the world’s global islamic finance news...

In this issue

News Briefs

Capital Markets .......................................... 1EIB prices bondsDIB’s new schemeQuadrant champions ShariahAmlak’s pipeline

more inside...

Ratings ......................................................... 8ADIB upgradedDP Sukuk rated

more inside...

Private Equity Funds Shine for GCC Investors ....................................................... 9

Islamic Private Equity Outgrowing Conventional Private Equity ....................12

Philippines – Sustainable and Resilient .....................................................14

Apathy for Islamic Banking ..................... 17

DIFC Investments – Ratings Rationale .18

Meet the Head ..........................................20Abradat Kamalpour, Partner, Dechert

Termsheet ..................................................21IIG Sukuk Mudarabah

Takaful News .............................................22Doha Takaful Viva Aviva!

more inside...

Takaful Report ..........................................23Challenges for Takaful

Moves ........................................................ 25

Deal Tracker NEW ........................................26

Eurekahedge .............................................27

Dow Jones Islamic Indexes .....................28

Bondweb ....................................................29

Dealogic – League Tables .......................30

Events Diary...............................................33

Subscriptions Form ..................................34

Country Index ............................................34

Company Index .........................................34

Vol. 4, Issue 24 15th June 2007

T h e W o r l d ’ s G l o b a l I s l a m i c F i n a n c e N e w s P r o v i d e r

PAKISTANHabib goes halalHabib Bank (HB) plans to establish a fully fl edged Islamic banking subsidiary. Zakir Mahmood, president of HB, affi rmed that the company intends to increase the number of investments and banking transactions undertaken via Shariah.

In related news, HB and Meezan Bank were recently mandated to arrange PKR8.5 billion (US$140.26 million) in Shariah compliant

facilities for Dawood Hercules Chemicals (DHC). The fi nancing will be arranged via multiple structures, each aimed to meet the specifi c objectives of the company.

HB and Meezan will act as lead arrangers, with Meezan also acting as the deal’s structuring agent. DHC is the fi rst subsidiary of the Dawood Group to undertake Shariah compliant fi nancing.

GLOBALShock departures for Dar Al IstithmarDar Al Istithmar (DI) has lost its whole team, headed by Dr Humayon Dar, Islamic Finance news can exclusively reveal. Dr Humayon, previously managing director of the company, Dr Adnan Aziz, ex-product manager, and four other team members have left to establish a new Shariah structuring and advisory company, Al Dar Islamic.

DI, a joint venture between Deutsche Bank, Russell Wood and Oxford Islamic Finance, was incorporated in the UK as a private limited company offering Islamic solutions. Offi cials at Deutsche Bank declined to comment on the future of DI, although they did confi rm the departure of Dr Humayon and his team.

Al Dar Islamic is a subsidiary of BMB Islamic, which is owned by BMB Group. The new company is a wealth management group catering to a select group of investors, especially Muslim royal families in the Middle East and South-East Asia. BMB Group is domiciled in Brunei, under BMB Capital. Prior to joining DI as vice president, Dr Humayon was founder and director at Loughborough University’s MSc course in Islamic economics, banking and fi nance.

Dr Humayon will serve as chairman and CEO of both Al Dar Islamic and BMB Islamic. The newly established company is currently on the lookout for more hires.

PAKISTANIslamic stock indexThe Securities and Exchange Commission of Pakistan (SECP) is set to introduce a Shariah compliant index on the Pakistani bourse.

Razi Ur Rehman, chairman of the SECP affi rmed: “Islamic fi nancing is needed to boost investments and trading in stock markets, following the successful results of Shariah

compliance in banking and insurance.”

In related news, the Karachi Stock Exchange (KSE) will become a private entity within the stock market by the end of 2007. 40% of its shares will be owned by enlisted members, with the remaining 60% fl oated on the open market.

www.islamicfi nancenews.comNEWS BRIEFS

15th June 2007©

UAEEIB prices bondsEmirates Islamic Bank (EIB) has priced its US$350 million Sukuk at 30 basis points over LIBOR. The fi ve-year Sukuk has also been listed on the London Stock Exchange.

The Sukuk raised more than US$500 million, with 34% derived from European investors and 38% from the Asia-Pacifi c region. The Sukuk is the fi rst sale in EIB’s US$1 billion debt program to fund acquisitions and new product development.

The Sukuk has a rating of A1 by Moody’s and A/A-1 by Standard & Poor’s. EIB and Standard Chartered Bank are the Sukuk’s co-managers.

INDIASurprise Islamic welcomeIndia’s 2i Capital Group, along with Amwal Investment, is set to offer a Shariah compliant infrastructure fund in the country.

The consortium has launched a US$300 million offshore Islamic In-dian Infrastructure Development Fund, registered with the Securities and Exchange Board of India (SEBI). The fund will have a seven-year tenure, and invest in energy, road and highway projects.

Investors unwilling to invest Islamically will be given an option to in-vest through a parallel investment vehicle. This vehicle will invest in projects and companies with the fund on a pro rata basis. The Indian Infrastructure Development Fund aims to post net investor returns of 30% a year throughout the seven years, with the fi rst returns expected within two years.

QATARQIB CEOs meetQIB Group’s CEOs met to discuss the group’s future strategy and cooperation between the fi nance houses and affi liated banks.

QIB CEO Salah Al Jaidah headed the meeting, which was attended by the group’s general managers as well as by QINVEST CEO Abdullatif Al Meer, CEO of Arab Finance House Fouad Matraji, Asian Finance Bank CEO Faisal Shoueikh, and European Finance House CEO Mike Clark.

QIB confi rmed its full readiness to commit its 25-year expertise in Islamic banking inland and abroad at the disposal of its affi liate fi nance houses. Salah also confi rmed that QIB is considering the establishment of more overseas banks in the near future.

UAE/UKNew indicesThe FTSE Group and the Abu Dhabi Securities Market (ADSM) have agreed to create a new set of indices for the Abu Dhabi market. The agreement is in line with ADSM’s intentions to attract more exchange traded funds (ETF) trading and develop Shariah screened indices.

The fi rst phase of development will see FTSE and ADSM research and design a new suite of indices. ADSM will contribute its signifi cant local market understanding and expertise, while FTSE will design and create indices in line with its internationally renowned methodology, relevant and attractive to investors worldwide.

GLOBALHedge funds debatedIslamic hedge funds are seen by many as a new mechanism for fund managers to tap into Gulf liquidity. However, there has been much controversy in terms of the funds’ true Shariah compliance.

Afaq Khan, head of Islamic banking at Standard Chartered believes: “It’s absolutely imperative that the Islamic fi nance industry has hedging tools. Hedge funds are work in progress. Islamic derivatives for hedging purposes are absolutely allowed as a risk management tool.”

Eric Meyer, CEO of Shariah Capital, defends his fi rm’s recently launched product: “Islamic hedge funds have the advantage of not being highly borrowed, unlike many hedge funds. They also avoid fi nancial stocks – for the same Shariah compliance reasons, and this is another important strength in bad times as fi nancial stocks tend to suffer most. We can demonstrate this in recent performance fi gures.”

However, Antoine Massad, chief executive of Man Investments Middle East, is adamant: “There are some who claim to have Islamic hedge funds in the market. Yes, there are three or four, but no one has invested in them, so to me they don’t exist.” Ahmed Abbas of Bahrain’s Liquidity Management Center is also skeptical: “I don’t care, if you take 20 Islamic steps in order to short sell, you cannot sell what you don’t own.”

MALAYSIADelay affects debtEncorp’s delay in deciding on variable costs for the construction of 10,000 units of teachers’ quarters threatened its debt servicing ability. Encorp had previously issued four tranches of RM2.75 billion (US$794.03 million) in Bai Bithaman Ajil notes.

Encorp will receive a total of RM162.59 million (US$46.93 million) in variable and other costs, following the government’s agreement to the quantum. Its unit Encorp Systembilt (ESS) will receive RM80.91 million (US$23.35 million) as retrospective concession payment and subsequently a monthly payment of RM1.55 million (US$447,509) until the end of the concession in January 2028.

PricewaterhouseCoopers Advisory Services was appointed as independent audit consultants to assess the validity of the variable and other costs in ESS’s fi nal account claim.

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15th June 2007©

PAKISTANMoney money moneyBankIslami is set to launch wealth management services encompass-ing integrated fi nancial planning solutions, proprietary products, third party products and retail banking products and services.

Bank Islami’s CEO Hasan Bilgrami also recently called for an end to riba in the Pakistani fi nancial landscape.

SAUDI ARABIAS&P to boost foreign investmentsStandard & Poor’s (S&P) has launched the S&P Saudi Shariah Index, with six Gulf stock indices. The launch is testament to S&P’s confi dence in Gulf stocks.

An expert-driven council will monitor the companies’ Shariah compliance. According to Alka Banerjee, vice-president of S&P for index services, the launch was 100% S&P’s initiative, without any support from the Saudi Capital Market Authority.

The index will host 62.9% of total companies domiciled on the Saudi bourse, ranking Saudi Arabia number one in the S&P Islamic Gulf index. Kuwait was placed number two with 20.1%.

UAEAmlak’s pipelineAmlak Finance plans to sell up to US$272 million in Sukuk for international expansions and long-term funding.

Emirates National Bonds and Finance has been mandated as the Sukuk’s advisor. The bonds are still awaiting regulatory approval.

MALAYSIATop 10 in the worldEurekahedge has placed Alliance Investment Management (AIM)’s Malaysian Islamic funds – Alliance Dana Adib (ADA) and Alliance Islamic Money Market (AIMM) – among its top 10 Islamic funds.

These rankings are testament to AIM’s capability and experience as a premier funds manager. Nik Azhar Abdullah, executive director of AIM stated: “The ADA and AIMM funds have demonstrated their values in terms of returns and stability. In fact, these two funds have consistently outperformed other trust funds in the same category.”

AIM is a subsidiary of Alliance Investment Bank, with assets under management worth RM2.34 billion (US$677.99 million) as at the 31st May 2007.

GLOBALQuadrant champions ShariahQuadrant will extend SAB2 – its Basel II Standardized Approaches capital adequacy calculation and reporting solution – to meet the requirements of institutions offering Islamic fi nancial services.

The extensions will adhere to the Guiding Principles of Risk Management for Institutions and Capital Adequacy under the Islamic Financial Services Board (IFSB). SAB2 will moderate Islamic fi nance products such as Murabahah, Salam, Istisnah, Mudarabah, Musharakah, Sukuk and Ijarah.

SAB2’s reporting will provide the minimum capital requirement calculation for credit, market and operational risk based on standardized approaches across various jurisdictions.

UAEDIB’s EmaratiDubai Islamic Bank (DIB) has launched the sixth installment of its banking training program “Emirati.” Held at the Emirates Banking Institute (EBI), Emirati will train UAE candidates to join the banking sector.

Ahmed Al Sirkal, head of group human resources for DIB, elucidated: “All students will gain in-depth experience within different divisions of the bank, including customer service, Islamic banking, English language skills, and management of banking systems and software. The trainees, whose progress will be supervised by the Emiratization division of the bank, will be placed in positions appropriate to their skills at the conclusion of the program.”

This training is in line with DIB’s aim to achieve 50% Emiritization in its workforce by the end of 2007.

SINGAPOREIslamic fi nance boot campSingapore Polytechnic has set up a training and research center for Islamic fi nance, with the aim of producing industry professionals. The center was launched in association with the Singapore Business Federation and Glohex Groups consulting company.

The upcoming academic year will see Singapore Poly offering Islamic fi nance elective modules.


15th June 2007©

www.IslamicFinanceTraining.com

FOR MORE INFORMATION, contact: Andrew Tebbutt Tel: 603 2143 8100;

Email: [email protected]

CALENDAR 2007

Essentials of Islamic Finance & Banking

25 – 28 June, HONG KONG

Structuring Islamic Financial Products

9 – 12 July, ZURICH

Legal & Documentary Issues in Islamic

Financial Products

25 – 28 July, KUALA LUMPUR

Post-Conference Workshop Series

15 – 16 August, KUALA LUMPUR

Structuring Islamic Financial Products

20 – 23 August, JOHANNESBURG

Undertaking Effective Shariah Control for

Islamic Banking

27 – 29 August, KUALA LUMPUR

Managing Islamic Funds

21 – 22 October, DUBAI

Managing the Shariah Advisory Process

21 – 23 October, DUBAI

Contemporary Islamic Finance & Islamic

Financial Products

22 – 25 October, KUALA LUMPUR

presents

SUDANUpdate: SudanThe Sudanese banking landscape is riddled with political controversy, stemming from the Comprehensive Peace Agreement (CPA), which fi rst dictated a dual banking system, where the north will retain the Sudanese pound and the south will utilize the Sudanese dinar. In terms of religion, Shariah law will remain applicable in the north, with parts of the constitution to be re-written to exclude non-Muslims throughout Sudan.

Following up from the highly publicized ban on Islamic banking in Sudan’s south, Islamic Finance news spoke to Ali Omer Ibrahim, general manager of Faisal Islamic Bank, Sudan to get an update on the current situation.

Ali was candid when speaking about the ban. “According to this ban, all branches of Islamic banks will close. Of course clients will be adversely affected, and deprived of interest-free banking. However, if banks are ordered to close, they have to close. But if a waiver to the ban is effected, we will continue to operate there and are ready to compete in a dual banking system.”

Faisal Islamic Bank has a presence in three major cities in the south. Ali believes that these branches have so far compensated for the shortage of banking institutions. In terms of withdrawing, Ali stated: “We will of course lose part of our business, but not that much. These are three out of thirty branches, and they do not contribute any more than 2.5% of our annual profi t and 1.1% of deposits.”

Commenting on the CPA, Ali was fi rm: “The CPA is a great achievement. No development can be effected without peace and no business can be conducted in a disturbed atmosphere. This is not a sudden ban. We have been discussing it among the Union of Sudanese Banks, with the Bank of Sudan and the south, but no breakthrough was obtained.”

Despite the ban, Ali is however optimistic regarding Islamic banking in Sudan. “Islamic banking in Sudan is expanding and more new banks are entering the market, including foreign banks, all Shariah compliant. Reception from the public has spurred this,” he stated.

Other banks such as Al Salam Bank are also capitalizing on the Sudanese economy. Al Salam’s website reads: “Due to the current economic and social conditions in Sudan and the remarkable changes caused by such conditions, it has become very necessary to build a strong base and to design new plans in order to strengthen the building process of the country and to better serve the society. Participate in Islamic fi nancing programs that enjoy lenient conditions; thus allowing you to fi nd the most appropriate solutions that would help reduce the hardships of your daily life.”

Watch this space for more updates on Sudan.

KUWAITMarkaz outperforms Kuwait Financial Center (Markaz)’s Fund for Excellent Yields outperformed the Kuwait Investment Company (KIC)’s index by 13%, reaching 14.6% for May, as against the 11.61% posted by the KIC index. In total, Markaz’s funds posted a year-to-date yield of 40.1%.

The Markaz Islamic Fund posted an 11.6% hike in May, reaching 30.4% so far this year, and outperforming the Al-Mal Shariah Index by 3%. The Markaz Forsa Financial Fund, a fund that invests in the options market, returned 6.5% for the month of May, and 20% since the start of 2007.

High market liquidity and a 179% boost in total corporate profi ts at KD1.19 million (US$4.13 million) are believed to have led to the funds’ performance.


15th June 2007©

UKCapital markets ConferenceRegistration for the Islamic Capital Markets Conference on the 27th and 28th June is now open. The conference will focus on Islamic issuers and investors, the interfaces between them, and future growth.

For further information and to register your team, email: [email protected].

BANGLADESHIFI approvesIslamic Finance and Investment (IFI) has approved 12.5% in shareholder cash dividends for 2006. As at the 31st December 2006, IFI’s investments rose to over TK1.89 billion (US$27.39 million), charting a 16% growth. The company’s pre-tax profi ts stood at TK55 million (US$797,101).

SINGAPORE/UAEALDAR JVALDAR Properties has signed a memorandum of understanding with Keppel Corporation of Singapore to form a joint venture property management company. The MoU relates to a strategic partnership which will see through the development of selected sites at Al Raha Beach.

Although the JV’s value is still pending, ALDAR will have a 51% stake in the company, with Keppel holding 48%.

