IIFM Sukuk Report (3rd Edition) A Comprehensive study of the ...

S U K U K R E P O R TA 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 SudanBank of Indonesia Autoriti Monetari Brunei Darussalam State Bank of PakistanDubai International Financial Centre Crdit Agricole Corporate & Investment Bank Al Salam Bank, BahrainKuwait 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, UAEAbu 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, BahrainBahrain 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 financial products, documentation and related processes at the global level. Moreover, IIFM also contribute in the development of ICMM by organizing specialized Seminars, Workshops & Consultative meetings as well as research on Sukuk issuances around the globe.

IIFM was founded with the collective efforts of the Central Bank of Bahrain, Islamic Development Bank, Autoriti Monetari (i.e. Monetary Authority) Brunei Darussalam, Bank Indonesia, Central Bank of Sudan and the Bank Negara Malaysia (delegated to Labuan Financial Services Authority) as a neutral and non-profit organization.

Besides the founding members, IIFM is supported by other jurisdictional members such as State Bank of Pakistan, Dubai International Financial Centre as well as a number of regional and international financial institutions and other market participants.

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 Clifford Chance LLP, UAE Allen & Overy LLP, UAE Zaid Ibrahim & Company, Malaysia The Islamic Bank of Asia Limited, Singapore The Royal Bank of Scotland, UK Istanbul Stock Exchange, Turkey Seera Investment Bank, Bahrain Bank Al Jazeera, KSABoubyan 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 plcBank 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

IVII


Research & Review Team

Mr. Ijlal Ahmed Alvi Chief Executive Officer

Dr. Ahmed Rufai Head of Shariah Department

Mr. Ismail Dadabhoy IIFM Advisor

Mr. Usman Mohammad Naseer Business Development Officer

Database Maintenance

Mr. Babar Naseer

Mr. Tareq Fouad

Design & Printing

Mr. Sayyed Zarrar

V III



The growth of the Islamic financial market worldwide has been very impressive and remarkable. The innovations have changed the dynamics of the industry especially, in the area of Sukuk which is a means of raising government finance through sovereign issues, and also a way for companies to obtain funding through offering corporate Sukuk.

This third edition of the IIFM Sukuk research report aims to shade light on the growth and development of international and domestic Sukuk issuances in recent years and to highlight as well on the different Sukuk structures used in various jurisdictions active in issuing Sukuk.

This research report highlighted and analyzed some selected case studies from the international Sukuk markets based on widely used structures for the purpose of achieving a deeper understanding of the mechanism of these unique and most popular and commonly used financial instruments in the Islamic Capital and Money Market.

The report presents invaluable information on the benefits of Sukuk for all the stake holders in the industry.

Abstract

VIIV


On the very outset of this research report, IIFM would like to take this opportunity to express its

deep sense of gratitude and thanks to individuals and institutions for their cordial support to

complete this research report.

The report would not have been seen light without the support of such individuals, the industry

institutions and the stakeholders in general.

Our sincere gratitude and highly thankful goes also to all institutions and stakeholders who provide

us with invaluable information that helped us to complete this task through various stages.

We take this opportunity to express our profound gratitude and deep regards to the Central Bank

of Bahrain (CBB) for its constant and continued support. We would also like to acknowledge and

highly thank IIFM Board of Directors and Members for their unreserved support for IIFM in its

general endeavors.

IIFM is very much thankful to Mr. Ismail Dadabhoy for his review and voluble contribution to this

report. We are also thankful to Ms. Shazia Farooq for her time and effort in jointly preparing the

case studies of this research report.

Lastly, IIFM is also thankful to Ministry of Finance Indonesia, Clifford Chance, Linklaters, HSBC

Bank, Al Hilal Bank, Noor Islamic Bank & FWU Group for providing case studies & articles on specific

Sukuk structures institutions contribution.

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 finance. Reliable research which provides data in respect of Sukuk issuance is a key factor in understanding the way in which the market is developing, and this in turn can be used to inform decisions as to when to issue a Sukuk; the anticipated terms of the issuance; and to facilitate the monitoring of any secondary market.

In 2010, the International Islamic Financial Market (IIFM) successfully published the first edition of a Sukuk Research Report, followed by the second edition in 2011. The two reports provided a comprehensive analysis of the market at the respective times. It has been encouraging to note the level of praise and admiration both reports received from existing and potential market participants.

The latest Research Report builds upon the previous success, and it goes a long way to strengthen and deepen the understanding of global Sukuk structures and issuance. The Report provides a reliable database, with accompanying professional analysis, and this can be used as a benchmark by regions which have a high concentration of the worlds Sukuk issuance.

