ICD TRADE PREMIUM FUND (Registration No. LLP/00185/2015-(I))

Transcription

1 ICD TRADE PREMIUM FUND (Registration No. LLP/00185/2015-(I)) (a Labuan Islamic Limited Liability Partnership registered under the Labuan Limited Partnerships and Limited Liability Partnerships Act 2010) AMENDED AND RESTATED PRIVATE PLACEMENT MEMORANDUM in relation to the private placement of the open-ended investment fund with Limited Liability Partnership Units at USD1 each DESIGNATED PARTNER ICD FIXED INCOME LIMITED FUND MANAGER ISLAMIC CORPORATION FOR THE DEVELOPMENT OF THE PRIVATE SECTOR i

2 ICD TRADE PREMIUM FUND This Amended and Restated Private Placement Memorandum ( Memorandum ) is furnished on a confidential basis to qualified prospective investors for their consideration in connection with the private offering ( Offering ) of limited liability partnership units ( Units ) in the ICD Trade Premium Fund (the Partnership or the Fund ). The Fund is a Labuan Islamic limited liability partnership established and registered on 19 November under the Labuan Limited Partnerships and Limited Liability Partnerships Act 2010, read together with the Labuan Islamic Financial Services and Securities Act Prospective investors should read and understand the contents of this Memorandum. Prospective investors should not treat the contents of this Memorandum as investment, tax or legal advice. Investors may be subject to taxation or reporting and filing requirements in their own jurisdictions with respect to the ownership, purchase or disposal of the Units. All prospective investors should seek advice or consult professional advisers and make their own investigations and evaluation of the investment of Units in the Partnership. There are certain risk factors which prospective investors should consider (see section 8 for Risk Factors ). RELIANCE ON THIS MEMORANDUM This Memorandum is not the sole document which prospective investors will rely upon to invest in the Units. The contents in this Memorandum are qualified by the Amended and Restated Islamic Limited Liability Partnership Agreement ( Partnership Agreement ) in relation to the the Partnership and the investment in the Units. The Partnership Agreement is available for inspection by prospective investors upon written request to the Designated Partner. No person has been authorized to give any information or make any statement concerning the Partnership or the Offering of the Units other than as set forth in this Memorandum. Prospective investors should not rely upon such other information or statements given or made. The Designated Partner has taken reasonable care to ensure that the information stated herein is true and accurate in all respects. However, this responsibility is limited to taking reasonable care in ensuring that such information is to the best of the knowledge and belief of the Designated Partner, properly extracted or derived from information released by sources which are reliable. No independent verification of this information has been carried out. Future projections and estimates made in this Memorandum are based on assumptions and expectations regarding future events which represent the Designated Partner s own assessment and interpretation of information available to it as at the date of this Memorandum. There can be no assurance that actual results will be the same as the future projections or estimates made. No representation or warranty, express or implied, is made by the Partnership, the Designated Partner or the Fund Manager, or any affiliates of these entities as to the accuracy or completeness of the information in this Memorandum. Prospective investors must determine for themselves what reliance they should place on the information in this Memorandum. The information contained in this Memorandum is current as at The Partnership, the Designated Partner, the Fund Manager or any of their affiliates have no obligation to update this Memorandum. The delivery of this Memorandum after this date does not indicate that there has been no change in the Partnership since this date. i

3 Prospective investors should rely on their own evaluation to assess the merits and risks of the investment. Prospective investors who are in any doubt as to the action to be taken should consult their professional advisers immediately. DISTRIBUTION RESTRICTIONS This Memorandum is furnished on a confidential basis and each recipient, by accepting the receipt of this Memorandum, agrees not to distribute or reproduce this Memorandum or disclose any information in this Memorandum to others without the prior written consent of the Designated Partner. This Memorandum has been or will be lodged with the Labuan Financial Services Authority under the Labuan Islamic Financial Services and Securities Act 2010 but has not otherwise been registered as a prospectus or as any form of offering document in any other jurisdictions in connection with the Offering. This Memorandum does not constitute an offer, invitation or solicitation for the Offering in any jurisdiction where such Offering is not authorised or to any person whom it is unlawful to make such an offer, invitation or solicitation of the Offering. NOTICE TO RESIDENTS OF MALAYSIA No recognition from the Securities Commission of Malaysia has been applied for or will be obtained for the making available, offering for subscription or purchase, or issuing invitation to subscribe for or purchase, the Partnership Units under the Capital Markets and Services Act Accordingly, this Prospectus or any amendment or supplement hereto may not be distributed in Malaysia directly or indirectly for the purpose of any offer of the Partnership Units and no person may make available, offer for subscription or purchase, or issue invitation to subscribe for or purchase, any of the Partnership Units directly or indirectly to anyone in Malaysia, unless the making available, offering for subscription or purchase, or issuing invitation to subscribe for or purchase, the Partnership Units falls within any of the categories specified in Schedule 5 of the Capital Markets and Services Act No prospectus has been or will be registered with the Securities Commission of Malaysia under the Capital Markets and Services Act Accordingly, no person may issue, offer for subscription or purchase, make an invitation to subscribe for or purchase, any of the Partnership Units directly or indirectly to anyone in Malaysia, unless the issue, offer for subscription or purchase, or invitation to subscribe for or purchase, the Partnership Units is made to persons specified in the applicable categories of Schedule 5, and Schedule 6 or 7, as the case may be, of the Capital Markets and Services Act 2007 in which case this Prospectus will be deposited as an information memorandum and where necessary registered as a disclosure document with the Securities Commission of Malaysia under the Capital Markets and Services Act ii