MALAYSIA/THAILANDDon’t just bank on Shariah According to a recently published article in a Thai daily, Malaysia cannot just bank on its halal projects. Some analysts say that the recent boom in Islamic fi nance and Malaysia’s drive to be at its forefront will not sustain the Malaysian economy.

Islamic investment funds amount to US$12.5 trillion, mostly derived from petro-money and the ruling families of Arab countries. Malik Al Awan, chief academic offi cer of the International Center for Education in Islamic Finance (INCEIF) elucidated: “Malaysia doesn’t try to tap the ruling families’ money in particular.”

Malaysia’s economy is still highly dependent on manufacturing (second to services), which comprises 30% of the country’s gross domestic product.

QATARDSM shuffl eThe Doha Securities Market (DSM) will be reshuffl ed on the 1st

September to exclude inactive shares.

The 20-stock index is set to list Qatar National Bank, Commercialbank, Qatar International Bank, Qatar Islamic Bank, Doha Bank, Qatar Islamic Insurance, Salam International, UDC, National Leasing, Mawashi (Qatar Meat and Livestock), Gulf Warehousing, Industries Qatar, Nakilat, Medicare Group, Real Estate Investments, Qatar Navigation, Qatar Shipping, Qatar Fuel, Qatar Telecom (Qtel) and Dlala.

Ahli Bank, Doha Insurance, Qatar Insurance, Qatar National Cement, Qatar Flour Mills, Qatar Industrial Manufacturing Company and Qatar Electricity and Water Company will be excluded from the DSM.

The decision to include/exclude entities was based on their respective performance, as measured by market capitalization, number of traded shares, trading value and number of transactions.

KUWAITJaber Islamic BankKuwait is set to see a third Islamic bank, joining the likes of Kuwait Finance House and Boubyan Bank. Jaber Islamic Bank (JIB) will have a start-up capital of US$347 million.

76% of JIB’s shares will be distributed to Kuwaiti citizens. The bank is awaiting the necessary regulatory approvals.

UAEOffi ce expansionFirst Gulf Bank (FGB) has opened a representative offi ce in Singapore. The bank aims to expand its operations to South-East Asia and diversify revenues. FGB also has more international offi ces in the pipeline.

UAEDIB’s new schemeDubai Islamic Bank (DIB) has launched a new capital protected in-vestment scheme. The fi ve-year notes are expected to open up the US$2 trillion hedge fund industry to Muslim investors. Deutsche Bank and Goldman Sachs Asset Management were involved in the notes’ structuring.

Deutsche Bank will issue the hedge fund-linked notes at a minimum subscription of US$10,000. They will be benchmarked against Gold-man Sachs Asset Managements’ index, without directly investing in hedge funds.

Naveed Ahmad, head of investment at DIB, assured: “The notes will refl ect the performance of the index, so the customer’s money will never actually go into the actual hedge fund. It will go into these notes.”

MALAYSIAKFH wants moreKuwait Finance House Malaysia (KFHM) will open a minimum of three branches before the end of the year. The bank plans to invest an average of RM1.5 million (US$432,694) per branch.

The branches are slated for the major cities of Johor Bahru, Penang and the Pavillion Mall in Kuala Lumpur.

QATARBorrowing to expandThe National Leasing Company (NLC) will borrow up to QR300 million (US$82.42 million) to part fi nance its activities, including expansion.

NLC, whose shareholders include Doha Bank, International Islamic, Qatar Islamic Insurance, Qatar Navigation, Qatar Shipping and Qatar National Cement, has not disclosed its modes of borrowing. However, they are expected to be Shariah compliant.


15th June 2007©

PAKISTANFirst Dawood goes liveNewly established First Dawood Islamic Bank (FDIB) has adopted SunGard’s System Access SYMBOLS for Islamic banking.

SYMBOLS aims to provide FDIB with Shariah compliant services and accelerate the bank’s branch and business expansions. The software will provide core banking and workfl ow matching international best practices, and will support Sukuk, Murabahah, Bai Bithaman Ajil, Istisnah, Ijarah, Musharakah and Mudarabah structures.

Phase 1 of the implementation is now completed, and the system is ready to go live.

UAEFollowing in Etihad’s footstepsDubai Aerospace Enterprise (DAE) plans to sell its maiden Sukuk for expansion purposes. The bonds are slated to be sold by the end of the year.

DAE targets US$15 billion in investments, including airport development and aircraft leasing. The US$1.8 billion acquisition of Standard Aero Holdings and Piedmont/Hawthorne Holdings from the private equity fi rm Carlyle Group is also on the horizon for DAE.

MALAYSIASound prospectsBaljeet Kaur Grewal of Kuwait Finance House Malaysia (KFHM) predicts the Malaysian economy to remain formidable and sustainable throughout 2007. This is underpinned by sound overall fundamentals, high Asian exports and investments.

Malaysia charted 20.5% year-on-year returns in Islamic banking at RM133 billion (US$38.27 billion), accounting for 12.2% of the total banking system assets in 2006. On the Islamic debt capital market front, new corporate bond issues amounted to RM18.3 billion (US$5.26 billion) as at the 31st May 2007, with issuers from infrastructure and utilities dominating the primary market at 47.2%. Asset-backed securities and fi nancial services contributed 19.8% and 12% respectively, while Islamic private debt securities (PDS) accounted for 68% of new issuances, with conventional PDS making up the remaining 32%.

Seventy per cent of the projected RM40 billion (US$11.51 billion) Malaysian debt market for 2007 is expected to be Shariah compliant, refl ecting the Ninth Malaysian Plan’s call for Islamic fi nance development.

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UAEDP World benchmark bondsPort operator DP World will sell up to US$3 billion in Sukuk and conventional bonds. The Sukuk is set to have a 10-year tenure, with banks managing the sale disclosing a possible 30-year maturity for the other bond.

Proceeds from both bonds will be used to refi nance debt and fulfi l long-term commitments. As at the 31st December 2006, company debt stood at US$5.72 billion. DP World also plans to develop container port operations in 12 countries, including France and Peru, and expand its facilities in nine more countries by the end of 2011.

These new developments will add a container handling capacity of 13.4 million 20 foot equivalent units (TEUs) a year, while the expansion of its existing facilities will increase the port’s capacity by 8.9 million TEUs a year. DP World had a capacity of 48.6 million TEUs at the end of 2006. DP World projects global container traffi c to grow by 9.1 % per year until 2011.

DP World’s Sukuk will be managed by Barclays, Citigroup, Deutsche Bank and Dubai Islamic Bank, while the long-term dollar bond will be managed by Barclays, Citigroup, Deutsche Bank and Lehman Brothers.

Moody’s Investors Service and Standard & Poor’s have assigned A1 and A+ ratings, respectively, to DP World. The Sukuk’s US roadshow began in Los Angeles, followed by New York and Boston, and a London roadshow will follow on the 18th and 19th June.

JAPANReal estate risingJapan is set to see its fi rst Islamic real estate investment project. The project will be funded by an as yet undisclosed Middle Eastern institutional investor.

Mikihaisa Hirai, president of Atlas Partners Japan (APJ), affi rmed: “We are working on a Shariah compliant Japanese real estate investment project with a major Middle East client. Our target is to close by the end of next month.”

APJ has successfully launched three Japanese real estate funds for pooled global investors and for institutional investors for three consecutive years.

GLOBALSukuk, SukukDeutsche Bank predicts Sukuk sales to double this year to US$50 billion. The bank expects to arrange up to US$10 billion in Islamic debt by the 15th July this year, excluding its recent US$5 billion DP World project.

Banks have also reduced Sukuk arranging fees by 50% due to the high volumes of sales and increased competition.


15th June 2007©

SAUDI ARABIASavola go halalSavola Group – a Saudi Arabian food company – plans to invest SR18 billion (US$4.8 billion) in North Africa and Central Asia and in business development.

It was revealed that the company is seeking ratings before it sells Islamic bonds, which will comprise 50% of the total US$4.8 billion. The remaining 50% is set to be raised from potential partners.

Savola confi rmed that its balance sheet will allow up to SR5 billion (US$1.33 billion) in loans, with SR9 billion (US$2.39 billion) leveraged for its expansion drive.

AUSTRALIA/UAEAussie GoldMonarch Gold Mining Company has listed on the Dubai International Financial Exchange (DIFX), making it the third gold mining company to list on the exchange, as well as the third Australian company to list.

The company aims to have up to 15% GCC-based shareholders, however maintaining Australian regulations. Computershare, an international share registry, will allow Monarch’s DIFX trading to match its ordinary shares on the Australian Stock Exchange (ASX), via a settlement link.

Monarch is currently the largest Australian landowner in Western Australia, with a resource base totaling 2.4 million ounces and two gold treatment plants. The company projects US$21 million post-tax profi ts from its mining activities over the next year.

Monarch’s listing is the 10th equity listing on the DIFX, with other issuers domiciled in Bahrain, Saudi Arabia, South Africa, the UK, Australia, Switzerland and Germany.

UAEDIFC names price The Dubai International Financial Center (DIFC) has priced its fi ve-year US$1.25 billion Sukuk at 42 basis points over Libor. This marks the DIFC’s fi rst Sukuk issuance.

The Sukuk was issued via Dubai Sukuk Center, a wholly owned subsidiary of DIFC Investments. Deutsche Bank, London branch and Goldman Sachs International acted as the deal’s lead managers and bookrunners, while Allen & Overy were its legal advisors.

Proceeds from the Sukuk will be used to fund DIFC’s generalactivities.

UAEGoldman in DubaiGoldman Sachs has commenced business in the Dubai International Financial Center (DIFC). Lloyd C. Blankfein, chairman of Goldman Sachs, visited the DIFC on its opening.

The fi rm joins the likes of Morgan Stanley, Barclays, Deutsche Bank and Lloyds TSB, who all have operations working out of the DIFC.

GLOBALActing IslamicallyThe World Bank wants to protect the rainforest. The bank has rolled out plans worth US$250 million to encourage biologically diverse countries such as Brazil and Indonesia from clearing its forests.

This is in line with the bank’s bid to combat climate change.

MALAYSIABhari’s Islamic solutions boostBhari Information Technology Systems (Bitech)’s Islamic banking solutions are set to rake in RM200 million (US$57.9 million) in annual turnover from the Malaysian market alone.

I-Mal – the result of three years of research – offers integrated end-to-end Islamic banking and investment solutions. This is fortifi ed by Bitech’s position as a part-provider of information technology solutions to more than 20 banks in the Middle East.

Bitech recently signed an agreement with RHB Islamic Bank, and is targeting the 12 other Islamic fi nancial institutions in Malaysia for I-Mal implementation. Bitech is an associate company of Dubai-based ETA-Ascon group.

KUWAITOverwhelming interestInternational Investment Group (IIG) has issued Sukuk worth US$200 million. Initially pegged at US$150 million, overwhelming investor response, with 65 accounts ordering a total demand of over US$1 billion, set the bar at US$200 million.

Sukuk holders will be able to convert their bonds into shares at a 45% premium to its average value during its book building period. IIG shares traded at US$1.34 earlier in the week. (For full details on this deal, see the Termsheet on page 21.)

JAPAN/PAKISTANJBIC on trackThe Japan Bank for International Cooperation (JBIC) has signed a memorandum of understanding (MoU) with the National Bank of Pakistan (NBP). This marks JBIC’s fi rst Pakistani agreement.

The MoU will see JBIC and NBP collaborating in promoting Japanese exports to Pakistan, and developing knowledge sharing in Islamic fi nance. Pakistan has also been active in seeking international cooperation for infrastructure development, to counter the aftermath of 9/11. Pakistan’s annual GDP growth currently stands at 6.7%.

GLOBALJP Morgan leans into Shariah? In a bid to match the current raw materials boom, JP Morgan plans to up its commodity trading staff by 30% come the end of 2007.

The bank plans to add 40 staff to its current 110 in commodities trading and marketing to increase client protection against fl uctuating energy and metal prices.

www.islamicfi nancenews.comRATINGS NEWS

15th June 2007©

MALAYSIASarawak power! Rating Agency Malaysia (RAM) has reaffi rmed Sarawak Power Generation (SPG)’s RM215 million (US$62.08 million) Sukuk Musharakah at AA1 with a stable outlook. SPG is a 100% owned subsidiary of Sarawak Energy, which operates a 210 mw open-cycle, gas turbine power plant in Bintulu.

The rating is premised upon SPG’s robust fi nancials, backed by the favorable terms of its Power Purchase Agreement (PPA) with Syarikat SESCO. The PPA essentially eliminates off-take risk by ensuring that the company earns fi xed capacity payments as long as it meets the required performance standards, and energy payments for actual energy sales. Furthermore, all risks associated with the supply of fuel are assumed by SESCO, which is responsible for fuel procurement, delivery and cost.

UAEDIFC is stableThe Dubai International Financial Center Investments (DIFC) has received an A1 rating with a stable outlook.

Moody’s Investor Services assigned the rating based on its methodology for government related issuers, combined with the company’s baseline credit assessment and expected support from the Dubai government when necessary. However, the ratings are moderated by a rapid rise in debt up to US$5 billion, leading up to 2012. (For a full explanation of the ratings rationale, see the breakdown on page 18.)

UAEDP Sukuk ratedDP World’s US$5 billion medium-term notes (MTN) debt issuance pro-gram has been rated at A+. The MTNs will be issued under DP World Sukuk.

The notes will partially refi nance DP World’s existing credit facilities, and Standard & Poor’s (S&P) does not expect the combined MTN and trust certifi cate issuance to exceed US$5 billion in the near term. S&P also expects any notes or proposed Sukuk to be issued to align with DP World’s corporate credit rating of A+/A-1, with a stable out-look.

UAEADIB upgradedAbu Dhabi Islamic Bank (ADIB)’s foreign currency long-term and fi nancial strength ratings have been upgraded from A- to A, with a stable outlook. Its short-term currency rating is maintained at A2.

The rating, awarded by Capital Intelligence (CI), refl ects ADIB’s change in ownership in line with its recently issued convertible Sukuk for the Emirates International Investment Company (EIIC). EIIC is now owned by members of Abu Dhabi’s royal family, with government and pension funds rising to over 50%. Shareholders are also expected to meet future capital requirements.

ADIB boasts strong fi nancials, high asset quality and growth in its commercial business, backed by conservative risk standards.

MALAYSIAHSBC reaffi rmedRating Agency Malaysia (RAM) has reaffi rmed HSBC Bank Malaysia’s general bank ratings at AAA/P1. The bank’s proposed RM1 billion (US$287.78 million) Tier-2 subordinated bonds also received long-term ratings of AA1. Both ratings possess a stable outlook.

The ratings are premised upon HSBC’s track record, boasting fi nancial strength in all areas, global network backing and solid branding. The bank’s healthy asset quality is supported by its prudent and adequate risk management framework and steady interest rates. RAM is confi dent of HSBC’s future performance, and ability to capitalize on the increasingly liberalized banking landscape. HSBC also currently boasts the largest Islamic asset base among foreign-owned banks in Malaysia, and plans to expand its Islamic banking operations via HSBC Amanah.

HSBC’s 31st December 2006 pre-tax profi ts stood at RM949.06 million (US$243.27 million), 29% higher than those of 2005.

THIS TIME LAST YEAR•The National Bank of Dubai obtained pre-approval from the UAE

Central Bank to establish an Islamic fi nance company.

•BIMB Holdings aimed to become Malaysia’s fi rst true blue Islamic investment company.

•Ahli Capital Company was established in Kuwait with a capital of US$51.8 million.

•The Commercial Bank of Kuwait launched the Tijari Islamic Fund at US345.8 million.

•Qatar International Islamic Bank received approval from the

ministry of economy and commerce to develop a rights issue, raising the bank’s capital by US$128 million.

•Dow Jones Indexes launched the Dow Jones Islamic Market China Offshore Index.

•The Islamic Development Bank planned to develop the fi rst Islamic currency swap through raising US$263 million in Malaysian ringgit bonds.

•Albaraka Banking Group posted a US$102.09 million net profi t at the end of the fi rst quarter of 2006.

•Saudi Basic Industries Corporation launched an Islamic fi nance arm to manage its domestic Islamic bond issuances.

