IIFM Sukuk Report (3rd Edition) A Comprehensive Study of The Global Sukuk Market

S U K U K R E P O R T
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)

:
I
Central Bank of Bahrain
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
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
fnancial 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 eforts 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-proft 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 fnancial
institutions and other market participants.
About IIFM
Bank Muscat SAOG, Oman
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
Cliford 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
IIFM MEMBERS
III
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.
DISCLAIMER
IV II
Research & Review Team
Mr. Ijlal Ahmed Alvi
Chief Executive Ofcer
Dr. Ahmed Rufai
Head of Shariah Department
Mr. Ismail Dadabhoy
IIFM Advisor
Mr. Usman Mohammad Naseer
Business Development Ofcer
Database Maintenance
Mr. Babar Naseer
Mr. Tareq Fouad
Design & Printing
Mr. Sayyed Zarrar

V III
The growth of the Islamic fnancial 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 fnance through sovereign issues, and also a way for companies
to obtain funding through ofering 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 diferent 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 fnancial instruments in
the Islamic Capital and Money Market.
The report presents invaluable information on the benefts of Sukuk for all the stake holders in the
industry.

Abstract
VI IV
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 efort in jointly preparing the
case studies of this research report.

Lastly, IIFM is also thankful to Ministry of Finance Indonesia, Cliford Chance, Linklaters, HSBC
Bank, Al Hilal Bank, Noor Islamic Bank & FWU Group for providing case studies & articles on specifc
Sukuk structures institutions contribution.
Acknowledgements
VII V
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
fnance. 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 frst 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 feld 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 confdent that there will be many grateful readers who will
gain a broader perspective of the Sukuk structure and how stakeholders can optimize the benefts of the
Sukuk market as a result of their eforts.
Mr. Khalid Hamad
April 2013
VIII VI
Foreword
From The Chief Executive Ofcer, 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 eforts in this
respect as refect in its 1
st
and 2
nd
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 fnancial 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
diferent jurisdictions. They have put in their eforts 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 specifc 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 verifcation.
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 fnd this report useful and of value.
Mr. Ijlal Ahmed Alvi
April 2013
IX VII
Foreword
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): 3
MEANING AND TYPES
1 Introduction 3
2 Sukuk Al-Istithmar 3
2.1 Defnition 3
2.2 Types of Sukuk Al-Istithmar 4
2.3 Characteristics of Sukuk Al-Istithmar 7
3 Fundamental diferences between Sukuk Al-Istithmar and Bonds 7
4 Conclusion 7
CHAPTER TWO : OVERVIEW OF THE GLOBAL SUKUK MARKET 9
2.1 Resurgence of Sukuk Market 9
2.2 Global Sukuk Issuances 9
2.3 Distribution of Global Sukuk Issuance by Issuer Status 14
2.4 International Sukuk Market 19
2.5 Domestic Sukuk Markets 22
2.6 Structural Break-up of Global Sukuk Market 24
2.7 Short Term Sukuk Market 29

CHAPTER THREE : CASE STUDIES OF SELECTED INTERNATIONAL SUKUK ISSUES 30
3.1 Abu Dhabi Islamic Bank (ADIB) Shirkat-Ul-Milk Based Sukuk 2011 30
3.2 Khazanah Nasional Wakalah Based Sukuk 2011 34
3.3 Majid Al Futtaim (MAF) Wakalah Based Sukuk 2012 38
3.4 Saudi Electricity Company (SEC) Al Ijarah Based Sukuk 2012 43
3.5 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 Government of Indonesia Sukuk Issuances (Sukuk Negara) 49
4.2 Republic of Turkey 56
4.3 Abu Dhabi Islamic Bank PJSC Mudaraba-Based Tier 1 Capital Sukuk 2012 59
4.4 Article on Sukuk Heading Forward 63
4.5 Article on Sukuk Secondary market overview (Q4 2012 Q1 2013) 66
4.6 FWU Group Sukuk CASE STUDY 66

CONCLUSION 68
GLOSSARY 71
REFERENCES 73
X VIII
LIST OF TABLES
TABLE PAGE
Table 1: Selected Hall Mark Global Sukuk Issues & Trends -2011- Jan 2013 - 11
Year wise latest frst USD 700 Millions or greater (International & Domestic)
Table 2: Selected the Non-Local Currency hallmark global Sukuk issuances 13
during last 2 years
Table 3: landmark Fixed Proft 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 - 15
(International & Domestic)
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 - 21
(Corporate, Sovereign & Quasi-Sovereign)
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 - 23
(Corporate, Sovereign & Quasi-Sovereign)
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 29
LIST OF CHARTS/FIGURES
CHART 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
XI IX
The International Islamic Financial Market (IIFM) over the past years has been in the forefront of global initiatives
and eforts 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 efciency, awareness and enhance competitiveness of the Islamic Capital and
Money Market industry, in 2010 IIFM has published its frst Sukuk research report (IIFM Sukuk Report 1
st
Edition) as
part of its eforts to help the industry move forward in a comprehensive manner.
In 2011 the 2
nd
edition of IIFM Sukuk research report (IIFM Sukuk Report 2
nd
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 fnancial
sector in the Islamic fnance 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 verifcation 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 fltered with respect to
diferent 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 verifcation.
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:
Introduction
1
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 specifc 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 fnancial 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 feld 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 feld. In order to maximize the beneft of the report,
some case studies and articles on specifc Sukuk structures and issues have been included.
2
3
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 diference between Sukuk Al-Istithmar and Sukuk Al-
Mudarabah 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 refect participation in the underlying asset so that what is traded is not a merely debt as each
certifcate 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 fnance 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 Defnition
The early Muslims have used the word Assakk,

which means certifcate or order of payment. And
the plural of this Arabic term is Sukuk
1

.
They used Sukuk in those early days as a form of papers representing fnancial obligations originating from trade
or any other commercial activities. However, in the modern day Islamic fnancial system, Sukuk are known as
instruments of the Islamic capital Market and it is one of the best fnancial instruments and mechanisms that are
commensurate with the needs of issuers/originators and investors.
Chapter One
1. Sheikh Ahmad Al- Fayyumi Al- Muqri, Al-Misabah Al-Munir, Kitab Al-Saad, Al-Saad ma a Al-Kaf.
4
Sukuk Al-Istithmar is defned as follows:
Investment Sukuk are certifcates 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 defnition as certifcates of equal value issued
and sold to investors who, by virtue thereof, have proportional claims over the fnancial rights underlying these
certifcates as well as proportionately liable for obligations arising from these certifcates i.e. benefts 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. Certifcates of ownership
in leased assets)
These are certifcates 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 fnancial agent with the aim of selling asset and recovering its value from
subscription. Thus, the holders of the certifcates 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 certifcate holders
will become the owners of the assets jointly sharing the profts and losses on the basis of the partnership that exist
between them.
2.2.2 Sukuk Milkiyyah Al- Mana f a (i.e. Certifcates of ownership of usufructs)
These Sukuk have diferent types as explained bellow:
(a) Sukuk Milkiyyah Al- Mana f a Al- a ayaan Al-maujudah (i.e. Certifcates of ownership of
usufructs of existing assets
These are Certifcates of equal value that are issued either by the owner of an existing asset or a fnancial
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 certifcates 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 certifcate holders become
jointly the owners of the usufructs sharing its benefts and risks.
(b) Sukuk Milkiyyah Al- Mana f a Al- a ayaan Al-mausufah f Al- dhimmah (i.e. Certifcates of
ownership of usufructs of described future assets)
These are certifcates 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
certifcates 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 certifcate holders become jointly the owners of the usufructs
sharing its benefts and risks.
(c) Sukuk Milkiyyah Al-Khadamaat min taraf mu ayyan (i.e. Certifcates of ownership of services of a specifed
party)
These are certifcates of equal value issued for the aim of providing services through a specifed provider (such as
educational benefts in a nominated university) and obtaining the value in the form of subscription income. Thus,
the certifcates holders become owners of the services.
(d) Sukuk Milkiyyah Al-Khadamaat min taraf mausufun f Al- dhimmah (i.e. Certifcates of ownership of
described future services)
These are certifcates of equal value issued for the purpose of providing future services through described provider
(such as educational benefts/ programs of determined specifcations without mentioning the educational
institution) and obtaining the fee in the form of subscription income. Thus, the holders of the certifcates 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 certifcate 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 certifcates 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 certifcate holders when its produced on Istisna a
basis.
In this transaction the issuer of these certifcates 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 certifcate 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 certifcates that represent equal value issued for the purpose of fnancing the purchase of Murabahah
commodity and therefore, the certifcate holders become the owners of the purchased commodity.
In this transaction, the issuer of these certifcates 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 certifcate holders
own the Murabahah commodity and are entitled to its sale price.

2.2.5 Sukuk Al- Musaqaah (i.e. Irrigation certifcates)
5
These are certifcates 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 certifcate holders become entitled to a share in the crop as per
agreement.

In this transaction, the issuer of these certifcates is the owner of the garden/ land that consist of trees, the
5
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 certifcate 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 certifcates)
These are certifcates that represent equal value issued with the aim of using the mobilized funds for establishing
a new project or developing an existing one or fnancing a business activity on the basis of any of partnership
contracts. Thus, the certifcate 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 certifcates)
These are certifcates 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 specifc 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 certifcate holders own the assets of partnership including profts
and losses and they are entitled to share of proft, if any.
2.2.6.2 Sukuk Al- Mudarabah
6

These are certifcates 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 certifcates is the Mudarib, the subscribers are the capital owners and
mobilized funds are the Mudarabah capital. Thus, the certifcate holders own the assets of Mudarabah and share
the proft 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. Certifcates of investment agency)
These are certifcates 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 certifcate holders.
In this transaction, the issuer of these certifcates is the investment agent, the subscribers are the principals and
the mobilized funds are the entrusted capital of the investment. Thus, the certifcate holders own the assets
represented by the certifcates with its benefts and risks, and also they are entitled to the profts if any.
2.2.7 Sukuk Al- Muzaraah (i.e. sharecropping certifcates)
7

These are certifcates of equal value issued for the objective of using the mobilized funds in fnancing a project on
the basis of a Muzaraah contract. Thus, the certifcate holders become entitled to a share in the crop as per the
terms of the agreement.
In this transaction the issuer of these certifcates 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 certifcate
holders are entitled to a share of the produce of the land as per the agreement.
6
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 proft generated from the capital is shared
between the two parties (Rabbul mal and Mudarib} according to mutually agreed proft sharing ratio whilst fnancial losses
are borne by the Rabbul Mal provided that such losses are not due to the Mudaribs misconduct, negligence or breach of
specifed 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 certifcates 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 certifcate holders.
In this transaction the issuer of these certifcates 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
certifcate holders are the owners of Salam goods and they are also entitled to the sale price of the certifcate 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 certifcates of equal value issued in the name of investor therefore, a legitimate claim
of its owner/investor over the fnancial rights and obligations represented by the certifcate 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 proft 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 diferences between Sukuk Al- Istithmar and Bonds
Bond is defned as:
A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows
the funds for a defned period of time at a fxed interest rate
10
.
Based on this defnition of the bonds, we can see that the fundamental diferences between Bonds and Sukuk
Al-Istithmar is in the fact that Sukuk Al-Istithmar are not fxed 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 certifcates 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 fow 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 certifcate on the basis of any known
Sahari ah investment contracts, such as Wakalah or Mudarabah or Salam or Ijarah contracts etc. and the certif-
8. Al Salam i.e. Advance purchase contract.
9. 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.
7
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 identifed 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 fxed-income securities which
represent debts.
4.2 Under the umbrella of Sukuk Al istithmar there are diferent types of Sukuk with diferentShari 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 invest-
ment of whatever type. Therefore, the relationship between the investors and issuer is based on some kind of
partnership in proft 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. Certifcate 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) gen-
eral provisions and conditions. This is after closing subscription, receipt of the value of the certifcates 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:
8
12

Types

of

Sukuk

Al
-
Istthmar
Sukuk
Al-Ijarah
Sukuk
Al-Murabahah

Sukuk
Al- Muzara'ah

Sukuk of ownership
of usufructs.These
Sukuk have dierent
types as follows:
Sukuk
Al- Istsna a

Sukuk Al-
Musaqaah
Sukuk
Al - Salam

Sukuk Al-
Musharakah may be
managed on the
following basis
(a) Sukuk of ownership of
usufructs of existng 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
described future
(a) SukukAl -Sharikah
(b) Sukuk Al-Mudharabah

(c ) Sukukof investment
agency (i.e.Al Wakalah

bil Istthmar)
Mixed asset
Sukuk or
hybrid Sukuk
Combine two or
more forms of
Islamic
nancing in
their structure.
The underlying
pool of assets
can comprise of
Istsna,
Murabahah
receivables as
well as Ijarah
etc.
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 fxed profle
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 fnancial 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 difculties in restructuring Sukuk. However, once
several defaulting Sukuk were restructured and legal certainty was established the market confdence 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 specifc 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 fnancing as well as for aircraft
fnancing (Emirates Airline, Malaysian Airline, Air Asia) which are of long term nature and Sukuk is well suited for
these kind of fnancing requirement.
Finally, fnancial 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 fxed proft 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:
Chapter Two
9
Chart 1: Total Global Sukuk Issuance (All Currencies) - Jan 2001 Jan 2013 US$ Millions
Global Sukuk market continued its positive upward momentum after the initial shock of the fnancial 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 $100 Billion mark of fnancing arranged via Sukuk. The market achieved a very respectable
issuance of US$ 137 Billion.
The Financial crisis of 2008, which pressured developed market fnancial institution into contracting and
deleveraging, played a big part in propelling Sukuk issuance to new heights. Sukuk is now establishing a frm 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 fnancial institution in Kazakhstan
g) First Perpetual Sukuk by Abu Dhabi Islamic Bank
h) First Tier 1 Sukuk by Abu Dhabi Islamic Bank
500,000
450,000
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
0
1,172 1,371
7,057 9,465
13,698
33,837
50,041
24,264
37,904
52,978
92,403
137,499
472,683
10,993
2
0
0
1
2
0
0
2
2
0
0
3
2
0
0
4
2
0
0
5
2
0
0
6
2
0
0
7
2
0
0
8
2
0
0
9
2
0
1
0
2
0
1
1
2
0
1
2
2
0
1
3