4 Contents 1 Executive Summary Overview Investment Objective and Strategy Structure Life of the Partnership Investment Committee Investment Management Anti-Money Laundering Measures Key Features Outlook for the Year 2015, 2016 and Trade Developments in Outlook for Trade in 2016 and Particulars of the Offering Subscription of Partnership Units and Minimum Contribution Subscription Agreement Initial Closing Subsequent Closings Distributions Investment Strategy and Investment Policies Investment Objectives Investment Criteria Targeted Investments Target Region Target Sector/Subsector Target Portfolio Structuring of Investments Mode of finance Investment Limits Shari ah Compliance Investment Management and Approval Process Corporate Structure of the Partnership Establishment of the Partnership Organisation of the Partnership Designated Partner Limited Partners Fund Manager Investment Committee Shari ah Committee Supervisory Board Summary of Principal Terms Performance Fees Risk Factors Market Risk Liquidity Risk Credit and Counterparty Risk Currency and Exchange Risk Profit Rate Risk Legal and Regulatory Risk Political Risk Terrorist Attacks, Armed Conflicts or Increased Hostilities Epidemic Outbreaks, Natural Disasters and other Catastrophes Profit Rate Volatility Risk Tax Risk Risk Mitigation Directory iii

5 1 Executive Summary 1.1 Overview The ICD Trade Premium Fund (Labuan) LLP (the Partnership or the Fund ) is a Labuan Islamic Limited Liability Partnership established and registered on 19 November 2015 under the Labuan Limited Partnerships and Limited Liability Partnerships Act The objective of the Partnership is to undertake the business of managing an Islamic investment fund. The Designated Partner of the Fund is ICD Fixed Income Limited ( Designated Partner ), a company incorporated under the Labuan Companies Act The Islamic Corporation for the Development of the Private Sector ( ICD ) acts as the Fund Manager of the Fund. 1.2 Investment Objective and Strategy The investment objective of the Partnership is to achieve competitive, periodic returns by investing in viable, short-term and comparatively low-risk trade finance investments in conformity with the principles of Shari ah and the Investment Policy of the Fund. To achieve its investment objectives, the Partnership may invest part or the whole of its deposited property directly or indirectly in member countries and in non-member countries of ICD in accordance with the Investment Policy and Shari ah principles. 1.3 Structure Prospective investors become Limited Partners of the Partnership by subscribing to partnership units ( Partnership Units or Units ) where the subscription price is fully payable at the relevant closing(s) of the Partnership. 1.4 Life of the Partnership The Partnership shall commence on the date of issuance of a certificate of registration by Labuan FSA and shall continue until in perpetuity or until the Partnership is dissolved or liquidated ( Term ) in accordance with the Amended and Restated Islamic Limited Liability Partnership Agreement, including any amendments and restatements thereto, entered into between the Designated Partner and the investors ( Partnership Agreement ). 1.5 Investment Committee The Investment Committee of the Partnership is composed of professionals with an excellent track record. They have international expertise with extensive experience in managing balance portfolio funds. The Investment Committee comprises of the following members: (a) (b) three representatives of ICD; and one independent expert from ICD s member countries to be appointed by the Fund Manager. The profiles of the four members of the Investment Committee are provided in section 6.6 of this Memorandum. 1.6 Investment Management The Fund will be managed by ICD in its capacity as Fund Manager. Please refer to section 6.5 of this Memorandum for the scope of duties of ICD. 1

6 1.7 Anti-Money Laundering Measures All investors are subject to the anti-money laundering measures aimed at the prevention of money laundering in accordance with the laws of Labuan and Malaysia which will require the verification of the identities of such investors prior to their admission into the Partnership. 2

7 2 Key Features The key features of the Partnership are set out in this section. Further details are contained in section 7 of this Memorandum. The Partnership or the Fund Designated Partner Fund Manager Shari ah Committee Supervisory Board Fund Administrator Term Investment Objective Target Sectors of investment Subscriptions ICD Trade Premium Fund (Labuan) LLP, a Labuan Islamic limited liability partnership established and registered on 19 November 2015 under the Labuan Limited Partnerships and Limited Liability Partnerships Act 2010, read together with the Labuan Islamic Financial Services and Securities Act ICD Fixed Income Limited (Company No. LL09668), a company incorporated in Labuan with a registered address as Unit Level 13(A), Main Office Tower, Financial Park Labuan, Jalan Merdeka, Federal Territory of Labuan, Malaysia. The Islamic Corporation for the Development of the Private Sector, a multilateral financial institution established pursuant to its Articles of Agreement, with its address at P.O. BOX 54069, Jeddah Saudi Arabia. The Shari ah Committee appointed by the Supervisory Board under Clause 11.3 of the LLPA Agreement. Means the Supervisory Board of the Partnership more particularly described in Clause 11.4 of the Partnership Agreement. The Islamic Corporation for the Development of the Private Sector, a corporation established in the Kingdom of Saudi Arabia under the Islamic Development Bank. The Partnership shall commence on the date of issuance of certificate of registration by Labuan FSA and shall continue until in perpetuity until the Partnership is dissolved or liquidated in accordance with the Partnership Agreement. The investment objective of the Partnership is to achieve competitive, periodic returns by investing in viable, short-term and comparatively low-risk trade finance investments in conformity with the principles of Shari ah and the Investment Policy of the Fund Investments made by the Partnership are not restricted to any sectors or subsectors provided that all investments, including any restrictions on any exposures to any country or region, must be discussed and approved by the Investment Committee and in accordance with the Investment Policy of the Partnership. The investment by the Limited Partners to the Fund shall be through Partnership Units, representing limited liability partnership interests. Each Partnership Unit carries an initial subscription price of 3

