Sukuk Report

SUKUK REPORT
A comprehensive study of the Global Sukuk Market
From the light of the Holy Quran

:
Allah Almighty Said:

We ask not of you a provision: We provide for you.
And the good end is for righteousness (Surat Ta-Ha, (20) 132)
SUKUK REPORT
About IIFM
IIFM is the International Islamic Financial Services Industrys standard setting organization focused on the Islamic
Capital & Money Market (ICMM) segment of the industry. Its primary focus lies in the standardization of Islamic
financial products, documentation and related processes at the global level. Moreover, IIFM also contribute in
the development of ICMM by organizing specialized Seminars, Workshops & Consultative meetings as well as
research on Sukuk issuances around the globe.
IIFM was founded with the collective efforts of the Central Bank of Bahrain, Islamic Development Bank, Autoriti
Monetari (i.e. Monetary Authority) Brunei Darussalam, Bank Indonesia, Central Bank of Sudan and the Bank
Negara Malaysia (delegated to Labuan Financial Services Authority) as a neutral and non-profit organization.
Besides the founding members, IIFM is supported by other jurisdictional members such as State Bank of
Pakistan, Dubai International Financial Centre as well as a number of regional and international financial
institutions and other market participants.
IIFM MEMBERS
entral Bank of Bahrain
C
Labuan Financial Services Authority, Malaysia
Islamic Development Bank, KSA
Central Bank of Sudan
Bank of Indonesia
Autoriti Monetari Brunei Darussalam
State Bank of Pakistan
Dubai International Financial Centre
Crdit Agricole Corporate & Investment Bank
Al Salam Bank, Bahrain
Kuwait Finance House, Kuwait
National Bank of Kuwait, Bahrain
Al Baraka Banking Group, Bahrain
Khaleeji Commercial Bank, Bahrain
Bank Islam Malaysia Berhad, Malaysia
Kuwait Finance House, Bahrain
Standard Chartered Saadiq, UAE
Abu Dhabi Islamic Bank, UAE
Jordan Islamic Bank, Jordan
Ahli United Bank, Bahrain
ABC Islamic Bank, Bahrain
Global Banking Corporation, Bahrain
Al Hilal Bank, UAE
Mashreq Al-Islami, UAE
Ithmaar Bank, Bahrain
Bahrain Islamic Bank
Gulf International Bank, Bahrain
The National Commercial Bank, KSA
III
ank Muscat SAOG, Oman

B
HSBC, UAE
Bank Kerjasama Rakyat Malaysia
Malaysian Rating Corporation Berhad, Malaysia
Emirates Securities & Commodities Authority, UAE
Ernst & Young, Bahrain
DDCAP Limited, UK
United Gulf Bank, Bahrain
First Habib Modaraba, Pakistan
Clifford Chance LLP, UAE
Allen & Overy LLP, UAE
Zaid Ibrahim & Company, Malaysia
The Islamic Bank of Asia Limited, Singapore
The Royal Bank of Scotland, UK
Istanbul Stock Exchange, Turkey
Seera Investment Bank, Bahrain
Bank Al Jazeera, KSA
Boubyan Bank, Kuwait
Bank of London and the Middle East
Kuveyt Trk Participation Bank Inc.
RAM Rating Services Berhad
Iraqi Islamic Bank
Islamic International Arab Bank plc
Bank Islam Brunei, Darussalam
SUKUK REPORT
DISCLAIMER
IIFM has prepared this publication for general information purposes only and this does not
constitute an invitation or solicitation to purchase, subscribe for or sell any Sukuk or to engage in,
lead into, conclude or refrain from engaging in any transaction.
IIFM or the author/s accept no liability whatsoever for any direct, indirect, consequential, or other
damages and loss arising from any use of this publication.
The information contained herein has been obtained from sources considered to be reliable. IIFM
or the author/s makes no guarantee, representation or warranty as to its accuracy or completeness.
II
SUKUK REPORT
IV
Research & Review Team

Mr. Ijlal Ahmed Alvi
Chief Executive Officer
Dr. Ahmed Rufai
Head of Shariah Department
Mr. Ismail Dadabhoy
IIFM Advisor
Mr. Usman Mohammad Naseer
Business Development Officer
Database Maintenance

Mr. Babar Naseer
Mr. Tareq Fouad
Design & Printing

Mr. Sayyed Zarrar
SUKUK REPORT
III
Abstract
The growth of the Islamic financial market worldwide has been very impressive and remarkable.
The innovations have changed the dynamics of the industry especially, in the area of Sukuk which
is a means of raising government finance through sovereign issues, and also a way for companies
to obtain funding through offering corporate Sukuk.
This third edition of the IIFM Sukuk research report aims to shade light on the growth and
development of international and domestic Sukuk issuances in recent years and to highlight as
well on the different Sukuk structures used in various jurisdictions active in issuing Sukuk.
This research report highlighted and analyzed some selected case studies from the international
Sukuk markets based on widely used structures for the purpose of achieving a deeper understanding
of the mechanism of these unique and most popular and commonly used financial instruments in
the Islamic Capital and Money Market.
The report presents invaluable information on the benefits of Sukuk for all the stake holders in the
industry.
IV
SUKUK REPORT
VI
Acknowledgements
On the very outset of this research report, IIFM would like to take this opportunity to express its
deep sense of gratitude and thanks to individuals and institutions for their cordial support to
complete this research report.
The report would not have been seen light without the support of such individuals, the industry
institutions and the stakeholders in general.
Our sincere gratitude and highly thankful goes also to all institutions and stakeholders who provide
us with invaluable information that helped us to complete this task through various stages.
We take this opportunity to express our profound gratitude and deep regards to the Central Bank
of Bahrain (CBB) for its constant and continued support. We would also like to acknowledge and
highly thank IIFM Board of Directors and Members for their unreserved support for IIFM in its
general endeavors.
IIFM is very much thankful to Mr. Ismail Dadabhoy for his review and voluble contribution to this
report. We are also thankful to Ms. Shazia Farooq for her time and effort in jointly preparing the
case studies of this research report.
Lastly, IIFM is also thankful to Ministry of Finance Indonesia, Clifford Chance, Linklaters, HSBC
Bank, Al Hilal Bank, Noor Islamic Bank & FWU Group for providing case studies & articles on specific
Sukuk structures institutions contribution.
VII
SUKUK REPORT
Foreword
From IIFM Chairman & Executive Director - Banking Supervision Central Bank of Bahrain (CBB)
In the Name of Allah, the Most Gracious, the Most Merciful

All the praises and thanks be to Allah Almighty. May peace and blessings of Allah Almighty be upon His
Messenger Prophet Muhammad (S.A.W.) his family and all his companions.
The continuing evolution of the Sukuk Market is critical to the sustainability of the future growth of Islamic
finance. Reliable research which provides data in respect of Sukuk issuance is a key factor in understanding
the way in which the market is developing, and this in turn can be used to inform decisions as to when
to issue a Sukuk; the anticipated terms of the issuance; and to facilitate the monitoring of any secondary
market.
In 2010, the International Islamic Financial Market (IIFM) successfully published the first edition of a Sukuk
Research Report, followed by the second edition in 2011. The two reports provided a comprehensive
analysis of the market at the respective times. It has been encouraging to note the level of praise and
admiration both reports received from existing and potential market participants.
The latest Research Report builds upon the previous success, and it goes a long way to strengthen
and deepen the understanding of global Sukuk structures and issuance. The Report provides a reliable
database, with accompanying professional analysis, and this can be used as a benchmark by regions
which have a high concentration of the worlds Sukuk issuance.
This research report aims to provide information for industry decision makers in their assessments of
trends in the issuance of Sukuk globally. The report also amply illustrates the importance of this field of
transactions to all stakeholders, and clearly demonstrates the way in which Sukuk issuance and utilisation
has evolved.
I believe that the IIFM research team can be confident that there will be many grateful readers who will
gain a broader perspective of the Sukuk structure and how stakeholders can optimize the benefits of the
Sukuk market as a result of their efforts.
Mr. Khalid Hamad

April 2013
VI
SUKUK REPORT
VIII
Foreword
From The Chief Executive Officer, International Islamic Financial Market (IIFM)
In the Name of Allah, the Most Gracious, the Most Merciful

All the praises and thanks be to Allah Almighty, the Lord of all that exists. And may peace and blessings of Allah Almighty be
upon His Messenger Prophet Muhammad, his family and all his companions.
There is no doubt that Sukuk play an essential role in the development of Islamic Capital and Money Market and also
play an important role in contributing to the economic growth and prosperity of Islamic countries. IIFM efforts in this
respect as reflect in its 1st and 2nd Editions of the Sukuk Reports are evident. The two reports were very well received
by the practitioners. Considering the value addition provided by IIFM in terms of Sukuk issuance database and issues
covered in the reports.
I have a great satisfaction in introducing this third edition of the IIFM Sukuk Report to the stake holders in the industry
in particular, governments, Islamic financial institutions and corporates. This report provides valuable information
obtained through data analysis, regarding the Sukuk issuances for the years January 2001 January 2013.
This report will pay particular attention on the prospects and overview trends of the global Sukuk Market and it will
highlight on major issuances around the globe.
This report is an excellent example of cooperative endeavor among a number of institutions and individuals from
different jurisdictions. They have put in their efforts and contributed to the successful completion of this report. I will like
to acknowledge their contribution individually but the constraint of space restricts me from that. The motivation and
commonality among the stakeholders of the research objective despite their belonging to divergent jurisdictions helped
IIFM to complete this important task without obstructions. The varied information of the collaborating institutions which
have been brought into this report, the issuance specific data and the profound analysis make the report immensely
useful and valuable.
I am very much thankful to Securities Commission Malaysia, Bank Indonesia, Ministry of Finance Indonesia, State Bank
of Pakistan and Central Bank of Sudan for their continued support and enriching t he IIFM database with valuable Sukuk
data information and verification.
I must place on record my profound gratitude to the Central Bank of Bahrain (CBB), IIFM board of directors and Members
for their continued support. I must also wholeheartedly thank the IIFM research team who through their hard work,
devotion and sincerity has completed this challenging task of Sukuk report successfully. It is my hope that the reader
will find this report useful and of value.
Mr. Ijlal Ahmed Alvi

April 2013
IX
SUKUK REPORT
VII
CONTENTS
CONTENT PAGE
Disclaimer ii
Research Team iii
Abstract iv
Acknowledgments v
Foreword (from the IIFM Chairman & CEO)
vi
Contents viii
List of Tables ix
List of Charts ix
INTRODUCTION 1
CHAPTER ONE :
SUKUK AL- ISTITHMAR (INVESTMENT SUKUK):
MEANING AND TYPES
CHAPTER TWO : OVERVIEW OF THE GLOBAL SUKUK MARKET
1
Introduction 3
2
Sukuk Al-Istithmar
3

2.1
Definition 3

2.2
Types of Sukuk Al-Istithmar 4

2.3
Characteristics of Sukuk Al-Istithmar 7
3
Fundamental differences between Sukuk Al-Istithmar and Bonds
7
4
Conclusion 7
2.1
2.2
2.3
2.4
2.5
2.6
2.7
Resurgence of Sukuk Market 9

Global Sukuk Issuances 9
Distribution of Global Sukuk Issuance by Issuer Status
14
International Sukuk Market 19
Domestic Sukuk Markets 22
Structural Break-up of Global Sukuk Market 24
Short Term Sukuk Market 29

CHAPTER THREE : CASE STUDIES OF SELECTED INTERNATIONAL SUKUK ISSUES 30
3.1
3.2
3.3
3.4
3.5
Abu Dhabi Islamic Bank (ADIB) Shirkat-Ul-Milk Based Sukuk 2011

30
Khazanah Nasional Wakalah Based Sukuk 2011 34
Majid Al Futtaim (MAF) Wakalah Based Sukuk 2012 38
Saudi Electricity Company (SEC) Al Ijarah Based Sukuk 2012 43
Projek Lebuhraya Usahasama Berhad (Plus Berhad) Musharakah Based Sukuk 2012 46
CHAPTER FOUR : CASE STUDIES & ARTICLES ON SPECIFIC SUKUK STRUCTURES 49

INSTITUTIONS CONTRIBUTION
4.1
4.2
4.3
4.4
4.5
4.6
Government of Indonesia Sukuk Issuances (Sukuk Negara)

49
Republic of Turkey
56
Abu Dhabi Islamic Bank PJSC Mudaraba-Based Tier 1 Capital Sukuk 2012
59
Article on Sukuk Heading Forward 63
Article on Sukuk Secondary market overview (Q4 2012 Q1 2013)
66
FWU Group Sukuk CASE STUDY
66
CONCLUSION 68
GLOSSARY 71
REFERENCES 73
VIII
SUKUK REPORT
LIST OF TABLES
TABLE
PAGE
Table 1: Selected Hall Mark Global Sukuk Issues & Trends -2011- Jan 2013 -
Year wise latest first USD 700 Millions or greater (International & Domestic)
11
Table 2: Selected the Non-Local Currency hallmark global Sukuk issuances 13

during last 2 years
Table 3: landmark Fixed Profit Rate Sukuk Issuances during Jan 2011 Jan 2013 period
14
Table 4: Global Sukuk Issuances by Issuer Status 2001- Jan 2013
15
Table 5: Global Sovereign Sukuk Issues -Selected Value Leaders 2011-2013 -

(International & Domestic)
15
Table 6: Global Corporate Sukuk Issues -Selected Value Leaders 2011-2013 -

16
Table 7: Global Quasi-Sovereign Sukuk Issues -Selected Value Leaders 2011-2012 -

18
Table 8: Regional Break-Up of the Total International Sukuk Issuance 2001-Jan 2013
20
Table 9: International Sukuk Issues -Selected Value Leaders in USD 2011- Jan 2013 -
(Corporate, Sovereign & Quasi-Sovereign)
21
Table 10: Regional break-up of the Total Domestic Sukuk Issuance 2001-Jan 2013
22
Table 11: Domestic Sukuk Issues -Selected Value Leaders in Local Currency 2011- 2013 -
(Corporate, Sovereign & Quasi-Sovereign)
23
Table 12: Cross Border International Sukuk Maturing 2013 26

Table 13: Cross Border International Sukuk Maturing 2014 26
Table 14: Domestic Sukuk Maturing 2013 27
Table 15: Domestic Sukuk Maturing 2014 28
Table 16: Total Global Short-Term Sukuk Issuance All Currencies
LIST OF CHARTS/FIGURES

CHART
XI
29
PAGE
Chart 1: Total Global Sukuk Issuance (All Currencies) 10
Chart 2: Total Global Sukuk Issuance (All Currencies) Breakdown by Issuer Status
18
Chart 3: Total Global Sukuk Issuance by Value (All currencies) Structural Breakdown
25
Chart4: Total Global Sukuk Issuance by currency Breakdown 2001- Jan 2013
25
Chart 5: Total Global Sukuk Issuance by Regional Breakdown 2001- Jan 2013
26
Chart 6: Total Global Short-Term Sukuk Issuance by Currency
29
SUKUK REPORT
IX
Introduction
The International Islamic Financial Market (IIFM) over the past years has been in the forefront of global initiatives
and efforts to help in establishing a sustainable, viable and feasible global Islamic Capital and Money Market
industry through its comprehensive documentation and product standardization initiatives that cater not only
Islamic Financial Industry but also to ensure that the Islamic Capital and Money Market products and services
remain attractive to all investors, creditors and Sukuk issuers across the Globe.
In an attempt to further strengthen efficiency, awareness and enhance competitiveness of the Islamic Capital and
Money Market industry, in 2010 IIFM has published its first Sukuk research report (IIFM Sukuk Report 1st Edition) as
part of its efforts to help the industry move forward in a comprehensive manner.
In 2011 the 2nd edition of IIFM Sukuk research report (IIFM Sukuk Report 2nd Edition) was published in order to meet
the growing and increasing needs of those interested in the Sukuk Market by providing them useful information
on the latest developments of Sukuk market.
The two reports covered a number of important issues related to Sukuk issuances across the globe over the period
of 2001 to 2010.
With the continued rise in global Sukuk Issuances whether its domestic or international, sovereign or corporate,
it has become very much necessary and essential to shed more light on the evolution of this important financial
sector in the Islamic finance industry.
This third edition of Sukuk report as the previous reports provides information and relevant details of Sukuk
issuances during the period of 2011 -2012 The main objective here is to highlight the development of the Sukuk
market during this period, in particular, in the GCC countries, Asia represented by Malaysia, Indonesia and other
countries such as Turkey, Pakistan etc., by analysing the transition and practices that have taken place. In doing
so, some of the relevant issues related directly to Sukuk issuances globally during this period of time is discussed
and analyzed.
As far as the International Sukuk secondary market is concern, there has been some improvement given the
record issuances during last two years, however, the data is not yet available to IIFM in order to assess the level of
secondary market Sukuk trading hence, our intention is to continue work on Sukuk secondary market and publish
the report at a later date.
Research methodology
Both quantitative and qualitative methods have been used in writing this report.
A quantitative method mainly involves data collection on various Sukuk issuances from January 2011 to January
2013 and also further data verification for 2001 to 2010 period. The main focus in this method is to collate data
from writing materials relating to the topic of the research. This includes prospectuses, publications, articles,
magazines, online research, and information service providers. Data collected was then filtered with respect to
different criteria such as chronology, geographic distribution, issuer status, country of origin, etc and depicted in
the form of tables and/or charts for better understanding. Moreover, certain IIFM Member jurisdictions as well as
institutions have also assisted IIFM in data verification.
However, in a qualitative method the main focus is to collect and analyze materials or data in respect to Sukuk
issuance acceptability. This includes the types of structures used, legal, innovation and Shariah issues.
This research report is organized into four standalone chapters which are organized as follows:
Chapter One explains the meaning, concept and types of Sukuk Al-Istithmar (An Arabic term of
investment Sukuk) and common mistakes in this regard.
Chapter Two discusses overview of the Sukuk issuances over the period of January 2011 to January
2013.
Chapter Three comprises of selected Sukuk case studies of international & domestic Sukuk issuances

prepared by IIFM.
Chapter Four consists of case studies & articles on specific Sukuk structures, written and prepared by

members & other institutions.
Among the the objective of this research report is to help the stake holders in the industry in particular,
governments, Islamic financial institutions and corporate, evaluate and asses their decisions on Sukuk issuance
as well as in their decision making and policy formulation. Also to orient those interested in the Sukuk Market to
the nature of Sukuk field and how it can be useful for those who need to gain some basic as well as more in-depth
knowledge and background on the level of research in this field. In order to maximize the benefit of the report,
some case studies and articles on specific Sukuk structures and issues have been included.
Chapter One
SUKUK AL- ISTITHMAR (AN ARABIC TERM OF INVESTMENT SUKUK)
MEANING AND TYPES
By: Ahmed Rufai - IIFM
Abstract
Every so often question is raised on whether there is any difference between Sukuk Al-Istithmar and Sukuk AlMudarabah or Sukuk Al-Wakalah bi Al-Istithmar or Sukuk Al-Salam etc. Some suggested in their writings on Sukuk
that Sukuk Al-istithmar should be distinguished from Sukuk al- Mudarabah and Sukuk al-Wakalah bi Al-Istithmar
without realizing that all these contracts in this context are in general termed or called Sukuk Al-Istithmar.
Therefore, the objective of this chapter is to explain the meaning and types of Sukuk Al-Istithmar based on the
AAIOFIShari ah Standard, without going into details of itsShari ah provisions and practical applications.
1. Introduction
Sukuk in general reflect participation in the underlying asset so that what is traded is not a merely debt as each
certificate must represent an undivided interest in the asset. This is because in the light of the prohibition of Riba
(i.e. interest) under theShari ah trading in pure debt instrument is forbidden. Therefore, Sukuk are structured to
achieve a desired economic objective in a manner conform to the principle and sprit ofShari ah.
Investment in tangible assets, used for productive purposes and reaping the rewards arising from those assets is
the core principle of Islamic finance and it is this principle on which Sukuk securitization structures are founded.
Moreover, for a Sukuk structure to comply withShari ah principles the underlying asset must also comply with
theShari ah principles as well. In other words the underlying asset must be lawful from theShari ah perspective.
As mentioned in the abstract that the primary purpose of this chapter is to give general information on Sukuk
Al-Istithmar without digging deep into its Sahriah provisions and practical applications but to know that these
Sukuk must be structured on the basis of the known Islamic investment transaction contracts such as Mudarabah,
or Wakalah or Ijarah or Salam etc. all of which are called/termed/categorized as Sukuk Al-Istithmar according to
AAIOFI Shariah Standard.
2. Sukuk Al- Istithmar

2.1 Definition
The early Muslims have used the word Assakk,

which means certificate or order of payment. And
1
the plural of this Arabic term is Sukuk
.
They used Sukuk in those early days as a form of papers representing financial obligations originating from trade
or any other commercial activities. However, in the modern day Islamic financial system, Sukuk are known as
instruments of the Islamic capital Market and it is one of the best financial instruments and mechanisms that are
commensurate with the needs of issuers/originators and investors.
1. Sheikh Ahmad Al- Fayyumi Al- Muqri, Al-Misabah Al-Munir, Kitab Al-Saad, Al-Saad ma a Al-Kaf.
Sukuk Al-Istithmar is defined as follows:

Investment Sukuk are certificates of equal value representing undivided shares in ownership of tangible
assets, usufructs and services or (in the ownership of) the assets of particular projects or special investment
activity 2.
The concept of Sukuk Al-Istithmar can be extracted from this definition as certificates of equal value issued
and sold to investors who, by virtue thereof, have proportional claims over the financial rights underlying these
certificates as well as proportionately liable for obligations arising from these certificates i.e. benefits and risks.

2.2 Types of Sukuk Al- Istithmar

There are many types of Sukuk Al-Istithmar which can be issued in many forms and structured from any of the
known Islamic investment transaction contracts such as Wakalah contract or Mudarabah contract or Salam
contract or Ijarah contracts etc. in other words Sukuk Al-Istithmar must be issued in accordance with one of these
known contracts. The most important of such contracts in this regard as set out in the AAIOFIShari ah Standard
are the following 3:
2.2.1 Sukuk Milkiyyah Al-Maujudaat Al-Muajjarah (i.e. Certificates of ownership
in leased assets)
These are certificates that represent equal value and are issued by the owner of leased asset or a tangible asset
to be leased by promise, or by his financial agent with the aim of selling asset and recovering its value from
subscription. Thus, the holders of the certificates become owners of the assets.
In this transaction the Issuer is the seller of a leased asset or a tangible asset to be leased on promise, the
subscribers are the buyers of the asset, mobilized funds are the purchase price of the asset. The certificate holders
will become the owners of the assets jointly sharing the profits and losses on the basis of the partnership that exist
between them.
2.2.2 Sukuk Milkiyyah Al- Mana fi a (i.e. Certificates of ownership of usufructs)

These Sukuk have different types as explained bellow:
(a)
Sukuk Milkiyyah Al- Mana fi a Al- a ayaan Al-maujudah (i.e. Certificates of ownership of
usufructs of existing assets
These are Certificates of equal value that are issued either by the owner of an existing asset or a financial
intermediary acting on the owners behalf, with the purpose of leasing or subleasing this asset and receiving the
rental from the revenue of subscription. Thus, the holders of the certificates become owners of the usufruct of the
asset.
In this transaction the Issuer is the seller of usufruct of an existing asset, the subscribers are the buyers of the
usufructs and the mobilized funds are the purchase price of the usufructs. Thus, the certificate holders become
jointly the owners of the usufructs sharing its benefits and risks.
(b)
Sukuk Milkiyyah Al- Mana fi a Al- a ayaan Al-mausufah fi Al- dhimmah (i.e. Certificates of
ownership of usufructs of described future assets)
These are certificates of equal value issued for the aim of leasing out tangible assets that the lessor is liable to
provide in the future whereby the rental is recovered from the subscription revenue. Thus, the holders of the
certificates become owners of the usufruct of these future assets.
2. Accounting and auditing organization for Islamic Financial Institutions (AAIOFI) Shariah Standards, 2010, item 2
Shariah Standard no. 17. PP. 307 309.
3. Ibid. (See the AAIOFI Sharia Standard no. 17 for more details on these Sukuk).
In this transaction whereby the ownership of described usufructs to be made available in the future the Issuer is the
seller of such usufruct, the subscribers are the buyers of the usufructs and the mobilized funds from subscription
are the purchase price of the usufructs. Thus, the certificate holders become jointly the owners of the usufructs
sharing its benefits and risks.
(c) Sukuk Milkiyyah Al-Khadamaat min taraf mu ayyan (i.e. Certificates of ownership of services of a specified
party)
These are certificates of equal value issued for the aim of providing services through a specified provider (such as
educational benefits in a nominated university) and obtaining the value in the form of subscription income. Thus,
the certificates holders become owners of the services.
(d)
Sukuk Milkiyyah Al-Khadamaat min taraf mausufun fi Al- dhimmah (i.e. Certificates of ownership of
described future services)
These are certificates of equal value issued for the purpose of providing future services through described provider
(such as educational benefits/ programs of determined specifications without mentioning the educational
institution) and obtaining the fee in the form of subscription income. Thus, the holders of the certificates become
owners of the services.
In these transactions (c & d) the issuer is the seller of services, the subscribers are the buyers of the services and the
mobilized funds are the purchase price of the services.
The certificate holders are entitled to sell all types of usufructs of (b, c & d) in addition to the funds of reselling such
usufructs 4.
2.2.3 Sukuk Al- Istisna a

These are certificates that represent equal value issued with the aim of mobilizing required funds to be used for
the production of certain goods which to be owned by the certificate holders when its produced on Istisna a
basis.
In this transaction the issuer of these certificates is the manufacturer (Seller), the subscribers are the buyers of the
goods to be produced and the mobilized funds are the cost of the goods. The certificate holders are entitled to the
goods or the selling price of the manufactured goods on the basis of a parallel Istisna a if any.
2.2.4 Sukuk Al- Murabahah

These are certificates that represent equal value issued for the purpose of financing the purchase of Murabahah
commodity and therefore, the certificate holders become the owners of the purchased commodity.
In this transaction, the issuer of these certificates is the seller of the Murabahah commodity, the subscribers are the
buyers of that commodity and mobilized funds are the purchasing cost of the commodity. The certificate holders
own the Murabahah commodity and are entitled to its sale price.
2.2.5 Sukuk Al- Musaqaah (i.e. Irrigation certificates) 5

These are certificates that represent equal value issued on the basis of an irrigation contract for the purpose of
using the mobilized funds for irrigating trees that produce fruits as well as meeting other expenses relating to
the maintenance of the trees and therefore, the certificate holders become entitled to a share in the crop as per
agreement.

