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Mudaraba Sukuk

Abu Dhabi Islamic Bank(ADIB)

Saudi Hollandi Bank(SHB)
December 25,2012

By its very nature, sukuk are more cumbersome to issue than conventional bonds. Securing assets to
back the sukuk issue value, while becoming easier, is still a significant challenge. If you lighten the
asset-backing requirement by employing asset-based structures such as a murabaha or a usufruct-
based ijara, you might be compromising sharia authenticity and therefore be exposed to the potential of
sharia non-compliance risk. Structuring innovation has nevertheless advanced quite substantially to the
extent that issuances are achieving a good compromise between sharia authenticity and issuers needs.
Additionally, issuance costs are still high, thereby pricing out smaller issues. Legal costs associated with
structuring/ documentation combined with additional registration or valuation costs add anything
between $50,000 to $199,000 on top of the costs of issuing a conventional bond, according to our
survey of lead arrangers. Hence issuers would have to raise at least $100 million for the issue to make
financial sense. In this regard, Malaysia has done a fantastic job incentivizing issuance out of the
country. Besides the captive investor community benefiting from exemption on withholding taxes, the
Malaysian government has made it simple and straightforward to issue from Malaysia, including a 14
working day turnaround for approval by the Securities Commission of ringgit-denominated sukuk by
multinational companies.
ADIB is the UAEs second largest Islamic bank by assets.

73 domestic branches and pursuing growth overseas. It already owns stakes in banks in Egypt and Bosnia and
has also established operations in Iraq, Saudi Arabia, UK and Qatar.

Primarily a retail bank, with almost 60% of the financing portfolio made up of retail.

Has a wholly-owned real estate investment and development company called Burooj Properties, which has
been an overhang on ADIBs profits, owing to challenges in UAEs real estate sector.

Carries adequate liquidity and is well placed to comply with the new liquidity regulations, in our view. The bank
addressed its low capitalization by issuing a USD1 billion Tier-1 sukuk.

The Certificates are perpetual securities and have no fixed or final redemption date. Unless the Certificates have previously
redeemed or purchased and cancelled as provided in the Conditions, the Trustee (but only upon the instructions of ADIB
(acting in its sole discretion)) shall redeem the Certificates on the First Call Date or on any Periodic Distribution Date falling
after the First Call Date in accordance with Condition 10.1(b) (Trustees Call Option). In addition, upon the occurrence of a
Tax Event or a Capital Event (each as defined in the Conditions), the Certificates may be redeemed in whole or in part, or the
terms thereof may be varied (at the option of the Trustee (but only upon the instructions of ADIB (acting in its sole
discretion)), in each case at any time on or after the Issue Date in accordance with Conditions 10.1(c) (Redemption or
due to Taxation) and 10.1(d) (Redemption or Variation for Capital Event). Any redemption or variation is subject to the
conditions described in Condition 10.1 (Redemption and variation).
The Certificates may only be redeemed in accordance with Condition 10 (Redemption and Variation) and Condition 11
(Dissolution Events and Winding-up). Upon the occurrence of a Dissolution Event (as defined in the Conditions), the Delegate
shall (subject to Condition 11.1 (Dissolution Events)) give notice of the occurrence of such event to the Certificateholders in
accordance with Condition 15 (Notices) with a request to the Certificateholders to issue a Dissolution Request (as defined in
Conditions) to the Delegate. Upon the receipt of a Dissolution Request in writing in accordance with Condition 11.1
(Dissolution Events) or if so directed by an Extraordinary Resolution of Certificateholders, the Delegate shall (but in each case
subject to Condition 11.3(c) (Entitlement of Trustee or Delegate)) give notice to the Trustee of the Dissolution Request
whereupon the aggregate face amount of the outstanding Certificates together with any Outstanding Payments (as defined in
Conditions) shall become immediately due and payable and, upon receipt of such notice, the Trustee and/or the Delegate
subject to Condition 11.3 (Winding-up, dissolution or liquidation) take the actions referred to therein.
Principal shareholders (Page 5)

If circumstances were to arise where the interests of the major shareholders
conflict with the interests of the Certificateholders, Certificateholders could be
disadvantaged by any such conflict.
No Guarantees
Investors should be aware that no guarantee is given in relation to the
Certificates or any of the
Transaction Documents by ADIB, the shareholders of ADIB or by any other
The Certificates are subordinated and unsecured obligations.