8 Shari ah Guidelines Management Rights Investments Approval Process Distributions Redemption Assignment and Transfers Amendments to Partnership Agreement United States Dollars One only (USD1). The objectives of the Partnership shall be in compliance with Shari ah guidelines determined by the Shari ah Committee of the Partnership. Limited Partners shall have no right to take part in the management, control or operation of the Partnership and shall have no power or authority to act for or bind the Partnership. All investments must be compliant with the investment criteria of the Fund and the principles of Shari ah, and must be approved by the Investment Committee. Distributions, if any, shall be made at the discretion of the Designated Partner and shall be made to all Limited Partners and shall be made only in the form of new Partnership Units which shall carry the Partnership Unit value in accordance with the Partnership Agreement to be entered into by the Limited Partners. All redemptions must be made via a redemption request ninety (90) days before the first business day of each month or such other period of time as the Designated Partner may, acting reasonably, in its discretion determine. The sale, assignment, transfer, pledge, encumbrance, disposition or the parting of any Partnership Units by any Limited Partner shall only be effective and valid with the prior written consent of the Designated Partner. The Partnership Agreement may be amended in whole or in part by the Designated Partner with the written consent consisting of one or more documents in like form each signed by one or more of the Limited Partners and together representing at least seventyfive per cent (75%) of the total of all contributions of the Limited Partners to the Partnership. 4

9 3 Outlook for the Year 2015, 2016 and Trade Developments in 2015 Data from World Trade Organization (WTO) showed that the 2015 result marks the fourth consecutive year in which growth in world merchandise trade stayed below 3.0% on an annual basis. Trade was also unusually volatile over the course of the year, falling in the second quarter in both developed and developing countries before rebounding in the final half. Chart 1: Volume of Merchandise Exports and Imports by Level of Development (1Q12-4Q15) Source: WTO secretariat for trade The weak but still positive growth of merchandise trade volume in 2015 (as shown by Chart 1) contrasted with the sharp decline in the dollar value of trade, which fell 13% to USD16.5tln, down from USD19tln in This discrepancy was mostly attributable to strong fluctuations in commodity prices and exchange rates, which were in turn driven by slowing economic growth in China, resilient fuel production in the United States, and divergent monetary policies across leading economies. Volatility in financial markets also dented business and consumer confidence and may have contributed to reduced global demand for certain durable goods. World trade in commercial services last year registered a smaller decline in current dollar terms (exports down 6.4% to $4.7 trillion) than merchandise trade, with goodsrelated services such as transportation experiencing stronger declines (down 10.3% to $870 billion) than other categories. The relative strength of services is not surprising, since this type of trade tends to be less sensitive to business cycles than trade in goods. The figure of 2.8% for world trade growth in 2015 refers to the average of merchandise exports and imports in volume terms, i.e. adjusted to account for differences in inflation and exchange rates across countries. By region (Chart 2), Asia contributed more than any other region to the recovery of world trade after the financial crisis of However, the region's impact on world import volume growth declined last year as the Chinese and other Asian economies cooled. To compare, Asia contributed 1.6 percentage points to the 2.3% rise in the volume of world merchandise imports in 2013, or 73% of world import growth, but in 2015 the region contributed just 0.6 percentage points to the global increase of 2.6%, or 23% of world import growth. 5

10 Meanwhile, European imports were stronger than predicted, accounting for 1.5 percentage points of the 2.6% increase in world import volume, or 59% of global trade growth. The relative strength of Europe's trade can be explained by the recovery of intra-european Union trade, as the drag exerted by the European sovereign debt crisis faded. North America made a positive contribution to world import growth last year (1.1%), while negative import growth in South and Central America (-0.2%) in 2015 was mostly due to the severe and ongoing recession in Brazil, although other distressed countries in the region contributed to the negative result as well. Negative contributions were also recorded in Other regions, which covers Africa, the Middle East, and CIS countries (0.4%). Chart 2: Contributions to World Trade Volume Growth by Region ( ) Annual % Change Source: WTO secretariat for trade On the export front (Chart 3), Asia also did more than any other region to lift merchandise export volume growth between 2011 and 2014, but its contribution fell below that of Europe in In the latest year, Asia was responsible for 1 percentage point of the 3.0% rise in world merchandise exports, or 35% of export growth, whereas Europe's 1.3 percentage point contribution accounted for 44% of the rise. North America's contribution to exports growth in volume terms was close to zero in 2015 as demand for US goods slowed in Canada, Asia and South and Central America. Meanwhile, South and Central America and other regions made small positive contributions to export volume growth. The combination of increased export volumes in oil producing regions and falling imports in Asia likely contributed to falling energy prices in 2015 (Chart 4), as oil supply outstripped energy demand, causing prices to plunge. 6