•UM Financial surpassed US$50 million in assets in real estate investments in a Musharakah project involving 200 units.

www.islamicfi nancenews.comSECTOR REPORT

15th June 2007©

Private equity funds have been very much en vogue over the past three years. However, although these funds have been very popular in Europe and the US, they have only recently gained momentum in the GCC. The recent turmoil in local markets is only fueling investors’ interest in diversifying their investment holdings. Over the past 20 years, private equity has outperformed the US stock market, both in the long term and the short term. Over the past two decades there has been a tremendous boom in the private equity industry. The pool of US private equity funds has grown from US$5 billion in 1980 to over US$500 billion in 2004.

The Middle East remains one of the least active regions for private equity, but this is rapidly changing as new players, including foreign investors, look to the market. Governments in the region have focused strongly on creating a much bigger role for the private sector through privatization initiatives. This will present excellent opportunities for private equity fi rms and will become a major source of deal fl ow. The region has also seen the opening up of new sectors for investment that were previously restricted to the public sector. In particular, Saudi upstream oil and gas.

The recent initial public offerings (IPOs) in the market continue to highlight investors’ appetite for new companies and investment opportunities, even as markets have had a bumpy ride recently. Some of the recent high profi le IPOs in the region include Al Rayan Bank, Qatar; Bank Al Bilad, Saudi Arabia; Amlak Finance, UAE; and Al Jazeera Airways, Kuwait.

Private equity in the GCCPrivate equity is not new to the Gulf region, yet it is a relatively small part of the economic picture in the GCC countries and throughout the Middle East. Despite the abundance of capital in the region, the Middle East has one of the lowest incidences of mergers and acquisitions and one of the least active private equity markets in the world. However, due to changing economic conditions abroad and an active local market resulting in high oil prices, investors have been keeping an increasing amount of wealth in local markets, which has been stimulating local merger activity and private equity transactions.

Growth dynamicsCurrently, the regional dynamics are changing, with relative government stability, the gradual improvement of regulations, developing capital markets and increased liquidity looking to be deployed within the region, making private equity one of the fastest growing sectors in the GCC region, and thus creating value for a wide range of players including governments, banks, investors and family-owned groups. The industry is driven mainly by the following six key drivers: macroeconomic conditions, regulatory and economic restructuring, excess liquidity, human capital, exit routes and family groups. (See the accompanying sidebar on “The Private Equity Growth Dynamics.”)

Picking up steamDespite investors’ sentiment for private equity investments, along with the availability of opportunities in the region, private equity investing comprises a relatively small part of the economic picture in the GCC countries and throughout the Middle East. There is no shortage of

capital in the GCC, yet the region has one of the lowest incidences of mergers and acquisitions and one of the least active private equity markets in the world, as illustrated by the following fi gures.

In the 10 years up to the end of 2003, 79 investments and eight divestments of a total value exceeding US$1 billion were publicly disclosed. Recent statistics indicate that up to the end of 2004, total capital raised by private equity funds was about US$2.2 billion, including the sizable – US$730 million – IDB Infrastructure Fund.

While indications are that the momentum for private equity investments is gaining strength, it is still signifi cantly below the activity levels experienced in the western world. Therefore, there is huge potential for local players to capture the opportunities in the regional private equity markets, as those markets are not penetrated by international private equity fi rms. Thus, investment managers are well positioned, considering the presence and the network of professional relationships in the region, to take advantage of such favorable market conditions.

Key market playersHaving started in 1982, Investcorp became a pioneer in the investment fi eld with a clear vision on opening up new investment opportunities to GCC investors in the US and Europe. The company has gone on to close transactions valued at over US$28 billion. However, the new trend in the Gulf is private equity funds. Several companies stand out in this area, such as the Dubai-based Abraaj Capital. This was the fi rst company in the GCC to raise money for a private equity fund in 2003, raising US$116 million for its Abraaj Buyout Fund I. In 2006, the fi rm raised another US$500 million for its Abraaj Buyout Fund II LP. Another Dubai-based fi rm, SHUAA Capital, had raised US$200 million in its fi rst private equity fund in August 2005. The fund completed its fi rst investment in June 2006 by acquiring Damas, a UAE-based jewelry fi rm. At the end of 2002, HSBC Bank’s private equity group closed a US$118 million GCC private equity fund. This was the fi rst time a foreign bank launched a private equity fund for the Middle East.

Millennium Finance, the investment banking unit of Dubai Islamic Bank (DIB), launched two US$1 billion Shariah compliant private equity funds at the end of last year. The target investments are the telecoms/media/technology and the energy industries. DIB and Dubai World each invested US$50 million in each of the two funds. Millennium is said to be aiming for a gross internal rate of return in excess of 20% per annum, with seven years’ tenure. Each investment is between US$20 and US$200 million, with a horizon of two to four years. The focus of the Millennium funds is on the Middle East, Africa and Asia, the fastest growing regions in the world.

Private Equity Funds Shine for GCC InvestorsBy Tariq Al-Rifai

continued...

“The GCC region has one of the lowest incidences of mergers and acquisitions and one of the least active private equity markets in the world”


15th June 2007©

Private Equity Funds Shine for GCC Investors (continued...)

Islamic private equityIncreasing transparency in regulatory frameworks, developing capital markets and overall liquidity are shifting regional dynamics in the Middle East and private equity has become one of the fastest growing sectors in the GCC region, with approximately US$2.3 billion of private equity funds raised in 2005. One of the most promising areas of this industry is Islamic private equity funds. So far there have been few attempts at launching such funds. However, Bahrain-based Unicorn Investment Bank raised capital for its fi rst private equity fund and the world’s fi rst global Islamic private equity fund. The bank has only been around for three years, yet has already shown stellar results and is setting a new trend in the region. Unicorn plans on raising US$150 million for its fund – which it claims will be a truly diversifi ed fund – through private placement. While most funds in the GCC have focused on the GCC or the Middle East, and others have launched US funds, Unicorn aims to offer investors the best opportunities from around the world.

The industry has come a long way in the past 15 years and has evolved into a comprehensive fi nancial system. Banks have always taken the lead in the Islamic fi nancial industry, investing depositors’ funds. However, the real catalyst to the development of Islamic equity investment came during the 1980s with the launch of the fi rst Islamic investment fund. This initiated a debate among Islamic scholars regarding the Shariah compliance of equity investments. The Islamic Fiqh Academy concluded the debate by ruling that shares in a company are an undivided portion of the company’s assets and are thus considered Shariah compliant.

Accordingly, Islamic investors should apply the model of private equity fi rms whose strategy evolves around taking majority stakes in privately held companies engaged in the real economy. This enables them to maintain control, which ensures the company’s adherence to Shariah principles. As a result, private equity offers Islamic investors a better value proposition compared to other asset classes in terms of performance, diversifi cation, long-term returns, price stability and lucrative investment opportunities.

There are a few Islamic fi nancial institutions active in private equity, most notably Arcapita Bank, Unicorn Investment Bank, Gulf Finance House (GFH), Kuwait Finance House (KFH) and Al-Tawfeek. However, only KFH and Al-Tawfeek currently have funds in the market.

Arcapita Bank has been active in private equity from its foundation in 1997. It has, however, focused on US and European private equity deals. The bank made headlines in November 2004 by acquiring South Staffordshire, a UK-based publicly traded water supply company. This deal marked the fi rst purchase of a water utility company by a foreign entity, which opened the door to others, mainly European investors, to start looking for similar deals in the UK. The fi rm has now has plans of forming its fi rst fund to focus exclusively on US companies.

Kuwait Finance House (KFH) has been one of the larger and more active Islamic banks in private equity. KFH Bahrain launched a US$100 million private equity fund focusing on Australia and New Zealand in 2003. Recently, the bank has begun focusing on private equity investments closer to home. In 2004, it launched a KD30 million (US$104.13 million) private equity fund for Kuwait, along similar lines

The Private Equity Growth

Dynamics

Macroeconomic conditionsMost of the countries in the GCC region have been registering stable growth and higher levels of GDP per capita – supported by the high oil prices – despite the unstable political environments of the neighboring countries. Some of the GCC economies have among the highest per capita GDP in the world. Overall growth rates have been high, particularly in Qatar and the UAE, where GDP growth has been over 5% in the 1990–2004 period.

Although much of the underlying economic activity refl ected in the GDP fi gures is very strongly correlated with oil prices, rather than genuine value-added economic activity, there has been an increase in development of other sectors as well. Saudi Arabia is in the process of developing its manufacturing sectors, while Bahrain and the UAE have concentrated on developing both their fi nancial and tourism sectors. Initiatives in Oman and Qatar to expand their natural gas resources have also led to growth in non-oil sectors.

The above factors, when coupled with strong, dollar-pegged currencies and stable infl ation and interest rates, have created a highly attractive economic and investment environment in the GCC region.

Regulatory and economic restructuringIn an attempt to attract foreign capital, most of the countries in the GCC region are improving their regulatory frameworks, in addition to the economic restructuring caused by globalization and privatization. The GCC economies are becoming a more integrated group and hence part of the global economy signaled by WTO membership. Signifi cant increases in cross-border regional trade is expected to take place over the next few years as domestic market saturation, economies of scale, and lower trade barriers make such activity more attractive. As a result, cross-border mergers and acquisitions are expected to increase as regional companies seek to build scale through acquisition rather than simply organic growth.

On the other hand, governments in the region have focused strongly on creating a much bigger role for the private sector through privatization initiatives. This will present massive opportunities for private equity fi rms and will become a major source of deal fl ow. Examples of such activity include privatization initiatives such as Mobile Telecom Company (MTC) in Kuwait and Saudi Telecom. The region has also seen the opening up of new sectors for investment that were previously restricted to the public sector, in particular, Saudi upstream oil and gas.

Excess liquidityThe GCC region is currently enjoying unprecedented levels of liquidity. The repatriation of regional wealth post-9/11 has fuelled

continued...


15th June 2007©

Private Equity Funds Shine for GCC Investors (continued...)

to the KAMCO Kuwait PE fund of KD20 million (US$69.42 million), which was launched the year before. These days, not a month goes by without hearing of another private equity fund being launched from the region. While most funds still tend to focus on investing in the region, a newer breed of funds seem to understand that savvy investors still prefer keeping their eggs in many baskets. As this trend becomes more prominent, investors in the Gulf can expect a world class private equity industry to reach the Gulf sooner, rather than later.

Keeping it private Despite this growth, private equity is often misunderstood. What constitutes a private equity transaction? How do private equity fi rms create value? What’s the difference between private equity and venture capital?

Private equity provides long-term, committed share capital, to help private (unlisted) companies grow and succeed. Categories of private equity include buyouts, venture capital, growth capital, angel investing and mezzanine capital. Private equity can be used to develop new products and technologies, to expand working capital, to make acquisitions, or to strengthen a company’s balance sheet.

Venture capital is a subset of private equity. Although directly related to private equity, venture capital tends to focus on investing in start-up companies with little or no track record and little or no revenues. Investors in venture capital take a much higher risk than private equity investors and in return seek much higher potential returns. Private equity, on the other hand, tends to invest in established companies with a proven business model, growing revenues and usually healthy profi ts. The main reason such companies would seek private equity capital is to grow their business beyond what the company could achieve on its own. Private equity funds add value by extensively scrutinizing fi rms before investing, actively managing companies post-investment, helping to increase the value of the companies by developing long-term strategies, holding management accountable for achieving business objectives and fi nancial targets, planning and executing a successful exit, whether it is a merger, IPO or other sale, and providing attractive returns to their investors.

Private equity has historically given investors higher returns than they would receive in other investment classes. As such, the industry has been growing at an accelerated rate over the past decade, as witnessed by the growth in private equity funds worldwide. Investments, however, are generally illiquid and thought of as a long-term investment and only appropriate for “patient” investors with a long-term horizon (fi ve to seven years or longer). Investors receive their returns through one of three ways: a sale or merger, a recapitalization, or an IPO. Investors in private equity have historically been savvy, high net worth investors, fi nancial institutions, pension funds and university endowments.

investors’ appetite for regional investment opportunities. This shift has created the availability of higher risk capital provided by both institutional and individual investors. It is apparent that this retention of capital, along with the availability of leverage in the GCC countries, has led to the current boom in the capital markets. However, considering the huge amount of liquidity in the region, investors are expected to diversify their portfolios away from traditional investment classes by investing in the private equity market.

Human capitalPrivate equity requires high caliber individuals that are able to execute transactions. Most of the GCC countries have succeeded in developing local skills and attracting foreign professionals. The region’s developed infrastructure, quality lifestyle and the tax-free atmosphere makes it an attractive environment for professionals from around the world. Furthermore, the region has witnessed an infl ow of high caliber investment banking professionals following the creation of fi nancial hubs in Dubai and Bahrain.

Exit routesThe increasing IPO and mergers and acquisition activity across the GCC region, as well as the impressive performance of regional stock markets, has spurred the availability of exit mechanisms. Due to the fact that massive liquidity is chasing a few investment opportunities, most of the IPOs in the region have been over 50 times oversubscribed. However, since regional companies are in general small, trade sales are expected to pick up and may be the best exit route for the region for the foreseeable future.

Family groupsIn general, the private sector in the region is controlled by family groups, some of which are large conglomerates. Typically, these groups are heavily diversifi ed into a variety of frequently unrelated business activities, with no formal capital structure. The majority of these family conglomerates achieved prominence over the last 50 years, mainly following the oil revolution, where the founders worked closely with the ruling families at that time in developing the regional economies. As management and ownership of these groups move to the second and third generation, the most pressing issue facing them is how best to divide group assets between the numerous sons and grandsons without vanishing the family’s brand equity.

Private equity is ideal to manage the family groups’ transition to such formal corporate and capital structures. As a result, family groups have become a major source of opportunity in the private equity industry in the region. Family groups that are looking to divest non-core businesses or expand existing businesses are realizing the benefi ts of associating themselves with private equity fi rms. Jawad Fashion Group in Bahrain is an example of such a spin-off. Furthermore, the region has started witnessing a trend of family businesses going public, evidence that the owners are keen to protect the sustainability of their businesses against the threats of generational changes.

The author is founding chairman of Failaka International, the fi rst corporation set up to monitor advancements in the fi eld

of Islamic investment funds. For more information on Failaka’s programs and services please contact by Mark Smyth by email on: [email protected] or telephone: +44 207 286 6523.


15th June 2007©

Islamic fi nance has witnessed tremendous growth over the past years, both in terms of the growth of the entire industry and in terms of the development of new and more sophisticated products that meet the increasing yet unmatched demand for structured products and comply with the principles of Shariah law. The global Islamic fi nance industry is valued today at approximately US$800 billion. Furthermore, there are a number of additional factors such as growth in the Muslim population (estimated to grow by over 20% within the next 8–10 years, to reach 1.6 billion, which represents 21% of the global population, against 19% as of today), an enormous increase in the wealth of this population (the wealth of high net worth individuals in the Middle East is estimated to grow at 8% per annum, to reach US$1.8 trillion by 2010), as well as a sharp rise in interest by international (non-Muslim) investors, Governments, fi nancial institutions and capital markets to enter the Islamic fi nance and investment space. This is documented by the value of Sukuk to be issued over the next three years, which is estimated to be worth US$30 billion, with global issuance totaling US$100 billion by 2010.

Islamic private equity focuses on acquiring majority stakes in privately held Shariah compliant companies. By doing so it enables investors to maintain control and ensure the company’s adherence to Shariah principles. Islamic private equity provides investors with an ethical investment product offering high performance, portfolio diversifi cation, superior risk-adjusted returns and diverse investment opportunities.Private equity and Islamic investment share a lot of common principles:

both of them are based on investment in the real economy, and on the principle of sharing risks and rewards through partnership. Private equity takes a long-term view on investments and aligns the interests of stakeholders, which are also among the key principles of Islamic investment.

At fi rst sight Islamic private equity appears to be restrictive in comparison to conventional private equity, In fact, on the investment side, there are indeed some limitations in terms of industries (for example alcohol, tobacco and leisure-related activities are prohibited industries), as well as certain fi nancial parameters such as the use of debt instruments and investing in companies with high leverage. However, such obstacles can in most cases be overcome by innovative structuring, for example through repaying a portfolio company’s conventional debt and refi nancing it through Shariah compliant structures such as Murabahah agreements, amongst other solutions.