-
J
a
n
u
a
r
y
T
o
t
a
l
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)

2012

PLUS

Berhad

Twenty Three Domestc Quasi-
Sovereign Sukuk issuances of various
tenors, Al Musharaka, issuer from
Malaysia
9,728 16
2012

Abu

Dhabi

Islamic

Bank

Internatonal Corporate, Mudarabah
Sukuk, Tier 1 & perpetual, issuer
1,000 Perpetual
2012

Qatar Internatonal Islamic
Bank
Internatonal Corporate Hybrid
Sukuk
700 5
2012

Qatar

Islamic

Bank

Internatonal Corporate Sukuk Al
Wakalah
750 5
2012

Celcom

Transmission

Five Domestc Corporate Sukuk
Issuances, Al Murabahah, Issuer
from Malaysia
1,442 8
2012

Tanjung

Bin

Power

9 Nine Domestc Corporate Sukuk
Issuances of various tenors, Al
Ijarah, issuer from Malaysia
1,101 12
2012

Emirates

Islamic

Bank

Two Internatonal Corporate Sukuk
issuances, Al Musharaka, issuer from
Dubai
1,000 6
2012

Johor

Corporaton

Three Domestc Corporate Sukuk
issuances, Al Wakalah, issuer from
Malaysia
941 7
2012

Banque

Saudi

Fransi

Internatonal Corporate Sukuk, Al
Wakalah, Tier 2, issuer from KSA
750 5
2012

Maxis

Berhad

Domestc Corporate Sukuk, Al
Musharaka, issuer from Malaysia
811 10
2012

Sarawak

Energy

Bhd

Two Domestc Corporate Sukuk
Malaysia
801 13
2012

Government

of

Malaysia

Seven Domestc Sovereign Sukuk
issuances of various tenors, Al
Murabahah
2,527 12
2012

Government

of

Indonesia

Internatonal Sovereign Sukuk Al
Ijarah 3.3% p.a. prot rate
1,000 10
2012

Government

of Turkey

1,500 6
2012

Government

of

Qatar

Two Internatonal Sovereign Sukuk
issuances, avg prot rate of 2.67%
p.a. Al Ijarah
4,000 16
2012

Government

of

Indonesia

Thirteen Domestc Sovereign Sukuk
Issuances of various tenors, Al Ijarah
3,620 9
2012

Government

of

Pakistan

Six Domestc Sovereign
Sukuk Issuances, Al Ijarah
3,135 3
2012

Government

of

Dubai

issuances, Al Ijarah, avg. prot rate
4.39% p.a.
1,250 8

Issue

Year

Issuer

Highlight

Amount in
Millions USD or
USD Equivalent
Average

Tenor

(Years)
2013 Sime Darby Berhad
The World biggest Palm Oil producer
and lowest ever USD prot by any
corporaton globally, two Sukuk
tranches having 5 & 10 years tenor
(Sukuk Al Ijarah Malaysian Issuer)
800 8
2013

Government

of

Dubai

Ijarah Issuer Dubai,
750 10
2012

Islamic

Development

Bank

Two Internatonal Quasi-Sovereign
Sukuk Issuances, Al Wakalah and
only AAA rated Sukuk
1,300 5
2012

Khazanah

Nasional

Bhd

Four Domestc Quasi-Sovereign
Sukuk issuances of various tenors, Al
Musharakah, Issuer from Malaysia ,
1,450 15
2012

Natonal Higher Educaton
Fund Corporaton
Malaysia
Two Domestc Quasi-Sovereign
Sukuk issuances, Al Murabahah,
Government of Malaysia
1,118 10
2012

Saudi

Electricity

Company

Two Internatonal Quasi-Sovereign
Sukuk Issuances, Al Ijarah,
issuerfrom KSA
1,750 8
2012

General Authority Of Civil
Aviaton
Domestc Quasi-Sovereign Sukuk, Al
Murabahah, issuer from KSA
4,000 10
11
Continuous innovation together with more Debut Sukuk issuances and refnancing 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.
2011

Malaysian

Airline

Nine Domestc Quasi-Sovereign
Sukuk issuances of various tenors, Al
Murabahah
2,576 7
2011

Islamic

Development

Bank

1 Internatonal Quasi-Sovereign
Sukuk Al Wakalah from KSA
750 5
2011

Manjung Island Energy
Berhad
7 Domestc Corporate Sukuk Al
Ijarah from Malaysia
1,242 9
2011

Saudi

Arabian

Aramco

Domestc Corporate Sukuk Al
Musharakah longer tenor
1,000 14
2011

Nakheel

Group

Domestc Corporate Sukuk Al Ijarah,
issuer from Dubai
1,034 5
2011

Sarawak

Energy Bhd

Four Domestc Corporate Sukuk
Issuances of various tenors,
AlMusharaka, issuer from Malaysia
990 9
2011

Central

Bank

of

Bahrain

Ijarah, 6.27% p.a. prot rate
750 7
2011

Government

of

Indonesia

Ijarah, 4% p.a. prot rate
1,000 7
2011

Government

of

Indonesia

Five Domestc Sovereign Sukuk
Issuances, Al Ijarah
2,033 10
2011

Government

of

Malaysia

Issuances, Al Wakalah,
2,000 8
2011

Government

of

Malaysia

Two Domestc Sovereign Sukuk Al
Murabahah,
984 9
2011 Government of Qatar Domestc Sovereign Sukuk Al Ijarah, 9,067 3
Source: IIFM Sukuk Issuance Database (Jan 2011 Jan 2013)

2012

PLUS

Berhad

Twenty Three Domestc Quasi-
Sovereign Sukuk issuances of various
tenors, Al Musharaka, issuer from
Malaysia
9,728 16
2012

Abu

Dhabi

Islamic

Bank

Internatonal Corporate, Mudarabah
Sukuk, Tier 1 & perpetual, issuer
1,000 Perpetual
2012

Qatar Internatonal Islamic
Bank
Internatonal Corporate Hybrid
Sukuk
700 5
2012

Qatar

Islamic

Bank

Internatonal Corporate Sukuk Al
Wakalah
750 5
2012

Celcom

Transmission

Five Domestc Corporate Sukuk
Issuances, Al Murabahah, Issuer
from Malaysia
1,442 8
2012

Tanjung

Bin

Power

9 Nine Domestc Corporate Sukuk
Issuances of various tenors, Al
Ijarah, issuer from Malaysia
1,101 12
2012

Emirates

Islamic

Bank

Two Internatonal Corporate Sukuk
Dubai
1,000 6
2012

Johor

Corporaton

Three Domestc Corporate Sukuk
issuances, Al Wakalah, issuer from
Malaysia
941 7
2012

Banque

Saudi

Fransi

Internatonal Corporate Sukuk, Al
Wakalah, Tier 2, issuer from KSA
750 5
2012

Maxis

Berhad

Domestc Corporate Sukuk, Al
Musharaka, issuer from Malaysia
811 10
2012

Sarawak

Energy

Bhd

Two Domestc Corporate Sukuk
Malaysia
801 13
2012

Government

of

Malaysia

Seven Domestc Sovereign Sukuk
issuances of various tenors, Al
Murabahah
2,527 12
2012

Government

of

Indonesia

1,000 10
2012

Government

of Turkey

1,500 6
2012

Government

of

Qatar

issuances, avg prot rate of 2.67%
p.a. Al Ijarah
4,000 16
2012

Government

of

Indonesia

Thirteen Domestc Sovereign Sukuk
Issuances of various tenors, Al Ijarah
3,620 9
2012

Government

of

Pakistan

Six Domestc Sovereign
Sukuk Issuances, Al Ijarah
3,135 3
2012

Government

of

Dubai

issuances, Al Ijarah, avg. prot rate
4.39% p.a.
1,250 8
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 refected 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 benefcial 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
Most of the Sukuk being issued of late has been fxed 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 fxed 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 proft and Islamic Proft Rate Hedging is already used by several
institutions based in GCC & Malaysia.
Issue

Year

Issuer

Issuance
Currency

Issuer

Country

Type of
Issued
Sukuk

Structure

Amount in
Millions
USD
Equivalent
Average
Tenor
(Years)
2012 First Resources Ltd MYR Singapore Corporate Sukuk Al Musharakah 319 5
2012

Natonal Bank of
Abu Dhabi
MYR

United Arab
Emirates
Corporate

Sukuk

Al

Murabahah

163 15
2012

Golden
Agri-Resources Ltd
MYR

Indonesia

Corporate

Sukuk

Al Murabahah

481 5
2012

Abu Dhabi Natonal
Energy Company
MYR

United Arab
Emirates
Corporate

Sukuk

Al Murabahah

212 10
2012

Noble Group
Limited
CYN

Hong

Kong

Corporate

Sukuk

Al

Murabahah

195.8 3
2012

UMW Toyota
Capital
MYR

Japan

Corporate

Sukuk

Al

Musharakah

89.56 4
2012

Bahrain
Mumtalakat
Holding Company
MYR

Bahrain

Sovereign

Sukuk

Al

Murabahah

97.44 5
2012 Axiata Berhad MYR Malaysia Corporate Hybrid Sukuk 157.85 2
2012

Development Bank
of Kazakhstan
MYR

Kazakhstan

Quasi-
Sovereign
Sukuk

Al

Murabahah

76.71 5
2012

Gulf Investment
Corporaton
MYR

Kuwait

Corporate

Sukuk

Al

Wakalah

101.08 13
2011

Gulf Investment
Corporaton
MYR

Kuwait

Corporate

Sukuk

Al

Wakalah

451 5
2011

Khazanah Nasional
Bhd
Malaysia

Quasi-
Sovereign
Sukuk

Al

Musharakah

78.2 3

13
Following are landmark Fixed Proft Rate Sukuk Issuances during Jan 2011 Jan 2013 period :
Table: 3 - Landmark Fixed Proft Rate Sukuk Issuances
2.3 Distribution of the Global Sukuk Issuance by Issuer Status
During the post fnancial 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%.
24-Jan-13 Government of Dubai Sovereign Internatonal Sukuk Al Ijarah 750 3.88%
16-Nov-12 Government of Indonesia Sovereign Internatonal Sukuk Al Ijarah 1,000 3.30%
12-Nov-12 Abu Dhabi Islamic Bank Corporate Internatonal Hybrid Sukuk 1,000 6.38%
11-Oct-12 Qatar Internatonal Islamic
Bank
Corporate

Internatonal

Hybrid

Sukuk

700

2.69%

3-Oct-12 Qatar Islamic Bank Corporate Internatonal Sukuk Al
Wakalah
750 2.50%
26-Sep-12 Government of Turkey Sovereign Internatonal Sukuk Al Ijarah 1,500 2.80%
18-Jul-12 Emaar Propertes, Dubai Corporate Internatonal Sukuk Al Ijarah 500 6.40%
11-Jul-12 Government of Qatar Sovereign Internatonal Sukuk Al Ijarah 2,000 2.10%
11-Jul-12 Government of Qatar Sovereign Internatonal Sukuk Al Ijarah 2,000 3.24%
25-Jun-12

Islamic Development Bank Quasi-
Sovereign
Internatonal

Sukuk Al
Wakalah
800

1.36%

19-Jun-12 Jebel Ali

Free

Zone,

Dubai

Corporate

Internatonal

Sukuk Al
Wakalah
650

7.00%

15-Jun-12 Natonal Higher Educaton
Fund Corporaton Malaysia
Quasi-
Sovereign
Domestc

Sukuk Al
Murabahah
789

3.85%

14-Jun-12

Johor Corporaton,Malaysia

Corporate

Domestc

Sukuk Al
Wakalah
564

3.84%

30-May-12

Dubai

Islamic Bank,UAE Corporate

Internatonal

Sukuk

Al

Ijarah

500

4.75%

22-May-12

Banque

Saudi

Fransi

Corporate

Internatonal

Sukuk Al
Wakalah
750

2.95%

25-Apr-12 Government of Dubai Sovereign Internatonal Sukuk Al Ijarah 650 6.45%
25-Apr-12 Government of Dubai Sovereign Internatonal Sukuk Al Ijarah 600 4.90%
28-Mar-12 Saudi

Electricity

Company

Quasi-
Sovereign
Internatonal

Sukuk

Al

Ijarah

500

2.67%
28-Mar-12 Saudi

Electricity

Company

Quasi
Sovereign
Internatonal

Sukuk Al

Ijarah

1,250

4.21%

18-Jan-12

Aviaton,Saudi Arabia
Quasi-
Sovereign
Domestc

Sukuk Al
Murabahah
4,000

2.50%

18-Jan-12 First Gulf Bank,UAE Corporate Internatonal Hybrid Sukuk 500 4.05%
30-Nov-11 Abu Dhabi Commercial
Bank,UAE
Corporate

