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Avenue of Choice for your Investment and Fund Raising Catalyst for growth Shareholder Banks:

Edition: May 2016

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IAP INTEGRATED SDN BHD (1140231-W) Suites 2-4, Level 2 Tower Block, Menara Milenium, Jalan Damanlela Pusat Bandar Damansara, 50490 Kuala Lumpur EMAIL : [email protected]

Your Avenue of Choice For Your Investment and Fund Raising Investment Account Platform (IAP) is a platform to facilitate the channelling of funds from investors to finance viable ventures and projects. IAP is backed by Islamic banking institutions which will facilitate the matching of investments with the identified ventures or projects that are in need of funding.

Who we are About Raeed Holdings Raeed Holdings Sdn Bhd (Raeed) is a consortium formed by six Islamic banking institutions in Malaysia namely Affin Islamic Bank Berhad, Bank Islam Malaysia Berhad, Bank Muamalat Malaysia Berhad, Maybank Islamic Berhad, Bank Kerjasama Rakyat Malaysia Berhad and Bank Simpanan Nasional. Raeed has set up a wholly-owned subsidiary, IAP Integrated Sdn Bhd to develop and operate a multi-bank platform known as the Investment Account Platform (IAP).

Corporate Structure

Board of Directors Datuk Zamani Abdul Ghani Chairman of Raeed Holdings Sdn Bhd & IAP Integrated Sdn Bhd

Encik Kamarul Ariffin Mohd Jamil Director (Group CEO of Affin Holdings Berhad)

Raeed Holdings

(investment holding company and the strategic driver for the group)

IAP Integrated

(owner and operator of IAP)

Dato’ Sri Zukri Samat Director (MD of Bank Islam Malaysia Berhad)

Dato’ Mohd Redza Shah Abdul Wahid Director (CEO of Bank Muamalat Malaysia Berhad)

Dato’ Muzaffar Hisham Director (CEO of Maybank Islamic Berhad)

Dato’ Mustafha Abd. Razak Director (MD/President of Bank Kerjasama Rakyat Malaysia Berhad)

Datuk Adinan Maning Director (CE of Bank Simpanan Nasional)

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IAP: A strategic initiative for the Islamic finance industry JOURNEY OF ISLAMIC FINANCE DEVELOPMENT IN MALAYSIA Phase I:

Phase II:

• Building the foundation

• Institutional building

•

Specific legislation for establishment of Islamic banks and takaful operators

•

Legislation enabling government to tap Shariah-compliant means of funding

•

•

Specific regulation allowing establishment of Islamic windows

•

Formation of Shariah Advisory Council at BNM

•

Establishment of Islamic interbank market

Distinct aspect of Shariah compliance in Islamic financial transactions

1980s

1990s

Phase III:

Phase IV:

• Emergence of dual financial system • Strengthen Islamic finance landscape

• Diversification of business • Strengthen Shariah compliance

•

Recognition on the dual financial system in Malaysia and BNM’s mandate in developing the Islamic financial system

•

Entrance of foreign Islamic banks and Islamic subsidiaries

•

Establishment of various talent development institutions (e.g. IBFIM, INCEIF, ISRA)

•

Launch of MIFC as a national agenda to promote the Malaysian Islamic finance industry internationally

•

Recognition of investment account (IA) under IFSA which paves the way for diversification of Islamic banking business

•

Requirement to observe end-to-end Shariah compliance by Islamic financial institutions

2000s

2010s

Source: Bank Negara Malaysia Note: IBFIM – Islamic Banking and Finance Institute Malaysia; INCEIF – International Centre for Education in Islamic Finance; ISRA – International Shariah Research Academy for Islamic Finance; MIFC – Malaysia International Islamic Financial Centre

Exciting future for Islamic finance

Engineering seamless investment experience

The Islamic Financial Services Act 2013 (IFSA) sets an

To facilitate successful delivery of IA, the Investment Account

enabling environment for Islamic banks to diversify their roles

Platform (IAP) has been developed.

through recognition of investment account (IA) as an alternative way of sourcing funds from the public.

The IAP not only seamlessly embeds several financial intermediary functions within its system, but also serves as a

Both investors and ventures can benefit from greater adoption

centralised point in matching investors with viable

of risk-reward concepts, structured based on a wider range of

ventures that suit their risk appetite.

Shariah contracts. This serves as a crucial step for the industry in further IA requires strong intermediation roles of Islamic banks which

diversifying the Islamic banking business, and ultimately

professionally manage the IA funds in the best interest of

benefiting the real economy.

investors.