11 Chart 3: Volume of Merchandise Exports and Imports by Region (1Q12-4Q15) (Seasonally adjusted volume indices, 1Q12=100) Source: WTO secretariat for trade Chart 4: Contributions to Growth in World Merchandise Trade by Product (1Q14-4Q15) (Year-on-year % change in current dollar values) Source: WTO secretariat for trade 3.2 Outlook for Trade in 2016 and 2017 According to the latest WTO forecasts, global trade is set to clock in a slower-than expected growth of 1.7%, well below the previous forecast of 2.8% underpinned by the slowdown in countries such as China and Brazil, in addition to lower levels of imports into the U.S. The new figure means that trade is no longer outpacing economic growth, as it once did. Historically, trade has grown 1.5 times faster than GDP over the long term (as conveyed by Chart 5), and twice as fast when globalization picked up in the 1990s. To compare, between 1960 and 2015, world trade increased at an average rate of 6.6% in real terms, while output grew at an average rate of 3.5%. Between 2008 and 2015 however, the average annual growth of world trade was 3.4% in real terms, while world output grew at 2.4%. This year, trade 7

12 is expected to grow only 80% as fast as the global economy, the WTO said, the first reversal of globalization since 2001 and only the second since Chart 5: Ratio of World Merchandise Trade Volume growth vs. World Real GDP Growth ( ) (% change and ratio) Source: WTO Secretariat for trade, consensus estimates for GDP. Overall, the downgrade follows a sharper-than-expected decline in merchandise trade volumes in the first quarter of 2016 (-1.1% quarter-on-quarter, as measured by the average of seasonally-adjusted exports and imports) and a smaller-thananticipated rebound in the second quarter (+0.3%), although trade activity is expected to pick up in the remainder of the year. By region (Chart 6), export growth in 2016 was downgraded for most regions, with the strongest revisions applied to Asia (0.3% compared to the previous April forecast of 3.4%) and North America (0.7% compared to 3.1%). Meanwhile, South America's export growth is expected to be stronger than previously forecast (4.4% compared 1.9%), benefiting from favourable exchange rate movements. Even with the downward revision to WTO s estimates, risks to the forecast remain mostly on the downside. Overall, exports of developing economies are forecast to grow 1.2% in 2016 (2015: 3.2%), while their imports are expected to increase by 0.4% (2015: 1.1%). Meanwhile, export growth for developed economies is anticipated to grow 2.1% (2015: 2.8%), with a 2.6% rise for imports (2015: 4.6%). 8

13 Chart 6: Merchandise Trade Volume and Real GDP ( ) (Annual % change) Source: WTO Secretariat for trade, consensus estimates for GDP. On a positive note, there are some indications that trade may be picking up in the second half of 2016, although the pace of expansion is likely to remain subdued. Supporting this is the latest reading of the World Trade Outlook Indicator (WTOI), which suggests a modest pick-up in the fourth quarter of 2016 and is broadly consistent with the current WTO trade forecast. To recap, the WTOI is a leading indicator of world trade (Chart 7), designed to provide "real time" information on the trajectory of merchandise trade three to four months ahead of trade volume statistics. Combining several trade-related indices into a single composite indicator, the WTOI measures short run performance against medium-run trends. A reading of 100 indicates trade growth in line with trend, while readings greater or less than 100 suggest above or below trend growth. 9

14 Chart 7: World Trade Outlook Indicator Source: WTO Secretariat for trade, consensus estimates for GDP. The forecast for 2017 has also been revised, with trade now expected to grow between 1.8% and 3.1%, down from 3.6% previously. The increase of the number of systematically important trading countries and the shift in the ratio of trade and GDP growth has made it more difficult to forecast future trade growth, which is why the WTO is for the first time providing a range of scenarios for its 2017 trade forecast rather than giving specific figures. In the near term, several downside risks persist. They include: A combination of self-reinforcing slowdowns. The synchronised economic slowdown in advanced and emerging economies is largely at fault. China s output growth has effectively been cut in half in recent years, reducing demand for imported resources and intermediate and final products. The resulting oversupply conditions and weak commodity prices among the world s major commodity producers, including the US, triggered an unprecedented global contraction in business investment. Although there are indications that the momentum of the downturn in business capital spending has moderated, the rebalancing underway has yet to fully run its course. The US economy has not fully recovered from a prolonged period of export weakness, attributed to the persistent sluggishness in global growth and a strong US dollar. Monetary policy changes in developed countries could lead to financial volatility. The integrated nature of the financial system was amply demonstrated by the turmoil in emerging market currency markets and bond markets in the wake of then Fed Chairman Ben Bernanke s statements in summer 2013 regarding the normalisation of US monetary policy, commonly termed the taper tantrum. It is clear that at a minimum policymakers in emerging market economies perceive an increasing vulnerability to the whims of the global financial system. The Brexit vote in the United Kingdom. The potential effects of the Brexit has also increased uncertainty about future trading arrangements in Europe, a region where trade growth has been relatively strong. The UK referendum result did not produce an immediately observable downturn in economic activity as measured by industrial production or employment; the main impact was a 13% drop in the exchange rate of the pound against the US dollar and an 11% decline in its value against the euro. The growing trend towards protectionism and anti-trade rhetoric across the globe. This is also a concern flagged in the International Monetary Fund s 10

