjXe[Zfdgc\ojkilZkli\j% US$650 million global Sukuk in October N\cc\efl^_kf`jjl\k_\]ìjk^cfYXcjlblbXe[k_\nfic[Ëj]ìjkjfm\i\`êjlblb%Fe\f]k_\cXi^\jk 2010 to the fi rst half of 2011. XìZiX]k]èXeZè^kflj\@aXiXc\Xjè^nXjZfe[lZk\[_\i\%

:cfj\kfLJ;(-Y`cc`fenfik_f]`jjlXeZ\j#èZcl[è^jlblb#_Xm\Y\\e`jjl\[k_ifl^_ljXe[(. The postponement of the global Sukuk gi`mXk\@jcXd`Z]le[jnfik_LJ;*Y`cc`fe\jkXYc`j_\[%C\Xjè^Xjj\kj_Xm\îfnekfLJ;(.Y`cc`fe was due to the lower budget defi cit, which Xe[i\kXbX]lcYljè\jjgi\d`ldjèZi\Xj\[kfLJ;((.d`cc`fe%@e)''/#;XiXc$8ibXef]JXl[`8iXY`X c`jk\[XLJ;(Y`cc`fejlblbfek_\CXYlXe@ek\ieXk`feXc=èXeZ`Xc

However, Indonesia will continue with the Fm\i_\i\#n\dXb\`kfliYlj`e\jjkf_\\[pfliZXcc% Samurai bond issuance, which will be issued on a smaller scale, he said.

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D8IB F==@:< CXYlXe @ek\ieXk`feXc 9lj`e\jj =`eXeZ`Xc :\eki\ @eZfigfiXk\[ J[e 9_[ /(.,0*; Jl`k\ )9$(($'* MALAYSIA: Lembaga Tabung Haji is planning GcXqXJ\ekiXc#AXcXeJk\j\eJ\ekiXc#BCJ\ekiXc#,'+.'BlXcXCldgli#DXcXpj`X%K\c1"-'*)..*/0..=Xo1"-'*)./')'.. to transfer its 51.47% stake in BIMB Holdings (BIMB) to Bank Islam.

© Page 3 25th August 2010 NEWS www.islamicfi nancenews.com continued... central bank will announce its decision on period of 33 days from the 24th August to the this matter by the fourth quarter. 24th September 2010. Zeti said the limit on pre-hedging for current account at onshore banks is also abolished Under the current regulations for Islamic to facilitate more effective risk management banks, Bank Indonesia will only allow Making its fi rst entry by foreign residents in Malaysia. restructuring terms to be altered once debt MALAYSIA: The Islamic Development Bank becomes non-performing. (IDB) has listed its RM1 billion (US$318.8 Licenses for Islamic banks million) 10-year Sukuk medium term note Telecommunication Sukuk program on Bursa Malaysia. This makes AFGHANISTAN: Da Afghanistan Bank, the IDB the fi rst multilateral development bank central bank of Afghanistan announced MALAYSIA: Local telecommunication fi rm to list its ringgit-denominated Sukuk on the plans to issue licenses to three local Celcom Axiata has issued a RM4.2 billion exchange. Islamic banks in the country. (US$1.3 billion) Sukuk to restructure Celcom’s business and establish a network The Sukuk is on an “exempt regime basis” Three banks have already applied for the focused entity. and will not be quoted or traded on the stock licenses. They are Afghan United Bank, exchange. Ghazanfar Bank and Maiwand Bank. The Sukuk issuance, with tenors ranging from fi ve to 10 years, is issued by Celcom’s The Islamic bond, which is rated ‘AAA’ by Aimal Hashoor, spokesman of the Da subsidiary, Celcom Transmission. Standard & Poor’s Ratings Services, will be Afghanistan Bank, said the decision to used for IDB’s general corporate purposes. grant licenses to the banks is to expand CIMB Investment Bank and Maybank Islamic fi nance in Afghanistan. Investment Bank are the joint principal advisors, lead arrangers and lead managers Steel mill fi nancing (Also see IFN Report on page 12) for the Sukuk. PAKISTAN: Tuwairqi Steel Mills (TSML) has secured a US$20 million Islamic fi nancing facility from the Islamic Development Bank. Dirham custodian service only Sukuk issuance MALAYSIA: Bank Islam Malaysia will not MALAYSIA: National mortgage corporation This fi nancing will be used by TSML to provide gold saving services nor distribution Cagamas has issued RM1 billion (US$319 complete its 1.28 million ton per year direct of the dinar/dirham currency recently issued million) tradable Sukuk al-Amanah Li al- reduction plant located at Karachi. by the Kelantan state government. Istithmar (Sukuk ALIm).

The bank will only offer a custodian service The Sukuk ALIm achieved a take up of 43% Airport Sukuk pricing for the currency via the bank’s unit, Farihan, from offshore investors, with 33% from MALAYSIA: Malaysia Airports Holdings will be at two of its Ar-Rahnu premises in Kelantan. Middle Eastern investors. pricing its RM1 billion (US$318.8 million) 10- year Sukuk at a yield of 4.65% to 4.85%. The bank will also accept the pawning of Al Rajhi Banking & Investment Corporation the dinar/dirham currency, whether from (Malaysia) (Al Rajhi), RHB Investment Bank Citibank and CIMB Investment Bank are joint the mint Kelantan Golden Trade or the and The Royal Bank of Scotland are the principal advisors, joint lead arrangers and public. managers for the Sukuk, while Al Rajhi and managers for the Sukuk. Amanie Business Solutions are the Shariah advisors. Spike in net profi ts Bank profi ts up 12% MALAYSIA: Hong Leong Bank has posted a MALAYSIA: Maybank Islamic has reported a net profi t of RM301.1 million (US$96 million) New fund in the market pre-tax profi t of RM533 million (US$170.4 th for its fourth quarter ending the 30 June MALAYSIA: AmIslamic Bank has launched a million) for the fi nancial year ended the 30th 2010, a 51% jump as compared to last year. close ended Shariah compliant investment June 2010. This fi gure is a 12% increase fund called AmDaily Opportunities Islamic as compared to RM476 million (US$152.2 The bank reported lower net income from Negotiable Instrument of Deposit (NID-i) with million) in the previous year. Islamic banking business for the same a targeted size of RM100 million (US$32 period. million). The growth is credited to a 20% increase in gross attributable income which is 10% of the group’s total pre-tax profi t, said Abdul Wahid Restructure fi nancing The four-year NID-i fund will be linked to six global stocks which are Procter & Gamble, Omar, president and CEO of Maybank. INDONESIA: Bank Indonesia, the central Dell, Google, China Mobile, Samsung bank of Indonesia, is considering the request Electronics and BHP Biliton. from local lslamic banks to restructure Shariah solution fi nancing facilities that are still new. The fund, which provides protection to MALAYSIA: Malaysia Debt Ventures (MDV) investors from the instability of the stock has signed an agreement with Innovation According to Mulya Siregar, director of market, comes with a minimum investment Associates Consulting, a local consulting and Islamic banking at Bank Indonesia, said the of RM70, 000 (US$22,000) during the offer continued...

© Page 4 25th August 2010 NEWS www.islamicfi nancenews.com continued... Haj product relaunched Pioneer Sukuk fi nally out technology fi rm, to set up on SAP Islamic INDONESIA: Bukopin Bank has relaunched TURKEY: Kuveyt Turk Participation Bank has banking solution. its BSB Haji iB savings product to raised a US$100 million three-year Sukuk help customers plan their future Haj issue, becoming the fi rst bank in Turkey to According to Md Zubir Ansori Yahaya, pilgrimage with a deposit and free monthly issue Islamic securities. managing director and CEO of MDV, this administration fee. Islamic banking solution will enable MDV Mehmet Simsek, fi nance minister for Turkey, to improve its management of the growing Customers will be required to make an said the Sukuk issue will make important number of fi nancings each year. initial deposit of IDR500,000 (US$55.7) contributions to the development of the and minimum deposit of IDR100,000 country. MDV is the national fi nancier and (US$11.1) to qualify for the BSB Haji iB development facilitator for the information savings product. and communications technology and high Shariah fund launched growth sectors. GUERNSEY: Investment manager fi rm Branding on transportation Argyll Investment Services (Argyll) has launched the World Shariah Funds, MALAYSIA: Kuwait Finance House (Malaysia) Crescent eyes pension fund a Guernsey based suite of Shariah embarked on a brand awareness campaign compliant investments. MALAYSIA: Crescent Investments on the light rail transit system in the country Australasia, an Islamic wealth management to commemorate the bank’s fi fth anniversary The fund is managed by three Islamic fi rm is looking to tap into the country’s and Malaysia’s month of independence. RM8.49 billion (US$2.7 billion) Islamic investment teams - Reliance Asset Management (Malaysia), CIMB Principal superannuation fund. The bank sponsored a car train incorporating Asset Management (Malaysia) and the tagline ‘The Symbol of Islamic Banking Kuwait Financial Center (Markaz) with Chaaban Omran, CEO of Crescent Security and Peace of Mind’ on the body of assets under management of US$4.3 Investments Australasia, said the fi rm is the train. looking at partnering with local Shariah billion, US$6.5 billion and US$2.2 billion respectively. compliant institutions to obtain a The campaign will end on the 14th April 2011. superannuation license to achieve this. Stuart Place, marketing director at Argyll State bonds surge said the World Shariah Funds addresses Developing Islamic fi nance investors’ concerns by eliminating heavily INDONESIA: The fi gure of state bonds in INDONESIA: Abdurrahman Sony Sugema, indebted companies as non-Shariah 2010 hit IDR1,000 trillion (US$111.5 billion), an Indonesian Islamic economic scholar compliant. compared to December 2009 at IDR979 has advised Otoritas Jasa Keuangan trillion (US$109.1 billion). (OJK), a department of Bank Indonesia, to (Also see IFN Report on page 12) understand the characteristics of Islamic economic and transactions. Data released by the bond management center at the ministry of fi nance in August New offerings 2010, stated bonds rose to IDR1,044 trillion Abdurrahman also called for OJK to appoint UK: The Islamic Bank of Britain has launched local Islamic fi nance industry players to run (US$116.4 billion) on July 2010 and can be traded on the secondary market at IDR785 two new products — fi xed rental rate and OJK, as it will benefi t the country’s Islamic variable rental rate. fi nancial institutions. trillion (US$87.6 billion). The fi xed rental rate product offers 3.99% The OJK is projected to be established by profi t rate and matures on January 2012, the end of 2010 to monitor the activities of EUROPE while the variable rental rate product comes banking and fi nancial institutions. with a 4.99% profi t rate. Promising fi gures Shariah aircraft fi nancing The products are introduced following the TURKEY: Funds raised in the four GBP20 million (US$31 million) capital THAILAND: The Islamic Bank of Thailand is participation banks in the country reached injection from Qatar International Islamic discussing with a Middle East bank about an US$18.4 billion with a 2% growth proportion. Bank. investment in Nava Leasing, said Dheerasak Suwannayos, president of The Islamic Bank These four banks are Bank Asya, Turkiye of Thailand. Finans, Albaraka Turk and Kuveyt Turk. Shariah compliant repos UK: Barclays Capital has launched Shariah According to Dheerasak, the Middle East Allocated funds were registered at US$17.9 compliant repurchase agreements (repos), bank which specializes in aircraft leasing, billion, total assets at US$23.4 billion and targeting clients from Malaysia and the wants to use Thailand as a base to expand net income at US$241 million. Middle East. its business in Southeast Asia. In the fi rst half of 2010, the number of Nava Leasing is a leasing fi rm in Thailand. branches of these banks totalled 578. continued...

© Page 5 25th August 2010 NEWS www.islamicfi nancenews.com continued... Zeid Ayer, chief investment offi cer at Al Salam Bank, Bank of Bahrain and Kuwait, Malaysia based CIMB-Principal Islamic Asset Kuwait Finance House, National Bank of Harris Irfan, head of Islamic fi nance products Management, explained that the continued Bahrain and Bahrain Islamic Bank are the at Barclays Capital, said the bank has interest in the Islamic bonds is because arrangers for the Ijarah facility. launched the repo agreements to meet the investors are uncertain about the recovery of strong demand for the product. the economy. Emar Bahrain, owners of BFHH, agreed to purchase 49.88% of GFH’s investment in It is also introduced to address the problem Zeid said the interest is also due to investors’ BFHH in June 2010. of liquidity management faced by Islamic perception that Sukuk is a safer alternative fi nancial institutions. for investment. EFG Hermes acquires shares Private equity not attractive LEBANON: Egypt based EFG Hermes has acquired 65% of Lebanon’s private bank GLOBAL GLOBAL: Private equity funds are lagging Credit Libanais’ shares for US$542 million Switching focus to Asia behind other asset classes in the Middle via its own cash resources. East in attracting Islamic funding. GLOBAL: UK and European investors are The Egyptian bank said the deal would help it considering exploring the Asia Pacifi c According to a report by Gulf Venture Capital expand into Lebanon and western Asia. It will debt markets for fi nancing purposes, Association (GVCA), the total value of private also help to widen its product range in retail, following a lack of liquidity in the equity funds dropped to US$1.06 billion in corporate, Islamic and online banking and European market, according to a report by 2009, from US$5.4 billion in 2008. consumer fi nance. PricewaterhouseCoopers. GVCA added that Islamic banks in the Middle Additionally, EFG Hermes will also have a call According to the report, European banks East invested less than 5% of the private option to purchase an extra 25% over the have switched their focus to the East, due to equity capital. next two years at the same price. Asia’s strong economic growth. Hussein A Hassan, head of Middle East In addition, Asian banks are widening the structuring at Deutsche Bank, said many Dubai Islamic Bank profi ts scope of their fi nancing facilities and market Islamic banks in the Middle East are UAE: Dubai Islamic Bank has posted a share, via developing their Shariah compliant reluctant to inject capital in the region’s second quarter net profi t of AED301 million funding markets. private equity funds, as these funds have long maturity periods, illiquid nature and (US$81.2 million), a 50% increase when different levels of debt liability. compared to the bank’s 2010 fi rst quarter net profi t of AED 201million (US$54.2 High optimism on Sukuk million). GLOBAL: Global Sukuk issuance in 2010 is expected to reach US$30 million, according MIDDLE EAST However, this fi gure was down 33% when to a report by Kuwait Finance House compared to the same period last year. Research. Sukuk oversubscribed BAHRAIN: Monthly Sukuk Al-Ijara issued by Attractive car fi nancing According to the report, the global Sukuk the Central Bank of Bahrain on behalf of the issuance saw an increase of 116% to government has been oversubscribed by QATAR: Al Khaliji Commercial Bank has US$16.5 billion during the fi rst half of 2010. 630%. partnered with Saad Buzwair Automotive to offer a 2.99% fi nancing for customers The report added the 2010 Sukuk market Subscriptions of BHD63 million (US$167.1 wishing to purchase a Volkswagen. would be spurred by the recovery in the million) was received for the BHD10 million global economy, low interest rates, continued (US$26.5 million) issues. These issues This Ramadan promotion applies for all new sovereign fund raising and revival of private carried an expected return of 0.9% and will Volkswagen models and will end on the 30th sector projects. mature on the 17th February 2011. September 2010.

Sukuk popularity continues Sukuk repaid Al Rajhi opening soon GLOBAL: Investors continue to show interest BAHRAIN: Bahrain Financial Harbour JORDAN: Saudi Arabia based Al Rajhi Bank in the Islamic bond market amid a slow Holding (BFHH) has repaid in full a US$134 (Al Rajhi) will commence its operations in economic recovery and reduction in new million Sukuk facility arranged by Liquidity Jordan in October 2010. Jordan is the third Sukuk issuances. Management Centre. This facility was used market outside Saudi Arabia, after Malaysia to ﬁ nance construction of the ﬁ nancial centre and Kuwait. According to the HSBC/NASDAQ Dubai US within Bahrain Financial Harbour. Dollar Sukuk Index, the average yield on Al Rajhi’s decision was made based on dollar-denominated Sukuk fell 22 basis Gulf Finance House (GFH) advised upon the the Central Bank of Jordan’s regulation, points this week to 5.25%, the lowest level structure of the Sukuk and raised funds for which requires the licensed bank to start its since December 2005. the facility. operations within a year.

Premier service arrives The facility is due to be signed on the Loss plunges by half 1st September 2010. Lead arrangers for QATAR: HSBC’s Islamic banking arm Amanah this transaction are Noor Islamic Bank, BAHRAIN: Gulf Finance House has posted has launched its premium banking service, Standard Chartered Bank and ABC Islamic fi rst half net loss of US$47.7 million for HSBC Amanah Premier, a cross-border Bank. 2010, almost half of US$92.1 million in the Islamic banking and wealth management same period of last year. service targeting globally mobile and wealthy Al Baraka reported fi rst half net profi t of customers. US$95 million, up 3% from the same period The bank reported fi rst half total income last year. at US$25.9 million, a slide from US$67.9 The service offers the same benefi ts million in the same period of the previous as HSBC’s Premier service via Shariah year. compliant products. Another quarter loss Total assets dropped to US$1.4 billion as UAE: Islamic mortgage provider Amlak of the 30th June 2010, down from US$2.7 Finance has posted a second net loss of billion in the same period of 2009. Al Baraka’s fi rst Sukuk AED597,000 (US$162,000) for 2010, as BAHRAIN: Al Baraka Banking Group (Al compared to a loss of AED65.3 million Baraka) is planning to sell its fi rst Sukuk of (US$18 million) last year. Profi t dives US$200 million before the end of 2010. Amlak Finance also made a second quarter KUWAIT: Kuwait Financial Centre (Markaz) Al Baraka is also raising a US$250 million comprehensive loss of AED5.1 million has reported a fi rst half net profi t of Murabahah facility for its Turkish operations. (US$1.4 million) this year. continued...

Islamic Finance: Opportunities for Tomorrow 25th - 28th October 2010, Kuala Lumpur

Hosted by: In support of the MIFC initiative: Featuring:

The Global Islamic Finance Forum (GIFF) 2010, themed “Islamic Finance: Opportunities for Tomorrow”, will be held in Kuala Lumpur from 25th — 28th October 2010.

GIFF 2010 is a high-level multi-track event that brings together regulators, scholars and ﬁ nancial industry players who are key drivers in shaping Islamic ﬁ nance globally. This event is organised in collaboration with the Association of Islamic Banking Institutions Malaysia (AIBIM), Malaysian Takaful Association (MTA), the International Shariah Research Academy for Islamic Finance (ISRA) and the REDmoney Group.

GIFF 2010 is organised in support of the Malaysia International Islamic Financial Centre (MIFC) initiative to develop Malaysia as a hub for international Islamic ﬁ nance.

GIFF 2010 is a platform for regulators, Shariah scholars, renowned industry leaders and ﬁ nancial market participants from across the globe to discuss and exchange views and insights on the growth potential and opportunities in the internationalization of Islamic ﬁ nance.

Lead Media Partners

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For more information or to register please visit www.giff2010.com

© Page 7 25th August 2010 NEWS www.islamicfi nancenews.com continued... Now in its 5th year, the IFN 2010 Issuers & Investors Asia Forum, KWD1.44 million (US$5 million), down 51.4% is categorically recognized as the industry’s leading and largest as compared to a net profi t of KWD2.18 annual event million (US$7.6 million) in the same period last year. 1,1ϵϳ uniƋue delegates aƩended in 200ϵ͘ In 2010 we’re eǆƉecƟng even more senior industry ƉracƟƟoners Ĩrom around the world to aƩend the industry’s largest and most resƉected event͘ Markaz’s Islamic fund recorded a negative More sessions, more topics, more speakers, more coverage guaranteed return of 0.25% while the fi rm’s Mumtaz and MIDAF funds listed returns of 1.6% and 1.7% Lead Sponsors respectively for the fi rst half of 2010.

Sukuk based mortgage SAUDIA ARABIA: The Saudi mortgage law should be Sukuk based and include Shariah compliant guidelines, according to Giambattista Atzeni, vice president and MENA business manager for corporate trust at BNY Mellon. Associate Sponsors

He added that Sukuk is the best way to mortgage homes in a Shariah compliant manner. Research Partner

Atzeni also projects the Saudi Islamic bond market activity to increase in the ﬁ rst quarter UK Pavilion Sponsors of 2011 due to project reﬁ nancing from Sukuk maturity. DDCAP Limited

Zakat collection service UAE: Abu Dhabi Islamic Bank (ADIB) has implemented a service to collect Zakat on behalf of the Zakat Fund.