This research report aims to provide information for industry decision makers in their assessments of trends in the issuance of Sukuk globally. The report also amply illustrates the importance of this field of transactions to all stakeholders, and clearly demonstrates the way in which Sukuk issuance and utilisation has evolved.

I believe that the IIFM research team can be confident that there will be many grateful readers who will gain a broader perspective of the Sukuk structure and how stakeholders can optimize the benefits of the Sukuk market as a result of their efforts.

Mr. Khalid Hamad April 2013

VIIIVI

Foreword


From The Chief Executive Officer, International Islamic Financial Market (IIFM)

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

All the praises and thanks be to Allah Almighty, the Lord of all that exists. And may peace and blessings of Allah Almighty be

upon His Messenger Prophet Muhammad, his family and all his companions.

There is no doubt that Sukuk play an essential role in the development of Islamic Capital and Money Market and also

play an important role in contributing to the economic growth and prosperity of Islamic countries. IIFM efforts in this

respect as reflect in its 1st and 2nd Editions of the Sukuk Reports are evident. The two reports were very well received

by the practitioners. Considering the value addition provided by IIFM in terms of Sukuk issuance database and issues

covered in the reports.

I have a great satisfaction in introducing this third edition of the IIFM Sukuk Report to the stake holders in the industry

in particular, governments, Islamic financial institutions and corporates. This report provides valuable information

obtained through data analysis, regarding the Sukuk issuances for the years January 2001 January 2013.

This report will pay particular attention on the prospects and overview trends of the global Sukuk Market and it will

highlight on major issuances around the globe.

This report is an excellent example of cooperative endeavor among a number of institutions and individuals from

different jurisdictions. They have put in their efforts and contributed to the successful completion of this report. I will like

to acknowledge their contribution individually but the constraint of space restricts me from that. The motivation and

commonality among the stakeholders of the research objective despite their belonging to divergent jurisdictions helped

IIFM to complete this important task without obstructions. The varied information of the collaborating institutions which

have been brought into this report, the issuance specific data and the profound analysis make the report immensely

useful and valuable.

I am very much thankful to Securities Commission Malaysia, Bank Indonesia, Ministry of Finance Indonesia, State Bank

of Pakistan and Central Bank of Sudan for their continued support and enriching t he IIFM database with valuable Sukuk

data information and verification.

I must place on record my profound gratitude to the Central Bank of Bahrain (CBB), IIFM board of directors and Members

for their continued support. I must also wholeheartedly thank the IIFM research team who through their hard work,

devotion and sincerity has completed this challenging task of Sukuk report successfully. It is my hope that the reader

will find this report useful and of value.

Mr. Ijlal Ahmed AlviApril 2013

IX VII

Foreword



CONTENTS

CONTENT PAGE

Disclaimer iiResearch Team iii Abstract ivAcknowledgments vForeword (from the IIFM Chairman & CEO) viContents viiiList of Tables ixList of Charts ix

INTRODUCTION 1

CHAPTER ONE : SUKUK AL- ISTITHMAR (INVESTMENT SUKUK): 3 MEANING AND TYPES1 Introduction 32 Sukuk Al-Istithmar 3 2.1 Definition 3 2.2 Types of Sukuk Al-Istithmar 4 2.3 Characteristics of Sukuk Al-Istithmar 73 Fundamental differences between Sukuk Al-Istithmar and Bonds 74 Conclusion 7

CHAPTER TWO : OVERVIEW OF THE GLOBAL SUKUK MARKET 9

2.1 Resurgence of Sukuk Market 92.2 Global Sukuk Issuances 92.3 Distribution of Global Sukuk Issuance by Issuer Status 142.4 International Sukuk Market 192.5 Domestic Sukuk Markets 22 2.6 Structural Break-up of Global Sukuk Market 242.7 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 343.3 Majid Al Futtaim (MAF) Wakalah Based Sukuk 2012 383.4 Saudi Electricity Company (SEC) Al Ijarah Based Sukuk 2012 433.5 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 68GLOSSARY 71REFERENCES 73

XVIII


LIST OF TABLES TABLE PAGE

Table 1: Selected Hall Mark Global Sukuk Issues & Trends -2011- Jan 2013 - 11 Year wise latest first 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 Profit Rate Sukuk Issuances during Jan 2011 Jan 2013 period 14

Table 4: Global Sukuk Issuances by Issuer Status 2001- Jan 2013 15

Table 5: Global Sovereign Sukuk Issues -Selected Value Leaders 2011-2013 - 15(International & Domestic)

Table 6: Global Corporate Sukuk Issues -Selected Value Leaders 2011-2013 - 16(International & Domestic)

Table 7: Global Quasi-Sovereign Sukuk Issues -Selected Value Leaders 2011-2012 - 18(International & Domestic)

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 efforts to help in establishing a sustainable, viable and feasible global Islamic Capital and Money Market industry through its comprehensive documentation and product standardization initiatives that cater not only Islamic Financial Industry but also to ensure that the Islamic Capital and Money Market products and services remain attractive to all investors, creditors and Sukuk issuers across the Globe.