15 (IMF) World Economic Outlook. Indeed, local content rules and subsidies for domestic industries are becoming more prevalent. The raising of non-tariff barriers flies in the face of the prolonged effort to lower tariff barriers, and continued efforts to ratify trade deals, CETA and TPP for example. Populist policies being offered in an increasing number of countries facing national elections have raised the spectre of re-evaluating and readjusting existing trade initiatives as a means to redress economic and social underperformance. In conclusion, the WTO analysis suggests that while world trade volumes are expected to somewhat recover in 2017, the waning pace of trade liberalization and the recent uptick in protectionism are holding back trade growth. Given the subdued global growth outlook, further trade reforms that lower barriers is crucial to stimulate and boost trade activity in the long run. 11

16 4 Particulars of the Offering 4.1 Subscription of Partnership Units and Minimum Contribution The investment by the Limited Partners to the Partnership shall be through Partnership Units, representing limited liability partnership interests. The minimum contribution shall be United States Dollars Five Million (USD5,000,000) for each Limited Partner, unless such requirement is waived in writing at the sole discretion of the Fund Manager. Any additional subscription by any Limited Partner will be a minimum of United States Dollars One Million (USD1,000,000). 4.2 Subscription Agreement Investors may subscribe to the Units by being admitted as a Limited Partner of the Partnership and executing the necessary documentation. 4.3 Initial Closing The initial closing of the Fund shall occur on: (a) (b) (c) three months from the date of registration of the Partnership as evidenced in the certificate of registration of a Labuan limited liability partnership issued by the Labuan Financial Services Authority; the date when the Fund has received Contributions of United States Dollars Forty Million (USD40,000,000); or the date as the Designated Partner may, acting reasonably, in its discretion determine in writing, (the Initial Closing ). 4.4 Subsequent Closings Subsequent closings may be held for the admission of any additional Limited Partners or for the additional subscription by any existing Limited Partner. 4.5 Distributions Distributions, if any, shall be made to all Limited Partners and shall be made only in the form of new Partnership Units which shall carry the Partnership unit value in accordance with the provisions of the Partnership Agreement which will be entered into by the Limited Partners. The frequency of distributions shall be made at the discretion of the Designated Partner. 12

17 5 Investment Strategy and Investment Policies 5.1 Investment Objectives As stated above, the investment objective of the Partnership is to achieve competitive, periodic returns by investing in viable, short-term and comparatively low-risk trade finance investments in conformity with the principles of Shari ah and the Investment Policy of the Fund. The Partnership targets to achieve a minimum of 12-Months LIBOR bps per annum net return on the invested capital contributions ( Target Return ). There are, however, no assurances that the Target Return will be achieved. Please refer to section 8 of this Memorandum for detailed discussion on the risk factors involved in the investments. 5.2 Investment Criteria The Fund Manager will only invest in in Shariah-compliant trade finance transactions which meet the following criteria: (a) (b) (c) (d) (e) investments should contribute to a portfolio weighted average return above 12 Months-LIBOR bps to the Partnership; investments are to be aligned with the sector/region driven strategy that falls within the value-chain of activities of the sectors devised by the Partnership s strategy. The Partnership consistently scans the Organisation of Islamic Conference market and conducts research on profitable commodities and sectors in attractive countries/regions, hence, allocation can change but subject to approval from the Investment Committee; investments are to either be secured by government or (central/commercial) bank guarantees or by an acceptable collateral (commodity stored in warehouse or receivable in secured collection account/escrow account); investments are to be conducted in United Sates Dollars to minimize foreign exchange exposure; invested amount in the proposed investment must be lower than the commodity ceiling margin where ceiling margin is: ceiling cumulative invested projects in (commodity) If a project is deemed considerably interesting, the Investment Committee can raise the ceiling by a maximum of 50% with consent from the Supervisory Board. (f) invested amount in the proposed investment must be lower than the sector ceiling margin where ceiling margin is: ceiling cumulative invested projects in (sector) If a project is deemed considerably interesting, the Investment Committee can raise the ceiling by a maximum of 50% with consent from the Supervisory Board. (g) invested amount in the proposed project is lower than country ceiling margin where ceiling margin is: ceiling cumulative invested projects in (country) If project deems considerably interesting, Investment Committee can raise the ceiling by a maximum of 50% with consent from the Supervisory Board. If the host country is outside of typical risk profile, specific guarantees for 13