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NEW WAY OF INVESTING AND RAISING FUNDS

The Investment Account Platform (IAP) is a multi-bank platform that facilitates channelling of funds from investors to finance viable ventures. Funds mobilised via IAP are intermediated by

What is IAP?

participating Islamic banks through investment account (IA) products. IAP allows investors to view and choose from a wide range of ventures sponsored by different Islamic banks for the investors to invest in. With IAP in place, several key functions of Islamic banks in managing IA are embedded within its system, thus enabling IA products to be delivered in an efficient and seamless manner.

How it Works Sponsoring Banks (SBs)

Investors (Sources of fund)

Channel funds to ventures of their choice

ISLAMIC BANK

Provide financing

Ventures (Users of fund)

Strong roles played by banks, in line with their fiduciary duty • Individual investors • Corporate and institutional investors • Islamic banks • Government (to support target industries)

• • • •

Due-diligence Performance monitoring Suitability assessment Investment management

• Target ventures include those businesses with viable projects, and new growth industries

Facilitated by

i Obtain Information

$ Choose Investment

Raise Funding

Promote & Advertise

Source: BNM

Key features of IAP An avenue for Shariahcompliant investment and financing

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Transactions regulated by the Islamic Financial Services Act 2013 (IFSA) and Development Financial Institutions Act 2002 (DFIA)

Credit assessment and screening on the listed ventures by participating Islamic banks

Ratings on the listed ventures by a reputable rating agency

Compliance to disclosure standard on ventures facilitate investors’ informed decision making

User friendly and easily accessible anywhere, anytime

Open to different types of business and ventures of varying size and industries

WHAT IS IA AND HOW IT RELATES TO IAP

IA is a recent product offering by Islamic banks that provides investors with an opportunity to directly invest and share the profits from Shariah-compliant investment activities. Islamic banks undertake significant roles in IA transactions in intermediating funds from investors.

Roles of Islamic banks in operationalising IA 2. Application of funds

1. Acceptance of funds

INVESTORS PLACE FUNDS IN ISLAMIC BANKS UNDER IA

Conduct suitability assessment to assess eligibility and risk appetite of individual investors

....................................

Individual and institutional investors

Ventures

ISLAMIC BANKS CHANNEL IA TO FINANCE VENTURES

Match funds received with underlying ventures according to the investment mandate Conduct due diligence on prospective ventures to ensure the risks undertaken are aligned with the investment mandate

Provide disclosures on the underlying ventures and their related risk-return profiles Recommend appropriate products in line with investors’ risk appetite

Ensure proper governance to safeguard investors’ interests and the banks’ reputation

ISLAMIC BANK

Maintain clear separation of funds to facilitate distributions of principal and returns, and resolution on winding-up

..............

Propose Shariah contracts which will define the intermediary role and basis for attributing returns generated to the banks and the investors

3. Continuous roles Conduct regular monitoring

Report performance to investors

Distribute profit to investors at preagreed term

Identify exit mechanism and perform recovery, if required

Source: BNM

Key features of IA Investors can specify

IA represents the

Investors may define

Returns of IA are based

where funds are

contractual

investment mandate

on the performance

channelled to (i.e.

relationship between and eligibility criteria

of underlying

choice of underlying

the investors and the

for the financing (e.g.

ventures (i.e. Islamic

ventures to invest in)

Islamic banks

investment tenure and

banks will enter into a

types of industry) to

different contractual

Islamic banks

relationship with

Similar to other investments in the market, funds placed under IA are not capital protected. IA is not guaranteed by PIDM

venture owners)

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Investing via IAP

GROW YOUR FUNDS WITH CONFIDENCE Why should I invest via IAP Potential high returns: Under IA, returns to investors are based on performance of the underlying ventures that they choose to invest in. Possible upside returns may be generated from the profit of debt-based financing under a broader set of credit criteria and more efficient capital and liquidity management strategies of Islamic banks in offering equity-based financing structures Bank-intermediated: Islamic banks undertake significant roles in intermediating investors’ funds including filtering of viable ventures, conducting suitability assessment on individual investors and continuous performance monitoring of underlying ventures Independent rating on ventures: Performed by a professional rating agency with extensive experience in rating of financial instruments, facilitating informed decision making by investors Broader choices: Investors can filter the ventures listed based on their desired criteria. This is especially useful to investors with specific investment mandates User friendly: IAP is a platform that is accessible anywhere, anytime, with some processes conducted online 6

What I need to know about IAP investments Investment fund size: Investment participation per investor shall be the multiples of minimum investment amount at the point of offering Underlying currency: Ringgit Malaysia (Investment denominated in foreign currency will be offered in the future) Tenure: The tenure of IA shall match the tenure of underlying financing asset Payment frequency: Principal and profit will be paid either periodically or upon maturity Performance report: To be provided on periodical basis Redemption of investment: At maturity date Profit distribution: Based on profit sharing ratio or expected profit rate Loss treatment: Losses will be borne by investors provided that they are not due to Islamic bank’s breach of specified terms

Invest via IAP today This web-based platform incorporates simple and user-friendly features as well as supporting tools that facilitate informed investment decision making and smooth investment process.