In an attempt to further strengthen efficiency, awareness and enhance competitiveness of the Islamic Capital and Money Market industry, in 2010 IIFM has published its first Sukuk research report (IIFM Sukuk Report 1st Edition) as part of its efforts to help the industry move forward in a comprehensive manner.

In 2011 the 2nd edition of IIFM Sukuk research report (IIFM Sukuk Report 2nd Edition) was published in order to meet the growing and increasing needs of those interested in the Sukuk Market by providing them useful information on the latest developments of Sukuk market.

The two reports covered a number of important issues related to Sukuk issuances across the globe over the period of 2001 to 2010.

With the continued rise in global Sukuk Issuances whether its domestic or international, sovereign or corporate, it has become very much necessary and essential to shed more light on the evolution of this important financial sector in the Islamic finance industry.

This third edition of Sukuk report as the previous reports provides information and relevant details of Sukuk issuances during the period of 2011 -2012 The main objective here is to highlight the development of the Sukuk market during this period, in particular, in the GCC countries, Asia represented by Malaysia, Indonesia and other countries such as Turkey, Pakistan etc., by analysing the transition and practices that have taken place. In doing so, some of the relevant issues related directly to Sukuk issuances globally during this period of time is discussed and analyzed.

As far as the International Sukuk secondary market is concern, there has been some improvement given the record issuances during last two years, however, the data is not yet available to IIFM in order to assess the level of secondary market Sukuk trading hence, our intention is to continue work on Sukuk secondary market and publish the report at a later date.

Research methodology

Both quantitative and qualitative methods have been used in writing this report.

A quantitative method mainly involves data collection on various Sukuk issuances from January 2011 to January 2013 and also further data verification for 2001 to 2010 period. The main focus in this method is to collate data from writing materials relating to the topic of the research. This includes prospectuses, publications, articles, magazines, online research, and information service providers. Data collected was then filtered with respect to different criteria such as chronology, geographic distribution, issuer status, country of origin, etc and depicted in the form of tables and/or charts for better understanding. Moreover, certain IIFM Member jurisdictions as well as institutions have also assisted IIFM in data verification.

However, in a qualitative method the main focus is to collect and analyze materials or data in respect to Sukuk issuance acceptability. This includes the types of structures used, legal, innovation and Shariah issues.

This research report is organized into four standalone chapters which are organized as follows:

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 specific Sukuk structures, written and prepared by members & other institutions.

Among the the objective of this research report is to help the stake holders in the industry in particular, governments, Islamic financial institutions and corporate, evaluate and asses their decisions on Sukuk issuance as well as in their decision making and policy formulation. Also to orient those interested in the Sukuk Market to the nature of Sukuk field and how it can be useful for those who need to gain some basic as well as more in-depth knowledge and background on the level of research in this field. In order to maximize the benefit of the report, some case studies and articles on specific Sukuk structures and issues have been included.

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 difference 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 reflect participation in the underlying asset so that what is traded is not a merely debt as each certificate must represent an undivided interest in the asset. This is because in the light of the prohibition of Riba (i.e. interest) under theShari ah trading in pure debt instrument is forbidden. Therefore, Sukuk are structured to achieve a desired economic objective in a manner conform to the principle and sprit ofShari ah.

Investment in tangible assets, used for productive purposes and reaping the rewards arising from those assets is the core principle of Islamic finance and it is this principle on which Sukuk securitization structures are founded.

Moreover, for a Sukuk structure to comply withShari ah principles the underlying asset must also comply with theShari ah principles as well. In other words the underlying asset must be lawful from theShari ah perspective.

As mentioned in the abstract that the primary purpose of this chapter is to give general information on Sukuk Al-Istithmar without digging deep into its Sahriah provisions and practical applications but to know that these Sukuk must be structured on the basis of the known Islamic investment transaction contracts such as Mudarabah, or Wakalah or Ijarah or Salam etc. all of which are called/termed/categorized as Sukuk Al-Istithmar according to AAIOFI Shariah Standard.

2. Sukuk Al- Istithmar

2.1 Definition

The early Muslims have used the word Assakk, which means certificate or order of payment. And the plural of this Arabic term is Sukuk 1 .

They used Sukuk in those early days as a form of papers representing financial obligations originating from trade or any other commercial activities. However, in the modern day Islamic financial system, Sukuk are known as instruments of the Islamic capital Market and it is one of the best financial instruments and mechanisms that are commensurate with the needs of issuers/originators and investors.