18 risk customers (promissory note, or letter of guarantee), consider noncommercial risk insurance for risky clientele. (h) invested amount in the proposed project is lower than non-icd Member countries ceiling margin where ceiling margin is: ceiling cumulative invested projects in (non-icd Member countries) If project deems considerably interesting, Investment Committee can raise the ceiling by a maximum of 50% with consent from the Supervisory Board. If the host country is outside of typical risk profile, specific guarantees for risk customers (promissory note, or letter of guarantee), consider noncommercial risk insurance for risky clientele. (i) if the country falls outside of the typical risk profile, only invest if noncommercial risk insurance or appropriate guarantees are in place. Appropriate due diligence conducted to prevent unrecoverable losses in principal or amount invested; and (j) investment should be short-term, usually 6-9 months, and not exceeding 12 months. 5.3 Targeted Investments The Partnership intends to achieve its objective by investing in Shari ah compliant trade finance investments globally. All investments must be certified by the Shari ah Committee to be compliant with the Shari ah guidelines of the Partnership. 5.4 Target Region Investments made by the Partnership may be in any country or region of the world provided that all investments, including any restrictions on any exposures to any sector or subsector, must comply with the Fund s Investment Policy. 5.5 Target Sector/Subsector Investments made by the Partnership are not restricted to any sectors or subsectors provided that all investments, including any restrictions on any exposures to any country or region, must be in compliance with the Investment Policy. The Partnership will invest in a diversified weighted sector-driven portfolio on Islamic sectors of interest to provide the optimum reward-risk ratio for the investors. The sector allocation would be revised on a yearly basis to reflect the most recent developments in the market and segment. The sectors of focus will be reviewed annually with the objective of identifying the sectors that are critical to development, has a high growth potential and in alignment with the Fund Manager s core competencies. 5.6 Target Portfolio The targeted portfolio allocation is as follows: (a) Structured Trade Finance and Trade Finance secured by commercial bank guarantee 60%-80%; and (b) Trade Finance secured by sovereign guaranty 10%- 30%; (c) Liquidity placed in short term 10%-15%. 5.7 Structuring of Investments The Partnership is carrying on a Labuan non-trading activity and is not chargeable to tax in accordance with the Labuan Business Activity Tax Act Nevertheless, the Designated Partner will give due consideration to the relevant foreign exchange administration policies, repatriation, restrictions of cross border investments with the view of maximising individual return on investments. 14

19 5.8 Mode of finance The Partnership will continue providing the following modes of finance to projects: (a) (b) (c) (d) Commodity Murabaha; Murabaha; Wakala / Restricted Wakala; and Other Shari ah compliant Finance Modes 5.9 Investment Limits To devise a sound allocation for the Partnership, the Investment Committee will approve ceilings that is a limit or cap on total amounts invested at a country level or sector level. The objective is to create an optimised and well-diversified Partnership portfolio with appropriate weightage that maximizes reward for investors at a low-to-medium risk level. The Fund Manager has developed a formula to calculate the maximum investment commitment for each country and each sector and/or a deeper-level of granularity such as sectors within a country. The methodology for creating a formula for a ceiling is as follows: (a) the ceiling for a country requires studying the following factors: (i) (ii) (iii) (iv) (v) social, and political factor; economic, gross domestic product growth, inflation; trade balance; foreign direct investment; ratings (ease of doing business, credit rating etc) can be aligned with formula; (b) (c) sector and commodity ceilings or limits can be quantified based on sectors and commodities absorptive capacity i.e. supply-demand and profitability of the sector/commodity; ceilings or limits will be reviewed on semi-annual basis. However, should a deal appear lucrative to the Investment Committee and meets the risk appetite of the Partnership, the Investment Committee can get approval from the Supervisory Board to raise the ceiling. The ceilings can be raised or dropped for a country based on: (i) (ii) (iii) credit rating changes; political improvements; economic (currency stability). The following diagrams represent the ceilings imposed by the Fund Manager, to be achieved after one year of launching the fund. These limits are subject to revision on a regular basis to reflect market changes: 15

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21 5.10 Shari ah Compliance The Partnership has been established to accord with the Shari ah guidelines. The Shari ah Committee of the Partnership shall oversee and advise the Partnership on whether the Partnership s operations, investments, financing activities or any act carried out by the Partnership is compliant with the Shari ah guidelines. The Shari ah Committee shall issue an annual Shari ah compliance pronouncement for the Partnership, subject to the Partnership s operations being compliant with Shari ah guidelines Investment Management and Approval Process The investment procedures applied by the Partnership are as follows: Management of Investment The Fund Manager shall manage the investments of the Fund and oversee the day-today investment activities of the Partnership. Meetings of the Investment Committee The Investment Committee of the Partnership shall meet at least once a month, however, it shall not be obliged to meet physically in all cases and proposals and votes may be considered and sent by , facsimile or by courier to the relevant party. The Investment Committee shall be responsible for reviewing and monitoring the investment process and approving all investments and divestments of the Partnership. Review by Shari ah Committee The investment universe of the Fund or any new investment structures or products undertaken by the Fund must first be approved by the Shari ah Committee. Identification and Evaluation of Investment Opportunities The sourcing and execution of investment and divestment for the Fund shall be conducted by the Fund Manager, who will identify suitable counterparties with potential investment opportunities for the Fund. The Fund Manager will then carry out the due diligence process on the proposed investments. Review by Investment Committee and the Fund Manager The Investment Committee shall review and consider the proposals provided by the Designated Partner and make such recommendations with respect to the investment proposals within seven (7) calendar days of despatch of the proposal by the Designated Partner by majority vote of those voting. The Fund Manager shall advise the Investment Committee of the investments to be made for the Fund based on the objectives of the Partnership and the Investment Policies. The Fund Manager shall carry out comprehensive due-diligence including financial analysis, financial reviews, audit and such other research and analysis in relation to the proposed investments to evaluate and analyse the investment opportunities. The Fund Manager shall determine the expected returns, appropriate exit strategy and the size of each investment. The Investment Committee shall then undertake a comprehensive review on the proposals based on the concept paper or report presented by the Fund Manager. Approval by Investment Committee The Investment Committee shall then decide on whether the Fund is to make an investment in each of the proposals and decide on the amount to be invested in each investment in line with the Investment Policies. The Designated Partner acting 17