Internatonal

Hybrid

Sukuk

500

3.78%

22-Nov-11 Central Bank of Bahrain Sovereign Internatonal Sukuk Al Ijarah 750 6.27%
21-Nov-11 Government of Indonesia Sovereign Internatonal Sukuk Al Ijarah 1,000 4.00%
25-Aug-11 Nakheel Group ,UAE Corporate Domestc Sukuk Al Ijarah 1,034 10.00%
2-Aug-11 First Gulf Bank Sukuk,UAE Corporate Internatonal Hybrid Sukuk 650 3.80%
2-Jun-11 HSBC Bank Middle East
Limited,UAE
Corporate

Internatonal

Hybrid

Sukuk

500

3.58%

25-May-11

Islamic

Development

Bank

Quasi-
Sovereign
Internatonal

Sukuk Al
Wakalah
750

2.35%

3-Feb-11 Emaar Propertes, Dubai Corporate Internatonal Sukuk Al Ijarah 500 8.50%
Issue

Date

Issuer

Type

of

Issued

Sukuk

Internatonal

or

Domestc

Structure

Amount in
Millions
USD or USD
Equivalent
Rate

of

Return

Per

Annum

14
Table: 4 - Global Sukuk Issuances by Issuer Status 2001- Jan 2013
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 frst
US $ 100 Millions or greater (International & Domestic)
Issuer

Status

No. of
Issues
Value (USD
Millions)
% of Total
Value
Sovereign 1,034 255,506 54%
Corporate 2,743 179,416 38%
Quasi-Sovereign 98 37,762 8%
Total 3,875 472,683 100%

Issue

Year

Issuer

Number
of
Issues

Issuer
Country

Internatonal

or

Domestc

Structure

Amount in
Millions
USD or USD
Equivalent
Average
Tenor
(Years)

2013

Government

of

Dubai

1

United Arab
Emirates
Internatonal

Sukuk

Al

Ijarah

750

10

2012

Government of
Malaysia
7

Malaysia

Domestc

Sukuk Al
Murabahah
2,527

12

2012

Government of
Indonesia
1

Indonesia

Internatonal

Sukuk

Al

Ijarah

1,000

10

2012 Government of Turkey 1 Turkey Internatonal Sukuk Al Ijarah 1,500 6
2012

Central Bank of
Bahrain
1

Bahrain

Domestc

Sukuk

Al

Ijarah

424

5

2012 Government of Qatar 2 Qatar Internatonal Sukuk Al Ijarah 4,000 16
2012

Government of
Indonesia
13

Indonesia

Domestc

Sukuk

Al

Ijarah

3,620

9

2012

Government of
Pakistan
6

Pakistan

Domestc

Sukuk

Al

Ijarah

3,135

3

2012

Government

of

Dubai

2

United Arab
Emirates
Internatonal

Sukuk

Al

Ijarah

1,250

8

2011

Central Bank of
Bahrain
1

Bahrain

Internatonal

Sukuk

Al

Ijarah

750

7

2011

Government of
Indonesia
1

Indonesia

Internatonal

Sukuk

Al

Ijarah

1,000

7

2011

Government of
Indonesia
5

Indonesia

Domestc

Sukuk

Al Ijarah

2,033

10

2011 Government of 2 Malaysia Internatonal Sukuk Al 2,000 8
Malaysia Wakalah
2011 Government of Sudan 1 Sudan Domestc Hybrid Sukuk 286 5
2011

Government of
Malaysia
2

Malaysia

Domestc

Sukuk Al
Murabahah
984

9

2011 Government of Qatar 1 Qatar Domestc Sukuk Al Ijarah 9,067 3
15
Table: 6 - Global Corporate Sukuk Issues -Selected Value Leaders 2011- Jan 2013 -
Year wise latest frst US $ 100 Millions or greater (International & Domestic)

Issue

Year

Issuer

Number
of
Issues

Issuer

Country

Internatonal

or

Domestc
Structure

Amount in
Millions
USD or USD
Equivalent
Average

Tenor
(Years)
2013 Sime Darby Berhad 2 Malaysia Internatonal Sukuk Al Ijarah 800 8
2013 Savola Group 1 Saudi Arabia Domestc Hybrid Sukuk 400 7
2013

Malako Corporaton
Berhad
3

Malaysia

Domestc

Sukuk

Al

Murabahah

696
9

2013 Segari Energy Ventures 1 Malaysia Domestc Sukuk Al Murabahah 559 15
2012

UEM Land Holdings
Berhad
1

Malaysia

Domestc

Sukuk

Al

Murabahah

196

5

2012

Banque

Saudi

Fransi

1 Saudi

Arabia

Domestc

Sukuk Al
Mudharabah
507

7

2012 Sime Darby Bhd 1 Malaysia Domestc Sukuk Al Murabahah 131 15
2012 First Resources Ltd 2 Singapore Internatonal Sukuk Al Musharakah 319 5
2012

Natonal Bank of Abu
Dhabi
1

United Arab
Emirates
Internatonal

Sukuk

Al Murabahah

163

15

2012 Saudi Hollandi Bank 1 Saudi Arabia Domestc Sukuk Al Murabahah 373 7
2012 Imtaz Sukuk Berhad 1 Malaysia Domestc Sukuk Al Musharakah 228 5
2012

Golden Agri-Resources
Ltd
1

Indonesia

Internatonal

Sukuk

Al

Murabahah

Sukuk

Al

Murabahah

481

5

2012

Abu

Dhabi

Islamic

Bank

1

United Arab
Emirates
Internatonal

1,000

Perpetual

2012

Qatar Internatonal
Islamic Bank
1

Qatar

Internatonal

Hybrid

Sukuk

700

5

2012 Qatar Islamic Bank 1 Qatar Internatonal Sukuk Al Wakalah 750 5
2012 HSBC Amanah 1 Malaysia Domestc Sukuk Al Wakalah 162 5
2012

Kuala Lumpur Kepong
Berhad
1

Malaysia

Domestc

Sukuk

Al

Ijarah

320

10

2012

Malako Corporaton
Berhad
1

Malaysia

Domestc

Sukuk

Al

Musharakah

576

30

2012 Celcom Transmission 5 Malaysia Domestc Sukuk Al Murabahah 1,442 8
2012 Tanjung Bin Power 9 Malaysia Domestc Sukuk Al Ijarah 1,101 12
2012

DanaInfra Nasional
Berhad
3

Malaysia

Domestc

Sukuk

Al

Murabahah

665

12

2012

Emaar

Propertes

1

United Arab
Emirates
Internatonal

Sukuk
Al Ijarah
500

7

2012 Cagamas Berhad 1 Malaysia Domestc Sukuk Al Ijarah 132 5
2012

Emirates

Islamic

Bank

2

United Arab
Emirates
Internatonal

Sukuk

Al

Musharakah

1,000

6

2012 Olayan Group 1 Saudi Arabia Domestc Hybrid Sukuk 173 5
2012

Jebel

Ali

Free

Zone

1

United Arab
Emirates
Internatonal

Sukuk

Al Wakalah

650

7

2012 Johor Corporaton 3 Malaysia Domestc Sukuk Al Wakalah 941 7
16
Contnue in next page

2012

Dubai

Islamic

Bank

1

United Arab
Emirates
Internatonal

Sukuk

Al

Ijarah

500

5

2012 Banque Saudi Fransi 1 Saudi Arabia Internatonal Sukuk Al Wakalah 750 5
2012

Saudi Arabia Natonal
Industrialisaton
Company
1 Saudi Arabia

Domestc

Hybrid

Sukuk

533

7

2012 Aman Sukuk Berhad 1 Malaysia Domestc Sukuk Al Musharakah 116 10
2012 Saudi Britsh Bank 1 Saudi Arabia Domestc Hybrid Sukuk 400 5
2012 Al Marai Company 1 Saudi Arabia Domestc Hybrid Sukuk 267 7
2012

Abu Dhabi Natonal
Energy Company
1

United Arab
Emirates
Internatonal
Sukuk
Al

Murabahah

212

10

2012 Maxis Berhad 1 Malaysia Domestc Sukuk Al Musharakah 811 10
2012 DRB-HICOM Bhd 1 Malaysia Domestc Sukuk Al Murabahah 132 9
2012

Majid Al Futaim
Propertes 1
United Arab
Emirates
Internatonal

Sukuk

Al

Wakalah

400

5

2012 Sarawak Energy Bhd 2 Malaysia Domestc Sukuk Al Musharakah 801 13
2012

First

Gulf

Bank

1

United Arab
Emirates
Internatonal

Hybrid

Sukuk

500
5

2012

Tamweel

Funding

1

United Arab
Emirates
Internatonal

Hybrid

Sukuk

300

5

2011

Abu Dhabi Commercial
Bank
1

United Arab
Emirates
Internatonal

Hybrid

Sukuk

500

5

2011

Berhad 7
Malaysia

Domestc

Sukuk

Al

Ijarah

1,242

9

2011

Kuveyt Trk Kat l m
Bankas
1

Turkey

Internatonal

Hybrid

Sukuk

350

5
2011

Saudi Arabian Aramco
Total Services Company
1

Saudi

Arabia
Domestc
Sukuk
Al
Musharakah

1,000

14

2011 AmIslamic Bank Berhad 1 Malaysia Domestc Sukuk Al Musharakah 192 10
2011

Nakheel

Group

1

United Arab
Emirates
Domestc

Sukuk

Al

Ijarah

1,034

5

2011

SapuraKencana
Petroleum
1

Malaysia

Domestc

Sukuk Al
Mudharabah
158

5

2011

Kencana

Petroleum

Bhd

1

Malaysia

Domestc

Sukuk Al
Mudharabah
167

5

2011

Gulf Investment
Corporaton
2

Kuwait

Internatonal

Sukuk

Al

Wakalah

451

5

2011

First

Gulf

Bank

1

United Arab
Emirates
Internatonal

Hybrid

Sukuk

650
5

2011 Almana Group W.L.L 1 Qatar Internatonal Sukuk Al Wakalah 215 5
2011 Sarawak Energy Bhd 4 Malaysia Domestc Sukuk Al Musharakah 990 9
2011

Saudi Internatonal
Petrochemical Company
1

Saudi

Arabia

Domestc

Sukuk Al
Mudharabah
480

5
2011

Bank Muamalat
Malaysia Berhad
1

Malaysia

Domestc

Sukuk

Al

Musharakah

132

10

2011

HSBC Bank Middle East
Limited
1

United Arab
Emirates
Internatonal

Hybrid

Sukuk

500

5

2011

Sharjah

Islamic

Bank

1

United Arab
Emirates
Internatonal

Sukuk

Al

Wakalah

400

5

2011 Al Rajhi Cement 1 Jordan Domestc Sukuk Al Ijarah 119 7
2011 Maybank Islamic 1 Malaysia Domestc Sukuk Al Musharakah 330 10
2011 Bank Al Jazira 1 Saudi Arabia Domestc Hybrid Sukuk 267 10
2011 Cagamas Berhad 1 Malaysia Domestc Hybrid Sukuk 131 5
2011

First Investment
Company
1

Kuwait

Domestc

Sukuk

Al

Wakalah

332
5

2011

Emaar

Propertes

1

United Arab
Emirates
Internatonal

Sukuk

Al

Ijarah

500
6

17
Table: 7 - Global Quasi-Sovereign Sukuk Issues -Selected Value Leaders 2011-2012
Year wise latest frst US $ 100 Millions or greater (International & Domestic)
Following are chart on Domestic and International Sukuk market:
Chart 2: Total Global Sukuk Issuance (All Currencies) Breakdown by Issuer Status
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 fnance 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.
Issue

Year

Issuer

Number
of
Issues

Issuer

Country

Internatonal

or

Domestc

Structure

Amount in
Millions
USD or USD
Equivalent
Average
Tenor
(Years)

2012

Malaysia Airports Capital
Berhad
1

Malaysia

Domestc

Sukuk

Al Ijarah

196

12

2012

Islamic

Development

Bank

2

Saudi

Arabia

Internatonal

Sukuk Al
Wakalah
1,300

5

2012

Khazanah

Nasional

Bhd

4

Malaysia

Domestc

Sukuk Al
Musharakah
1,450

15

2012

Natonal Higher Educaton
Fund Corporaton Malaysia
2

Malaysia

Domestc

Sukuk Al
Murabahah
1,118

10

2012

Malaysian Airline System
Berhad
2

Malaysia

Domestc

Sukuk Al
Musharakah
479

10

2012

Syarikat Prasarana Negara
Berhad
2

Malaysia

Domestc

Sukuk Al
Murabahah
642

13

2012 Saudi Electricity Company 2 Saudi Arabia Internatonal Sukuk Al Ijarah 1,750 8
2012

Khazanah

Nasional

Bhd

1

Malaysia

Internatonal

Sukuk Al
Musharakah
358
7

2012

Aviaton
1

Saudi

Arabia

Domestc

Sukuk Al
Murabahah
4,000

1

2012

PLUS

Berhad

23

Malaysia

Domestc

Sukuk Al
Musharakah
9,728

16

2011

Pengurusan Aset Air
Berhad
9

Malaysia

Domestc

Sukuk Al
Murabahah
2,576

7

2011

Syarikat Prasarana Negara
Berhad
2

Malaysia

Domestc

Sukuk

Al

Ijarah

673

13

2011

Islamic

Development

Bank

1

Saudi

Arabia

Internatonal

Sukuk Al
Wakalah
750

5

2011

Khazanah

Nasional

Bhd

1

Malaysia

Domestc

Sukuk Al
Musharakah
334

20

Domestc Sukuk Issuances 2001-2010
Sovereign,
(86,498)
47%
Corporate,
(93,022)
51%
Quasi-
Sovereign,
(4,104)2%