This collection will be done via the bank’s branches, ATMs and phone banking service. Corporate Gift Sponsor This service marks activation of the MoU signed between ADIB and Zakat Fund in June 2010. Booth Sponsors

Broadening its horizons SAUDI ARABIA: Saudi Arabia based Islamic Corporation for the Development of the Private Sector (ICD) has signed an MoU with Technology Sponsor Bahrain based Al Baraka Banking Group (Al Baraka) to jointly provide Islamic ﬁ nancing services. Lead Takaful Sponsors

ICD and Al Baraka will provide the cash for ﬁ nancing activities besides exchanging information on Islamic ﬁ nance products with each other. Takaful Associates

They will also collaborate to enable investment companies and funds to develop Shariah compliant ﬁ nance and investment For sƉonsorshiƉ oƉƉortuniƟes͗ Wlease contact products. Natasha͘FrancisΛZmoneygrouƉ͘com or нϲ0ϯͲ21ϲ2Ͳϳϴ00 eǆt ϲ5

Bond for fi nanciers capital program and appointed Deutsche later this year although it currently has Bank as its structuring agent. no pressure for an issue, according to UAE: Nakheel has planned to issue fi ve-year Abdulrahman al-Saleh, director general of bonds for its creditors by the end of this year. The board of GFH is also seeking a further Dubai’s department of fi nance. The bonds which have a 10% return will be recapitalization by way of issuing equity listed on the Nasdaq Dubai stock exchange. linked convertible Murabahah or similar Analysts said that Dubai’s plans to launch a instruments to raise up to US$300 million for road show for fi xed-income investors hinted Nakheel made US$681 million cash payment acquisitions and growth initiatives. that it could possibly issue bonds later this last month from the US$1.08 billion it owes to year as it moves to restructure a US$23.5 creditors. The moves are part of GFH’s plans for its billion debt. next stage of recovery and reviving growth. Ali Rashid Lootah, chairman of Nakheel, said the company has no intention to sell any of its Shariah funding real estate assets or cancel its projects. Fighting poverty UAE: Abu Dhabi Islamic Bank has provided SYRIA: Ibdaa Bank, a local microfi nance US$300 million in fi nancing to construction Repayment postponed bank has been launched in Syria, as part based fi rm Al Jaber Energy Services (AJES), UAE: Abu Dhabi Islamic Bank (ADIB) has of Arab Gulf Program for United Nations to fi nance the development of a gas project postponed its Shariah compliant repayment Development’s (AGFUND) plan to fi ght in Shah, in Abu Dhabi. plan for four months beginning in the month poverty and unemployment in Syria. of Ramadan. AJES is a subsidiary of Al Jaber Group, which Nasser al-Qahtani, a representative is involved in the construction, heavy lifting This postponement applies to ADIB’s custom- of AGFUND said, Ibdaa Bank is set up and logistics, trading and industrial sector in ers who are allowed to defer their monthly to improve the economic and social the UAE. installments by 90 to 120 days, until 2011. conditions of low income families and owners of small businesses. Venturing into Saudi Arabia Deferred repayments Ibdaa Bank is a microfi nance bank jointly owned by the Syrian government, public BAHRAIN: Al Baraka Banking Group (Al UAE: UAE based Shariah compliant Al Hilal and private sector. Baraka) is planning to venture into Saudi Bank has expanded its auto fi nancing Arabia by acquiring a fi nancial fi rm this repayments until January 2011 beginning in The bank will provide conventional and year. the month of Ramadan. Shariah compliant loans over fi ve years via 40 branches in the country. The group is currently obtaining approval These repayments apply to Al Hilal Bank’s from the Saudi authorities and has not customers who own either old or new cars. disclosed the name of the fi nancial fi rm it (Also see IFN Report on page 13) plans to acquire.

Structuring GFH Al Baraka is also looking at venturing BAHRAIN: Gulf Finance House (GFH) Dubai sovereign debt issue into France and is eyeing a stake in Bank Muamalat Malaysia in a deal that is expected has appointed Esam Janahi as executive UAE: The government of Dubai has kept to conclude by the end of 2010. chairman. GFH has also launched a new its options open for a sovereign debt issue

same period, the total premium income rose Total assets for the fi rst half of 2010 were ASIA 36% to IDR4.5 trillion (US$502 million). registered at AED126.17 million (US$34 million). Rumors shot down Kuan aims to maintain the growth by MALAYSIA: Syed Moheeb Kamarulzaman, increasing the quality of its customer service president and CEO of Takaful Ikhlas, has and upgrading its information technology. Lack of insurance refuted rumors that it will be acquired by UAE: As many as 80% of buildings in Dubai Etiqa Takaful. New products are uninsured or underinsured, according to Abdul Muttalib al Jaidi CEO of Oman Syed Moheeb explained that no talks were MALAYSIA: Hong Leong Tokio Marine Takaful Insurance Company. held with Permodalan Nasional (shareholder) (HLTM Takaful) will introduce two new family and MNRB Holdings (parent of Takaful products in mid October 2010. This is because the current law in UAE does Ikhlas), along with Takaful Ikhlas. not require buildings to have insurance. Abdul Latiff Abu Bakar, CEO of HLTM Takaful Additionally, Syed Moheeb said the rumors said the company will also be developing Global insurer Swiss Re said that in 2007, do not make sense as Takaful Ikhlas is one other product offerings relating to Wakaf, premiums written in Muslim countries of the fastest growing Takaful fi rms in the Korban, Zakat and Hajj. amounted to only 1.3% of GDP. This shows country. that Takaful has room to grow in Islamic markets. Takaful Ikhlas posted a 5.9% increase in its Finance and insurance in one turnover to RM615 million (US$195 million) for 2010, which ended on the 31st March SRI LANKA: Muslim Aid Sri Lanka and Amana Insurance premium growth 2010. Takaful have worked together in providing a microfi nance solution, known as MASL Micro- JORDAN: The Insurance Commission of fi nance, making it the fi rst microfi nance Jordan has reported that preliminary gross Good business scheme in Sri Lanka to combine a fi nancing insurance premiums in the market grew by and insurance protection. 14% from US$309.5 million at the end of MALAYSIA: Prudential Assurance Malaysia 2009 to US$352.4 million in July 2010. has recorded a 39% increase to RM395 The microfi nance scheme is designed to million (US$126 million) from its new encourage entrepreneurship among the General insurance premiums stood at business sales of annual premium poor, while providing risk mitigation services. US$319 million, while life assurance equivalent (APE) for the fi rst half of 2010. premiums stood at US$33 million and gross Muslim Aid Sri Lanka is part of Muslim Aid, paid claims amounted to US$228.4 million. The APE consists of retail life insurance sales an organization which provides relief to poor and Takaful contributions. countries. The Insurance Commission of Jordan is the Takaful and insurance regulator in the country. High income from premiums MIDDLE EAST MALAYSIA: Takaful Ikhlas is planning to Latest News raise RM650,000 (US$207,763) monthly Diversifying plan in premiums from Takaful Amani by selling Deal Flows 13,000 policies. UAE: The Roads and Transport Authority’s (RTA) Licensing Agency has signed an People Moves Takaful Amani is a joint effort by Takaful agreement with fi ve vehicle insurers to Ikhlas and Bank Kerjasama Rakyat Malaysia process vehicle registration renewals for RTA New Entrants (Bank Rakyat). clients. Competition More than 3,741 customers signed up for The fi ve vehicle insurers are Royal and Sun Takaful Amani within four weeks after its Alliance, Fujairah, Oman, AXA and Noor New Products initial introduction. Takaful.

Ahmed Hashem Bahrozyan, CEO of RTA, Maintaining performance said the deal is part of a plan to diversify the channels available for license and INDONESIA: William Kuan, senior vice lets you know first registration services. president of Prudential Indonesia, intends to maintain the premium growth of Prudential Indonesia’s subsidiary, Prudential Syariah Takaful House loss SUBSCRIBE NOW! Indonesia. UAE: Takaful House has reported its second Prudential Syariah Indonesia, a local Takaful quarter loss for this year at AED4.79 million operator has recorded a 38% increase (US$1.3 million) as compared to a profi t of For more information email to IDR534 billion (US$60 million) in its AED657,910 (US$177,506) for the same subs@islamicfinancenews.com premium for the fi rst half of 2010. In the quarter in 2009.

The ratings of the CP/MTN program, are The rating was initiated following the ASIA attributed to the improvement in the form of board of EON Capital’s decision to seek an option contract for the Sukuk, given by shareholders’ approval for the acquisition of Positive move OCBC Bank (Malaysia) to the Sukuk holders. Hong Leong Bank. AZERBAIJAN: Moody’s Investors Service (Moody’s) has revised the Midas Plantation is a special purpose vehicle EON Bank is the main asset of EON Capital. outlook for Azerbaijan’s banking incorporated as the fi nancing channel for the Ijarah Sukuk. system from negative to stable. SI Capital holds ground Moody’s attributed this change to the recent Signifi cant role MALAYSIA: RAM Ratings stabilization in the bank’s asset quality Services (RAM) has and liquidity, improving profi tability and MALAYSIA: RAM Rating reaffi rmed SI Capital’s capitalization. Services (RAM) has RM167 million (US$53.2 assigned long- and short- million) Al-Bai Bithaman Ajil Islamic debt term ratings of ‘AA3’ securities ‘AAA’ rating. Good standing and ‘P1’ to Padiberas Nasional’s (Bernas) PAKISTAN: JCR-VIS Credit proposed RM750 million (US$234 million) SI Capital’s RM143 million (US$45.6 million) NEW Rating Company has assigned a Islamic commercial papers/medium Murabahah commercial papers/medium preliminary fund stability rating term notes program (2010/2017) Sukuk notes program (2004/2011) was rated at of ‘AA+ (f)’ to ABL Cash Fund Musharakah. ‘AAA/P1’. and ‘AA (f)’ to ABL Islamic Cash Fund (ABL ICF). The long-term rating carries a stable outlook. The ratings are attributed to a stream of payments due from a strong counterparty The ABL ICF fund aims to invest in RAM attributed the ratings to Bernas’s role in under the governing agreements, structural government guaranteed Sukuk, cash and the local rice industry. features of the fi nancing facilities, obligations bank deposits. under the said agreements and credit strength of the company’s counterparty. Ratings upgraded Preserving its grades PAKISTAN: Capital Intelligence (CI) MALAYSIA: Malaysian has affi rmed the National Bank of MIDDLE EAST Rating Corporation Pakistan’s foreign currency long (MARC) has affi rmed local term rating at ‘B-’ and upgraded its Grades maintained construction fi rm WCT’s foreign currency short term rating UAE: Fitch Ratings has rating of RM300 million (US$95 million) to ‘B’ with a stable outlook. affi rmed HSBC Bank Middle redeemable Sukuk at ‘AA-IS’ and RM300 East’s long term issuer million Islamic commercial papers/medium The bank’s foreign currency rating was default rating (IDR) at ‘AA- term notes (CP/MTN) at ‘MARC-1ID/AA-ID’. prompted by CI’s recent Pakistan’s sovereign ratings. +’, short term IDR at ‘F1+’ and support rating at ‘1’. MARC has also affi rmed WCT’s RM100 million (US$32 million) Islamic fi xed rate The individual ‘B/C’ rating remains on serial bonds at ‘’AA-ID’’ and RM100 million One notch down Rating Watch Negative (RWN). The long term Islamic CP/MTN at ‘MARC-1ID/AA-ID’. The BAHRAIN: Moody’s Investors outlook for the long term IDR is stable. rating outlook for the Islamic bonds was Service has downgraded Bahrain’s revised to stable from developing. local and foreign currency from ‘A2’ The IDRs are attributed to the support to ‘A3’. The rating carries a stable from its parent, HSBC Holdings, while the The ratings are attributed to WCT’s strong outlook. individual rating is based on HSBC Bank liquidity position. Middle East’s regional franchise, sound The rating is attributed to the kingdom’s liquidity and satisfactory capitalization. increasingly high price of oil needed to Excellent grades balance its budget and deterioration of its MALAYSIA: RAM Rating fi scal fl exibility in meeting banking sector Services has reaffi rmed liabilities. the respective ‘AAA’, ‘AA2’ Too many pieces in the puzzle? and ‘A2’ ratings of RM50 Acquisition rating Let IFN put it together for you… million (US$14 million) Midas Plantation’s SUBSCRIBE TO IFN TODAY Class A, Class B and Class C Sukuk Ijarah MALAYSIA: Moody’s Investors commercial paper/medium term notes (CP/ Service (Moody’s) continues its MTN) program. review for possible upgrade of EON Bank ‘Baa2/P-3’ foreign At the same time, the rating of Midas currency long- and short-term Plantation’s Class C Sukuk Ijarah has been deposit ratings and ‘D’ bank upgraded from ‘A2’ to ‘AA3’. fi nancial strength rating. www.IslamicFinanceNews.com

Islamic banks to increase liquidity Shariah funds grow

AFGHANISTAN: The central bank, Da Afghanistan Bank (DAB) plans GUERNSEY: Argyll Investment Services (Argyll) recently launched to issue three new licenses in the next three years, allowing the the World Shariah Funds (WSF), a Guernsey based suite of Shariah establishment and operation of full-fl edged Islamic banks in the compliant investments. The WSF comprises of three sub-funds: country. Asian Pacifi c Shariah Growth Fund, MENA Shariah Growth Fund and Reliance Global Shariah Fund. Zulfi qar Ali Khan, head of Islamic banking at DAB told Islamic Finance news that licensing awaits legislative approval, which could take In creating the base fund, WSF has brought together three Shariah few years but “three banks have already applied for full-fl edged compliant investment teams for the fi rst time in a single offering. Islamic banking licenses.” The three banks are Afghan United Bank, They are Reliance Asset Management and Asian CIMB Principal Asset Ghazanfar Bank and Maiwand Bank. Management that have US$4.3 billion and US$6.85 billion assets under its management respectively. The third member of the WSF DAB is looking at popularizing Shariah compliant banking and fi nance team is Kuwait based Markaz, which has US$2.2 billion worth of in Afghanistan. “The fi rst Islamic banking window opened in November assets under its management. 2005 by Bank Alfalah. The majority of the business community prefers Islamic banking. This demand has increased trust and confi dence on The WSF is structured as a protected cell company (PCC). In addition Shariah compliant banking and fi nance products,” added Zulfi qar. to its main or core level, a PCC company contains a number of parts or cells, where the assets and liabilities of different classes of shares are segregated from each other. Each cell is legally independent and Rama Raju, CEO and president of the Maiwand Bank told Islamic separate from the others as well as from the core of the company. Finance news that his bank is “one of the sorted banks” that is set If one cell becomes insolvent, creditors only have recourse to the to receive a full-fl edged Islamic banking license. “The demand for assets of that particular cell and not to any other. As a fairly new Islamic banking in Afghanistan is high and expected to be good,” he corporate form, the PCC concept originated in Guernsey in 1997 and said. has become available in more offshore jurisdictions since. PCCs have gained recognition in its use for multi-class funds. Based on its legal Although 99% of the population are Muslims, the prevailing banking structure, a PCC is useful for structuring Shariah funds with different laws are currently inadequate for Islamic banks. These laws only allow sub-funds employing different techniques for investments. conventional banks to offer a limited number of Shariah compliant fi nancial products through Islamic banking windows. Currently these While three different asset management companies are involved include Bank Alfalah, Kabul Bank and Bank Mille Afghan. in the WSF, strict criteria will be applied to select investment opportunities. Stuart Place, marketing director of Argyll ensures that Afghanistan has managed to record a 22.5% GDP growth and a 10% a fi ltering process adopted by WSF during the fi rst phase would avoid decrease in the external debt during the fi nancial year 2009/2010. heavily indebted companies in investor portfolios. Although the world The debt relief programs such as the heavily indebted poor country credit crisis caused companies to incur losses on a global scale, the and multilateral debt reduction initiatives are two key factors that will WSF would avoid investing in them as “businesses that are non- continue to help the economy to bounce back. The country expects to Shariah compliant.” maintain its GDP level at 8.6% in 2010/2011 and the infl ation at less than 5%. According to the International Monetary Fund, Afghanistan The fund administrator for the WSF is Legis Fund Services (LFS), is the poorest nation in Asia. which has administered several Shariah compliant open-ended funds in Guernsey. Martin Tolcher, director at LFS rated the WSF to be within In meeting these fi nancial targets, the Afghan government is looking other Shariah compliant structures administered by his company. at mobilizing all cash in the country by using the Islamic banking “The demand continues to increase for Shariah compliant investment system. When these funds join the cash cycles, it will increase the products, including offshore funds whose portfolios consist of Shariah fi nancial liquidity that is necessary for infrastructure development compliant securities,” said Martin Tolcher. and other long-term plans. Argyll is an independent fund manager based in the bailiwick of Muddassir Siddiqui, partner at Denton Wild Sapte (Dubai) believes Guernsey, one of the English Channel Islands. It is licensed by the that the establishment of Islamic banks will improve fi nancial Guernsey Financial Services Commission and has established a liquidity by “attracting investments from the Middle East and other strong track record for investment portfolio management services. Islamic countries.” It will also form the much wanted launchpad for the government to reduce the fi nancial exclusion of the Muslim Puzant Merdinian, head of legal for Islamic fi nance at Gatehouse community in Afghanistan who currently do not use the conventional Bank told Islamic Finance news that Guernsey is strategically important banking system due to their religious concerns. “In addition to new for offshore investors. Although new to Shariah compliant fi nancial services, “Guernsey is capable to develop further as a key Islamic Islamic banking regulations, the tax laws should also be changed,” fi nance center,” said Merdinian. added Muddassir. Among the special tax initiatives found in Guernsey, it has maintained The conventional banking system in Afghanistan currently has a 20% rate of taxation for over 40 years in addition to other fi scal two state owned banks, 10 commercial banks, and fi ve foreign benefi ts that include no withholding tax on interest paid to depositors banks. However, with anticipated parliament approval, DAB will and special taxation for international businesses. face the challenge of promoting Islamic banking in parallel with the conventional banking industry. Reports by Ashwin Hemmathagama