Payments of Periodic Distribution Amounts will be made by the Trustee provided that
ADIB (as Mudareb) shall have paid profit amounts equal to such Periodic Distribution
Amount pursuant to the terms of the Mudaraba Agreement.

Payment obligations of ADIB under the Mudaraba Agreement are subordinated to the
claims of the Senior Creditors (as defined in the Conditions) and rank pari passu to
ADIBs obligations under the Existing Tier 1 Securities. By virtue of such
subordination, the payment obligations of ADIB under the Mudaraba Agreement will,
in the event of the liquidation, dissolution or winding-up of ADIB, rank junior to all
claims of holders of any unsubordinated obligations of ADIB.
Risks Relating to the Certificates
If ADIB were wound up, liquidated or dissolved, ADIBs liquidator would first apply the assets of ADIB to
satisfy all claims of the Senior Creditors.

If ADIB does not have sufficient assets to settle claims of the Senior Creditors in full, the claims of the
Trustee in relation to the payment obligations of ADIB will not be settled. Further, the Trustee will share
equally in payment with the claims of the holders of Pari Passu Obligations and holders of ADIBs Existing
Tier 1 Securities if ADIB does not have sufficient funds to make full payments on all of them. In such a
situation, Certificate holders could lose all or part of their investment.

Further, the issue of any securities may reduce the amount recoverable by the Certificate holders in the
event of a winding-up, liquidation or dissolution of ADIB and ADIB may not have sufficient funds to satisfy
the Certificate holders claims. In such a situation, the Certificate holders could lose all
or part of their investment.
The Certificates are perpetual securities which have no scheduled repayment date. Certificate holders have no ability to
require the Trustee to redeem their Certificates unless a Dissolution Event occurs.

The Dissolution Events and Certificate holders rights following a Dissolution Events are set out in Condition 11 (Dissolution
Events and Winding-up). The Trustee has the option to redeem the Certificates in certain circumstances as more particularly
described in Condition 10 (Redemption and Variation).

This means that the Certificate holders have no ability to cash in their investment, except:

(i) if the Trustee exercises its rights to redeem the Certificates in accordance with Condition 10 (Redemption and Variation);
(ii) if so directed by an Extraordinary Resolution of the Certificate holders following a Dissolution Event; or
(iii) by selling their Certificates.

There can be no assurance that Certificate holders will be able to reinvest the amount received upon redemption at a rate
that will provide the same rate of return as their investment in the Certificates.

If the Central Bank informs ADIB that the Certificates no longer count as Additional Tier 1 capital, pursuant to Section
10.1(d) of the Conditions, a redemption may occur without the consent of the Certificate holders at any time after the
applicable notice period to the Certificate holders
Perpetual Securities
Pursuant to the Mudaraba Agreement between ADIB (as Mudarib) and the Trustee (as Rab-al- Maal), which constitutes a
Mudaraba, the proceeds of the issuance of the Certificates will be applied as capital of the Mudaraba (the Mudaraba
Capital). The Mudaraba Capital will be invested by ADIB in its general business and the assets in which the Mudaraba
Capital is invested will constitute the assets of the Mudaraba (the Mudaraba Assets) with a view to earning profit
therefrom, which will in turn be applied towards payments due to Certificate holders in respect of the Certificates.

No investigation or enquiry will be made and no due diligence will be conducted in respect of any Mudaraba Assets.