Quasi-
Sovereign,
(22,392)1
1%
Sovereign,
(148,132)
70%
Corporate
(40,210)
19%
Domestc Sukuk Issuances 2011-Jan 2013
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.
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 confdence 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 confdence 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 ofer 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 ofers investors and fund managers with a good mix of Sovereign and Corporate risk to consider.
The choice ofers the fund manager to not only diversify credit risk but also take into account their risk return
profle 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$13.80 billion. Currently outstanding International
Sukuk fgure is approximately US$ 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
confrmation of this prediction.
International Sukuk Issuances 2001-2010
International Sukuk Issuances 2011-Jan 2013
Sovereign
(8,529)
18%
Quasi-
Sovereign
(6,953)
14%
Corporate,
(32,681)
68%

Corporate,
(13,502)
45%
Sovereign,
(12,347)
41%
Quasi-
Sovereign,
(4,313)14%
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
4 3,131 4%
Pakistan
1 600 0.77%
Singapore
2 319 0.41%
Hong Kong
2 196 0.25%
Japan
3 190 0.24%
Total
31 14,113 18%
GCC & MIDDLE EAST Number of Issues Amount USD Millions % of Total
Value
Bahrain
93 6,780 8.7%
Qatar
9 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%
Total
180 61,119 78%
AFRICA Number of Issues Amount USD Millions % of Total
Value
Sudan
1 130 0.17%
Total 1 130
0.17%
EUROPE & OTHERS Number of Issues Amount USD Millions % of Total
Value
Turkey
3 1,950 2.5%
Germany
1 55 0.07%
UK
3 282 0.36%
France
1 1 0.00%
USA
2 600 0.77%
Kazakhstan
1 77 0.10%
Total
11 2,965 4%
Grand Total 223

78,326

100%

20
Table : 9 - Selected Value Leaders in International Sukuk Market for Jan 2011- Jan 2013
(US $ 50 million or greater)

Issue
Year

Issuer

Number
of
Issues
Issuer

Country

Type of
Issued
Sukuk
Structure

Millions
USD
Average
Tenor
(Years)
2013 Sime Darby Berhad 2 Malaysia Corporate Sukuk Al Ijarah 800 8
2013 Government of Dubai 1 United Arab Emirates Sovereign Sukuk Al Ijarah 750 10
2012 FWU AG Group 1 Germany Corporate Sukuk Al Ijarah 55 7
2012

Abu Dhabi Islamic
Bank
1

United

Arab

Emirates

Corporate

Hybrid

Sukuk

1,000

Perpetual

2012

Qatar Internatonal
Islamic Bank
1

Qatar

Corporate

Hybrid

Sukuk

700

5

2012 Qatar Islamic Bank 1 Qatar Corporate Sukuk Al Wakalah 750 5
2012 Emaar Propertes 1 United Arab Emirates Corporate Sukuk Al Ijarah 500 7
2012

Emirates

Islamic

Bank

2

United

Arab

Emirates

Corporate

Sukuk Al
Musharakah
1,000

6

2012 Jebel Ali Free Zone 1 United Arab Emirates Corporate Sukuk Al Wakalah 650 7
2012 Dubai Islamic Bank 1 United Arab Emirates Corporate Sukuk Al Ijarah 500 5
2012 Banque Saudi Fransi 1 Saudi Arabia Corporate Sukuk Al Wakalah 750 5
2012

Majid Al Futaim
Propertes
1

United

Arab Emirates

Corporate

Sukuk
Al
Wakalah

400

5

2012 First Gulf Bank 1 United Arab Emirates Corporate Hybrid Sukuk 500 5
2012 Tamweel Funding 1 United Arab Emirates Corporate Hybrid Sukuk 300 5
2012

Islamic Development
Bank
2

Saudi

Arabia

Quasi-
Sovereign
Sukuk

Al

Wakalah

1,300

5

2012 Saudi Electricity 2 Saudi Arabia Quasi- Sukuk Al Ijarah 1,750 8
Company Sovereign
2012

Khazanah Nasional
Bhd
1

Malaysia

Quasi-
Sovereign
Sukuk Al
Musharakah
358

7

2012

Government of
Indonesia
1

Indonesia

Sovereign

Sukuk

Al

Ijarah

1,000

10

2012 Government of Turkey 1 Turkey Sovereign Sukuk Al Ijarah 1,500 6
2012 Government of Qatar 2 Qatar Sovereign Sukuk Al Ijarah 4,000 16
2012 Government of Dubai 2 United Arab Emirates Sovereign Sukuk Al Ijarah 1,250 8
2011

Abu Dhabi
Commercial Bank
1

United

Arab Emirates

Corporate

Hybrid

Sukuk

500

5

2011

Kuveyt Trk Kat l m
Bankas
1

Turkey

Corporate

Hybrid

Sukuk

350

5

2011 First Gulf Bank 1 United Arab Emirates Corporate Hybrid Sukuk 650 5
2011 Almana Group W.L.L 1 Qatar Corporate Sukuk Al Wakalah 215 5
2011

HSBC Bank Middle
East Limited
1

United

Arab

Emirates

Corporate

Hybrid

Sukuk

500

5

2011 Sharjah Islamic Bank 1 United Arab Emirates Corporate Sukuk Al Wakalah 400 5
2011 Emaar Propertes 1 United Arab Emirates Corporate Sukuk Al Ijarah 500 6
2011

Islamic Development
Bank
1

Saudi

Arabia

Quasi-
Sovereign
Sukuk

Al

Wakalah

750

5

2011

Central Bank of
Bahrain
1

Bahrain

Sovereign

Sukuk

Al

Ijarah

750

7

2011

Government of
Indonesia
1

Indonesia

Sovereign

Sukuk

Al

Ijarah

1,000

7

2011

Government of
Malaysia
2

Malaysia

Sovereign

Sukuk

Al

Wakalah

2,000

8

21
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 feld 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 fgure 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%
Singapore
5 192 0.05%
Total
3,304 337,015 85.5%
GCC & MIDDLE EAST Number of Issues Amount USD Millions % of Total
Value
Bahrain
173 5,675 1.4%
Qatar
3 9,548 2.4%
Saudi Arabia
26 18,712 4.7%
United Arab Emirates
13 8,218 2.1%
Kuwait
1 332 0.08%
Jordan
1 119 0.03%
Yemen
2 253 0.06%
Total
219 42,856 10.9%
AFRICA Number of Issues Amount USD Millions % of Total
Value
Sudan
22 13,214 3.4%
Gambia
104 78 0.02%
Total 126 13,292
3.37%
EUOROPE & OTHERS Number of Issues Amount USD Millions % of Total Value
Turkey
1 905 0.23%
Germany
1 123 0.03%
USA
1 167 0.04%
Total
3 1,195 0.30%
Grand Total 3,652

394,358

100%

22
Table: 11- Domestic Sukuk Issues -Selected Value Leaders in Local Currency 2011- 2013
Year wise latest frst US $ 100 Millions or greater (Corporate, Sovereign & Quasi-Sovereign)
2013

Malako Corporaton
Berhad
3

Malaysia

Corporate

Sukuk

Al

Murabahah

696

9

2013 Segari Energy Ventures 1 Malaysia Corporate Sukuk Al Murabahah 559 15
2012

UEM Land Holdings
Berhad
1

Malaysia

Corporate

Sukuk

Al

Murabahah

196

5

2012

Banque

Saudi Fransi

1

Saudi
Arabia
Corporate

Sukuk

Al

Mudharabah

507

7

2012 Sime Darby Bhd 1 Malaysia Corporate Sukuk Al Murabahah 131 15
2012

Saudi

Hollandi

Bank

1

Saudi
Arabia
Corporate

Sukuk

Al

Murabahah

373

7

2012 Imtaz Sukuk Berhad 1 Malaysia Corporate Sukuk Al Musharakah 228 5
2012 HSBC Amanah 1 Malaysia Corporate Sukuk Al Wakalah 162 5
2012

Kuala Lumpur Kepong
Berhad
1

Malaysia

Corporate

Sukuk

Al

Ijarah

320

10

2012

Malako Corporaton
Berhad
1

Malaysia

Corporate

Sukuk

Al

Musharakah

576

30

2012 Celcom Transmission 5 Malaysia Corporate Sukuk Al Murabahah 1,442 8
2012 Tanjung Bin Power 9 Malaysia Corporate Sukuk Al Ijarah 1,101 12
2012

DanaInfra Nasional
Berhad
3

Malaysia

Corporate

Sukuk

Al

Murabahah

665

12

2012 Cagamas Berhad 1 Malaysia Corporate Sukuk Al Ijarah 132 5
2012

Olayan

Group

1 Saudi
Arabia
Corporate

Hybrid

Sukuk

173

5

2012 Johor Corporaton 3 Malaysia Corporate Sukuk Al Wakalah 941 7
2012

Saudi Arabia Natonal
Industrialisaton
Company
1

Saudi

Arabia
Corporate

Hybrid

Sukuk

533

7

2012 Aman Sukuk Berhad 1 Malaysia Corporate Sukuk Al Musharakah 116 10
2012

Saudi

Britsh

Bank

1

Saudi
Arabia
Corporate

Hybrid

Sukuk

400

5

2012

Al

Marai

Company

1

Saudi
Arabia
Corporate

Hybrid

Sukuk

267

7

2012 Maxis Berhad 1 Malaysia Corporate Sukuk Al Musharakah 811 10
2012 DRB-HICOM Bhd 1 Malaysia Corporate Sukuk Al Murabahah 132 9
2012 Sarawak Energy Bhd 2 Malaysia Corporate Sukuk Al Musharakah 801 13
2012

Government of
Malaysia
7

Malaysia

Sovereign

Sukuk

Al

Murabahah

2,527

12

2012 Central Bank of Bahrain 1 Bahrain Sovereign Sukuk Al Ijarah 424 5
2012

Government of
Indonesia
13

Indonesia

Sovereign

Sukuk

Al

Ijarah

3,620

9

2012

Government of
Pakistan
6

Pakistan

Sovereign

Sukuk

Al

Ijarah

3,135

3

2012

Malaysia Airports
Capital Berhad
1

Malaysia

Quasi-
Sovereign
Sukuk

Al

Ijarah

196

12

2012

Khazanah

Nasional

Bhd

4

Malaysia

Quasi-
Sovereign
Sukuk

Al

Musharakah

1,450

15

Issue
Year

Issuer

Number
of
Issues

Issuer
Country

Issued
Sukuk
Structure

Amount in

Equivalent
Average
Tenor
(Years)
2013

Savola

Group

1

Saudi
Arabia
Corporate

Hybrid

Sukuk

400

7

23
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.
Educaton Fund
Corporaton Malaysia
Sovereign
2012

Malaysian Airline
System Berhad
2

Malaysia

Quasi-
Sovereign
Sukuk Al

Musharakah

479

10

2012

Syarikat Prasarana
Negara Berhad
2

Malaysia

Quasi-
Sovereign
Sukuk

Al

Murabahah

642

13

2012

General Authority Of
Civil Aviaton
1

Saudi
Arabia
Quasi-
Sovereign
Sukuk

Al

Murabahah

4,000

10

2012

PLUS

Berhad

23

Malaysia

Quasi-
Sovereign
Sukuk

Al

Musharakah

9,728

16

2011

Berhad
7

Malaysia

Corporate

Sukuk

Al

Ijarah

1,242

9

2011

Saudi Arabian Aramco
Total Services Company
1

Saudi
Arabia
Corporate

Sukuk

Al

Musharakah

1,000

14

2011 AmIslamic Bank Berhad 1 Malaysia Corporate Sukuk Al Musharakah 192 10
2011

Nakheel

Group

1

United
Arab
Emirates
Corporate

Sukuk Al

Ijarah

1,034

5

2011

SapuraKencana
Petroleum
1

Malaysia

Corporate

Sukuk

Al Mudharabah

158

5

2011 Kencana Petroleum Bhd 1 Malaysia Corporate Sukuk Al Mudharabah 167 5
2011 Sarawak Energy Bhd 4 Malaysia Corporate Sukuk Al Musharakah 990 9
2011

Saudi Internatonal
Petrochemical
Company
1

Saudi
Arabia

Corporate

Sukuk

Al

Mudharabah

480

5

2011

Bank Muamalat
Malaysia Berhad
1

Malaysia

Corporate

Sukuk

Al

Musharakah

132

10

2011 Al Rajhi Cement 1 Jordan Corporate Sukuk Al Ijarah 119 7
2011 Maybank Islamic 1 Malaysia Corporate Sukuk Al Musharakah 330 10
2011

Bank

Al

Jazira

1 Saudi
Arabia
Corporate

Hybrid

Sukuk

267

10
2011 Cagamas Berhad 1 Malaysia Corporate Hybrid Sukuk 131 5
2011

First Investment
Company
1

Kuwait

Corporate

Sukuk

Al Wakalah

332

5

2011

Government of
Indonesia
5

Indonesia

Sovereign

Sukuk

Al

Ijarah

2,033

10

2011 Government of Sudan 1 Sudan Sovereign Hybrid Sukuk 286 5
2011

Government of
Malaysia
2

Malaysia

Sovereign

Sukuk

Al Murabahah

984

9

2011 Government of Qatar 1 Qatar Sovereign Sukuk Al Ijarah 9,067 3
2011

Pengurusan Aset Air
Berhad
9

Malaysia

Quasi-
Sovereign
Sukuk

Al

Murabahah

2,576

7

2011

Syarikat Prasarana
Negara Berhad
2

Malaysia

Quasi-
Sovereign
Sukuk

Al

Ijarah

673

13

2011

Khazanah

Nasional

Bhd

1

Malaysia

Quasi-
Sovereign
Sukuk

Al

Musharakah

334

20

2012 Natonal Higher

2 Malaysia Quasi- Sukuk Al Murabahah 1,118 10
24
Chart 3: Total Global Sukuk Issuance by Value (All currencies) Structural Breakdown

Chart 4: Total Global Sukuk Issuance by currency Breakdown 2001- Jan 2013
Malaysian Ringgit takes the frst spot mainly due to its strong and deep local fxed 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 fne 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 fow will continue, since the sovereign needs to fund its budget while also sets up the local benchmark curves.