Microﬁ nance to alleviate poverty Sukuk to turnaround the market

SYRIA: The Arab Gulf Program for United Nations Development UK: International Innovative Technologies (IIT), a maker of industrial (AGFUND) has recently launched the Ibdaa Bank in Syria aimed at milling machines in the UK has recently created history by becoming poverty alleviation and generating employment opportunities for the fi rst Sukuk issuer in the country. the needy. Although the formation of Ibdaa Bank took place during a meeting held between the AGFUND board members and the IIT has used this mini issuance to successfully raise US$10 million representatives from the Public Commission for Employment and using the Sukuk Musharakah structure that operates on a profi t and Enterprise Development of Syria, the physical establishment of the loss sharing basis. The funds raised from the issuance will be used institution is expected to take place before the end of this year. to support the product development initiatives of the IIT. A 10% per annum return on investment has been agreed between the sole Once established, the Ibdaa Bank plans to offer 407,000 micro investor, Dubai based Millennium Private Equity and the issuer, IIT, fi nance facilities during a fi ve-year period until 2015. The fi nancial to make the deal attractive. The Sukuk will be listed on the Cayman assistance will be in the form of both conventional and Shariah Island Stock Exchange and expire in 2014. compliant facilities. To meet this target, Ibdaa Bank is set to open 40 branches throughout Syria employing at least 500 staff to manage its Farmida Bi, partner at Norton Rose (UK) considers that IIT’s Sukuk development assistance program. Ibdaa Bank would be the second issuance is a signifi cant step forward for companies considering microfi nance institution to operate in the country in addition to the alternative forms of investment. “There have been no UK corporate First Micro Finance Institution initiated by the Aga Khan Agency for or sovereign Sukuk issuances to date. This deal proves that Sukuk Microfi nance in 2008. can work to greater effect in the UK,” she said, sighting the possible increase of demand for Islamic banking products and services. Nasser al-Qahtani, a representative of AGFUND stated that Ibdaa Bank can improve the socioeconomic conditions of “low-income families There are 2.5 million Muslims in the UK who make 3.3% of the total and owners of small and micro businesses.” Hasan al-Jabiri, head of population. Although the UK is considered as the leading Islamic the board of directors of Ibdaa Bank, believes that the bank will play an banking and fi nance center in Europe with Shariah compliant assets active role in the country’s microfi nance sector “through commitment exceeding US$19 billion, it is yet to get off the ground and is struggling to its goal of improving the living conditions of poor families”. to survive, according to UK research company Financial Advice. The Islamic mortgage market is estimated at GBP500 million (US$780 Although Syria is a Muslim country, the Islamic banking was not million), which is around 0.3% of the total mortgage sector in the recognized by the government until 2005. Since then, the government country. has allowed Shariah compliant banking and fi nance sector to grow by passing a special law. This growth has helped to establish three Asmihan Ibrahim, legal practitioner at Addleshaw Goddard (UK) told Islamic banks during the last fi ve years; namely Syria International Islamic Finance news that the fi nancial markets have been stagnant Islamic Bank, Cham Bank, and Al-Sham Islamic Bank. Apart from for some years but would bounce back this year. “The new Finance Act these Islamic banks, there are 13 conventional banks in the country. 2009 has enabled the private sector to opt for Sukuk issuances. IIT is one such example that will help to develop the Islamic fi nance market Abdullah Ahmad Shaaban, the head of Islamic banking and and products,” she said. microfi nance at the Central Bank of Syria told Islamic Finance news that both the conventional and Islamic banking systems contributes The Islamic Bank of Britain (IBB), the fi rst government approved positively to the economic growth. The microfi nance facilities Shariah compliant bank, in Europe have failed to make profi ts over the scheduled to be provided by Ibdaa Bank would be for “lesser amounts last fi ve years. During the last fi nancial year IBB’s Islamic fi nancing and for conditions where an ordinary bank would fail to facilitate,” said has reduced from US$12.2 million in 2008 to US$4.6 million. Adding Abdullah Ahmad. more to this list, HSBC Amanah has reduced its Islamic banking staff in the UK and marketing volume has been reduced considerably. The Syria is a lower middle income country with an estimated per capita country’s fi rst Shariah compliant Takaful company, Salaam Insurance GDP of US$4,600. Last year it maintained an estimated GDP growth of wound up its operations last year having operated for less than 18 5%. Although Syria has a population of 18.7 million growing at about months in the UK. 2.5% per annum, employment opportunities are limited. Last year the country’s labor force was estimated at only 5.4 million. Taking the Keith Leach, head of real estate in Islamic fi nancial services at ABC sector specifi c composition, 67% of the workforce are engaged in the International Bank told Islamic Finance news that the majority of the services sector, 17% in agriculture, and 16% in the industry sector. Islamic banks are new in the UK market. “It should not therefore be assumed that the recent failure of Islamic banks in the UK to publish Although the country was badly affected by the global fi nancial positive results is a sign that there is not a viable market or that the crisis that reduced the economic growth rate by 1.8% in 2009, Raed banks are doing something wrong,” he said. Karawani, managing partner at Karwani Law Offi ce told Islamic Finance news that economy gained in 2010. “The economy is doing well and “We were offering mortgage products to the UK’s Muslim community would continue to improve,” said Raed Karawani. and this was proving popular and successful. However, to gain economies of scale we were offering products in conjunction with However, The World Bank has recommended that Syria develop its the Bank of Ireland who were unfortunately badly affected by the non-oil sector and diversify its economy. This would deviate Syria from fi nancial crisis and therefore our products were scaled back,” added its high dependency on an oil-related economy and will be forced Leach to improve in other sectors. Among the recommended sectors for improvement include banking and fi nance. Reports by Ashwin Hemmathagama

Sukuk Innovation With constant calls for greater product innovation and harmonization between Shariah jurisdictions, a groundbreaking Sukuk structure has hit the market.

On the 13th July 2010, Malaysia’s national mortgage corporation Innovative structure Cagamas, launched its RM5 billion (US$1.56 billion) Islamic Due to the need to reconcile Al Rajhi’s Shariah requirements alongside commercial paper and Islamic medium term note programs based market expectations and understanding, it is imperative for the on the Sukuk al-Amanah Li al-Istithmar (ALIm) structure, a joint effort underlying transactions of Sukuk ALIm to mimic a bond while the with Al Rajhi Bank Malaysia. The fi rst issuance of Sukuk ALIm on the Sukuk per se is actually an equity instrument and represents actual 19th August 2010, amounted to RM1 billion (US$319 million), priced ownership of assets. This is to minimize any sort of contention on the at a yield to maturity of 3.48% and tenor of three years. structure from a Shariah standpoint. Hence, the Sukuk itself works in the vein of an investment or unit trust instrument. In fact, the Sukuk The move has garnered considerable focus from all quarters, as prior ALIm is a typical of any other previous Cagamas issuance, since it is to this, Saudi Arabian based Al Rajhi Bank, one of the world’s largest not based on the usual asset based or asset backed structure. Islamic banking groups, had been a noticeable absentee in the global Islamic debt capital market. “The underlying assets of Sukuk ALIm are tangible assets such as real estate properties and fi nancial assets such as receivables, with “Al Rajhi Banking Group has yet to be involved in any Sukuk, be it as tangible assets making up the majority of the total assets which Sukuk an advisor, arranger, issuer or investor,” said Eqhwan Mokhzanee ALIm represents. Upon the issuance of the Sukuk, the proceeds would Muhammad, senior vice president of structured investment, Al Rajhi be utilized by the trustee for property investment and commodity Bank Malaysia. “The reason is because existing Sukuk have elements trade. At the conclusion of the investment exercise, Cagamas will which could be deemed contentious to our Shariah,” added Eqhwan. receive cash to be utilized for Shariah compliant purposes. In a Having previously been unable to partake in existing Sukuk, the Al nutshell, Sukuk ALIm meets Al Rajhi’s Shariah requirements since it Rajhi Banking Group thus set itself incredibly high standards for any precludes the elements of Inah Bai Dayn Tawarruq Munazzam and Sukuk issuances. Waad. Nonetheless, Sukuk ALIm is at par with other comparable Sukuk in terms of behaviour, characteristics and risk profi le. In fact, What other way forward was there except to formulate an innovative even though the structure may appear complicated, the issuance does structure to meet its own Shariah requirements? The team from Al not involve higher costs,” explained Eqhwan. Rajhi Bank Malaysia led by Eqhwan worked in close cooperation with Cagamas for 15 months before bringing Sukuk ALIm to market. The development process also involved the rating agencies, lawyers, “Sukuk ALIm could also be regulators, tax advisors, accounting advisors, other fi nancial viewed as setting a benchmark institutions and several market participants, to not only ensure Shariah compliance, but also market and regulatory acceptability. In addition, for future Sukuk issuances, for the development process was mindful of the Shariah standards of the AAOIFI. those targeting the Middle East

Existing structures markets” Common practice denotes Sukuk as debt instruments. Sukuk Sukuk ALIm adopts the principles of Ijarah Wakalah, Bai Bithaman Ajil issuances which are based on debt receivables, such as Sukuk and Bai. Regarding the principle of Bai Bithaman Ajil, Eqhwan clariﬁ ed Murabahah are common. However, such Sukuk should not be traded that it is a misconception that the principle is contentious. Bai Bithaman in the secondary market if based on Al Rajhi Shariah requirements Ajil is merely the conduct of a sale where the payment is made on which do not accept Bai Dayn. “While our Shariah board respects the deferred basis. But the contention arises when its application gives rise views of other Shariah scholars and practitioners, our Shariah board to Inah or when the receivables arising from the deferred payment is opines that trading of debt or Bai Dayn is prohibited. Therefore, if a traded Eqhwan reiterated that the manner in which Sukuk ALIm applies Sukuk represents substantially debt receivables, such Sukuk should Bai Bithaman Ajil does not give rise to Inah or involve Bai Dayn. not be tradable,” Eqhwan explained. Sukuk ALIm could also be viewed as setting a benchmark for future There are also Sukuk issuances which are based on or include tangible Sukuk issuances, for those targeting the Middle East markets. assets, in the case of Sukuk Ijarah or Sukuk Istithmar respectively. According to Eqhwan, while the issuer in this particular instance But such Sukuk Ijarah or Sukuk Istithmar would typically include the is Cagamas, Sukuk ALIm can be issued by others as Al Rajhi Bank element of Waad as part of the purchase undertaking provided by the can tailor it to meet the issuer’s needs. It is envisaged that in the issuer pursuant to the Sukuk maturity and hence, do not fulﬁ l Al Rajhi’s foreseeable future, Sukuk ALIm could be distributed in the Middle Shariah requirements. “There are a number of Shariah scholars who East, in search for increased liquidity. Because the securities issued accept the use of Waad as legally binding contracts. But again, while by Cagamas are highly sought after, they also have the potential to our Shariah board respects the views of these Shariah scholars and build a secondary market. practitioners, our Shariah board opines that Waad cannot be legally binding since it is deemed as a promise, and not a contract,” Eqhwan Eqhwan also paid tribute to Cagamas and the Malaysian Islamic elaborated. banking sector by stating, “Al Rajhi Bank is proud to partner Cagamas continued...

Sukuk Innovation (continued) with this innovation. Cagamas’ role and contribution were imperative in debt like instruments, and Sukuk ALIm is targeted for the latter,” he in the success of Sukuk ALIm. We are also grateful to Bank Negara remarked. Malaysia and the Securities Commission of Malaysia which have created the conducive environment and framework within which There could be a number of reasons for this, he said. First is the lower Sukuk ALIm was made a reality. It must be emphasized that Al Rajhi risk for debt instruments, and the second is regulatory reasons. For Bank does not view Sukuk ALIm as superior than other Sukuk since we instance, under central banks’ liquidity framework, liquefi able assets highly respect the views of other Shariah scholars. Sukuk ALIm should need to be debt based instruments. be seen as complementing the Islamic capital markets and whatever Equity fi nancing such as Musharakah and Mudarabah may be argued contribution that Sukuk ALIm may have, particularly in bridging the to be closer to the Shariah’s aim of ensuring that gains and losses gap between Malaysia and Middle East Shariah requirements, it is are shared equitably. However, while equity funding is commonly a testimony to the vision of the government of Malaysia and earlier associated with higher returns, bankers say it may not necessarily be Shariah practitioners.” more profi table than debt, especially when the returns are adjusted for the risks.

“For the Islamic banking sector Program details The Cagamas RM5 billion (US$1.56 billion) Sukuk program was to continue to evolve, the market launched as long term programs. Since gaining its approval from the Securities Commission, the issuance, initially based on the Sukuk must start to accept equity like ALIm structure has a running cap of RM5 billion (US$1.56 billion).

instruments and equity risks, The issuance of the Islamic commercial papers and Islamic medium and accept that at certain times term notes can be made over a seven-year and 30-year period respectively. Eqhwan explained: “This means that we do not have to you might not get your capital obtain regulatory approval each time Cagamas intends to issue the Sukuk. back” As long as the total amount of Sukuk outstanding under the program at any one time does not exceed RM5 billion (US$1.56 billion), Cagamas Equity issues can proceed with more issuances under the same programs, without As the global fi nancial system emerges from the fi nancial crisis and having to revert to the Securities Commission.” banks shy away from assuming added risks, some practitioners want Islamic fi nance to rely more on partnership structures and less on The fi rst Sukuk ALIm issued on the 19th August 2010 of RM1 billion direct fi nancing. However, they are aware that the concept of equity (US$319 million) was targeted to the Southeast Asian market focusing based fi nancing is still relatively alien to the market; with most on Malaysia, Singapore and Hong Kong. The rationale being that this investors perceiving debt fi nancing to have less risks involved. is simply an issue of demand exceeding supply. But strong interest was also shown by foreign, including Middle Eastern, investors during How then, did Al Rajhi Bank attain the balance between targeting the book building exercise. At the conclusion of the book building fi xed income investors whilst meeting its own Shariah requirements? exercise, foreign based investors took up more than 40% of Sukuk According to Eqhwan, in order for Sukuk ALIm to be tradable in the ALIm, including a 33% take up rate from Middle East based investors. secondary market, it has to fi rst represent ownership of tangible assets. However, in order to satiate investor expectations, another component “The demand for the Cagamas Sukuk ALIm was very high, even at was created within the Sukuk to have the receivables element and the early stages of the book building exercise. In fact, there was a allow the Sukuk as a whole to maintain its debtlike characteristics, subscription rate of 2.7 times the issuance size. In light of the highly without compromising Al Rajhi Bank’s Shariah requirements. encouraging response, future issuances of Sukuk ALIm by Cagamas may involve distribution in the Middle East. This will put Cagamas in “For the Islamic banking sector to continue to evolve, the market must good stead to diversify its already impressive investor base and drive start to accept equity like instruments and equity risks, and accept Malaysia as a global Islamic fi nancial hub. We opine that Islamic cross that at certain times you might not get your capital back. But for the currency swaps can be coupled with Sukuk ALIm as a comprehensive time being, the market is so used to debt, and despite the presence solution which includes risk hedging tools and high quality assets of sophisticated investors who are willing to take up equity type which are pertinent to attract international investors into Malaysia,” investments, a signifi cant number of investors are mandated to invest Eqhwan concluded.

Next Forum Question Will the recent pioneer UK Sukuk issuance trigger more Sukuk issuances and other Islamic ﬁ nance products in the UK and Europe? If you would like to air your views on the next Islamic Finance Forum Question, please email your response of between 50 and 300 words to Christina Morgan, Forum Editor, at: [email protected] before Monday, 30th August 2010.

Islamic Investment Funds in Singapore By Yeo Wico and Suhaimi Zainul-Abidin

Another key development has taken shape in the growth of Singapore fund would usually engage a board or committee of Shariah scholars, as a hub for Islamic fi nance — the establishment of the world’s fi rst known as a Shariah committee to advise the Islamic investment fund Shariah compliant data centre fund in Singapore earlier this year. on the appropriate form of investment and governance structure for This follows from the establishment of the fi rst corporate Sukuk Shariah compliance purposes. Typically, this would require Shariah program in Singapore in 2008 (SG$1 billion [US$738 million]) and supervision relating to: the fi rst Sukuk program established by a statutory body in Singapore in 2009 (Monetary Authority of Singapore’s SG$200 million (US$147 • the agreements governing the fund’s constitution and the million) Islamic Trust Certifi cate Issuance Program). agreements entered into by the fund (for acquisition of assets and through which income may be generated) Worlds’ fi rst Islamic data center fund Securus Data Property Fund (Securus Fund), launched in Singapore • the types of assets acquired and owned by the fund earlier this year, achieved an initial closing of US$100 million in June. The fund is incorporated and managed in Singapore. The launch of • the cash management procedures of the fund Securus Fund is an indication of the growing diversity and depth of the Islamic fi nance space in the country. • the capital structure of the fund and fund raising structures adopted by the fund

“Shariah supervision may also Where the Islamic investment fund invests in real estate assets, the entail looking into the primary Shariah supervision may also entail looking into the primary business of the tenants of such real estate (both prior to acquisition and on an business of the tenants of such ongoing basis) and the entry into Takaful in place of insurance, where available, for such real estate. Some Islamic investment funds could real estate and the entry into also implement additional procedures such as donating to charity the income which the fund earns from tenants in such real estate Takaful” that engage in activities that are non-permissible from a Shariah perspective. Islamic investment funds Islamic investment funds can be, and are often, broadly compared to For ease of administration, Islamic investment funds would also ethical or socially responsible investment funds in that they rely on typically appoint a Shariah secretariat, whose responsibilities would certain guiding principles that will dictate the objectives and strategies include collating information on the Islamic investment fund’s of the fund, the assets invested and investment structure. In the case assets for analysis and monitoring by the fund’s Shariah committee, of Islamic investment funds, these guiding principles would be the conducting preliminary analysis of Shariah issues for consideration by tenets of Shariah. the Shariah committee and preparing reports for, and certifi cations to be given by, the fund’s Shariah committee. The requirement of compliance with Shariah is what distinguishes Islamic fund management from its conventional equivalent. For As a result of the wide ranging scope of supervision by the Shariah instance, an Islamic investment fund would not invest in assets that committee of an Islamic investment fund, the investment activities are not permissible under Shariah. This would typically exclude assets and transactions entered into by the Islamic investment funds which are used for: would typically require approval by the fund’s Shariah committee in addition to the approval that would typically be garnered from • manufacturing or sale of alcohol, pork, pornography and arms the fund’s investment committee or manager. However, while an and munitions Islamic investment fund may be operated with a view to observing Shariah considerations, its investment objectives will ultimately be • provision of fi nancial services based on riba (interest), including commercially driven. conventional banks, brokerage fi rms and insurance companies Securus Fund is managed in accordance with Shariah principles and • gambling or other vice related activities prescribed controls and guidelines for Shariah compliance. In order to ensure Shariah compliance, a committee of Shariah scholars has been In addition, an Islamic fund would generally need to manage its fi nances appointed by Securus Fund to guide and approve the fund’s activities. in a Shariah compliant manner, by depositing its cash in non-interest bearing accounts and rely on Islamic fi nancing techniques (Ijarah or Data center fund Commodity Murabahah) in order to raise Shariah compliant fi nancing Securus Fund was established on the back of strong global demand (instead of using conventional bank loans that charge interest). for data centers, a unique asset class whose growth is being driven by the rapid rise of information-centric trends such as e-commerce, social Islamic investment funds seek to earn returns from the fund’s networking and fi le sharing. It is anticipated that the development of investment activities while operating under Shariah principles. In order cloud computing will result in this demand further outstripping supply. to ensure continuing compliance with Shariah, an Islamic investment continued...

Islamic Investment Funds in Singapore (continued)

Data centers are purpose built real estate facilities housing rack Attractiveness of Singapore as Islamic fund mounted information technology computer servers, offering state-of- management domicile the-art data center co-location and business contingency services. Singapore has emerged as one of the most popular jurisdictions in Due to the mission’s critical nature of data centers, it is important Asia for fund management companies as a result of the country’s that they are operated to high technical standards, to ensure security economic strength and ‘AAA’ sovereign rating, stable political and maintenance and fi re prevention and appropriate levels of cooling and legal systems, its experience in the fund management industry and power at all times. attractive tax benefi ts. These tax benefi ts include:

The fund will be jointly managed (on a 50:50 basis) by Keppel Data • qualifying investors may enjoy tax exemptions on income Centre Investment Management (Keppel DCIM) and AEP Investment derived from qualifying funds Management (AEPim), which will together provide fund and asset management services for Securus Fund. • funds managed by a Singapore based fund manager may be exempted from Singapore tax on speciﬁ ed income from designated investments (Mudarabah, Musharakah, Istisnah “Funds managed by a Singapore and Salam)

based fund manager may be • funds constituted in Singapore may beneﬁ t from Singapore’s extensive treaty network of comprehensive avoidance of exempted from Singapore double taxation agreements

tax on specifi ed income from • fund managers in Singapore may enjoy a concessionary tax designated investments rate of 10% on fee income Apart from the benefi ts that a fund or fund manager would derive (Mudarabah, Musharakah, from being domiciled in Singapore, Islamic investment funds and Istisnah and Salam)” Islamic fund managers would also fi nd Singapore to be a conducive regional base as a result of the Monetary Authority of Singapore having progressively provided greater certainty and transparency in Keppel DCIM is a wholly owned subsidiary of Keppel Telecommunica- Singapore’s regulatory framework in relation to Islamic fi nance, with tions & Transportation (Keppel T&T). As an owner and manager of data a fundamental approach of levelling the playing fi eld between Islamic center, Keppel T&T has the track record and required competencies to and conventional fi nance. develop, operate and enhance the value of the fund’s assets, resulting in security of income and value growth for the fund’s investors. Growth and challenges The growth of Islamic investment funds in Singapore refl ects the AEPim is a Singapore based private equity investment and fund theme of a growing market. More importantly, the development of management company under the Saudi based Al Rajhi Holding Group, Islamic investment funds in Singapore could play a catalytic role in the with a focus on developing and managing real estate strategies in the internationalization of the Islamic capital market in Singapore as well Asia Pacifi c region that cater to the requirements of Shariah based as augment demand for Shariah compliant fi nancing and other Islamic investors. fi nancial services in Singapore.