The Mudaraba Assets shall be selected by ADIB and the Certificate holders shall have no ability to influence such
selection. ADIB shall be granted the express entitlement to commingle its own assets with the Mudaraba Assets and as a
result, it may not be possible to identify the Mudaraba Assets separately from the assets of ADIB.

In the event that any of the risks relating to the business of ADIB mentioned above (see Risk Factors Risks relating to
ADIB) materialize or otherwise impact ADIBs business, the value of and profit earned from the investment in such
Mudaraba Assets may drop which may, in turn, have a material adverse effect on the ADIBs ability to fulfil its payment
obligations under the Mudaraba Agreement and consequently, the Trustees ability to make payments in respect of the
Investment in the Mudaraba Assets
The Executive Committee of the Fatwa & Sharia Supervisory Board of ADIB, the HSBC Amanah Central Shariah Committee,
the Morgan Stanley Sharia Supervisory Board and the Sharia Supervisory Committee of Standard Chartered Bank have
confirmed that the Transaction Documents are, in their view, Sharia compliant.

However, there can be no assurance that the TransactionDocuments or the issue and trading of the Certificates will be
deemed to be Sharia compliant by any other Sharia board or Sharia scholars. None of the Trustee, ADIB, the Delegate or
the Managers makes any representation as to the Sharia compliance of the Certificates and/or any trading thereof and
potential investors are reminded that, as with any Sharia views, differences in opinion are

In addition, prospective investors are reminded that the enforcement of any obligations of any of the parties would be, if in
dispute, the subject of arbitration in London under the LCIA Rules. ADIB has also agreed under certain of the Transaction
Documents to submit to the jurisdiction of the courts of England, at the option of the Trustee. In such circumstances, the
arbitrator or judge, as the case may be, will first apply the relevant law of the relevant Transaction Document rather than
Sharia principles in determining the obligation of the parties.
Assurance on Sharia rules
Mike Kennedy
The profound impact of the global financial crisis prompted G20 leaders to seek agreement on a set of internationally
effective rules to improve both the quantity and quality of bank capital as well as to discourage excessive leverage
Basel III.

Given that Islamic banks are liquid and inherently risk averse, the sector avoided many of the speculative products that
contributed to the recent economic turmoil. Nevertheless, Islamic banks were not totally immune to the situation: many
were left exposed due to over-expansion and excessive risk concentrations, notably in the real estate sector.

Financial institutions must have more and higher quality tier 1 capital (which includes common equity and certain
minority interests, as well as deferred tax assets). Tier 1 capital must be fully effective at absorbing losses and tier 2
capital (which includes undisclosed reserves, revaluation reserves, general provisions, hybrid instruments and
subordinated term debt) must absorb more losses in order to protect capital. Capital, which is additional to minimum
capital requirements, is needed to address systemic and procyclicality risks.

The first point to note is that the capital structures of the significant majority of Shariaa-compliant banks are dominated
by tier 1 capital in common equity form, often in excess of 80 per cent of capital resources. In addition, most have
capital adequacy ratios noticeably higher than those seen in the conventional banking sector. The reasons for this can
be explained by a combination of complexities and Shariaa prohibitions in raising alternative and lower quality forms of
capital, which result in:-
The lack of Islamic subordinated debt.
The lack of hybrid and callable capital structures due to the prohibition of Gharar (conditionality and uncertainty).
The lack of meaningful levels of preference shares, even in Shariaa jurisdictions that permit this form of capital.
Basel III and Islamic finance
As a consequence of these factors, the capital structures and above average capital ratios of
Shariaa financial institutions put them in a favourable position relative to many of their
conventional counterparts. The capital adequacy positions of Shariaa-compliant banks will also
benefit from:-
The modest role of Trading Book businesses as Shariaa principles prohibit short selling and
impose strict limitations on the use of derivatives. Shariaa financial institutions will be negligibly
impacted by the higher capital charges for such operations.
The modest and very limited use of derivatives and securitised structures by Shariaa-
compliant banks will result in not being adversely impacted by the additional capital charges that
are being applied to address the inherent risks in such products (e.g. wrong way risk).
The lack of leverage and contingent risks, auger well for Islamic banks in so far as the new
leverage ratio is unlikely
to have anything more than a very
modest impact.