Sukuk
Al Wakalah
(371) 0%
Hybrid Sukuk
(10,552) 6%
Bai Bithaman
Ajil (12,207)
7%
Sukuk Al Istsnaa
(3,469) 2%
Sukuk Al Salam
(1,291) 1%
Sukuk
Al Musharakah
(39,318) 21%
Sukuk
Al Murabaha,
(76,802) 42%
Sukuk
Al Ijarah
(35,746) 19%
Sukuk
Al Mudharabah
(3, 458) 2%
Islamic
Exchangeable
Sukuk (408) 0%

Hybrid Sukuk
(3,516) 2%
Bai Bithaman Ajil
(18,782) 9%
Sukuk
Al Murabaha
(122,173) 58%
Sukuk
Al Ijarah
(32,214) 15%
Sukuk
Al Wakalah
(1,595) 1%
Sukuk
Al Mudharabah
(7,029) 3%
Sukuk
Al Istsnaa (19)
0%
Sukuk
Al Musharakah
(23,932)
11%
Sukuk Al Salam
(1,473) 1%
Islamic Exchangeable
Sukuk (6,190) 13%
Sukuk
Al Mudharabah
(4,725) 10%
Sukuk Al Wakalah
(3,228) 7%
Hybrid Sukuk
(1,237) 2%
Sukuk Al Murabahah
(756) 2%
Sukuk Al Salam
(1,958) 4%
Sukuk Al Musharakah
(9,286) 19%
Sukuk Al Ijarah
(20,784) 43%
Sukuk Al Wakalah
(7,767) 26%
Hybrid Sukuk
(4,658) 15%
Sukuk Al Murabahah
(1,527) 5%
Sukuk
Al Musharakah
(1,845) 6%
Sukuk
Al Mudharabah
(1) 0%
Sukuk Al Ijarah
(14,366) 48%
25

Singapore Dollars
(SGD) 0%
Turkish lira (TRY)
0%
Emirat Dirhams
(AED)
2%
Bahraini
Dinars
(BHD)
1%
Bruneian
Dollars
(BND)
1%
Chinese Yuan
Renminbi
(CNY)
0%
Britsh
Pounds
(GBP)
0%
Gambian
Dalasi
(GMD)
0%
Indonesian
Rupiah
(IDR)
3%
Jordanian Dinars
(JOD)
0%
Euros
(EUR)
0%
Kuwait Dinars
(KWD)
0%
Malaysian Ringgit
(MYR)
67%
Yemeni Riyals
(YER)
0%
United States Dollars
(USD)
16%
Sudanese Pounds
(SDG) 3%
Saudi Riyals
(SAR) 4%
Qatari Riyals
(QAR) 2%
Pakistani Rupees
(PKR) 1%
Domestic Sukuk Issuances 2001-2010
International Sukuk Issuances 2001-2010
Domestic Sukuk Issuances 2011 - Jan 2013
International Sukuk Issuances 2011 - Jan 2013
Chart 5: Total Global Sukuk Issuance by Regional Breakdown 2001- Jan 2013
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 fnancial 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
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 fnancial crisis.
Table: 13 - Cross Border International Sukuk Maturing 2014
Europe & Others (4,159) 1%
Africa (13, 422) 3%
GCC & Middle
East (103,975)
22%
Asia & Far East,
(351,12)74%
Year

Sukuk

Issuer

Issuer Currency Issue

Type

Intl Sukuk Amount

(US$m)

Tenor Maturity

Date Issued

Country

Type

Month
2010

KT Turkey sukuk
Limited
Turkey

USD

Corporate Intl

Murabahah

100

36 31-Aug-13
2008

Government of
Bahrain
Bahrain

USD

Sovereign

Intl

Ijarah

350

60 31-Mar-13
2008

Khazanah Nasional
Bhd
Malaysia

USD

Quasi-
Sovereign
Intl

Exchangeable

550

60 31-Mar-13
2008

Gulf Holding
Company ( Villamar
Sukuk company
limited)
Kuwait

USD

Corporate Intl Musharakah

190 60 31-May-13
Total Maturity Value 1,190
Issue

Sukuk

Issuer

Issuer

Country
Currency
Issue
Type
Intl

Sukuk
Type
Amount Tenor
Maturity
Date Year (US$m) Month
2009

Indonesian Government
Shariah securites
Indonesia

USD

Sovereign

INTL

Ijarah

650

60 30-Apr-14
2009 Government of Bahrain Bahrain USD Sovereign INTL Ijarah 750 60 30-Jun-14
2009 Govt of Ras Al Khaimah UAE USD Sovereign INTL Ijarah 400 60 31-Jul-14
2009

Petroliam Nasional Bhd
(Petronas)
Malaysia

USD

Corporate INTL Ijarah

1,500 60 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 Berber Cement Co, Sudan Sudan USD Corporate INTL Musharakah 130 84 30-Sep-14
2009

Islamic Development Bank
(IDB)
Saudi
Arabia
USD

Quasi-
Sovereign
INTL Wakalah

850

60 30-Sep-14
2009 Government of Dubai UAE USD Sovereign INTL Ijarah 1,250 60 31-Oct-14
2009

Tourism Deveopment
Investment Company
UAE

USD

Corporate INTL Ijarah

1,000

60 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 Internatonal Bank Bahrain USD Corporate INTL Murabahah 300 36 31-Dec-14
26
Starting from 30th June to 31st Dec 2014 we have 12 Sukuk maturing which could well provide some refnancing
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 fnancing 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
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 )
Year Obligor
Issuer
Currency
Issue
Type Domestc
Sukuk
Amount
(US$m)

Maturity Country Type Month
2008 Government of Sudan Sudan SDG Sovereign Domestc ijara 131 60 31-Jan-13
2006

Putrajaya Holdings
Sdn Bhd
Malaysia

MYR

Corporate

Domestc

Murabahah

579

84

31-Jan-13
2010

Indonesian
Government
Indonesia

IDR

Sovereign

Domestc

Ijarah

880

36

28-Feb-13
2008

Government of
Malaysia
Malaysia

MYR

Sovereign

Domestc

Murabahah

627

60

31-Mar-13
2003

Petronas Fertliser
Sdn Bhd
Malaysia

MYR

Corporate

Domestc

BBA

198

120

31-Mar-13

2006

Rantau Abang Capital
Bhd
Malaysia

MYR

Corporate

Domestc

Musharakah

789

84

31-Mar-13
2006

Bhd
Malaysia

MYR

Corporate

Domestc

Musharakah

2,029

84

31-Mar-13
2010

Bank Pembangunan
Malysia
Malaysia

MYR

Sovereign

Domestc

Murabahah

157

36

30-Apr-13

2007

Nucleus Avenue
Malaysia Bhd
Malaysia

MYR

Corporate

Domestc

Musharakah

205

72

30-Apr-13
2010

Indonesian
Government
Indonesia

IDR

Sovereign

Domestc

Ijarah

465

36

17-May-13
2010 Cagamas Berhad Malaysia MYR Corporate Domestc Ijarah 184 36 31-May-13
2008 Dubai Elec (DEWA) UAE AED Corporate Domestc Ijarah 871 60
31-May-13
2006 Gas Malaysia Malaysia MYR Corporate Domestc Murabahah 132 84
31-May-13
2008

Gov of Ras Al
Khaimah
UAE

AED Sovereign

Domestc

Ijarah

272 60

31-May-13
2008

Mohammed H. Al
Mana Grp
UAE

AED

Corporate

Domestc

Mudharabah

163

60

31-May-13
2006

Putrajaya Holdings
Sdn Bhd
Malaysia

MYR

Corporate

Domestc

Murabahah

395

84

31-May-13
2012 Sime Darby Bhd Malaysia MYR Corporate Domestc Murabahah 157 12
31-May-13
2008 Aldar Propertes PJSC UAE AED Corporate Domestc Ijarah 1,021 60 30-Jun-13
2008 Tamweel PJSC UAE AED Corporate Domestc Ijarah 299 60 31-Jul-13
2010 Cagamas Berhad Malaysia MYR Corporate Domestc Ijarah 318 36 31-Aug-13
2003

Putrajaya Holdings
Sdn Bhd
Malaysia

MYR

Corporate

Domestc

BBA

225

124

31-Aug-13
2006

Berhad
Malaysia

MYR

Corporate

Domestc

Musharakah

395

84

31-Aug-13
2008 Binladin Group, Saudi Saudi SAR Corporate Domestc 267 60 30-Sep-13
Arabia Arabia
Mudharabah

2009

Government of
Pakistan
Pakistan

PKR

Sovereign

Domestc

Ijarah

174

48

30-Sep-13
2006 Scomi Group Malaysia MYR Corporate Domestc Murabahah 166 84 31-Oct-13
2010 Government of Sudan Sudan SDG Sovereign Domestc Hybrid 313 36 30-Nov-13
2010

Government of
Pakistan
Pakistan

PKR

Sovereign

Domestc

Ijarah

592

36

30-Nov-13
2006

Am Islamic Bank
Berhad
Malaysia

MYR

Corporate

Domestc

Musharakah

105

84

31-Dec-13
2010 Cagamas Berhad Malaysia MYR Corporate Domestc Ijarah 223 36 31-Dec-13
2006 MISC Berhad Malaysia MYR Corporate Domestc Murabahah 263 84 31-Dec-13
2010

Government of
Pakistan
Pakistan

PKR

Sovereign

Domestc

Ijarah

424

36

31-Dec-13

27
Table : 15 - Domestic Sukuk Maturing 2014
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.

Year Obligor
Issuer
Country Currency Issue Type Domestc Type
Amount
(US$m) Tenor
Maturity
Date
2011 Qatar Central Bank Qatar QAR Sovereign Domestc Ijara 9,067 36 16-Jan-14
2009 Sudan Govt Sudan SDG Sovereign Domestc Hybrid 125 60 31-Jan-14
2011

Padiberas Nasional
Bhd
Malaysia

MYR

Corporate

Domestc

Musharaka

114

36

31-Jan-14
2011 Pakistan Govt Pakistan PKR Sovereign Domestc Ijara 555 36 28-Feb-14
2011

Pengurusan Aset Air
Bhd
Malaysia

MYR

Quasi-
Sovereign Domestc
Murabaha

395

36

28-Feb-14
2009

Penerbangan
Malaysia Bhd
Malaysia

MYR

Quasi-
Sovereign
Domestc

Murabaha

406

60

31-Mar-14
2012 Central Bk of Yemen Yemen YER Sovereign Domestc Salam 234 12 1-Apr-14
2005

Golden Crop Returns
Bhd
Malaysia

MYR

Corporate

Domestc

Ijara

116

102

30-Apr-14

2009

Khazanah Nasional
Bhd
Malaysia

MYR

Quasi-
Sovereign
Domestc

Musharaka

303

60

30-Apr-14
2007

Kuala Lumpur Sentral
Sdn Bhd
Malaysia

MYR

Corporate

Domestc

Musharaka

208

84 30-Apr-14
2013

Malako Power Sdn.
Bhd.
Malaysia

MYR

Corporate

Domestc

Murabaha

232

15

30-Apr-14
2007

Nucleus Avenue
Malaysia Bhd
Malaysia

MYR

Corporate

Domestc

Musharaka

205

84

30-Apr-14
2011 GovPakistan Pakistan PKR Sovereign Domestc Ijara 537 36 8-May-14
2009

(Dar

Al Arkan)

Saudi
Arabia
SAR

Corporate

Domestc

Ijarah

200

60

31-May-14
2007 Cagamas Berhad Malaysia MYR Corporate Domestc Ijarah 2,890 84 30-Jun-14
2011

Pengurusan Aset Air
Berhad
Malaysia

MYR

Quasi-
Sovereign
Domestc

Murabahah

164

36

30-Jun-14
2007 Silterra Malaysia Malaysia MYR Corporate Domestc Ijarah 529 84 30-Jun-14
Sdn.Bhd
2011 Cagamas Berhad Malaysia MYR Corporate Domestc Ijarah 207 36 31-Jul-14
2004 Bahrain Govt Bahrain BHD Sovereign Domestc Ijarah 106 120 31-Jul-14
2012 Indonesia Govt Indonesia IDR Sovereign Domestc Ijarah 104 60 9-Aug-14
2010 Indonesian Govt Indonesia IDR Sovereign Domestc Ijarah 313 48 9-Aug-14
2012 Indonesia Govt Indonesia IDR Sovereign Domestc Ijarah 156 96 25-Aug-14
2005 Bayu Padu Sdn Bhd Malaysia MYR Corporate Domestc Istsna'a 132 108 31-Aug-14
2004 Gas Malaysia Malaysia MYR Corporate Domestc BBA 184 120 30-Sep-14
2011

Government of
Malaysia (GII)
Malaysia

MYR

Sovereign

Domestc

BBA

958

33

30
-
Sep-14
2011

Government of
Malaysia (GII)
Malaysia

MYR

Sovereign

Domestc

Murabahah

1,322

42

30-Sep-14
2011 MISC Berhad Malaysia MYR Corporate Domestc BBA 160 36 30-Sep-14
2004

Optmal Chemicals
Sdn Bhd
Malaysia

MYR

Corporate

Domestc

BBA

149

120

30-Sep-14
2004 Optmal Glycols Malaysia MYR Corporate Domestc Murabahah 119 120 30-Sep-14
2006

Perwaja Steel Sdn
Bhd
Malaysia

MYR

Corporate

Domestc

Istsna'a

105

96

30-Sep-14
2004

Sarawak Specialist
Hospital Bhd
Malaysia

MYR

Corporate

Domestc Al Ijarah 112

120

30-Sep-14
2012

The Republic of
Turkey
Turkey

TRY

Sovereign

Domestc

Ijarah

905

24

2-Oct-14
2010 Indonesian Govt Indonesia IDR Sovereign Domestc Ijarah 219 48 7-Oct-14
2011 Pakistan Govt Pakistan PKR Sovereign Domestc Ijarah 785 36 25-Dec-14
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 fnancial 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)
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.