22 through the Fund Manager shall then implement the proposals based on the approval granted by the Investment Committee. Approval by Investment Committee The Designated Partner shall not undertake any investments without the prior positive consent of the Investment Committee. Monitoring of Investments The Fund Manager will monitor the investments made by the Partnership. The Fund Manager shall make necessary recommendations to the Investment Committee where applicable. The Supervisory Board will monitor and review the progress of the Partnership s investments, and then report to the Limited Partners on the performance of the Partnership. 18

23 6 Corporate Structure of the Partnership 6.1 Establishment of the Partnership The ICD Trade Premium Fund (Labuan) LLP was established under the Labuan Limited Partnerships and Limited Liability Partnerships Act 2010, read together with the Labuan Islamic Financial Services and Securities Act The capital of the Partnership will consist of the investments contributed from the Limited Partners. The term of the Partnership commence on the issuance of the certification of registration by the Labuan FSA and shall continue in perpetuity until the Partnership is dissolved under the Partnership Agreement. 6.2 Organisation of the Partnership ICD Fixed Income Limited (Designated Partner) Limited Partners ICD Trade Premium Fund (Labuan) LLP (Fund) The Islamic Corporation for the Development of the Private Sector (Fund Manager) 6.3 Designated Partner The Designated Partner of the Partnership is ICD Fixed Income Limited. It was incorporated in 2013 in the Federal Territory of Labuan, Malaysia. The Designated Partner shall be responsible for the administration, operation and management of the investment business and affairs of the Partnership and shall have the power and authority to do all things necessary to carry out the purposes of the Partnership subject to the Partnership Agreement and the principles of Shari ah. 6.4 Limited Partners Investors in the Fund will acquire limited liability partnership interests in the Fund. They will not participate in the management of the Fund. The Limited Partners shall be limited liability partners within the meaning of the laws of Labuan. Other than as provided under the laws of Labuan, any other applicable law or as expressly provided under the Partnership Agreement, in the event that the Partnership is unable to pay its debts, liabilities or obligations, the liability of each Limited Partner shall be limited to the amount of its contributions. 19

24 Unless as otherwise stated in the Partnership Agreement, the Limited Partners shall have no right to take part in the management, control or operation of the Partnership and shall have no power or authority to act for or bind the Partnership under any agreement with third parties. Any violation of this requirement shall constitute one of the circumstances for withdrawal from the Partnership. 6.5 Fund Manager The Fund Manager, or investment manager of the Fund is ICD. The Fund Manager shall exercise and carry on its duties as Fund Manager with reasonable care, skill and diligence with the expertise, knowledge, skill and experience which may reasonably be expected of an investment manager. The duties of the Fund Manager include: (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) (o) (p) advising the Partnership of the investments to be made for the Partnership subject to the objectives of the Partnership and the Investment Policy of the Partnership; identifying and analysing suitable investments, where appropriate; undertaking comprehensive due diligence on the proposed investments; monitoring and managing the investments once such investments are made; making recommendations regarding the acquisition and disposition of investments; making and divesting investments subject to the approval of the Investment Committee and Shari ah Committee; overseeing the whole investment process including the preparation of any form of proposals to the Investment Committee or Shari ah Committee; monitoring of the financial performance of the Partnership and of its portfolio investment; maintaining the books and records for the Partnership in accordance with the accounting standards of the Partnership; coordinating with the tax advisors and other professionals engaged on behalf of the Partnership; attending Partnership meetings or any other meetings which may be held from time to time where the presence of the Designated Partner is necessary; providing office facilities, staff and equipment to facilitate the business of the Partnership; opening, maintaining and closing of bank accounts and custodian accounts of the Partnership; drawing cheques, transferring and receiving payments, on behalf of the Partnership, made by Limited Partners and other monies arising from the investments of the Partnership; disbursing payments or expenses payable by the Partnership in accordance with this Agreement; executing any agreements or performing any acts or deeds as it is necessary in relation to the business of the Partnership in accordance with the objectives of the Partnership and any other policies which may be laid down by the Partnership; 20