Liquidity is, however, one area where both conventional and Shariaa-compliant banks are likely
to be impacted in different ways. Firstly, there remains a dearth of liquid Islamic instruments.
Despite progress in the deepening of Islamic liquidity markets, notably the increased Sukuk
issuance by the AAA rated Islamic Development Bank, there is a lack of eligible liquidity
instruments and central bank facilities. However, these limitations are offset by the relative lack
of contingent and leveraged liquidity risk; a generally low reliance on interbank funding; and for
many banks strong depositor loyalty.

Stronger and better managed Islamic banks will see Basel III as an opportunity to prosper and
strengthen their competitive positions. Many banks may not have this chance.
Several features of the ADIB sukuk qualify it more as an equity instrument than a
plain vanilla sukuk, which is usually classified as senior debt.
The upcoming perpetual sukuk will be classed as deeply subordinated, with
proceeds used to strengthen ADIB's core capital rather than booked as a liability
on its balance sheet.
"Common equity is generally perpetual, unlike bonds and sukuk, which typically
have a defined maturity. ADIB's Tier 1 also features a discretionary profit payment,
which more closely resembles an equity dividend than a bond's coupon payment,"
said Nick Stadtmiller, head of fixed income research at Emirates NBD.
"The economics of ADIB's Tier 1 notes have more equity-like features to allow
them to book the notes as capital on their balance sheet, rather than as a liability."
ADIB shareholders approved the capital-boosting measures at a meeting last
month. The bank had a Tier 1 capital ratio of 13.45 percent at the end of June
2012, and said in its second-quarter results that it aimed to raise this to above 15
percent in the near term.
ADIB, the largest sharia-compliant lender by market value in Abu Dhabi, is to
conclude investor meetings on Wednesday in Zurich, after kicking off meetings
last week in the Middle East and Asia.
The bank has mandated itself, HSBC Holdings, Morgan Stanley Inc, National
Bank of Abu Dhabi and Standard Chartered Plc to arrange the deal. (Additional
reporting by Mala Pancholia; Editing by Andrew Torchia)
Issuer as
Rabbul Mal
Mudaraba Capital
Dissolution Mudaraba capital and
Mudaraba Profit
Periodic distribution amounts,
Dissolution distribution Amount
and Mudaraba Premium (if
Proceeds of
of Trust
ADIB Sukuk

Main points of ADIB Sukuk

Mudaraba Structure
Asset ownership by the Rabbul Mal(Trustee) on
Mudaraba Assets
Limited Recourse to disposal of Assets
The Certificates are limited recourse obligations
The Certificates are not debt obligations of the Trustee.
Instead, the Certificates represent an undivided ownership
interest solely in the Trust Assets. Recourse to the Trustee
in respect the Certificates is limited to the Trust Assets and
the proceeds of such Trust Assets are the sole source of
payments on the Certificates.

Features such as the subordination of sukuk holders and
the conditionality of payments - ADIB can halt periodic
distributions to investors if it wishes - mean sukuk
behave more like equity than debt, which is favoured by
the new Basel standards,
Perpetual Sukuk
Perpetual means it would not have maturity
date i.e. no scheduled repayment date
Certificate holders have no ability to require
the Trustee to redeem their Certificates unless a
Dissolution Event occurs. Principal is repaid at the
discretion of the issuer
ADIB can choose to repay the bond on certain dates
from 2018 if it wishes. Sukuk is callable at year six


For Tier 1 capital
The structure, in line with Basel III requirements,
will raise the banks tier 1 capital ratio to
19 % from 13.7 % at the end of September.