Islamic Private Equity Outgrowing ConventionalPrivate Equity

By Catharina-Sophie Bescht

continued...

“Islamic private equity is based on investment in the real economy, as well as on the principle of sharing risks and rewards through partnership”


15th June 2007©

Islamic Private Equity Outgrowing Conventional Private Equity (continued...)

Since Islamic investment adheres to high ethical standards, it has been attracting a growing number of non-Muslim investors, in addition to the 1.3 billion Muslims worldwide, thereby targeting a substantially larger investor base than conventional private equity. Recent research has found that a considerable number of private equity and venture capital funds have passed Shariah compliance tests, with only minor adjustments made to the investment policies of these funds.

Nevertheless, regional private equity in general and Islamic private equity in particular are still in their very early stages. Today, players in the industry face a lack of information and academic research, as available market data is often incomplete and inconsistent. Additionally, there are only a limited number of professionals who are well-trained in the principles of Shariah law and their application, especially when it comes to the development of new products and structures.

What is needed to accelerate the Islamic fi nance and the Islamic private equity industry’s development in particular is skilled and educated human capital, as well as a higher level of standardization across countries, disciplines and products of the entire Islamic fi nance space. Critical success factors on the micro level include product development expertise, client relationship management and competitiveness, both in terms of quality and pricing, among others. In this context, innovation is the key, as it enables individual players and the industry as a whole to draw the link between conventional and Islamic fi nancial products by structuring the former in adherence to Shariah principles.

Islamic private equity promises to be one of the fastest-growing areas both within the private equity and the Islamic fi nance space over the coming years. To date, there are only a few Islamic private equity funds in the market. However, the popularity of these funds is growing tremendously; over the last year alone Islamic private equity funds announced exceeded US$4 billion, demonstrating a strong and yet unmet investor demand.

Considering the growth in assets of global and GCC Islamic banks and fi nancial institutions, it is estimated that the Islamic private equity industry in the region will be worth US$41 billion by 2011.

The author is a senior fi nancial analyst at CORECAP, which is a Dubai-based investment and advisory fi rm that offers a spectrum of compelling investment opportunities in alternative asset classes in the MENA region to sophisticated institutional and high net

worth investors. She is involved in all aspects of the investment cycle, including deal sourcing, execution, post-acquisition management and realization. With over six years’ experience in the fi nancial and consulting industries, she was formerly actively involved in the preparation and execution of two highly complex transactions worth €2.6 billion (US$3.46 billion) out of the €36 billion (US$47.87 billion) portfolio of non-performing loans and non-strategic assets at the Institutional Restructuring Unit, a specialized task force in Dresdner Bank, Frankfurt. The author can be contacted by email at: [email protected]. Any other enquiries should be directed to the director of investor relations, Jawaher Menassa, by email at: [email protected] or by telephone at: +971 4 391 0627.

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www.islamicfi nancenews.comCOUNTRY REPORT

15th June 2007©

The Philippines’ 2007 gross domestic product (GDP) growth is projected to increase by 6%, as against 5.4% in 2006, on the back of a sustained private consumption (in line with higher overseas remittances), higher public spending on infrastructure projects to boost domestic demand and positive contributions from services sub-sectors such as business process outsourcing, telecommunications and fi nancial services. However, given that the Philippines economy is closely linked to the global economy, due to exports forming 50% of GDP and the nation’s dependence on capital infl ows, slowing E&E exports to the US may drag down the Philippines’ growth momentum. The Philippines’ fi rst quarter of 2007 GDP growth came in at 6.9% year-on-year (y-o-y), as against 5.7% in the fi rst quarter of 2006, the fastest pace since 1990, underpinned by strong workers’ remittances, which increased consumer spending, strong exports (in particular to China) despite a strong currency, as well as increased government spending prior to the 14th May mid-term elections. Services expanded by 9.1% y-o-y, while industrial production and agriculture increased by 5.3% and 4.2% respectively.

Private consumption is expected to remain the key growth driver in 2007 as the government continues to maintain fi scal prudence to rein in budget defi cit. Private consumption growth is projected at 5.5% in 2007 (2006: 5.3%), underpinned by double-digit growth in overseas remittances (of 17%), keeping domestic spending well-supported. Private consumption contributed 80% to GDP, while overseas remittances account for 11% of GDP.

Total investment is forecasted to grow at 5% y-o-y in 2007, as against 2.1% y-o-y in 2006, propelled by low interest rates, increases in private investment and positive public infrastructure spending. Philippines’ Board of Investments and the Philippine Economic Zone Authority reported that total investment commitments made in January to April 2007 increased by 194% y-o-y to PHP73.3billion (US$1.59 billion). A total of 234 projects were approved, as compared to 220 projects during the same period last year.

The Philippines’ main exports include fruit, furniture, garments and electronics, with key export markets including the Middle East, Europe and the US. Exports contribute 50% to the Philippines’ GDP and E&E exports account for 66% of total exports value. However, due to the high dependence of the Philippines’ exports on E&E and the US market, the country’s export performance this year will inevitably be impacted by the slowdown in global economies and external demand. Nevertheless, higher intra-regional trades and sustained demand from China and Japan are expected to cushion external demand slowdown from the US. A strong and sustained growth in Europe is also expected to support the country’s external trade growth this year. For 2007, we expect export growth to moderate to 11% y-o-y, as against 14.6% y-o-y in 2006.

In the fi rst quarter of 2007, exports increased by 12% y-o-y to US$12.1 billion, despite a strong peso and expectations of a slowdown in the US economy. Concurrently, imports grew by 7.1% to approximately US$12 billion. On its external position, Philippines is expected to post a current account surplus of 3.2% of GDP in 2007, as against 4.3% in 2006, as high infl ows from overseas remittances continue to compensate for the country’s trade defi cit.

The Philippines’ manufacturing output, however, continued to show a declining trend, dropping by 7.6% y-o-y in March 2007, due mainly to the high cost of manufacturing caused by the high cost of power, the second most expensive in the region after Japan, as refl ected by an increase of 2.6% in the producers price index during the same period. In April 2007, electricity prices at Philippines’ Wholesale Electricity Spot Market for energy continued to increase for a fourth month, by PHP2 (US$0.04) per kilowatt hour (kWh) to PHP8 (US$0.17) per kWh, underpinned by the low availability of power plants running on cheaper fuels, such as coal. Other factors that contribute to the high cost of doing business in the Philippines include the high transaction costs and poor infrastructure.

Philippines – Sustainable and Resilient

By Kuwait Finance House

continued...

Source: Bloomberg, KFH

0.01.02.03.04.05.06.07.08.0

01:Q1 Q3 02:Q1 Q3 03:Q1 Q3 04:Q1 Q3 05:Q1 Q3 06:Q1 Q3 07:Q1

% y

-o-y

Philippines’ GDP Growth Trend


15th June 2007©

Philippines – Sustainable and Resilient (continued...)

The sub-sector that witnessed the biggest drop in the volume of manufacturing output in March 2007 was textiles, which declined by 46.4%. Other sub-sectors that also faced a sharp decline in output included tobacco (42.4%), footwear and wearing apparel (37.1%), non-electrical machinery (35.7%), rubber products (16.6%), and electrical machinery (13.4%). However, wood and wood products, furniture and fi xtures, and non-metallic mineral products posted higher outputs, increasing by 39.8%, 11.8% and 9.9% respectively.

In terms of its labor economics, the Philippines’ unemployment rate declined slightly to 7.8% y-o-y in the fi rst quarter of 2007, as against 8.2% y-o-y in the fi rst quarter of 2006. Nevertheless, unemployment still remains a key challenge to the economy. Tourism and housing were among the fastest-growing sectors that helped to create new jobs. Over the past three years, more than 1.1 million and 2 million jobs were created in the tourism and housing sector respectively. The Department of Tourism estimated that a foreign tourist in the Philippines spent an average of US$1,200, higher than the country’s average GDP per capita of approximately US$1,100. However, the relatively fast employment growth over the years was still insuffi cient to reduce unemployment, given the rapid population growth and increased labor force participation. To reduce unemployment, key policy implications include higher economic growth beyond the current range of 5–6% y-o-y.

Philippines’ GDP per capita continued to grow over the years, due to steady GDP growth and an increase in infl ow of workers’ remittances. In March 2007, growth in remittances surged 26.4% y-o-y to US$1.3 billion in March 2007. Given the sustained strength in remittance fl ows since early this year, the fi rst quarter of 2007 remittance showed a commendable growth of 24% y-o-y to US$3.5 billion, supported by the growing number of Filipinos working overseas, innovative remittance schemes offered by fi nancial institutions, and enhanced links

established with foreign counterparts. The buoyant remittances led to increased spending on homes, cars and mobile phones. Meanwhile, the continuing exodus of workers overseas will also help to ease the unemployment rate, further boosting private consumption.

Fiscal defi cit is expected to be maintained at 1% of GDP in 2007 (2006: 1% of GDP). In the fi rst quarter of 2007, fi scal defi cit continued to decline by 23.1% y-o-y at PHP52 billion (US$1.12 billion), compared to PHP67.6 billion (US$1.45 billion) in fi rst quarter of 2006. While new value-added tax laws contributed to higher government revenue, reducing fi scal defi cit was also achieved via the reduction in public spending over the past two years. Excessive decline in public spending risks limiting growth prospects over a longer term. We maintain a cautious stance on the Philippines, despite some positive indicators. It will take more than economic resolve to strengthen domestic dynamics; reforms – though positive – are still lacking political will in certain regions.

Despite progress in federal defi cit, concerns over fi scal consolidation remain, with interest payments accounting for one-third of total government expenditure, leaving the country vulnerable to fi nancial shocks. Nevertheless, interest payment is expected to contribute 4.6% of GDP this year, as compared to 5.2% in 2006. For 2007, the country’s debt service requirement is expected to decline by 30% to PHP610.4 billion (US$13.09 billion) or 9.1% of GDP, from PHP854.4 billion (US$18.32 billion) or 14.2% of GDP in 2006. This is mainly due to the retirement of more foreign and domestic obligations to take advantage of lower interest rates and a stronger peso. The national government’s total debt stood at 64.2% of GDP in 2006, a signifi cant reduction from the high of 78.5% of GDP in 2004. For 2007, the government expects the amount to reduce further to 58.3% of GDP, as part of its effort to achieve a balanced budget by the end of 2008, two years ahead of the original 2010 schedule.

Philippines’ international reserves increased from US$23 billion in 2006 to US$25 billion in April 2007 as a result of foreign exchange operations and income from investments abroad. This reserves amount is adequate to fi nance approximately 4.7 months of imports or fi ve times the country’s short-term external debt, based on original maturity. The continued build-up in reserves, despite its pre-payment of foreign debts, was due to the robust foreign exchange infl ows amid bullish investor sentiment on the country’s economic fundamentals. On this premise, the Central Bank has revised the 2007 forecast for the reserves from US$25 billion to US$26 billion. However, an overly

Source: Central Bank of Philippines, KFH

Netherlands10.1%

Germany3.8%

US18.3%

Others13.5%

Malaysia5.6% Taiwan

4.3%

Korea3.0%

Hongkong7.9%

Japan16.5%

Singapore7.3%China

9.8%

Source: Central Bank of Philippines, KFH

Korea7.5%

Thailand4.8%

Saudi Arabia6.9%

Singapore10.1%

Japan16.3%

Germany3.2%

China8.5%

Malaysia4.9%

Hongkong4.8%

Taiwan9.6%

Iran3.9%

US19.5%

continued...

Philippines’ Direction of Exports, 2006 Philippines’ Direction of Imports, 2006

“In the fi rst quarter of 2007, exports increased by 12% y-o-y to US$12.1 billion. Concurrently, imports grew by 7.1% to approximately US$12 billion”


15th June 2007©

Philippines – Sustainable and Resilient (continued...)

liquid market may result in higher infl ation, something that the Central Bank may wish to avoid, in particular when infl ation seems to have already bottomed out and be on the uptrend again.

On the infl ation front, we expect infl ation to ease to 4.8% y-o-y in 2007 (the government is targeting to hold infl ation between 4% and 5%, as against 6.2% in 2006, premised on stable global crude oil price, the subsiding impact of higher value added tax and measures imposed by the government to counter buoyant domestic liquidity). Infl ation eased signifi cantly in fi rst quarter of 2007, declining to 2.9% y-o-y from 4.8% y-o-y in the fourth quarter of 2006, supported by generally stable prices for major food items, a stronger peso, which mitigated the impact of cost-pushed infl ation, and the subsiding base effects of the Reformed Value Added Tax on CPI. Concurrently, demand-based price pressures have remained limited given the sluggish demand conditions. Nevertheless, surging domestic consumption brought about by high workers’ remittances may lead to infl ationary pressures. The main infl ationary risk, however, could come from a sustained surge in liquidity and volatility in energy prices.

In the fi rst quarter of 2007, the Monetary Board decided to maintain the target rate steady at 7.5% during its policy meetings on the 25th January and the 8th March 2007, while opening up access to higher paying deposit accounts to encourage savings in an effort to control excess liquidity and infl ation. Policy interest rates were last changed on the 20th October 2005. We expect the Central Bank may start to ease monetary policy in the second half of 2007 if required to boost economic expansion. However, the Central Bank may eventually tighten the monetary policy, given the higher-than-expected GDP growth in the fi rst quarter of 2007, which may ease the need for the government to spend more in coming quarters, and expanding aggregate demand, which may lead to infl ationary pressures.

On the currency front, the Philippine peso surged in fi rst quarter of 2007, ending at PHP48.28 per US dollar in March, as against PHP48.91 per US dollar at the start of the year. On the 1st June 2007, the peso strengthened to 6.37% year-to-date, closing at PHP45.95 per US dollar. We expect the peso to continue to remain strong in the second half of 2007, underpinned by continued large infl ows from overseas workers and favorable economic fundamentals. While the strong currency has helped to ease infl ationary pressures and enabled the government to lower the budget defi cit, concerns remain that it may adversely affect exporters, in particular small and medium-scale exporters. In the longer term, however, a stronger peso will lead to higher investment spending. Private investment is expected to increase as businesses will fi nd it cheaper to import capital goods.

The Philippines’ total foreign direct investments (FDIs) are expected to reach US$2.1 billion in 2007, as against US$1.9 billion in 2006, underpinned by strong investor confi dence following the government’s success in controlling its fi scal defi cit for the past two years. The growth in net FDI refl ects the country’s efforts to increase its share in the amount of investments received by the region. For the fi rst two months of 2007, net infl ow of FDI in the Philippines increased by 33.5% y-o-y to US$633 million, on the back of a sharp increase in net equity capital infl ows during the period, mainly from the acquisition of a local bottling company by the US-based Coca Cola Company in February.

Sectors that benefi ted from the infl ows of FDI included manufacturing (chemical products, electronics), mining (mineral processing), services (international courier, information technology development), real estate, fi nancial intermediation, agricultural and construction. Primary sources of FDI fl ows included the US, Japan and Singapore.

In terms of creating and maintaining conditions favorable to business, the Philippines slipped from 42nd to 45th place in the rankings of the World Competitiveness Yearbook 2007, released in May this year. Challenges for the Philippines in attracting FDIs include the high cost of electricity and labor, a poor infrastructure and an unstable regulatory environment. Nevertheless, the government’s plans to boost spending on infrastructure projects in 2007 are expected to help the country attract FDIs, create new jobs, and revive the country’s economic growth. In the medium term, the government plans to boost the economy further by investing US$40 billion in infrastructure. This includes the government’s commitment of US$300 million in funds for roads, which is expected to improve the supply chain in import and export. Besides strengthening the investment climate, the country also needs to focus on improving its labor force skills.

Key risks to the Philippines economy in 2007 In summary, we expect GDP growth to accelerate for the Philippines in 2007, growing at 6% y-o-y, mainly due to a sustained private consumption given higher overseas remittances, positive public infrastructure spending and sustained services sector. Challenges include achieving higher GDP growth beyond the current 5–6% range, on the back of stronger investments instead of high labor exports, in order to provide productive employment for the country’s rapidly growing workforce. The government, therefore, needs to strongly focus on strengthening the country’s investment climate and competition, while maintaining a sound fi scal policy. Key risks to the Philippines economy in 2007 include drastic slowdown in the US economy, and resurgence in the global crude oil price, impacting domestic infl ation. In addition, given that the Philippines’ trade with China is an increasingly important factor in terms of export performance this year, the result of efforts by China to slow down its sizzling economy may have an impact on the Philippines’ economy.