Simple steps for investment

1

(Processes conducted through

Register as an IAP user

2

)

View and select venture

3

Is IAP regulated?

Undertake suitability assessment

The IA offerings and transactions conducted by Islamic banks on the platform are regulated under IFSA and DFIA.

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Islamic bank to facilitate payment of the investment

6

Islamic bank to create Investment Account for investors

Receive periodical report on venture

Receive profit and principal

Suitability assessment (SA) on investors Who should undertake SA

How is SA performed on IAP

Individual investors are required to undertake

SA function is embedded on IAP. Investors will

SA under BNM requirements. Institutional

be prompted to undergo SA before choosing

investors are not required to do so as they

to invest in any ventures listed on the platform.

are deemed to have sufficient resources in

The SA score obtained by each investor will

What will be assessed in SA

supporting informed investment decision

be valid for one year.

SA will assess investors on three key areas

making.

namely financial capabilities, investment IAP will also alert investors should they select

needs and appetite, as well as investment

Why is SA required

ventures that are beyond their risk appetite.

knowledge and experience.

SA is a mechanism for Islamic banks to assist

Investors will be asked to seek additional

investors to choose ventures which are in line

consultation at dedicated branches of

with their respective risk appetite. Investors

participating Islamic banks before

would be alerted should they choose to invest

proceeding with their investment decision.

beyond their risk tolerance.

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Raising funds via IAP:

FINANCE YOUR BUSINESS EFFICIENTLY

Why should I raise financing via IAP Competitive financing terms: Financing application by ventures can be assessed simultaneously by all participating Islamic banks. Venture owners can then choose the best financing offer that suits their needs Variation in financing structures: Diverse types of financing are possible on IAP including debt-based financing, equity-based or hybrid of the two

What I need to know about raising funds

Visibility: IAP provides access to a broad range of individual and institutional investors, thus placing ventures within the radar of potential customers which privilege is normally available to established companies User friendly: IAP is a platform that is accessible anywhere, anytime, with some processes conducted online

AMOUNT RM500,000 and above

Financing facilities available on IAP

TYPES OF VENTURES Any types of business in various industries (including SMEs, PLCs, MNCs, GLCs, federal and state-owned institutions)

Capital expenditure

TENURE Up to 5 years (longer tenure can also be provided with advice from Islamic banks) ASSESSMENT CRITERIA Creditworthiness and viability of the ventures

•

A financing facility provided for a specific amount and to be paid within a specific timeframe as agreed upfront

•

To fund short or long-term financing needs

Working capital •

Provide short-term financing to ventures for working capital requirements

Per project basis

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•

To be structured according to specific project financing requirement

•

No specific timeframe of payment features

Simple steps in raising funds

1

Submit application online (subsequent follow-ups by Islamic banks)*

Submit your financing application today

2

Islamic banks to conduct due diligence on venture application

3

Negotiation of financing terms and conditions Independent rating on venture

Processes conducted through

*Note: Venture owners may also apply for fund raising via IAP by visiting the branches of participating Islamic banks

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Islamic banks to disburse funds upon successful fund raising

4

5

Islamic banks to float venture on IAP

What are the costs involved? • Financing rate which will be negotiated with Islamic banks • Listing and rating fees which are commercially competitive

How much information do I need to disclose? To Islamic banks and RAM Similar to common financing applications to banks

Why? Vital to facilitate assessment on viability and creditworthiness of ventures and projects

To IAP users Details on the company, project and financing required, PDS** as per requirement of BNM as well as ratings assigned by RAM

Why? For ventures to be able to earn investors’ trust to invest in their business or projects during listing on IAP

To investors Progress of the venture and payment of profits and principal is on a periodical basis

Why? To report on the performance of ventures to investors

**Note: Product Disclosure Sheet (PDS) is a product-specific disclosure about a particular venture to be prepared by Islamic bank together with the venture owner to facilitate informed decision-making by potential investors.

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Independent rating on ventures:

ASPIRING CONFIDENCE AMONGST INVESTORS Why is credit rating necessary Before ventures are listed on IAP, they will be independently reviewed and assigned a credit rating by a professional rating agency. This credit rating is to assist potential investors in making informed investment decisions. For institutional investors, a credit rating is useful in monitoring compliance with their respective internal risk limitations.