In this transaction, the issuer of these certificates is the owner of the garden/ land that consist of trees, the
4. Accounting and auditing organization for Islamic Financial Institutions (AAIOFI) Shariah Standards, 2010, item 5/1/5/2
Shariah Standard no. 17. P. 311.
5. This is a type of contract in which the owner of agricultural land shares its produce with another person in return for his
services in irrigating the garden.
subscribers are those who assume the obligation of irrigation process on the basis of Al- Musaqah contract and
the mobilized funds stand as the maintaining cost of the garden/ trees. The certificate Holders are entitled to a
share in the produce of the trees as per the agreement.
2.2.6 Sukuk Al- Musharakah (i.e. participation certificates)

These are certificates that represent equal value issued with the aim of using the mobilized funds for establishing
a new project or developing an existing one or financing a business activity on the basis of any of partnership
contracts. Thus, the certificate holders become the owners of the project or the assets of the activity as per their
respective shares.
Sukuk Al-Musharakah however, may be managed on the basis of Al- Shirkah i.e. participation or Al- Mudarabah or
trough Al- Wakalah bil Istithmar i.e. investment agency as explained below:
2.2.6.1 Sukuk Al- Sharikah (i.e. Participation certificates)

These are certificates representing projects or activities that are managed on the basis of Musharakah contract by
appointing either one of the parties or any other party to manage the operation.
In this transaction, the issuer is the inviter to a partnership with him in a specific project or determined activity,
the subscribers are the partners in the Musharakah contract and mobilized funds are the share contribution of the
subscribers in the Musharakah capital. Thus, the certificate holders own the assets of partnership including profits
and losses and they are entitled to share of profit, if any.
2.2.6.2 Sukuk Al- Mudarabah 6

These are certificates that represent projects or activities that are managed on the basis of Mudarabah contract by
appointing Mudarib who could be one of the partners or any other person for the management of the operation.
In this transaction, the issuer of these certificates is the Mudarib, the subscribers are the capital owners and
mobilized funds are the Mudarabah capital. Thus, the certificate holders own the assets of Mudarabah and share
the profit as per the agreement. They also being the capital providers, bear the losses, if any.
2.2.6.3 Sukuk Al Wakalah bil Istithmar (i.e. Certificates of investment agency)

These are certificates that represent projects or activities that are managed on the basis of investment agency by
appointing an agent to manage the operation on behalf of the certificate holders.
In this transaction, the issuer of these certificates is the investment agent, the subscribers are the principals and
the mobilized funds are the entrusted capital of the investment. Thus, the certificate holders own the assets
represented by the certificates with its benefits and risks, and also they are entitled to the profits if any.
2.2.7 Sukuk Al- Muzaraah (i.e. sharecropping certificates) 7

These are certificates of equal value issued for the objective of using the mobilized funds in financing a project on
the basis of a Muzaraah contract. Thus, the certificate holders become entitled to a share in the crop as per the
terms of the agreement.
In this transaction the issuer of these certificates is the owner of the land, the subscribers are the cultivators who
invest on the basis of Muzaraah contract and the mobilized funds are the cultivation cost. Thus, the certificate
holders are entitled to a share of the produce of the land as per the agreement.
6. Al- Mudarabah or Al-Qiradh: Is a contract between a Rabbul Mal (capital provider) and (an entrepreneur) under
which the Rabbul Mal provides capital to be managed by the Mudarib and any profit generated from the capital is shared
between the two parties (Rabbul mal and Mudarib} according to mutually agreed profit sharing ratio whilst financial losses
are borne by the Rabbul Mal provided that such losses are not due to the Mudaribs misconduct, negligence or breach of
specified terms of the contract.
7. This is a type of contract in which one person works on the land of another person in return for a share in the produce of the land.
2.2.8 Sukuk Al - Salam 8

These are certificates of equal value issued for the aim of mobilizing Salam capital so that the goods to be delivered
on the basis of Salam contract are owned by the certificate holders.
In this transaction the issuer of these certificates is the seller of the Salam goods, the subscribers are the buyers of
the goods and the mobilized funds are the purchase price of the commodity, which is the Salam capital. Thus, the
certificate holders are the owners of Salam goods and they are also entitled to the sale price of the certificate or
the sale price of the Salam goods sold through a parallel Salam, if any.
2.3 Characteristics of Sukuk Al- Istithmar 9

Sukuk Al-Istithmar is characterized with many features that distinguish them from the non Shari ah complaint
bonds. These features include:
(a) Sukuk Al-Istithmar are certificates of equal value issued in the name of investor therefore, a legitimate claim
of its owner/investor over the financial rights and obligations represented by the certificate can be established.
(b) It represents a common share in the ownership of the tangible assets earmarked for investment, usufructs,
services etc. and hence, it does not represent debt as in the case of non Shari ah compliant bonds.
(c) It is issued on the basis of known and acceptable Shari ah investment contracts and in accordance with Shari ah
principles which governing its issuance as well as its trading.
(d) Investors in Sukuk Al-Istithmar share the profit according to the agreement set forth in the prospectus and
also bear the losses if any, based on the percentage/proportion owned by each investor.
3. Fundamental differences between Sukuk Al- Istithmar and Bonds

Bond is defined as:
A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows
the funds for a defined period of time at a fixed interest rate 10.
Based on this definition of the bonds, we can see that the fundamental differences between Bonds and Sukuk
Al-Istithmar is in the fact that Sukuk Al-Istithmar are not fixed income securities, because they do not represent
debts between the issuer and the investors. Rather, the investors share Sukuk returns and proceeds according to
percentages stated in the prospectus, and bear losses in proportion to the number of the Sukuk certificates held
by them.
AAIOFI Shari ah Standard clearly stated that these Sukuk Al-Istithmar are investment Sukuk in order to distinguish
them from shares, bonds etc. which, as well as other large part of the conventional securitization market, are not
conform to theShari ah principles of transaction as its income element of the cash flow is considered to be Riba
(i.e. interest) hence, could not be accepted as an asset class as well as it represent debt rather than Shariahh
compliant acceptable commodity.
4. Conclusion
The of this chapter can be summarized in the following points:
4.1 There is no any objection from theShari ah to issue Sukuk Al-Istithmar certificate on the basis of any known
Sahari ah investment contracts, such as Wakalah or Mudarabah or Salam or Ijarah contracts etc. and the certifi8.
9.
Al Salam i.e. Advance purchase contract.

Accounting and auditing organization for Islamic Financial Institutions (AAIOFI) Shariah Standards, 2010, item 4 Shariah
Standard no. 17. PP.309-310.
10. http://www.investopia.com/terms/b/bond.asp#ixzz2LWMKa0x6.
cates must be issued for asset that are tangible assets, usufructs and services by dividing them into equal shares
and issuing Sukuk for their value. In other words, it must be backed by aShari ah compliant real underlying assets
that are subject to aShari ah known contracts and the rights and obligations of all parties in the transaction should
be spelled out clearly and identified in a transparent manner. Also its documentation must demonstrate that any
income arising must derive from the underlying activities for which the funding has been used, and not simply
comprise Riba (i.e. interest) as these Sukuk Al-Istithmar deferred from bonds and fixed-income securities which
represent debts.
4.2 Under the umbrella of Sukuk Al istithmar there are different types of Sukuk with differentShari ah rulings and
structures. All these Sukuk are called Sukuk Al istithmar in order to distinguish them from shares and bonds.
4.3 Sukuk Al-Istithmar represents undivided shares in the ownership of all the assets made available for investment of whatever type. Therefore, the relationship between the investors and issuer is based on some kind of
partnership in profit and loss sharing not on debt as debts owed as liability are not allowed inShari ah to securitize
them for the purpose of trading.
4.4 For the sake of information, Sukuk Al Wakalah bi Al-Istithmar (i.e. Certificate of investment agency) is under the
umbrella of Sukuk Al istithmar which includes as mentioned above, various Islamic contracts. Some in the Sukuk
industry are not aware of this as they suggested in their writings that Sukuk Al-istithmar should be distinguished
from Sukuk Al- Mudarabah and Sukuk al-Wakalah bi Al-Istithmar.
4.5 It is a Shari ah requirement that Sukuk Al-Istithmar must be structured and issued on the basis of any known
Islamic investment contracts, so that the transactions will be subjected to its (i.e. the investment contracts) general provisions and conditions. This is after closing subscription, receipt of the value of the certificates and putting
it to use as planned.
Below diagram illustrate the types of Sukuk Al- Istithmar where they must be structured and issued on the
basis of any of the Islamic nominated Investment contract:
Sukuk
Al-Ijarah
Sukuk
Al-Murabahah
Sukuk
Al- Muzara'ah
Sukuk
Al- Istisna a
Types of
- Sukuk
Al Istithmar
Mixed asset
Sukuk or
hybrid Sukuk
Sukuk of ownership
of usufructs.These
Sukuk have dierent
types as follows:
Combine two or
more forms of
Islamic
nancing in
their structure.
(a) Sukuk of ownership of

usufructs of existing assets.
(b) Sukuk of ownership of
usufructs of described
future assets.
( c) Sukuk of ownership of
services of a specied
party.
(d) Sukuk of ownership of
The underlying
pool of assets
can comprise of
Istisna,
Murabahah
receivables as
well as Ijarah
etc.
described future
Sukuk AlMusaqaah
Sukuk
Al - Salam
Sukuk AlMusharakah may be

managed on the
following basis
(a) Sukuk Al -Sharikah

(b) Sukuk Al-Mudharabah
(c ) Sukuk of investment
agency (i.e.Al Wakalah
bil Istithmar)
12
Chapter Two
OVERVIEW OF THE GLOBAL SUKUK MARKET
2.1 Resurgence of Sukuk Market
Islamic Capital Market continued its upward trend in recent years and is led by the key Islamic fixed profile
instrument known as Sukuk. After a relatively large dip in the Sukuk issuances in mid 2008 to 2009, the year 2010
showed the glimpse of true potential of Sukuk.
The global financial crisis had a direct impact on Sukuk market and the few holders of troubled Sukuk were facing
the default and insolvency proceedings and uncertainty on legal difficulties in restructuring Sukuk. However, once
several defaulting Sukuk were restructured and legal certainty was established the market confidence returned.
The most recent restructuring of Sukuk is Dana Gas US$ 1 billion Sukuk which is expected to be soon approved
by the creditors. The Dana Gas restructuring involve partial cash repayment and issuance of US$ 425 million
Convertible Sukuk & US$ 425 million Sukuk which shows that legal system is present to tackle such events though
further improvement may be required to tackle certain issues specific to Islamic Finance.
Furthermore, the Islamic jurisdictions also stepped in and started bench mark Sukuk issuances both in their
Domestic Market as well as in International Market. A number of Islamic countries such as Indonesia, Turkey,
Pakistan, GCC countries and others gave priority to developing the Islamic Financial Services Industry particularly
Sukuk market.
The year 2011 & 2012 witnessed record Sukuk issuances by Sovereigns, Quasi Sovereigns & Corporates and this
was in line with IIFMs Sukuk Report 2nd edition indication that Sukuk market will grow and Islamic jurisdictions
will lead the Sukuk market recovery.
The other helpful and much needed development is use of Sukuk in project financing as well as for aircraft
financing (Emirates Airline, Malaysian Airline, Air Asia) which are of long term nature and Sukuk is well suited for
these kind of financing requirement.
Finally, financial institutions are no longer the majority investors in Sukuk as fund managers; Takaful operators,
high Net worth Individuals and others are now investing in Sukuk which is one of the reason why most of the Sukuk
are issued on fixed profit rate basis.
2.2 Global Sukuk Issuances

As illustrated in the below chart, the share of sovereign as well as Quasi Sovereign Sukuk issuances has increased
a great deal during Jan 2011 Jan 2013 period and is contributing to the further development of Sukuk market:
Chart 1: Total Global Sukuk Issuance (All Currencies) - Jan 2001 Jan 2013 US$ Millions
500,000
472,683
450,000
400,000
350,000
300,000
250,000
200,000
137,499
150,000
92,403
To
ta
l
20
13
-Ja
nu
ar
12
20
11
10,993
20
10
20
09
20
08
20
07
06
52,978
50,041
37,904
33,837
24,264
20
05
20
04
20
03
20
02
20
01
1,172 1,371 7,057 9,465 13,698
20
50,000
20
100,000
Global Sukuk market continued its positive upward momentum after the initial shock of the financial crisis. Sukuk
issuance enjoying a very successful runs that began in 2010 and recorded another pinnacle in 2012, and in doing
so, it crossed the $100 Billion mark of financing arranged via Sukuk. The market achieved a very respectable
issuance of US$ 137 Billion.
The Financial crisis of 2008, which pressured developed market financial institution into contracting and
deleveraging, played a big part in propelling Sukuk issuance to new heights. Sukuk is now establishing a firm base
as an alternative source of funding, not just for the GCC and Malaysian market but with interest gathering from
Europe, African continent and the CIS countries.
We witnessed many milestones in 2012, just to highlight a few:
a) The biggest Sukuk issuance from PLUS - Malaysia
b) The biggest Saudi Sukuk by the Civil Aviation Authority
c) First Intl Sukuk issuance with a Saudi Sovereign Guarantee
d) Debut International Sukuk by The Republic of Turkey
e) Debut Domestic Lira issuance by Republic of Turkey
f ) First Sukuk issuance from a financial institution in Kazakhstan
g) First Perpetual Sukuk by Abu Dhabi Islamic Bank
h) First Tier 1 Sukuk by Abu Dhabi Islamic Bank
10
The following table gives a clear picture on the hallmark Global Sukuk issues during 2011 Jan 2013:

Table :1- Selected Hall Mark Global Sukuk Issues & Trends -2011- January 2013

(US$ 700 Millions or greater)
Issue
Year
Issuer
2013
Sime Darby Berhad
2013
Government of Dubai
2012
Islamic Development Bank
2012
Khazanah Nasional Bhd
2012
National Higher Education

Fund Corporation
Malaysia
2012
Saudi Electricity Company
2012
General Authority Of Civil

Aviation
2012 PLUS Berhad
11
Highlight
The World biggest Palm Oil producer
and lowest ever USD prot by any
corporation globally, two Sukuk
tranches having 5 & 10 years tenor
(Sukuk Al Ijarah Malaysian Issuer)
International Sovereign Sukuk Al
Ijarah Issuer Dubai,
Two International Quasi-Sovereign
Sukuk Issuances, Al Wakalah and
only AAA rated Sukuk
Four Domestic Quasi-Sovereign
Sukuk issuances of various tenors, Al
Musharakah, Issuer from Malaysia ,
Two Domestic Quasi-Sovereign
Sukuk issuances, Al Murabahah,
Government of Malaysia
Two International Quasi-Sovereign
Sukuk Issuances, Al Ijarah,
issuerfrom KSA
Domestic Quasi-Sovereign Sukuk, Al
Murabahah, issuer from KSA
Twenty Three Domestic QuasiSovereign Sukuk issuances of various

tenors, Al Musharaka, issuer from
Malaysia
2012 Abu Dhabi Islamic Bank
International Corporate, Mudarabah
Sukuk, Tier 1 & perpetual, issuer
2012 Qatar International Islamic International Corporate Hybrid
Bank
Sukuk
2012 Qatar Islamic Bank
International Corporate Sukuk Al
Wakalah
2012 Celcom Transmission
Five Domestic Corporate Sukuk
Issuances, Al Murabahah, Issuer
from Malaysia
2012 Tanjung Bin Power
9 Nine Domestic Corporate Sukuk
Issuances of various tenors, Al
Ijarah, issuer from Malaysia
2012 Emirates Islamic Bank
Two International Corporate Sukuk
issuances, Al Musharaka, issuer from
Dubai
2012 Johor Corporation
Three Domestic Corporate Sukuk
issuances, Al Wakalah, issuer from
Malaysia
2012 Banque Saudi Fransi
International Corporate Sukuk, Al
Wakalah, Tier 2, issuer from KSA
2012 Maxis Berhad
Domestic Corporate Sukuk, Al
Musharaka, issuer from Malaysia
2012 Sarawak Energy Bhd
Two Domestic Corporate Sukuk
Malaysia
2012 Government of Malaysia
Seven Domestic Sovereign Sukuk
issuances of various tenors, Al
Murabahah
2012 Government of Indonesia International Sovereign Sukuk Al
Ijarah 3.3% p.a. prot rate
Amount in
Millions USD or
USD Equivalent
Average
Tenor
(Years)
800
750
10
1,300
1,450
15
1,118
10
1,750
4,000
10
9,728
16
1,000
Perpetual
700
750
1,442
1,101
12
1,000
941
750
811
10
801
13
2,527
12
1,000
10
2012
Emirates Islamic Bank
2012
Johor Corporation
2012
Banque Saudi Fransi
2012
Maxis Berhad
2012
Sarawak Energy Bhd
2012
Government of Malaysia
2012
Government of Indonesia
2012
Government of Turkey
2012
Government of Qatar
2012
2012
Government of Pakistan
2012
Government of Dubai
2011 Malaysian Airline
Issuances of various tenors, Al

Ijarah, issuer from Malaysia
Two International Corporate Sukuk
Dubai
Three Domestic Corporate Sukuk
issuances, Al Wakalah, issuer from
Malaysia
International Corporate Sukuk, Al
Wakalah, Tier 2, issuer from KSA
Domestic Corporate Sukuk, Al
Musharaka, issuer from Malaysia
Two Domestic Corporate Sukuk
Malaysia
Seven Domestic Sovereign Sukuk
issuances of various tenors, Al
Murabahah
Two International Sovereign Sukuk
issuances, avg prot rate of 2.67%
p.a. Al Ijarah
Thirteen Domestic Sovereign Sukuk
Issuances of various tenors, Al Ijarah
Six Domestic Sovereign
Sukuk Issuances, Al Ijarah
issuances, Al Ijarah, avg. prot rate
4.39% p.a.
Nine Domestic Quasi-Sovereign

Sukuk issuances of various tenors, Al
Murabahah
2011 Islamic Development Bank 1 International Quasi-Sovereign
Sukuk Al Wakalah from KSA
2011 Manjung Island Energy
7 Domestic Corporate Sukuk Al
Berhad
Ijarah from Malaysia
2011 Saudi Arabian Aramco
Domestic Corporate Sukuk Al
Musharakah longer tenor
2011 Nakheel Group
Domestic Corporate Sukuk Al Ijarah,
issuer from Dubai
2011 Sarawak Energy Bhd
Four Domestic Corporate Sukuk
Issuances of various tenors,
AlMusharaka, issuer from Malaysia
2011 Central Bank of Bahrain
Ijarah, 6.27% p.a. prot rate
2011 Government of Indonesia International Sovereign Sukuk Al
Ijarah, 4% p.a. prot rate
2011 Government of Indonesia Five Domestic Sovereign Sukuk
Issuances, Al Ijarah
Issuances, Al Wakalah,
Two Domestic Sovereign Sukuk Al
Murabahah,
2011 Government of Qatar
Domestic Sovereign Sukuk Al Ijarah,
Source: IIFM Sukuk Issuance Database (Jan 2011 Jan 2013)
1,000
941
750
811
10
801
13
2,527
12
1,000
10
1,500
4,000
16
3,620
3,135
1,250
2,576
750
1,242
1,000
14
1,034
990
750
1,000
2,033
10
2,000
984
9,067
Continuous innovation together with more Debut Sukuk issuances and refinancing of maturing Sukuk is likely
to maintain the Sukuk Volume trajectory upwards in 2013 and beyond, as countries and corporate look to take
advantage of extremely attractive low yields being priced by the market.
12
It is also interesting to note that Sukuk pricing are now beginning to be more attractive than conventional as the
liquidity and investors demand are creating pricing tension in favour of the issuer. While the market continues to
keep risk aversion strategy intact, this we will most likely see continued Sovereign and Sovereign linked Sukuk to
take centre stage.
Against this backdrop, the hunt for yield continued apace and this has been reflected in the strong performance
of some previously unloved but relatively higher yielding issuers.
While more depth is created in the Sukuk market, the issuance of Non-Local Currency Sukuk by foreign issuers
is a positive development and will contribute in the growth of the Sukuk market. These issuances have also
highlighted the need of currency hedging which is one of the key contributions of IIFM to the Islamic Financial
Services Industry and standards developed by IIFM will be extremely beneficial in the risk mitigation arising from
such Sukuk issuances.
Following Table will give a clear picture on the Non-Local Currency hallmark global Sukuk issuances during
last 2 years:

Table: 2 - Selectd hallmark NM currency Sukuk issues 2011 Jan 2013

Issue
Year
2012
2012
2012
2012
2012
2012
2012
2012
2012
2012
2011
2011
Issuer
First Resources Ltd

National Bank of
Abu Dhabi
Golden
Agri-Resources Ltd
Abu Dhabi National
Energy Company
Noble Group
Limited
UMW Toyota
Capital
Bahrain
Mumtalakat
Holding Company
Axiata Berhad
Development Bank
of Kazakhstan
Gulf Investment
Corporation
Gulf Investment
Corporation
Khazanah Nasional
Bhd
Issuance
Currency
Issuer
Country
Type of
Issued
Sukuk
Structure
MYR
MYR
Singapore
United Arab
Emirates
Indonesia
Corporate
Corporate
Sukuk Al Musharakah
Sukuk Al Murabahah
319
163
5
15
Corporate
Sukuk Al Murabahah
481
Corporate
Sukuk Al Murabahah
212
10
CYN
United Arab
Emirates
Hong Kong
Corporate
Sukuk Al Murabahah
195.8
MYR
Japan
Corporate
Sukuk Al Musharakah
89.56
MYR
Bahrain
Sovereign
Sukuk Al Murabahah
97.44
MYR
MYR
Malaysia
Kazakhstan
Hybrid Sukuk
Sukuk Al Murabahah
157.85
76.71
2
5
MYR
Kuwait
Corporate
QuasiSovereign
Corporate
Sukuk Al Wakalah
101.08
13
MYR
Kuwait
Corporate
Sukuk Al Wakalah
451
Malaysia
QuasiSovereign
Sukuk Al Musharakah
78.2
MYR
MYR
Amount in
Millions
USD
Equivalent
Average
Tenor
(Years)
Most of the Sukuk being issued of late has been fixed rate, which is good for the Sukuk issuer as it locks in its
funding cost at historic low rate. While the investor may well be pleased with its fixed return for now, but as soon
as the global economy shows signs of growth, the yield will jack up and the investor may carry a book loss. Since
IIFM has developed the ISDA / IIFM Tahawwut agreement, it would be prudent to keep an eye on the returns
and at some point consider hedging to lock in a profit and Islamic Profit Rate Hedging is already used by several
institutions based in GCC & Malaysia.
13
Following are landmark Fixed Profit Rate Sukuk Issuances during Jan 2011 Jan 2013 period :

Table: 3 - Landmark Fixed Profit Rate Sukuk Issuances

Issue
Date
Issuer
Type of
Issued
Sukuk
International Structure
or
Domestic
24-Jan-13
Government of Dubai
Sovereign
International
Sukuk Al Ijarah
750
3.88%
16-Nov-12
Sovereign
International
Sukuk Al Ijarah
1,000
3.30%
12-Nov-12
11-Oct-12
Corporate
Corporate
International
International
Hybrid Sukuk
Hybrid Sukuk
1,000
700
6.38%
2.69%
3-Oct-12
Abu Dhabi Islamic Bank

Qatar International Islamic
Bank
Qatar Islamic Bank
Corporate
International
Sukuk Al
Wakalah
750
2.50%
26-Sep-12
Sovereign
International
Sukuk Al Ijarah
1,500
2.80%
18-Jul-12
Emaar Properties, Dubai
Corporate
International
Sukuk Al Ijarah
500
6.40%
11-Jul-12
Government of Qatar
Sovereign
International
Sukuk Al Ijarah
2,000
2.10%
11-Jul-12
25-Jun-12
Government of Qatar
International
International
3.24%
1.36%
Jebel Ali Free Zone, Dubai
650
7.00%
15-Jun-12
QuasiSovereign
Corporate
Domestic
789
3.85%
14-Jun-12

Fund Corporation Malaysia
Johor Corporation,Malaysia
Domestic
564
3.84%
30-May-12
Dubai Islamic Bank,UAE
Corporate
International
Sukuk Al Ijarah
Sukuk Al
Wakalah
Sukuk Al
Wakalah
Sukuk Al
Murabahah
Sukuk Al
Wakalah
Sukuk Al Ijarah
2,000
800
19-Jun-12
Sovereign
QuasiSovereign
Corporate
500
4.75%
22-May-12
Banque Saudi Fransi
Corporate
International
Sukuk Al
Wakalah
750
2.95%
25-Apr-12
Government of Dubai
Sovereign
International
Sukuk Al Ijarah
650
6.45%
25-Apr-12
28-Mar-12
Government of Dubai
International
International
Sukuk Al Ijarah
Sukuk Al Ijarah
600
500
4.90%
2.67%
28-Mar-12
International
Sukuk Al Ijarah
1,250
4.21%
18-Jan-12

Aviation,Saudi Arabia
Sovereign
QuasiSovereign
Quasi
Sovereign
QuasiSovereign
Domestic
Sukuk Al
Murabahah
4,000
2.50%
18-Jan-12
30-Nov-11
First Gulf Bank,UAE

Abu Dhabi Commercial
Bank,UAE
Corporate
Corporate
International
International
Hybrid Sukuk
Hybrid Sukuk
500
500
4.05%
3.78%
22-Nov-11
Central Bank of Bahrain
Sovereign
International
Sukuk Al Ijarah
750
6.27%
21-Nov-11
Sovereign
International
Sukuk Al Ijarah
1,000
4.00%
25-Aug-11
Nakheel Group ,UAE
Corporate
Domestic
Sukuk Al Ijarah
1,034
2-Aug-11
2-Jun-11
Corporate
Corporate
International
International
Hybrid Sukuk
Hybrid Sukuk
650
500
3.80%
3.58%
25-May-11
First Gulf Bank Sukuk,UAE

HSBC Bank Middle East
Limited,UAE
QuasiSovereign
International
Sukuk Al
Wakalah
750
2.35%
3-Feb-11
Emaar Properties, Dubai
Corporate
International
Sukuk Al Ijarah
500
8.50%
International
Amount in
Millions
USD or USD
Equivalent
Rate of
Return Per
Annum
10.00%
2.3 Distribution of the Global Sukuk Issuance by Issuer Status

During the post financial crisis until 2011, the appetite for the corporate risk, especially in GCC, was subdued and
the Sovereign issuers have been main driver of growth in Sukuk market. The share of Sovereign has increased to
54% as compare to sovereign market share of 34% during 2001 to 2010 period while corporate share has dropped
to 38% from 63%.
14
Table: 4 - Global Sukuk Issuances by Issuer Status 2001- Jan 2013

No. of
Issues
Issuer Status
Value (USD
Millions)
% of Total
Value
Sovereign
1,034
255,506
54%
Corporate
2,743
179,416
38%
98
37,762
8%
3,875
472,683
100%
Quasi-Sovereign
Total
Following are the tables for Hall Mark Sukuk Issuances in Sovereign, Corporate and Quasi-Sovereign