For further enquiries please contact the chief economist and head of research at Kuwait Finance House,

Baljeet Grewal, by email at: [email protected].

“It will take more than economic resolve to strengthen domestic dynamics; reforms – though positive – are still lacking political will in certain regions”


15th June 2007©

Taking advantage of the effi ciency of a private sector and saving mon-ey when implementing infrastructure projects are two reasons why a country may choose a privatization program. Privatization could also be due to budgetary concerns or simply part of an economic develop-ment program. The decision to privatize in relation to state-owned banks can be signifi cantly infl uenced by economic and political fac-tors. Another key factor is the quality of the bank. For the Al-Amanah Islamic Investment Bank (AIIB), the only Islamic bank in the Philip-pines, privatization is for the purposes of limiting government owner-ship and expanding the ownership of the private sector.

Islamic banking in the Philippines was established by the Republic Act No. 6848, signed into law by then President Corazon C. Aquino on the 26th January 1990. Following this, AIIB established its fi rst operating branch in Cobato City on the 11th February, 1991. The primary objective was to provide banking facilities and services to Filipinos in general, and Filipino Muslims in particular, in accordance with Islamic commercial law. While across the globe the Islamic fi nancial services industry has grown tremendously, the Philippines has found diffi culty in operating only one Islamic bank. This is a shame considering its sizeable Muslim population of around 6–10 million and the country’s location within the major trade centers and fi nancial markets of the South-east Asian region.

The Philippines has yet to realize and appreciate the potential capital that Islamic fi nance can generate to fund development projects, trade, and commercial activities. While Muslim investors from Malaysia, the Middle East and even Europe have expressed interest in taking up a stake in AIIB, the government’s privatization program proved to be futile when it was reported that there were hardly any takers for the bank. AIIB has cumulative losses of more than fi ve times its paid-up capital. Bidders for the bank would have to assume the bank’s PHP552 million (US$12 million) in liabilities, quite apart from taking care of bad loans and foreclosed assets. As of January 2006, it had only PHP98 million (US$2.1 million) in assets. This would seem to be a mockery of Islamic fi nance, as the bank seems to be using depositors’ money to fund its operations.

Given the growing importance of the Islamic world to the foreign policy and international trade of the Philippines, the country has every reason to strengthen Islamic fi nance locally and integrate it into the mainstream of the fi nancial community. This is also in line with the country’s bid to seek admission as an observer member of the infl uential Organization of Islamic Conference (OIC).

Having been in operation now for more than 30 years, the government-run Islamic bank AIIB should have been a breakthrough to the area of Islamic fi nance, had it been given enough attention to make it a viable and sustainable fi nancial institution. Indeed, the government’s plan to sell the bank at a time when Islamic banking is expanding at a frenetic pace seems ill-advised if the purpose of the sale is to recover government investment in the bank and to raise funds for the Philippine treasury.

The initial privatization program in the Philippines began in 1986–87 during a period of political mayhem. The government – having lent

out huge sums to fi nance properties for cronies and associates of the party in power – had to foreclose them during the economic downturn, and government or state-owned banks had to take over these properties. Funding operations already at a loss was worsened during the economic crisis in 1981 – double-digit infl ation, a defi cit in the balance of payments, gross international reserves below US$1 billion – and the government decided to cut its losses and resell these companies in a bid to meet its dire need for cash. The second phase of privatization was in the 1990s, using an expanded build operate and transfer law in areas of infrastructure such as roads, airports, seaports, water and even information technology. The current phase of privatization includes the housing, health, postal services and pension funds.

Many reasons can be cited for the tremendous problems facing Islamic banking in the Philippines, chief of which are the lack of a fi nancial infrastructure and legislation for the operation of Islamic banking in the Philippines. A critical lack of support from the government and an inadequate capital market are also to blame.

In the 1996 Peace Agreement between the Moro National Liberal Front and the government, it was mentioned that the Central Bank of the Philippines, now called Bangko Sentral ng Pilipinas (BSP), must open an Islamic banking unit, however this has yet to happen. AIIB is further disadvantaged in the banking arena, as it has not received a rehabilitation fund from the Government, unlike other government fi nancial institutions – the Development Bank of the Philippines, Philippines National Bank, Veterans Bank and the Central Bank of the Philippines. These institutions were aided to the tune of PHP1 trillion (US$21.4 billion). Yet the AIIB has remained in the Government’s hands since 1974, when it was still Philippine Amanah Bank.

Another factor in the setback suffered by Islamic banking in the Philippines is the lack of an Islamic money market – both a primary and secondary market. An action plan to ensure the success of the Islamic banking system in the country is required. It is recommended that the ailing, sole Islamic bank in the Philippines adapts an Islamic micro fi nancing strategy in order to remain relevant to its primary market, the local Muslim communities.

The domestic market is big enough for the Islamic banking industry and capital market to fl ourish, but the local Muslim population is neither educated nor aware of the importance and benefi ts of Islamic fi nance. Massive marketing and awareness campaigns are called for. AIIB is dysfunctional for many reasons: a shortage of working capital, ambiguous strategy, and thus a lack of equipment, manpower and branches. All these issues must be addressed in order to support and nurture the industry in the Philippines.

Apathy for Islamic Banking

By Sandra Isnaji

The author has been instrumental in formulating two types of micro fi nancing programs for the Muslim community in the Philippines based on Islamic concepts of economics and social development. She is currently the manager of corporate planning and strategy at CyberSecurity Malaysia, an agency under the Ministry of Science and Technology and Innovation, Malaysia, and can be contacted by email at: [email protected].

www.islamicfi nancenews.comRATINGS REPORT

15th June 2007©

DIFC Investments, rated A1 with a stable outlook, is a wholly owned subsidiary of the Dubai International Financial Center (DIFC) Authority, one of the three public bodies responsible for administering and developing the DIFC, a fi nancial free zone in the Emirate of Dubai.

Moody’s Investors Services applied its government related issuers rating methodology to DIFC Investments and, as such, the rating of A1 is a combination of: (a) the company’s underlying strength, or Baseline Credit Assessment (BCA), which includes the expectation that a favorable legal and regulatory framework will continue to contribute to low operating and refi nancing risk; and (b) the credit support the Government of Dubai is likely to provide in a situation of distress. DIFC Investments’ BCA is ranked at 5 – equivalent to Moody’s rating of A1 on its global scale in June 2007.

Moody’s considers that DIFC Investments is an effective government agency. Continuous government support of new land grants – a large real estate development program – and other fi nancial support – debt fi nanced investment strategy – would offset any challenge – rising debt levels and reliance on capital markets’ fi nancing – over the program period. The company’s BCA was overlaid with a joint default analysis for government-related issuers.

Management objectives and strategies The objectives and strategies of DIFC and DIFC Investments are inter-linked. In Moody’s view, DIFC’s three-pronged objectives – to be a fi nancial center in the Emirate, to promote the position of the Emirate as a leading international fi nancial center, and to develop the economy

of the Emirate – imply a close alignment with the overall economic strategy laid in Dubai’s Strategic Plan 2015.

Key rating considerationsMoody’s opines that DIFC Investments’ creditworthiness is more accurately determined by its central importance as Dubai’s major economic initiative, rather than its current and projected stand-alone fi nancial risk profi le. Moody’s A1 rating takes into consideration the following factors, characteristic of a government agent.

• As the executive arm of the DIFC, the DIFC Authority can be identifi ed with the DIFC itself, which was created as an instrument of Government policy. Its promotion of a strong fi nancial services industry is considered vital to the Dubai economy.

• The legal framework which established DIFC and DIFC Investments underpins the A1 rating.

• The close involvement of the Dubai government, in particular its ruler Sheikh Mohammad Bin Rashid Al-Maktoum (also UAE vice-president and prime minister and DIFC president) in the management and direction of DIFC and DIFC Investments.

• Financing for the development and build-out of DIFC will be sourced from both the public and private sectors. DIFC’s prime real estate was valued at US$2.5 billion in December 2006. The forthcoming and fi rst Sukuk deal could see debt rise to around US$5 billion by 2009. In Moody’s view such heavy reliance on the private sector implies some additional risk not usually associated with other rated government agencies.

DIFC Investments – Ratings RationaleThis feature is a summary of Moody’s Investors Services Report on DIFC Investments,

which was issued on the 12th June 2007.

continued...

Figure 1: DIFC Institutional Framework

Office of the President of the DIFCHeaded by DIFC Governor: H.E. Dr. Omar Bin Sulaiman

Dubai Financial Services Authority (DFSA)

DIFC AuthorityDIFC Judicial Authority

(DIFC Courts)

H.H. Sheikh Mohammed Bin Rashid Al MaktoumRuler of Dubai

UAE Vice PresidentUAE Prime Minister

President of the DIFC

Registrar of Security DIFC Investments LLCChairman: H.E. Dr. Omar Bin Sulaiman

Registrar of Companies

Dubai International Financial Exchange Limited (DIFX)

Hawkamah Corporate Governance Institute (CGI)

100% 100%

100%

Reporting

OwnershipRating Perimeter

www.islamicfi nancenews.comRATINGS REPORT

15th June 2007©

DIFC Investments – Ratings Rationale (continued...)

• As a jurisdiction, DIFC Investments’ quasi-agency status and the relatively early stage in its development make it extremely unlikely for DIFC Investments to be privatized, at least until the DIFC has been completed.

• In view of its characteristics, DIFC is well positioned to compete with fellow Emirates and maintain its position as front runner in the development of an international fi nancial free zone in the region, with over 400 companies already established in the DIFC.

• As the commercial and operational arm of DIFC Authority, DIFC Investments is engaged in three broad areas of activities: ongoing build-out of DIFC’s infrastructure, expanding its income base from 2007, and as the owner of the Dubai International Financial Exchange (DIFX).

• DIFC assumes the lion’s share of developing 1 million square meters. The Gate District, completed in 2006, created some 115,000 square meters – 89% offi ce and 11% retail. The Gate District is fully let to approximately 150 tenants and the Gate Village is due to be completed this year, also fully let to approximately 100 tenants. To date tenants include many blue chip fi nancial services fi rms. Nonetheless, Moody’s is cautious about the construction and letting risks involved in such large-scale development.

• DIFC Investments’ purpose in pursuing investment beyond the build-out of the free fi nancial zone’s infrastructure is to generate additional returns to supplement rental income. While acknowledging that DIFC Investments intends to fi nance such investments on a limited or non-recourse basis, and to hedge against excessive market volatility, Moody’s considers nevertheless that leveraged investments on this scale increase DIFC Investments’ fi nancial risk profi le. At the end of 2006, DIFC Investments reported total investment of US$652 million, and this will continue into 2012. Investment falls under two categories: strategic – such as its shareholding in NYSE Euronext and in Deutsche Bank – and opportunity-driven, which although not strategic, can add signifi cant value.

• DIFX aims to become the leading stock exchange between western Europe and East Asia, and currently is market leader in the fl edgling Sukuk market. DIFX currently has 21 members and differentiates itself from its regional rivals by emphasizing its international nature, while operating within the GCC region.

Financial risk considerations

• Moody’s view is that DIFC Investments’ reported fi nancial profi le as at December 2006 is somewhat unrepresentative. Fundamental change in the fi nancial profi le of DIFC Investments can be expected over the next six years, when its core activities progressively transform from real estate development to investment management, with the completion of the DIFC. At the end of 2006 DIFC Investments reported investment property (US$304 million, excluding construction work in progress) and investment holdings (US$652 million) and a net debt of US$643 million, implying asset cover of over 1.4 times. Adjusting investment property assets to the year-end market valuation boosts asset cover to 4.9 times. Cash generated from rental income and dividends from investments covered expenses, resulting in earnings before interest tax depreciation and amortization of US$6 million.

• Over the period up to 2012, a rapid rise in debt is envisaged, resulting in a potential weakening in its reported asset cover. On the positive side, Moody’s anticipates net debt to peak around US$5 billion in 2009–10, when construction is completed. Positive operating cash fl ow from 2010, combined with a partial liquidation of its investment portfolio, would reduce borrowing from 2011. The cautionary note is the extent to which DIFC Investments’ fi nancial risk profi le develops, in accordance with its business plan, depends on several variables: success in building the project to schedule; letting space in the completed estate; and the ability to sell assets at an acceptable price. While construction delays, cost overruns or weaker market conditions that vary materially from plan will negatively impact DIFC Investments’ fi nancial risk profi le in the A1 rating factors, DIFC Investments should benefi t from timely tangible support from the government.

• Given the scale of its capital commitments, DIFC Investments will be reliant on capital markets access to meet these. Its liquidity position is underpinned by a considerable undrawn revolving credit facility of US$200 million provided by Deutsche Bank (rated Aa3) and Goldman Sachs (rated Aa3), expiring in 2011. Furthermore, the company’s liquidity policy requires maintaining a minimum of US$25 million in cash balances, which provides an additional cushion, albeit of a relatively small size. Year-end 2006, cash and cash equivalents on the balance sheet were well above this threshold, amounting to US$129.9 million.

conferences

@

www.islamicfi nancenews.comMEET THE HEAD

15th June 2007©

Islamic Finance news talks to leading players in the industry

Could you provide a brief journey of how you arrived where you are today?

I started my legal career as a straight capital markets and structured fi nance lawyer at leading Australian law fi rm Mallesons Stephen Jacques in my native Melbourne. At the end of 2002, I moved to London and joined Norton Rose. It was during my time there that I developed an interest in Islamic capital markets and structured fi nance techniques.

I joined Dechert as a partner in January 2006 to spearhead the development of the fi rm’s London-based Islamic fi nance practice, working closely with our New York and German Islamic fi nance teams.

What does your role involve?Structuring, documenting, implementing and closing Islamic capital markets and structured fi nance transactions. Not to mention helping to build and promote Dechert’s Islamic fi nance practice.

What is your greatest achievement to date?Having helped Dechert build an award-winning Islamic fi nance practice in less than two years!

I am also proud to have advised CMH on the launch of one of Bahrain’s key Shariah compliant private equity funds, and to have worked on the landmark Bahrain Financial Harbour Sukuk.

Which of your products/services deliver the best results?

Complex and innovative Islamic structured fi nance products and capital markets instruments. Also, the service which delivers the best results for our clients is our ability to take a conventional fi nancial product, take it apart and re-engineer it to create a Shariah compliant product that works.

What are the strengths of your business?We are very successful in helping clients to structure and implement highly complicated and innovative Islamic fi nance structures, thanks to our team of experienced Islamic fi nance lawyers with capability in English, New York and German law.

What are the factors contributing to the success of your company?

Perhaps our key strength is our thorough understanding of conventional structured products, which ensures that we can deliver on complex Islamic structured products according to our clients’ needs.

We believe we are also unique in being able to offer Islamic fi nance expertise on both sides of the Atlantic – there are many US and UK fi rms with a good understanding of Islamic fi nance, but none can offer our strength in-depth in both the US and Europe.

Dechert is pretty unique in offering a comprehensive, “one-stop shop” service with full support on a transatlantic basis.

What are the obstacles faced in running your business today?

There simply aren’t enough lawyers with both the relevant Islamic and conventional fi nance expertise out there!

Where do you see the Islamic fi nance industry, maybe in the next fi ve years?

There will be a much wider range of Shariah compliant products available, and a lot more traditional investors tapping and trading the Islamic markets.

Name one thing you would like to see change in the world of Islamic fi nance?

More lawyers really need to get involved in the industry and get themselves up to date with the products that are already available and the direction the industry is heading in.

Name:

Position:

Company:

Based:

Age:

Nationality:

Abradat Kamalpour

Partner

Dechert

London 33

Australian

Dechert is an international law fi rm that focuses on core transactional and litigation practices, providing world class services to major corporations, fi nancial

institutions and private funds worldwide. With more than 1,000 lawyers in our global practice groups working across Dechert’s 16 offi ces in Europe and the US, we have the resources to deliver seamless, high quality legal services to clients worldwide. Our top-ranked, world class practices include corporate and securities, complex litigation, fi nance and real estate, and fi nancial services and asset management.