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 defined as follows:

Investment Sukuk are certificates of equal value representing undivided shares in ownership of tangible assets, usufructs and services or (in the ownership of) the assets of particular projects or special investment activity 2.

The concept of Sukuk Al-Istithmar can be extracted from this definition as certificates of equal value issued and sold to investors who, by virtue thereof, have proportional claims over the financial rights underlying these certificates as well as proportionately liable for obligations arising from these certificates i.e. benefits and risks.

2.2 Types of Sukuk Al- Istithmar

There are many types of Sukuk Al-Istithmar which can be issued in many forms and structured from any of the known Islamic investment transaction contracts such as Wakalah contract or Mudarabah contract or Salam contract or Ijarah contracts etc. in other words Sukuk Al-Istithmar must be issued in accordance with one of these known contracts. The most important of such contracts in this regard as set out in the AAIOFIShari ah Standard

are the following 3:

2.2.1 Sukuk Milkiyyah Al-Maujudaat Al-Muajjarah (i.e. Certificates of ownership in leased assets)

These are certificates that represent equal value and are issued by the owner of leased asset or a tangible asset to be leased by promise, or by his financial agent with the aim of selling asset and recovering its value from subscription. Thus, the holders of the certificates become owners of the assets.

In this transaction the Issuer is the seller of a leased asset or a tangible asset to be leased on promise, the subscribers are the buyers of the asset, mobilized funds are the purchase price of the asset. The certificate holders will become the owners of the assets jointly sharing the profits and losses on the basis of the partnership that exist between them.

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

These Sukuk have different types as explained bellow:

(a) Sukuk Milkiyyah Al- Mana fi a Al- a ayaan Al-maujudah (i.e. Certificates of ownership of usufructs of existing assets

These are Certificates of equal value that are issued either by the owner of an existing asset or a financial intermediary acting on the owners behalf, with the purpose of leasing or subleasing this asset and receiving the rental from the revenue of subscription. Thus, the holders of the certificates become owners of the usufruct of the asset.

In this transaction the Issuer is the seller of usufruct of an existing asset, the subscribers are the buyers of the usufructs and the mobilized funds are the purchase price of the usufructs. Thus, the certificate holders become jointly the owners of the usufructs sharing its benefits and risks.

(b) Sukuk Milkiyyah Al- Mana fi a Al- a ayaan Al-mausufah fi Al- dhimmah (i.e. Certificates of ownership of usufructs of described future assets)

These are certificates of equal value issued for the aim of leasing out tangible assets that the lessor is liable to provide in the future whereby the rental is recovered from the subscription revenue. Thus, the holders of the certificates become owners of the usufruct of these future assets.

2. Accounting and auditing organization for Islamic Financial Institutions (AAIOFI) Shariah Standards, 2010, item 2 Shariah Standard no. 17. PP. 307 309. 3. Ibid. (See the AAIOFI Sharia Standard no. 17 for more details on these Sukuk).

In this transaction whereby the ownership of described usufructs to be made available in the future the Issuer is the seller of such usufruct, the subscribers are the buyers of the usufructs and the mobilized funds from subscription are the purchase price of the usufructs. Thus, the certificate holders become jointly the owners of the usufructs sharing its benefits and risks.

(c) Sukuk Milkiyyah Al-Khadamaat min taraf mu ayyan (i.e. Certificates of ownership of services of a specified party)

These are certificates of equal value issued for the aim of providing services through a specified provider (such as educational benefits in a nominated university) and obtaining the value in the form of subscription income. Thus, the certificates holders become owners of the services.

(d) Sukuk Milkiyyah Al-Khadamaat min taraf mausufun fi Al- dhimmah (i.e. Certificates of ownership of

described future services)

These are certificates of equal value issued for the purpose of providing future services through described provider (such as educational benefits/ programs of determined specifications without mentioning the educational institution) and obtaining the fee in the form of subscription income. Thus, the holders of the certificates become owners of the services.

In these transactions (c & d) the issuer is the seller of services, the subscribers are the buyers of the services and the mobilized funds are the purchase price of the services.

The certificate holders are entitled to sell all types of usufructs of (b, c & d) in addition to the funds of reselling such usufructs 4.

2.2.3 Sukuk Al- Istisna a

These are certificates that represent equal value issued with the aim of mobilizing required funds to be used for the production of certain goods which to be owned by the certificate holders when its produced on Istisna a basis.

In this transaction the issuer of these certificates is the manufacturer (Seller), the subscribers are the buyers of the goods to be produced and the mobilized funds are the cost of the goods. The certificate holders are entitled to the goods or the selling price of the manufactured goods on the basis of a parallel Istisna a if any.