Table: 5 - Global Sovereign Sukuk Issues -Selected Value Leaders 2011-2013 - Year wise latest first

US $ 100 Millions or greater (International & Domestic)
Issue
Year
Number
of
Issues
2013
Government of Dubai
2012
Government of
Malaysia
Government of
Indonesia
2012
Country
Issuer
International
or Domestic
Structure
International
Sukuk Al Ijarah
United Arab
Emirates
Malaysia
Domestic
Indonesia
International
Sukuk Al
Murabahah
Sukuk Al Ijarah
Turkey
Bahrain
International
Domestic
Amount in
Millions
USD or USD
Equivalent
Average
Tenor
(Years)
750
10
2,527
12
1,000
10
Sukuk Al Ijarah
Sukuk Al Ijarah
1,500
424
6
5
2012
2012
Central Bank of
Bahrain
1
1
2012
2012
Government of Qatar
Government of
Indonesia
Government of
Pakistan
Government of Dubai
2
13
Qatar
Indonesia
International
Domestic
Sukuk Al Ijarah
Sukuk Al Ijarah
4,000
3,620
16
9
Pakistan
Domestic
Sukuk Al Ijarah
3,135
International
Sukuk Al Ijarah
1,250
International
Sukuk Al Ijarah
750
2012
2012
Central Bank of
Bahrain
Government of
Indonesia
Government of
Indonesia
United Arab
Emirates
Bahrain
Indonesia
International
Sukuk Al Ijarah
1,000
Indonesia
Domestic
Sukuk Al Ijarah
2,033
10
2011
Government of
Malaysia
Malaysia
International
Sukuk Al
Wakalah
2,000
2011
2011
Government of Sudan
Government of
Malaysia
1
2
Sudan
Malaysia
Domestic
Domestic
Hybrid Sukuk
Sukuk Al
Murabahah
286
984
5
9
2011
Government of Qatar
Qatar
Domestic
Sukuk Al Ijarah
9,067
2011
2011
2011
15
Issuer

Table: 6 - Global Corporate Sukuk Issues -Selected Value Leaders 2011- Jan 2013 -

Year wise latest first US $ 100 Millions or greater (International & Domestic)
Issue
Year
Issuer
Number
of
Issues
Issuer
Country
International
or Domestic
Structure
Amount in
Millions
USD or USD
Equivalent
Average
Tenor
(Years)
2013 Sime Darby Berhad
2 Malaysia
International
Sukuk Al Ijarah
800
2013 Savola Group

2013 Malako Corporation
Berhad
1 Saudi Arabia
3 Malaysia
Domestic
Domestic
Hybrid Sukuk
Sukuk Al Murabahah
400
696
2013 Segari Energy Ventures

2012 UEM Land Holdings
Berhad
1 Malaysia
1 Malaysia
Domestic
Domestic
Sukuk Al Murabahah
Sukuk Al Murabahah
559
196
15
5
1 Saudi Arabia
Domestic
Sukuk Al
Mudharabah
507
2012 Sime Darby Bhd
1 Malaysia
Domestic
Sukuk Al Murabahah
131
15
2012 First Resources Ltd

2012 National Bank of Abu
Dhabi
2 Singapore
1 United Arab
Emirates
International
International
Sukuk Al Musharakah
Sukuk Al Murabahah
319
163
5
15
2012 Saudi Hollandi Bank
1 Saudi Arabia
Domestic
Sukuk Al Murabahah
373
2012 Imtiaz Sukuk Berhad

2012 Golden Agri-Resources
Ltd
2012 Abu Dhabi Islamic Bank
1 Malaysia
1 Indonesia
Domestic
International
Sukuk Al Musharakah
Sukuk Al Murabahah
228
481
5
5
1 United Arab
Emirates
1 Qatar
International
Sukuk Al Murabahah
International
Hybrid Sukuk
700
1 Qatar
International
Sukuk Al Wakalah
750
2012 HSBC Amanah

2012 Kuala Lumpur Kepong
Berhad
2012 Malako Corporation
Berhad
1 Malaysia
1 Malaysia
Domestic
Domestic
Sukuk Al Wakalah
Sukuk Al Ijarah
162
320
5
10
1 Malaysia
Domestic
Sukuk Al Musharakah
576
30
2012 Celcom Transmission
5 Malaysia
Domestic
Sukuk Al Murabahah
1,442
2012 Tanjung Bin Power

2012 DanaInfra Nasional
Berhad
2012 Emaar Properties
9 Malaysia
3 Malaysia
Domestic
Domestic
Sukuk Al Ijarah
Sukuk Al Murabahah
1,101
665
12
12
1 United Arab
Emirates
1 Malaysia
2 United Arab
Emirates
International
Sukuk
500
132
1,000
5
6
2012 Qatar International

Islamic Bank
2012 Cagamas Berhad

Domestic
International
Al Ijarah
Sukuk Al Ijarah
Sukuk Al Musharakah
1,000 Perpetual
2012 Olayan Group

2012 Jebel Ali Free Zone
1 Saudi Arabia
1 United Arab
Emirates
Domestic
International
Hybrid Sukuk
Sukuk Al Wakalah
173
650
5
7
2012 Johor Corporation
3 Malaysia
Domestic
Sukuk Al Wakalah
941
Continue in next page
16
2012
Dubai Islamic Bank
United Arab
Emirates
International
Sukuk Al Ijarah
500
2012
2012
Banque Saudi Fransi

Saudi Arabia National
Industrialisation
Company
1
1
Saudi Arabia
Saudi Arabia
International
Domestic
Sukuk Al Wakalah
Hybrid Sukuk
750
533
5
7
2012
Aman Sukuk Berhad
Malaysia
Domestic
Sukuk Al Musharakah
116
10
2012
Saudi British Bank
Saudi Arabia
Domestic
Hybrid Sukuk
400
2012
2012
Al Marai Company
Abu Dhabi National
Energy Company
1
1
Saudi Arabia
United Arab
Emirates
Domestic
International
Hybrid Sukuk
Al Murabahah
Sukuk
267
212
7
10
2012
Maxis Berhad
Malaysia
Domestic
Sukuk Al Musharakah
811
10
2012
2012
DRB-HICOM Bhd
Majid Al Futtaim
Properties
Malaysia
United Arab
Emirates
Domestic
International
Sukuk Al Murabahah
Sukuk Al Wakalah
132
400
9
5
2012
2012
Sarawak Energy Bhd

First Gulf Bank
2
1
Domestic
International
Sukuk Al Musharakah
Hybrid Sukuk
801
500
13
2012
Tamweel Funding
International
Hybrid Sukuk
300
5
5
2011
Abu Dhabi Commercial

Bank
Manjung Island Energy
Berhad
Kuveyt Trk Kat l m
Bankas
Saudi Arabian Aramco
Total Services Company
International
Hybrid Sukuk
500
7
1
Malaysia
United Arab
Emirates
United Arab
Emirates
United Arab
Emirates
Malaysia
Domestic
Sukuk Al Ijarah
1,242
Turkey
International
Hybrid Sukuk
350
Saudi Arabia
Musharakah
1,000
14
2011
2011
AmIslamic Bank Berhad

Nakheel Group
1
1
Domestic
Domestic
Sukuk Al Musharakah
Sukuk Al Ijarah
192
1,034
10
5
2011
SapuraKencana
Petroleum
Kencana Petroleum Bhd
Malaysia
United Arab
Emirates
Malaysia
Domestic
158
Malaysia
Domestic
167
Gulf Investment
Corporation
First Gulf Bank
Kuwait
International
Sukuk Al
Mudharabah
Sukuk Al
Mudharabah
Sukuk Al Wakalah
451
United Arab
Emirates
International
Hybrid Sukuk
650
1
4
1
Qatar
Malaysia
Saudi Arabia
International
Domestic
Domestic
215
990
480
5
9
5
Malaysia
Domestic
Sukuk Al Wakalah
Sukuk Al Musharakah
Sukuk Al
Mudharabah
Sukuk Al Musharakah
132
10
United Arab
Emirates
United Arab
Emirates
International
Hybrid Sukuk
500
2011
Almana Group W.L.L

Sarawak Energy Bhd
Saudi International
Petrochemical Company
Bank Muamalat
Malaysia Berhad
HSBC Bank Middle East
Limited
Sharjah Islamic Bank
International
Sukuk Al Wakalah
400
2011
Al Rajhi Cement
Jordan
Domestic
Sukuk Al Ijarah
119
2011
Maybank Islamic
Malaysia
Domestic
Sukuk Al Musharakah
330
10
2011
Bank Al Jazira
Saudi Arabia
Domestic
Hybrid Sukuk
267
10
2011
2011
Cagamas Berhad
First Investment
Company
Emaar Properties
1
1
Malaysia
Kuwait
Domestic
Domestic
Hybrid Sukuk
Sukuk Al Wakalah
131
332
United Arab
Emirates
International
Sukuk Al Ijarah
500
2011
2011
2011
2011
2011
2011
2011
2011
2011
2011
2011
2011
17
Domestic
Sukuk
Al
5
6
Table: 7 - Global Quasi-Sovereign Sukuk Issues -Selected Value Leaders 2011-2012
Year wise latest first US $ 100 Millions or greater (International & Domestic)
Issue
Year
Issuer
Number
of
Issues
Issuer
Country
International
or Domestic
Structure
2012
2012
Malaysia Airports Capital

Berhad
Malaysia
Domestic
Sukuk Al Ijarah
Saudi Arabia
International
2012
Malaysia
Domestic
2012

Fund Corporation Malaysia
Malaysian Airline System
Berhad
Syarikat Prasarana Negara
Berhad
Malaysia
Domestic
Malaysia
Domestic
Malaysia
Domestic
2012
2012

2
1
Saudi Arabia
Malaysia
International
International
2012

Aviation
PLUS Berhad
Saudi Arabia
Domestic
23
Malaysia
Domestic
2012
2012
2012
2011
Malaysia
Domestic
Malaysia
Domestic
2011
Pengurusan Aset Air

Berhad
Syarikat Prasarana Negara
Berhad
Saudi Arabia
International
2011
Malaysia
Domestic
2011
Amount in
Millions
USD or USD
Equivalent
Average
Tenor
(Years)
196
12
Sukuk Al
Wakalah
Sukuk Al
Musharakah
Sukuk Al
Murabahah
Sukuk Al
Musharakah
Sukuk Al
Murabahah
1,300
1,450
15
1,118
10
479
10
642
13
Sukuk Al Ijarah
Sukuk Al
Musharakah
Sukuk Al
Murabahah
Sukuk Al
Musharakah
Sukuk Al
Murabahah
Sukuk Al Ijarah
1,750
358
4,000
7
1
9,728
16
2,576
673
13
750
334
20
Sukuk Al
Wakalah
Sukuk Al
Musharakah
Following are chart on Domestic and International Sukuk market:

Chart 2: Total Global Sukuk Issuance (All Currencies) Breakdown by Issuer Status
Domestic Sukuk Issuances 2001-2010
Sovereign,
(86,498)
47%
QuasiSovereign,
(4,104)2%
Domestic Sukuk Issuances 2011-Jan 2013

Corporate
(40,210)
19%
Corporate,
(93,022)
51%
Sovereign,
(148,132)
70%
QuasiSovereign,
(22,392)1
1%
It is no surprise that the domestic market is very much Sovereign lead, as the domestic market needs local currency
instruments to manage their Liquidity while the domestic investors prefer to invest in their home currency so as
not to be exposed to currency risk.
Sovereign will certainly keep a bigger share of the local market as Islamic finance activities grows around the
globe, more countries will issue Sukuk in their home currency as part of the Government own funding needs and
to develop bench mark curve to facilitate growth of their domestic market.
18
As the market is now recovering from the shock of the Global Financial crisis, Corporate sector will undoubtly will
increase their share, attracted by lower yield and investors demand for Sukuk.
International Sukuk Issuances 2001-2010

Sovereign
(8,529)
18%
Corporate,
QuasiSovereign
(6,953)
14%
International Sukuk Issuances 2011-Jan 2013

Sovereign,
(12,347)
41%
(13,502)
45%
(32,681)
68%
Corporate,
QuasiSovereign,
(4,313)14%
In the international cross border market, Corporate were the earlier years dominant issuers but only after
Sovereign or Quasi Sovereign laid the foundation that provided confidence in the Sukuk as an acceptable and
viable instrument. (Eg; Bahrain, Dubai, Malaysia, Qatar, and IDB)
The fallout from the Financial crisis lead investors to move towards safe haven investment strategy and the
Sovereign and Quasi Sovereign stepped up to provide confidence and stability.
In addition many new Sovereign / Quasi Sovereign issuer lent support to the Sukuk market, (Eg; Saudi Civil
Authourity, Turkey,). Not only these chunk size Sukuk issuance from high credit quality issuer helped absorbed
some of the liquidity but in doing so, is paving the way for more Sovereign Debutant Sukuk.
Moreover, when putting the Global issues together from 2001 to Jan 2013, then the Sovereign and Quasi Sovereign
takes almost 62% of all issuance to date. Between 2011 and Jan 2013, surprisingly Qatar Sovereign came in as
the top issuer of combined Domestic and International with US $ 13 Billion, Indonesia with US $7.7 Billion and
Malaysia with US $ 5.5 Billions. The standing changes considerably with Malaysia taking a handsome lead with US
$ 36 Billions, followed by Qatar US $ 15 Billion, Saudi US $ 13 Billions and UAE with US $ 11 Billions when including
Quasi Sovereign and Corporate.
A healthy development in the Sukuk Mutual Funds space is taking shape with number of banks having set up
their own Sukuk Fund to offer to their private clients, this is a positive sign, that the Sukuk market is coming of age.
Development of the Sukuk Fund is timely, as the current split between Sovereign and Corporate risk is very much
desirable, since it offers investors and fund managers with a good mix of Sovereign and Corporate risk to consider.
The choice offers the fund manager to not only diversify credit risk but also take into account their risk return
profile in allocating to their portfolio.
2.4 International Sukuk Market

The year 2012 was record year in terms of International Sukuk issuances and the year closed at US$ 20 billion Sukuk
issuances as compare to previous 2007 pre-crisis record of US$13.80 billion. Currently outstanding International
Sukuk figure is approximately US$ 45 bio and it is expected that Q1 of 2013 will close with US$ 50 billion outstanding
Sukuk market.
There were several landmark Sukuk issuances from Malaysia, Qatar, Turkey, UAE, Saudi Arabia, Indonesia, Bahrain
etc., this indicates that Sukuk market has fully emerged from the declining trend witnessed in 2008 & 2009 and
further double digit growth prospects are intact for next coming years and existing Sukuk issuance pipeline is the
confirmation of this prediction.
19
The following table illustrates the regional break-up of the total international Sukuk issuance during the
period of Jan 2001 Jan 2013:

Table: 8 - Regional Break-Up of the Total International Sukuk Issuance 2001-Jan 2013
ASIA & FAR EAST
Number of Issues
Amount USD Millions
% of Total
Value
Malaysia
19
9,677
12.4%
Indonesia
3,131
4%
Pakistan
600
0.77%
Singapore
319
0.41%
Hong Kong
196
0.25%
Japan
190
0.24%
Total
31
Number of Issues
14,113
Amount USD Millions
18%
% of Total
Value
93
6,780
8.7%
GCC & MIDDLE EAST

Bahrain
Qatar
7,685
9.8%
Saudi Arabia
15
9,990
12.8%
United Arab Emirates
50
34,536
44.1%
Kuwait
13
2,127
2.7%
180
Number of Issues
61,119
Amount USD Millions
78%
% of Total
Value
1
1
130
130
0.17%
Total
AFRICA
Sudan
Total
EUROPE & OTHERS
Number of Issues
Amount USD Millions
0.17%
% of Total
Value
Turkey
1,950
2.5%
Germany
55
0.07%
UK
282
0.36%
France
0.00%
USA
600
0.77%
Kazakhstan
77
0.10%
11
223
2,965
78,326
4%
100%
Total
Grand Total
20

Table : 9 - Selected Value Leaders in International Sukuk Market for Jan 2011- Jan 2013

(US $ 50 million or greater)
Issue
Year
21
Issuer
Number Issuer Country

of
Issues
Type of
Issued
Sukuk
Structure
Millions
USD
Average
Tenor
(Years)
2013 Sime Darby Berhad
2 Malaysia
Corporate
Sukuk Al Ijarah
800
2013 Government of Dubai
1 United Arab Emirates
Sovereign
Sukuk Al Ijarah
750
10
2012 FWU AG Group

2012 Abu Dhabi Islamic
Bank
2012 Qatar International
Islamic Bank
1 Germany
Corporate
Corporate
Sukuk Al Ijarah
Hybrid Sukuk
1 Qatar
Corporate
Hybrid Sukuk
700
1 Qatar
Corporate
Sukuk Al Wakalah
750


Corporate
Corporate
Sukuk Al Ijarah
Sukuk Al
Musharakah
500
1,000
7
6
2012 Jebel Ali Free Zone
Corporate
Sukuk Al Wakalah
650
2012 Dubai Islamic Bank
Corporate
Sukuk Al Ijarah
500

2012 Majid Al Futtaim
Properties
1 Saudi Arabia
Corporate
Corporate
Sukuk Al Wakalah
Sukuk Wakalah
Al
750
400
5
5
2012 First Gulf Bank
Corporate
Hybrid Sukuk
500
2012 Tamweel Funding

2012 Islamic Development
Bank

2 Saudi Arabia
Corporate
QuasiSovereign
Hybrid Sukuk
Sukuk Al Wakalah
300
1,300
5
5
2012 Saudi Electricity

Company
2 Saudi Arabia
QuasiSovereign
Sukuk Al Ijarah
1,750
2012 Khazanah Nasional

Bhd
2012 Government of
Indonesia
1 Malaysia
QuasiSovereign
Sovereign
Sukuk Al
Musharakah
Sukuk Al Ijarah
358
1,000
10
1 Indonesia
55
7
1,000 Perpetual
2012 Government of Turkey
1 Turkey
Sovereign
Sukuk Al Ijarah
1,500
2012 Government of Qatar
2 Qatar
Sovereign
Sukuk Al Ijarah
4,000
16
2012 Government of Dubai

2011 Abu Dhabi
Commercial Bank
2011 Kuveyt Trk Kat l m
Bankas

Sovereign
Corporate
Sukuk Al Ijarah
Hybrid Sukuk
1,250
500
8
5
1 Turkey
Corporate
Hybrid Sukuk
350
2011 First Gulf Bank
Corporate
Hybrid Sukuk
650
2011 Almana Group W.L.L

2011 HSBC Bank Middle
East Limited
1 Qatar
Corporate
Corporate
Sukuk Al Wakalah
Hybrid Sukuk
215
500
5
5
2011 Sharjah Islamic Bank
Corporate
Sukuk Al Wakalah
400

2011 Islamic Development
Bank
2011 Central Bank of
Bahrain
2011 Government of
Indonesia
2011 Government of
Malaysia
1 United Arab Emirates Corporate

1 Saudi Arabia
QuasiSovereign
1 Bahrain
Sovereign
Sukuk Al Ijarah
Sukuk Al Wakalah
500
750
6
5
Sukuk Al Ijarah
750
1 Indonesia
Sovereign
Sukuk Al Ijarah
1,000
2 Malaysia
Sovereign
Sukuk Al Wakalah
2,000
2.5 Domestic Sukuk Market

As far as the domestic Sukuk market is concern, Malaysia has the lions share in terms of both volume and value.
Malaysia remains as the largest domestic Sukuk issuer with 79.8% though the countries like Indonesia, Pakistan,
Qatar and Saudi Arabia while Turkey has entered the market as new potential leader plus Yemen has also entered
the Sukuk market at domestic level. Bahrain has also kept its presence felt in Sukuk issuances and has seen several
landmark issuances and issuance volume has increased by almost 50%. Qatar has also issued landmark Sukuk
issuances and its domestic Sukuk market is growing quite rapidly.
The domestic Sukuk market in a number of jurisdictions (as shown in table below) is becoming active particularly
Indonesia & Pakistan and central banks are providing avenues to Islamic banks and other investors to invest their
surplus liquidity in government Sukuk programs designed to provide level playing field to the Islamic institutions.
The total outstanding Domestic Sukuk at Dec 2012 stood at US$ 191 billion and it is expected that 2013 will close
with even higher figure as sovereigns, quasi sovereign & corporates in jurisdictions like Malaysia, Indonesia, Turkey
and several other countries including GCC are getting more active in Sukuk issuances

Table: 10 - Regional break-up of the Total Domestic Sukuk Issuance 2001-Jan 2013
ASIA & FAR EAST
Number of Issues
Amount USD Millions
% of Total
Value
Malaysia
3026
314,820
79.8%
Indonesia
146
12,029
3.1%
Pakistan
43
6,045
1.5%
Brunei Darussalam
84
3,929
1.0%
192
0.05%
Singapore
Total
GCC & MIDDLE EAST
3,304
Number of Issues
Bahrain
337,015
Amount USD Millions
85.5%
% of Total
Value
173
5,675
1.4%
Qatar
9,548
2.4%
Saudi Arabia
26
18,712
4.7%
United Arab Emirates
13
8,218
2.1%
Kuwait
332
0.08%
Jordan
119
0.03%
253
0.06%
219
42,856
10.9%
Yemen
Total
AFRICA
Number of Issues
Sudan
Gambia
Total
EUOROPE & OTHERS
Amount USD Millions
% of Total
Value
22
13,214
3.4%
104
126
78
13,292
0.02%
Number of Issues
Amount USD Millions
3.37%
% of Total Value
Turkey
905
0.23%
Germany
123
0.03%
USA
167
0.04%
3
3,652
1,195
394,358
0.30%
100%
Total
Grand Total
22

Table: 11- Domestic Sukuk Issues -Selected Value Leaders in Local Currency 2011- 2013

Year wise latest first US $ 100 Millions or greater (Corporate, Sovereign & Quasi-Sovereign)
Issue
Year
Issuer
2013
Savola Group
2013
Malako Corporation
Berhad
2013
2012
2012
Segari Energy Ventures

UEM Land Holdings
Berhad
Banque Saudi Fransi
2012
2012
Number Issuer
of
Country
Issues
1 Saudi
Arabia
3 Malaysia
Issued
Sukuk
Corporate
Structure
Hybrid Sukuk
Amount
in
Equivalent
400
Average
Tenor
(Years)
7
Corporate
Sukuk Al Murabahah
696
1 Malaysia
1 Malaysia
Corporate
Corporate
Sukuk Al Murabahah
Sukuk Al Murabahah
559
196
15
5
1 Saudi
Arabia
Corporate
Sukuk Al Mudharabah
507
Sime Darby Bhd

Saudi Hollandi Bank
1 Malaysia
1 Saudi
Arabia
Corporate
Corporate
Sukuk Al Murabahah
Sukuk Al Murabahah
131
373
15
7
2012
Imtiaz Sukuk Berhad
1 Malaysia
Corporate
Sukuk Al Musharakah
228
2012
2012
HSBC Amanah
Kuala Lumpur Kepong
Berhad
Malako Corporation
Berhad
1 Malaysia
1 Malaysia
Corporate
Corporate
Sukuk Al Wakalah
Sukuk Al Ijarah
162
320
5
10
1 Malaysia
Corporate
Sukuk Al Musharakah
576
30
2012
Celcom Transmission
5 Malaysia
Corporate
Sukuk Al Murabahah
1,442
2012
2012
Tanjung Bin Power

DanaInfra Nasional
Berhad
9 Malaysia
3 Malaysia
Corporate
Corporate
Sukuk Al Ijarah
Sukuk Al Murabahah
1,101
665
12
12
2012
2012
Cagamas Berhad
Olayan Group
1 Malaysia
1 Saudi
Arabia
Corporate
Corporate
Sukuk Al Ijarah
Hybrid Sukuk
132
173
5
5
2012
2012
Johor Corporation
Saudi Arabia National
Industrialisation
Company
3 Malaysia
1 Saudi
Corporate
Corporate
Sukuk Al Wakalah
Hybrid Sukuk
941
533
7
7
2012
2012
Aman Sukuk Berhad

Saudi British Bank
Corporate
Corporate
Sukuk Al Musharakah
Hybrid Sukuk
116
400
10
5
2012
Al Marai Company
1 Malaysia
1 Saudi
Arabia
1 Saudi
Arabia
Corporate
Hybrid Sukuk
267
2012
Maxis Berhad
1 Malaysia
Corporate
Sukuk Al Musharakah
811
10
2012
DRB-HICOM Bhd
1 Malaysia
Corporate
Sukuk Al Murabahah
132
2012
2012
Sarawak Energy Bhd

Government of
Malaysia
2 Malaysia
7 Malaysia
Corporate
Sovereign
Sukuk Al Musharakah
Sukuk Al Murabahah
801
2,527
13
12
2012
2012
Central Bank of Bahrain

Government of
Indonesia
Government of
Pakistan
Malaysia Airports
Capital Berhad
1 Bahrain
13 Indonesia
Sovereign
Sovereign
Sukuk Al Ijarah
Sukuk Al Ijarah
424
3,620
5
9
6 Pakistan
Sovereign
Sukuk Al Ijarah
3,135
1 Malaysia
QuasiSovereign
QuasiSovereign
Sukuk Al Ijarah
196
12
1,450
15
2012
2012
2012
2012
23
Arabia
4 Malaysia
Sukuk Al Musharakah
2012
2012
2012
2012
2012
2011
National Higher
Education Fund
Corporation Malaysia
Malaysian Airline
System Berhad
Syarikat Prasarana
Negara Berhad
General Authority Of
Civil Aviation
PLUS Berhad
2 Malaysia
QuasiSovereign
Sukuk Al Murabahah
2 Malaysia
QuasiSovereign
QuasiSovereign
QuasiSovereign
QuasiSovereign
Corporate
2 Malaysia
1 Saudi
Arabia
23 Malaysia
1,118
10
Sukuk Al Musharakah
479
10
Sukuk Al Murabahah
642
13
Sukuk Al Murabahah
4,000
10
Sukuk Al Musharakah
9,728
16
Sukuk Al Ijarah
1,242
Manjung Island Energy

Berhad
Saudi Arabian Aramco
Total Services Company
7 Malaysia
1 Saudi
Arabia
Corporate
Sukuk Al Musharakah
1,000
14
2011
2011
AmIslamic Bank Berhad

Nakheel Group
Corporate
Corporate
Sukuk Al Musharakah
Sukuk Al Ijarah
192
1,034
10
5
2011
SapuraKencana
Petroleum
1 Malaysia
1 United
Arab
Emirates
1 Malaysia
Corporate
Sukuk Al Mudharabah
158
2011
Kencana Petroleum Bhd
1 Malaysia
Corporate
Sukuk Al Mudharabah
167
2011
2011
Sarawak Energy Bhd