Securus Fund will leverage on Keppel T&T’s expertise in operating While there is much more that could be done to develop and grow high quality and mission-critical data centers and the investment Islamic fi nancing in Singapore, we are witnessing encouraging signs management capabilities of AEPim. AEPim’s parentage with the of an unfolding story. Al Rajhi Holding Group also gives Securus Fund access to Islamic investors from the Gulf Cooperation Council regions. Allen & Gledhill’s Property Funds team led by partner Jerry Koh advised on the establishment of Securus Fund. Investors Yeo Wico The fund’s initial closing was achieved at US$100 million, with Partner Keppel T&T and AEP Capital, part of the Al Rajhi Holding Group, as Allen & Gledhill co-sponsors and institutional investors from the Middle East and Asia, Email: [email protected] including Brunei based Perbadanan Tabung Amanah Islam Brunei, as a cornerstone investor. Suhaimi Zainul-Abidin Partner The fund is structured as a close-end fund with a term of fi ve years Allen & Gledhill from the initial closing, although this may be extended by two Email: [email protected] additional one-year periods with the approval of the board of directors of the fund. Earnings are expected to be derived from recurrent leasing Wico and Suhaimi have pioneered and advised on Islamic fi nance income and capital appreciation if the fund sells its assets. transactions in Singapore.

Singapore’s Sukuk Market — Where It Adds Value By Allan Redimerio

As the Singapore dollar bond market enjoy one of its best years in or those investors who are not buy-and-hold in nature. Finally, there record, we see broadening the investor base as a key consideration is the pricing consideration for both issuers and investors. “Is it really for companies and fi nancial institutions looking to tap this market. cheaper to issue Sukuk than conventional?”, is the question asked by Singapore’s Sukuk market is clearly benefi ting from this trend. many. Khazanah’s SG$1.5 billion (US$1.1 billion) Sukuk issue marks Singapore’s entry into the big league of Sukuk issuers, propelling Given the relative complexity of Sukuk structures to conventional, both Sukuk issuance from the island-state this year to close to 10% of hard and soft transaction costs could be higher due to additional legal total global Sukuk issuance. Prior to Khazanah’s Sukuk issue, less and tax advisory costs, and the time needed to be invested by issuers than 1% of global Sukuk issuance year-to-date was from Singapore. to familiarize with a fi nancing technology. Investors, on the other hand, may also require a pricing premium for Sukuk given their unfamiliarity The key question in the minds of many is can Singapore remain at with these structures, and by factoring in some liquidity premium due this level and become a major regional Sukuk market to rival that of to a perceived lack of secondary trading. Malaysia? In short, there are challenges to overcome before a real Sukuk market can emerge in Singapore and takes time. Malaysia was not a Sukuk success story overnight, but a succession of well crafted regulations “Singapore is a regional fi nancial over time created a full functioning Islamic fi nance market.

centre and has the important However, what is important to point out is that for the Sukuk market to ingredients to become a major develop in the region and, for that matter, globally, the market should be looked at collectively, not individually. Greater cross-border activity Sukuk market” is needed to educate investors in different markets on the risk and rewards of Sukuk. Malaysia is the world’s top Sukuk market as it contributed more than 50% of global Sukuk issuance in the fi rst half Singapore is a regional fi nancial centre and has the important of 2010. Besides Malaysia there is only one other major Sukuk market ingredients to become a major Sukuk market. Firstly, regulations which is the GCC. are in place which provides a level playing fi eld between Islamic and conventional fi nance. This means issuers choosing to implement an Clearly, for the global Sukuk market to develop, expansion of activities Islamic fi nance solution will not be disadvantaged when the alternative outside these two centers is needed. Malaysia needs Singapore just conventional means offers similar economic risks and rewards. The as it needs Indonesia, Hong Kong, Japan and Asia to develop their Monetary Authority of Singapore has been a strong supporter of own Sukuk markets. The converse is also true — these countries need developing Islamic fi nance in the country for some time now. Secondly, Malaysia to continue to lead and support the development of Sukuk Singapore’s political stability, ‘AAA’ rated government, and effi cient in the region. legal and security enforcement laws have been key factors in attracting global capital to the island state. Hence, instead of asking the question of whether Singapore can become a major center for Sukuk issuance, we should be asking the Being a regional fi nancial center and given the relatively short history of question of how Singapore can leverage on its strengths in order to Sukuk issuances in the country, it is expected that Singapore, however, further develop the Sukuk market regionally and globally. Instead will face some key hurdles as it further develops its Sukuk market. of coming up with arguments to promote Singapore as a future Firstly, the Singapore market offers strong alternatives to issuers (or major Sukuk market, one should be using those arguments to show borrowers) when it comes to fi nancing. The conventional Singapore how Singapore can complement Malaysia and the GCC in further dollar bond market is tried and tested, and both issuers and investors developing the Sukuk market. are familiar with the terms of conventional bond offerings. The diffi culties faced by Singapore in becoming a major Sukuk market There is also ample liquidity in the domestic banking system, with should not be seen as challenges, but rather opportunities to access Singapore among the world’s highest in terms of per-capita savings- a broader group of investors. We already know that Singapore, with to-income ratio. An example of this is during the worst of the downturn its proximity to Malaysia and given its desirable qualities as a wealth when the bond markets were shut, there was an expectation that management hub, can play a key role in developing the Sukuk market. Islamic fi nance would fi ll the fi nancing void in Singapore. Although it However, it was not until the Khazanah issue that we saw the full generated some level of interest, most issuers were reluctant to spend potential of what Singapore can offer to the Sukuk market. the time to study a new technology that was largely untested in the Singapore context. Instead, they opted for an easier solution bank loan Khazanah’s successful cross border issuance is important in a fi nancing, although at much higher fi nancing costs. number of aspects. Firstly, the fact that the issue generated so much interest at a time when there were many competing Singapore dollar Secondly, there are liquidity considerations for investors. One of the conventional bond issues on offer was encouraging. Added to this is problems with the Sukuk market has been the lack of secondary market the fact that the issue itself is not small — it was marketed at around trading, and this has affected demand from traditional fund managers continued...

Singapore’s Sukuk Market — Where It Adds Value (continued)

SG$1 billion (US$737million), and upsized afterwards to SG$1.5 Finally, Khazanah successfully employed an investor education billion (US$1.1 billion) due to strong demand. process to introduce a new structure to Singapore dollar investors.

This acceptance of the Sukuk structure by a new group of investors In short, the Khazanah transaction has showcased how advanced — Singapore dollar fi xed income investors — would only be benefi cial markets like Singapore can help develop the Sukuk market. It was able to the development of the Sukuk market given the depth, as shown to turn challenges into opportunities for both issuers and investors here, of Singapore’s fi xed income market. It also shows a more alike. Indeed, this transaction has caught the attention of global appealing side — that Islamic fi nance system can work side by side Islamic fi nance markets and will be remembered as the transaction with conventional fi nance, which benefi t investors given they now have that put Singapore on the global Sukuk map. a broader range of investment options to choose from.

Secondly, the cross border issuance promotes greater economic links between countries. An important tenet of Islamic fi nance is “By leveraging on their key the use of money for productive purposes, and greater Sukuk cross border integration between countries such as for example Singapore strengths, countries like and Malaysia could see Sukuk proceeds raised in Singapore being channeled to productive projects such as infrastructure development in Singapore can play a key role in Malaysia, and vice versa. A similar situation could take place between helping to shape the future of countries in Southeast Asia, which would be appealing to ASEAN governments given their desire for greater economic and fi nancial Sukuk globally” integration within the region. Thirdly, the Sukuk issue facilitates pricing discovery and creates a pricing benchmark for future Sukuk issuances in Singapore dollars. More importantly, however, it showed that the future of the global Sukuk market is bright and a greater acceptance of Islamic securities In addition, the Sukuk is also traded in the secondary market which by the wider investment community would be an eventuality. By increases its appeal to non buy-and-hold investors. The combination leveraging on their key strengths, countries like Singapore can play a of these two would make it easier for Singapore dollar fi xed income key role in helping to shape the future of Sukuk globally. investors to invest in Sukuk going forward. Allan Redimerio Fourthly, Khazanah chose a structure with the widest acceptance to Associate director investors. The Wakalah structure is a typical structure applied by GCC Corporate and infrastructure ratings issuers for offshore issuances. A wider acceptance helps facilitate Standard & Poor’s secondary market trading, thus providing more comfort to investors. Email: [email protected] These widely accepted structures could become the blueprint for Allan Redimerio is the regional coordinator for Islamic fi nance ratings greater standardization of Islamic structures across markets and at Standard & Poor’s, responsible for assessing the rating of a wide countries. range of Sukuk structures, the most recent one being Nomura Sukuk.

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Global Equities — Mergers and Acquisitions on the Rise By Adam Ebrahim

The global economy has recovered from its deepest recession in The survey found that respondents were building up a cash war chest 70 years over the past year. This was on the back of decisive and for mergers and acquisitions (M&A) activity rather than paying down substantial coordinated ﬁ scal and monetary stimulus by governments debt of increasing dividends. The increase in M&A activity has started globally as well as aggressive growth realized in emerging markets to come through during the current year, following the huge drop off such as China and India. Risks to the sustainability of recovery are seen in 2009. high and could potentially impact economic growth expectations over the next few years. S&P ex ﬁ nancials cash as a % of market cap

These risks include the stringent austerity measures being implemented 14 in many developed countries to address their huge fi scal defi cits and 12.4 bloated debt levels. In emerging markets, China and India face risks 12 around rising infl ation and property bubbles with their authorities implementing aggressive measures to cool their economies. 10

S&P 500 net debt to equity and long term average 8

80 6

70 4

2 60 57.5 0 1995 1997 1999 2001 2003 2005 2007 2009 50 1996 1998 2000 2002 2004 2006 2008 Source: Bloomberg, Oasis Research 40 An analysis of the deals completed year to date highlight that cash ﬂ ush 35.6 sectors such as information technology, healthcare and resources 30 appear the most favored.

M&A activities 20 4.0

3.5 Dec-09 Dec-08 Dec-07 Dec-06 Dec-05 Dec-04 Dec-03 Dec-02 Dec-01 Dec-00 Dec-99 Dec-98 Dec-97 Dec-96 Dec-95 Current

Source: Bloomberg 3.0

Global equity markets have faced some pressure in the current 2.5 year, following the sharp recovery realized during 2009. Markets have declined year to date on the back of concerns around slowing 2.0

economic growth and the impact of fi scal and sovereign debt crisis US$ T 1.5 globally. 1.0 Global corporates on the other hand have restructured over the past year and are currently in a solid fi nancial position, particularly the major 0.5 US companies. These companies used the recession to downsize their cost bases, shore up their balance sheets and focus on the basics of - generating an abundance of cash fl ow. 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

During 2010, we have seen a recovery in earnings growth for corporates Source: BofA Merrill Lynch on the back of the cost cutting measures implemented. Sitting on mountains of cash and with strong balance sheets, corporates are Deals such as Oracle’s Sun acquisition, Intel’s proposed McAfee looking at opportunities to expand and grow their businesses proﬁ tably acquisition and BHP Billiton’s hostile bid for Potash Corp, highlight over the medium to long term. This was further supported by the Ernst the strategy of global market leaders looking to further enhance and & Young capital conﬁ dence barometer, which surveyed more than 800 entrench their market positions. The focus on emerging markets for executives globally. continued...

Global Equities — Mergers and Acquisitions on the Rise (continued) growth is also likely to see increased cross border deals as noted by Global equities are offering good value in relation to the other asset the proposed acquisition of Dimension Data (IT player with signiﬁ cant classes such as bonds, and their long term histories. This, together exposure to emerging markets) by Japan’s largest telecoms operator, with the strong ﬁ nancial positions of the major corporates should see NTT Corporation. robust M&A activity being realized in the year ahead.

S&P 500 earnings yield — US 10-year bond yield Adam Ebrahim CEO and CIO 8 Oasis Group Holdings Email: [email protected] 6 Adam is the founder of Oasis Group Holdings, a Shariah compliant 4.4 investment leader that won the Failaka Award in 2010 for Best Global 4 Equity Fund over 5 years.

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Other programs: We anticipate that market leaders with robust cash ﬂ ows and low ŽŶƚƌĂĐƚƐΘEĞŐŽƟĂƟŽŶĨŽƌŶĞƌŐǇŽŵƉĂŶŝĞƐ gearing levels will look to acquire companies with valuable intellectual KŝůΘ'ĂƐĐŽŶŽŵŝĐƐΘZŝƐŬŶĂůǇƐŝƐ property. This will allow for the higher quality companies, with dominant WůĞĂƐĞĐŽŶƚĂĐƚ^ƵďĂƐŚŝŶŝ:ĂŐĂŶĂƚŚĂŶĨŽƌŵŽƌĞĚĞƚĂŝůƐ͗ market positions and solid balance sheets to borrow at relatively low ƐƵďĂƐŚŝŶŝ͘ũĂŐĂŶĂƚŚĂŶΛƌĞĚŵŽŶĞǇŐƌŽƵƉ͘ĐŽŵŽƌ+603 2162 7800Ğǆƚ͘32 cost and gain on the higher risk, poorer quality companies.

EXPAEXPAAANDINNDINNNDDINDINGINNGNNGGG THETH THEHHEE REALMSRRERREALMS EAEEAALAALALMSALMLMSMMSMSSSOS O OFOOF FFFIFIS ISLAMICIIS ISLAMICSLAMLLAMIAMMMIIICC FINANFINANCEFINANCFFIN FINANFINANCEINNANNANCNCNNCENCCCEE Register to secure your FREE seat now! Designed to generate ideas and fresh views to help you develop new or alternative ways to improve your business, these roadshows aim to explore and analyze the latest developments in the Canada, United Kingdom and France Islamic financial markets.

CANADA ͻ Session One: University of Toronto What is Islas mic Finance and WWhere are We Now? 9th November 2010 ͻ SessiosioononnT Twwoo: Canadanadd and thethe Islamic FinFinanciFi al Markets

UNITED KINGDOM ͻ Norton Rose slamimicic PProducts:ucts: What CCanan and Can’t beb Done? 12th November 2010 ͻ Sessisionsio Four: /ƐƐƵŝŶŐĂŶĚ/ŶǀĞƐƟŶŐŝŶƚŚĞ/ƐůĂŵŝĐ&ŝŶĂŶĐŝĂůDĂĂŶĚ/ŶǀĞƐƟŶŐŝŶƚŚĞ/ƐůĂŵŝĐ/ŶǀĞƐƟŶŐŝŶƚŚĞ/ƐůĂŵŝĐ&ǀĞ ƌŬĞƚƐ

FRANCE ͻ Sessionession Five: Dauphine University, Paris Closing Round-tableable 15th November 2010

Classiﬁ cations of Mergers and Acquisitions By Aﬁ fuddin Baharuddin and Leow Yongjie

Companies execute merger and acquisition (M&A) activities for via M&A to capitalize on market power. However, antitrust various reasons. Some to achieve growth via acquisition rather regulation exists to prevent such M&A so that competition is than organic growth, and some seek diversifi cation. It is important maintained in the market. to gauge the motives for M&A and their fi nancial and operational consequences. An acquisition refers to the purchase or acquisition (ii) Secure unique capabilities and resources of the entire stake or a portion of one company by another until When a company is unable to cost effectively create internally one becomes the parent company or holds the controlling stake. the capabilities required to sustain future triumphs, getting Whereas a merger, or takeover, occurs when one company purchases them via M&A would be an alternative. A company may engage the entire assets and liability of another company and absorbs the in M&A to acquire specifi c competencies it lacks such as Kim entire business. Only one company remains as a separate legal entity Eng Holdings’ purchase attempt of Inter-Pacifi c Securities from after a merger. Berjaya Corp which will allow Kim Eng Holdings access to the Malaysian stock broking business which it is lacking. M&A can be classifi ed under a few categories. A statutory merger results when one of the companies ceases to exist as an identifi able (iii) Diversifi cation entity because all of its assets and liabilities merged with the Through M&A, conglomerates are able to reduce the purchasing company’s. Conversely, a subsidiary merger, as the name variability of total cash fl ows to the extent that the industries implies, requires that the target company becomes a subsidiary of the of the companies acquired are uncorrelated. Examples of purchasing company, often due to strong branding or image among conglomerates are Berjaya Corp and Sunway Group where consumers towards the company being purchased. their business span across several uncorrelated industries helped in maintaining stable cash fl ows. This motive often Takeovers are more than often hostile due to disagreement among proves to be a double-edged sword in the sense that some acquiring company’s offer price and target company’s shareholders. obsessed companies may lose sight of their major competitive One recent example is the dispute over Hong Leong Bank’s offer price advantages and expand into industries where they lack to takeover EON Cap which is claimed to be undervalued by 22% by comparative advantages at the cost of their shareholders. Primus Pacifi c. (iv) Tax considerations It is plausible for the profi table acquirer to benefi t from M&A “It is relatively faster to achieve with a target that has accumulated tax losses. Instead of carrying the tax losses forward, it can be used instantaneously growth through M&A especially to lower its current tax liability.

when the company is operating (v) Unlocking hidden value Companies may be uncompetitive for a sustained period in a mature industry” for a variety of reasons, such as insuffi cient resources, poor management or incompetent organizational structure. These types of companies may be potential targets because Motives for M&A the acquirer believes that it can acquire underperforming 1. Synergy companies relatively cheaper and unlock hidden value through Most common motive is to generate synergies via M&A to either restructuring of management or the entire business. reduce costs through economies of scale in R&D, manufacturing, sales and marketing, administration or enhancing revenue by cross- (vi) Cross border motivations selling of products, expand market share or reduce competition. With increasing international privatization trends, reduction in burdensome industry regulations and bureaucracy, cross- 2. Growth border M&A has intensifi ed over the years. Apart from these Management are often pressurized to foster growth in terms obvious reasons, cross-border M&A allows multi national of revenues and they can achieve this either by profi ting from corporations to exploit market imperfections, overcome investments internally (organic growth) or through M&A (external adverse government policy, technology transfer, product growth). It is relatively faster to achieve growth through M&A differentiation and also following their clients to better cater especially when the company is operating in a mature industry. to their domestic clients more effectively. MSIG insurance Nike’s takeover of the iconic Converse to expand its market share provider followed Honda to Malaysia. and capture a different market segment proved to be a successful growth strategy. Method of payment The acquirer may choose the method of payment subject to the (i) Market power consent of the target. A mixed offering is when a combination of both Industries with limited competition, such as the operating cash and securities are used as a payment method. A cash offering system industry where Linux and Microsoft pretty much comes from the acquirer’s existing reserves or from a debt issue. dominate the market, could seek to monopolize the market continued...