Issuer

Country

No.

of

Issues

Value

(USD

Millions)

Value

Malaysia 1705 175,300 89%
Sudan 12 11,311 6%
Bahrain 209 5,959 3%
Brunei Darussalam 83 3,829 2%
Indonesia 10 544 0.3%
Saudi Arabia 2 454 0.2%
Yemen 1 234 0.1%
Gambia 104 78 0.04%
Pakistan 3 62 0.03%
Singapore 1 36 0.02%
Total 2,130 197,807 100%

Singapore Dollars
(SGD) 36, 0.02%
Saudi Riyals
(SAR) 454, 0.23%
Pakistani Rupees
(PKR) 62, 0.03%
Malaysian Ringgit
(MYR) 175,300,88.62%
Indonesian Rupiah
(IDR) 544, 0.27%
Bruneian Dollars
(BND) 3, 829, 1.94%
Bahraini Dinars
(BHD) 3,981, 2.01%
Yemeni Riyals
(YER) 234, 0.12%
United States Dollars
(USD) 1,977, 1.00%
Gambian Dalasi
(GMD) 78, 0.04%
Sudanese Pounds
(SDG)
11, 311, 5.72%
Bahrain is the frst
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.
Chart 6: Total Global Short-Term Sukuk Issuance by Currency All Amounts in
US $ Millions 2001 - Jan 2013
29
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 fnancial 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 fnancial institution.
Background
Abu Dhabi Islamic Bank (ADIB) is a top tier Islamic fnancial 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.
Chapter Three
Sukuk Summary
SPV
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 Fixed
Return frequency 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
ADIB Sukuk Company Ltd
11
Shirkat-ul-Milk: Shirkat-ul-Milk is defned 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 diferent 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 certifcates of equal value issued with the aim of using the mobilized funds for establishing
a new project, fnancing a business activity etc on the basis of any of partnership contract so that the certifcate
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 profts 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 proft
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.
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 certifcates.
(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.

13%
57%
30%
Geographic Distributon
ADIB Sukuk Investors
Asia Middle East Europe
12
AAOIFI Shariah standard no. 17, 2010, Musharaka Sukuk, page 308.
31
(4) 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.
(5) The revenues that represent proft 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 proft returns in any period are insufcient 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 proft 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 sufcient 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 fows to assist in
understanding the transaction documents relating to such a structure.
Diagram Explanation
(i) On the Issue Date, the certifcate 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.

Source: ADIB Sukuk Base Prospectus
ADIB
as Seller of
co-ownership
interests
Proceeds
Return on
Co-ownership
interest
Master Purchase
Agreement and
Supplemental Purchase
Contract
MasterTrust
Deed and
Supplenental
Trust Deed
Management
Agreement
Purchase
Undertaking
Deed
Issuer
Proceeds
Periodic Distribution
Amounts and
Dissolution Amount
Exercise Price
Investors
ADIB
as Managing
Agent
ADIB
as Purchaser
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 proft in respect of the co-ownership as
sets on each Periodic Distribution Date. If the proft returns are insufcient 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 proft 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 Certifcates.
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 benefcaries, 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_proft_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 ofering was the frst Global Ofshore
RMB denominated Sukuk issued by issuer based outside China. This case study intends to highlight Khazanahs
continued commitment towards the expansion of Islamic fnance in pursuit of Government of Malaysias agenda
to establish the country as an Islamic fnance hub.
Sukuk Summary
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,
efciency gains and enhance corporate governance in companies controlled by the Malaysian Government.
Sukuk Al Wakalah
Wakalah Sukuk are certifcates issued by the investment agent. The subscribers are the principals and the realised
funds are the entrusted capital of the investment. The certifcate holders own the assets represented by the
certifcates with its benefts and risks, and they are entitled to the profts, if any
13
.
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 frst ever RMB Islamic trust certifcates. The three
(3) year Wakalah based Sukuk ofering, 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:
SPV Danga Capital Bhd
Structure type Wakala
Issue Size CNY 500,000,000
Issue Date 20-Oct-11
Maturity date 20-Oct-14
Return 2.9
Book Runner RBS, BOC Intl, CIMB
Listng Bursa Malaysia + Labuan
ISIN RegS HK0000090669
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 fnance and profling Malaysia as the hub for Sukuk
issuances
The Sukuk was priced at the tightest end of 2.90 per cent proft 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 ofering was oversubscribed 3.6 times refecting robust demand from Malaysian and regional investors despite
volatile global market conditions. The deal attracted a diverse group of investors comprising fnancial 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 ofering respectively.
The principal transaction documents are Wakalah Agreement, Sale and Purchase Agreement, Obligor Undertaking,
Issuer Undertaking, Purchase Undertaking, Commodity Murabahah Investment Agreement. The trust certifcates
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 certifcate 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 certifcates and the
Islamic securities holders will subscribe to the certifcates by payment of the proceeds to the Issuer. Pursuant to
the Wakalah Agreement, the Issuer (on behalf of the Trust Certifcates Holders) shall appoint Khazanah (Wakeel)
as its agent and shall instruct the Wakeel to invest the proceeds in a Wakalah Venture which shall comprise invest-
ments 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 beneft of
the Islamic securities holders. The Trust Certifcates 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 benefcial
shareholder on behalf of the Issuer. During the term of the Sukuk, the aggregate fair market value of the relevant
Private
Banks
15%
Asset
Managers
45%
Financial
Insttutons
40%
Distributon of Khazanah Sukuk Investors
by Investor Type
Singapore
30%
Europe
6%
Middle East
1%
Hong Kong
26%
Malaysia
37%
Geographic Distributon
Khazanah Sukuk Investors
Distribution of Khazanah Sukuk Investors
by Investor Type
Geographic Distribution
Khazanah Sukuk Investors
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 Certifcates 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 sufcient 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 Certifcates Holders in proportion to the Nominal Value of
the Trust Certifcates held by each Trust Certifcates Holder.
5. Dissolution Payments: The Obligor shall issue the Purchase Undertaking in favour of the Issuer and the
Trustee (for the beneft of the Trust Certifcates 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 certifcates plus the accrued but unpaid Periodic Distributions under the trust certifcates
shall be retained by Khazanah as incentive fee.
Sukuk Structure and Diagram
10. Dissolution
Distribution Amount
on Disolution Event
Redemption Date
Trust Certicates holders
Deutsche Trustees Malaysia
(as Trustee for the Trust
Certicates Holders)
9. Purachase Price on
Dissolution Event
Redemption Date
Khazanah Nasional
Berhad (as Obligor)
Purchase
Undertaking
Purchase Undertaking
9. Purchase Price in respect of Maturity Date
3. Wakalah
Agreement
4. Seies
Proceeds
7. Periodic Income
less
Inteim Incentive
Fee (if any)
11. Final Incentive
Fee (if any)
Khazanah Nasional Berhad
(as Wakeel)
Series Wakalah
Venture
5. Series Proceeds
5. Periodic Income
Incestment in Shares
Commodaty Murabahah
Invesment
1. Trust
Certicates
2. Series
Proceeds
3. Periodic
Distribution
Amounts
10. Dissolution
Distribution Amount
on Maturity Date
Danga Capital Berhad
(as Issuer and trustee of
Trust Assets)
36
Diagram Explanation
(i) Investors will subscribe to Islamic certifcates issued by Danga Capital Berhad (as Issuer) through payment
of proceeds.
(ii) The Issuer (on behalf of the Trust Certifcates 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 Distri-
butions or One-of 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 Certifcates, whichever is earlier.
Conclusion
Expanding the investment universe by ofering 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
fnancing in China. Adventuring International frms having CNY income fows 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) Khazanah Nasional Berhad Website: http://www.khazanah.com.my/docs/knb_Sukuk_131011.pdf
37
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 frst 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 profle.
Sukuk Summary
Background
Established in 1992, Majid Al Futtaim Holding LLC (MAF) the conglomerate frm 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 certifcates issued by the investment agent. The subscribers are the principals and the realised
funds are the entrusted capital of the investment. The certifcate holders own the assets represented by the
certifcates with its benefts and risks, and they are entitled to the profts, if any
14
.
Majid Al Futtaim Wakalah based Sukuk
MAF successfully priced a US $ 400 million Sukuk issue on 31 January, 2012. The certifcates 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 proft rate of 5.85 per cent per annum payable semi-annually in arrears. The proceeds will be used to fund

d t L k u k u S F A M V P S
Structure type Wakala
Issuesize USD 400,000,000
Issue Date 7-Jan-12
Maturity date 7-Feb-17
Return 5.85%
Pricing =Spread
over mid-swaps, 482bp
Book Runners
Standard Chartered, HSBC,
Dubai Islamic Bank , Abu
Dhabi Islamic Bank
Listing London
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-diversifed investor group. The fnal
distribution of the certifcates 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 ofering of 6 per cent.

Fitch Ratings assigned MAF Sukuk series of certifcates under the US $ 1 billion trust certifcate issuance program a
rating of BBB. The ratings were assigned to the program and not to the certifcates 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 certifcates.
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) 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
(ii) Self-use assets which are non-income generating assets. If such assets form a part of the Wakalah
14%
54%
32%
Geographic Distributon of MAF Sukuk Investors
Asia Middle East Europe
39
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 refecting 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,
benefts 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,
benefts 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 certifcates 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 certifcates
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 fnal dissolution amount payable by the Trustee under the relevant certifcates. Wakalah
principal revenue comprises amounts in the nature of sale, capital or principal payments.
40
7. Guarantor: MAF is the guarantor of certain obligations of MAF Properties, due to the structure of the
Sukuk, including the following:
1) MAF Properties obligations under the documentation rank pari passu with its other unsecured obligations;
2) MAF Properties undertaking to purchase the Sukuk assets on the scheduled or any earlier dissolution
dates from MAF Sukuk Ltd.; and
3) on any periodic distribution date, if the returns generated from the Sukuk assets are insufcient 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.
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) The Managing Agent will pay to the Trustee an amount refecting 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.

MAF Properties as
seller of Wakala Assets
Wakala
Assets
Return on
WakalaAssets
Master Purchase
Agreement and
Supplemental
Purchase Contracts
Master Lease
Agreement and
Supplemental Lease
Contracts
MAF Properties as
Lessee of
Self-Use Assets
Master Trust
Deed and
Supplemental
Trust Deeds
Source: MAF Sukuk Base Prospectus
Purchase
Undertaking/
Sale Undertaking
MAF Sukuk Ltd.
as Issuer and Trustee
Rentals
Proceeds
Guarantee to Trustee
of certain of MAF
Properties obligations
(pursuant to Master
Trust Deed)
Execise
Price/Cancellation
of Certicates
Periodic Distribution
Amounts and
Dissolution Amounts Certicates
Proceeds
Investors
Management
Agreement
MAF Properties as
managing agent
MAF Properties as
purchaser
MAF Holding as
Guarantor
41
(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) MAF Website: http://www.majidalfuttaim.com/
(2) 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 confrms 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
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 Certifcates of equal value that are issued either by the owner of an existing asset or a fnancial interme-
diary 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 certifcates 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 $ 1.75bil-
lion. The Sukuk comprised a US $500 million tranche with a fve year maturity and a US $ 1.25 billion one with a 10
year maturity at proft rates of 2.665 per cent and 4.211 per cent respectively.