USD 1 Billion
Coupon: 6.375% payable twice per annum
Issue Managers: ADIB,HSBC,Morgan Stanley,
National Bank of Abu Dhabi, Standard Chartered

$15 billion subscribed from 330 orders
The issue was driven by broad demand across three
regions, with allocations of 38 per cent to Asia, 32 per cent
to Middle East, 26 per cent to Europe, and 4 per cent to
US Offshore investors. By investor type, the Trust
Certificates were sold to private banks which took 60 per
cent, Asset and Fund managers bought 26 per cent,
commercial banks 11 per cent and other 3 per cent.
Periodic payments by the Trustee
Unless a Non-Payment Event or a Non-Payment Election has occurred, prior to each Periodic
Distribution Date, the Mudareb shall distribute the profit generated by the Mudaraba to both the
Issuer and the Mudareb in accordance with an agreed percentage split (90 percent to the Issuer (as
Rab-al-Maal) and 10 percent to the Mudareb). The Issuer shall apply its share of the profit (if any)
generated by the Mudaraba on each Periodic Distribution Date to pay the Periodic Distribution
Amount due to the Certificateholders on such date.
Payments of Mudaraba Profit (as defined in the Mudaraba Agreement) 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 obligation to make any subsequent payment in respect of such unpaid profit (whether from
its own cash resources, from the Mudaraba Reserve or otherwise).
Tier 1 capital is the core measure of a bank's financial strength from a regulator's point of view. It is
composed of core capital,
which consists primarily of common stock and disclosed reserves (or retained
One of the highest priority issues for the Basel committee in designing Basel III was the need to
strengthen the quality, consistency, and transparency of the regulatory capital base .This shows that
capital ratios have been increased in order to discourage banks from taking excessive risks.

The formulae of the capital ratios are as follows:
Capital adequacy ratio = Tier1 + Tier2 : This has to be minimum 8%
Risk weighted Assets

The common equity tier 1 ratio is calculated as:
Common equity tier 1 ratio = Tier1 :4.5% minimum
Risk weighted Assets.
In addition to this, there has to be an extra capital conservation buffer of 2.5%. This essentially brings up
the common equity requirement up to 7%. This buffer is used to ensure that financial institutions have a
cushion during periods of financial and economic stress

On the funding side of an Islamic bank's balance sheet, we are expected to find three types of equities - equity
of Musharakah, equity of Mudarabah and equity of sukuk. Our approach to these equity types needs to be
changed to respond effectively to Basel III reforms and benefit from and contribute to genuine Islamic finance.
With this spirit we suggest the perpetual participation sukuk within the framework of Basel III as additional tier-
1 capital.

Mudarabah is an important Islamic partnership and asset price risk driven contract. In a nutshell, the principal
amount of funds and profit rates cannot be guaranteed and the contract is fundamentally a profit sharing
arrangement between the two parties.

A perpetual participation sukuk (PPS) is a Mudarabah equity share in an Islamic bank to be traded on the
stock markets.

The PPS will fully conform to the fundamental Shariah requirements of the Mudarabah partnership contract. In
addition, the PPS will be perpetual, non-redeemable, and junior to all forms of deposits of the Islamic bank but
will be treated as senior to Musharakah equity shares whether held privately or publically. Furthermore, the
PPS will meet all the conditions of Basel III for fulfilling the additional tier-1 capital criteria.

Basel III has introduced important capital reforms for strengthening tier-1 capital, especially by introducing a
new category of capital with the name of 'additional tier 1 capital'. Additional tier 1 capital is a perpetual
financial instrument. It is not guaranteed, it has no redemption features, and it is junior to depositors and other
creditors of the bank.

Perpetual Participation Sukuk - A proposed
additional tier-1 capital under Basel III
The equity of Mudarabah and the equity of sukuk do not qualify to be a form of capital under Basel III.