2.2.4 Sukuk Al- Murabahah

These are certificates that represent equal value issued for the purpose of financing the purchase of Murabahah commodity and therefore, the certificate holders become the owners of the purchased commodity.

In this transaction, the issuer of these certificates is the seller of the Murabahah commodity, the subscribers are the buyers of that commodity and mobilized funds are the purchasing cost of the commodity. The certificate holders own the Murabahah commodity and are entitled to its sale price. 2.2.5 Sukuk Al- Musaqaah (i.e. Irrigation certificates) 5

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

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 certificate Holders are entitled to a share in the produce of the trees as per the agreement.

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

These are certificates that represent equal value issued with the aim of using the mobilized funds for establishing a new project or developing an existing one or financing a business activity on the basis of any of partnership contracts. Thus, the certificate holders become the owners of the project or the assets of the activity as per their respective shares.

Sukuk Al-Musharakah however, may be managed on the basis of Al- Shirkah i.e. participation or Al- Mudarabah or trough Al- Wakalah bil Istithmar i.e. investment agency as explained below:

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

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

2.2.6.2 Sukuk Al- Mudarabah 6

These are certificates that represent projects or activities that are managed on the basis of Mudarabah contract by appointing Mudarib who could be one of the partners or any other person for the management of the operation.

In this transaction, the issuer of these certificates is the Mudarib, the subscribers are the capital owners and mobilized funds are the Mudarabah capital. Thus, the certificate holders own the assets of Mudarabah and share the profit as per the agreement. They also being the capital providers, bear the losses, if any.

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

These are certificates that represent projects or activities that are managed on the basis of investment agency by appointing an agent to manage the operation on behalf of the certificate holders.

In this transaction, the issuer of these certificates is the investment agent, the subscribers are the principals and the mobilized funds are the entrusted capital of the investment. Thus, the certificate holders own the assets represented by the certificates with its benefits and risks, and also they are entitled to the profits if any.

2.2.7 Sukuk Al- Muzaraah (i.e. sharecropping certificates) 7 These are certificates of equal value issued for the objective of using the mobilized funds in financing a project on the basis of a Muzaraah contract. Thus, the certificate holders become entitled to a share in the crop as per the terms of the agreement.

In this transaction the issuer of these certificates is the owner of the land, the subscribers are the cultivators who invest on the basis of Muzaraah contract and the mobilized funds are the cultivation cost. Thus, the certificate holders are entitled to a share of the produce of the land as per the agreement.

6

6. Al- Mudarabah or Al-Qiradh: Is a contract between a Rabbul Mal (capital provider) and (an entrepreneur) under which the Rabbul Mal provides capital to be managed by the Mudarib and any profit generated from the capital is shared between the two parties (Rabbul mal and Mudarib} according to mutually agreed profit sharing ratio whilst financial losses are borne by the Rabbul Mal provided that such losses are not due to the Mudaribs misconduct, negligence or breach of specified terms of the contract. 7. This is a type of contract in which one person works on the land of another person in return for a share in the produce of the land.

2.2.8 Sukuk Al - Salam 8

These are certificates of equal value issued for the aim of mobilizing Salam capital so that the goods to be delivered on the basis of Salam contract are owned by the certificate holders.

In this transaction the issuer of these certificates is the seller of the Salam goods, the subscribers are the buyers of the goods and the mobilized funds are the purchase price of the commodity, which is the Salam capital. Thus, the certificate holders are the owners of Salam goods and they are also entitled to the sale price of the certificate or the sale price of the Salam goods sold through a parallel Salam, if any.

2.3 Characteristics of Sukuk Al- Istithmar 9

Sukuk Al-Istithmar is characterized with many features that distinguish them from the non Shari ah complaint bonds. These features include:

(a) Sukuk Al-Istithmar are certificates of equal value issued in the name of investor therefore, a legitimate claim of its owner/investor over the financial rights and obligations represented by the certificate can be established.

(b) It represents a common share in the ownership of the tangible assets earmarked for investment, usufructs, services etc. and hence, it does not represent debt as in the case of non Shari ah compliant bonds.

(c) It is issued on the basis of known and acceptable Shari ah investment contracts and in accordance with Shari ah principles which governing its issuance as well as its trading.

(d) Investors in Sukuk Al-Istithmar share the profit according to the agreement set forth in the prospectus and also bear the losses if any, based on the percentage/proportion owned by each investor.

3. Fundamental differences between Sukuk Al- Istithmar and Bonds

Bond is defined as:

A debt investment in which an investor loans money to an entity (corporate or governmental) that borrows the funds for a defined period of time at a fixed interest rate 10.