Classiﬁ cations of Mergers and Acquisitions (continued)

The last method of payment, securities offering, settles payment by 3. White Knight defense offering target shareholders common stocks as compensation. Arguably the best outcome for targets is to source for a third party to purchase the target in lieu of the hostile bidder. The Takeover defense mechanisms: Pre-offer main purpose behind this technique is to try to stir up a bidding 1. Poison pills war between the white knight and the hostile bidder. This might A legal device that allows the target to issue shares at a signifi cant be the best outcome for targets because of the tendency for the discount to market value which makes it substantially less bidding winner, in some competitive bidding scenario, to overpay attractive to the acquirer while at the same time, requiring prior due to overestimation of intrinsic value, emotion or information approval of the target’s board of directors before the M&A could asymmetries. materialize. Because the acquirer is generally prohibited from participating in the share purchase through the pill, it dilutes the Shariah compliant M&A? acquirer’s power hence making it more costly for the M&A to go In general, the workings and procedures for an Islamic M&A are through for the acquirer. similar to that of conventional M&A with no real stark variations. All the motives and defence mechanism are still applicable. The major 2. Poison puts consideration for the so called Islamic M&A would be the business This gives rights to the target’s bondholders which entitles them and operations of the target company. The target company shall not to put the bonds to the company at a pre-specifi ed redemption be involved in Shariah non-compliant businesses which are involved price usually at or above par. Poison puts effectively requires the in riba (interest), gharar (excessive ambiguity), maysir (gambling) and acquirer to refi nance the target’s debt instantly after the takeover non-halal goods and services. In addition, the funds required for the which increases the need for cash and raises the cost of M&A. M&A shall also be obtained in a Shariah compliant manner. Other considerations are mostly universal values which include fair and 3. Restricted voting rights equitable dealings, just treatment to the employees of the acquired Another deterrent where target companies instill a mechanism company and right of the minority shareholders. where shareholders with holdings exceeding 15% or 20% for example, are forbidden to exercise their voting rights until the Some notable M&A initiatives are centered on fi rms from GCC who target’s board releases the shareholders from the constraint. This are keen on acquiring partners from Malaysia and Southeast Asia makes it hard for the acquirer to utilize its rights to vote during region in an attempt to expand the Islamic fi nance footprint via board meetings, making any restructuring attempt diffi cult. cross-border M&A. Notably one of the largest Islamic M&A in 2007 was the US$1.08 billion takeover of Turkiye Finans by Saudi Arabia’s National Commercial Bank. Malaysia’s fi rst Islamic bank, Bank Islam, “In general, the workings and is enthusiastically looking for potential targets at home and abroad to regain its market share which was lost to intense competition from procedures for an Islamic 14 full-fl edged Islamic banks and conventional banks with Islamic windows. This signifi es that the Malaysian Islamic fi nancial market M&A are similar to that of is overcrowded, which could spur a wave of M&A in the near future. Lastly, Islamic M&A are motivated primarily in the same way as a conventional M&A with no real conventional M&A, which is to achieve growth rapidly. stark variations” Conclusion Going forward, with the global economy recovering, Malaysian banks Takeover defense mechanism: Post-offer have been picking up steam in terms of balance sheet numbers and 1. Litigation share prices, which constitutes a tougher M&A environment. However, A notorious technique used by many target companies by fi ling with the liberalization of the Malaysia ringgit currency and the New a lawsuit against the acquirer on alleged violations of securities Economic Policy, Malaysia might post as an attractive investment or antitrust laws, or unlawful and void appointment of directors destination which could stimulate M&A. such as the recent Primus-Pacifi c’s RM1.1 billion (US$349 million) lawsuit against EON Cap. Afi fuddin Baharuddin Senior vice president, Islamic banking 2. Share repurchase OSK Investment Bank Target might utilize this by repurchasing shares back from any Email: afi [email protected] shareholder, diluting acquirer’s voting rights, or might even start a Afi fuddin has more than 15 years of experience in Islamic fi nance bidding war which will push target’s share prices upwards, making having started his career with the fi rst Islamic bank in Malaysia. it costly to acquire. Furthermore, share repurchase may require the target to leverage because borrowings are one alternative source Leow Yongjie to fund share repurchases. This additional debt kills incentives for Management associate, Islamic banking the acquirer to takeover. In some extreme cases, target buys all of OSK Investment Bank its outstanding shares to privatize its company which is known as Email: [email protected] a leveraged buyout. Leow Yongjie works and writes on Islamic fi nance.

Islamic Accounting — Exclusivity, Harmonization or Convergence? By Arzim Naim

When the notion of Islamic economics was introduced, the argument disseminated will only useful to certain parties (for example, bankers, against its very existence was expected. Along the way, not only did creditors, staffs and such). On the other hand, ‘accountability based’ people eventually appreciate its main distinctions, it fl ourished and framework within the Islamic context is a consequence of responsibility. Islamic fi nance principles and products were spread to the world. In Islam, man has a covenant with God. Accordingly, this covenant These phenomena have led to the existence of Islamic accounting requires the man to discharge his accountability in accordance with principles to be used as it is more suitable in conveying the true nature the responsibilities laid down by the Shariah. of Islamic fi nancial instruments. The never ending debate on the need to use Islamic accounting by the Islamic fi nancial institutions Whether those arguments are real or not will depend on the perceptions (IFIs) over the use of conventional accounting has pushed Islamic of the public. Some would say that conventional accounting has always accounting to a new level. catered for all users of fi nancial statements. The person preparing fi nancial statements will always be held accountable for the accuracy The question now is whether Islamic accounting should (i) live in its of the fi nancial statements. The fact that modern accounting requires own exclusivity, or (ii) harmonize or (iii) to converge with conventional more transparency in the accounts has proven that the ‘decision accounting. These three options have been highlighted by Mohammad usefulness’ framework no longer prevails in its framework. In addition, Faiz Azmi, chairman of the Malaysian Accounting Standards Board the core content of modern corporate governance will always focus (MASB). on the fair information fl ow to all parties particularly through fi nancial statements. Exclusivity means that Islamic accounting is to live side by side with its conventional counterpart. Thus, any Islamic fi nancial instruments The ‘accountability based’ framework has now become universal will only be recorded by way of Islamic accounting. The harmonization practise. However, I must say that the only distinction of the concept is when the fi nancial reporting standards (FRSs) are fi ne tuned ‘accountability based’ framework espoused by Islamic accounting is — for example, certain exemptions are allowed/disallowed or Shariah that the rule of accountability must be purely divined since fi nancial related disclosures are allowed for any Islamic fi nancial instruments. reporting and accounting carries religious obligations. In this sense, The last option is convergence, or simply put, applying FRSs in every Islamic accounting must not incur any form of reporting that gives way aspect, even to Islamic fi nancial instruments. to interest based elements.

This article attempts to fi ll the gap in the literature and encourage For example, under the new requirements of the FRSs, any form of emancipator perspectives to the notion of Islamic accounting. In loan given by a parent company to its subsidiaries must be discounted order to do so, we need to go back to the basic building blocks of both back using an appropriate rate of returns/interest rate used by the Islamic and conventional accounting. Are they really miles apart? company’s panel actuary after the timing for the repayment of the loans have been forecasted. The fact that this requirement includes What is Islamic accounting? the Qard al-Hassan (benevolent loan) by the company to another party Accounting is just a recording function, just a tool. An academic to be discounted back using an appropriate interest rate, defi nitely defi nition for accounting is the “identifi cation, recording, classifi cation, contravenes the Islamic precepts itself. interpreting and communication of economics events to permit users to make informed judgment” (American Accounting Association, 2. Identifi cation, valuation and measurement 1966). It is a total value free defi nition without attaching any religious Conventional accounting in its current structure follows what is dogma to it. The Islamic accounting’s defi nition does share the same known as generally accepted accounting principle or the fundamental spirit to its conventional counterpart. However, the main difference lies accounting concepts. This takes into account among others accrual in two major categories (i) its objectivity and to whom the information and matching, substance over form, going concern, prudence or shall be communicated, and (ii) the identifi cation, valuation and conservatism, consistency, monetary measurement, materiality and measurement of information. others.

1. Objective of accounting (i) Going concern and accruals It is widely accepted that the primary objective of fi nancial reporting These two concepts are considered part of the bedrock of and accounting is to provide useful information to assist users in accounting. The going concern is particularly important with regard making economic decisions. It is the objective of the accounting to to measurement. As a result, the conventional accounting standards provide a fair information fl ow between the principal and agent. One requires that fi nancial statements be prepared on going concern and of the arguments on the basic differences between Islamic accounting requires that the directors assess whether there are signifi cant doubts and conventional accounting falls within the ambit of the objective of about the entity’s ability to continue as a going concern. accounting itself. The accruals concept lies at the heart of the defi nitions of assets, Conventional accounting leans towards the term ‘decision liabilities, gains, losses and changes to shareholders funds. Accruals usefulness’ whereas Islamic accounting leans towards the context of basis of accounting requires the non-cash effects of transactions to be ‘accountability’. The ‘decision usefulness’ is where the information continued...

Islamic Accounting — Exclusivity, Harmonization or Convergence? (continued) refl ected in the fi nancial statements for the period in which they occur. In view of the primacy of contract in transactions in Islam, the emerging This concept is closely related to the ‘realization’ concept whereby the reality must be constructed or appear to be as the form. This view is fi rms can only allow profi ts that are ‘realized’ or earned by the balance espoused by AAOIFI. This stand is backed by many Shariah scholars on sheet date to be included in the income statements. the need to recognize ‘substance’ together with the ‘form’ in fi nancial transactions or at least meet the ‘form over substance’ principle. Thus, Basically, the going concern concept embedded in conventional there shall be no such recognition such as quasi-subsidiary for that accounting is not in confl ict with the requirements of Islamic matter. accounting. The directors should assess the fi rms’ ability to continue as a going concern. Consequently, fi nancial statements must also be Some may argue ‘substance over form’ in a way is closer to Shariah prepared on the basis of going concern unless otherwise, alternative because this principle is putting the ‘intention’ or the ‘substance’ as valuations of assets and liabilities are used. the utmost requirement no matter what legal structure or the ‘form’ the fi nancial transaction wants to pose. It is the ‘substance’ that is The principle of accruals concept does not in confl ict to the matter. Most of the Sunni schools such as Maliki uphold that the requirements of Shariah. It is permissible under the purview of ‘intention’ or the ‘niyyah’ will be the determination in deriving to the Shariah. This is evidenced from the treatments of Murabahah (sale rules due to certain acts. with deferred payment) transactions conducted by Islamic banks. The accrual basis method recognises profi t based on a proportionate (iv) Historical cost and market valuation allocation of profi ts whether cash is received or otherwise. IFIs had Historical cost concept only provides input to the ‘satisfying’ notion. once used the cash accounting method. This was due to the religious Some decision makers do not seek to optimize but ‘satisfy’. It is easy dogma that the income/profi t will be recognized as and when money and very cost favorable to the reporting fi rm. The Para 135, Statement is received, and vice versa. of Financial Accounting No 2 of AAOIFI is taken as proof pertaining to the endorsement of historical cost technique. On the other hand, The Accounting and Auditing Organization for Islamic Financial the new FRS advocates the use of the ‘mark-to-market’ valuation. It is Institutions (AAOIFI), the body that promulgated Islamic accounting expensive and undesirable. However, the ‘mark-to-market’ valuation standards and MASB have rejected the applications of the cash basis is really Islamic in a way that it will lead to the fair value of Zakat accounting on the grounds that the accruals concept appears to be computation which is so central to the Islamic faith, thus, should be more conclusive in reporting. given a prominent place in accounting.

(ii) Consistency and prudence (conservatism) Conclusion These two concepts are considered desirable qualities of fi nancial From the analysis we can safely say that in basic principles, FRS is statements. Consistency implies that a company should rarely change closer to the Islamic precepts. To answer the question of whether the way in which fi nancial information is prepared and presented. The Islamic accounting is to be in exclusivity or to harmonize or to converge, consistency requirement is not in confl ict with the Islamic accounting will depend on the perceptions of the standards setters. requirement. However, the comparability is regarded to be a more fundamental objective than consistency. In particular, IFIs should not In my opinion, it is not an option to let the Islamic accounting remain use consistency to justify an accounting policy that is no longer the in exclusivity. Such treatment will lead to undesirable accounting most appropriate to its particular circumstances. arbitrage. On the other hand, to converge with FRS will be a better option except that the ‘discounted’ valuation technique for some The prudence concept was closely linked to that of ‘realization’. The Islamic fi nancial instruments for example the benevolent loan is concept of prudence implies that IFIs should take a very pessimistic undesirable. Thus, the only option left is to harmonize both accounting outlook in estimating income, expenses, assets and liabilities and schools. This means, the FRS has to be fi netuned to accommodate promotes the need to be cautious in overstating assets or profi ts Shariah principles. The new FRS could probably be issued for use especially in the face of inevitable uncertainties in the business world only in IFIs. This has to be resolved as soon as possible in order with a reasonable dose in the preparation of fi nancial statements. to eliminate any hindrance that limits the progress Islamic fi nance Apparently AAOIFI is silent on the prudence principle in fi nancial developments. reporting. If IFIs understate the potential income or assets value, the fi nancial report would be ‘unfair’ to the stakeholders and the users Muhammad Arzim Naim of fi nancial statements. AAOIFI leaves it to the best discretion of the Principal consultant preparers of fi nancial statements. Arzim Associates Chartered Accountants Accounting and auditing lecturer for National University of Malaysia (iii) Assets and the ‘substance over form’ principle Email: [email protected] A major difference between conventional accounting and Islamic Arzim is an Islamic fi nancial accountant consultant, a practising accounting lies in the defi nition of assets. In a conventional sense, any member of the Association of Chartered Islamic Finance tangible or intangible is regarded as an asset when there is any future Professionals and the Malaysian Institute of Accountants, member of economic benefi t embodied in it regardless of whether there is legal the Association of Chartered Certifi ed Accountants and is currently a control by the reporting fi rm. From Islamic perspectives, to qualify as PhD candidate in Islamic fi nance at International Centre for Education an asset, the reporting fi rm should have acquired the right to hold, use in Islamic Finance. or dispose of the asset. Thus, Islamic accounting does not particularly endorse the concept of ‘substance over form’.

Has the Global Debt Crisis Made Islamic Banking Less Competitive? By Michael D Billy

In order to sustain and profi t from the turbulence generated by the Product designed to meet demand global debt crisis, Islamic fi nance requires a different perspective on While fi xed income is certainly appropriate for widows and savers, strategies, asset classes and product development. those who are prudent but prefer a higher return are inclined to pursue higher yielding opportunities within a profi t/loss sharing In 55 BC, Marcus Tullius Cicero, the great Roman philosopher and partnership. In various benefi ts and outcome scenarios, the product politician stated, “The budget should be balanced, the treasury should can be designed so that a portion of profi t is allocated directly to a be refi lled, public debt should be reduced, the arrogance of offi cialdom common good or goal. At the outset, the benefactor is identifi ed with a should be tempered and controlled, and the assistance to foreign contractual obligation. lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.” Whether it is a Mudarabah or Musharakah partnership arrangement, banks need to reconsider their product development focus as it relates How misguided is the world today, as the simplicity and directness to the transition from a preponderance of debt offerings to those which of the ages, have been lost in modern times? The evidence is allow for non-correlated diversifi cation. abundant within global governments and fi nancial institutions alike. Governments have displayed fi scal irresponsibility to the point it Perhaps within a self initialized investment platform, the ideal product threatens the country’s well being and standard of living. Financial can be a segregated managed account, an ethics fund or similar institutions have been self serving. format, where priorities for transparency and accountability are preset to allow a closer observance of the profi t cycle and forthcoming “Debt, on a single country basis, distribution. has exploded beyond control” It is not a contradiction to have profi t tied to levels of risk arrangements that far exceed present day interest rates. Given the right dynamics, analytics and market focus, these capital input versus skill complement Debt, on a single country basis, has exploded beyond control. On a partnerships are justifi ed and benefi cial in a myriad of ways. collective basis, it is beyond masterful containment. Government greed, and its relative lack of risk mismanagement controls, combined with an inability to foresee economic consequences has reshaped “When numerous causational the globe into a chaotic state of economic affairs, whereby individual responsibility has been replaced by an irrational dependency. factors create havoc within Product purveyors, eager to improve revenue, have seized the markets global markets, a fl ight to with offerings that disguise the true agenda of those who create them. Recently offered Sukuk are in default. Stock offerings have incurred fractional yields is not the the same fate. With little or no underlying values present at issuance, both are released on faulty assumptions to support initial price levels predominant safety net for all or subsequent trading. All for the purpose of creating additional revenue streams for the placement agent. investors”

Instead of Islamic fi nance moving in a positive direction to fi ll the need After all, in that banks do not limit themselves to prosper from a single of its immense and broadly diversifi ed market, issuers are content to strategy, why should investors be restricted as to their motive for rollout products that are limited in scope, where the interest is self seeking profi t? If preservation of capital is the dominant priority for serving rather than for the benefi t of the investor. creating the partnership, and the skills are available to accomplish the intended objective, why prevent profi t sharing arrangements from When numerous causational factors create havoc within global existing and fl ourishing? markets, a fl ight to fractional yields is not the predominant safety net for all investors. While those who choose to pursue income without As witnessed, the current market environment abounds with risk have abundant choices, individuals without personal limitations uncertainly and will prevail in the foreseeable future. Predicted by seek out greater risk/reward opportunities. Restricted by choice and gurus and talking heads, they cite the overhang to be at least 10 years. availability, investors will turn to more progressive institutions that If only 50% of these predictions are correct, all product creators and identify with the demand and recognize the product demand is a purveyors have numerous challenges before them. multiple tiered need, whether aligned to Islamic law prohibitions or not. It is necessary to proceed with caution on all levels, as formally adhered to risk averse theories no longer embody the refi ned elements No longer does the axiom, “Build it and they will come” apply. Our to protect against all of the erosive infl uences present today. Nor do virtual world allows discretion and choice. continued...

Has the Global Debt Crisis Made Islamic Banking Less Competitive? (continued) they contain deterrents for preserving capital when unexpected future demand imbalances, the optimization of minimizing losses escalates events occur. the opportunity for profi table or net absolute return outcomes, in any number of highly liquid asset classes. The complexity of global fi nance, and all relevant counterproductive infl uences, signifi es the beginning of a new investment era. It is time Achievable through innovation, success comes when portfolios harness to remodel and prosper. This can be accomplished without giving up volatility to their benefi t. When properly structured and managed, an the economic and ethical framework from which both Islamic and non- alpha type return on investment (ROI) will perpetuate itself. The offset Islamic investors can benefi t. to that outcome is that capital is preserved according to the terms and conditions within the Mudarabah or Musharakah agreement. While previously constructed risk management models and tools have served their purposes over the past many decades, the onslaught Historical performance of economic uncertainty, unfathomable debt and global discord has In the past, the analytical execution has only been applied to liquid created a new trading environment whereby volatility dominates the markets, for example the foreign exchange spot, equity indices, landscape. managed futures, and such. The question remains, “How effective has the methodology performed during market periods with extreme “How effective has the turbulence?“ methodology performed during Historical performances include: market periods with extreme • From 2008-2009, the model was applied to the Standard & Poor’s E-mini market. The ROI ranged from 2.4% to 5.5% with turbulence?” a Sharpe ratio of 2.74+.

Capital preservation analytics • Regarding volatility and price movement analysis, the Risk analysts and bank investment offi cers have to ask themselves: directional predictability ranged from 77% to 92%. How do we effectively implement the changeover process in order to avoid self-initialized losses? • Customized for our proprietary FX model, profi tability ranged from 59% to 1.4% per week. A positive step in the right direction is to avoid conventional models aligned to adjusted risks/returns. The most detrimental limitation • Drawdowns have remained a single digit event, with most involves a skewed predictability outcome as they are predicated on recent occurrence at 3%. mean averages and co-variance analysis. If the product concept and • A comparative test in 2007 to S&P’s Diversifi ed Trend planning process fails to establish forward observing risk tolerance Indicator (DTI), our models analytics produced a cumulative mechanisms, the capital preservation objective is lost. +9.23% vs S&P’s (– 2.698%) from July 2007 to October 2007. The maximum drawdown occurred at (-0.479%) vs. S&P’s Counter measures to uncertainties and negative infl uences are (-1.670%). Our model returned to par+ in three days with S&P’s constructed by applying sophisticated, scientifi c customization tools DTI never recovering. and methodologies. The failure of adopting embedded defensive volatility tactics impairs the product’s ability to engage offensive Cicero’s strategy for implementing responsible fi scal management trading mechanisms. While you may benefi t from a single directional that controlled public debt did not take into account that 2,065 trend, restrictions raise the inability to capture parallel movements. years later, political ineptitude and incomprehension combined with technology, would lead the world and related markets into such a To gain the upper hand, profi table execution requires analytical volatile environment stifl ing entrepreneurship and creativity. components that align risk with volatility forecasting mechanisms and supply/demand imbalance analysis. Besides enacting disciplines In all cases, the single or multiple environments do not have risk taking that adhere to core Islamic principles, the underlying defensive tolerances that are homogenous nor can they be simply addressed. mechanics, allowing for a more effi cient execution, have to address Being able to conceptualize and offer innovative products, derived in these questions: house or outsourced, will be “spot on” to serve the entire spectrum of the community with the utmost of fairness and honesty attributable to 1) What is the expected risk associated with a price appreciation Shariah law. of an instrument as it approaches a certain level? Michael D Billy 2) What is the expected risk associated with a price depreciation Managing partner of an instrument as it approaches a certain level? Econophy Capital Advisors Email: [email protected] Unquestionably, establishing operable risk thresholds is imperative for Michael has worked with traders at UAE based sovereign funds and assessing potential losses and profi t potential. By applying customized is currently working with Newedge and The IGS Group in London to scientifi c solution modeling to relationships related to supply and create an innovative Mudarabah product.