Dechert’s Islamic fi nance team focuses on the full range of commercial efforts on behalf of major players in the Islamic fi nance industry, including securities and capital markets advisory work, structured fi nance, real estate and infrastructure development, mergers and acquisitions, and private equity and hedge fund formation. In addition, the regional experience of Dechert’s lawyers, gained while living and working in Organization of Islamic Conference (OIC) jurisdictions, enables us to counsel both clients based in the OIC and clients planning to expand to such jurisdictions.

www.islamicfi nancenews.comTERMSHEET

15th June 2007©

INSTRUMENT Sukuk Mudarabah

ISSUER IIG Funding, a special purpose vehicle of the International Investment Group (IIG), established in Jersey.

PRINCIPAL ACTIVITIES

IIG is a Shariah compliant investment company, licensed by the Central Bank of Kuwait. IIG’s investments include companies involved in a range of businesses operating in real estate, the energy and oil industry, the services sector, consumer and real estate fi nance, and insurance. IIG also acts as a strategic advisor to its associate companies, carries on an asset management business and provides corporate fi nance services.

BOARD OF DIRECTORS Abdulhameed Moheyddin Nazer, Jamal Fahad Al Nafi si, Omar Hamed Al Harazi, Rasheed Ali Al Abduljader, Saleh Jameel Malaika, Sami Al Bader Al Jena’ai, Saqer Ahmad Al Maosharji, Saqer Easa Al Mana’ai and Sheikh Salman Dawood Al Salman Al Sabah.

LISTINGThe Sukuk is listed on the Dubai International Financial Exchange and the Professional Securities Market of the London Stock Exchange. Its shares are listed and traded on the Kuwait Stock Exchange.

ISSUE SIZEUS$200 million. The transaction size was increased from US$150 million to US$200 million due to strong investor demand from an approximate 65 accounts, exceeding US$1 billion.

DATE OF ISSUE June 2007

MATURITY July 2012. Sukuk-holders are, however, entitled to redeem the Sukuk in July 2010, at par.

COUPON

The Sukuk is marketed to investors with a periodic distribution amount equal to the 3-year US dollar mid-swap rate (set at the time of pricing), plus a margin within a range of 1.5% to 2% and an initial exchange premium range of 35% to 45%, based on the arithmetic average of the volume weighted average price of the ordinary shares of IIG on each trading day from the 15th May 2007 to pricing.

PAYMENT SCHEDULE The issuer will have the option to redeem all (but not part) of the Sukuk in July 2010 and July 2011 if IIG’s share price is greater than 150% of the prevailing exchange price during no less than 20 out of any 30 consecutive trading days.

AUTHORIZED PAID-UP CAPITAL

KD31.82 million (US$110.44 million), as per IIG’s 31st March 2007 fi nancials.

IDENTIFIED ASSETS Investments in real estate, energy and fi nancial services companies.

LEGAL COUNSEL Allen & Overy, Clifford Chance, Abdullah Kh Al Ayoub, Al Sharraf and Bedell Cristin.

FINANCIAL ADVISOR Barclays Capital

TRUSTEE IIG Funding, Jersey

REGISTRAR Deutsche Bank

DELEGATE Deutsche Trustee Company

SHARIAH ADVISOR IIG’s Shariah Board

MANAGER/BOOKRUNNER

Barclays Capital

METHOD OF ISSUE

The Sukuk offering targeted institutional investors under jurisdictions outside the US (including US persons), Canada, Australia, Italy or Japan. The Sukuk was offered to investors in compliance with the laws and regulations applicable in each country where the offering took place. The Sukuk was issued by IIG Funding in a purchase undertaking grant in its corporate capacity (and not as the Mudarib), an option in favor of the issuer permitting the issuer to require the obligor to purchase the assets of the Mudarabah from IIG at a price suffi cient to fund the redemption upon maturity.

PURPOSE OF ISSUEProceeds from the Sukuk will be invested by IIG (in its capacity as Mudarib) in accordance with the investment plan set out in the Mudarabah agreement to be entered into by it and the issuer in relation to the Sukuk, for business expansion.

IIG Sukuk Mudarabah

For more term sheets visit www.islamicfinancenews.com

www.islamicfi nancenews.com

15th June 2007©

Next Forum Question

The biggest challenge facing the Islamic capital market is to originate sizeable Shariah compliant assets. What are the factors behind this challenge, what can be done to alleviate the problem and what/where are the

opportunities ahead?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 Wednesday 20th June 2007.

Manulife Insurance expects to see strong sales in 2007, on the back of a 40% growth in new business premiums in the 1st quarter of the year.

The company, which is 45.76% owned by Manulife Financial in Canada, credits its growth to its bancassurance division. Bancassurance saw a 100% growth, with 28% of new business premiums as at the 31st March. Manulife’s bancassurance business is driven mainly by its tie-up with HSBC Bank Malaysia, particularly for Takaful products, via HSBC Amanah Takaful. Manulife also has four other bancassurance partners.

The company expects Takaful to complement conventional life insurance and investment-linked plans, raising insurance penetration.

MALAYSIAManulife’s Takaful makeover

Takaful BIBD, providers of the Fire Takaful Scheme and Car Financing Protector, has pledged to consistently hold presentations and roadshows throughout 2007. This is in line with its promotional and awareness-raising bid.

BRUNEITakaful BIBD raises awareness

Aviva UK will form a joint venture with the CIMB Group, having received approval from Bank Negara Malaysia. The joint venture will see Aviva acquire up to ₤74 million (US$145.52 million), or 49% in equity in two of CIMB’s subsidiaries – Commerce Life Assurance and Commerce Takaful.

Commerce Life and Commerce Takaful are also set to enter into exclusive bancassurance agreements with CIMB Bank, to distribute life and Takaful insurance products via the bank’s 383 branches.

MALAYSIA/UKViva Aviva!

Doha Insurance (DIC) has established an Islamic arm. Dubbed Doha Takaful, the company will be a separate branch of Doha Insurance, and is expected to be operational by the 4th quarter of 2007.

Doha Takaful results from the end of DIC’s management agreement with Solidarity, dissolving Doha Solidarity under Doha Insurance. Bassem Hussein, DIC’s general manager, explained: “We decided to end the management agreement with Solidarity in the interest of both parties. Solidarity did not want to limit itself to a specifi c area within a relatively small market. It makes sense for us to have a separate Islamic insurance branch.”

100% Shariah compliant Doha Takaful will have a separate technical and fi nancial team, along with a Shariah supervisory board. The company will maintain separate accounts from DIC.

QATARDoha Takaful

Saudi Arabia aims to triple the volume of its insurance premiums to SR20 billion (US$5.3 billion) by the end of 2017. This is in line with the Saudi government’s bid to develop the insurance industry and expand fi nancial services. The government also aims to branch out from energy exports.

The growth of Takaful – along with the government’s new laws for compulsory health and car insurance – spurred industry growth to SR7 billion (US$1.86 billion) in 2006.

Saudi Arabia is the largest economy in the Gulf Arab region but one of the world’s most under-insured areas, partly due to most Muslims declining to partake in conventional insurance.

SAUDIA ARABIATen-year projection

SINGAPOREMAS is lenientThe Monetary Authority of Singapore (MAS) has proposed a new regulatory framework for insurance securitization.

Upon approval, MAS will register special purpose reinsurance vehicles (SPRVs) incorporated in Singapore under section 8 of the Insurance Act. These SPVRs will, however, be regulated more lightly than fully fl edged reinsurance fi rms.

To qualify as an SPRV under the proposed new rules, a vehicle must be structured and managed as a bankruptcy remote entity and be fully funded. Reinsurance obligations must also receive higher priority than any claims on the vehicle’s assets by investors in its issued securities.

www.islamicfi nancenews.comTAKAFUL REPORT

15th June 2007©

Takaful has become a key component in offering valuable services to individuals, families, businesses and the economy in the Shariah compatible risk intermediation industry. Islamic banks and asset management institutions that are without Takaful coverage face the potential of insurable risks, thus increasing operational costs and impairing competitiveness. By the same token, the family of a recipient of family micro-fi nance will remain exposed to additional hardships in the event of the recipient’s death if the latter does not have micro-Takaful coverage.

At present, there are more than 78 companies operating in various jurisdictions which offer life and general insurance services in compliance with the principles of Shariah. Nonetheless, there is no established source of data for the Takaful segment in the Islamic Financial Services Industry (IFSI). Takaful operators are largely concentrated in Malaysia, Sudan and Bahrain, where specifi c regulatory frameworks for Takaful have been introduced. This, to a large extent, has helped to stimulate the growth of Takaful services in these countries.

Conventional insurance, whether general or life protection and savings, forms an integral part of the fi nancial sector in any developed fi nancial services environment. There is a large demand for such services in Islamic countries, even though conventional insurance is against the injunctions of the Shariah. Takaful is not only a product that can provide fi nancial security, but it also enhances solidarity under the cherished Islamic principles of cooperation and mutual help. Hence, the potential market for Takaful around the world is large.

Life and general Takaful, as well as re-Takaful, which are all in their infancy, represent a major gap in the provision of Islamic fi nancial services worldwide. Therefore, signifi cant opportunities exist to develop the market for all types of Shariah compliant insurance. Moreover, conventional insurance operators are showing a growing interest in Takaful. There are also opportunities to create and develop bancaTakaful for both Islamic and conventional banks, which will greatly enhance the ability to introduce Takaful worldwide.

Apart from the adoption by one or two international players, giving an immediate global push to Takaful, microfi nance programs have also been steadily rising in developing countries. These programs require micro-Takaful support in order to function effi ciently. There is no difference in the synergy between the Takaful and Islamic asset management industries, and the well-known synergy between life insurance and the asset management industries. The development of Takaful, in particular life or family Takaful, will greatly enhance the ability of Islamic fund managers to increase assets under management signifi cantly, as well as the number of clients in a fund. Similarly, the development of Takaful services will also strengthen Islamic banking by providing risk coverage to their clients and reducing the banks’ exposure to risks.

Despite the strong growth seen and the strong demand for Takaful and re-Takaful products, there are several critical challenges confronting the Takaful industry which may adversely affect its development. These need to be identifi ed and addressed.

The major challenge is developing human resources competent in both Shariah and actuarial sciences. The other single most important problem is the non-existence of a supportive legal and regulatory framework. For example, in countries other than Bahrain, Malaysia and Sudan, Takaful providers must operate within the regulatory framework of conventional insurance services. Moreover, from the legal standpoint, Takaful is treated no different than conventional insurance. As a result, Takaful services providers are having the diffi culty of facing competition from conventional insurance providers. Consequently, on the global front, there is insignifi cant development of Takaful taking place outside of areas that have a predominantly Muslim community. The establishment of institutions such as the Islamic Bank of Britain encourages regulators, as it helps to put in place a Shariah supervisory infrastructure and increases understanding of Islamic fi nance by the regulators.

Efforts by the joint International Association of Insurance Supervisors (IAIS) and International Financial Services Board (IFSB) working group identify four main themes. These are: (a) corporate governance; (b) fi nancial and prudential regulation; (c) transparency, reporting and market conduct; and (d) supervisory review process. Corporate governance, in its widest sense, is top priority; it is diffi cult to make progress in other areas without a view of both the structural and the fi nancial relationships between shareholders and policyholders, including the location of the various fi nancial risks.

A more serious issue in the Takaful segment than in any other segment of the IFSI is the non-existence of uniform terminologies and the degree of unresolved fi qh issues – there is an absence of Shariah guidelines on even very basic issues, and fi qh views differ widely – often challenging even the basic concept of Takaful. Moreover, the industry has been left open to criticism when companies fail, or fail to protect the consumers, due to a lack of uniform corporate governance standards and Shariah audit guidelines that the industry can follow. Looking forward, the potential for utilizing participants’ or policyholders’ funds in a way that contradicts good corporate governance from the perspective of the Takaful segment is a very real threat.

Another crucial point is that the Takaful segment needs to provide a clear and transparent service where long-term life Takaful contracts – which can be as long as 40 years – need to cope with transactions over the entire lifetime of a contract. Such facilities can only be assured if the level of technology implemented by the operator is

Challenges for Takaful By Ayesha Saeed

continued...

“The industry is open to criticism and credibility challenges if the roots of the Takaful concept – mutual risk protection under Shariah rules and principles – are not recognized”

www.islamicfi nancenews.comTAKAFUL REPORT

15th June 2007©

Challenges for Takaful (continued...)

capable of providing the participant with assurances that his long-term interests are being met. Technology has been a driver of conventional insurance development and there is no reason for it not to drive Takaful development forward as well. Many of the markets still to be developed by Takaful operators are not technology-driven environments. The speed of technological development in the Takaful segment must be matched by such developments in the general marketplace.

The availability of fi nancial assets that can match the long-term nature of the risks will contribute to the success of Takaful. However, long-dated sovereign and corporate Islamic fi nancial products are not at present available to invest the funds collected by Takaful companies.

Another concern – inside and outside of the Takaful industry – relates to the absence of highly rated re-Takaful companies. Critics rightly point out that even with Shariah dispensation supporting the use of conventional reinsurance where necessary, reliance upon the latter implies that, in practice, the Takaful industry is a hybrid of Islamic and conventional institutions. Re-Takaful facilities themselves depend on a suffi cient pool of underlying Takaful business, but also on the availability of acceptable assets for investment.

Takaful services and products face a severe lack of publicity and marketing. For example, the very essence of Takaful is mutual risk protection between members on a cooperative basis, under Shariah

compliant principles. The adoption of a savings element for individual participants is laudable but, as in conventional insurance, such funds are not mutual or cooperative, but belong exclusively to the member making the contribution. Therefore, these investment products are offered with little or no Takaful coverage. Furthermore, to move away from the very essence of Takaful is to lean too far towards a conventional insurance model, mimicking the tax advantages of products which are signifi cantly more in the nature of investment and tax avoidance vehicles than they are protection or Takaful products. The industry is open to criticism and credibility challenges if the roots of the Takaful concept – mutual risk protection under Shariah rules and principles – are not recognized.

Takaful is still perceived as something undesirable and incompatible with Islamic principles by a considerable number of Shariah scholars and members of the public. Yet the general public, corporations, governments and institutions of civil society institutions cannot function effi ciently without having access to risk intermediation services. Therefore, concerted efforts are needed by the industry, as well as by its regulators, to change the perception of Takaful to one that is more favorable in the medium term.

Contact Sharmilee SagadavinTel: +603 2143 8100


GET YOUR COPY TODAY!July – December

The author is pursuing her postgraduate degree at Bahaudin Zakariya University, Pakistan. She can be contacted at [email protected].

www.islamicfi nancenews.comMOVES

15th June 2007©

AXA – Gulf

Paul Bromley has been appointed AXA Insurance Gulf’s Regional Life & Takaful manager. He will be responsible for the management and development of AXA’s life business until the end of 2008.

Mr Bromley is an accomplished strategic development manager with extensive life assurance, family Takaful, and fi nancial service experience spanning three continents. He has seen a total of 38 years in the industry, with 12 years in the Middle East, having worked with the Saudi British Bank, SALAMA and Zurich Financial Services.

PRUDENTIAL AM – Asia-Pacifi c

Ajay Srinivasan has resigned as CEO of Prudential Asset Management for Asia-Pacifi c. It is as yet unknown where his next move will be, but he has affi rmed his intentions to take a breather.

Mr Srinivasan is renowned as among the region’s most experienced fund managers, and for building up Prudential AM from scratch. He joined Prudential ICICI Asset Management in India in 1998, growing the business to a collective US$30 million in Asia-Pacifi c assets. In 2001 Srinivasan was picked to lead the Asia-Pacifi c funds business and moved to Hong Kong, having seen Prudential’s life insurance business increase to US$2 billion.

Alan Wren from Prudential’s London offi ce is due to serve as interim CEO, until a permanent successor is picked.

ABN AMRO – Pakistan

Mohamad Shaheed Khan and Humayon Jamshed have both left ABN Amro.

They have been replaced by Umer Shakil as head of Islamic product development, Fawad Hashmi as country head for Islamic fi nance and Ali Hasnain as head of Islamic consumer fi nance.

MERRILL LYNCH – Asia

Merrill Lynch’s head of Pacifi c Rim credit trading – Peter Walshe – has resigned. It is still unknown what he will do next.