Based on this definition of the bonds, we can see that the fundamental differences between Bonds and Sukuk Al-Istithmar is in the fact that Sukuk Al-Istithmar are not fixed income securities, because they do not represent debts between the issuer and the investors. Rather, the investors share Sukuk returns and proceeds according to percentages stated in the prospectus, and bear losses in proportion to the number of the Sukuk certificates held by them.

AAIOFI Shari ah Standard clearly stated that these Sukuk Al-Istithmar are investment Sukuk in order to distinguish them from shares, bonds etc. which, as well as other large part of the conventional securitization market, are not conform to theShari ah principles of transaction as its income element of the cash flow is considered to be Riba (i.e. interest) hence, could not be accepted as an asset class as well as it represent debt rather than Shariahh compliant acceptable commodity.

4. Conclusion

The of this chapter can be summarized in the following points:

4.1 There is no any objection from theShari ah to issue Sukuk Al-Istithmar certificate on the basis of any known Sahari ah investment contracts, such as Wakalah or Mudarabah or Salam or Ijarah contracts etc. and the certifi-

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 identified in a transparent manner. Also its documentation must demonstrate that any income arising must derive from the underlying activities for which the funding has been used, and not simply comprise Riba (i.e. interest) as these Sukuk Al-Istithmar deferred from bonds and fixed-income securities which represent debts.

4.2 Under the umbrella of Sukuk Al istithmar there are different types of Sukuk with differentShari ah rulings and structures. All these Sukuk are called Sukuk Al istithmar in order to distinguish them from shares and bonds.

4.3 Sukuk Al-Istithmar represents undivided shares in the ownership of all the assets made available for invest-ment of whatever type. Therefore, the relationship between the investors and issuer is based on some kind of partnership in profit and loss sharing not on debt as debts owed as liability are not allowed inShari ah to securitize them for the purpose of trading.

4.4 For the sake of information, Sukuk Al Wakalah bi Al-Istithmar (i.e. Certificate of investment agency) is under the umbrella of Sukuk Al istithmar which includes as mentioned above, various Islamic contracts. Some in the Sukuk industry are not aware of this as they suggested in their writings that Sukuk Al-istithmar should be distinguished from Sukuk Al- Mudarabah and Sukuk al-Wakalah bi Al-Istithmar.

4.5 It is a Shari ah requirement that Sukuk Al-Istithmar must be structured and issued on the basis of any known Islamic investment contracts, so that the transactions will be subjected to its (i.e. the investment contracts) gen-eral provisions and conditions. This is after closing subscription, receipt of the value of the certificates and putting it to use as planned.

Below diagram illustrate the types of Sukuk Al- Istithmar where they must be structured and issued on the basis of any of the Islamic nominated Investment contract:

8

12

Types of

Sukuk

Al- Istithmar

Sukuk Al-Ijarah

Sukuk Al-Murabahah

Sukuk Al- Muzara'ah

Sukuk of ownership of usufructs.These

Sukuk have different types as follows:

Sukuk Al- Istisna a

Sukuk Al-Musaqaah

Sukuk Al - Salam

Sukuk Al-Musharakah may be

managed on the following basis

(a) Sukuk of ownership of usufructs of existing assets.

(b) Sukuk of ownership of usufructs of described future assets.

( c) Sukuk of ownership of services of a specified party.

(d) Sukuk of ownership of described future

(a) Sukuk Al -Sharikah

(b) Sukuk Al-Mudharabah (c ) Sukuk of investment

agency (i.e. Al Wakalah bil Istithmar)

Mixed asset Sukuk or

hybrid Sukuk

Combine two or more forms of

Islamic financing in

their structure.

The underlying pool of assets

can comprise of Istisna,

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 fixed profile instrument known as Sukuk. After a relatively large dip in the Sukuk issuances in mid 2008 to 2009, the year 2010 showed the glimpse of true potential of Sukuk.

The global financial crisis had a direct impact on Sukuk market and the few holders of troubled Sukuk were facing the default and insolvency proceedings and uncertainty on legal difficulties in restructuring Sukuk. However, once several defaulting Sukuk were restructured and legal certainty was established the market confidence returned. The most recent restructuring of Sukuk is Dana Gas US$ 1 billion Sukuk which is expected to be soon approved by the creditors. The Dana Gas restructuring involve partial cash repayment and issuance of US$ 425 million Convertible Sukuk & US$ 425 million Sukuk which shows that legal system is present to tackle such events though further improvement may be required to tackle certain issues specific to Islamic Finance.