Khazanah Nasional’s US$1.1 billion Sukuk issued in Singapore By DBS Bank and Islamic Bank of Asia

Some time during the launch of the Malaysia’s inaugural US dollar investment portfolio, will provide the Shariah compliance legitimacy, to global Sukuk, Khazanah Nasional, Malaysia’s sovereign wealth fund enable secondary tradability of the Sukuk al-Wakalah. was contemplating consolidating its Singapore dollar denominated strategic investments in Singapore. Currency matching in terms of Wakalah as a fi nancing modality serves well in the case of Khazanah revenue and expenses was a mantra that Khazanah Nasional held Nasional as it directly holds no physical assets. Another key factor that onto as a key pillar of its investment management strategies. augurs well for the utilization of Wakalah as a fi nancing modality is the familiarity of the regulatory authorities with the mechanisms and Khazanah Nasional decided to test Singapore dollar capital market trappings that underlie the same. Given expediency in execution, place with a maiden benchmark Sukuk issuance after careful procurement of tax concession and deal closure is key and paramount. consideration with bankers. DBS Bank is honored to be tasked jointly Wakalah as a fi nancing modality became the preferred choice. with two other banking groups with the marketing and distribution aspects of the deal. The Islamic Bank of Asia, the Islamic banking arm The JLMs and joint Shariah advisors worked diligently towards getting of DBS Bank and the respective Islamic banking arm of the other two the preliminary Shariah compliance endorsement. The proposed banking groups CIMB and OCBC (joint lead managers [JLMs] and joint Wakalah structure for Khazanah Nasional’s maiden Singapore Shariah advisors) were entrusted to handle the structuring aspects of dollar denominated Sukuk issuance evolved around shares in one the deal. of the identifi ed investee companies and commodity Murabahah arrangements. The deal was to be issued off Khazanah Nasional’s multi currency Sukuk issuance program currently outstanding. The program has The incorporation of shares as part of the investment portfolio, specifi cally designated Musharakah as an approved fi nancing is to enable secondary tradability of Khazanah Nasional’s Sukuk modality. However, other modalities are not ruled out provided the when viewed strictly from the perspective of mainstream Shariah joint arrangers under the said program agree to amendments to any interpretation and specifi cally to Islamic investors. The share of the provisions enshrined into the said program inclusive of other component was a necessity given that Khazanah Nasional does not fi nancing modality to be applied. hold any hard physical asset with sizable monetary value.

Within the offshore Islamic capital market space, three recently closed The structure precedent deals acted as reference points in structuring the Sukuk for For ease of exposition, the Wakalah arrangements utilized under this Khazanah Nasional. The Islamic Development Bank, HSBC Middle East structure have two levels. The broad level arrangements involve the and Dar Al-Arkan issuances utilized the Wakalah structure. In these Sukuk issuer which is Danga Capital, the special purpose company three issuances, the respective Wakalah arrangements invested into which is being constituted to undertake Sukuk issuances under identiﬁ ed Murabahah and Ijarah assets. The Ijarah asset component, Khazanah Nasional’s Sukuk issuance program. if it exceeds the prescribed minimum percentage as a value of the continued...

6 2

Khazanah Nasional Danga Capital Certificate holders (Wakeel) (Issuer) 1

Venture 4 5

Commodity Shares Murabahah

Step 1 Sukuk al- Wakalah issued to certifi cate holders. Step 2 Sukuk proceeds received by the issuer. Step 3 Issuer appoints Khazanah as Wakeel (agent). Step 4 Khazanah as Wakeel manages the venture. Step 5 Returns generated by the venture shall be distributed to certifi cate holders as periodic distributions. Step 6 Khazanah as obligor will enter into a purchase undertaking with the issuer to purchase the certifi cate holders’ interest in the venture upon maturity or dissolution event as defi ned. The venture will be purchased based on market valuation.

Khazanah Nasional’s US$1.1 billion Sukuk issued in Singapore (continued)

Other than Danga Capital, other parties involved at this level of the successful execution of the deal. Due to volatile swap rates, the JBRs Wakalah arrangements evolve around Sukuk investors, co-trustee decided to proceed with a one-day roadshow in Singapore to meet acting ultimately in the interest of the Sukuk investors, the venture with the largest and most prominent Singapore dollar bond investors established to invest subscription proceeds garnered from the Sukuk in order to ascertain indicative demand and pricing commitments. holders, into prescribed investment portfolio, Wakeel (agent) who has been tasked to manage the venture and Khazanah Nasional upon The feedback from the investor base was solid as investors had no whom the purchase undertaking will be enforced to purchase the problems with the credit quality of Khazanah. However, investors investment portfolio constituted by the venture. needed additional education and training on the specifi c structural aspects used in the deal as the investors were mainly conventional The schematic diagram below, together with accompanying bond investors and did not have such background on Islamic descriptions, provides a discourse as to how the Wakalah structures. The JBRs continued to educate the investors throughout arrangements work at the broad level. It is worth mentioning that the day via conference calls and meetings to point to the key aspect of subscription proceeds received from the Sukuk holders will be utilized the transaction that the structure was essentially a senior, unsecured by the venture to acquire identifi ed Shariah compliant shares and to offering with recourse to Khazanah Nasional. invest into a commodity Murabahah arrangement. After the solid feedback, we decided to execute an accelerated book The proceeds attributing to the shares acquisition is larger than that build strategy to open, price and close the deal within the day to used to invest into the commodity Murabahah arrangement. The minimize market risk. share acquisition portion will constitute a majority of the value of the investment portfolio at the outset. In this case, acquisition of shares is The deal drew demand of over four times book size enabling effected through a mere transfer of benefi cial interest therein. Khazanah to upsize the transaction from the initial offer size of SG$1 billion (US$734 million) to SG$1.5 billion (US$1.1 billion). The deal The following schematic diagram demonstrates the events leading up attracted a diverse group of over 80 local and international investors to the consummation of the commodity Murabahah arrangements at comprising fi nancial institutions, asset management, statutory bodies the underlying level of the Wakalah arrangements. More importantly, and insurance companies from Singapore, Malaysia, Hong Kong and it demonstrates how the minority portion of the Sukuk subscription Brunei. proceeds are being utilized by the venture to invest into commodity Murabahah arrangements with Khazanah Nasional as the buyer of the The book opened on the 3rd August 2010 with a price whisper of 90- commodity. 120bp above Singapore Swap Offered Rate (SOR) and 110-140bp above SOR for the fi ve-and 10-year Sukuk respectively and the deal was closed within a four-hour window to limit market and execution Danga Khazanah risk. Upon receiving investors’ feedback, a revised price guidance of (as buyer) Capital 2 90bp above SOR and 120bp above SOR was released at mid-day for the fi ve-and 10-year Sukuk respectively and the offer size was upsized Khazanah to SG$1.5 billion. At book closure, demand had reached over SG$4 (as Wakeel) billion (US$2.9 billion).

3 This deal was successfully priced after a one-day road show in 1 Singapore on the 2nd August 2010 and through an accelerated book building process on the 3rd August 2010. The Series 2015 Trust Certifi cates and Series 2020 Trust Certifi cates, were priced at 2.615% Commodity Commodity and 3.725% for the fi ve-and 10-year Sukuk respectively. Broker A Broker B The deal was notable on various accounts including:

Step 1 Khazanah as Wakeel will buy commodities from 1) Monumental orderbooks — SG$4.3 billion (US$3.1billion) one Broker A on behalf of the Issuer at a spot price. of the largest orderbooks for a Singapore dollar bond by a Step 2 Khazanah as buyer will purchase the commodities foreign issuer at a deferred sale price. The deferred sale price will equal the principal amount plus the total 2) Benchmark deal size — largest ever Singapore dollar bond by a periodic distributions, to be paid on a deferred foreign issuer and the largest Singapore dollar Sukuk issuance payment basis. Step 3 Khazanah as buyer sells the commodities at the 3) Tight pricing — tight pricing on a swapped US dollar basis was same spot price to Broker B. achieved at a level at or tighter than the rated US$ Malaysian Sukuk

Marketing and distribution 4) Pin-point marketing strategy — 86% hit rate in converting DBS Bank and two other banking groups as joint bookrunners (JBRs) investor meetings during the roadshow into real orders were tasked to formulate an effective marketing strategy to ensure continued...

Khazanah Nasional’s US$1.1 billion Sukuk issued in Singapore (continued)

5) Innovative structure — The fi rst benchmark Singapore dollar Islamic issuances and the Khazanah Nasional name. This benchmark denominated Sukuk Al-Wakalah ever issued deal will allow Khazanah to diversify its funding sources and creates a liquid benchmark for Khazanah to tap the Singapore dollar debt Closing remarks capital markets in the future. This issuance was true success in expanding the Singapore dollar debt capital markets and promoting Islamic issuances in the local In many ways, the successful closure of this issuance puts to rest currency market. This is the fi rst time, a Malaysia sovereign linked the disquiet among pundits and cynics that Sukuk structures are entity taps into the Singapore dollar debt capital market, with the only inherently of lesser embodiment in terms of protection and value other benchmark Malaysian issuer being Maybank’s SG$600 million recovery as compared to equivalent conventional counterpart. That (US$440 million) bank capital issuance. said, the Singapore dollar denominated Khazanah Nasional’s Sukuk issuance is indeed a trailblazer. In its wake, it has left behind an This Sukuk issuance scores another fi rst in the offshore Islamic capital indelible impression and a high watermark for many to emulate for market place for utilizing Shariah compliant shares as part of the some time to come. investment portfolio that is to be constituted pursuant to a Wakalah arrangement. This Sukuk issuance may be construed as possibly the DBS Bank was tasked with marketing and distribution of this deal while fi rst debt securities issuance that had commanded the attention of The Islamic Bank of Asia managed the structuring aspect of the deal. investors within the Singapore dollar debt capital market place to forcibly comprehend and grasp what Wakalah structure and governing Lum Moe Tchun terms and conditions thereof entail. Senior vice president DBS Bank Prior to this issuance, the Singapore dollar-denominated debt capital Email: [email protected] market place appreciates the Ijarah structure given that the Monetary Authority of Singapore’s reverse inquiry Sukuk issuance program and Subir Lohani City Development’s Sukuk issuance program apply the Ijarah structure. Associate Furthermore, after suffi cient education, conventional investors in the DBS Bank Singapore dollar bond market have started to view Islamic issuances Email: [email protected] as simply a structural alternative that have the same features as their conventional bond issues. John Yip Senior vice president As the curtain draws to a close, the overwhelming response and pin The Islamic Bank of Asia point execution of the deal has created confi dence in the market for Email: [email protected]

Islamic Finance news talks to leading players in the industry

Name: Armando O were conventional deposits in our portfolio that we have to continue Samia servicing. However, the bank is targeting full Islamic operations within the fi ve-year rehabilitation program. Position: Chairman and CEO What are the strengths of your business? Company: Al-Amanah Islamic We are the only Islamic bank in the country, with a population of Investment Bank about nine million. AAIIBP covers the area of the autonomous region of the Philippines for Muslim Mindanao, with eight branches located in major cities of Mindanao. We are also a state-owned bank. The bank gains the (AAIIBP) support of the government through the DBP, which is another state- owned fi nancial institution. Based: Makati City, Philippines What are the factors contributing to the success of your company? Age: 58 The full support of the government and all regulating bodies in the country help to promote our business. We also have a dedicated and Nationality: Filipino motivated workforce, the majority who are Muslims that easily relate to the target market of the bank. With the improvement of our offi ce facilities and upgrading of our information technology processes, the Could you provide a brief journey of how you arrived bank is hopeful that we will be able to attain our budget. where you are today? I started as a general clerk in 1972 in one of the commercial banks in the Philippines. In 1983 I was working with a foreign bank up to 1996. What are the obstacles faced in running your My main concentration then was investment banking and capital business today? markets. The fi rst is the level of familiarity of Islamic banking in the Philippines. There are very few Filipinos, and even Muslims that are familiar with In 1996, I moved to a government bank, the Development Bank of Islamic fi nance. the Philippines (DBP), and held various senior level positions, the latest of which was as senior executive vice president and head of the Secondly, the insurance matter for Islamic deposits. We do not have marketing sector. Here I was responsible for taking the lead in major Takaful yet in the Philippines. Compared to the assurance of the state corporate lending, fi nance deals and underwriting issues before I was on insurance coverage up to PHP500, 000 (US$11,000) per account appointed as chairman and CEO of Al-Amanah Islamic Investment for conventional deposits through the Philippine Deposit Insurance Bank of the Philippines (AAIIBP). System, we cannot promise anything yet to Islamic depositors except the guarantee of return of deposit when demanded.

What does your role involve? Additionally, the regulatory framework is not yet in place. Our central As chairman of the board, I participate in the deliberation of policy bank is still in the process of organizing the framework for Islamic issues and preside over meetings of the board of directors. As CEO, I banking, in coordination with other agencies of the government for the implement policies and oversee the entire operations of the bank to tax and property laws. help support the development of DBP’s initiatives for micro, small and medium entrepreneurs. I also handle the relationship affairs of the bank, especially on top level negotiations. Where do you see the Islamic fi nance industry in, say, the next fi ve years or so? In the Philippines, Islamic fi nance as a new dimension where we have What is your greatest achievement to date? to exert extra effort to introduce the banking system. With the help of Other than the refurbishment of our branches and introduction other Islamic institutions in the region that can provide training and of online banking, we are also building our loan portfolio while exposure to interested players, we see it as a sunrise industry in the implementing the fi ve-year rehabilitation program of the bank. next fi ve years.

Which of your products / services deliver the best Name one thing you would like to see change in the results? world of Islamic ﬁ nance. As we are just starting our rehabilitation program this year, we cannot Since we are still in the infant stage of Islamic banking, what we want quantify nor qualify yet which product or service gives best results. We to see is the recognition that Islamic banking can be carried out in our need time to do it. To date, we offer both conventional and Islamic country. We want the Islamic ﬁ nance world to recognize that there is products. When DBP took over management of the bank, there Islamic business in the Philippines.

SUMMARY OF TERMS & CONDITIONS

Obligor/Issuer Cagamas

Cagamas Variable Rate Sukuk Tenor Three years Commodity Murabahah Return 3.41%

Maturity Date 8th August 2013

Arranger/Dealer CIMB Investment Bank, HSBC Malaysia and Maybank RM230 million (US$73 million) Investment Bank

Governing Law Malaysian law

Purpose of issuance To purchase Islamic housing receivables

Principal activities National Mortgage Corporation

Rating ‘AAA/AAA’ by RAM and MARC

Shariah Advisor Amanie Business Solutions, CIMB Islamic Shariah 9th August 2010 committee, HSBC Amanah Malaysia and Maybank Islamic

The Q&A was conducted with Angus Salim Amran head of treasury and capital markets at Cagamas:

1. Why did you use this particular Islamic structure? What other structures were considered? Variable rate Sukuk commodity Murabahah addresses counterparty, credit and operational risk more effectively than Mudarabah interbank investments. As the profi t rate is re-fi xed periodically, we are able to provide our investors with an alternative fi xed income product that addresses the interest rate normalization environment more effi ciently than a fi xed rate bond.

2. What will this capital be used for? To purchase Islamic housing receivables.

3. What were the challenges faced and how were they resolved? One of the challenges to overcoming the structuring of a variable rate Sukuk commodity Murabahah is the requirement to transact commodities at each rollover period to lock in a new proﬁ t rate. We actively engage suppliers to ensure that there will be a sufﬁ cient commodity pool to meet all future rollover periods.

4. Geographically speaking, where did the investors come from? Southeast Asia.

5. Was this deal rated? Yes, ‘AAA’ by RAM and MARC.

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We’re not just a Weekly but also a Daily news provider

MACQUARIE CAPITAL Hodes is responsible for marketing wealth Siddiqi will be in charge of the delivery of risk management products and portfolio management products across asset classes SINGAPORE: Macquarie Capital solutions to regional consumer bank clients to corporate clients in the region. has hired Anupam Garg to co-head in Asia Pacifi c. He is also in charge of telecommunications, media, entertainment expanding traditionally managed investment Prior to this appointment, he was Barclays and technology (TMET) investment banking products in the region. Capital’s head of corporate foreign exchange for Asia. and foreign exchange distribution for Asia Prior to these appointments, Hodes was Pacifi c. Garg was previously attached to Singapore Citi’s head of retail banking in Malaysia. Technologies Telemedia where he was senior vice president for international business development. BNP PARIBAS DEUTSCHE BANK US: BNP Paribas corporate and investment HONG KONG: Deutsche Bank has hired Ajay banking division has appointed four GATEHOUSE BANK Kapur as managing director and head of individuals to its Americas operation Asian equity strategy. corporate and investment banking division. UK: Michael Bavington has joined Gatehouse Bank as vice president of the asset fi nance Kapur will be in charge of developing They are Edward Speal as head of global team. Deutsche Bank’s Asian equity strategy equities and commodity derivatives, Lionel capabilities and research product offering. Crassier as head of equities, Dan Cozine Prior to his appointment, Bavington was as head of structured fi nance and Chris a director in the corporate asset fi nance Innes as head of equity fl ow and fi nancing The bank has also appointed Priscilla Luk business at Lloyds banking group. sales. and Ritesh Samadhiya as director and vice president of Asian equity strategy, respectively. JP MORGAN ASSET HSBC MANAGEMENT SINGAPORE: Clyde Choi has joined HSBC as GLOBAL: JP Morgan Asset Management MUBADALA DEVELOPMENT head of emerging markets foreign exchange has appointed Jim Fuell as head of global COMPANY trading in Asia. liquidity for Europe. UAE: Peter Wilding has been appointed the Choi previously headed the Asian macro Fuell will be responsible for sales and acting director for Mubadala Development interest rate and foreign exchange trading marketing for the liquidity business in the UK Company’s real estate and hospitality unit operations with UBS Singapore. and Europe. effective on the 31st August 2010.

He was previously attached with Deutsche He replaces John Thomas, the current CREDIT SUISSE Bank’s global banking business in Tokyo, director who will be leaving at the end of Japan. August 2010. UK: Credit Suisse has hired four individuals to its private banking team in the UK.