Saudi International
Petrochemical
Company
Bank Muamalat
Malaysia Berhad
4 Malaysia
1 Saudi
Arabia
Corporate
Corporate
Sukuk Al Musharakah
Sukuk Al Mudharabah
990
480
9
5
1 Malaysia
Corporate
Sukuk Al Musharakah
132
10
2011
2011
2011
Al Rajhi Cement
1 Jordan
Corporate
Sukuk Al Ijarah
119
2011
2011
Maybank Islamic
Bank Al Jazira
1 Malaysia
1 Saudi
Arabia
Corporate
Corporate
Sukuk Al Musharakah
Hybrid Sukuk
330
267
10
10
2011
2011
Cagamas Berhad
First Investment
Company
Government of
Indonesia
1 Malaysia
1 Kuwait
Corporate
Corporate
Hybrid Sukuk
Sukuk Al Wakalah
131
332
5
5
5 Indonesia
Sovereign
Sukuk Al Ijarah
2,033
10
2011
2011
Government of Sudan
Government of
Malaysia
1 Sudan
2 Malaysia
Sovereign
Sovereign
Hybrid Sukuk
Sukuk Al Murabahah
286
984
5
9
2011
2011
Government of Qatar
Pengurusan Aset Air
Berhad
Syarikat Prasarana
Negara Berhad
1 Qatar
9 Malaysia
Sovereign
QuasiSovereign
QuasiSovereign
QuasiSovereign
Sukuk Al Ijarah
Sukuk Al Murabahah
9,067
2,576
3
7
Sukuk Al Ijarah
673
13
Sukuk Al Musharakah
334
20
2011
2011
2011
2 Malaysia
1 Malaysia
2.6 Structural Break-up of Global Sukuk Market

Ijarah Sukuk structure has been the most popular and widely used structure for both International &
Domestic Sukuk issuance although in terms of volume Murabaha share in the domestic market is higher
than the Ijarah and the reason for this is due to issuance by certain larger market share countries.
24
Chart 3: Total Global Sukuk Issuance by Value (All currencies) Structural Breakdown
Domestic Sukuk Issuances 2001-2010
Sukuk
Sukuk
Al Wakalah Al Mudharabah
Islamic
(3,
458) 2%
(371) 0%
Exchangeable
Hybrid Sukuk
Sukuk (408) 0%
(10,552) 6%
Sukuk
Al Ijarah
(35,746) 19%
Bai Bithaman
Ajil (12,207)
7%
Domestic Sukuk Issuances 2011 - Jan 2013
Sukuk Al Istisnaa
(3,469) 2%
Bai Bithaman Ajil

(18,782) 9%
Sukuk
Al Musharakah
(23,932)
11%
Sukuk
Al Ijarah
(32,214) 15%
Sukuk
Al Musharakah
(39,318) 21%
Sukuk
Al Murabaha,
(76,802) 42%
Sukuk
Al Istisnaa (19)
0%
Sukuk
Sukuk
Al Wakalah Al Mudharabah
(1,595) 1% (7,029) 3%
Hybrid Sukuk
(3,516) 2%
Sukuk
Al Murabaha
(122,173) 58%
Sukuk Al Salam
(1,473) 1%
Sukuk Al Salam
(1,291) 1%
International Sukuk Issuances 2001-2010
International Sukuk Issuances 2011 - Jan 2013
Islamic Exchangeable
Sukuk (6,190) 13%
Sukuk
Al Mudharabah
(4,725) 10%
Hybrid Sukuk
(1,237) 2%
Sukuk Al Murabahah
(756) 2%
Sukuk Al Wakalah
(7,767) 26%
Sukuk Al Ijarah
(20,784) 43%
Sukuk Al Wakalah
(3,228) 7%
Sukuk
Al Mudharabah
(1) 0%
Hybrid Sukuk
(4,658) 15%
Sukuk Al Ijarah
(14,366) 48%
Sukuk Al Musharakah
(9,286) 19%
Sukuk Al Salam
(1,958) 4%
Sukuk Al Murabahah
(1,527) 5%
Sukuk
Al Musharakah
(1,845) 6%
Chart 4: Total Global Sukuk Issuance by currency Breakdown 2001- Jan 2013
Chinese Yuan
Gambian
Renminbi British Dalasi Indonesian
Emirati Dirhams Bahraini
(CNY) Pounds (GMD)
Rupiah
Dinars
(AED)
0%
0%
(GBP)
(IDR)
(BHD) Bruneian Euros
Turkish lira (TRY)
2%
0%
Dollars
3%
1%
0%
Singapore Dollars
(BND) (EUR)
Yemeni
Riyals
0%
(SGD) 0%
1%
(YER)
Jordanian Dinars
0%
(JOD)
Sudanese Pounds
0%
(SDG) 3%
United States Dollars
Kuwaiti Dinars
(USD)
(KWD)
Saudi Riyals
16%
0%
(SAR) 4%
Qatari Riyals
(QAR) 2%
Pakistani Rupees
(PKR) 1%
Malaysian Ringgit
(MYR)
67%
Malaysian Ringgit takes the first spot mainly due to its strong and deep local fixed income market. Malaysian
market attracted some GCC institutions, Supra national Agencies and Japanese institution to raise their funding
needs in Malaysian Ringgit. These institution took advantage of the fine pricing due to local demands and the
attractive currency swap rates that achieved lower yield as well as to diversify its investors.
US Dollars continue to be the favored currency for attracting international investors around the globe. We most
likely to see developments of local currency Sukuk in the comings year as more OIC countries develop their
domestic Sukuk market. This trend is taking shape with Indonesia, Turkey, Pakistan and the GCC countries issuing
local currency Sukuk. Sovereign or sovereign linked entities currently dominate issuance in these countries and
this flow will continue, since the sovereign needs to fund its budget while also sets up the local benchmark curves.
25
Chart 5: Total Global Sukuk Issuance by Regional Breakdown 2001- Jan 2013
Africa (13, 422) 3%
Europe & Others (4,159) 1%
GCC & Middle

East (103,975)
22%
Asia & Far East,

(351,12)74%
Asia will continue to dominate the Sukuk issuance in the short term due to its deep Local currency Fixed income
market with Malaysia and Indonesia being the driving force in that region. However, we are likely to see the GCC
& Middle East pie get larger with a heavy future funding needs due to healthy pipeline of infrastructure projects
coupled with greater participation from Corporates in issuing Sukuk.
With the game plan in Europe changing due to the financial crisis & Basel III, and coupled with abundant liquidity
in the Sukuk market, we may well witness European Corporates line up to take advantage of current favourable
pricing.
Table: 12 - Cross Border International Sukuk Maturing 2013
Year
Issued
2010
2008
2008
2008
Sukuk Issuer
Issuer
Country
Currency
Issue
Type
Intl
Sukuk
Type
KT Turkey sukuk
Limited
Government of
Bahrain
Khazanah Nasional
Bhd
Gulf Holding
Company ( Villamar
Sukuk company
limited)
Turkey
USD
Corporate
Intl
Bahrain
USD
Sovereign
Malaysia
USD
Kuwait
USD
QuasiSovereign
Corporate
Amount
(US$m)
Tenor
Month
Maturity
Date
Murabahah
100
36
31-Aug-13
Intl
Ijarah
350
60
31-Mar-13
Intl
Exchangeable
550
60
31-Mar-13
Intl
Musharakah
190
60
31-May-13
1,190
Total Maturity Value
Cross border Global Sukuk Maturities in 2013 is extremely light as the new issuance in 2008 was pretty much
subdued following the onslaught of the financial crisis.
Table: 13 - Cross Border International Sukuk Maturing 2014
Issue
Year
Sukuk Issuer
Issuer
Country
Currency
Issue
Type
Intl
Sukuk
Type
650
Tenor
Month
60
Maturity
Date
2009
Indonesian Government
Shariah securities
Indonesia
USD
Sovereign
INTL
2009
Government of Bahrain
Bahrain
USD
Sovereign
INTL
Ijarah
750
60
30-Jun-14
2009
2009
Govt of Ras Al Khaimah

Petroliam Nasional Bhd
(Petronas)
UAE
Malaysia
USD
USD
Sovereign
Corporate
INTL
INTL
Ijarah
Ijarah
400
1,500
60
60
31-Jul-14
31-Aug-14
2005
Sanctuary Building Sukuk
UK
GBP
Corporate
INTL
Musharakah
261
108
31-Aug-14
2012
Axiata Berhad
Malaysia
CNY
Corporate
INTL
Sukuk
158
24
18-Sep-14
2007
2009
Berber Cement Co, Sudan

(IDB)
Sudan
Saudi
Arabia
USD
USD
Corporate
QuasiSovereign
INTL
INTL
Musharakah
Wakalah
130
850
84
60
30-Sep-14
30-Sep-14
2009
2009
Government of Dubai
Tourism Deveopment
Investment Company
UAE
UAE
USD
USD
Sovereign
Corporate
INTL
INTL
Ijarah
Ijarah
1,250
1,000
60
60
31-Oct-14
31-Oct-14
2009
General Electric
USA
USD
Corporate
INTL
Ijarah
500
60
30-Nov-14
2009
Hilal Sukuk Company
USA
USD
Corporate
INTL
Ijarah
100
60
30-Nov-14
2011
Gulf International Bank
Bahrain
USD
Corporate
INTL
Murabahah
300
36
31-Dec-14
Ijarah
Amount
(US$m)
30-Apr-14
7,849
26
Starting from 30th June to 31st Dec 2014 we have 12 Sukuk maturing which could well provide some refinancing
opportunities. UAE s three emirates tops the maturity with US $ 2.65 billion , followed by Malaysian Issuers with
US $ 1.657.8 Billion and the other Billion + maturity coming out of Bahraini issuers.
On the other hand, if no or little financing is required then the Investors would most probably looking to reinvest
the maturing Sukuk proceed , thereby, increasing the investable liquidity.
Table : 14 - Domestic Sukuk Maturing 2013
Issuer
Year
2008
2006
2010
2008
2003
2006
2006
2010
2007
2010
Sukuk
Obligor
Country
Currency
Issue
Type
Government of Sudan
Putrajaya Holdings
Sdn Bhd
Indonesian
Government
Government of
Malaysia
Petronas Fertiliser
Sdn Bhd
Rantau Abang Capital
Bhd
Bhd
Bank Pembangunan
Malysia
Nucleus Avenue
Malaysia Bhd
Indonesian
Government
Sudan
Malaysia
SDG
MYR
Sovereign
Corporate
Domestic
Domestic
ijara
Murabahah
131
579
60
84
31-Jan-13
31-Jan-13
Indonesia
IDR
Sovereign
Domestic
Ijarah
880
36
28-Feb-13
Malaysia
MYR
Sovereign
Domestic
Murabahah
627
60
31-Mar-13
Malaysia
MYR
Corporate
Domestic
BBA
198
120
31-Mar-13
Malaysia
MYR
Corporate
Domestic
Musharakah
789
84
31-Mar-13
Malaysia
MYR
Corporate
Domestic
Musharakah
2,029
84
31-Mar-13
Malaysia
MYR
Sovereign
Domestic
Murabahah
157
36
30-Apr-13
Malaysia
MYR
Corporate
Domestic
Musharakah
205
72
30-Apr-13
Indonesia
IDR
Sovereign
Domestic
Ijarah
465
36
17-May-13
31-May-13
31-May-13
Domestic
Type
Amount
(US$m)
Month
Maturity
2010
Cagamas Berhad
Malaysia
MYR
Corporate
Domestic
Ijarah
184
36
2008
Dubai Elec (DEWA)
UAE
AED
Corporate
Domestic
Ijarah
871
60
2006
2008
Gas Malaysia
Gov of Ras Al
Khaimah
Mohammed H. Al
Mana Grp
Putrajaya Holdings
Sdn Bhd
Malaysia
UAE
MYR
AED
Corporate
Sovereign
Domestic
Domestic
Murabahah
Ijarah
132
272
84
60
UAE
AED
Corporate
Domestic
Mudharabah
163
60
31-May-13
Malaysia
MYR
Corporate
Domestic
Murabahah
395
84
31-May-13
2012
Sime Darby Bhd
Malaysia
MYR
Corporate
Domestic
Murabahah
157
12
2008
Aldar Properties PJSC
UAE
AED
Corporate
Domestic
Ijarah
1,021
60
2008
Tamweel PJSC
UAE
AED
Corporate
Domestic
Ijarah
299
60
31-Jul-13
2010
2003
Cagamas Berhad
Putrajaya Holdings
Sdn Bhd
Berhad
Malaysia
Malaysia
MYR
MYR
Corporate
Corporate
Domestic
Domestic
Ijarah
BBA
318
225
36
124
31-Aug-13
31-Aug-13
Malaysia
MYR
Corporate
Domestic
Musharakah
395
84
31-Aug-13
2008
Binladin Group, Saudi

Arabia
Saudi
Arabia
SAR
Corporate
Domestic
Mudharabah
267
60
30-Sep-13
2009
Government of
Pakistan
Pakistan
PKR
Sovereign
Domestic
Ijarah
174
48
30-Sep-13
2006
Scomi Group
Malaysia
MYR
Corporate
Domestic
Murabahah
166
84
31-Oct-13
2010
2010
Government of Sudan
Government of
Pakistan
Am Islamic Bank
Berhad
Sudan
Pakistan
SDG
PKR
Sovereign
Sovereign
Domestic
Domestic
Hybrid
Ijarah
313
592
36
36
30-Nov-13
30-Nov-13
Malaysia
MYR
Corporate
Domestic
Musharakah
105
84
31-Dec-13
2010
Cagamas Berhad
Malaysia
MYR
Corporate
Domestic
Ijarah
223
36
31-Dec-13
2006
2010
MISC Berhad
Government of
Pakistan
Malaysia
Pakistan
MYR
PKR
Corporate
Sovereign
Domestic
Domestic
Murabahah
Ijarah
263
424
84
36
31-Dec-13
31-Dec-13
2008
2006
2006
2006
31-May-13
31-May-13
31-May-13
30-Jun-13
13,019
Almost 50% of the Domestic market is denominated in Malaysian Ringgits (US $ 6.6 Billion) the next to maturities
are: UAE (US$ 2.6 Billion) and Indonesia (US $ 1.5Billion )
27
Table : 15 - Domestic Sukuk Maturing 2014

Year
Obligor
Issuer
Country Currency Issue Type
Domestic Type
Amount
Maturity
(US$m) Tenor Date
2011
Qatar Central Bank
Qatar
QAR
Sovereign
Domestic
Ijara
9,067
36
16-Jan-14
2009
2011
Sudan Govt
Padiberas Nasional
Bhd
Sudan
Malaysia
SDG
MYR
Sovereign
Corporate
Domestic
Domestic
Hybrid
Musharaka
125
114
60
36
31-Jan-14
31-Jan-14
2011
2011
Pakistan Govt
Pengurusan Aset Air
Bhd
Penerbangan
Malaysia Bhd
Pakistan
Malaysia
PKR
MYR
Domestic
555
395
36
36
28-Feb-14
28-Feb-14
MYR
Domestic
Domestic
Ijara
Murabaha
Malaysia
Sovereign
QuasiSovereign
QuasiSovereign
Murabaha
406
60
31-Mar-14
Yemen
Malaysia
YER
MYR
Sovereign
Corporate
Domestic
Domestic
Salam
Ijara
234
116
12
102
1-Apr-14
30-Apr-14
Malaysia
MYR
Domestic
Musharaka
303
60
30-Apr-14
Malaysia
MYR
QuasiSovereign
Corporate
Domestic
Musharaka
208
84
30-Apr-14
Malaysia
MYR
Corporate
Domestic
Murabaha
232
15
30-Apr-14
Malaysia
MYR
Corporate
Domestic
Musharaka
205
84
30-Apr-14
537
200
36
60
8-May-14
31-May-14
2,890
164
84
36
30-Jun-14
30-Jun-14
84
30-Jun-14
2009
2012
2005
2009
2007
2013
2007
Central Bk of Yemen
Golden Crop Returns
Bhd
Khazanah Nasional
Bhd
Kuala Lumpur Sentral
Sdn Bhd
Malako Power Sdn.
Bhd.
Nucleus Avenue
Malaysia Bhd
2011
2009
GovPakistan
(Dar Al Arkan)
Pakistan
Saudi
Arabia
PKR
SAR
Sovereign
Corporate
Domestic
Domestic
Ijara
Ijarah
2007
2011
Cagamas Berhad
Pengurusan Aset Air
Berhad
Malaysia
Malaysia
MYR
MYR
Corporate
QuasiSovereign
Domestic
Domestic
Ijarah
Murabahah
2007
Silterra Malaysia
Sdn.Bhd
Malaysia
MYR
Corporate
Domestic
Ijarah
529
2011
Cagamas Berhad
Malaysia
MYR
Corporate
Domestic
Ijarah
207
36
31-Jul-14
2004
Bahrain Govt
Bahrain
BHD
Sovereign
Domestic
Ijarah
106
120
31-Jul-14
2012
Indonesia Govt
Indonesia
IDR
Sovereign
Domestic
Ijarah
104
60
9-Aug-14
2010
Indonesian Govt
Indonesia
IDR
Sovereign
Domestic
Ijarah
313
48
9-Aug-14
2012
Indonesia Govt
Indonesia
IDR
Sovereign
Domestic
Ijarah
156
96
25-Aug-14
2005
Bayu Padu Sdn Bhd
Malaysia
MYR
Corporate
Domestic
Istisna'a
132
108
31-Aug-14
2004
2011
Gas Malaysia
Government of
Malaysia (GII)
Government of
Malaysia (GII)
Malaysia
Malaysia
MYR
MYR
Corporate
Sovereign
Domestic
Domestic
BBA
BBA
184
958
120
33
Malaysia
MYR
Sovereign
Domestic
Murabahah
1,322
42
30-Sep-14
30 Sep-14
30-Sep-14
2011
2004
MISC Berhad
Optimal Chemicals
Sdn Bhd
Malaysia
Malaysia
MYR
MYR
Corporate
Corporate
Domestic
Domestic
BBA
BBA
160
149
36
120
30-Sep-14
30-Sep-14
2004
2006
Optimal Glycols
Perwaja Steel Sdn
Bhd
Sarawak Specialist
Hospital Bhd
The Republic of
Turkey
Malaysia
Malaysia
MYR
MYR
Corporate
Corporate
Domestic
Domestic
Murabahah
Istisna'a
119
105
120
96
30-Sep-14
30-Sep-14
Malaysia
MYR
Corporate
Domestic
Al Ijarah
112
120
30-Sep-14
Turkey
TRY
Sovereign
Domestic
Ijarah
905
24
2-Oct-14
2010
Indonesian Govt
Indonesia
IDR
Sovereign
Domestic
Ijarah
219
48
7-Oct-14
2011
Pakistan Govt
Pakistan
PKR
Sovereign
Domestic
Ijarah
785
36
25-Dec-14
2011
2004
2012
22,317
Of the US $ 22.32 Billion total domestic market maturities, Qatar Government heads the list with a US $ 9.1 billion
followed by Malaysias government and other corporate totaling US $ 9 Billion equivalent. Two other big maturities
are from relatively new Domestic issuers, Turkey US $ 900 million and Indonesia US $ 800 million.
28
2.7 Short Term Sukuk Market

Short term Sukuk with maturity of 1 year or less are essential in the development of Islamic Inter-bank market
and they play a key role in the liquidity management of the financial institutions. Malaysia remains the leader in
domestic short term Sukuk issuances followed by Sudan, Bahrain, and Brunei. Indonesia is showing sign of playing
a leading issuance role in this type of Sukuk and is a country to watch in coming years.
The appetite for short term Sukuk is far greater than longer tenor Sukuk as evident by these issuers. The trend
towards issuing shorter tenor Sukuk is increasing and is driven by sovereign issuers through central banks.
Malaysian and some GCC corporate issuers are getting in this segment of the Sukuk market and are providing
diversity and depth to the local markets which is essential in the development of money market.
Bahrain has kept its leading role in Short Term Sukuk issuances and it regular issuances are always oversubscribed.
The outlook for Short Term Sukuk is encouraging and it is expected this segment will continue its growth trend.
The following table illustrates the total short-term Sukuk issuance globally with a tenor of 1 year or less during the
period of Jan 2001 Jan 2013:

Table: 16 - Total Global Short-Term Sukuk Issuance All Currencies (Less than or Equal to 12 Months
2001-Jan 2013)
Issuer Country
No. of Issues
Malaysia
Sudan
Value
Value (USD Millions)
1705
175,300
89%
12
11,311
6%
209
5,959
3%
Brunei Darussalam
83
3,829
2%
Indonesia
10
544
0.3%
454
0.2%
234
0.1%
104
78
0.04%
Bahrain
Saudi Arabia
Yemen
Gambia
Pakistan
62
0.03%
Singapore
36
0.02%
2,130
197,807
100%
Total
The following chart illustrates the currency wise break down of Short Terms Sukuk issuances. Though Malaysia,
Sudan & Bahrain leads the table of short term issuers, however; several countries such as Indonesia has also started
regular issuance of short term Sukuk program which will greatly help the liquidity management requirement of
Islamic institutions.
Bahrain is the first
jurisdiction which started
the regular issuance of
Short Term Sukuk mostly
in Bahraini Dinar and it
continues to improve
on its Sukuk issuance
plan while Indonesia and
Pakistan are the recent
entrant in this Sukuk
market segment.
29
Chart 6: Total Global Short-Term Sukuk Issuance by Currency All Amounts in

US $ Millions 2001 - Jan 2013
Singapore Dollars
(SGD) 36, 0.02%
Sudanese Pounds
(SDG)
11, 311, 5.72%
Saudi Riyals
(SAR) 454, 0.23%
United States Dollars Yemeni Riyals

(USD) 1,977, 1.00% (YER) 234, 0.12%
Bahraini Dinars
(BHD) 3,981, 2.01%
Bruneian Dollars
(BND) 3, 829, 1.94%
Gambian Dalasi
(GMD) 78, 0.04%
Pakistani Rupees
(PKR) 62, 0.03%
Indonesian Rupiah
(IDR) 544, 0.27%
Malaysian Ringgit
(MYR) 175,300,88.62%
Chapter Three
CASE STUDIES OF SELECTED
INTERNATIONAL SUKUK ISSUES

By: IIFM & Ms. Shazia Farook
3.1 ABU DHABI ISLAMIC BANK (ADIB) SHIRKAT-UL-MILK 11 BASED SUKUK 2011
Abstract
This case study intends to highlight on the successful issuance of the Shirkat-ul-Milk structure based Sukuk worth
US $ 500 million issued in November 2011 by Abu Dhabi Islamic Bank (ADIB) a top tier Islamic financial services
group in the United Arab Emirates (UAE). The issuance of this Sukuk has been a successful step towards diversifying
and lengthening funding sources for Islamic financial institution.
Sukuk Summary
SPV
ADIB Sukuk Company Ltd
Structure type
Al Ijara
Issuesize
USD 500,000,000
Issue Date
30-Nov-11
Maturity date
11/30/16
Return
3.78%
Fix or Variable
Return frequency
Fixed
Semi Annual
Pricing =Spread
over mid-swaps,
245bp
Book Runners
HSBC, Citigroup, NBAD,

Standard Chartered Bank,
Nomura Securities
Listing
London S.E.
ISIN RegS
XS0711035286
Background
Abu Dhabi Islamic Bank (ADIB) is a top tier Islamic financial institution in the United Arab Emirates (UAE) which
operates through a network of 73 retail branches in the country. The bank has won a number of prestigious awards
including Sheikh Khalifa Excellence Award- Gold category in 2012 and the best Islamic Bank in the UAE by Global
Finance for 2011.
11
Shirkat-ul-Milk: Shirkat-ul-Milk is defined as: a joint ownership of two or more persons in a particular property. This type of
partnership i.e. shirkah; however, may come into existence in two different ways:
(1) At the option of the parties. For example, if two or more persons purchase property etc, it will be owned jointly by both
of them and the relationship between them with regard to that property is called shirkat-ul-milk. The relationship between
the parties in this transaction has come into existence at their own option, because they themselves choose to purchase the
equipment jointly.
(2) Happened automatically without any action taken by the parties. For example, after the death of a person, all his heirs
inherit his property which comes into their joint ownership as an automatic consequence of the death of that person.
30
Sukuk Al Musharakah 12
Musharakah Sukuk are certificates of equal value issued with the aim of using the mobilized funds for establishing
a new project, financing a business activity etc on the basis of any of partnership contract so that the certificate
holders become the owners of the project. (Musharakah Sukuk is an investment partnership between two or more
entities which together provide the capital of the Musharakah and share in its profits and losses in pre-agreed
ratios)
ADIB Shirkat-ul-Milk based Sukuk

ADIB returned successfully to the Sukuk markets with the issuance of US $ 500 million, 5-year Sukuk at a profit
rate of 3.78 per cent in November 2011. This Sukuk which will be matured in November 30, 2016, had received an
overwhelming response with orders worth 4 times the issue size spread across 122 investors. Fifty-seven per cent
of the orders came from investors in the Middle East, 29 per cent from Europe and 13 per cent from Asia. Banks
bought 52 per cent of the Islamic bond, fund managers 28 per cent and central banks 16 per cent. The Sukuk
was rated A2 (stable outlook) and A+ (stable outlook) by Moodys and Fitch respectively. This transaction marked
the third benchmark deal by ADIB under its US $5 billion Sukuk Program initiated in 2007. However, the primary
objective of issuing this Shirkat-ul-Milk Sukuk was to diversify and to lengthen the average maturity of funding
sources of the bank.
Geographic Distribution
ADIB Sukuk Investors
13%
30%
57%
Asia
Middle East
Europe
ADIB, Citibank, HSBC, National Bank of Abu Dhabi, Nomura and Standard Chartered Bank were the joint lead
managers and book-runners for this Sukuk which was listed on the London Stock Exchange. The principal
transaction documents are: Purchase Agreement, Management Agreement and Purchase Undertaking Deed.
Sukuk Structure and Payment Flows
(1)

The Sukuk was issued through a Special Purpose Vehicle (SPV) under the name of ADIB
Sukuk Company, registered in the Cayman Islands.
(2)
ADIB Sukuk Company was the issuer and the trustee for the certificates.
(3) Under a Master Purchase Agreement, ADIB (acting as seller) agreed to sell to ADIB Sukuk Company, from

time to time, a co-ownership interest in a portfolio of Ijarah assets originated, co-owned and managed

by ADIB (the trust assets). The composition of the trust assets in relation to each issue and the purchase

price for such assets are mutually agreed between ADIB and ADIB Sukuk Company upon each issuance

under the program. A Supplemental Purchase Contract is entered into between them to record the
agreement.
12
AAOIFI Shariah standard no. 17, 2010, Musharaka Sukuk, page 308.
31
(4)