Mudarabah is the basis of profit sharing investment accounts (PSIAs) in Islamic banks. PSIAs have unique
features including withdrawal risk, fiduciary risk, displaced commercial risks etc. Therefore, some regulatory
jurisdictions do not even recognize the PSIAs as a source of funding for the Islamic bank. Other jurisdictions
prefer to treat PSIAs no differently than current accounts in terms of regulatory capital allocation.

All existing sukuk are facing what can be called "structural risks" - a risk showing a condition in the design of
the contract when asset price risk, rate of return risk and credit risk are not separated properly. The rating
agencies, sukuk arrangers and law firms have tried to remove the asset price risk from sukuk through
various undertakings, particularly the re-purchase undertaking at the initial price. In the existence of this
undertaking, sukuk replicates the credit risks and interest rate risks of conventional bonds.

But most Shariah scholars reject the undertaking, considering it Bai' Al I'nna. If the re-purchase undertaking
at initial price is removed, the sukuk will move into the category of equity driven by asset price risk.
This tussle between the asset price risk driven sukuk which is preferred by the Shariah scholars on one hand
and credit risk driven sukuk as preferred by rating agencies, arrangers and law firms on the other hand
compound the sukuk structure risks. Therefore, sukuk with structure risks cannot be a stable source of
funding for Islamic banks.
The central focus of Basel III is on strengthening the stable sources of funding and liquidity in banking
institutions. The PPS is based on a pure Mudarabah contract, it is driven by asset price risk, it is perpetual
and non-redeeming, it is junior to deposits and hence it will be fully compliant with the Basel III additional tier-
1 capital criteria.
Why Do Islamic Banks Need PPS?
No Fixed Redemption Date and Conditions
for Redemption and Variation *(page 46)
No Fixed Redemption Date and Conditions for Redemption and Variation
The Certificates are perpetual securities in respect of which there is no fixed redemption date
and the Trustee shall (subject to the provisions of Condition 4.2.2 (Subordination) and Condition
11.3 (Winding-up, dissolution or liquidation) and without prejudice to the provisions of Condition
13 (Prescription)) only have the right to redeem the Certificates or vary the terms thereof in
accordance with the following provisions of this Condition 10 (Redemption and Variation).
The redemption of the Certificates or variation of the Conditions, pursuant to this Condition 10
(Redemption and Variation) is subject to the following conditions:
(i) the prior consent of the Financial Regulator;
(ii) the requirement that both at the time when the relevant notice of redemption or variation
is given and immediately following such redemption or variation (as applicable), ADIB is
or will be (as the case may be) in compliance with the Applicable Regulatory Capital
(iii) the requirements of Condition 4.2 (Subordination); and
(iv) (in the case of Conditions 10.1(c) (Redemption or Variation due to Taxation) or 10.1(d)
(Redemption or Variation for Capital Event) only) the requirement that the circumstance
that entitles the Trustee to exercise its right of redemption or variation is a change of law
or regulation (including in the case of Condition 10.1(d) (Redemption or Variation for
Capital Event), Applicable Regulatory Capital Requirements) in the Emirate of Abu Dhabi
or the United Arab Emirates or a change in the interpretation of such law or regulation
by any court or authority entitled to do so which change becomes, or would become,
effective on or after the date of the Mudaraba Agreement,
(in the case of (i) and (ii) above only, except to the extent that the Financial Regulator no
longer so requires).
On 16 April 2009, under the Government of Abu Dhabi Bank capitalisation programme, the Bank has issued Tier 1
sukuk (the "Sukuk") to the Department of Finance of the Government of Abu Dhabi, with a principal amount of
AED 2,000,000 thousand. Issuance of this Sukuk was approved by the shareholders of the Bank in the Extraordinary
General Meeting held on 22 March 2009.

This Sukuk is a perpetual security in respect of which there is no fixed redemption date and constitute direct,
unsecured, subordinated obligations of the Bank subject to the terms and conditions of the Mudaraba. The Sukuk is
callable by the Bank subject to certain conditions. The Sukuk bear an expected mudaraba profit rate of 6% payable
during the initial period of five years semi-annually in arrears and, after the initial period, bear an expected variable
mudaraba profit rate payable of 6 months EIBOR plus an expected margin of 2.3%. Profit distributions will be
reported in the consolidated statement of changes in equity.