25 (q) (r) conducting any valuations of the Partnership (directly or through third party agents) and to submit such valuation reports or information on the valuations in accordance with this Agreement; and doing all such other things as may appear to the Fund Manager to be incidental to any or all of the above or as may be requested by the Designated Partner. 6.6 Investment Committee The Designated Partner has established an investment committee ( Investment Committee ) which shall comprise of Four (4) members including one independent member. The following are the details of the members of the Investment Committee: (a) Mr. Khaled Al-Aboodi CEO & General Manager, ICD Years of Experience: Previous Experience: 25+ years Economics & Finance. Alternative Governor for Saudi Arabia for the World Bank/IFC, and Senior Economist at Saudi Arabia Public Fund. Education: King Saudi University (BA Economics), Northeastern University (MS Economics). (b) Ms. Nida Raza Director, Advisory & Asset Management, ICD Years of Experience: Previous Experience: Education: 16 of professional advisory and investment banking experience worked at JP Morgan, KeyBank, Standard Chartered, Millennium Finance & Bank Alkhair prior to EY First Class BSc(Hons) in Physics & Space Science from UCL & MSc in International Securities Investment & Banking from ICMA Center in the UK (c) Mr. M. Hasan Mahmud Division Head, Credit Risk Monitoring & Reporting, ICD Years of Experience: Previous Experience: 16+ years in Banking & Finance. Co-TAF Manager for the AFFI-TAF Initiative, IDB. Senior Investment Officer, PPP Division, IDB. Manager, Syndications & Structured Finance, Global Markets, Standard Chartered Bank. Education: CFA Charterholder. 21

26 (d) Mr Nazeem Noordali General Manager, Corporate & Structured Finance Department, ITFC Years of Experience: +24 years in Trade & Finance Previous Experience: Finance Department of the French Conseil General (Regional Government ) - 2 Years Mauritius Export Development Agency (Economic Free Zone of Mauritius) - 4 Years UNIDO - 1 year Education: BSc (Econ.) in Trade Economics from London School of Economics - University of London MSc in Shipping Trade & Finance from CASS Business School - London The Investment Committee shall be responsible for, among other things: (a) (b) (c) (d) (e) (f) reviewing proposed investments and making recommendations with respect to investment proposals; monitoring the investment process and making recommendations where applicable; approving all investments and divestments; performance review of the Partnership; responding to shorter-term changes flagged by the Fund Manager such as rises in variable interest rates, minimising exposure to specific index as a result of changes to the market; and risk management functions such as ensuring the pricing, maturity, structure and amount invested in a project is in congruence with the risk taken. The quorum for any meeting of the Investment Committee shall be three (3) members of the Investment Committee. Decisions made by the Investment Committee on a proposed investment or divestment shall be by a majority vote of those voting. 6.7 Shari ah Committee The Shari ah Committee of the Partnership shall have the following duties and obligations: (a) (b) (c) (d) (e) (f) establish, confirm and approve the Shari ah Guidelines of the Partnership (the Shari ah Guidelines ) and amend such guidelines as may be required from time to time; confirming the compliance of the Partnership s investments and accounting standards with Shari ah Guidelines; review and approve the documentation of all investments; advise the Partnership on whether a certain activity, investment or act carried out by the Partnership is Shari ah compliant; provide the Partnership with a yearly Shari ah compliance audit report of investments and transactions; and issuance of the annual Shari ah compliance pronouncement for the Partnership. 22

27 6.8 Supervisory Board (a) The Designated Partner shall establish, appoint, administer and maintain at all times during the Partnership, a Supervisory Board to act in a consultative role to the Partnership. (b) (c) The Supervisory Board shall comprise of three (3) members, consisting of a chairman and two (2) other members. The Principal Sponsor shall appoint the chairman and one members and the remaining member shall be an independent director to be appointed by the Designated Partner. The Supervisory Board shall be responsible for: (i) (ii) (iii) (iv) (v) (vi) establishing and/or approving policies and objectives of the Partnership; approving the overall strategic direction and business plan of the Partnership; monitoring and generally reviewing the Partnership s, Designated Partner s and Fund Manager s overall performance and progress of the Partnership's Investments acting at all times in good faith; approving the annual budget of the Partnership and ensuring the availability of adequate financial resources for the operations of the Partnership; accounting and/or reporting to the Limited Partners on the performance of the Partnership; approving dividend distribution to Limited Partners; (vii) considering and, if it thinks appropriate, approve the recommendations of the Designated Partner with respect to any revision to the Investment Policy which is sought by the Designated Partner; (viii) considering and, if it thinks appropriate, approve the recommendations of the Designated Partner with respect to the first Auditors and any change of the Auditors; (ix) considering and, if it thinks appropriate, approve the recommendations of the Designated Partner with respect to the appointment of the Partnership's bankers by the Designated Partner; (x) considering and, if it thinks appropriate, approve the recommendations of the Designated Partner (upon advice of the Fund Manager) with respect to the choice of Administrator and the Custodian and any replacement thereof; (xi) (xii) monitoring the compliance by the Designated Partner with the Investment Policy and Shari ah principles; and reviewing and advising on any conflicts of interest or potential conflicts of interest between the Partnership on the one hand, and any other persons, including without limitation, the Designated Partner and the Fund Manager (and any affiliates of the Designated Partner), the Limited Partners, any advisor or consultant retained by the Partnership, or any of their respective affiliates on the other hand which conflicts or potential conflicts shall be drawn to the attention of the Supervisory Board by the Designated Partner as soon as practicable after the Designated Partner becomes aware of them. 23