(5)
Under a Management Agreement, ADIB (acting as managing agent) agrees to maintain the co-owned
Ijarah assets. ADIB also maintains a collection account in respect of each series of Sukuk issued. Amounts
credited to a collection account include revenues received from the co-owned assets that are attributable
to ADIB Sukuk Company as its share.
The revenues that represent profit returns from the underlying assets are used to pay periodic distribu-
tions under the Sukuk. Revenues that represent principal payments relating to the underlying assets are
reinvested in new Shariah compliant assets. If the profit returns in any period are insufficient to fund the
periodic distribution payment of the Sukuk, ADIB will provide Shariah compliant funding to ADIB Sukuk
Company to make up for the shortfall. However, if profit returns are more than the amount needed to pay
the relevant periodic distribution, the excess will be paid to ADIB as an incentive fee.
(6)
Pursuant to a Purchase Undertaking Deed, ADIB (acting as purchaser) agrees to repurchase the issuers in

terest in the relevant trust assets at their market value, as estimated by ADIB. However, ADIB has agreed
to ensure that the market value of the trust assets is never less than the face amount of the outstanding

Sukuk. Therefore, the price paid by ADIB will be sufficient to meet the issuers obligations to pay Sukuk

holders any amounts due following redemption of Sukuk upon maturity or earlier if an event of default
occurs.
Structure Diagram
Set out below is the structure diagram and brief explanation of the structure and principal cash flows to assist in
understanding the transaction documents relating to such a structure.
ADIB
as Seller of
co-ownership
interests
Proceeds
ADIB
as Managing
Agent
Return on
Co-ownership
interest
Management
Agreement
Master Purchase
Agreement and
Supplemental Purchase
Contract
ADIB
as Purchaser
Purchase
Undertaking
Deed
Exercise Price
Issuer
Proceeds
MasterTrust
Deed and
Supplenental
Trust Deed
Source: ADIB Sukuk Base Prospectus
Periodic Distribution
Amounts and
Dissolution Amount
Investors
Diagram Explanation
(i)
On the Issue Date, the certificate holders will pay the issue price to ADIB Sukuk Company (as Issuer/Trustee).
(ii)
The proceeds will be used by ADIB Sukuk Company to purchase a co-ownership interest in a portfolio of
Ijarah assets from ADIB (as Seller) under a Purchase Agreement.
32
(iii)
ADIB (as Managing Agent) agrees to maintain the co-owned Ijarah assets through a Management Agreement.
(iv)

ADIB will pay to the Issuer an amount representing its share of profit in respect of the co-ownership as
sets on each Periodic Distribution Date. If the profit returns are insufficient to fund the periodic distribu-
tion payment, ADIB will make up for the shortfall by providing Shariah compliant funding to ADIB Sukuk
Company. However, if profit returns are more than the amount needed to pay the relevant periodic
distribution, the excess will be paid to ADIB as an incentive fee.
(v)
The Issuer will sell its co-ownership interest in the co-ownership assets to ADIB (as Purchaser) on the
Maturity Date, pursuant to a Purchase Undertaking.
(vi)
The Exercise Price paid by ADIB is intended to fund the dissolution amount payable by the Issuer
under the Trust Certificates.
The ADIB Shirkat-ul-Milk based Sukuk was well-received by investors globally , which is evidend by the
order book size that crossed the $2 billion. Middles East investor being the main beneficaries, picking
up over 50% of the issue and the balance spread between Asia and Europe. Having a diverse group
of joint lead managers ensured acceptance and success of the Sukuk in terms of the structure and
wider client distribution. It seems ADIB have established a good following amongst the investors base,
allowing it to tap the market with ease and at a competitive pricing.
References
(1)
ADIB Website: http://www.adib.ae/
(2)
Bloomberg Business Week:http:

//investing.businessweek.com/research/stocks/snapshot/snap shot.asp?ticker=ADIB:UH
(3) Zawya: http://www.zawya.com/story/ADIB_issues_US500M_Sukuk_at_a_profit_rate_of_378-

ZAWYA20111124075126/
33
3.2 KHAZANAH NASIONAL WAKALAH BASED SUKUK 2011

ABSTRACT
In October 2011, Khazanah Nasional Berhad issued a Wakalah structure based Sukuk worth Remembi (RMB) 500
million (also known as Chinese Yuan) equivalent to RM 246 million. The offering was the first Global Offshore
RMB denominated Sukuk issued by issuer based outside China. This case study intends to highlight Khazanahs
continued commitment towards the expansion of Islamic finance in pursuit of Government of Malaysias agenda
to establish the country as an Islamic finance hub.
Sukuk Summary
SPV
Structure type
Issue Size
Issue Date
Maturity date
Return
Fix or Variable
Return frequency
Book Runner
Listing
ISIN RegS
Danga Capital Bhd

Wakala
CNY 500,000,000
20-Oct-11
20-Oct-14
2.9
Fixed
Semi Annual
RBS, BOC Intl, CIMB
Bursa Malaysia + Labuan
HK0000090669
Background
Khazanah Nasional Berhad is the Government of Malaysias strategic investment fund. Its role as trustees to the
Malaysian Governments commercial assets is to promote economic growth and make strategic investments on
behalf of the Malaysian Government which would contribute towards nation-building.
Khazanahs task includes nurturing the development of selected strategic industries in Malaysia with the aim of
pursuing the Malaysian Governments long-term economic interests.
Khazanah has investments in over 50 major companies, both in Malaysia and abroad, and its companies are
involved in a broad spectrum of industries. It is also the key agency mandated to drive shareholder value creation,
efficiency gains and enhance corporate governance in companies controlled by the Malaysian Government.
Sukuk Al Wakalah
Wakalah Sukuk are certificates issued by the investment agent. The subscribers are the principals and the realised
funds are the entrusted capital of the investment. The certificate holders own the assets represented by the
certificates with its benefits and risks, and they are entitled to the profits, if any13.
Khazanah Nasional Wakalah based Sukuk

Khazanah Sukuk issued in October 2011 was based on Islamic contract of Wakalah due to the structures wider
acceptability, practicality and ease of understanding. It is the first ever RMB Islamic trust certificates. The three
(3) year Wakalah based Sukuk offering, due in 2014, was issued under the Malaysia International Islamic Financial
Centre (MIFC) initiative. The rationale behind the issuance of this Sukuk was as follows:
13
AAOIFI Shariah standard no. 17, 2010, Investment Sukuk, page 312.
34

Asset liability matching to cater for investment requirements in China

Pushing the boundary of Sukuk market by venturing beyond familiar shores

Supporting MIFCs agenda on Islamic finance and profiling Malaysia as the hub for Sukuk
issuances
The Sukuk was priced at the tightest end of 2.90 per cent profit rate. Due to overwhelming investor response,
Khazanah had to upsize the Sukuk from an earlier announced size of RMB 300 million to RMB 500 million.
The offering was oversubscribed 3.6 times reflecting robust demand from Malaysian and regional investors despite
volatile global market conditions. The deal attracted a diverse group of investors comprising financial institutions,
asset management companies, private banks and statutory bodies from Malaysia, Singapore, Hong Kong, the
Middle East and Europe. Investors in Malaysia, Singapore and Hong Kong subscribed to 37 per cent, 30 per cent
and 26 per cent of the offering respectively.
Khazanah Sukuk Investors
DistributionofofKhazanah
Khazanah
Sukuk
Investors
Distribution
Sukuk
Investors
by
Investor
Type
by Investor Type
Financial
Institutions
40%
Private
Banks
15%
Asset
Managers
45%
Khazanah Sukuk Investors
Singapore
30%
Malaysia
37%
Europe
6%
Hong Kong
26%
Middle East
1%
The principal transaction documents are Wakalah Agreement, Sale and Purchase Agreement, Obligor Undertaking,
Issuer Undertaking, Purchase Undertaking, Commodity Murabahah Investment Agreement. The trust certificates
of the Sukuk are listed on Labuan International Financial Exchange and Bursa Malaysia.
Sukuk Structure and Transaction Flows

1. SPV: Khazanah Sukuk was issued via a Malaysian-incorporated special purpose vehicle, Danga Capital Berhad.
2. Trustee: Deutsche Trustees Malaysia was the trustee for the Trust certificate holders. Danga Capital Berhad was
the trustee for the trust assets.
3. Use of Sukuk Proceeds: On the issue date, the Danga Capital (as Issuer) will issue the trust certificates and the
Islamic securities holders will subscribe to the certificates by payment of the proceeds to the Issuer. Pursuant to
the Wakalah Agreement, the Issuer (on behalf of the Trust Certificates Holders) shall appoint Khazanah (Wakeel)
as its agent and shall instruct the Wakeel to invest the proceeds in a Wakalah Venture which shall comprise investments in:
(i) certain Shariah-compliant shares owned by Khazanah; and
(ii)
the Commodity Murabahah Arrangement with Khazanah (Murabahah Investment)
3.1.
The Issuer shall make a declaration of trust over the proceeds and thereafter the Venture for the benefit of
the Islamic securities holders. The Trust Certificates will represent the Islamic securities holders proportionate and
undivided ownership in the Venture.
3.2.
Pursuant to the Sale and Purchase Agreement, the Issuer (acting through the Wakeel as agent) shall
purchase from the seller certain Shariah-compliant shares at their fair market value calculated in accordance with
the mutually agreed Valuation Principles. The Wakeel shall manage the shares and exercise all rights as beneficial
shareholder on behalf of the Issuer. During the term of the Sukuk, the aggregate fair market value of the relevant
35
shares must be at least equal to the Shares Investment Minimum Value, as determined in accordance with the
mutually agreed Valuation Principles.
3.3.
Pursuant to the Obligor Undertaking granted by Khazanah (as the Obligor) in favour of the Issuer, if
the aggregate fair market value of the shares falls below the Shares Investment Minimum Value at any time, the
Obligor has undertaken that it will substitute existing shares with alternative Shariah-compliant ones having fair
market value equal to the agreed upon minimum value. A similar substitution will take place in case some of the
shares are no longer Shariah compliant.
3.4.
Pursuant to the Issuer Undertaking granted by the Issuer (on behalf of the Trust Certificates Holders)
in favour of the Obligor, if before any Periodic Distribution Date, the fair market value of the shares exceeds the
Shares Investment Minimum Value (the amount of such excess being referred to as the Excess Shares), the
Issuer has undertaken that it will sell to the Obligor all or some of such Excess Shares.
3.5. The Commodity Murabahah Investment Agreement will be entered into between the Buyer, the
Issuer (acting through the Wakeel as agent) and CIMB Islamic Bank Berhad as Facility Agent for investments in
commodities.
4. Periodic Distribution Payments: The Wakeel shall calculate periodic income before each periodic distribution
date. The Wakeel shall be eligible for an interim incentive fee, provided that the periodic income is sufficient to
satisfy the aggregate periodic distribution amount and all amounts (if any) payable prior to it. Any loss incurred
under the Wakalah Venture shall be borne by the Trust Certificates Holders in proportion to the Nominal Value of
the Trust Certificates held by each Trust Certificates Holder.
5. Dissolution Payments: The Obligor shall issue the Purchase Undertaking in favour of the Issuer and the
Trustee (for the benefit of the Trust Certificates Holders) under which it undertakes to purchase from the Issuer all
of the investments in the Wakalah Venture in consideration for the Purchase Price on the maturity date or upon a
Dissolution Event, whichever is earlier. The Purchase Price of the investments shall be determined in accordance
with the mutually agreed Valuation Principles. Any amount of the market value of the Investments above the
nominal value of the trust certificates plus the accrued but unpaid Periodic Distributions under the trust certificates
shall be retained by Khazanah as incentive fee.
Sukuk Structure and Diagram

10. Dissolution
Distribution Amount
on Disolution Event
Redemption Date
Deutsche Trustees Malaysia

(as Trustee for the Trust
Certicates Holders)
9. Purachase Price on
Dissolution Event
Redemption Date
Khazanah Nasional
Berhad (as Obligor)
Trust Certicates holders
1. Trust
Certicates
2. Series
Proceeds
3. Periodic
Distribution
Amounts
10. Dissolution
Distribution Amount
on Maturity Date
Purchase
Undertaking
Danga Capital Berhad
(as Issuer and trustee of
Trust Assets)
Purchase Undertaking
9. Purchase Price in respect of Maturity Date

3. Wakalah
Agreement
Incestment in Shares
Commodaty Murabahah
Invesment
4. Seies
Proceeds
7. Periodic Income
less
Inteim Incentive
Fee (if any)
11. Final Incentive

Fee (if any)
5. Series Proceeds
Series Wakalah
Venture
Khazanah Nasional Berhad

(as Wakeel)
5. Periodic Income
36
Diagram Explanation
(i)

Investors will subscribe to Islamic certificates issued by Danga Capital Berhad (as Issuer) through payment
of proceeds.
(ii)

The Issuer (on behalf of the Trust Certificates Holders) shall instruct Khazanah (as the Wakeel) to invest the
proceeds in a Wakalah Venture under a Wakalah Agreement.
(iii)

The Venture shall comprise investments in: 1) certain Shariah-compliant shares owned by Khazanah and
2) the Commodity Murabahah Arrangement with Khazanah (Murabahah Investment).
(iv)
Khazanah, as Wakeel, shall manage the Venture for the Islamic Securities holders.
(v)

Returns generated from the Venture shall be distributed by Khazanah to Sukuk-holders as Periodic Distributions or One-off Distribution, as the case may be up to the Expected Returns. Returns in excess thereof
shall be retained by the Khazanah as an incentive fee for the Wakeel. Any loss shall be borne by the Islamic
Securities holders based on their respective capital contribution in the Venture.
(vi)

Khazanah (as Obligor) will enter into a Purchase Undertaking with the Issuer (acting on behalf of the Islamic
Securities holders) and the Trustee to purchase the Investments at market value upon an Event of Default
or upon the maturity of the Trust Certificates, whichever is earlier.
Conclusion
Expanding the investment universe by offering Sukuk in a new currency
(Chinese Yuan), pushing the boundaries bodes well for the overall Global Sukuk market, as it lays down the
foundation for possible Sukuk issuance from not only China, but other coroprates outside of China requiring
financing in China. Adventuring International firms having CNY income flows could now raise their funding
requirement with a Sukuk in CNY without having to taking on FX risk and be able to match their Asset & Liability.
On the structuring, the unrestricted Wakalah arrangement is well thought out as it allows for balancing the assets
between Shares and Murabahah aswell as facilitating share substitution and or, of selling of the shares .
References
(1)
37
Khazanah Nasional Berhad Website: http://www.khazanah.com.my/docs/knb_Sukuk_131011.pdf
3.3 MAJID AL FUTTAIM (MAF) WAKALAH BASED SUKUK 2012

Abstract
Majid Al Futtaim Holding LLC (MAF), issued in January 2012 Sukuk based on Wakalah structure worth US $ 400
million. This transaction represents its first foray into the public debt market/Islamic capital market. The aim of this
study is to highlight on how Islamic capital markets can be successfully accessed by privately held companies like
Majid Al Futtaim to strategically diversify their sources of funding and extend their liability maturity profile.
Sukuk Summary
SPV
Structure type
Issuesize
Issue Date
Maturity date
Return
Fix or Variable
Return frequency
Pricing =Spread
over mid-swaps,
Book Runners
Listing
ISIN RegS
MAF Sukuk Ltd

Wakala
USD 400,000,000
7-Jan-12
7-Feb-17
5.85%
Fixed
Semi Annual
482bp
Standard Chartered, HSBC,
Dubai Islamic Bank , Abu
Dhabi Islamic Bank
London
XS0742399198
Background
Established in 1992, Majid Al Futtaim Holding LLC (MAF) the conglomerate firm has established itself as the leading
retail and leisure pioneer across the Middle East and North Africa region. It is the highest rated private corporate
in the Middle East.
The main business of the company includes the development of shopping malls, hotels and mixed-use communities
across the Middle East and North Africa region with a customer base in excess of 107 million customers per annum.
Managing hypermarkets such as Carrefour and developing new businesses that complement and reinforce the
Groups leadership in its core businesses.
Sukuk Al Wakalah
Wakalah Sukuk are certificates issued by the investment agent. The subscribers are the principals and the realised
funds are the entrusted capital of the investment. The certificate holders own the assets represented by the
certificates with its benefits and risks, and they are entitled to the profits, if any 14.
Majid Al Futtaim Wakalah based Sukuk

MAF successfully priced a US $ 400 million Sukuk issue on 31 January, 2012. The certificates were issued under the
companys US $ 1 billion regional Sukuk Program set up earlier this year. The Sukuk will mature in 2017 and will
pay a profit rate of 5.85 per cent per annum payable semi-annually in arrears. The proceeds will be used to fund
14 AAOIFI Shariah standard no. 17, 2010, Investment Sukuk, page 312.
38
expansion plans worth US $ 2 billion for malls and shopping centers in Lebanon, Egypt and Syria, alongside plans
for a hypermarket in Erbil, Kurdistan.
The issue was priced based on investor meetings held in the UAE, Kuala Lumpur and London. Abu Dhabi Islamic
Bank, Dubai Islamic Bank, HSBC Bank Plc and Standard Chartered Bank were joint lead managers and book runners
for the transaction.
The Sukuk was 4 times oversubscribed with more than 140 orders from a well-diversified investor group. The final
distribution of the certificates was well-balanced with investors from Middle East (54 per cent), Europe (32 per
cent) and Asia (14 per cent). Banks accounted for 52 per cent, fund managers 42 per cent, and private banks the
balance offering of 6 per cent.
Geographic Distribution of MAF Sukuk Investors
14%
32%
54%
Asia
Middle East
Europe
Fitch Ratings assigned MAF Sukuk series of certificates under the US $ 1 billion trust certificate issuance program a
rating of BBB. The ratings were assigned to the program and not to the certificates issued under the program. The
rating is driven solely by MAF Holdings (the Guarantor) Issuer Default Rating (IDR) and senior unsecured rating.
Fitch assigned MAF Holding a Long-term IDR of BBB, with a Stable Outlook.
The principal transaction documents include Purchase Agreement, Lease Agreement, Management Agreement,
Purchase Undertaking and Sale Undertaking.

1.
SPV: The Sukuk was issued through a Special Purpose Vehicle (SPV) incorporated in the Cayman Islands,
MAF Sukuk Limited.
2. Trustee: MAF Sukuk Limited was the issuer and the trustee for the certificates.
3.

Use of Sukuk Proceeds: On the issue date, MAF Sukuk Ltd. (the Issuer and the Trustee) will use the
proceeds to purchase from MAF Properties (the Obligor) a portfolio of Wakalah Assets termed as the
Wakalah Portfolio.

Initially the Master Purchase Agreement was entered into between MAF Sukuk Ltd. (as Trustee and as

Purchaser) and MAF Properties (as Seller). Subsequently, a Supplemental Purchase Contract between the

same parties will be entered into on the issue date of each series. Pursuant to the Purchase Agreement,

the Seller will sell the Wakalah Portfolio to the Purchaser. The Wakalah Portfolio will include the following
assets:
(i)

(ii)
39
Income generating real estate related assets or Shariah compliant tangible assets which are
either externally leased to third parties immediately prior to the issue date or which will become leased
assets on the issue date
Self-use assets which are non-income generating assets. If such assets form a part of the Wakalah

portfolio, these shall be leased by the MAF Sukuk Ltd. (the Lessor) to MAF Properties (the Lessee) pursuant

to a Master Lease Agreement. At the onset of the transaction, the Master Lease Agreement will be entered

into between MAF Properties (as Lessee) and MAF Sukuk Ltd. (as Trustee and as Lessor). Subsequently, a

Supplemental Lease Contract between the same parties will be entered into on the issue date of each

Series or whenever a self-use asset forms a part of the Wakalah Portfolio. Self-use assets may include the
following:
a.

real estate related asset which, immediately prior to the Issue Date, is either a plot of land to be developed
in accordance with a development plan or is used by MAF Properties for its own account; and
b. Other Shariah compliant tangible assets which, immediately prior to the Issue Date, are used by MAF

Properties for its own account
4.
Management of Assets: The Management Agreement will be entered into between MAF

Sukuk Ltd. (as Trustee) and MAF Properties (as Managing Agent of each Wakalah Portfolio).

Pursuant to the Management Agreement, the Trustee will appoint the Managing Agent to manage
the Wakalah Portfolio applicable to each series. The Managing Agent will manage the Wakalah Portfolio

in accordance with the Wakalah Investment Plan set out in the Schedule to the Management Agreement.

Amongst the key responsibilities of the Managing Agent will be to ensure that on the issue date of a
series, but not necessarily thereafter, the Wakalah Portfolio entirely comprises tangible assets. It will also
strive to ensure that, at all times following each issue date, at least 70 percent of the Wakalah Portfolio
Value is derived from tangible assets. Furthermore, it will carry out all major maintenance and structural
repair in respect of the tangible assets on behalf of the Trustee.
5.

Periodic Distribution Payments: Prior to each periodic distribution date, the Managing Agent will pay
to the Trustee an amount reflecting returns generated (including all rental payable under a Lease
Agreement) by the relevant Wakalah Portfolio during the relevant distribution period.
In the event that the revenues from the Wakalah Portfolio to be paid by the Managing Agent on any
Wakalah distribution date are greater than the required amount, the excess amount shall be retained
by the Managing Agent as a reserve and credited to a separate book entry ledger account. If in any
distribution period the revenues from Wakalah Portfolio are less than the required amount, the shortfall
will be met through transfer of funds from the reserve account. If the shortfall still remains, the Managing
Agent may either provide Shariah compliant funding to the Trustee itself or procure the same from a
third party.
6.

Dissolution Payments: On each scheduled dissolution date, the Trustee will have the right under the
Purchase Undertaking to require MAF Properties to purchase all of the Trustees rights, title, interests,
benefits and entitlements in, to and under the relevant Wakalah Portfolio. The Purchase Undertaking was
executed as a deed by MAF Properties in favor of MAF Sukuk Ltd (as Trustee).
The Sale Undertaking was executed as a deed by MAF Sukuk Ltd. (as Trustee) in favor of MAF Properties. Pursuant
to the Sale Undertaking, MAF Properties will be able to oblige the Trustee to sell all of its rights, title, interests,
benefits and entitlements in, to and under the relevant Wakalah Portfolio at the exercise price. The exercise prices
shall be an amount equal to the aggregate of:
a)
the aggregate outstanding face amount of the certificates of the relevant series on the relevant dissolution
date;
b)
an amount equal to all accrued and unpaid periodic distribution amounts (if any) relating to the certificates

of the relevant series; and
c)
the sum of any outstanding (i) amounts repayable in respect of any liquidity facility and (ii) any amounts

of management liabilities.
The exercise price payable by MAF Properties, together with any principal revenues in respect of the relevant
Wakalah Assets then held by the Managing Agent and payable to the Trustee under the Management Agreement,
are intended to fund the final dissolution amount payable by the Trustee under the relevant certificates. Wakalah
principal revenue comprises amounts in the nature of sale, capital or principal payments.
40
Guarantor: MAF is the guarantor of certain obligations of MAF Properties, due to the structure of the
Sukuk, including the following:
MAF Properties obligations under the documentation rank pari passu with its other unsecured obligations;
MAF Properties undertaking to purchase the Sukuk assets on the scheduled or any earlier dissolution
dates from MAF Sukuk Ltd.; and
on any periodic distribution date, if the returns generated from the Sukuk assets are insufficient to cover
the periodic distribution payments due, MAF Properties undertaking to pay further amounts to the
SPV to remedy such shortfall. MAFs obligations under the guarantee rank pari passu with all its other
unsecured obligations.
7.

1)
2)

3)


MAF Properties as
seller of Wakala Assets
MAF Properties as
managing agent
MAF Properties as
purchaser
MAF Holding as
Guarantor
Return on
WakalaAssets
Wakala
Assets
Management
Agreement
Master Purchase
Agreement and
Supplemental
Purchase Contracts
Purchase
Undertaking/
Sale Undertaking
Execise
Price/Cancellation
of Certicates
Proceeds
MAF Sukuk Ltd.
as Issuer and Trustee
Rentals
Guarantee to Trustee
of certain of MAF
Properties obligations
(pursuant to Master
Trust Deed)
Proceeds
Master Lease
Agreement and
Supplemental Lease
Contracts
Master Trust
Deed and
Supplemental
Trust Deeds
MAF Properties as
Lessee of
Self-Use Assets
Amounts and
Dissolution Amounts
Certicates
Investors
Source: MAF Sukuk Base Prospectus
Diagram Explanation
(i) MAF Sukuk Ltd. (as the Issuer and the Trustee) will use the proceeds to purchase from MAF Properties (as

the Obligor) a portfolio of Wakalah assets, pursuant to a Purchase Agreement.
(ii)

Under a Management Agreement, MAF Sukuk will appoint MAF Properties (as Managing Agent of each
Wakalah Portfolio) to manage the Wakalah Portfolio.
(iii) The Wakalah Portfolio will include a) income generating real estate related assets or Shariah compliant

tangible assets and b) self-use assets which are non-income generating assets. The latter shall be leased

by the MAF Sukuk Ltd. (the Lessor) to MAF Properties (the Lessee) through a Lease Agreement.
(iv)

41
The Managing Agent will pay to the Trustee an amount reflecting returns generated by the Wakalah
Portfolio during the distribution period. In the event that the revenues from the Wakalah Portfolio are
greater than the required amount, the excess amount shall be retained by the Managing Agent as a
reserve. If the revenues are less than the required amount, the shortfall will be met through transfer
of funds from the reserve account. If the shortfall still remains, the Managing Agent may either provide
Shariah compliant funding to the Trustee itself or procure the same from a third party.
(v)

On each scheduled dissolution date, through a Purchase Undertaking, Trustee will have the right to
require MAF Properties to purchase all of its interests in the Wakalah Portfolio.
Conclusion
It is no surprise the majority of the Sukuk was taken up by Middle East investors as MAF is well recognised corporate
name that people can associate with its quality Mall across the region , City Centre. Furthermore the rate of return
too was very attractive at 5.85% and this lead to good demand from investors from Europe with a respectable
32%. MAF Wakala structure stands well to the asset management role of managing the Real Estate portfolio with
high percentage income is generated from the leased asset to third parties.
References
(1)
(2)
MAF Website: http://www.majidalfuttaim.com/

Zawya: http://www.zawya.com/story/ZAWYA20120201141857/
42
3.4 SAUDI ELECTRICITY COMPANY (SEC) AL IJARAH BASED SUKUK 2012

Abstract
This case study intends to examine and analyse the dual tranche Al Ijarah based structured Sukuk worth US $
1.75 billion issued in April 2012 by Saudi Electricity Company (SEC) the largest utility company in the Middle
East. In order to analyse the data collected through the documentation method for this study, the inductive and
comparative methods are applied. This study confirms that the issuance of this dual tranche Sukuk by the SEC
Company has been positive for the growth and further development of the Sukuk market and the Islamic Capital
Market across the globe.
Sukuk Summary
SPV
Saudi Electricity
Global
SPV
Saudi Electricity
Global
Structure type
Ijara
Issue Size
USD 1,250,000,000
Issue Date
3-Apr-12
Maturity date
3-Apr-22
Return
4.211
Structure type
Issue Size
Issue Date
Maturity date
Return
Ijara
USD 500,000,000
3-Apr-12
3-Apr-17
2.665
Fix or Variable
Return
frequency
Fixed
Semi Annual
Fixed
Semi Annual
Pricing
=Spread over
mid-swaps,
Book Runners
200.8 bp
Fix or Variable
Return
frequency
Pricing
=Spread over
mid-swaps,
Listing
ISIN RegS
Deutsche Bank ,
HSBC
London stock
Exchange
Book Runners
XS00767862914
ISIN RegS
Listing
163.bp
Deutsche Bank .
HSBC
London Stock
Exchange
XS0764883806
Background
Saudi Electricity Company (SEC) is the largest utility company in the Middle East and a dominant vertically
integrated utility in the Kingdom of Saudi Arabia, where it served more than 6.3 million customers as of
December 2011. The company owns 46 major plants with a total capacity of 42,012 megawatts (MWs),
which represents the vast majority of Saudi Arabias total generation capacity.
Sukuk Al Ijarah
These are Certificates of equal value that are issued either by the owner of an existing asset or a financial intermediary acting on the owners behalf, with the purpose of leasing or subleasing this asset and receiving the rental
from the revenue of subscription. Thus, the holders of the certificates become owners of the usufruct of the asset 15.
SEC Dual Tranche Sukuk Al Ijarah

SEC company has successfully issued dual tranche Sukuk Al Ijarah in April 2012 with a total amount of US $ 1.75billion. The Sukuk comprised a US $500 million tranche with a five year maturity and a US $ 1.25 billion one with a 10
year maturity at profit rates of 2.665 per cent and 4.211 per cent respectively.
15 AAOIFI Shariah standard no. 17, 2010, Investment Sukuk, page 312.
43
It is the first international Sukuk issuance by the SEC Company and the largest issuance from Saudi Arabia in the
global debt capital markets. The objective of the Sukuk issuance is to secure long term financing from a diversified
investor base and use its proceeds to fund the aggressive capital expenditure program as the company plans to
boost its capacity to at least 80,000 MW by 2020.
The Sukuk was extremely well received globally by inventors after a widespread road show covering major markets
in Asia, Middle East and Europe. The Sukuk has generated a large order book with over 440 investors placing orders
in excess of US $17.5 billion.
Moodys assigned an A1 rating to the Sukuk which is in line with the long-term issuer rating of SEC. The rating is
mainly supported by the low business risk profile of SEC. The company enjoys a dominant position in Saudi Arabia
as the integrated and exclusive electricity provider, either directly or through independent power purchasers in
which it owns a stake. Furthermore, the regulatory environment in the country remains highly supportive.
Deutsche Bank and HSBC are the Joint Lead Managers while the Co-Manager is Mitsubishi UFJ Securities. The
principal transaction documents consist of Purchase Agreement, Ijarah Agreement, Servicing Agency Agreement,
Substitution Undertaking, Purchase Undertaking and Sale Undertaking.