DFSA – UAE

The Dubai Financial Services Authority (DFSA) has made fi ve major appointments. Marc Hambach, Michael Golden, Stephen Glynn, Sameer Sheth and David Haswell will make up the newly promoted fi nance squad.

Mr Hambach will serve as head of anti-money laundering, Mr Golden as head of insurance, Mr Glynn, head of enforcement, Mr Sheth as head of fi nance and Mr Haswell the DFSA’s head of internal audit.

BANK ISLAM – Malaysia

Ahmad Saeed Brek has been appointed as Bank Islam Malaysia’s independent non-executive director. Heralded as a turnaround spe-cialist, Mr Brek was credited for turning around Citibank’s Dh1 million (US$272,258) loss to a profi t of Dh150 million (US$40.84 million) in 1990. He also established a diversifi ed commercial and retail seg-ment for Citibank UAE.

Ahmad Saeed has over 25 years of experience in the banking and fi nancial services sector in the UAE and Gulf region, and is an ac-countant by training. He is currently CEO of MAF Ventures. He has also served as CEO of Citibank North Africa, UAE and Oman, Dubai Bank, and was senior auditor for Ernst & Young.

MTA – Malaysia

The Malaysian Takaful Association (MTA) has appointed a string of new offi ce bearers for the 2007–2009 session. Mohammed Tarmidzi Ahmad Nordin, CEO of Takaful Nasional, is now chairman of MTA, with Ezamshah Ismail, CEO of Hong Leong Tokio Marine, acting as deputy.

Mohammad Tarmidzi’s insurance industry experience spans 30 years, having fi rst served as a broker before moving on to start up Malaysia’s fi rst Takaful company. He was previously CEO of Mayban Takaful and an associate lecturer at the Malaysian Insurance Institute (MII).

Ezamshah, who is currently on the board of the Malaysian Rating Corporation (MARC), was previously part of the MII and Malaysian Insurance Mediation Bureau Committee.

HLIB/KFHM/RHB – Malaysia

Three key moves are awaiting Bank Negara Malaysia approval. Now, you may need to take your time reading this...

Jamelah Jamaluddin, deputy chief executive offi cer and head of cor-porate and investment banking at Kuwait Finance House Malaysia, is moving back to RHB to serve as chief executive offi cer of RHB Islamic. She is taking over from Khalid Bhaimia.

Khalid Bhaimia, who has moved to Hong Leong Islamic Group as chief operating offi cer, will resume the role of CEO once David Vicary Abdul-lah receives approval from Bank Negara for his move to the Asian Finance Bank as chief operating offi cer.

SOROUH – UAE

Mohammed Khalaf al Mazrui has been appointed a member of So-rouh Real Estate’s board of directors, and vice chairman.

BEAR STEARNS – Hong Kong

Equity research analysts Mohan Singh and Leon Chik will join Bear Stearns Hong Kong as managing directors. The two will cover the Asian markets, with Mr Singh focusing on the consumer sector, and Mr Chik covering small/mid-cap companies.

Prior to Bear Stearns, Mr Singh was head of regional consumer equity research and India product coordinator for BNP Paribas. Mr Chik was previously with HSBC where he served as a mid-cap analyst, covering the Hong Kong and China markets.

BIIH – UK

Bradley Brandon-Cross has been appointed CEO of British Islamic Insurance Holdings (BIIH).

Mr Brandon-Cross has over 20 years’ experience within the UK and international insurance industry, covering both life and general insurance. He also has extensive expertise in business process outsourcing within the insurance industry, having been CEO of an insurance services provider. Prior to this appointment, Mr Brandon-Cross co-founded Rubicon, an insurance services provider. He has also worked with GE Insurance.

LEHMAN – India

Jayanta Banerjee, previously director of investments at ICICI Venture, has joined Lehman Brothers, India. He will serve as managing direc-tor, head of private equity excluding real estate and head of growth capital.

www.islamicfi nancenews.comDEAL TRACKER

15th June 2007©

Islamic Finance newsAdvisory Board:

Mr Daud Abdullah (David Vicary)Managing Director

Hong Leong Islamic Bank

Dr Mohd Daud BakarChief Executive Offi cer

International Institute of Islamic Finance

Prof Dr Mohd Masum BillahAssociate Professor

International Islamic University of Malaysia

Dr Humayon DarManaging Director

Dar Al Istithmar

Mr Badlisyah Abdul GhaniChief Executive Offi cer

CIMB Islamic

Ms Baljeet Kaur GrewalChief Economist

Kuwait Finance House

Mr Sohail JafferPartner & Chief Executive Offi cer

FWU Group

Dr Monzer Kahf Consultant/Trainer/Lecturer

Private Practice

Mr Mohd Ridza bin Mohammed Abdullah

Managing PartnerMohamed Ridza & Co

Prof Bala ShanmugamDirector of Banking & Finance Monash University Malaysia

Mr Muhammad Nejatullah SiddiqiAuthor, Scholar, Speaker, Trainer

Mr Rushdi SiddiquiGlobal Director

Dow Jones Islamic Indexes

Mr Dawood TaylorHead of Takaful Taawuni Division

Bank Aljazira

Mr Abdulkader ThomasPresident & CEO

SHAPE – Financial Corp.

Mr Paul WoutersOf Counsel

Bener Law Offi ce

Prof Rodney WilsonDirector

Durham University

Mr Sohail ZubairiVice President & Head Shariah

Coordination Dubai Islamic Bank

Another Islamic Finance news exclusive

ISSUER SIZE (million) INSTRUMENT

SilTerra US$525.5 Ijarah

PINS Capital Up to US$43.79 CP/MTN Program

Perusahaan Listrik Negara

US$33.97 Ijarah

Dubai Financial TBA Sukuk

Thani Investments US$100 Sukuk

Al Imtiaz Investment US$75–150 Sukuk

Haisan Resources US$58.79 Sukuk Ijarah

IJM Corporation US$511.60 Sukuk Istisnah

Ras Al Khaimah Investment Authority

US$400 TBA (Sukuk)

ARAPESONA US$56.9/US$19.9 ICP/MTN

Bank Syariah Mandiri US$3.25 Subdebt

Cagamas US$584.60 TBA

Gamuda TBA Murabahah or Musharakah

Saudi Electric Company US$4,000 Sukuk

MTC US$1,200 Sukuk

Prolintas US$170.70 Senior Ijarah/Junior Musharakah

Tomei Consolidated US$28.50 Islamic Commercial Papers

Sui Southern Gas Co. US$49 Islamic Commercial Papers

JBIC US$250–US$350 Sukuk

Dynamic Communication US$143.40 Istisnah/MTN program

GLOMAC US$50.18 Murabahah MTN program

Indonesia Comnets Plus US$11.02 Sukuk Murabahah

Karachi Shipyard US$69.19 TBA

Kwantas US$69.19 Murabahah/Off CP/MTN program

Malaysia International Shipping

US$286.30 Sukuk Murabahah

Gamuda US$256 ICPs/IMTNs

Islamic Development Bank

US$142.40 Ringgit denominated Sukuk

AMMB Holdings US$114.20 Sukuk

ADIB US$408.50 Sukuk

Moccis US$108.80 Sukuk Murabahah/2 Tranches/6 Series

MTD Infraperdana US$71.50 Murabahah (CP/MTN program)

For more details and the full list of deals visit

www.islamicfi nancenews.com

Deal trackerKeeping you abreast of the world’s upcoming Shariah compliant deals

www.islamicfi nancenews.comFUNDS PAGE

15th June 2007©

Monthly returns for Middle East/Africa funds (as of 14th June 2007)

FUND MANAGEMENT COMPANY March 07 Return (%) FUND DOMICILE

1 Zajil – Service & Telecommunications Fund National Investments Company 10.86 Kuwait

2 Mawarid Industrial and Petroleum Services Fund National Investments Company 10.86 Kuwait

3 Al Darij Investment Fund National Investments Company 7.98 Kuwait

4 GCC Al-Raed Fund Samba 5.06 Saudi Arabia

5 Cap Al Moucharaka Fund Wafa Gestion 4.79 Morocco

6 Al Rajhi Al Jwhara Ladies Fund Al Rajhi Banking & Investment Corporation 4.31 Saudi Arabia

7 National Bank of Abu Dhabi (NBAD) UAE Islamic Fund National Bank of Abu Dhabi 4.07 UAE

8 Al Rajhi Children Fund Al Rajhi Banking & Investment Corporation 4.03 Saudi Arabia

9 Gulf Industrial Companies Fund The Saudi Investment Bank 3.82 Saudi Arabia

10 Markaz Islamic Fund Kuwait Financial Centre 3.81 Kuwait

Eurekahedge Middle East/Africa Islamic Fund Index* 0.80

DisclaimerCopyright 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 purpose.

Contact EurekahedgeTo list your fund or update your fund information: [email protected]

For further details on Eurekahedge: [email protected] Tel: +65 6212 0900

Eurekahedge Islamic Fund Index

Monthly returns for Asia-Pacifi c funds (as of 14th June 2007)

FUND MANAGEMENT COMPANY March 07 Return (%) FUND DOMICILE

1 CMS Islamic Fund CMS Trust Management 16.00 Malaysia

2 TRIM Syariah Berimbang Trimegah Securities 11.31 Indonesia

3 Al Meezan Mutual Fund Al Meezan Investment Management 9.76 Pakistan

4 India Fund Al-Madina for Finance and Investment Company 9.73 Kuwait

5 Kotak Indian Shariah Fund Kotak Mahindra (UK) 9.73 Mauritius

6 ING Ekuiti Islam Fund ING Funds 9.71 Malaysia

7 Apex Dana Al-Faiz-i Apex Investment Services 9.68 Malaysia

8 IPB Syariah PT Kresna Graha Sekurindo 9.56 Indonesia

9 SBB Dana Al-Ihsan 2 CIMB Wealth Advisors 9.54 Malaysia

10 SBB Dana Al-Ihsan CIMB Wealth Advisors 9.54 Malaysia

Eurekahedge Asia Pacifi c Islamic Fund Index* 4.20

140

150

160

170

180

190

200

210

220

Apr-04

Jun-0

4Aug-0

4Oct-

04

Dec-04

Feb-05Apr-0

5Ju

n-05

Aug-05

Oct-05

Dec-05

Feb-06Apr-0

6Ju

n-06

Aug-06

Oct-06

Dec-06

Feb-07Apr-0

7

Inde

x Valu

es

Geographic Mandate = Asia-Pacifi c

Geographic Mandate = Middle East/Africa

www.islamicfi nancenews.comMARKET INDEXES

15th June 2007©

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

IndexComponent

numberFull

Float adjusted

Mean Median Largest Smallest Largest Smallest

DJIM World 2351 18308.93 15556.04 6.62 1.59 474.54 0.01 3.05 0

DJIM Asia/Pacifi c 944 3319.33 2379.88 2.52 0.62 96.26 0.01 4.04 0

DJIM Europe 355 4822.74 3858.74 10.87 3.18 219.46 0.28 5.69 0.01

DJIM US 719 8691.49 8282.39 11.52 3.20 474.54 0.18 5.73 0

DJIM Titans 100 100 7817.39 7122.04 71.22 49.27 472.67 1.21 6.64 0.02

DJIM Asia/Pacifi c Titans 25 25 935.63 654.86 26.19 18.92 78.56 8.67 12.00 1.32

Mean, median, largest, smallest and component weights are based on fl oat adjusted market capitalization, not full market capitalization.

Anthony YeungRegional Director

[email protected]: +852 2831 2580

Learn more about the Dow Jones Islamic Market Indexes

Data as of the 13th June 2007

INDEX PRICE RETURN (%)

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

DJIM World -0.84 -0.53 -0.58 0.73 7.70 9.62 29.18 9.87

DJIM Asia/Pacifi c -2.16 1.14 0.42 1.68 5.65 7.16 26.29 6.91

DJIM Europe -1.17 -1.33 -2.31 -0.53 7.43 8.91 31.29 8.85

DJIM US -0.25 -0.73 -0.08 0.92 7.35 9.51 27.14 10.09

PERFORMANCE OF DJ TITANS INDEXES

PERFORMANCE OF DJ INDEXES

INDEX PRICE RETURN (%)


DJIM Titans 100 -0.60 -0.66 -0.57 0.42 7.20 6.63 25.27 6.91

DJIM Asia/Pacifi c Titans 25 -1.96 1.81 0.95 2.61 5.31 6.91 30.96 6.96

PRIC

E R

ETU

RN

(%)

PRIC

E R

ETU

RN

(%)

1 Week 2 Week 3 Week 1 Month 3 Month 6 Month 1 Year YTD-5

0

5

10

15

20

25

30

35

-5

0

5

10

15

20

25

30

35

DJIM World DJIM Asia/Pacif ic DJIM Europe DJIM US

DJIM Titans 100 DJIM Asia/Pacif ic Titans 25


www.islamicfi nancenews.comMALAYSIAN SUKUK UPDATE

15th June 2007©

AS AT 13th June 2007

Key Benchmarks Trend (by volume) Rating This week close (RM) 06 June 07 (RM) 30 May 07 (RM) 23 May 07 (RM)

Private Debt Securities

NAB IMTN 5.783% 30.04.2013 – MTN 001 AA3 (RAM) 105.25 105.41 106.60 107.10

RANTAU IMTN 0% 15.03.2012 – MTN 3 AAA (RAM) 99.95 100.21 101.12 101.83

RANTAU IMTN 15.03.2011 – MTN 1 AAA (RAM) 101.31 101.42 102.03 102.61

RANTAU IMTN 0% 14.08.2013 – MTN 2 AAA (RAM) 104.20 104.27 105.63 106.67

LEKAS 0% 12.06.2019 AA3 (RAM) 70.26 N/A N/A N/A

Government Investment Instruments

PROFIT-BASED GII 3/2006 15.11.2016 N/A 101.10 101.61 104.27 105.59



Quasi Government

KHAZANAH 0% 08.12.2016 N/A 69.07 69.92 71.13 71.21

SILTERRA CAP 3.900% 06.06.2014 N/A 99.99 N/A N/A N/A

RINGGIT ISLAMIC DEBT MARKET: WEEKLY SNAPSHOT

SPREAD VS GII (in b.p.)