The four individuals are Ian Hale as CITI UBS director in the investments team and head SINGAPORE: Citi has hired Paul Hodes as SINGAPORE: Lutfey Siddiqi will join UBS as of investment consulting; Chris Pottle as its Asia Pacifi c head of wealth management its head of fi xed income, currencies and director and investment consultant; John products for its regional consumer bank and commodities corporate coverage for the Williams as director of wealth planning team traditional managed investment products for Asia Pacifi c region in Singapore, on the 20th and Chris Williams as vice president and its wealth management business. September 2010. wealth planning product manager.

www.islamicﬁ nancetraining.com

Islamic Finance news Advisory Board: Keeping you abreast of the world’s upcoming Shariah compliant deals Mr Daud Abdullah (David Vicary) Global Leader Another Islamic Finance news exclusive Global Islamic Finance Group, Deloitte ISSUER SIZE INSTRUMENT Prof Dr Mohd Masum Billah Islamic Development Bank US$3.5 billion Sukuk Group Executive Chairman Middle Eastern Business Al Baraka Turkey US$250 million Sukuk World Group of Companies Al Baraka Banking Group US$200 million Sukuk Dr Humayon Dar Asosiasi Baitul Maal wa TBA Sukuk Chief Executive Offi cer Tamwil (BMT) se-Indonesia BMB Islamic Konsortium Lebuhraya Utara- RM35 million Sukuk Timur (Kesturi) Mr Badlisyah Abdul Ghani South Korea TBA Sukuk Chief Executive Offi cer CIMB Islamic Capital Development PKR20 billion Sukuk Authority, Pakistan Ms Baljeet Kaur Grewal Bank Muamalat US$100 million Sukuk Managing Director/Vice Chairman Head, Global Research Malaysia Airports Holdings RM3.1 billion Sukuk KFH Research Limited Kuwait Turkish Participation US$100 million Sukuk Mr Sohail Jaffer Bank Partner Abu Dhabi Ports Company US$1 billion Sukuk International Business Development FWU International Saudi Electricity Company TBA Sukuk Kazakhstan US$300 million Sukuk Dr Monzer Kahf Consultant/Trainer/Lecturer Indonesia US$650 million Sukuk Private Practice Abu Dhabi Islamic Bank US$5 billion Sukuk Mr Mohamed Ridza Abdullah Cagamas US$5 billion Sukuk Managing Partner Mohamed Ridza & Co AmIslamic Bank RM3 billion Senior Sukuk Musharakah Nakheel TBA Sukuk Prof Bala Shanmugam Sumitomo Corporation TBA Sukuk Director of Banking & Finance Monash University Malaysia Nomura Holdings US$100 million Sukuk Mr Muhammad Nejatullah Siddiqi State Bank of Pakistan TBA Sukuk Author, Scholar, Speaker, Trainer Islamic Bank of Thailand THB5 billion Sukuk Mr Rushdi Siddiqui Trans Thai Malaysia TBA Sukuk Head of Islamic Finance Thomson Reuters Axiata Group RM4.2 billion Sukuk Lebanon TBA Sukuk Mr Dawood Taylor Regional Senior Executive-Middle East Emirates Integrated TBA Sukuk Prudential PLC Telecommunications Mr Abdulkader Thomas General Electric Capital TBA Sukuk President & CEO Cahaya Jauhar, Malaysia RM114 million Sukuk SHAPE – Financial Corp Saudi Home Loans Company TBA Sukuk Mr Paul Wouters Partner Dubai TBA Sukuk Bener Pakistan PKR75 billion Sukuk and conventional Prof Rodney Wilson bonds Director of Postgraduate Studies Finance ministry, Indonesia US$500 million to Global Sukuk Durham University US$600 million Mr Sohail Zubairi Chief Executive Offi cer For more details and the full list of deals visit Dar Al Sharia Legal & Financial www.islamicfi nancenews.com Consultancy

Eurekahedge North America Islamic Fund Index

120

110

100

50 4/1/01 8/1/01 4/1/00 8/1/00 4/1/02 8/1/02 4/1/03 8/1/03 4/1/04 8/1/04 4/1/05 8/1/05 4/1/06 8/1/06 4/1/07 8/1/07 4/1/08 8/1/08 4/1/09 8/1/09 4/1/10 12/1/99 12/1/00 12/1/01 12/1/02 12/1/03 12/1/04 12/1/05 12/1/06 12/1/07 12/1/08 12/1/09

Monthly returns for Developed Markets funds (as of the 24th August 2010)

FUND FUND MANAGER PERFORMANCE MEASURE FUND DOMICILE 1 Taurus Ethical B Taurus Asset Management 87.92 India 2 Shariah Benchmark Exchange Traded Scheme Benchmark Asset Management Company 53.21 India (Shariah BeES) 3 Kagiso Islamic Equity Kagiso Asset Management 25.95 South Africa 4 Am-Namaa' Asia-Paciﬁ c Equity Growth AmInvestment Management 18.69 Malaysia 5 Danareksa Indeks Syariah Danareksa Investment Management 17.75 Indonesia 6 Manulife Dana Ekuitas Syariah Manulife Aset Management Indonesia 17.38 Indonesia 7 Symmetry Islamic SYmmETRY Multi-Manager 16.97 South Africa 8 ETFS Physical Gold ETFS Metal Securities 16.77 Jersey 9 Public Islamic Select Enterprises Public Mutual 16.23 Malaysia 10 AlAhli Saudi Trading Equity The National Commercial Bank 16.15 Saudi Arabia Eurekahedge Islamic Fund Index* 1.94

Monthly returns for Emerging Markets funds (as of the 24th August 2010) FUND FUND MANAGER PERFORMANCE MEASURE FUND DOMICILE 1 iHilal Sharia Compliant Global Equity Opp (A) iHilal Financial Services 0.00 Cayman Islands 2 RHB Cash Management - Institutional RHB Investment Management 0.02 Malaysia 3 CIMB Islamic Money Market CIMB-Principal Asset Management 0.17 Malaysia 4 Public Islamic Money Market Public Mutual 0.18 Malaysia 5 PB Islamic Cash Management Public Mutual 0.18 Malaysia 6 Al Rajhi Commodity Mudarabah - EUR Al Rajhi Bank 0.23 Saudi Arabia 7 CMS Islamic Money Market CMS Trust Management 0.27 Malaysia 8 AlAhli Euro Murabahah The National Commercial Bank 0.29 Saudi Arabia 9 PB Islamic Cash Plus Public Mutual 0.30 Malaysia 10 ING i-Enhanced Cash ING Funds 0.32 Malaysia Eurekahedge Islamic Fund Index* 9.24

Contact Eurekahedge To list your fund or update your fund information: [email protected] For further details on Eurekahedge: [email protected] Tel: +65 6212 0900

Disclaimer Copyright Eurekahedge 2007, All Rights Reserved. You, the user, may freely use the data for internal purposes and may reproduce the index data provided that reference to Eurekahedge is provided in your dissemination and/or reproduction. The information is provided on an “as is” basis and you assume and will bear all risk or associated costs in its use, and neither Islamic Finance news, Eurekahedge nor its afﬁ liates provide any express or implied warranty or representations as to originality, accuracy, completeness, timeliness, non-infringement, merchantability and ﬁ tness for any

S&P Shariah Indices Price Index Levels

1300 1180 1060 940 820 700 580 S&P 500 Shariah S&P Europe 350 Shariah 460 S&P Japan 500 Shariah 340 220 100 23/08/10July-10 June-10 May-10 April-10 Mac-10 Feb-10

Index Code Index Name 23/08/10 July-10 June-10 May-10 Apr10 Mar-10 Feb-10 SPSHX S&P 500 Shariah 948.560 971.473 912.024 962.089 1053.050 1041.681 995.080 SPSHEU S&P Europe 350 Shariah 807.167 798.851 788.950 798.456 837.896 848.990 796.383 SPSHJU S&P Japan 500 Shariah 945.295 736.906 723.883 750.472 847.533 844.692 764.677

1300 1180 1060 940 820 700 580 S&P Pan Asia Shariah S&P GCC Composite 460 S&P Pan Arab Shariah 340 S&P BRIC Shariah 220 100 23/08/10July-10 June-10 May-10 Apr-10 Mar-10 Feb-10

Index Code Index Name 23/08/10 July-10 June-10 May-10 Apr10 Mar-10 Feb-10 SPSHAS S&P Pan Asia Shariah 981.111 976.003 929.342 921.335 1010.900 979.563 919.609 SPSHG S&P GCC Composite Shariah 676.225 685.668 659.910 672.795 750.159 753.479 712.179 SPSHPA S&P Pan Arab Shariah 115.373 116.915 112.797 115.358 128.364 128.302 121.503 SPSHBR S&P BRIC Shariah 1113.006 1130.118 1058.653 1069.475 1183.561 1182.207 1117.929

1200 1080 960 840 720 600 480 S&P Global Property Shariah 360 S&P Global Infrastructure Shariah 240 120 0 23/08/10July-10 June-10 May-10 Apr-10 Mar-10 Feb-10

Index Code Index Name 23/08/10 July -10 June-10 May-10 Apr10 Mar-10 Feb-10 SPSHGU S&P Global Property Shariah 671.865 664.799 612.598 608.951 667.56 684.290 646.637 SPSHIF S&P Global Infrastructure Shariah 81.822 85.243 79.474 77.86 86.827 85.743 82.828 The S&P Shariah Indices. Creating opportunity for Islamic investors.

To learn more, contact [email protected].

PERFORMANCE OF DJ INDEXES

DJIM WorldDJIM US DJIM Europe DJIM GCC DJIM ASEAN

-5 PRICE RETURN (%)

-10

-15 1 Week 2 Week 3 Week 1 Month 3 Month 6 Month 1 Year YTD

INDEX 1 Week 2 Week 3 Week 1 Month 3 Month 6 Month 1 Year YTD

DJIM World -0.71 -4.75 -4.01 -1.86 2.42 -2.93 4.95 -5.87

DJIM US -0.68 -5.00 -4.57 -2.98 -1.59 -4.38 3.18 -6.44

DJIM Europe -2.13 -6.61 -5.51 -2.04 6.28 -5.82 -0.68 -10.92

DJIM GCC -0.10 -1.93 -1.89 0.96 -1.70 -5.09 2.33 0.14

DJIM ASEAN 1.26 -0.96 -0.75 1.88 12.07 9.67 20.50 9.31

*all performance is cumulative, based on price return and US$

DESCRIPTIVE STATISTICS Market Capitalization (US$ billion) Component Weight (%)

Component Float INDEX Full Mean Median Largest Smallest Large Small number adjusted

DJIM World 2344 14376.06 11224.40 4.79 0.99 303.90 0.01 2.71 0.00

DJIM US 585 6119.59 5740.11 9.81 2.48 303.90 0.14 5.29 0.00

DJIM Europe 263 2640.15 2099.28 7.98 1.97 122.96 0.05 5.86 0.00

DJIM GCC 114 199.11 84.62 0.74 0.28 9.28 0.03 10.97 0.03

DJIM MENA 158 346.53 97.09 0.61 0.17 11.19 0.02 11.53 0.02

DJIM ASEAN 203 404.41 160.72 0.79 0.18 15.17 0.00 9.44 0.00

DJIM Titans 100 100 6225.44 5491.11 54.91 36.18 303.90 12.41 5.53 0.23

DJIM Asia/Paciﬁ c Titans 25 25 1005.13 643.97 25.76 19.71 64.97 12.41 10.09 1.93

For more information, please visit www.djislamicmarkets.com or contact

Anthony Yeung Ariff Sultan Tariq al-Rifai Regional Director Business Development Director Director Hong Kong, China, Taiwan, Korea, Malaysia, Singapore, Indonesia, India, Islamic Market Indexes Japan, Australia & New Zealand Thailand, Pakistan, Sri Lanka & Bangladesh Tel: +971 4374 8045 Tel: +852 2831 2580 Tel: +65 6415 4262 [email protected] [email protected] [email protected]

TOP 30 ISSUERS OF ISLAMIC BONDS 12 Months

Issuer Nationality Instrument Market Amt US$ Iss % Managers 1 Government of Dubai UAE Sukuk Euro market public 1,931,000,000 1 11.5 Standard Chartered, UBS National issue Bank of Abu Dhabi, Dubai Islamic Bank. Bahrain Islamic Bank, Mitsubishi UFJ Financial Group, Emirates NBD, Al Hilal Bank

2 Saudi Electricity Saudi Arabia Sukuk Domestic market 1,866,000,000 1 11.1 HSBC, Samba Capital public issue

3 Danga Capital Malaysia Sukuk Musharakah Domestic market 1,700,000,000 2 10.1 Standard Chartered, HSBC, OCBC, RHB public issue Capital, CIMB. DBS

4 Celcom Transmission (M) Malaysia Sukuk Domestic market 1,329,000,000 1 7.9 CIMB, Maybank Investment Bank public issue

5 Cagamas Malaysia Sukuk Murabahah Domestic market 1,256,000,000 9 7.5 CIMB, Maybank Investment Bank. HSBC, private placement; Cagamas, AmInvestment, RBS, RHB Domestic market Capital, Al-Rajhi Banking & Investment public issue 6 Malaysia Malaysia Sukuk Ijarah Euro market public 1,250,000,000 1 7.4 HSBC, Barclays Capital, CIMB issue 7 TDIC Sukuk UAE Sukuk Ijarah Euro market public 1,000,000,000 1 5.9 Standard Chartered, HSBC, Abu Dhabi issue Commercial Bank 8 Islamic Development Bank Saudi Arabia Sukuk Wakalah Euro market public 850,000,000 1 5.0 Deutsche Bank, BNP Paribas, HSBC, issue CIMB

9 Sime Darby Malaysia Sukuk Musharakah Domestic market 590,000,000 1 3.5 Public Bank, CIMB, Maybank Investment public issue Bank

10 Syarikat Prasarana Negara Malaysia Sukuk Ijarah Domestic market 573,000,000 1 3.4 CIMB, Maybank Investment Bank private placement 11 GE Capital Sukuk US Sukuk Euro market public 498,000,000 1 3.0 Goldman Sachs, KFH, National Bank of issue Abu Dhabi, Citigroup

12 Dar Al-Arkan International Saudi Arabia Sukuk Euro market public 446,000,000 1 2.6 Goldman Sachs, Deutsche Bank, Unicorn Sukuk issue Investment Bank 13 Pengurusan Aset Air Malaysia Sukuk Ijarah Domestic market 341,000,000 1 2.0 CIMB private placement 14 Projek Lebuhraya Utara Malaysia Sukuk Musharakah Domestic market 301,000,000 1 1.8 CIMB Selatan private placement

15 Khazanah Nasional Malaysia Sukuk Musharakah Domestic market 228,000,000 1 1.4 Standard Chartered, CIMB private placement 16 Saudi Hollandi Bank Saudi Arabia Sukuk Mudarabah Domestic market 193,000,000 1 1.2 Saudi Hollandi Bank, Riyad Bank public issue 17 Islamic Republic of Pakistan Pakistan Sukuk Domestic government 174,000,000 1 1.0 Standard Chartered debt 18 MISC Malaysia Sukuk Murabahah Domestic market 172,000,000 1 1.0 HSBC, CIMB public issue

19 Maju Expressway Malaysia Sukuk Musharakah Domestic market 168,000,000 1 1.0 CIMB public issue 20 Malaysia Debt Ventures Malaysia Sukuk Murabahah Domestic market 158,000,000 1 0.9 Lembaga Tabung Haji, RHB Capital, CIMB public issue 21 Bank Pembangunan Malaysia Malaysia Sukuk Murabahah Domestic market 153,000,000 1 0.9 HSBC, CIMB public issue

22 National Bank of Abu Dhabi UAE Sukuk Murabahah Foreign market public 153,000,000 1 0.9 HSBC, Maybank Investment Bank issue 23 Penerbangan Malaysia Malaysia Sukuk Murabahah Domestic market 148,000,000 2 0.9 Bank Muamalat Malaysia, CIMB, HSBC public issue AmInvestment Bank

24 UMW Holdings Malaysia Sukuk Musharakah Domestic market 141,000,000 1 0.8 Maybank Investment Bank private placement 25 Nomura Sukuk Japan Sukuk Ijarah Euro market public 100,000,000 1 0.6 KFH issue

26 Kuveyt Turk Katilim Bankasi Kuwait Sukuk Murabahah Euro market public 100,000,000 1 0.6 KFH, Citigroup issue

27 International Finance US Sukuk Euro market public 100,000,000 1 0.6 HSBC, KFH, Dubai Islamic Bank, Liquidity issue Management Centre 28 Gamuda Malaysia Sukuk Musharakah Domestic market 97,000,000 1 0.6 CIMB, AmInvestment private placement

29 Perusahaan Listrik Negara Indonesia Sukuk Ijarah Domestic market 87,000,000 2 0.5 (Persero) Danareksa Bahana Securities public issue Bank Mandiri, Trimegah Securities

30 CIMB Islamic Bank Malaysia Sukuk Musharakah Domestic market 86,000,000 1 0.5 CIMB public issue Total 16,865,000,000 75 100

20 MOST RECENT GLOBAL ISLAMIC BONDS

Priced Issuer Nationality Instrument Market Value US$ Managers

18th Aug 2010 Celcom Transmission (M) Malaysia Sukuk Domestic market public issue 1,329,000,000 CIMB, Maybank Investment Bank

11th Aug 2010 Cagamas Malaysia Sukuk Domestic market private placement 317,000,000 RBS, RHB Capital, Al-Rajhi Banking & Investment

11th Aug 2010 Malaysia Debt Ventures Malaysia Sukuk Murabahah Domestic market public issue 158,000,000 Lembaga Tabung Haji, RHB Capital, CIMB

3rd Aug 2010 Danga Capit Malaysia Sukuk Wakalah Foreign market private placement 1,089,000,000 OCBC, DBS, CIMB

22nd Jun 2010 Nationalof Abu Dhabi UAE Sukuk Murabahah Foreign market public issue 153,000,000 HSBC, Maybank Investment Bank

14th Jun 2010 Maju Expressway Malaysia Sukuk Musharakah Domestic market public issue 168,000,000 CIMB

27th May 2010 Malaysia Malaysia Sukuk Ijarah Euro market public issue 1,250,000,000 HSBC Barclays Capital, CIMB

24th May 2010 Projek Lebuhraya Utara Malaysia Sukuk Musharakah Domestic market private placement 301,000,000 CIMB Selatan

10th May 2010 Saudi Electricity Saudi Arabia Sukuk Domestic market public issue 1,866,000,000 HSBC, Samba Capital

7th May 2010 Cagamas Malaysia Sukuk Domestic market private placement 314,000,000 AmInvestment

27th Apr 2010 Cagamas Malaysia Sukuk Domestic market private placement 156,000,000 AmInvestment

1st Apr 2010 Bank Pembangunan Malaysia Sukuk Murabahah Domestic market public issue 153,000,000 HSBC, CIMB Malaysia

31st Mar 2010 Danga Capital Malaysia Sukuk Wakalah Foreign market private placement 612,000,000 Standard Chartered, HSBC, OCBC, RHB Capital, CIMB

10th Mar 2010 Khazanah Nasional Malaysia Sukuk Musharakah Domestic market private placement 359,000,000 Standard Chartered, CIMB

11th Feb 2010 Dar Al-Arkan International Saudi Arabia Sukuk Euro market public issue 450,000,000 Goldman Sachs, Deutsche Sukuk Bank, Unicorn Investment Bank

25th Dec 2009 Saudi Hollandi Bank Saudi Arabia Sukuk Mudarabah Domestic market public issue 193,000,000 Saudi Hollandi Bank, Riyad Bank

21st Dec 2009 Cagamas Malaysia Sukuk Domestic market private placement 148,000,000 Cagamas

19th Nov 2009 GE Capital Sukuk US Sukuk Euro market public issue 500,000,000 Goldman Sachs, KFH, National Bank of Abu Dhabi, Citigroup

16th Nov 2009 Cagamas Malaysia Sukuk Domestic market private placement 142,000,000 CIMB, Maybank Investment Bank

28th Oct 2009 Government of Dubai UAE Sukuk Euro market public issue 1,931,000,000 Government of Dubai

GLOBAL ISLAMIC BOND VOLUME BY MONTH GLOBAL ISLAMIC BOND VOLUME BY QUARTER

TOP 30 MANAGERS OF ISLAMIC BONDS 12 Months ISLAMIC BOND VOLUME BY CURRENCY US$ (BILLION)

Manager Amt US$ Iss % US dollar 7.0 1 CIMB 3,934,000,000 33 23.3

2 HSBC 2,355,000,000 13 14.0 Malaysian ringgit 5.6

3 Maybank Investment Bank 1,657,000,000 14 9.8 Saudi riyal 2.1 4 Standard Chartered 1,081,000,000 9 6.4

5 Samba Capital 933,000,000 1 5.5 Singapore dollar 1.2 6 AmInvestment 607,000,000 8 3.6

7 OCBC 500,000,000 3 3.0 UAE dirham 0.7

8 Barclays Capital 417,000,000 1 2.5

9 KFH 374,000,000 4 2.2 ISLAMIC BOND VOLUME BY ISSUER NATION US$ (BILLION) - 12 Months 10 DBS 370,000,000 2 2.2

11 Deutsche Bank 361,000,000 2 2.1

12 Abu Dhabi Commercial Bank 333,000,000 1 2.0 Malaysia 9.1

13 Dubai Islamic Bank 331,000,000 2 2.0 Saudi Arabia 3.4 14 Mitsubishi UFJ Financial Group 324,000,000 2 1.9

15 RHB Capital 317,000,000 4 1.9 UAE 3.1 16 UBS 306,000,000 1 1.8

16 Emirates NBD 306,000,000 1 1.8 US 0.6

18 Goldman Sachs 248,000,000 2 1.5 Pakistan 0.2 19 BNP Paribas 213,000,000 1 1.3

20 Bahrain Islamic Bank 208,000,000 1 1.2

21 National Bank of Abu Dhabi 197,000,000 2 1.2 GLOBAL ISLAMIC BOND VOLUME BY SECTOR - 12 Months

22 Public Bank 197,000,000 1 1.2

23 Citigroup 150,000,000 2 0.9 18% 24 Unicorn Investment Bank 149,000,000 1 0.9

Government 25 RBS 106,000,000 1 0.6 37% Finance 25 Al-Rajhi Banking & Investment 106,000,000 1 0.6 8% Utility & Energy 27 Cagamas 101,000,000 1 0.6 Oil & Gas 9% 28 Al Hilal Bank 97,000,000 1 0.6 Real Estate/Property Other 29 Saudi Hollandi Bank 97,000,000 1 0.6 12% 29 Riyad Bank 97,000,000 1 0.6 16%