Process flow of venture assessment Rating scale and definitions used on IAP Rating Symbol*

Credit Quality

aaa

Superior

aa

High

a

Adequate

bbb

Moderate

bb

Low

b

Very Low

c

High likelihood of default

d

Default

IAP

RAM PROFESSIONAL RATING AGENCY

* Suffixes 1, 2 and 3 are applied to ratings in the six rating categories from “aa” to “c” to denote the higher and lower end of the respective rating band (e.g. bbb1, bbb2, bbb3)

• Conduct independent credit assessment and ratings • Forward rating and its review to Islamic bank for listing on IAP

ISLAMIC BANK

VENTURE

• Post venture information and rating review on the platform

• Conduct internal credit assessment • Forward venture information to rating agency

• Provides information to Islamic bank

What does credit rating mean Credit rating reflects opinions on the capacity and willingness of a venture to meet the payment of capital and expected returns on a full and timely basis from the perspective of the rating agency. While credit ratings can be used as a reference to gauge an appropriate level of returns considering the risks involved, it is not a recommendation to buy, sell or hold investment, and does not signify any measure to define good or bad ventures.

What I need to know about credit rating on IAP Credit rating will be conducted by RAM which has over 25 years of experience in rating bonds and sukuk

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Ratings are benchmarked against existing methodology and rating scale which institutional and corporate investors are familiar with

Ratings are one-off, issue-specific and reflect the position at the inception of the financing

Investors will have access to a rating rationale for each rating on ventures listed on IAP

POTENTIAL STRATEGIC COLLABORATION TO ACHIEVE COMMON OBJECTIVES How is IAP useful to my institution Various institutions have specific mandates or objectives that need to be achieved. Strategic collaborations can be explored by these institutions with IAP and Islamic banks to achieve common objectives.

POTENTIAL COLLABORATION New investment avenue TYPES OF INSTITUTIONS Pension funds, insurance /takaful companies, fund management companies etc.

POTENTIAL COLLABORATION Efficient channelling of grants or funding TYPES OF INSTITUTIONS Institutions managing government grants or dedicated funds for specific target groups

POTENTIAL COLLABORATION Enhanced financing opportunities for strategic ventures TYPES OF INSTITUTIONS Institutions with mandate to develop targeted industries

1. Efficient channelling of grants or funding Through IAP, institutions can leverage on the strength of Islamic banks to assess the viability of ventures that can receive the grants managed by these institutions. The institutions would also receive regular progress reports on the ventures. By streamlining the assessment criteria between the institutions and Islamic banks on IAP, they can also open these ventures to be invested by the private sector, therefore further expanding the potential users of the grants available to benefit more ventures.

2. New investment avenue for cornerstone investors Institutional investors can establish a special scheme with a dedicated amount of funds to be channelled in ventures that meet certain set of criteria set by the investors. In return, the investors can be allocated with a portion of investment in those qualified ventures, thus assisting the investors in achieving their target return.

3. Enhanced financing opportunities for strategic ventures Institutions with mandate to develop specific industries can support ventures in those industries by providing a letter of support backing these ventures. This will enhance opportunities of these ventures in obtaining financing from investors via IAP.

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VALUE PROPOSITIONS OF IAP

• • • •

Wider investment choice Bank-intermediated Screened and rated investment Robust and timely update

IAP Value Creations

• • •

Product differentiation New source of income Internationalisation

• • •

New avenue of funding Variety of funding structure Enhanced your venture visibility

How is IAP different from other fund raising platforms There has been an emergence of technology-based fund raising platforms that allow investors to choose the underlying ventures for them to invest in. A key difference of IAP is the intermediation roles of Islamic banks embedded in the operationalisation of IA offered on the platform. IAP also features independent rating on the ventures intended to facilitate investors in making informed investment decisions.

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IAP also targets a wider range of underlying ventures such as SMEs, listed firms and multinational companies to raise funds on the platform. This is in contrast with some other fund raising platforms which are aimed to enhance financial accessibility of start-ups and SMEs and can be equity-driven.

Interested?

Register as an IAP user today! To register and for further information on IAP, please visit our website at

www.iaplatfor m.com You may also email us at

c u st o m e rse r vice@iaplatfor m.com

DISCLAIMER The content of this brochure is for general information purposes only. The content contained does not constitute legal, financial or investment advice and neither does it make any recommendation or endorsement regarding the product mentioned herein. Although care has been taken to ensure the accuracy of the information within this brochure, Raeed Holdings and IAP Integrated do not warrant or represent, expressedly or impliedly as to the accuracy or completeness of the information herein. Raeed Holdings and IAP Integrated do not accept any liability for any investment decisions made on the basis of this information. You are advised to seek independent advice and/ or consult relevant laws, regulations and rules prior to investing or undertaking any financial transaction.

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IAP INTEGRATED SDN BHD (1140231-W) Suites 2-4, Level 2 Tower Block, Menara Milenium, Jalan Damanlela Pusat Bandar Damansara, 50490 Kuala Lumpur EMAIL : [email protected]