MYR ISLAMIC DEBT YIELD CURVESYTM Curves 5 YEAR YTM Historical Charts (weekly closing, over last 6 months)

TENURE

1Y 2Y 3Y 5Y 7Y 10Y

GII 3.57 3.58 3.59 3.64 3.75 3.88

Cagamas 0.08 0.16 0.24 0.34 0.26 0.22

Khazanah -0.02 0.06 0.15 0.21 0.13 0.07

AAA 6.06 6.51 6.86 7.50 8.00 8.47

AA1 0.21 0.30 0.39 0.58 0.65 0.76

A1 1.39 1.58 1.75 2.10 2.35 2.70

www.islamicfi nancenews.comLEAGUE TABLES

15th June 2007©

For all enquires regarding the above information, please contact: Catherine Chu Email: [email protected] Phone: +852 2804 1223; Fax: +852 2529 4377

TOP ISSUERS OF ISLAMIC BONDS JUNE 2006 – JUNE 2007

Issuer or Group Nationality Instrument Amt US$ m Iss. % Manager

1 Nakheel Development UAE Convertible Sukuk Ijarah 3,520 2 15.6 Barclays Capital, Dubai Islamic Bank

2 Malaysia Malaysia Sukuk 2,638 3 11.7 Malaysian Government bond

3 Aldar Funding MalaysiaExchangeable Sukuk Al Mudarabah

2,530 1 11.2Barclays Capital, Credit Suisse Securities (Europe), Abu Dhabi International Bank

4 Nucleus Avenue (M) Malaysia Sukuk Musharakah MTN 1,994 9 8.8 CIMB Investment

5 Dubai Sukuk Centre UAE Sukuk Mudarabah 1,248 1 5.5Deutsche Bank (London), Goldman Sachs International

6 Rantau Abang Capital Malaysia Sukuk Musharakah MTN 975 2 4.3 CIMB, AmMerchant Bank

7 ADIB Sukuk UAE Sukuk Ijarah 800 1 3.5 HSBC

8 Dubai Islamic Bank UAE Sukuk Musharakah 750 1 3.3Barclays Capital, Citi, Standard Chartered Bank

9 Raffl esia Capital MalaysiaPeriodic Payment Exchangeable Trust Certifi cates

750 1 3.3 CIMB Investment, HSBC Amanah, UBS

10Projek Lebuhraya Utara Selatan (PLUS)

Malaysia Sukuk Musharakah MTN 743 18 3.3 CIMB Investment

11 Golden Belt 1 SukukSaudi Arabia

Sukuk Manafaa 650 1 2.9 BNP Paribas

12 Cagamas MBS Malaysia

Sukuk Musharakah Islamic Residential Mortgage Backed Securities

620 7 2.7 HSBC, CIMB, AmMerchant Bank

13 Silterra Capital MalaysiaGovernment Guaranteed Sukuk Ijarah

530 1 2.3CIMB Investment, HSBC Bank Malaysia, Citibank

14 Cagamas MalaysiaBithaman Ajil Islamic Securities

489 10 2.2 Cagamas, AmMerchant Bank

15 Jimah Energy Ventures Malaysia Istisnah Islamic MTN 437 20 1.9AmMerchant Bank, Bank Muamalat Malaysia, MIMB, RHB Sakura

16 Lebuhraya Kajang – Seremban Malaysia Sukuk Istisnah 413 12 1.8 AmInvestment Bank

17 MBB Sukuk MalaysiaSubordinated Sukuk Trust Certifi cates

300 1 1.3 HSBC, Aseambankers Malaysia, UBS

18 SIB Sukuk UAE Musharakah Sukuk 225 1 1.0 HSBC

19 Putrajaya Holdings Malaysia Murabahah MTN 211 5 0.9 Alliance Merchant, CIMB, RHB Sakura

20 Kuala Lumpur Sentral Malaysia Sukuk Musharakah 208 7 0.9 HSBC Bank Malaysia

Total of issues used in the table 22,576 293 100.0


15th June 2007©

TOP ISSUERS OF ISLAMIC BONDS JANUARY 2007 – JUNE 2007

Issuer or Group Nationality Instrument Amt US$ m Iss. % Manager

1 Aldar Funding UAEExchangeable Sukuk Mudarabah

2,530 1 20.9Barclays Capital, Credit Suisse Securities (Europe), Abu Dhabi International Bank

2 Nucleus Avenue (M) Malaysia Sukuk Musharakah MTN 1,994 9 16.5 CIMB Investment

3 Dubai Sukuk Centre UAE Sukuk Mudarabah 1,248 1 10.3Deutsche Bank (London), Goldman Sachs International

4 Malaysia Malaysia Islamic Sukuk MTN 997 1 8.2 Malaysian Government bond

5 Dubai Islamic Bank UAE Sukuk Musharakah 750 1 6.2Barclays Capital, Citi, Standard Chartered

6 Golden Belt 1 Sukuk Saudi Arabia Sukuk Manafaa 650 1 5.4 BNP Paribas

7 Cagamas MBS MalaysiaSukuk Musharakah Islamic Residential Mortgage Backed Securities

620 7 5.1HSBC, CIMB, Aseambankers Malaysia

8 Rantau Abang Capital Malaysia Sukuk Musharakah MTN 570 1 4.7 CIMB

9 Silterra Capital MalaysiaGovernment Guaranteed Sukuk Ijarah

530 1 4.4CIMB Investment, HSBC Bank Malaysia, Citibank

10 Lebuhraya Kajang – Seremban Malaysia Sukuk Istisnah 413 12 3.4 AmInvestment Bank

11 MBB Sukuk MalaysiaSubordinated Sukuk Trust Certifi cates

300 1 2.5 HSBC, Aseambankers Malaysia, UBS

12 Jimah Energy Ventures Malaysia Istisnah Islamic MTN 229 10 1.9AmMerchant Bank, RHB Islamic, MIMB, Bank Muamalat Malaysia

13 Cagamas MalaysiaBithaman Ajil Islamic Securities

217 7 1.8Cagamas, AmMerchant Bank, Aseambankers Malaysia

14 Kuala Lumpur Sentral Malaysia Sukuk Musharakah 208 7 1.7 HSBC Bank Malaysia

15 IIG Funding Kuwait Sukuk Mudarabah 200 1 1.7 Barclays Capital

16 MTD InfraPerdana Malaysia Murabahah MTN 174 8 1.4AmInvestment Bank, CIMB Investment, United Overseas Bank (Malaysia)

17 Syarikat Bekalan Air Selangor MalaysiaBai Bithaman Ajil Medium Term Notes

90 3 0.7HSBC Bank Malaysia, CIMB Investment, Bank Islam Malaysia

18 ABS Logistics Malaysia Sukuk Ijarah 88 14 0.7Deutsche Bank (Malaysia), Hong Leong Islamic Bank

19 Kuala Lumpur Kepong Malaysia Sukuk Ijarah 88 1 0.7Aseambankers Malaysia, CIMB Investment

20Malaysian International Tuna Port

MalaysiaBai Bithaman Ajil Islamic Securities

71 6 0.6OSK Securities, RHB Sakura Merchant Bankers


ARE YOUR DEALS LISTED HERE?

Catherine ChuEmail: [email protected]

Telephone: +852 2804 1223

If you feel that the information within these tables is inaccurate, youmay contact the following directly:


15th June 2007©

ISLAMIC BONDS BY CURRENCY JANUARY 2007 – JUNE 2007

Amt US$ m Iss. %

Malaysian ringgit 6,415 53.0 117

US dollar 5,678 46.9 6

Pakistan rupee 16 0.1 1

Total 12,109 100.0 124

ISLAMIC BONDS BY CURRENCY JUNE 2006 – JUNE 2007

Amt US$ m Iss. %

Malaysia 6,715 118 55.4

UAE 4,530 3 37.4

Saudi Arabia 650 1 5.4

Kuwait 200 1 1.7

Pakistan 16 1 0.1

Total 12,109 124 100.0

ISLAMIC BONDS JUNE 2006 – JUNE 2007

Manager or Group Amt US$ m Iss. %

1 CIMB 4,360 72 19.3

2 Barclays Capital 3,053 5 13.5

3 Malaysian Government bond 2,638 3 11.7

4 HSBC 2,015 26 8.9

5 Dubai Islamic Bank 1,768 3 7.8

6 AmInvestment Bank 1,461 54 6.5

7 Abu Dhabi Investment 843 1 3.7

8 Credit Suisse 843 1 3.7

9 Deutsche Bank 668 15 3.0

10 BNP Paribas 650 1 2.9

11 Goldman Sachs & Co 624 1 2.8

12 Citi 427 2 1.9

13 Standard Chartered Bank 409 19 1.8

14 Aseambankers Malaysia 379 19 1.7

15 UBS 350 2 1.6

16 RHB Investment Bank 342 60 1.5

17 United Overseas Bank 317 39 1.4

18 Cagamas 217 7 1.0

19 Merrill Lynch & Co 168 1 0.7

20 Kuwait Finance House 154 8 0.7


ISLAMIC BONDS BY COUNTRY JUNE 2006 – JUNE 2007

Amt US$ m Iss. %

Malaysia 12,112 277 53.6

UAE 9,273 8 41.1

Saudi Arabia 668 2 3.0

Kuwait 300 2 1.3

US 168 1 0.7

Pakistan 35 2 0.2

Indonesia 21 1 0.1

Total 22,576 293 100.0

ISLAMIC BONDS JANUARY 2006 – JUNE 2007

Manager or Group Amt US$ m Iss. %

1 CIMB 3,101 38 25.6

2 Barclays Capital 1,293 3 10.7

3 Malaysian Government bond 997 1 8.2

4 Abu Dhabi Investment 843 1 7.0

5 Credit Suisse 843 1 7.0

6 Deutsche Bank 668 15 5.5

7 BNP Paribas 650 1 5.4

8 Goldman Sachs & Co 624 1 5.2

9 HSBC 617 19 5.1

10 AmInvestment Bank 553 33 4.6

11 Citi 427 2 3.5

12 Aseambankers Malaysia 374 17 3.1

13 Standard Chartered Bank 258 2 2.1

14 Cagamas 217 7 1.8

15 Kuwait Finance House 104 7 0.9

16 UBS 100 1 0.8

17 RHB Investment Bank 93 16 0.8

18 Bank Muamalat Malaysia 69 18 0.6

19 United Overseas Bank 58 8 0.5

20 EON Bank 57 10 0.5


ISLAMIC BONDS BY COUNTRY JANUARY 2007 – JUNE 2007

Amt US$ m Iss. %

US dollar 11,458 15 50.8

Malaysian ringgit 11,062 275 49.0

Pakistan rupee 35 2 0.2

Indonesian rupiah 21 1 0.1

Total 22,576 293 100.0

For all enquires regarding the above information, please contact:

Catherine Chu

Email: [email protected]: +852 2804 1223; Fax: +852 2529 4377

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15th June 2007©

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2i Capital Group 2ABN Amro 25Abu Dhabi Islamic Bank 8Abu Dhabi Securities Market 2Ahli Bank 5Al Dar Islamic 1Al Salam Bank 4ALDAR Properties 5Alliance Investment Management 3Amlak Finance 3Amwal Investment 2Arab Finance House 2Asian Finance Bank 2,25Atlas Partners Japan 6Aviva UK 22AXA Insurance 25Bank Islam 25Bank Islami 3Bank Negara 25Barclays 6Bear Stearns 25Bitech 7BMB Group 1BNP Paribas 25Boubyan Bank 5British Islamic Insurance Holdings 25

Capital Intelligence 8Carlyle Group 6CIMB Group 22Citibank 25Citigroup 6Commercialbank 5Dar Al Istithmar 1Deutsche Bank 1,6DFSA 25DIFC 7,8DIFX 7Doha Bank 5Doha Insurance 5,22DP World 6,8Dubai Aerospace Enterprise 6Dubai Islamic Bank 3,5Emirates Islamic Bank 2Encorp 2Eurekahedge 3European Finance House 2Faisal Islamic Bank 4First Dawood Islamic Bank 6First Gulf Bank 5FTSE Group 2Glohex Groups 3Goldman Sachs 7

Habib Bank 1Hong Leong Islamic 25Hong Leong Tokio Marine 25HSBC 8,25ICICI Venture 25INCEIF 5International Investment Group 7International Islamic 5Islamic Finance Investment 5Jaber Islamic Bank 5Japan Bank for International Cooperation 7JP Morgan 7Kuwait Finance House 5,6,25Kuwait Financial Center 4Lehman Brothers 6,25Liquidity Management Center 2Man Investments Middle East 2Manulife Insurance 22Mayban Takaful 25Meezan Bank 1Merrill Lynch 25Monetary Authority of Singapore 22Moody’s Investor Services 8MTA 25National Bank of Pakistan 7National Leasing Company 5

Oxford Islamic Finance 1Qatar International Bank 5Qatar Islamic Bank 2,5Qatar Islamic Insurance 5Qatar National Bank 5QINVEST 2Quadrant 3Rating Agency Malaysia 8RHB Islamic 25Russell Wood 1Salam International 5SALAMA 25Saudi British Bank 25Savola Group 7SECP 1Shariah Capital 2Singapore Polytechnic 3Sorouh 25Standard & Poor’s 3,8Standard Chartered 2Takaful BIBD 22Takaful Nasional 25World Bank 7Zurich Financial Services 25

NE-IFN04/24

Company Index

Company Page Company Page Company Page Company Page

Country Index

Australia Aussie Gold 7Bangladesh IFI approves 5Brunei Takaful BIBD raises awareness 22Global Hedge funds debated 2 Quadrant champions Shariah 3 Shock departures for Dar Al Istithmar 1 Sukuk, sukuk 6 JP Morgan leans into Shariah? 7 Acting Islamically 7India Surprise Islamic welcome 2Japan Real estate rising 6 JBIC on track 7Kuwait Markaz outperforms 4 Jaber Islamic Bank 5 Overwhelming interest 7Malaysia Manulife’s Takaful makeover 22 Viva Aviva! 22 Delay affects debt 2 Top 10 in the world 3 Don’t just bank on Shariah 5

KFH wants more 5 Sound prospects 6 Bhari’s Islamic solutions boost 7 Sarawak power! 8 HSBC reaffi rmed 8Pakistan Money money money 3 Islamic stock index 1 Habib goes halal 1 First Dawood goes live 6 JBIC on track 7Qatar Doha Takaful 22 QIB CEOs meet 2 DSM shuffl e 5 Borrowing to expand 5Saudi Arabia Ten-year projection 22 S&P to boost foreign investments 3 Savola go halal 7Singapore MAS is lenient 22 Islamic Finance bootcamp 3 ALDAR JV 5

Sudan Update: Sudan 4Thailand Don’t just bank on Shariah 5UAE New indices 2 EIB prices bonds 2 DIB’s Emarati 3 Amlak’s pipeline 3 DIB’s new scheme 5 Offi ce expansion 5 Following in Etihad’s footsteps 6 DP World benchmark bonds 6 Aussie Gold 7 Goldman in Dubai 7 DIFC names price 7 ADIB upgraded 8 DIFC is stable 8 DP Sukuk rated 8UK Viva Aviva! 22 New indices 2 Capital markets Conference 5

Country Title Page Country Title Page Country Title Page

Developing the Global Islamic Financial MarketsThe 2nd International Islamic Financial Market Conference Bahrain

“Developing the Global Islamic Financial Markets”18th & 19th June 2007

Participants include:H.E. Rasheed Al Maraj, Governor, Central Bank of Bahrain; Dr. Ahmad Jachi, First Vice-Governor, Banque Du Liban, Lebanon; Khalid Hamad, Executive Director, Central Bank of Bahrain; Mohammed Ayman Al Tajer, Director, Central Bank of Bahrain; Wafi k Grais, Senior Adviser, World Bank, USA; Ijlal A. Alvi, CEO, International Islamic Financial Market, Bahrain; Robert Pickel, CEO, ISDA, New York, USA; Abdulkader Thomas, President & CEO, Shape Financial, Kuwait; A. Riawan Amin, President Director, Bank Muamalat, Indonesia; Sh. Nizam Yaquby, Shariah Scholar; Syed Tariq Husain, CEO, Emirates Global Islamic Bank, Pakistan; Arshad Zaman, Ex-Chief Economist & Special Planning Secretary, Government of Pakistan; Dr. Obiyatullah Ismath Bacha, Islamic Research & Training Institute, Saudi Arabia; Badlisyah Abdul Ghani, CEO, CIMB Islamic Bank, Malaysia; Dr. Mohamad Daud Bakar, Shariah Scholar, Malaysia; Ali Fardan, General Manager, National Bank of Kuwait, Bahrain; Ahmed Adil, Partner, Ernst & Young; Dr. Burhan Arbouna, Shariah Scholar, Bahrain; Abdul Rahman Al Baker, Executive Director, Central Bank of Bahrain; Prof. Mahmood Faruqui, Vice Chairman, Institute of Islamic Banking & Insurance, UK; Colin Willis, Senior Advisor, Calyon Coporate & Investment Bank, Bahrain; Luma Saqqaf, Lawyer, Linklaters, UAE; Lilian Le Falher, Head of Treasury, Kuwait Finance House; Danie Marx, Head of Treasury & Capital Markets, European Islamic Investment Bank, UK; Dr. Zaha Rina Zahari, Director, MAA Assurance, Malaysia; Dr. Syed Salman Ali, Islamic Research & Training Institute, Saudi Arabia; Roslan Abdul Razak, Director Business Advisor, IBFIM, Malaysia; Mohammed Sulaiman Al-Omar, General Manager, Kuwait Finance House, Kuwait; Qudeer Latif, Lawyer, Clifford Chance, UAE; Stella Cox, Managing Director, Dawnay Day Global Investment Ltd, UK; Kamal Quadir, Head of Structured Finance, Capital Management House, Bahrain; Agil Natt, Chief Executive Offi cer, INCEIF, Malaysia; Habib Motani, Lawyer, Clifford Chance, UAE; Prof. Mahmood Faruqui, Vice Chairman, Institute of Islamic Banking & Insurance, UK; Dr. Sami Al Suwailem, Islamic Research & Training Institute, Saudi Arabia; Shariah Scholars, Legal and IIFM Board Members

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