Total 16,849,000,000 75 100

GLOBAL ISLAMIC BOND VOLUME - US$ ANALYSIS GLOBAL ISLAMIC LOANS - YEARS TO MATURITY (YTD Comparison)

2010 2009 2008 2007 2006

2005 2004

0% 10%20% 30% 40% 50% 60% 70%80% 90% 100% 0 to 3 years 3 to 5 years 5 to 7 years 7 to 10 years 10+years

Manager Commitment Market Manager Commitment Market Manager Issues Manager Issues (in US$) Share % (in US$) Share % 1 Malaysia (Government) 22,451,969,300 97 59.1 1 Malaysia (Government) 7,786,166,400 97 69.4 2 CIMB 4,485,844,575 75 11.8 2 CIMB 1,177,609,172 75 10.5 3 Malayan Banking 1,365,071,839 83 3.6 3 HSBC Banking Group 477,520,712 34 4.3 4 HSBC Banking Group 1,069,424,593 34 2.8 4 Barclays Bank 412,500,000 1 3.7 5 RHB Banking Group 923,132,566 35 2.4 5 RHB Banking Group 286,946,845 35 2.6 6 Malaysian Industrial Development 919,332,166 214 2.4 6 Malayan Banking 253,415,245 83 2.3 Finance 7 Malaysian Industrial Development 231,632,978 214 2.1 7 Standard Chartered 734,306,431 13 1.9 Finance 8 AMMB Holdings 698,729,631 55 1.8 8 Cagamas 193,660,288 26 1.7 9 Dubai Islamic Bank 602,646,875 3 1.6 9 AMMB Holdings 85,051,618 55 0.8 10= UBS 482,646,875 2 1.3 10 RBS 77,507,250 1 0.7 10= Mitsubishi UFJ Financial Group 482,646,875 2 1.3 11 EON Capital 54,379,586 71 0.5 12 Cagamas 465,919,418 26 1.2 12 Afﬁ n Holdings 46,364,565 19 0.4 13 Barclays Bank 412,500,000 1 1.1 13 OSK Holdings 33,573,106 21 0.3 14 Indonesia (Government) 242,558,020 14 0.6 14 Hong Leong Financial Group 10,922,135 4 0.1 15 Afﬁ n Holdings 200,178,705 19 0.5 15= Indo Premier Securities 10,822,500 3 0.1 16 OCBC Bank 180,236,152 24 0.5 15= Standard Chartered 10,822,500 13 0.1 17 EON Capital 167,497,037 71 0.4 17 Public Bank 7,813,545 7 0.1 18 OSK Holdings 157,166,825 21 0.4 18= Asia Sukses Mandiri Sejati 5,530,950 2 0.0 19= Goldman Sachs & Company 148,500,000 1 0.4 18= Bumiputera 5,530,950 2 0.0 19= Unicorn Investment Bank 148,500,000 1 0.4 18= Danareksa Sekuritas 5,530,950 11 0.0

SUKUK ISSUERS(12 months) AUG 2009 – AUG 2010 SUKUK ISSUERS (3 months) MAY 2010 - AUG 2010

Issuer Commitment Market Issuer Commitment Market Issuer Issues Issuer Issues (in US$) Share % (in US$) Share % 1 BNM Sukuk 13,809,512,600 68 33.0 1 BNM Sukuk 5,064,827,900 26 47.5

2 Malaysia (Government) 7,539,741,900 26 18.0 2 Malaysia (Government) 2,842,675,500 5 26.7

3 Bank Indonesia 3,199,637,862 41 7.6 3 Cagamas 549,356,950 4 5.2 4 Perusahaan Penerbit SBSN Indonesia 2,232,327,003 10 5.3 4 Perusahaan Penerbit SBSN 319,528,745 1 3.0 Indonesia 5 Dubai DOF Sukuk 1,930,587,500 2 4.6 5 Projek Lebuhraya Utara-Selatan 303,767,000 1 2.8 6 Cagamas 1,636,264,460 27 3.9 6 Pengurusan Air SPV 222,575,500 1 2.1 7 Pengurusan Air SPV 1,173,293,540 5 2.8 7 Maju Expressway 172,521,800 11 1.6 8 Khazanah Nasional 1,073,562,800 3 2.6 8 ESSO Malaysia 166,130,460 4 1.6 9 TDIC Sukuk 1,000,000,000 1 2.4 9 National Bank of Abu Dhabi 155,014,500 1 1.5 10 Esso Malaysia 747,297,060 12 1.8 10 Bank Indonesia 138,480,335 5 1.3 11 Danga Capital 621,408,000 1 1.5 11 Hytex Integrated 73,334,177 13 0.7

12 Sime Darby 594,088,000 3 1.4 12 Perusahaan Perseroan (Persero) 55,309,500 2 0.5 Perusahaan Listrik Negara 13 Syarikat Prasarana Negara 577,872,000 2 1.4 13 Perbadanan Kemajuan Negeri 50,831,530 3 0.5 14 Dar Al-Arkan International Sukuk 450,000,000 1 1.1 Selangor 14 Hubline 46,364,565 4 0.4 15 Malakoff 331,466,000 2 0.8 15 MM Vitaoils 41,869,826 15 0.4 16 Projek Lebuhraya Utara-Selatan 303,767,000 1 0.7 16 CJ Capital 35,343,306 10 0.3 17 MISC 288,936,000 3 0.7 17 WCT 31,002,900 1 0.3 18 Rantau Abang Capital 287,900,000 1 0.7 18 Tomei Consolidated 28,292,760 3 0.3 19 Hytex Integrated 251,819,062 44 0.6 19 Weida 28,192,035 7 0.3 20 Hubline 197,480,905 17 0.5 20 KNM Capital 28,130,125 4 0.3

Islamic Sukuk league tables reﬂ ect Shariah compliant bonds showing evidence of ownership of assets or their earnings. These results include (but are not limited to) the following securities/assets: Sukuk Salam, Sukuk Mudarabah, Sukuk Ijarah, Sukuk Murabahah, Sukuk Istisna and Sukuk Musharakah. For more information please contact: Aimee Webster Telephone: +1-646-223-6816 Email: [email protected]

LOAN MANDATED LEAD ARRANGERS(12 Months) AUG 2009 – AUG 2010 LOAN BOOKRUNNERS(12 Months) AUG 2009 – AUG 2010

Market Pro Rata Full Credit Market Lender Pro Rata (US$) Full Credit (US$) Deals Lender Share % (US$) (US$) Deals Share %

1 HSBC 1,518,372,333.40 5,985,989,333.62 5 17.2 2 Standard 1,142,422,170.70 3,733,106,140.19 6 12.9 1 Qatar Islamic Bank 1,098,538,943.20 1,098,538,943.20 1 57.2 Chartered 3 Qatar Islamic 1,098,538,943.20 1,098,538,943.20 1 12.4

4 Samba Financial 844,786,446.53 4,538,817,559.88 4 9.6 5 Credit Agricole 744,789,113.13 4,138,828,226.26 3 8.4 2 WestLB 291,161,570.19 291,161,570.19 3 15.2 Corporate & Investment Bank 6 National 699,985,528.84 4,049,221,057.68 3 7.9 Commercial Bank 3= Noor Islamic Bank 159,648,190.00 478,944,570.00 2 8.3 7= Arab Bank 380,500,000.00 2,283,000,000.00 1 4.3 7= Saudi Hollandi 380,500,000.00 2,283,000,000.00 1 4.3 Bank 3= Standard Chartered 159,648,190.00 478,944,570.00 2 8.3 9 Alinma Bank 319,485,528.84 1,766,221,057.68 2 3.6

10 WestLB 218,232,314.04 291,161,570.19 3 2.5

11= Al Rajhi Banking & 187,875,000.00 1,503,000,000.00 1 2.1 5 Arab Banking 84,648,190.00 253,944,570.00 1 4.4 Investment 11= Bank of China 187,875,000.00 1,503,000,000.00 1 2.1

13 Royal Bank of 175,000,000.00 525,000,000.00 2 2.0 Royal Bank of 6 75,000,000.00 225,000,000.00 1 3.9 Scotland Scotland 14 Noor Islamic Bank 159,648,190.00 478,944,570.00 2 1.8

15 Masraf Al Rayan 126,666,666.67 460,000,000.00 2 1.4 7 Citigroup 53,000,000.00 53,000,000.00 2 2.8

16= National Bank 99,997,333.40 399,989,333.62 1 1.1

16= Riyad Bank 99,997,333.40 399,989,333.62 1 1.1 ISLAMIC LOANS RAISED(12 Months) AUG 2009 – AUG 2010

18 Arab Banking 84,648,190.00 253,944,570.00 1 1.0 Borrower Country Islamic Loan Amount (US$) 19 Citigroup 53,000,000.00 53,000,000.00 2 0.6 20 Development 51,666,666.67 260,000,000.00 2 0.6 1 Power & Water Utility Co for Jubail Saudi Arabia 2,283,000,000 Bank of Singapore & Yanbu 21= Bank Islam 26,666,666.67 160,000,000.00 1 0.3 2 Rabigh Independent Power Saudi Arabia 1,503,000,000 Malaysia Project 21= Sumitomo Mitsui 26,666,666.67 160,000,000.00 1 0.3 3 Qatari Diar Real Estate Qatar 1,500,000,000 Financial Investment 21= Malayan Banking 26,666,666.67 160,000,000.00 1 0.3 4 Qatari Diar Real Estate Qatar 1,098,538,943 Investment 24= Oversea-Chinese 25,000,000.00 100,000,000.00 1 0.3 Banking Corp 5 Riyadh Independent Power Plant Saudi Arabia 616,049,284

24= Mitsubishi UFJ 25,000,000.00 100,000,000.00 1 0.3 6 Etihad Etisalat Saudi Arabia 399,989,334 Financial Group 7 Qatari Diar Real Estate Qatar 300,000,000 24= CIMB Group 25,000,000.00 100,000,000.00 1 0.3 Investment Holdings

27= Kuwait Finance 18,232,314.04 91,161,570.19 1 0.2 8 Asya Katilim Bankasi Turkey 253,944,570 House 9 Dubai International Capital UAE 225,000,000 27= Abu Dhabi 18,232,314.04 91,161,570.19 1 0.2 Commercial Bank 10 Qatar Airways Qatar 160,000,000

27= Standard Bank 18,232,314.04 91,161,570.19 1 0.2 11 Emirates Trading Agency UAE 100,000,000 12 Gulf Finance House Bahrain 100,000,000

30= Al Hilal Bank 14,000,000.00 42,000,000.00 1 0.2 13 Olam International Singapore 100,000,000

14 Global Investment House Kuwait 91,161,570 30= BNP Paribas 14,000,000.00 42,000,000.00 1 0.2 15 Al Jaber Aviation UAE 42,000,000 30= National Bank of 14,000,000.00 42,000,000.00 1 0.2 Abu Dhabi 16 Ozkan Demir Celik Sanayi Turkey 40,000,000

SUKUK BY COUNTRY(12 Months) AUG 2009 – AUG 2010 LOANS BY COUNTRY (12 Months) AUG 2009 – AUG 2010

Country Volume Issued Volume Outstanding Country Volume (US$) Market Share (%)

Malaysia 32,252,114,091 21,921,531,809 Saudi Arabia 4,802,038,618 54.4 Indonesia 5,646,014,883 2,543,405,447 Qatar 3,058,538,943 34.7 Eurobond 2,930,587,500 2,930,587,500 US 575,000,000 575,000,000 UAE 367,000,000 4.2 Saudi Arabia 193,328,500 193,328,500

Pakistan 174,265,020 174,265,020 Turkey 306,944,570 3.5 Singapore 92,728,884 92,728,884 Singapore 100,000,000 1.1 Bahrain 42,436,820 26,521,700

Cayman Islands - - Bahrain 100,000,000 1.1 UAE - - Kuwait 91,161,570 1.0 Jersey - -

SUKUK BY INDUSTRY(12 Months) AUG 2009 – AUG 2010 LOANS BY INDUSTRY(12 Months) AUG 2009 – AUG 2010

Industry Volume Issued Volume Outstanding Industry Volume (US$) Market Share(%)

Other ﬁ nancial 21,515,292,596 12,987,716,424 Other ﬁ nancial 22,091,725,671 13,697,821,429 Sovereign 10,947,322,427 7,811,035,345 Sovereign 10,913,644,781 7,811,035,345 Agency 3,413,979,933 3,373,285,553 Agency 3,433,865,173 3,375,199,313 Manufacturing 2,087,188,806 1,340,948,294

Transportation 1,161,673,755 997,876,415 Manufacturing 2,091,762,149 1,344,575,693

Energy company 820,440,475 102,945,990 Transportation 1,148,992,755 997,876,415 Service company 453,626,747 320,159,268 Energy company 819,024,045 102,945,990 Banks 435,023,800 435,023,800 Service company 423,881,717 320,159,268 Electric power 418,970,597 243,146,597

Consumer goods 108,387,410 108,387,410 Banks 435,023,800 435,023,800

Telephone 21,197,600 21,197,600 Electric power 418,970,597 243,146,597

GLOBAL ISLAMIC VOLUME SUKUK/LOANS (US$ IN MILLIONS)

18,000

16,000 Sukuk 14,000 Loan

12,000

10,000

8,000

6,000

4,000

2,000

0 1Q - '07 2Q - '073Q - '07 4Q - '07 1Q - '08 2Q - '08 3Q - '084Q - '08 1Q - '09 2Q - '09 3Q - '09 TD 4Q - '09 TD 1Q - '10 TD 2Q - '10 TD 3Q - '10 TD

For more information please contact: Aimee Webster Telephone: +1-646-223-6816 Email: [email protected]

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© Page 44 25th August 2010 Company Index Company Page Company Page Company Page AAOIFI 14, 25 CIMB Principal Asset Management 5, 12 Maiwand Bank 4, 12 ABC Islamic Bank 7 Citi 34 Malaysia Airports Holdings 4 ABC International Bank 13 Citibank 4 Malaysia Debt Ventures 4 Abu Dhabi Islamic Bank 8, 9 City Development 30 Malaysian Accounting Standards Board 24 Addleshaw Goddard 13 Credit Libanais 6 MARC 3, 11, 32 AEP Capital 17 Credit Suisse 34 Maybank 4, 30 AEP Investment Management 17 Crescent Investments Australasia 5 Maybank Investment Bank 4, 32 Afghan United Bank 4, 12 Da Afghanistan Bank 4, 12 Maybank Islamic 4 Aga Khan Agency 13 Danga Capital 29 McAfee 20 Al Baraka Banking Group 7, 8, 9 DBS Bank 28, 29, 30 Midas Plantation 11 Al Hilal Bank 9 Denton Wilde Sapte 12 Misr Iranian Development Bank 3 Al Jaber Energy Services 9 Dar Al-Arkan 28 Millennium Private Equitiy 13 Al Jaber Group 9 Dell 4 MNRB Holdings 10 Al Khaliji Commercial Bank 6 Deutsche Bank 6, 9, 34 Monetary Authority of Singapore 16, 30 Al Rajhi Bank 6, 15 Development Bank of the Philippines 31 Moody’s 11 Al Rajhi Bank Malaysia 14 Dimension Data 21 Mubadala Development Company 34 Al Rajhi Banking Group 14 Dubai Islamic Bank 6 Muslim Aid 10 Al Rajhi Banking & Investment Corporation (Malaysia) Econophy Capital Advisors 27 Muslim Aid Sri Lanka 10 4EFG Hermes 6 Nakheel 9 Al Rajhi Holding Group 17 EON Bank 11 Nasdaq Dubai 9 Al Salam Bank 6 EON Capital 11, 22, 23 National Bank of Bahrain 6 Al Sham Islamic Bank 13 Ernst & Young 20 National Commercial Bank 23 Al-Amanah Islamic Investment Bank of the Philippines Etiqa Takaful 10 Nava Leasing 5 31Faisal Islamic Bank of Egypt 3 Noor Islamic Bank 7 Albaraka Turk 5 First Micro Finance Institution 13 Noor Takaful 10 Allen & Gledhill 17 Fitch 11 Norton Rose 13 Allianz 10 Fujairah 10 Oasis Group Holdings 21 Amana Takaful 10 Gatehouse Bank 12, 34 OCBC 28 Amanie Business Solutions 4, 32 Ghazanfar Bank 4, 12 Oman 10 American Accounting Association 13 Google 4 Oman Insurance Company 10 AmIslamic Bank 4 Guernsey Financial Services Commission 12 Oracle 20 Amlak Finance 7 Gulf Finance House 6, 7, 9 OSK Investment Bank 23 Arab Gulf Program for United Nations Development Gulf Venture Capital Association 6 Otoritas Jasa Keuangan 5 13Honda 22 Padiberas Nasional 11 Argyll Investment Services 5, 10, 12 Hong Leong Bank 4, 11, 22 Permodalan Nasional 10 Arzim Associates 25 Hong Leong Tokio Marine Takaful 10 Potash Corp 20 Bahrain Financial Harbour 6 HSBC 7, 34 Primus Paciﬁ c 22, 23 Bahrain Financial Harbour Holding 6 HSBC Malaysia 32 Procter & Gamble 4 Bahrain Islamic Bank 6 HSBC Amanah 7, 13 Prudential Assurance Malaysia 10 Bank Alfalah 12 HSBC Amanah Malaysia 32 Prudential Indonesia 10 Bank Asya 5 HSBC Bank Middle East 11, 28 Prudential Syariah Indonesia 10 Bank of Ireland 13 HSBC Holdings 11 PricewaterhouseCoopers 6 Bank Indonesia 4 Hytex Integrated 3 RAM 11, 32 Bank Islam Malaysia 3, 4 Ibdaa Bank 9, 13 Reliance Asset Management 5, 12 Bank Kerjasama Rakyat Malaysia 10 IMF 12 RHB Investment Bank 4 Bank Mille Afghan 12 Intel 20 Roads and Transport Authority 10 Bank Muamalat Malaysia 9 Innovation Associates Consulting 4 Royal and Sun Alliance 10 Bank Negara Malaysia 3, 15 Insurance Commission of Jordan 10 S&P 4, 19 Bank of Bahrain and Kuwait 6 International Innovative Technologies 13 Samsung Electronics 4 Barclays Capital 5, 6 Islamic Corporation for the Development of the Private Securities Commission of Malaysia 15 Berjaya Corp 22 Sector 8 SI Capital 11 BHP Biliton 4, 20 Islamic Development Bank 3, 4, 28 Standard Chartered Bank 7 BIMB Holdings 3 JCR-VIS Credit Rating Company 11 Sunway Group 22 BNP Paribas 34 JP Morgan Asset Management 34 Swiss Re 10 BNY Mellon 8 Kabul Bank 12 Syarikat Takaful Malaysia 3 Bukopin Bank 5 Karwani Law Ofﬁ ce 13 Syria International Islamic Bank 13 Bursa Malaysia 4 Kelantan Golden Trade 4 Takaful House 10 Cagamas 4, 14, 15, 32 Keppel Data Centre Investment Management 17 Takaful Ikhlas 10 Cayman Island Stock Exchange 13 Keppel Telecommunications & Transportation 17 The Insurance Commission of Jordan 10 Cham Bank 13 Khazanah Nasional 18, 28, 29 The Islamic Bank of Asia 28, 30 Capital Intelligence 11 Kim Eng Holdings 22 The Islamic Bank of Britain 13 Celcom Axiata 4 King & Spalding 3 The Islamic Bank of Thailand 5 Celcom Transmission 4 Kuveyt Turk 5 The Royal Bank of Scotland 4 Central Bank of Bahrain 6 Kuveyt Turk Participation Bank 5 The World Bank 13 Central Bank of Jordan 6 Kuwait Finance House 6 Turkiye Finans 5, 23 Central Bank of Syria 13 Kuwait Finance House Malaysia 5 Tuwairqi Steel Mills 4 China Mobile 4 Kuwait Finance House Research 6 UBS 34 CIMB 28 Kuwait Financial Centre 5, 7, 12 WCT 11 CIMB Islamic 32 Lembaga Tabung Haji 3 WTO 3 CIMB Investment Bank 4, 32 Linux 22 Zakat Fund 7 CIMB Principal Islamic Asset Management 6 Macquarie Capital 34

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