1. SPV: The Sukuk was issued through a Special Purpose Vehicle (SPV) under the name of Saudi Electricity
Global Sukuk Company (SEGSC) incorporated in the Cayman Islands.
2. Trustee: The Company (SEGSC) will act as the trustee for and on behalf of the certificate holders.
3.

Use of Sukuk Proceeds: Pursuant to the relevant Purchase Agreement, the Trustee (in its capacity as the
Purchaser) will use the issue price to purchase from SEC (in its capacity as the Seller) the relevant
power generation assets (the Ijarah Assets) with an economic life substantially beyond the relevant
scheduled dissolution date. The Ijarah Assets may be substituted in accordance with the relevant
Substitution Undertaking for any assets, the identity of which shall be determined by SEC under the
condition that the value of the substitute assets is equal to or greater than the value of the assets being
substituted. The Trustee (in its capacity as the Lessor) will lease the relevant Ijarah Assets to SEC (in its
capacity as the Lessee) pursuant to the relevant Ijarah Agreement.
4.

Periodic Distribution Payments: The Lessee will pay rental payments in respect of the relevant Ijarah
Assets which are intended to be sufficient to fund the periodic distribution amounts due under the
relevant series of certificates on each periodic distribution date. Payment obligations under the various
documents -- especially under the Ijarah Agreement and the Purchase Undertaking -- will be direct,
unconditional, unsecured and general obligations of SEC and rank at least pari passu with all other
unsecured, unsubordinated and general obligations of the company.
5.
Dissolution Payments:
5.1

Pursuant to the Purchase Undertaking in respect of each Series, the Trustee may, on the relevant scheduled
dissolution date, or prior thereto following the occurrence of a dissolution event or a change of control,
exercise its rights under the relevant Purchase Undertaking and require SEC to purchase the relevant
Ijarah Assets as well as repay any unpaid and accrued periodic distribution amount.
5.2
Pursuant to the Sale Undertaking in respect of each Series, SEC may, following the occurrence of a Tax

Event, exercise its rights under the relevant Sale Undertaking to require the Trustee to sell to SEC the
relevant Ijarah Assets. Tax Event is referred to as the event when Trustee will become obliged to pay

additional amounts as provided due to any change in, or amendment to, the laws or regulations of a

relevant jurisdiction.
5.3

Pursuant to the Sale Undertaking in respect of each Series, SEC may also, in the event that SEC wishes
to cancel any certificate of the relevant series purchased in accordance with the stipulated conditions,
44
exercise its rights to require the Trustee to transfer the relevant Ijarah Assets to SEC as identified by it.
In each case, the consideration payable by SEC upon such exercise of a Purchase Undertaking or a Sale Undertaking,
as appropriate, shall be the relevant Exercise Price.
Soucrce: SEC Sukik Base Prospectus
Diagram Explanation
(i)
SEGSC (as the Issuer/Trustee/Purchaser) will purchase power generation assets (Ijarah Assets) from SEC

(as Seller/Lessee/Servicing Agent) pursuant to a Purchase Agreement.
(ii)
SEGSC (as the Lessor) will lease the relevant Ijarah Assets to SEC (as the Lessee) pursuant through an Ijarah
Agreement.
(iii)
SEC will pay rental payments which are intended to be sufficient to fund the periodic distribution amounts

to SEGSC.
(iv)
The Trustee may, on the dissolution date, or prior thereto following the occurrence of a dissolution event,

exercise its rights under the relevant Purchase Undertaking and require SEC to purchase the relevant

Ijarah Assets as well as repay any unpaid and accrued periodic distribution amount.
(v)
SEC may also, in the event that it wishes to cancel any certificate, exercise its rights under the Sale

Undertaking, to require the Trustee to transfer the relevant Ijarah Assets to it.
(vi)
The consideration payable by SEC upon, exercise of a Purchase Undertaking or a Sale Undertaking, shall

be the relevant Exercise Price.
Conclusion
Rarity of Quality Saudi issuer like, Saudi Electric Company ensured a good as investors piled on with an oversubscription of 10 Times. Another rarity being the long dated Sukuk which took the limelight and raised $ 1.25 Billion
with such ease, considering the sweet spot for GCC investors histmrically has been less than 10 years.
Extension of the Maturities past 5 year is a healty development for both , the investors community and for the
corporates.
References
(1) SEC Sukuk Base Prospectus
45
3.5 PROJEK LEBUHRAYA USAHASAMA BERHAD (PLUS BERHAD) MUSHARAKAH

BASED SUKUK 2012
Abstract
Projek Lebuhraya Usahasama Berhad (PLUS Berhad) a company that provides expressway operation services in
Malaysia issued Sukuk Al Musharakah structure based Sukuk worth Malaysian Ringgit (MYR) 30.6 billion (US $ 9.7
billion) in January 2012. It is the largest global Sukuk and Malaysias single largest bond issuance to-date, following
the privatization exercise. This Sukuk provides an excellent case study for long term Shariah compliant fund raising
exercise using readily available infrastructure assets which generate stable returns. It is a case of matching longterm and stable revenue streams against long-term financing obligations.
Background
Projek Lebuhraya Usahasama Bhd is a wholly owned subsidiary of Plus Malaysia Sdn. Bhd. (Plus Malaysia), which
is a jointly-owned special purpose company of UEM Group Berhad and the Employees Provident Fund (EPF). Plus
Malaysia was set up to acquire the Malaysian business and undertakings including the assets and liabilities of
PLUS Expressways Berhad, the largest provider of expressway operation services in Malaysia, under a privatization
exercise. UEM Group is a wholly-owned subsidiary of Khazanah Nasional Berhad, an investment arm of the
Government of Malaysia.
PLUS Expressways Berhad is the largest toll road company in South East Asia and one of the largest in the world
by market capitalization. It operates and maintains 973 kilometers of inter-urban toll expressways in Peninsular
Malaysia, stretching from the border of Thailand in the north to the border of Singapore in the south, linking all
major cities on the west coast of Peninsular Malaysia.
Sukuk Al Musharakah
Are certificates of equal value issued with the aim of using the mobilized funds for establishing a new project,
financing a business activity etc on the basis of any of partnership contract so that the certificate holders become
the owners of the project. (Musharakah Sukuk is an investment partnership between two or more entities which
together provide the capital of the Musharakah and share in its profits and losses in pre-agreed ratios).
Plus Berhad Musharakah Based Sukuk

PLUS Berhad issued MYR 30.6 billion (US $9.7 billion) Musharakah based structured Sukuk on 12 January 2012.
The Sukuk proceeds were utilized to part finance the purchase of assets, liabilities, businesses, undertakings and
rights of five toll concessions Projek Lebuhraya Utara-Selatan Berhad, Expressway Lingkaran Tengah Sdn Bhd,
Konsortium Lebuhraya Butterworth-Kulim Sdn Bhd, Linkedua (Malaysia) Berhad and Penang Bridge Sdn Bhd. The
proceeds were also used for capital expenditure, working capital and other general funding requirement.
PLUS Berhad acquired all the assets and liabilities of the respective concession companies, through MYR 11
billion of government guaranteed (GG) and MYR 19.6 billion of non-government guaranteed AAA-rated (AAA)
Sukuk issuances of varying tenors, sizes and expected returns and yields to maturity (YTMs). The issuances were
distributed on a direct placement basis. The Sukuk repayment period ranges from 5 to 27 years.
CIMB Investment Bank was the financial adviser, sole principal adviser, sole lead arranger and joint lead manager
for the deal. AmInvestment Bank, Maybank and RHB Investment Bank were the other joint lead managers. The
principal transaction documents consist of Musharakah Agreement(s), Management Agreement, Purchase
Undertaking and Sale Agreement.

1. SPV: The Sukuk was issued by PLUS Berhad which is a wholly owned subsidiary of Plus Malaysia, a special

purpose company set up to acquire business interests of PLUS Expressways Berhad,
46
2. Trustee: Mayban Trustees Berhad was the Trustee for the certificates.
3.

Use of Sukuk Proceeds: In respect of each issue of Sukuk Al Musharakah under the Sukuk Program, PLUS
Berhad will identify its business comprising of rights under the respective toll-road concessions granted
by the Government of Malaysia or part thereof which will be used as the underlying asset for that
particular Musharakah transaction.
Sukuk holders shall via the Trustee, from time to time, form a Musharakah amongst themselves, which
is a partnership amongst the Sukuk holders, to invest in the underlying asset (Musharakah Venture)
via the subscription of the Sukuk. There will be at least two Sukuk holders forming the Musharakah
through a Musharakah Agreement at each issuance. The Sukuk Al Musharakah shall represent
amongst others, undivided proportionate interest of the Sukuk holders in the Musharakah Venture. A
declaration shall be made by Plus Berhad that it holds on trust, the underlying asset for the benefit of the
Sukuk holders. PLUS Berhad shall receive Musharakah Capital arising from the subscription of the Sukuk.
4.

Management of Musharakah Venture: Pursuant to the Management Agreement to be entered into

between PLUS Berhad and the Trustee (acting on behalf of the Sukuk holders), the Trustee shall appoint
PLUS Berhad as the manager of the Musharakah Venture.
5.

Periodic Distribution Payments: The expected return of the Sukuk holders from the Musharakah
Venture shall be the yield for the Sukuk Al Musharakah up to the maturity date of the Sukuk Al Musharakah
or the date of declaration of an event of default/dissolution event, whichever is the earlier.
In respect of Sukuk Al Musharakah with periodic distribution, income from the Musharakah Venture of up
to an amount equal to a certain percentage of the face value of the Sukuk Al Musharakah per annum,
(Expected Periodic Distribution) shall be distributed periodically in the form of periodic distribution
to the Sukuk holders. The periodic distribution shall be made semi-annually or on such period to be
determined prior to each issuance. In the event of any shortfall between the periodic distribution and the
Expected Periodic Distribution for such relevant period, PLUS Berhad shall make top-up payments
to compensate for the shortfall. The top-up payments will be set-off against the Exercise Price defined
under dissolution payments. Any income in excess of the Expected Periodic Distribution shall be retained
by PLUS Berhad as an incentive fee.
In respect of Sukuk Al Musharakah without periodic distribution, income from the Musharakah Venture
of up to the Expected Return shall be distributed on a one-off basis upon the maturity date of the Sukuk
Al Musharakah or the Dissolution Date, whichever is the earlier. In the event of any shortfall between the
One-off Distribution and the Expected Return for such relevant period, PLUS Berhad shall make top-up
payment to make good the difference. The top-up payment will be set-off against the Exercise Price. Any
income in excess of the Expected Return shall be retained by PLUS Berhad as an incentive fee.
6.
Dissolution Payments: Pursuant to a Purchase Undertaking granted by PLUS Berhad (as Obligor)

in favor of the Trustee (acting on behalf of the Sukuk holders), PLUS Berhad shall undertake to purchase
the Sukukholders interest in the Musharakah Venture by entering into a Sale Agreement and pay the

Exercise Price on either the maturity date of the Sukuk Al Musharakah or on the Dissolution Date,

whichever is the earlier.

PLUS Berhad shall be entitled to set-off the Exercise Price with any top-up payment(s) made. In the case
of Sukuk Al Musharakah with periodic distribution, the Exercise Price for the Sukuk Al Musharakah shall

be equivalent to the Musharakah Capital plus the Expected Return less total Periodic Distributions. In the

case of Sukuk Al Musharakah without periodic distribution, the Exercise Price for the Sukuk Al Musharakah

shall be equivalent to the Musharakah Capital plus the Expected Return less any One-off Distribution.
47

2 Issues Sukuk
4. Purchase Undertaking
PLUS Berhad
(Issuer/Manager)
3. Appoints asManager
1 Identies Business
2. Proceeds
Musharakah
Venture
(Trucst Asset)
Trustee
(Acting on behalf of
the investors)
2. Musharakah
Captial
/Proceeds
Sukukholders
2. Incests in venture
3 One-of Distribution/ Periodic Distributions
Source: Plus Berhad Sukuk Information Memorandum
Diagram Explanation
(1)

(2)

(3)

(4)

(5)

(6)

Sukuk holders through Mayban Trustees Berhad (as the Trustee) will form a Musharakah amongst
themselves under a Musharakah Agreement, to invest in the underlying asset (Musharakah
Venture) via the subscription of the Sukuk.
PLUS Berhad (as Issuer/Obligor) shall receive Musharakah Capital arising from the subscription
of the Sukuk.
Trustee shall appoint PLUS Berhad as the Manager of the Musharakah Venture through a
Management Agreement.
Income from Musharakah Venture shall be distributed as periodic distributions or one-off
distribution to Sukuk holders as the case may be. In the event of any shortfall between the
periodic/one-off distribution and the Expected Distribution, PLUS Berhad shall make top-up
payments to compensate for the shortfall. The top-up payments will be set-off against the
Exercise Price. Any income in excess of the Expected Return shall be retained by PLUS Berhad as
an incentive fee.
PLUS Berhad (as Obligor) shall undertake to purchase the Sukuk holders interest in the
Musharakah Venture pursuant to a Purchase Undertaking granted by it in favor of the Trustee
(acting on behalf of the Sukuk holders).
The Exercise Price will be paid on either the maturity date of the Sukuk Al Musharakah or on the
Dissolution Date, whichever is earlier.
Conclusion
The success of this sizeable PLUS issuance further reinforces the depth of the Malaysian Ringgit market and its
ability to absorb and place such a large Sukuk with the investors. With number of Infrastructure developments
taking place around the globe, potential issuers can take comfort based on the market acceptability with this type
of Sukuk that allowed multi tranching, having maturities ranging from 5 years to 27 years.
References
Plus Berhad Sukuk Information Memorandum
48
Chapter Four
CASE STUDIES & ARTICLES ON SUKUK
ISSUANCES - INSTITUTIONS CONTRIBUTION
4.1 Government of Indonesia Sukuk Issuances

(Sukuk Negara 16)
INTRODUCTION
In 2008, the House of Representatives (DPR) passed the law No. 19/2008 on StateShari ah Securities (SBSN) which
paved the way for the government to rise funding using aShari ah compliant Sukuk Al-Ijarah for the first time.
The law 19/2008 on SovereignShari ah Securities( Sukuk)

Regulate the governance of Sukuk Negara issuance by the Central Government

Legal basis of Sukuk Negara issuance:

__
Provide mandate to the government for issuing Sukuk Negara

__
Establishment of the Special Purpose Vehicle

__
Utilize state-owned assets and government projects as underlying
The Sukuk law opened up another alternative source of financing for the government and for local corporations
to tap this new source of funding.
However, Islamic financing is not alien to Indonesia, history of Islamic Capital Market in Indonesia is not new, as
PT Indosat issued a Sukuk back in 2002 using a Mudarabah structure. Moverever, due to Legal ,Tax ,Shari ah and
infrastructure issues, active development for Sukuk market did not take off until 2009 when the Government of
Indonesia issued its First Cross Border Global Sukuk, raising US $ 650myn. The issue was a success with demand
exceeding 7 times the amount offered. Local currency with the demand from local population forShari ah Compliant
products and the opening of Islamic windows to complement full fledge Islamic Bank,Shari ah compliant T-Bill
was introduced in 2011 which added avenue of fund raising to help the government budgetary requirements.
Objectives OfShari ah Compliant Financing
OfferingShari ah compliant product to both the International market and to its population ( Most populace
Muslim Nation) fits in well, since the Sukuk market is going from strength to strength with the demand outstripping
supply, even with record global issuance.
Enhancing the Islamic Finance Market with Government Sukuk and T Bills is helping develop the localShari ah
based investments and financing. While creating the Yield curves could lead to corporate Sukuk issuance using the
government as a benchmark for pricing.
Overall, the objectives allow the government to have more tools in helping finance the government budget
deficit:-

Diversifying State Budget Financing Source

Developing Alternative Investment Instruments
16 Debt Management Office, Ministry of Finance, Republic of Indonesia. Information extracted from a presentation provided
by Dahlan Siamat
Directorate of Islamic Financing.
49
Financing Government Infrastructure Projects through Sukuk

Broadening Investor Base
Maximizing Utilization of State Owned Assets
Enhancing Islamic Financial Market
Legal certainty for investor:

Ijarah Cash flows
Based on the Sukuk Al Ijarah and the relevant purchase undertaking (Wa ad ) to purchase the asset by the
Government of Indonesia at maturity or upon an event of default , provides investors a Sovereign risk of the
Government of Indonesia . As the lease rental payments and exercise of the purchase undertaking is being
provided by the Government
Fatwa and Shari ah Endorsement
To ensure its compliance with Islamic principles, Sukuk Negara issuance requires Fatwa andShari ah Endorsement
(Shari ah Opinion) from NationalShari ah Board Indonesian Council of Ulama:
Fatwa No. 69/DSN-MUI/VI/2008 onShari ah Sovereign Securities
Fatwa No. 70/DSN-MUI/VI/2008 onShari ah Sovereign Securities Issuance Methods
Fatwa No. 71/DSN-MUI/VI/2008 on Sale and Lease Back
Fatwa No. 72/DSN-MUI/VI/2008 onShari ah Sovereign Securities Ijarah Sale and Lease Back
Fatwa No. 76/DSN-MUI/VI/2008 onShari ah Sovereign Securities Ijarah Asset to be Leased
Sukuk being the latest product that is providing momentum in the IndonesianShari ah compliant
Capital Market, is currently driven by the government initiatives. However, it has the potential to be
developed both, in the government as well as the corporate sector. As these development takes place ,
the market will need to explore other form of structures to cater for the likely demands generated by
various institutional needs, ( eg Istisna, Mudarabah, Wakala etc) and developing Equity linked Sukuk (
Convertible, Exchangeable)
Opportunities for Sukuk Negara Issuance

Sukuk issuance by Indonesia has allowed the government to source alternative financing in balancing its budget
deficit while diversifying its investor base. TheShari ah compliant market is fast growing with demand outstripping
supplies, this creates pricing tension, specially for Sovereign and quality issuers.
Indonesia Sukuk has been one of the benefactors of the demand side which in
turn provided fine pricing to GOI.
Indonesian government has successfully tapped the international market since 2009, It has become a regular
issuer in the domestic market from its first launch in 2008 and then followed by the T-bills debut in 2011.
This positive development is putting the foundation of a pricing curve that will allow its corporates to tap the
international market using the government Global Sukuk as the benchmark. While the domestic curve will lead to
developing the local fixed income market.
50
Milestone of Sukuk Negara
Milestone of Sukuk Negara
Indonesia continues its eort in laying the foundation for developing Sharia Compliant
Market
Source: bapepam.go.id
51
Sukuk Structure format reflecting on tradability and issuance method by GOI

Ijarah Sale & Lease
Back
Ijarah Al-Khadamat
Ijarah Asset to be
Leased
Based on AAOIFI
Shariah Standards
No.17
Certicates of
ownership in leased
assets (3/1)
Certicates of
ownership of described
future services (3/2/4)
Certicates of
ownership of assets to
be leased (3/1)
Underlying asset
State-Owmed Assets
Hajj Services
Infrastructure Project
Coupon
Fixed rate
Fixed rate
Fixed rate
Tradability
Tradable
Non-tradable
Tradable
Bookbuilding, Auction
Private placement
Auction
IFR, SNI, SR, SPN-S
SDHI
PBS, SR
Issuance method
Series of Sukuk Negara
Sukuk Negara - Issuance Program

Domestic Market
Auction
Bookbuilding
IFR, Islamic T-Bills, PBS.

Conducted regularly 1-2
times a month based on
annual calendar of issuance
Auction Participants
Conducted regularly once a

year (SR series) issuance
Selling agents
Private Placement
SDHI series (Hajj Fund
Sukuk)
Billateral agreement
Green Shoe Option (GSO)
International Market
Bookbuilding
Issued annually (semester 2)
USD denoninated (SNI series)
144A/Reg-S issue format
Joint lead managers
The strategy followed by the government of Indonesia tackles plugging the budget deficit through
regular issuance of Sukuk in the International market, and developing domestic fixed income market
through much more regular issuance program. Another initiative the GOI looks to implement is the
Primary dealership for Sukuk which in turn would offer secondary market liquidity, greater price
transparency and widening investors base.
52
Market Development Policy And Strategy

Product Development
Recent Product Development: Project Financing Sukuk

Debuted: Since 16th February 2012, GoI has frequently issued Project Based Sukuk (PBS Series)
Structure: Ijarah Asset to be Leased, has been approved by NationalShari ah Board (Fatwa No. 76/2010)
Project finance Sukuk policy is regarded as a positive move which serves in developing countrys infrastructure
while providing additionalShari ah compliant product to the market that offers longer maturity.
Benefits of Project Financing Sukuk

Diversifying State Budget Financing

Accelerating Infrastructure Development

Enhancing Islamic Financial Market

Enhancing Public Services, Empowerment of Local Industries and Government Investment

Improving transparency of Government activities
Domestic Sukuk Issuance

Domestic Sukuk Issuance (2002 - 2012 ytd)
Sukuk Negara vs. Corporate Sukuk Issuance
45.000
billion IDR
40.000
35.000
30.000
25.000
20.000
15.000
10.000
5.000
0
Domestic Corporate Sukuk

Domestic Sukuk Negara
2002
175
2003
565
2004
654
2005
585
2006
200
2007
1.025
2008
1.534
2009
1.980
2010
997
2011
200
June 18,2012
250
4.700
9.519
26.967
24.271
40.783
Corporate were the initial pioneers of Sukuk in the early 2000s . However, by 2008 GOI had taken the initiative to
enact some laws to facilitate Sharia financing. This has resulted in GOI taking the lead in issuing Sukuk on a regular
basis, laying the frame work for issuance by corporates.
53
Domestic Sukuk are an important tool for the Central Bank (BOI) policy in having Sukuk Negara as part of its
monetary operation.
IDR Retail Sukuk Series SR004

MAJOR REASONS FOR THE
ISSUANCE:
Diversifying Sukuk Negara
Instrument
Developing an alternative sharia
compliant investment
instrument
Enhancing the development of
Islamic nancial market
Providign attractive and safe
investment alternatives to
individual investors
Strengthening Indonesian capital
market by encouraging the
transformation from savingsoriented society.
Broadengng the investor base of
Islamic Government Securities in
the domestic market.
Summary of Terms and Conditions

Types of
Structure
Ijara Asset to be Leased
Periodic
Distribution
Fixed coupon 6.25% per annum,

payable monthly
Price
100% (At Par)

IDR 1.000.000,00
Unit Price
Minimum Order
Min IDR 5 mio, Max IDR 5 Bio.
Settlement Date
March 21, 2012
Maturity Date
Tradability
September 21, 2015
Underlying
Government Projects
Targeted
Investor
Listing
Indonesian citizen investor
Tradable
Indonesia Stock Exchange (IDX)
Retail Sukuk provides for wider understanding and acceptability of Sharia compliant investments aswell as
encouraging savings
Sukuk Negara in Secondary Market
Sukuk Negara in Secondary Market

Others
5%
Non Resident
9%
Mutual Founds
5%
Sukuk Negara
Ownerships
Notes:
conventional
29%
Onlycounted for IDR

tradable Sukuk Negara.
Individual
18%
All gures are as of

th
june 14 , 2012.
Insurance
Company
24%
Islamic
Banks
6%
Pension Founds
1%
1,600
Central Bank
1%
Avarage Daily Trading-Goverment Islamic Securities

1431.77
250
1,400
Secondary
Market
Trading
200
1,200
1,000
150
800
600
388.79
370.95
400
200
100
512.64
173.64
14.51
48.37
116.86
216.17
193.80
0
Volume(LHS)
50
Frequency (RHS)
It is no surprise that the Banks and Insurance companies taking up majority of the Sukuk ,as GOI offers risk free
return as well as duration investment to match their Asset and Liability . Also, encouraging to note that 18% of the
market share of tradeable Sukuk are from individuals Retail investors.
54
Summary of International Global Sukuk