Furthermore, the Islamic jurisdictions also stepped in and started bench mark Sukuk issuances both in their Domestic Market as well as in International Market. A number of Islamic countries such as Indonesia, Turkey, Pakistan, GCC countries and others gave priority to developing the Islamic Financial Services Industry particularly Sukuk market.

The year 2011 & 2012 witnessed record Sukuk issuances by Sovereigns, Quasi Sovereigns & Corporates and this was in line with IIFMs Sukuk Report 2nd edition indication that Sukuk market will grow and Islamic jurisdictions will lead the Sukuk market recovery.

The other helpful and much needed development is use of Sukuk in project financing as well as for aircraft financing (Emirates Airline, Malaysian Airline, Air Asia) which are of long term nature and Sukuk is well suited for these kind of financing requirement.

Finally, financial institutions are no longer the majority investors in Sukuk as fund managers; Takaful operators, high Net worth Individuals and others are now investing in Sukuk which is one of the reason why most of the Sukuk are issued on fixed profit rate basis.

2.2 Global Sukuk IssuancesAs 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 financial crisis. Sukuk issuance enjoying a very successful runs that began in 2010 and recorded another pinnacle in 2012, and in doing so, it crossed the $100 Billion mark of financing arranged via Sukuk. The market achieved a very respectable issuance of US$ 137 Billion.

The Financial crisis of 2008, which pressured developed market financial institution into contracting and deleveraging, played a big part in propelling Sukuk issuance to new heights. Sukuk is now establishing a firm base as an alternative source of funding, not just for the GCC and Malaysian market but with interest gathering from Europe, African continent and the CIS countries.

We witnessed many milestones in 2012, just to highlight a few:

a) The biggest Sukuk issuance from PLUS - Malaysia

b) The biggest Saudi Sukuk by the Civil Aviation Authority

c) First Intl Sukuk issuance with a Saudi Sovereign Guarantee

d) Debut International Sukuk by The Republic of Turkey

e) Debut Domestic Lira issuance by Republic of Turkey

f ) First Sukuk issuance from a financial institution in Kazakhstan

g) First Perpetual Sukuk by Abu Dhabi Islamic Bank

h) First Tier 1 Sukuk by Abu Dhabi Islamic Bank

500,000

450,000

400,000

350,000

300,000

250,000

200,000

150,000

100,000

50,000

01,172 1,371 7,057 9,465 13,698

33,83750,041 24,26437,90452,978

92,403

137,499

472,683

10,993

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013 -

Januar

yTot

al

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 Domestic Quasi-Sovereign Sukuk issuances of various tenors, Al Musharaka, issuer from Malaysia

9,728 16

2012

Abu Dhabi

Islamic

Bank

International Corporate, Mudarabah Sukuk, Tier 1 & perpetual, issuer

1,000 Perpetual

2012

Qatar International Islamic Bank

International Corporate Hybrid Sukuk

700 5

2012

Qatar Islamic

Bank

International Corporate Sukuk Al Wakalah

750 5

2012

Celcom

Transmission

Five Domestic Corporate Sukuk Issuances, Al Murabahah, Issuer from Malaysia

1,442 8

2012

Tanjung

Bin

Power

9 Nine Domestic Corporate Sukuk Issuances of various tenors, Al Ijarah, issuer from Malaysia

1,101 12

2012

Emirates

Islamic

Bank

Two International Corporate Sukuk issuances, Al Musharaka, issuer from Dubai

1,000 6

2012

Johor

Corporation

Three Domestic Corporate Sukuk issuances, Al Wakalah, issuer from Malaysia

941 7

2012

Banque Saudi

Fransi

International Corporate Sukuk, Al Wakalah, Tier 2, issuer from KSA

750 5

2012

Maxis Berhad

Domestic Corporate Sukuk, Al Musharaka, issuer from Malaysia

811 10

2012

Sarawak

Energy

Bhd

Two Domestic Corporate Sukuk issuances, Al Musharaka, issuer from Malaysia

801 13

2012

Government

of

Malaysia

Seven Domestic Sovereign Sukuk issuances of various tenors, Al Murabahah

2,527 12

2012

Government of

Indonesia

International Sovereign Sukuk Al Ijarah 3.3% p.a. profit rate

1,000 10

2012

Government of Turkey


1,500 6

2012

Government

of

Qatar

Two International Sovereign Sukuk issuances, avg profit rate of 2.67% p.a. Al Ijarah

4,000 16

2012

Government of

Indonesia

Thirteen Domestic Sovereign Sukuk Issuances of various tenors, Al Ijarah

3,620 9

2012

Government of

Pakistan

Six Domestic Sovereign Sukuk Issuances, Al Ijarah

3,135 3

2012

Government

of

Dubai

Two International Sovereign Sukuk issuances, Al Ijarah, avg. profit 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 profit by any corporation globally, two Sukuk tranches having 5 & 10 years tenor (Sukuk Al Ijarah Malaysian Issuer)