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
Return
frequency
Semi Annual
Pricing
=Spread over
mid-swaps,
200.8 bp
Book Runners Deutsche Bank ,
HSBC
Listing London stock
Exchange

SPV Saudi Electricity
Global
Structure type Ijara
Issue Size USD 500,000,000
Issue Date 3-Apr-12
Maturity date 3-Apr-17
Return 2.665
Return
frequency
Semi Annual
Pricing
=Spread over
mid-swaps,
163.bp
Book Runners
Deutsche Bank .
HSBC
Listing
London Stock
Exchange
15 AAOIFI Shariah standard no. 17, 2010, Investment Sukuk, page 312.
43
It is the frst 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 fnancing from a diversifed
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 profle 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 certifcate 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 sufcient to fund the periodic distribution amounts due under the
relevant series of certifcates 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 certifcate 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 identifed 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 sufcient 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 certifcate, 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 oversub-
scription 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 long-
term and stable revenue streams against long-term fnancing 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 certifcates of equal value issued with the aim of using the mobilized funds for establishing a new project,
fnancing a business activity etc on the basis of any of partnership contract so that the certifcate 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 profts 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 fnance the purchase of assets, liabilities, businesses, undertakings and
rights of fve 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 fnancial 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 certifcates.
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 beneft 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-of against the Exercise Price defned
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-of 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-of Distribution and the Expected Return for such relevant period, PLUS Berhad shall make top-up
payment to make good the diference. The top-up payment will be set-of 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-of 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-of Distribution.
47
Source: Plus Berhad Sukuk Information Memorandum
Diagram Explanation
(1) 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.
(2) PLUS Berhad (as Issuer/Obligor) shall receive Musharakah Capital arising from the subscription
of the Sukuk.
(3) Trustee shall appoint PLUS Berhad as the Manager of the Musharakah Venture through a
Management Agreement.
(4) Income from Musharakah Venture shall be distributed as periodic distributions or one-of
distribution to Sukuk holders as the case may be. In the event of any shortfall between the
periodic/one-of distribution and the Expected Distribution, PLUS Berhad shall make top-up
payments to compensate for the shortfall. The top-up payments will be set-of against the
Exercise Price. Any income in excess of the Expected Return shall be retained by PLUS Berhad as
an incentive fee.
(5) 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).
(6) 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
Sukukholders
2 Issues Sukuk
4. Purchase Undertaking
3. Appoints asManager
2. Proceeds
PLUS Berhad
(Issuer/Manager)
Trustee
(Acting on behalf of
the investors)
Musharakah
Venture
(Trucst Asset)
1 Identies Business 2. Incests in venture
3 One-of Distribution/ Periodic Distributions
2. Musharakah
Captial
/Proceeds
48
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 frst 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 fnancing for the government and for local corporations
to tap this new source of funding.
However, Islamic fnancing 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 of 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 ofered. Local currency with the demand from local population forShari ah Compliant
products and the opening of Islamic windows to complement full fedge 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
OferingShari ah compliant product to both the International market and to its population ( Most populace
Muslim Nation) fts 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 fnancing. 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 fnance the government budget
defcit:--
Diversifying State Budget Financing Source
Developing Alternative Investment Instruments
Chapter Four
16 Debt Management Ofce, 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 fows
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 fnancing in balancing its budget
defcit 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 fne 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 frst 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 fxed income market.
50
Milestone of Sukuk Negara

Milestone of Sukuk Negara

Indonesia contnues its eort in laying the foundaton for developing Sharia Compliant
Market

Source: bapepam.go.id
51
Sukuk Structure format refecting on tradability and issuance method by GOI
Sukuk Negara - Issuance Program
The strategy followed by the government of Indonesia tackles plugging the budget defcit through
regular issuance of Sukuk in the International market, and developing domestic fxed 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 ofer secondary market liquidity, greater price
transparency and widening investors base.

Based on AAOIFI
Shariah Standards
No.17
Ijarah Sale & Lease
Back
Certcates of
ownership in leased
assets (3/1)
Ijarah Al-Khadamat
Ijarah Asset to be
Leased
Underlying asset State-Owmed Assets
Coupon Fixed rate
Tradable
Bookbuilding, Aucton
IFR, SNI, SR, SPN-S
Certcates of
ownership of described
future services (3/2/4)
Hajj Services
Fixed rate
Non-tradable
Private placement
SDHI
Certcates of
ownership of assets to
be leased (3/1)
Infrastructure Project
Fixed rate
Tradable
Aucton
PBS, SR
Tradability
Issuance method
Series of Sukuk Negara
52
Aucton
Domestc Market
Internatonal Market
Bookbuilding
Bookbuilding
Private Placement
IFR, Islamic T-Bills, PBS.
Conducted regularly 1-2
tmes a month based on
annual calendar of issuance
Aucton Partcipants
Green Shoe Opton (GSO)
Conducted regularly once a
year (SR series) issuance
Selling agents
Issued annually (semester 2)
USD denoninated (SNI series)
144A/Reg-S issue format
Joint lead managers
SDHI series (Hajj Fund
Sukuk)
Billateral agreement
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 fnance Sukuk policy is regarded as a positive move which serves in developing countrys infrastructure
while providing additionalShari ah compliant product to the market that ofers longer maturity.
Benefts 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
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 fnancing. This has resulted in GOI taking the lead in issuing Sukuk on a regular
basis, laying the frame work for issuance by corporates.

Domestc Sukuk Issuance (2002 - 2012 ytd)
Sukuk Negara vs. Corporate Sukuk Issuance
billion IDR
45.000
40.000
35.000
30.000
25.000
20.000
15.000
10.000
5.000
0
Domestc Corporate Sukuk
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 June 18,2012
175 565 654 585 200 1.025 1.534 1.980 997 200 250
0 0 0 0 0 0 4.700 9.519 26.967 24.271 40.783 Domestc Sukuk Negara
53
Domestic Sukuk are an important tool for the Central Bank (BOI) policy in having Sukuk Negara as part of its
monetary operation.
Retail Sukuk provides for wider understanding and acceptability of Sharia compliant investments aswell as
encouraging savings
Sukuk Negara in Secondary Market
It is no surprise that the Banks and Insurance companies taking up majority of the Sukuk ,as GOI ofers 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.
Types of
Structure
Ijara Asset to be Leased
Fixed coupon 6.25% per annum,
payable monthly
100% (At Par)
IDR 1.000.000,00
Min IDR 5 mio, Max IDR 5 Bio.
March 21, 2012
September 21, 2015
Tradable
Government Projects
Indonesian citizen investor
Indonesia Stock Exchange (IDX)
Periodic
Distribution
Price
Unit Price
Minimum Order
Settlement Date
Maturity Date
Tradability
Underlying
Targeted
Investor
Listing