RoI Global Sukuk SNI18
Republic of Indonesia
Global Sukuk SNI18
Execution Highlights
Lowest coupon ever achieced by the Republic of

Indonesia in the international capital markets.
Lowest coupon ecer achieced in a 7-year US$
Sukuk and conventional transaction for an Asian
issuer.
First ever 7-year US$ Sukuk by a non-GCC
sovereing issuer.
Impressive prderbook consisting of US$6.5
billion orders from over 250 high quality
institutional accounts from Asia, East and Islamic
investors.
Summary of Terms & Conditions

Issuer
Obligor
Currency/Format
Sturcture
Sukuk Asset
Size
Pricing/Settl.Date
Maturity Date
Tenor
Periodic
Distributions
Price/Re-offer
Spread
Listing
Govenning Law
:
:
:
:
:
:
:
:
:
:
:
:
:
Perusahaan Penerbit SBSN

Indonesia 2 (PPSI-2)
ROI
USD / 144A. Reg.s
Ijarah Sale and Lease Back
Land & Building
USD 1,000 million
14 Nov 2011/21 Nov 20111
21 Nov 2018
7 Years
4.00% p/a., semi annually
100% / UST7 + 250 bps
Singapore Stock Exchange
English Law
(Asset-related documents
Under Indonesian Law)
The issue was well placed globally with Asian and Middle Eastern investors who took up 60% of the issue while
another another 30% was shared by Europe 18% and Indonesia 12%. Further encouraging point is that 59% take
up was by Funds , these type of investors are like to provide secondary market liquidity as they trade in and out
on based on value .
Project-Based Sukuk (PBS004)

Transaction Highlights
-
Summary of terms & conditions

Perusahaan Penerbit SBSN
Indonesia 2 (PPSI-2)
PBS004 is initially issued at Feb 16th

2012 through auction Reopened
regularly on each Sukuk Negara auction
(Scheduled twice amonth)
Issuer (SPV)
Obligor
Structure
Galned enormous demand on each

auction, with average IDR1. 3trillion.
Current outstanding is IDR4.58traillion.
Underlying
Projects
Normal per Unit
IDR 1 million
Coupon
Payment
First Issue Date

Maturity Date
:
:
Average bid to cover ratio is about 1.81,

reects fair yield orrered by investores.
Attracted Islamic investores most,

compared to other series, with average
is 8.3% from total incoming bid.
Underlying asset is pool of projects such

rehabilitation and construction of
road, irrigation, drainage, and residential.
Issuance
Methood
Listing
Tradability
Republic of Indonesia
Ijarah Asset to be Leased
6.10% p.a.
Paid semi-annually
At Par (100%)
Bullet payment at
maturity
16 February 2012
15 February 2037
Auction
Indonesia Stock
Exchange
Tradable
Conclusion
The initiative and commitment by Indonesian goverment in promoting and developing Islamic Finance is quite
evident with the foundation set for Sukuk and its issuance program.
Expanding and creating Sukuk for retail investor is very encouraging , while the project based Sukuk is healthy in
developing and upgrading the infrastructure that will benefit the country and its citizens.
55
4.2 Republic of Turkey

By Mr. Qudeer Latif, Robin Balmer and Lauren Djedid (Clifford Chance, Dubai)
The debut international issuance of U.S.$1,500,000,000 lease certificates by Hazine Mstearlii Varlik Kiralama
anonim irketi (the Issuer) on 26 September 2012 was a landmark issuance which has had a lasting impact on
the European and Middle Eastern Islamic finance market. The issuance was upsized from the originally intended
U.S.$1 billion to U.S.$1.5 billion due to the significant demand received from the investor base and was ultimately
five times over-subscribed with the order book reaching a total value of U.S.$8 billion. This case study will investigate the structure, the particular features of the transaction and the wide effect it has had in the European and
International Sukuk market.
The lease certificates are listed on the Irish Stock Exchange U.S.$1,500,000,000 with a profit rate of 2.803 per cent.
and are due to be redeemed on 26 March 2018. The offering was made to investors outside of the U.S. pursuant to
Regulation S and to certain sophisticated categories of investor (namely Qualified Institutional Buyers and Qualified Purchasers) within the U.S. pursuant to Rule 144 A of the United States Securities Act of 1933. Investors in the
United Arab Emirates, the Dubai International Financial Center, the United Kingdom, Malaysia, Saudi Arabia, Qatar
and Singapore were also invited to participate in the offering.
Clifford Chance advised the joint lead managers, Citigroup Global Markets Limited, HSBC Bank plc and Liquidity
Management House for Investment Company K.S.C.C. (the Joint Lead Managers) in relation to the lease certificate issuance. A further six Asian, Middle Eastern and European banks subscribed for the issuance and were
named co-lead managers. The co-lead managers were Bank Islam Brunei DarusSalam, Barwa Bank, IS Investment,
Islamic Development Bank, Kuveyt Turk and Sharjah Islamic Bank. The issuance was assigned a rating of BB by
Standard & Poors and Ba1 by Moodys Investors Service, consistent with the Republic of Turkeys (the Republic)
sovereign ratings.
Structure and Cash Flows

The lease certificates were issued by way of a Sukuk al ijara structure.
The Issuer is an asset leasing company wholly owned by the Republic and incorporated in accordance with the
laws of the Republic solely for the purpose of issuing lease certificates under Article 7/A of law number 4749. The
objects of the Issuer are primarily to enter into the transactions contemplated by the transaction documents as
well as future issuances of lease certificates to the extent authorised by the Ministerial Decisions (defined below).
Set out below is a simplified structure diagram and description of the principal cash flows underlying the transaction.
Structure Diagram
The Republic
(acting through
the Treasury)
as Seller
The Republic
as Servicing
Agent
The Republic
as Leasee
Lease
Agreement
Sale Agreement
Substituted Lease
Certicate Assets
Rental
Payments
Redemption
Assets
Substitution
Undertaking
Lease
Certicate
Assets
Redemption
Undertaking
Appointment as
Servicing Agent
The Republic
as Obligor
Reimbursement of
Servicing Costs (setoff against
Supplemental Rental)
Exercise
Price
Purchase Undertaking
Sale Price
Hazine Mstesarligi Varlik Kiralama Anonim Sirketi

Sale of Lease Certicate Assets
Lease Certicate Assets
A
Certicates
Cash
Periodic
Distribution
Amounts
Dissolution
Amount
Assets
Certicate holders
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A.
On the closing date of the Sukuk issuance, the Issuer issued the lease certificates to the Certificateholders.
B.

Pursuant to the terms of the Sale Agreement, the Republic (acting through the Treasury) sold all of its
rights, titles, interests and benefits in and to the Lease Certificate Assets to the Issuer in consideration for
a sale price equal to the net Sukuk issuance proceeds.
C.

Pursuant to the terms of the Lease Agreement, the Issuer leased the Lease Certificate Assets to the Re
public for a term commencing on the closing date of the Sukuk issuance and ending on the scheduled
dissolution date of the Sukuk issuance.
D.

Pursuant to the Lease Agreement, periodic rental payments are received by the Issuer from the Republic
at regular intervals in respect of the Lease Certificate Assets and used by the Issuer to pay the Periodic
Distribution Amounts to Certificateholders. Periodic Distribution Amounts will be paid to Certificateholders
pursuant to this transaction on 26 March and 26 September each year (or if such date is not a business
day, the following business day) from 2013 until the scheduled dissolution date of the Sukuk issuance.
E.

The Certificates may, in accordance with the Terms and Conditions of the Lease Certificates, be re deemed
prior to scheduled dissolution date of the Sukuk issuance upon the occurrence and continuation of certain
dissolution events. In such case, the Republic will be required to purchase the Issuers interest, rights,
benefits and entitlements in and to the Lease Certificate Assets and pay the Exercise Price to the Issuer
pursuant to the terms of the Purchase Undertaking. The Exercise Price payable by the Republic to the
Issuer for such purpose is intended to fund the Dissolution Amount to Certificateholders, payable by the
Issuer under the Certificates.
F.

The Republic will be entitled to purchase leasing certificates throughout the term of the Sukuk in the
open market or otherwise. The Issuer will grant a Redemption Undertaking in favour of the Republic
ursuant to which the Republic will be able to require the Issuer to purchase and cancel the leasing certificates
in return for certain Lease Certificate Assets equal in value to the leasing certificates being redeemed.
G.

The Republic will be entitled to substitute the Lease Certificate Assets, from time to time, pursuant to a
Substitution Undertaking. The Republic may request the Issuer to transfer back a Lease Certificate Asset
for the consideration-in-kind transfer from the Republic to the Issuer of another real estate asset of com
parable value.
The structure was approved by the Islamic Finance Advisory Boards of each of the Joint Lead Managers, as well as
Dar Al Sharia Legal and Financial Consultancy LLC.
Underlying Assets
The assets used as part of the structure were comprised of certain real estate assets owned by the Republic.
Upon issuance, each lease certificate evidences the entitlement of each Certificateholder to a right to receive the
economic benefit derived from the use of the underlying assets (the Lease Certificate Assets). This is allocated
on a pro rata basis in keeping with the proportion which the face value of such certificate bears to the aggregate
value of the outstanding lease certificates. Each lease certificate ranks pari passu, or equally without any preference, with the other lease certificates.
The Lease Certificate Assets are, insured to the extent reasonable and commercially practicable by the Servicing Agent so long as the Certificates are outstanding. The insurances are procured in a manner compliant with
the principles of Islamic finance to cover against a total loss of the assets, at their full reinstatement value. The
obligation to insure may be delegated to the relevant government ministry which has been allocated the use of
a specific asset from the Lease Certificate Assets, detailed below. It was not a requirement that the insurances for
the Lease Certificate Assets be entered into with third parties and the Republic was permitted to self-insure the
Lease Certificate Assets.
The composition of the Lease Certificate Assets may change over the life of the Certificates and they may be substituted by other assets pursuant to the terms of the Substitution Undertaking. Upon substitution, the Republic is
required to certify that the value of the new lease assets being substituted into the pool are of a greater or equal
value to the assets being substituted. In addition, certain Turkish ministries and governmental departments have
existing allocation rights over the Lease Certificate Assets which remain unaffected by the transactions entered
into as part of the financing.
57
The sale of the Lease Certificate Assets pursuant to the Sale Agreement and the resale of the Lease Certificate Assets pursuant to the Purchase Undertaking have been registered with the Title Deeds Office in the Republic.
Limited Recourse
The Certificates are not secured and the Certificateholders will have no direct recourse to the Lease Certificate
Assets under either Turkish Law or English Law. No payment of any amount whatsoever will be made under the
Certificates except to the extent that funds for that purpose are available from the Lease Certificate Assets. Certificateholders, by subscribing for or acquiring certificates, acknowledge that no recourse may be taken against
the Issuer or the Representative (to the extent each of them fulfils all of its obligations under the transaction documents to which it is a party) in respect of any shortfall in the expected amounts from the Lease Certificate Assets
to the extent that the Lease Certificate Assets have been extinguished.
Particular Issues
As Turkish law does not recognise the concept of a trust, the Issuer does not act as trustee for the Certificateholders in relation to the Lease Certificate Assets. Pursuant to the transaction documents, the Issuer confirms that it
will hold the Lease Certificate Assets in its own name and on its own behalf and for the account and benefit of the
Certificateholders. The income accruing to the Issuer from the Lease Certificate Assets, together with any capital
arising from disposal of such Lease Certificate Assets, shall be for the benefit of, and shall be accounted by the Issuer to, the Certificateholders.
The implication of Article 7/A of Law Number 4749 (as amended by Law No. 6327 of 13 June 2012, the New Law)
on the transaction required consideration. The New Law was recently passed by the Republic of Turkey, and it was
considered by the Clifford Chance Istanbul office in conjunction with Somay Hukuk Burosu. This Sukuk issuance of
the Republic of Turkey was the first ever issuance compliant with the principles enshrined in the New Law.
In common with other sovereign issuances, the entry by the Issuer into the transaction was authorised through
ministerial decisions dated 17 August 2012 and 17 September 2012 passed by the Deputy Prime Minister for Economic and Financial Affairs (the Ministerial Decisions). The Ministerial Decisions related to (i) the establishment
of the Issuer (including the Articles of Association of the Issuer) and (ii) the economic terms of the issuance.
Market Implications
This issuance by the Republic is the first ever to raise funds by way of Islamic compliant structures and of Sukuk in
particular. This transaction should help to open up the Turkish and, by extension, both the Eastern European and
other regional markets to the potential offered by Sukuk and increase momentum resulting in the announcement
of further issuances. The decision of the Republic to execute its inaugural Islamic bond issuance is generally seen
as a positive step in encouraging wider use of Islamic finance alternatives and, in particular, Sukuk as methods of
financing by Turkish corporate and financial institutions.
Recent developments in Turkey have included a number of other Participation Banks indicating their intention
to issue leasing certificates in the next 12 months. Any future issuances originating in Turkey will now have the
benefit of the pricing and structural bench mark set by this transaction.
Recent legislative changes intended to counter-act low issuance volumes in Turkey, such as an exemption from
withholding tax on issuances of five years or more have been partially successful in encouraging investment, but
further reforms are needed to remove lasting obstacles, such as the adverse tax implications for structures based
on assets other than real estate assets. The market is still in its infancy and further development will take some
time, there having been only two other Sukuk transactions originating in Turkey to date; the 3-year U.S.$100 million Sukuk Al Ijara in 2010 and a 5-year U.S.$350 million Sukuk Al-Ijara offering in November 2011 by Kuveyt Turk.
Given the increasing familiarity of Islamic investors with Turkish Islamic debt and capital markets, and also Turkeys
strong economic growth rates being amongst the highest globally in 2011, the prognosis for coming years is positive. Following the examples set by the Republic and Kuveyt Turk, analysts expect further US-dollar denominated
and Turkish Lira-denominated issuances to come from utilities, state-owned enterprises and corporates in Turkey.
58
4.3 Abu Dhabi Islamic Bank PJSC

Mudaraba-Based Tier 1 Capital Sukuk 2012
This case study has been prepared by Mohammed Dawood and Ali Taufeeq at HSBC, structuring adviser and joint
bookrunner on the Sukuk transaction, and Richard OCallaghan and Jack Nichols at Linklaters LLP, who acted as
UAE and international legal counsel to the Managers.
Abstract
This case study intends to highlight the successful issuance of the Mudaraba-based Sukuk worth US $ 1 billion issued in November 2012 by Abu Dhabi Islamic Bank PJSC (ADIB), one of the leading Islamic banks in the Middle
East in terms of assets and revenues, and the fourth largest Islamic bank globally by assets. The issuance of this
Sukuk has been a successful step towards diversifying funding sources for Islamic financial institutions.
Parties to the Sukuk transaction
Mudareb
Abu Dhabi Islamic Bank PJSC
Issuer
ADIB Capital Invest 1 Ltd.
Joint Lead Managers
ADIB, HSBC, Morgan Stanley, National Bank of Abu Dhabi and

Standard Chartered Bank
Co-Lead Managers
Barwa Bank and Sharjah Islamic Bank
Delegate
HSBC Corporate Trustee Company (UK) Limited
Counsel to the Managers
Linklaters LLP
Counsel to the Mudareb
Latham and Watkins LLP
Counsel to the Issuer
Maples and Calder
Background
ADIB is one of the leading Islamic banks in the Middle East in terms of assets and revenues, which operates through
a network of 73 retail branches in the United Arab Emirates as at 14 March 2013. ADIB has won a number of prestigious awards including Sheikh Khalifa Excellence Award - Gold category in 2012 and the Best Islamic Bank in the
UAE by Global Finance in 2012 for three consecutive years.
ADIB elected to issue a tier 1 Sukuk as it wanted to strengthen its tier 1 capital ratio relative to its regional peers.
It intends to maintain above average capitalisation levels in the context of regulatory changes (the future implementation of Basel III in the UAE), financial markets expectations of stronger balance sheets and ADIBs own asset
growth.
The Sukuk transaction represents the first ever Shariah compliant Tier 1 issue executed in the international capital
markets and the first ever Tier 1 instrument issued by a Middle East bank in the international capital markets. The
Sukuk transaction was awarded Best Islamic Bond by International Financing Review for 2012 and UAE Deal of the
Year by Islamic Finance News for 2012.
Mudaraba
Mudaraba is a joint venture between two or more parties where one party (the Mudareb) contributes its effort and
management skills and the other party (the Rab-al-Maal) contributes capital. The parties may share profits but
losses can only be borne by the capital provider. A mudaraba contract can be for any period of time, at the end of
which the mudaraba is liquidated. The investor is not entitled to claim a fixed amount as profit, however, the percentage of the actual profit payable to the investor (as Rab-al-Maal) may be stipulated in the financing agreement.
59
Accordingly there should be no guaranteed return for the investors with this type of financing.
Sukuk Al Mudaraba
Mudaraba Sukuk are certificates issued with the aim of using the proceeds of issuance for investment in a business
activity on the basis of a joint venture contract so that the certificateholders obtain the right to receive certain payments arising from an undivided ownership interest in the assets of a trust declared by the issuer of the certificates
(typically a special purpose vehicle) over the capital of the mudaraba and the issuers contractual rights against
the Mudareb under the relevant documentation entered into in connection therewith. The issuer therefore acts as
Rab-al-Maal and provides the capital, being the proceeds of the issue of the certificates, and the relevant counterparty seeking to raise financing acts as Mudareb and provides its effort and management skills.
ADIB Mudaraba-based Sukuk
The ADIB Sukuk certificates had a key anchor in private banks, which took 60 per cent. of the final allocation, followed by fund managers with 26 per cent. of the allocation and banks with 11 per cent. of the allocation.
In terms of geography, Asian accounts were the largest recipient of the ADIB Sukuk certificates, with 38 per cent. of
the allocation. Middle East investors received 32 per cent. of the allocation, followed by Europe with 26 per cent.
and US offshore investors with 4 per cent.
The profit rate payable on the certificates was 6.375 per cent. per annum, representing one of the lowest rates
payable for US dollar denominated tier 1 issues in the international capital markets. Final pricing was significantly
lower than initial price thoughts and official price guidance, as a result of overwhelming demand by investors
the final order book was 15 times oversubscribed and was the largest oversubscription seen in any Sukuk offering
globally. Furthermore, the Sukuk has traded up significantly in the secondary market in the period since its initial
issue date.
Structure Diagram
Set out below is the structure diagram and brief explanation of the structure and principal cash flows to assist in
understanding the transaction documents relating to such a structure.
Mudareb (ADIB)
Mudaraba Agreement
Mudaraba Capital
Dissolution Mudaraba Capital and

Mudaraba Prot
Issuer (special purpose vehicle)

as Rab-al-Maal
Proceeds of
Certicates
Declaration of
Trust
Periodic Distribution Amounts,

Dissolution Distribution Amount and
Mudaraba Premium (if applicable)
Certiicate holders
60
Analysis of Structure and Cashflows

(i)
On the Issue Date, ADIB Capital Invest 1 Ltd. (a special purpose vehicle) will issue the Certificates, and the
Certificate holders will pay the issue price in respect of the Certificates to it (as Issuer/Trustee).
(ii)

ADIB Capital Invest 1 Ltd. will apply the proceeds of the issuance of the Certificates to wards the capital
of the Mudaraba pursuant to the Mudaraba Agreement (the Mudaraba Capital).
(iii)

ADIB (as Mudareb) will invest the Mudaraba Capital in the business activities of ADIB in accordance with
an agreed Investment Plan prepared by the Mudareb.
(iv)
Unless a Non-Payment Event 17 or a Non-Payment Election 18 has occurred, prior to each Priodic Distri

bution Date, the Mudareb shall distribute the profit generated by the Mudaraba to both the Issuer and
the Mudareb in accordance with an agreed percentage split (90 per cent. to the Issuer (as Rab-al-Maal)

and 10 per cent. to the Mudareb). Payments of Mudaraba Profit by ADIB (as Mudareb) are at the sole

discretion of ADIB (as Mudareb) and may only be made in circumstances where ADIB will not be in

breach of certain conditions as a result of making such payment. The Mudareb shall not have any obli

gation to make any subsequent payment in respect of such unpaid profit (whether from its own cash

resources, from the Mudaraba Reserve or otherwise).
The Issuer shall apply its share of the profit (if any) generated by the Mudaraba on each Periodic Distribu
tion Date to pay the Periodic Distribution Amounts due to the Certificate holders on such date.
(v)

(vi)
The Certificates are perpetual securities in respect of which there is no fixed redemtion date. Accoringly
the Mudaraba is a perpetual arrangement with no fixed end date.
(vii)

Subject to certain conditions, ADIB (as Mudareb) may at its option liquidate the Mudaraba in whole, but
not in part, on the basis of an actual liquidation of the Mudaraba in the following circustances:
(a)

at its option on the First Call Date (being 16 October 2018) or any Periodic Distribution Date after the
First Call Date; or
(b)
on any date on or after the Issue Date (whether or not a Periodic Distribution Date):
A. upon the occurrence of a Tax Event (being circumstances where the Mudareb or the Issuer would be re

quired to pay tax on amounts due under the Mudaraba Agreement or the Certificates, as applicable, due

to a change in law); or
B. upon the occurrence of a Capital Event (being circumstances where ADIB is notified in writing by the

UAE Central Bank to the effect that the notional amount of the Certificates which qualifies as regulatory

capital would cease to qualify for inclusion in full in the consolidated Tier 1 capital of ADIB).
(viii)
Upon the occurrence of the circumstances set out in paragraph (vii) above, the Trustee shall (only upon

the instructions of ADIB) redeem the Certificates. Alternatively, upon the occurrence of a Tax Event or a

Capital Event, ADIB (as Mudareb) may require the Trustee to make such variations to the terms

of the Certificates and the Mudraba Agreement as may be required to ensure that the Certificates be

come or, as appro priate, remain qualifying Tier 1 capital instruments. ADIB (as Mudareb) agrees in the

transaction documents that such variation will not be materially prejudicial to the interests of Certifi
cateholders.
Interesting features
The mudaraba structure was chosen as a result of its inherent simplicity and it being structurally appropriate for
a loss-absorbing tier 1 capital instrument to be issued by an Islamic Bank the absence of a guaranteed return of
17
18
61
Non-Payment Event means the occurrence of certain specified events (such as ADIBs insolvency or the absence of
sufficient distributable profits).
Non-Payment Election means that ADIB has elected in its absolute discretion not to make the relevant payment (this
provision is required to be included in the documentation to ensure regulatory capital compliance).
profit satisfies both the principles of Shariah and the Basel regime applicable to such instruments. Similarly, the
absence of a purchase undertaking in the documentation did not cause any legal or credit concerns given the
fact that the certificates were perpetual instruments with no fixed maturity date. The position of holders of the
certificates on any such redemption was, however, protected by including certain conditions to liquidation of the
mudaraba, including the relevant liquidation proceeds being sufficient to make payment in full of amounts otherwise due to certificateholders on any such redemption of the certificates (including, in the case of redemption
following a Capital Event described above, a premium of 1 per cent. of the face amount of the certificates).
The first call date was set at approximately six years after the issue date, to allow flexibility for a fungible issue of
further Sukuk certificates to be issued within a year after the issue date. Any additional certificates issued during
that period would thereby also be eligible for inclusion in ADIBs tier 1 capital base (as a result of the Basel regime
which requires the first call date to be no more than five years after the issue date). The inclusion of a tap feature
is unusual in the context of typical Sukuk documentation and required detailed consideration of legal, commercial
and Shariah aspects for it to be viable.
Conclusion
This transaction represented the first ever international Shariah-compliant Tier 1 perpetual transaction. A key
challenge faced on the transaction was to ensure that the Sukuk structure complied with the requirements of the
Shariah committees of ADIB and each of the joint lead managers, was in line with international market practice,
and allowed for flexibility in anticipation of the implementation of Basel III rules in the United Arab Emirates in due
course.
This transaction was a very significant transaction for the capital markets in the United Arab Emirates and the
wider region and marked an important step forward in the evolution of the regulatory capital markets and, more
generally, the diversity of potential funding sources available to Islamic financial institutions.
The success of this transaction has been reflected in the interest of other financial institutions to consider the
options available to raise regulatory capital in the Middle East. For example, Dubai Islamic Bank PJSC priced a US
$1 billion Tier 1 capital Sukuk certificate issuance on 13 March 2013, with the Sukuk structure following the ADIB
Sukuk in many respects.
62
4.4 Article on Sukuk Heading Forward

By Al Hilal Bank, UAE

With global issuance of Sukuk expanding for the fourth year in a row in 2012 by 64 per cent to about $138 billion, the Sukuk market can expect another few strong years, said a recent report released by Standard & Poors
(S&P).
The Sukuk market can expect another few strong years after global issuance of Sukuk expanded for the fourth
year in a row in 2012. The report Investors Are Snapping Up Sukuk, Despite Questions About Creditworthiness points out that there is little to hinder another strong performance by the Sukuk market in the next few
years. The Sukuk market is believed to have the potential to grow and join the mainstream. New Sukuk issuance
worldwide is expected to exceed $100 billion again this year. However, yields in the region have been declining, and even fell under those on conventional debt.
Sukuk comply with Sharia law, they do not technically pay interest; rather, they are structured to provide Sukuk
holders a profit margin. Confidence and investor sentiment toward Islamic bonds have contributed to growth.
Large infrastructure projects, particularly in Malaysia and the GCC, are likely to stoke issuance. S&P analysts
expect the new issuance of Sukuk worldwide could top above $100 billion again this year. Sustained investment spending and ample domestic liquidity are likely to support Sukuk issuance, especially in Malaysia, Saudi
Arabia, Qatar, and the UAE. Investment spending could see high single-digit growth for 2013.
The Sukuk market is believed to have the potential to grow and join the mainstream. Despite increased growth,
the market for Sukuk, the Islamic equivalent of bonds, is still a small segment of the global fixed-income world.
Sales of bonds that comply with Muslim tenets jumped 25 percent in 2012 as companies sold debt as part of
government programs in Asia and the Middle East to build railways, ports and roads. Thailand and South Africa
have also announced plans to issue Sukuk once legislation has been passed that will open up new markets for
investors.
63
GCC Sukuk Index has given a 32% return over the past 3 years as can be seen from the chart below:
whereas the conventional GCC Bond Index (below) has yielded exactly half that return only (16%)
Global issuance expanded for the fourth year in a row in 2012, growing 64% to about $138bn, and we expect
another strong few years. Overall sovereign issuers are expected to dominate the Sukuk market. We believe that
sovereign and sovereign-related issuance will continue to dominate, shape, and underpin the Sukuk market, as it
has in the past several years. Sovereign Sukuk are generally the first inroad into Sharia-compliant funding in any
given country, enabling the gradual creation of reference prices over time, to which private-sector entities can
benchmark themselves, said Pruvost.
Borrowing costs on Shariah-compliant debt have fallen 11.4 percentage points to 2.82 percent since the end of
2008 as central banks in Europe, the US and Japan pumped funds into their economies to spur growth. Demand
will be driven by the rise in Islamic banking assets, which may reach $1.8 trillion in 2013, compared with $1.3 trillion in 2011, led by Saudi Arabia and Malaysia, Ernst & Young said in a recent report.
64
Sukuk is an attractive channel to explore for those countries looking to expand funding sources, Kuala Lumpurbased Alhami Mohd Abdan, Head of international finance and capital markets at OCBC Al-Amin, a unit of Singapores Oversea- Chinese Banking Corp., said in an interview. Liquidity in the Islamic space is growing quite
significantly, he added.
The biggest sales came out of Saudi Arabia and Qatar amid development programs of $373 billion and $130 billion, respectively. Malaysia has embarked on a $444 billion spending spree over 10 years that helped spur Islamic
bond offerings to an all-time high of 95 billion ringgit ($31 billion) in 2012.
Saudi Electricity Co. sold $1.75 billion of notes due in 2017 and 2022 in March. The yield on the five-year 2.665
percent securities has since dropped 55 basis points, or 0.55 percentage point, to 1.95 percent, according to the
compiled data.
Borrowing costs on global Shariah-compliant bonds fell 117 basis points in 2012 and the credit default swaps for
regional countries are close to all time highs in March 2013, giving a huge impetus to Sukuk investments. According to the E&Y World Islamic Banking Competitiveness Report for 2013, there will be a need for about US $ 220bn
of Islamic assets (Sukuks or other solutions) in 2015 to fulfill the liquidity surpluses of this growing market assuming that all investors hold all existing Sukuks till maturity. The chart below highlights this huge opportunity:
However, with the US $ yield curve beginning to steepen, and 10 year US $ Treasury yields already up 65bp from
June 2012 to March 2013, there will be pressure on Sukuk performance going forward especially if regional credit
spreads start to widen. This is a big challenge for Islamic investors for whom a wide range of alternative solutions
which are shariah compliant is not really available. Needless to add, this is also a big opportunity for solution
providers to showcase investments across different asset classes which shall show long term growth in an interest
rate rising environment.
About Al Hilal Bank