The Bank may, at its sole discretion, elect not to make any Mudaraba profit distributions as expected and the event is
not considered an event of default. If the Bank makes a non-payment election or a non-payment event occurs, then
the Bank will not (a) declare or pay any distribution or dividend or (b) redeem, purchase, cancel, reduce or otherwise
acquire any of the share capital or any securities of the Bank ranking pari passu with or junior to the Sukuk except
securities, the term of which stipulate a mandatory redemption or conversion
Sukuk Mudaraba
As Mudarib

Capital + Periodic
of project
2a 2b

Steps involved in the structure:
1.Mudarib enters into an agreement with project owner for construction/commissioning of project.
2. SPV issues Sukuk to raise funds.
3. Mudarib collects regular profit payments and final capital proceeds from project activity for onward distribution to investors.
4. Upon completion, Mudarib hands over the finished project to the owner.
As Mudarib

Capital + Periodic
of project
2a 2b
Offer of Mudaraba Sukuk due 2019 callable with step up in 2014
Issuer: ..............................................................S...a.u di Hollandi Bank
Joint Bookrunners & Joint Lead Managers: ....R...i.y ad Capital and Saudi Hollandi
Sukukholders Agent: ......................................S...a.u di Hollandi Capital
Payment Administrator: ...................................S...a.u di Hollandi Capital
Registrar: .........................................................T...h. e Saudi Stock Exchange
Summary of the Offering
Mudaraba Agreement: ....................................P...u. r suant to a mudaraba agreement (the Mudaraba
Agreement) dated on or about the Closing Date between the Issuer (as mudareb) and the SukukholdersAgent on behalf of the
Sukukholders (as raab al maal), the proceeds of the sale of the Mudaraba Sukuk will be applied as the capital (the Capital) of the
Mudaraba constituted by the Mudaraba Agreement (the Mudaraba).

The Mudaraba will commence on the Closing Date and will end either: (i) on the later of 31 December 2019 and the date on which the
Mudaraba Sukuk are redeemed in full; or (ii) in the event that the Mudaraba Sukuk are redeemed in full prior to 31 December 2019, on
the day immediately following such redemption

Mudaraba Assets: ..........................................
..T...h. e Capital of the Mudaraba to be invested by the Issuer (acting as mudareb) in the Islamic Business
Portfolio. The Issuer shall be entitled to commingle its own Islamic assets with the Mudaraba Assets.
None of the Issuer, the Sukukholders Agent and the Joint Bookrunners & Joint Lead Managers are providing a guarantee in
connection with the performance of the profitability of the Mudaraba Assets or for the share and amount of the distributions
(if any) made to the Sukukholders.

Mudaraba Income Distribution: ....................
..T...h. e objective of the Mudaraba will be to earn profit from the application of the Capital in accordance with
the Mudaraba Agreement. Such profit will be distributed among the Issuer and the Sukukholders in accordance with the
following ratios applied over the Net Profit (as defined below) less the Mudaraba Costs (as defined in the Conditions):
Sukukholders: 90 per cent. of the Net Profit (the Mudaraba Income); and Issuer: 10 per cent. of the Net Profit (the
Mudareb Profit).
The Mudaraba Income, up to the periodic Distribution
Amount, shall be distributed by the Issuer to the
Sukukholders on each Periodic Distribution Date on the
basis of a constructive liquidation of the Mudaraba.
If the Mudaraba Income in any Periodic Distribution
Period exceeds the Periodic Distribution Amount, the
amount of any surplus shall be retained by the Issuer as
a reserve (the Reserve). The Issuer shall not have the
right to use and invest the monies (if any) standing to
the credit of the Reserve for its own account.