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 savings-
oriented society.
Broadengng the investor base of
Islamic Government Securities in
the domestic market.
Summary of Terms and Conditions
IDR Retail Sukuk Series SR004
Sukuk Negara in Secondary Market
Sukuk Negara
Ownerships
Secondary
Market
Trading
Notes:
Onlycounted for IDR
tradable Sukuk Negara.
All gures are as of
june 14
th
, 2012.
Central Bank
1%
Insurance
Company
24%
conventional
29%
Individual
18%
Pension Founds
1%
Mutual Founds
5%
Non Resident
9%
Others
5%
Islamic
Banks
6%
Avarage Daily Trading-Goverment Islamic Securites
1,600
1,400
1,200
1,000
800
600
400
200
0
250
200
150
100
50
0
Volume(LHS) Frequency (RHS)
14.51
48.37
116.86
173.64
193.80
370.95
1431.77
512.64
216.17
388.79
54
Summary of International Global Sukuk
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 .
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 beneft the country and its citizens.
RoI Global Sukuk SNI18
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.
-
-
-
-
-
Republic of Indonesia
Global Sukuk SNI18
Execution Highlights
Perusahaan Penerbit SBSN
Indonesia 2 (PPSI-2)
English Law
(Asset-related documents
Under Indonesian Law)
Issuer :
Obligor :
Currency/Format :
Sturcture :
Sukuk Asset :
Size :
Pricing/Settl.Date :
Maturity Date :
Tenor :
Periodic
Distributions :
Price/Re-offer
Spread
:
Listing :
Govenning Law :
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
Summary of Terms & Conditions
Project-Based Sukuk (PBS004)
Transaction Highlights Summary of terms & conditions
- PBS004 is initially issued at Feb 16th
2012 through auction Reopened
regularly on each Sukuk Negara auction
(Scheduled twice amonth)
- Galned enormous demand on each
auction, with average IDR1. 3trillion.
Current outstanding is IDR4.58traillion.
- 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.
Issuer (SPV) :
Obligor :
Structure :
Underlying :
Normal per Unit :
Coupon :
Payment :
First Issue Date :
Maturity Date :
Issuance
Methood
Listing
Tradability
Perusahaan Penerbit SBSN
Indonesia 2 (PPSI-2)
Republic of Indonesia
Ijarah Asset to be Leased
Projects
IDR 1 million
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
55
4.2 Republic of Turkey
By Mr. Qudeer Latif, Robin Balmer and Lauren Djedid (Cliford Chance, Dubai)
The debut international issuance of U.S.$1,500,000,000 lease certifcates 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 fnance market. The issuance was upsized from the originally intended
U.S.$1 billion to U.S.$1.5 billion due to the signifcant demand received from the investor base and was ultimately
fve times over-subscribed with the order book reaching a total value of U.S.$8 billion. This case study will inves-
tigate the structure, the particular features of the transaction and the wide efect it has had in the European and
International Sukuk market.
The lease certifcates are listed on the Irish Stock Exchange U.S.$1,500,000,000 with a proft rate of 2.803 per cent.
and are due to be redeemed on 26 March 2018. The ofering was made to investors outside of the U.S. pursuant to
Regulation S and to certain sophisticated categories of investor (namely Qualifed Institutional Buyers and Quali-
fed 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 ofering.
Cliford 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 cer-
tifcate 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 certifcates 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 certifcates 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 certifcates to the extent authorised by the Ministerial Decisions (defned below).
Set out below is a simplifed structure diagram and description of the principal cash fows underlying the transac-
tion.
Structure Diagram
Certicate holders
Certicates
Lease Certicate Assets
Sale Price
Sale Agreement
Lease
Agreement
Substituted Lease
Certicate Assets Substitution
Undertaking
Redemption
Assets
Redemption
Undertaking
Appointment as
Servicing Agent
Reimbursement of
Servicing Costs (set-
off against
Supplemental Rental)
Rental
Payments
Lease
Certicate
Assets
Purchase Undertaking
Sale of Lease Certicate Assets
Assets
The Republic
(acting through
the Treasury)
as Seller
The Republic
as Leasee
The Republic
as Servicing
Agent
The Republic
as Obligor
A
Cash
Periodic
Distribution
Amounts
Dissolution
Amount
Hazine Mstesarligi Varlik Kiralama Anonim Sirketi
D E
E
F
G C
B
Exercise
Price
56
A. On the closing date of the Sukuk issuance, the Issuer issued the lease certifcates to the Certifcateholders.
B. Pursuant to the terms of the Sale Agreement, the Republic (acting through the Treasury) sold all of its
rights, titles, interests and benefts in and to the Lease Certifcate 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 Certifcate 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 Certifcate Assets and used by the Issuer to pay the Periodic
Distribution Amounts to Certifcateholders. Periodic Distribution Amounts will be paid to Certifcateholders
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 Certifcates may, in accordance with the Terms and Conditions of the Lease Certifcates, 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,
benefts and entitlements in and to the Lease Certifcate 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 Certifcateholders, payable by the
Issuer under the Certifcates.
F. The Republic will be entitled to purchase leasing certifcates 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 certifcates
in return for certain Lease Certifcate Assets equal in value to the leasing certifcates being redeemed.
G. The Republic will be entitled to substitute the Lease Certifcate Assets, from time to time, pursuant to a
Substitution Undertaking. The Republic may request the Issuer to transfer back a Lease Certifcate 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 certifcate evidences the entitlement of each Certifcateholder to a right to receive the
economic beneft derived from the use of the underlying assets (the Lease Certifcate Assets). This is allocated
on a pro rata basis in keeping with the proportion which the face value of such certifcate bears to the aggregate
value of the outstanding lease certifcates. Each lease certifcate ranks pari passu, or equally without any prefer-
ence, with the other lease certifcates.
The Lease Certifcate Assets are, insured to the extent reasonable and commercially practicable by the Servic-
ing Agent so long as the Certifcates are outstanding. The insurances are procured in a manner compliant with
the principles of Islamic fnance 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 specifc asset from the Lease Certifcate Assets, detailed below. It was not a requirement that the insurances for
the Lease Certifcate Assets be entered into with third parties and the Republic was permitted to self-insure the
Lease Certifcate Assets.
The composition of the Lease Certifcate Assets may change over the life of the Certifcates and they may be sub-
stituted 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 Certifcate Assets which remain unafected by the transactions entered
into as part of the fnancing.
57
The sale of the Lease Certifcate Assets pursuant to the Sale Agreement and the resale of the Lease Certifcate As-
sets pursuant to the Purchase Undertaking have been registered with the Title Deeds Ofce in the Republic.
Limited Recourse
The Certifcates are not secured and the Certifcateholders will have no direct recourse to the Lease Certifcate
Assets under either Turkish Law or English Law. No payment of any amount whatsoever will be made under the
Certifcates except to the extent that funds for that purpose are available from the Lease Certifcate Assets. Cer-
tifcateholders, by subscribing for or acquiring certifcates, acknowledge that no recourse may be taken against
the Issuer or the Representative (to the extent each of them fulfls all of its obligations under the transaction docu-
ments to which it is a party) in respect of any shortfall in the expected amounts from the Lease Certifcate Assets
to the extent that the Lease Certifcate 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 Certifcatehold-
ers in relation to the Lease Certifcate Assets. Pursuant to the transaction documents, the Issuer confrms that it
will hold the Lease Certifcate Assets in its own name and on its own behalf and for the account and beneft of the
Certifcateholders. The income accruing to the Issuer from the Lease Certifcate Assets, together with any capital
arising from disposal of such Lease Certifcate Assets, shall be for the beneft of, and shall be accounted by the Is-
suer to, the Certifcateholders.
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 Cliford Chance Istanbul ofce in conjunction with Somay Hukuk Burosu. This Sukuk issuance of
the Republic of Turkey was the frst 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 Eco-
nomic and Financial Afairs (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 frst 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 ofered 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 fnance alternatives and, in particular, Sukuk as methods of
fnancing by Turkish corporate and fnancial institutions.
Recent developments in Turkey have included a number of other Participation Banks indicating their intention
to issue leasing certifcates in the next 12 months. Any future issuances originating in Turkey will now have the
beneft 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 fve 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 mil-
lion Sukuk Al Ijara in 2010 and a 5-year U.S.$350 million Sukuk Al-Ijara ofering 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 posi-
tive. 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 is-
sued 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 fnancial institutions.
Parties to the Sukuk transaction
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 pres-
tigious 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 imple-
mentation of Basel III in the UAE), fnancial markets expectations of stronger balance sheets and ADIBs own asset
growth.
The Sukuk transaction represents the frst ever Shariah compliant Tier 1 issue executed in the international capital
markets and the frst 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 efort and
management skills and the other party (the Rab-al-Maal) contributes capital. The parties may share profts 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 fxed amount as proft, however, the per-
centage of the actual proft payable to the investor (as Rab-al-Maal) may be stipulated in the fnancing agreement.
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
59
Accordingly there should be no guaranteed return for the investors with this type of fnancing.
Sukuk Al Mudaraba
Mudaraba Sukuk are certifcates 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 certifcateholders obtain the right to receive certain pay-
ments arising from an undivided ownership interest in the assets of a trust declared by the issuer of the certifcates
(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 certifcates, and the relevant counter-
party seeking to raise fnancing acts as Mudareb and provides its efort and management skills.
ADIB Mudaraba-based Sukuk
The ADIB Sukuk certifcates had a key anchor in private banks, which took 60 per cent. of the fnal allocation, fol-
lowed 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 certifcates, 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 ofshore investors with 4 per cent.
The proft rate payable on the certifcates 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 signifcantly
lower than initial price thoughts and ofcial price guidance, as a result of overwhelming demand by investors
the fnal order book was 15 times oversubscribed and was the largest oversubscription seen in any Sukuk ofering
globally. Furthermore, the Sukuk has traded up signifcantly 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 fows to assist in
understanding the transaction documents relating to such a structure.
Proceeds of
Certcates
Mudaraba Capital
Mudareb (ADIB)
Issuer (special purpose vehicle)
as Rab-al-Maal
Certiicate holders
Declaraton of
Mudaraba Agreement
Dissoluton Mudaraba Capital and
Mudaraba Prot
Periodic Distributon Amounts,
Dissoluton Distributon Amount and
Mudaraba Premium (if applicable)
Trust
60
Analysis of Structure and Cashfows
(i) On the Issue Date, ADIB Capital Invest 1 Ltd. (a special purpose vehicle) will issue the Certifcates, and the
Certifcate holders will pay the issue price in respect of the Certifcates to it (as Issuer/Trustee).
(ii) ADIB Capital Invest 1 Ltd. will apply the proceeds of the issuance of the Certifcates 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 proft 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 Proft 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 proft (whether from its own cash
resources, from the Mudaraba Reserve or otherwise).
(v) The Issuer shall apply its share of the proft (if any) generated by the Mudaraba on each Periodic Distribu
tion Date to pay the Periodic Distribution Amounts due to the Certifcate holders on such date.
(vi) The Certifcates are perpetual securities in respect of which there is no fxed redemtion date. Accoringly
the Mudaraba is a perpetual arrangement with no fxed 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 Certifcates, as applicable, due
to a change in law); or
B. upon the occurrence of a Capital Event (being circumstances where ADIB is notifed in writing by the
UAE Central Bank to the efect that the notional amount of the Certifcates which qualifes 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 Certifcates. 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 Certifcates and the Mudraba Agreement as may be required to ensure that the Certifcates 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 Certif
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
Non-Payment Event means the occurrence of certain specifed events (such as ADIBs insolvency or the absence of
sufcient distributable profts).
18
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).
61
proft satisfes 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 certifcates were perpetual instruments with no fxed maturity date. The position of holders of the
certifcates on any such redemption was, however, protected by including certain conditions to liquidation of the
mudaraba, including the relevant liquidation proceeds being sufcient to make payment in full of amounts oth-
erwise due to certifcateholders on any such redemption of the certifcates (including, in the case of redemption
following a Capital Event described above, a premium of 1 per cent. of the face amount of the certifcates).
The frst call date was set at approximately six years after the issue date, to allow fexibility for a fungible issue of
further Sukuk certifcates to be issued within a year after the issue date. Any additional certifcates 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 frst call date to be no more than fve 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 frst 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 fexibility in anticipation of the implementation of Basel III rules in the United Arab Emirates in due
course.
This transaction was a very signifcant 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 fnancial institutions.
The success of this transaction has been refected in the interest of other fnancial 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 certifcate 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 bil-
lion, 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 Creditworthi-
ness 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 declin-
ing, 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 proft margin. Confdence 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 invest-
ment 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 fxed-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 frst 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 tril-
lion 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 Lumpur-
based Alhami Mohd Abdan, Head of international fnance and capital markets at OCBC Al-Amin, a unit of Sin-
gapores Oversea- Chinese Banking Corp., said in an interview. Liquidity in the Islamic space is growing quite
signifcantly, he added.
The biggest sales came out of Saudi Arabia and Qatar amid development programs of $373 billion and $130 bil-
lion, respectively. Malaysia has embarked on a $444 billion spending spree over 10 years that helped spur Islamic
bond oferings 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 fve-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. Accord-
ing 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 fulfll the liquidity surpluses of this growing market assum-
ing 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 diferent 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 fnancial 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 ofers 2 open ended mutual funds inclusive of the Global Sukuk Fund. The AHB GCC Equity Fund was the
frst 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 refects 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 confdence 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 follow-
ing the Feds historical targeting of the unemployment rate combined with $85B of fxed income purchases per
month. Equities rallied way outperforming other asset classes as money went into equity funds away from money
markets and fxed income funds. US $ swap rates witnessed a steepening sellof 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 outper-
formed 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 signifcant development in terms of diversifcation of asset class-
es 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 fnance has seen welcoming initiatives, and Sukuk instruments are in-
creasingly attracting attention as a source of funding and diversifcation.
It was in Germany that the frst 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 fnancial group announced what is considered to be the frst 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 -
frst 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 refnance its Sharia-compliant factoring busi-
ness 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 frst of any signifcant size.
66
The issuance in dollar was intended to appeal
to a broad range of investors. In the case of this
Sukuk, investors were identifed 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 dol-
lar is an ever-more useful currency of fnance. This
was a private placement to a group of institution-
al investors in the Middle East
FWU group Sukuk added a new innovation mark
with the frst Sukuk ever to have intellectual prop-
erty as underlying assets
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 Sttching Structure
Sharia Advisor Amanie Advisors LLC
Pricing 7 Per Cent Per Annum
Periodic Distributon Semi Annual
Underlying Assets The Underlying assets are a
proprietary computer sofware
system and associated intellectual
property rights developed n-house
by the FWU Group and used by it
and its bank distributon partners in
connecton with their combined
takaful operatons in the various
geographies in which they operate
67
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 confdence is restored on Sukuk legal & restructuring issues coupled with direct support
by a number of Islamic jurisdictions the Sukuk market regained confdence and the market took of 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 Malay-
sia, 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 fol-
lowed 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 fnancial institutions into contraction and dele-
veraging, also impacted momentarily impacted Sukuk issuances but in the last two years Sukuk issuances have
attained new heights. Sukuk is now establishing a frm 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, frst Intl Sukuk issuance with a Saudi Sovereign Guarantee, Debut
International Sukuk by The Republic of Turkey, Debut Domestic Lira issuance by Republic of Turkey, frst Sukuk
issuance from a fnancial institution in Kazakhstan , frst Tier 1 Perpetual Sukuk by Abu Dhabi Islamic Bank and
several others.
Continuous innovation together with more debut Sukuk issuances and refnancing of maturing Sukuk is likely to
maintain the Sukuk volume trajectory upwards in 2013 and beyond, as countries and corporate look to take ad-
vantage of extremely attractive low yields being priced by the market. Moreover, the trend of Sukuk issuances on
fxed proft 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 foating
a Malaysian Ringgit Sukuk or Malaysian issuer Sukuk issuance in Chinese Yaun etc., This is also a positive develop-
ment and will further contribute in the development of Sukuk market. The risk mitigation or hedging documen-
tation and product standards are being published by IIFM and provide further confdence 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 con-
siderably 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 fgure is approximately US$45 bio and it is expected that Q1 of 2013 will close with US$ 50 billion outstand-
ing 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
confrmation of this prediction.
68
Conclusion
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 govern-
ment Sukuk programs designed to provide level playing feld 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 fgure 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 frst spot mainly due to its strong and deep local fxed income market. Malaysian mar-
ket attracted some GCC institutions, Supra national Agencies and Japanese institution to raise their funding needs
in Malaysian Ringgit. These institutions took advantage of the fne 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 is-
suing local currency Sukuk. Sovereign or sovereign linked entities currently dominate issuance in these countries
and this fow 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 sub-
dued following the onslaught of the fnancial crisis.
Starting from 30th June to 31st Dec 2014 we will have 12 Sukuk maturing which could well provide some refnanc-
ing 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 fnancial 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 to-
wards 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 Indo-
nesia has also started regular issuance of short term Sukuk program which will greatly help the liquidity manage-
ment requirement of Islamic institutions.
Bahrain is the frst 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 fxed 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 fnancial 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 benefcial in the risk
mitigation arising from such Sukuk issuances.
Also in spite of all the signifcant 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 difcult for the limited amount of Sukuk issuers based in Islamic countries to achieve that satis-
faction.
70
71
Glossary
Term Meaning
Shariah Islamic Law
A Shariah compliant
product
Product meets the requirements of Islamic law
A Shariah board Is the commitee of Islamic scholars available to an Islamic nancial insttuton
for guidance and supervision in the development of Shariah compliant products
A Shariah advisor Is an independent Islamic trained scholar that advises Islamic insttutons on the
compliance of the products and services with the Islamic law
Sukuk An Arabic term for nancial certcate, it can be seen as an Islamic equivalent of
the conventonal bonds. It is dened as Certcates of equal value representng
undivided shares in ownership of tangible assets, usufructs and services or (in
the ownership of) the assets of partcular projects or special investment actvity.
Bai al Salam

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 tme of the bargain. However, this type
of sale is an excepton, 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
quantty, quality and workmanship.
Istsnaa

Advance purchase of goods or buildings.A contract of acquisiton of goods by
specicaton 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 partes. Repayment, usually in installments, is specied in the
contract.
Musharakah

Joint venture, prot and loss sharing.An investment partnership in which all
partners are enttled to a share in the prots of a project in a mutually agreed
rato. Losses are shared in proporton to the amount invested. All partners to a
Musharakah contribute funds and have the right to exercise executve powers in
that project, similar to a conventonal partnership structure and the holding of
votng 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 actvity. While prots are shared on a pre-
agreed rato, losses are born by the investor alone. The mudarib loses only his
share of the expected income.

72
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 duraton 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. Afer the expiry of the
lease agreement, this right reverts back to the lessor.

Salam Sukuk Are certcates 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 certcates 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)
Istsnaa Sukuk Are certcates of equal value issued with the aim of mobilizing funds to be
employed for the producton of goods so that the goods produced come to be
owned by the certcates 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 aircraf
(constructon/manufacturing nancing)
Murabahah Sukuk Are certcates of equal value issued for the purpose of nancing the purchase of
goods through murabaha so that the certcate 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 certcates of equal value issued with the aim of using the mobilized funds
for establishing a new project, nancing a business actvity etc on the basis of any
of partnership contract so that the certcate holders become the owners of the
project. (MusharakahSukuk is an investment partnership between two or more
enttes which together provide the capital of the Musharakah and share in its
prots and losses in pre-agreed ratos)
Mudarabah Sukuk Are certcates that represent project or actvites managed on the basis of
Mudarabah by appointng one of the partners or another person as the mudarib
for the management of the operaton. (It is an investment partnership between
two enttes whereby one entty 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

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
*****
Internatonal Sukuk
(for the purpose of this report)
A Sukuk issued in hard currency such as USD
Domestc Sukuk
A Sukuk issued in local currency
Global Sukuk
Both internatonal and domestc Sukuk
Convertble or exchangeable
Sukuk
Convertble or exchangeable Sukuk certcates are convertble into the issuers
shares or exchangeable into a third partys shares at an exchange rato which is
determinable at the tme 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 Istsnaa and Ijarah, Murabahah and Ijarah etc.
Sovereign Sukuk Are Sukuk issued by a natonal government. The term usually refers to Sukuk
issued in foreign currencies, while Sukuk issued by natonal governments in the
countrys own currency are referred to as government Sukuk.
Quasi-sovereign Sukuk Are Sukuk issued by a public sector entty that is like sovereign Sukuk. It may
carry explicit or implicit government guarantee.
Corporate Sukuk Is a Sukuk issued by a corporaton 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.

73

IIFM Sukuk Report (3rd Edition) A Comprehensive Study of The Global Sukuk Market

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