Al Hilal Bank was established in June 2008 with an authorized capital of AED 4 billion and is fully owned by the Abu Dhabi
Investment Council, the investment arm of the Government of Abu Dhabi. The bank is Shariah compliant and operates through
a network of 23 branches strategically located across the United Arab Emirates as well as 3 other branches in major cities of
Kazakhstan. Al Hilal Bank aims to become the leading financial institution in the region and is committed to increase the
growth of Islamic banking by providing new direction, new technologies and special services.
Al Hilal Bank currently offers 2 open ended mutual funds inclusive of the Global Sukuk Fund. The AHB GCC Equity Fund was the
first to be launched in 2011, and has delivered strong performance since inception despite highly volatile market conditions.
The fund delivered a healthy double digit return of 13.23% in 2012 while return since inception is up 8.53%
The Banks Flagship Global Sukuk Fund was launched in March 2012 with the 4.36% dividend. The positive performance of
the fund amidst a low interest rate environment and global uncertainty reflects the fund management expertise of Al Hilal
Banks Investment Banking Group, the Fund Manager, and its Investment Advisor, CIMB-Principal Islamic Asset Management
of Malaysia.
65
4.5 Article on Sukuk Secondary market overview (Q4 2012 Q1 2013)

By Mr. Ibrahim Bitar, Head of Sukuk Trading Noor Islamic Bank
In Q4 2012, High Beta Sukuk tightened as money went into the asset class driven by low rates, global quantitative
easing, and on improving economic fundamentals. The European Central Banks actions in July removed tail risks
of a renewed recession. The 5 year swap rate rose by 13 bps from exceedingly low levels while the JPM EMBI index
tightened 40 bps. Low beta Qatar and Abu Dhabi Sukuk widened by about 20 bps while Dubai Inc tightened by
about 65 bps. High Yield Sukuk tightened by 100 bps. Malaysia Dollar Sukuk tightened 25 bps in that period. GCC
hard currency issuance was a low $2.5B. Strong economic rebound in Dubai led by the Trade and Tourism sectors,
made Dubai Incs credit the star performer. As investors confidence in Dubai came back, many areas in Dubais
residential real estate exceeded their 2008 peak prices.
In Q1 2013, GCC Sukuk tightening decelerated as markets priced stronger economic growth especially following the Feds historical targeting of the unemployment rate combined with $85B of fixed income purchases per
month. Equities rallied way outperforming other asset classes as money went into equity funds away from money
markets and fixed income funds. US $ swap rates witnessed a steepening selloff while credit indices widened:
Swap yields weakened by 20 bps, JPMs EMBI widened 42 bps and CEEMEA SOVX widened 56 bps. Low beta Qatar
and Abu Dhabi Sukuk widened about 2 bps while Dubai Inc tightened by about 25 bps. Malaysia Dollar Sukuk
were about 5 bps wider in that period on concerns going into the elections in April. GCC Sukuk overall outperformed other EM markets driven by strong local demand in spite of strong $5.75B GCC Sukuk issuance.
Looking ahead to the rest of 2013, we are in the last innings of the easing cycle as stronger than expected growth
is sparking talks to curtail QE. We expect overnight rates to rise in late 2015 but markets will anticipate that and
take the 10 year yield to 2.40% by the end of 2013. As a result we continue to position in 2015 and shorter maturity
Sukuk and in higher beta names.
4.6 FWU Group SUKUK

The Islamic capital market continues to witness a significant development in terms of diversification of asset classes and geographies, but to date, Sukuk remains the leading structure and has seen unprecedented growth within
the last few years.
Across Western Europe, Shariah compliant finance has seen welcoming initiatives, and Sukuk instruments are increasingly attracting attention as a source of funding and diversification.
It was in Germany that the first Sukuk issuance took place in Europe.
In 2004, a 100 million quasi government Sukuk, structured as Sukuk Ijarah, was issued in the federal state of
Saxony-Anhalt in Germany.
FUW GROUPS SUKUK ISSUANCE:
In November 2012 it was in Germany again that a pioneering initiative took place in the emerging Euro Sukuk
market. FWU a Munich based financial group announced what is considered to be the first issuance by a German
corporate and the largest of its kind in Europe. The Euro55Million is based on the Islamic principle of Ijara or sale
and lease-back. The underlying assets are a proprietary computer software system and associated Intellectual
Property rights developed in-house by the FWU Group and used by its bank distribution partners in connection
with their combined takaful operations. The FWU group has the full proprietary rights to this system.
The Sukuk were issued through a Luxembourg SPV incorporated using a Dutch Stichting (foundation) structure first used in connection with the quasi-sovereign Sukuk issuance by Saxony-Anhalt.
Other details of the structure include:
FWU has been looking for a Sharia-compliant means by which it can refinance its Sharia-compliant factoring business globally. The company, however, is cautious to stress that it is hard to predict the wider impact of the FWU
Sukuk, but it is noteworthy that it is the largest Sukuk issuance by a European corporate to date and, the FWU Sukuk
is the first of any significant size.
66
The issuance in dollar was intended to appeal

to a broad range of investors. In the case of this
Sukuk, investors were identified in jurisdictions
in the Middle East which use currencies that are
pegged to the US $ which made a US $ issuance
more practical. In addition, as FWU expands its
operations into new geographical areas (often
ones with US $ pegged currencies), the US dollar is an ever-more useful currency of finance. This
was a private placement to a group of institutional investors in the Middle East
FWU group Sukuk added a new innovation mark
with the first Sukuk ever to have intellectual property as underlying assets
67
Date of Launch
November 2012
Issue Size
US$55Million
Issue Type
Sukuk Al Ijara
Tenor
7 Years Matures in 2019
Currency
US Dollar
Governing Law
English Law, Luxembourg Law

Using a Dutch Stitching Structure
Sharia Advisor
Amanie Advisors LLC
Pricing
7 Per Cent Per Annum
Semi Annual
Underlying Assets
The Underlying assets are a

proprietary computer software
system and associated intellectual
property rights developed n-house
by the FWU Group and used by it
and its bank distribution partners in
connection with their combined
takaful operations in the various
geographies in which they operate
Conclusion
As indicated in the second edition of the IIFMs Sukuk Report, the Sukuk market will continue its growing trend
and Islamic jurisdictions will be leading that growth after a relatively large dip in the Sukuk issuances in mid 2008
to 2009. Once investors confidence is restored on Sukuk legal & restructuring issues coupled with direct support
by a number of Islamic jurisdictions the Sukuk market regained confidence and the market took off again since
2011.
As foreseen in the mentioned IIFM Report, the 2011 & 2012 were a record years of Sukuk issuances, which reached
in 2011 US $ 92.4 billion and US $ 137.4 billion in 2012 respectively. These issuances include Sovereigns, Quasi
Sovereigns & Corporates.
Strong demand of Sukuk from the Islamic jurisdictions in the GCC countries including Bahrain as well as Malaysia, Indonesia, Turkey, Pakistan, Sudan, Brunie, Islamic Development Bank etc. was the main force in driving the
Sukuk market towards the rapid growth mentioned. These countries in particular including GCC have immensely
engaged in the Sukuk issuances for both domestic and international markets. Moreover, several jurisdictions followed the strategy adopted by Bahrain (year 2001) and started regular issuances of Short Term as well as medium
Skukuk to support the liquidity and investment requirements of Islamic Institutions based in its jurisdiction.
The Financial crisis of 2008, which pressured developed market financial institutions into contraction and deleveraging, also impacted momentarily impacted Sukuk issuances but in the last two years Sukuk issuances have
attained new heights. Sukuk is now establishing a firm base as an alternative source of funding, not just for the
Islamic jurisdictions market but with interest gathering from Europe, African continent and the CIS countries. We
have witnessed many milestones biggest Sukuk issuances in such as Sukuk issued by PLUS - Malaysia, Government
of Qatar, Sukuk issuances from Saudi Arabia, first Intl Sukuk issuance with a Saudi Sovereign Guarantee, Debut
International Sukuk by The Republic of Turkey, Debut Domestic Lira issuance by Republic of Turkey, first Sukuk
issuance from a financial institution in Kazakhstan , first Tier 1 Perpetual Sukuk by Abu Dhabi Islamic Bank and
several others.
Continuous innovation together with more debut Sukuk issuances and refinancing of maturing Sukuk is likely to
maintain the Sukuk volume trajectory upwards in 2013 and beyond, as countries and corporate look to take advantage of extremely attractive low yields being priced by the market. Moreover, the trend of Sukuk issuances on
fixed profit rate is continuing which is also helping the development of Sukuk secondary market.
Another interesting trend or innovation is Sukuk issuances in non-local currency i.e. issuer based in UAE floating
a Malaysian Ringgit Sukuk or Malaysian issuer Sukuk issuance in Chinese Yaun etc., This is also a positive development and will further contribute in the development of Sukuk market. The risk mitigation or hedging documentation and product standards are being published by IIFM and provide further confidence to investors in Sukuk.
When putting the Global issues together from 2001 to Jan 2013, then the Sovereign and Quasi Sovereign takes
almost 62% of all issuance to date.
Between 2011 and Jan 2013, Qatar Sovereign came in as the top issuer of combined Domestic and International
with US $ 13 Billion, Indonesia with US $7.7 Billion and Malaysia with US $ 5.5 Billions. The standing changes considerably with Malaysia taking a handsome lead with US $ 36 Billions, followed by Qatar US $ 15 Billion, Saudi US
$ 13 Billions and UAE with US $ 11 Billions when including Quasi Sovereign and Corporate.
The year 2012 was record year in terms of International Sukuk issuances and the year closed at US$ 20 billion Sukuk
issuances as compare to previous 2007 pre-crisis record of US$13.80 billion. Currently outstanding International
Sukuk figure is approximately US$45 bio and it is expected that Q1 of 2013 will close with US$ 50 billion outstanding Sukuk market.
There were several landmark Sukuk issuances from Malaysia, Qatar, Turkey, UAE, Saudi Arabia, Indonesia, Bahrain
etc., this indicates that Sukuk market has fully emerged from the declining trend witnessed in 2008 & 2009 and
further double digit growth prospects are intact for next coming years and existing Sukuk issuance pipeline is the
confirmation of this prediction.
68
As far as the domestic Sukuk market is concern, Malaysia has the lions share in terms of both volume and value.
Malaysia remains as the largest domestic Sukuk issuer with 79.8% though the countries like Indonesia, Pakistan,
Qatar and Saudi Arabia while Turkey has entered the market as new potential leader plus Yemen, Gambia etc.,
have also entered the Sukuk market at domestic level. Bahrain has also kept its presence felt in Sukuk issuances
and has seen several landmark issuances and issuance volume has increased by almost 50%. Qatar has also issued
landmark Sukuk issuances and it domestic Sukuk market is growing quite rapidly.
The domestic Sukuk market in a number of jurisdictions is becoming active particularly Indonesia & Pakistan and
central banks are providing avenues to Islamic banks and other investors to invest their surplus liquidity in government Sukuk programs designed to provide level playing field to the Islamic institutions.
The total outstanding Domestic Sukuk at Dec 2012 stood at US$ 191 billion and it is expected that 2013 will close
with even higher figure as sovereigns, quasi sovereign & corporates in jurisdictions like Malaysia, Indonesia, Turkey
and several other countries including GCC are getting more active in Sukuk issuances.
Malaysian Ringgit takes the first spot mainly due to its strong and deep local fixed income market. Malaysian market attracted some GCC institutions, Supra national Agencies and Japanese institution to raise their funding needs
in Malaysian Ringgit. These institutions took advantage of the fine pricing due to local demands and the attractive
currency swap rates that achieved lower yield as well as to diversify its investors.
However, US Dollars continue to be the favored currency for attracting international investors around the globe.
We most likely to see developments of local currency Sukuk in the comings year as more OIC countries develop
their domestic Sukuk market. This trend is taking shape with Indonesia, Turkey, Pakistan and the GCC countries issuing local currency Sukuk. Sovereign or sovereign linked entities currently dominate issuance in these countries
and this flow will continue, since the sovereign needs to fund its budget while also sets up the local benchmark
curves as well as to fund huge infrastructure projects.
Cross border Global Sukuk Maturities in 2013 is extremely light as the new issuance in 2008 was pretty much subdued following the onslaught of the financial crisis.
Starting from 30th June to 31st Dec 2014 we will have 12 Sukuk maturing which could well provide some refinancing opportunities. UAE s three emirates tops the maturity with US $ 2.65 billion , followed by Malaysian Issuers
with US $ 1.66 Billion and the other Billion + maturity coming out of Bahraini issuers.
Almost 50% of the Domestic market is denominated in Malaysian Ringgits (US$ 6.6 Billion) the next to maturities
are: UAE (US$ 2.6 Billion) and Indonesia (US $ 1.5Billion) of the US $ 22.32 Billion total domestic market maturities,
Qatar Government heads the list with a US $ 9.1 billion followed by Malaysias government and other corporate
totaling US $ 9 Billion equivalent. Two other big maturities are from relatively new Domestic issuers, Turkey US $
900 myn and Indonesia US $ 800 myn.
Short term Sukuk with maturity of 1 year or less are essential in the development of Islamic Inter-bank market
and they play a key role in the liquidity management of the financial institutions. Malaysia remains the leader in
domestic short term Sukuk issuances followed by Sudan, Bahrain, and Brunei. Indonesia is showing sign of playing
a leading issuance role in this type of Sukuk and is a country to watch in coming years.
The appetite for short term Sukuk is far greater than longer tenor Sukuk as evident by these issuers. The trend towards issuing shorter tenor Sukuk is increasing and is driven by sovereign issuers through central banks. Malaysian
and some GCC corporate issuers are getting in this segment of the Sukuk market and are providing diversity and
depth to the local markets which is essential in the development of money market.
Bahrain has kept its leading role in Short Term Sukuk issuances and it regular issuances are always oversubscribed.
The outlook for Short Term Sukuk is encouraging and it is expected this segment will continue its growth trend.
Though Malaysia, Sudan & Bahrain leads the table of short term issuers, however; several countries such as Indonesia has also started regular issuance of short term Sukuk program which will greatly help the liquidity management requirement of Islamic institutions.
Bahrain is the first jurisdiction which started the regular issuance of Short Term Sukuk mostly in Bahraini Dinar and
it continues to improve on its Sukuk issuance plan while Indonesia and Pakistan are the recent entrant in this Sukuk
market segment.
Asia will continue to dominate the Sukuk issuance in the short term due to its deep local currency fixed income
69
market with Malaysia and Indonesia being the driving force in that region. However, we are likely to see the GCC
& Middle East pie get larger with a heavy future funding needs due to healthy pipeline of infrastructure projects
coupled with greater participation from Corporates in issuing Sukuk.
With the game plan in Europe changing due to the financial crisis & Basel III, and coupled with abundant liquidity
in the Sukuk market, we may well witness European Corporates line up to take advantage of current favourable
pricing.
Finally, while more depth is created in the Sukuk market, the issuance of Non-Local Currency Sukuk by foreign
issuers is a positive development and will contribute in the growth of the Sukuk market. We believe that these
issuances have also highlighted the need of currency hedging which is one of the key contributions of IIFM to
the Islamic Financial Services Industry. Hence, standards developed by IIFM will be extremely beneficial in the risk
mitigation arising from such Sukuk issuances.
Also in spite of all the significant progress in the Sukuk issuances we still believe that the Sukuk market is in need
of more action and long term plan for a sustainable growth and progress which will satisfy the investor demand,
because it will be difficult for the limited amount of Sukuk issuers based in Islamic countries to achieve that satisfaction.
70
Glossary
Term
Meaning
Shariah
Islamic Law
A Shariah compliant
Product meets the requirements of Islamic law
product
A Shariah board
Is the committee of Islamic scholars available to an Islamic nancial institution

for guidance and supervision in the development of Shariah compliant products
A Shariah advisor
Is an independent Islamic trained scholar that advises Islamic institutions on the

compliance of the products and services with the Islamic law
Sukuk
An Arabic term for nancial certicate, it can be seen as an Islamic equivalent of

the conventional bonds. It is dened as Certicates of equal value representing
undivided shares in ownership of tangible assets, usufructs and services or (in
the ownership of) the assets of particular projects or special investment activity.
Advance purchase.Advance payment for goods which are to be delivered at a
specied future date. Under normal circumstances, a sale cannot be eected
unless the goods are in existence at the time of the bargain. However, this type
of sale is an exception, provided the goods are dened and the date of delivery is
xed. The objects of sale must be tangible goods that can be dened as to
quantity, quality and workmanship.
Bai al Salam
71
Istisnaa
Advance purchase of goods or buildings.A contract of acquisition of goods by

specication or order, where the price is paid in advance, or progressively in
accordance with the progress of a job. For instance, to purchase a yet to be
constructed house, payments would be made to the builder according to the
stage of work completed.
Murabahah
Cost-plus nancing.A form of credit that enables customers to make a purchase

without having to take out an interest-bearing loan. The bank buys an item and
sells it to the customer on a deferred basis. The price includes a prot margin
agreed by both parties. Repayment, usually in installments, is specied in the
contract.
Musharakah
Joint venture, prot and loss sharing.An investment partnership in which all
partners are entitled to a share in the prots of a project in a mutually agreed
ratio. Losses are shared in proportion to the amount invested. All partners to a
Musharakah contribute funds and have the right to exercise executive powers in
that project, similar to a conventional partnership structure and the holding of
voting stock in a limited company.
Mudarabah
Trust nancing, prot sharing.An investment partnership, whereby the investor

(the rab al maal) provides capital to the entrepreneur (the mudarib) in order to
undertake a business or investment activity. While prots are shared on a preagreed ratio, losses are born by the investor alone. The mudarib loses only his
share of the expected income.
Ijarah
Leasing. A lease agreement whereby a bank or nancier buys an item for a

customer and then leases it to him over a specic period, thus earning prots for
the bank by charging rental. The duration of the lease and the fee are set in
advance. During the period of the lease, the asset remains in the ownership of
the lessor (the bank), but the lessee has the right to use it. After the expiry of the
lease agreement, this right reverts back to the lessor.
Salam Sukuk
Are certicates of equal value issued with the aim of mobilizing salam capital
(mobilizing funds) so that the goods to be delivered on the basis of salam come
to be owned by the certicates holders. (Salamis a sale, whereby the seller
undertakes to supply a specic commodity to the buyer at a future date in return
for an advanced price paid in full on the spot. The price is in cash but the supply
of the purchased good is deferred)
Istisnaa Sukuk
Are certicates of equal value issued with the aim of mobilizing funds to be
employed for the production of goods so that the goods produced come to be
owned by the certicates holders. (This type of Sukuk has been used for the
advance funding of real estate development, major industrial projects or large
items of equipment such as: turbines, power plants, ships or aircraft
(construction/manufacturing nancing)
Murabahah Sukuk
Are certicates of equal value issued for the purpose of nancing the purchase of
goods through murabaha so that the certicate holders become the owners of
the murabaha commodity. (This is a pure sale contract based Sukuk which based
on the cost plus prot mechanism)
Musharakah Sukuk
Are certicates of equal value issued with the aim of using the mobilized funds
for establishing a new project, nancing a business activity etc on the basis of any
of partnership contract so that the certicate holders become the owners of the
project. (MusharakahSukuk is an investment partnership between two or more
entities which together provide the capital of the Musharakah and share in its
prots and losses in pre-agreed ratios)
Mudarabah Sukuk
Are certicates that represent project or activities managed on the basis of

Mudarabah by appointing one of the partners or another person as the mudarib
for the management of the operation. (It is an investment partnership between
two entities whereby one entity is mainly a provider of capital and the other is
mainly the manager)
Al-Ijarah Sukuk
An Islamic certicate for the buying and leasing of assets by the investors
to the issuer and such Sukuk shall represent the undivided benecial
rights/ownership/interest in the asset held by the trustee on behalf of the
investors
72
International Sukuk
A Sukuk issued in hard currency such as USD
(for the purpose of this report)

Domestic Sukuk
A Sukuk issued in local currency

Global Sukuk
Both international and domestic Sukuk

Convertible or exchangeable
Sukuk
Convertible or exchangeable Sukuk certicates are convertible into the issuers

shares or exchangeable into a third partys shares at an exchange ratio which is
determinable at the time of exercise with respect to the going market price
and a pre-specied formula.
Hybrid Sukuk
Hybrid Sukuk combine two or more forms of Islamic nancing in their structure
such as Istisnaa and Ijarah, Murabahah and Ijarah etc.
Sovereign Sukuk
Are Sukuk issued by a national government. The term usually refers to Sukuk
issued in foreign currencies, while Sukuk issued by national governments in the
countrys own currency are referred to as government Sukuk.
Quasi-sovereign Sukuk
Are Sukuk issued by a public sector entity that is like sovereign Sukuk. It may
carry explicit or implicit government guarantee.
Corporate Sukuk
Is a Sukuk issued by a corporation as opposed to those issued by the

government. It is a major way for companies to raise funds in order to expand
its business or for a specic project.
References
Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Shariah Standards
ADIB Website: http://www.adib.ae
IIFM Sukuk Issuance Database (2001 January 2013)
Khazanah Nasional Berhad Website: http://www.khazanah.com.my
Majid Al Futtaim Website: http://www.majidalfuttaim.com
Ministry of Finance, Republic of Indonesia
Plus Berhad Sukuk Information Memorandum
Saudi Electricity Company Sukuk Base Prospectus
*****
73

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SUKUK REPORT

A comprehensive study of the Global Sukuk Market

From the light of the Holy Quran

Allah Almighty Said:

ank Muscat SAOG, Oman

Research & Review Team

Mr. Ijlal Ahmed Alvi

Chief Executive Officer

Dr. Ahmed Rufai

Head of Shariah Department

Mr. Ismail Dadabhoy

Mr. Usman Mohammad Naseer

Business Development Officer

Mr. Babar Naseer

Mr. Tareq Fouad

Design & Printing

Mr. Sayyed Zarrar

In the Name of Allah, the Most Gracious, the Most Merciful

Mr. Khalid Hamad

In the Name of Allah, the Most Gracious, the Most Merciful

Mr. Ijlal Ahmed Alvi

CHAPTER TWO : OVERVIEW OF THE GLOBAL SUKUK MARKET

Resurgence of Sukuk Market 9

Abu Dhabi Islamic Bank (ADIB) Shirkat-Ul-Milk Based Sukuk 2011

CHAPTER FOUR : CASE STUDIES & ARTICLES ON SPECIFIC SUKUK STRUCTURES 49

Government of Indonesia Sukuk Issuances (Sukuk Negara)

Table 2: Selected the Non-Local Currency hallmark global Sukuk issuances 13

Table 4: Global Sukuk Issuances by Issuer Status 2001- Jan 2013

Table 5: Global Sovereign Sukuk Issues -Selected Value Leaders 2011-2013 -

Table 6: Global Corporate Sukuk Issues -Selected Value Leaders 2011-2013 -

Table 7: Global Quasi-Sovereign Sukuk Issues -Selected Value Leaders 2011-2012 -

Table 12: Cross Border International Sukuk Maturing 2013 26

Chart 1: Total Global Sukuk Issuance (All Currencies) 10

Chart 6: Total Global Short-Term Sukuk Issuance by Currency

By: Ahmed Rufai - IIFM

2. Sukuk Al- Istithmar

Sukuk Al-Istithmar is defined as follows:

2.2 Types of Sukuk Al- Istithmar

2.2.1 Sukuk Milkiyyah Al-Maujudaat Al-Muajjarah (i.e. Certificates of ownership

2.2.2 Sukuk Milkiyyah Al- Mana fi a (i.e. Certificates of ownership of usufructs)

2.2.3 Sukuk Al- Istisna a

2.2.4 Sukuk Al- Murabahah

2.2.5 Sukuk Al- Musaqaah (i.e. Irrigation certificates) 5

2.2.6 Sukuk Al- Musharakah (i.e. participation certificates)

2.2.6.1 Sukuk Al- Sharikah (i.e. Participation certificates)

2.2.6.2 Sukuk Al- Mudarabah 6

2.2.6.3 Sukuk Al Wakalah bil Istithmar (i.e. Certificates of investment agency)

2.2.7 Sukuk Al- Muzaraah (i.e. sharecropping certificates) 7

2.2.8 Sukuk Al - Salam 8

2.3 Characteristics of Sukuk Al- Istithmar 9

3. Fundamental differences between Sukuk Al- Istithmar and Bonds

Al Salam i.e. Advance purchase contract.

(a) Sukuk of ownership of

Sukuk AlMusharakah may be

(a) Sukuk Al -Sharikah

2.2 Global Sukuk Issuances

1,172 1,371 7,057 9,465 13,698

Sime Darby Berhad

Islamic Development Bank

Khazanah Nasional Bhd

National Higher Education

Saudi Electricity Company

General Authority Of Civil

2012 PLUS Berhad