800 8

2013

Government of

Dubai

International Sovereign Sukuk Al Ijarah Issuer Dubai,

750 10

2012

Islamic

Development

Bank

Two International Quasi-Sovereign Sukuk Issuances, Al Wakalah and only AAA rated Sukuk

1,300 5

2012

Khazanah

Nasional

Bhd

Four Domestic Quasi-Sovereign Sukuk issuances of various tenors, Al Musharakah, Issuer from Malaysia ,

1,450 15

2012

National Higher Education Fund Corporation Malaysia

Two Domestic Quasi-Sovereign Sukuk issuances, Al Murabahah, Government of Malaysia

1,118 10

2012

Saudi

Electricity

Company

Two International Quasi-Sovereign Sukuk Issuances, Al Ijarah, issuerfrom KSA

1,750 8

2012

General Authority Of Civil Aviation

Domestic Quasi-Sovereign Sukuk, Al Murabahah, issuer from KSA

4,000 10

11

Continuous innovation together with more Debut Sukuk issuances and refinancing of maturing Sukuk is likely to maintain the Sukuk Volume trajectory upwards in 2013 and beyond, as countries and corporate look to take advantage of extremely attractive low yields being priced by the market.

2011

Malaysian

Airline

Nine Domestic Quasi-Sovereign Sukuk issuances of various tenors, Al Murabahah

2,576 7

2011

Islamic Development

Bank

1 International Quasi-Sovereign Sukuk Al Wakalah from KSA

750 5

2011

Manjung Island Energy Berhad

7 Domestic Corporate Sukuk Al Ijarah from Malaysia

1,242 9

2011

Saudi Arabian

Aramco

Domestic Corporate Sukuk Al Musharakah longer tenor

1,000 14

2011

Nakheel Group

Domestic Corporate Sukuk Al Ijarah, issuer from Dubai

1,034 5

2011

Sarawak

Energy Bhd

Four Domestic Corporate Sukuk Issuances of various tenors, AlMusharaka, issuer from Malaysia

990 9

2011

Central Bank

of

Bahrain

International Sovereign Sukuk Al Ijarah, 6.27% p.a. profit rate

750 7

2011

Government of

Indonesia

International Sovereign Sukuk Al Ijarah, 4% p.a. profit rate

1,000 7

2011

Government of

Indonesia

Five Domestic Sovereign Sukuk Issuances, Al Ijarah

2,033 10

2011

Government of

Malaysia

Two International Sovereign Sukuk Issuances, Al Wakalah,

2,000 8

2011

Government of

Malaysia

Two Domestic Sovereign Sukuk Al Murabahah,

984 9

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

2012

PLUS

Berhad

Twenty Three Domestic Quasi-Sovereign Sukuk issuances of various tenors, Al Musharaka, issuer from Malaysia

9,728 16

2012

Abu Dhabi

Islamic

Bank

International Corporate, Mudarabah Sukuk, Tier 1 & perpetual, issuer

1,000 Perpetual

2012


International Corporate Hybrid Sukuk

700 5

2012

Qatar Islamic

Bank

International Corporate Sukuk Al Wakalah

750 5

2012

Celcom

Transmission

Five Domestic Corporate Sukuk Issuances, Al Murabahah, Issuer from Malaysia

1,442 8

2012

Tanjung

Bin

Power

9 Nine Domestic Corporate Sukuk Issuances of various tenors, Al Ijarah, issuer from Malaysia

1,101 12

2012

Emirates

Islamic

Bank

Two International Corporate Sukuk issuances, Al Musharaka, issuer from Dubai

1,000 6

2012

Johor

Corporation

Three Domestic Corporate Sukuk issuances, Al Wakalah, issuer from Malaysia

941 7

2012

Banque Saudi

Fransi

International Corporate Sukuk, Al Wakalah, Tier 2, issuer from KSA

750 5

2012

Maxis Berhad

Domestic Corporate Sukuk, Al Musharaka, issuer from Malaysia

811 10

2012

Sarawak

Energy

Bhd

Two Domestic Corporate Sukuk issuances, Al Musharaka, issuer from Malaysia

801 13

2012

Government

of

Malaysia

Seven Domestic 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

Two International Sovereign Sukuk issuances, avg profit rate of 2.67% p.a. Al Ijarah

4,000 16

2012

Government of

Indonesia

Thirteen Domestic Sovereign Sukuk Issuances of various tenors, Al Ijarah

3,620 9

2012

Government of

Pakistan

Six Domestic Sovereign Sukuk Issuances, Al Ijarah

3,135 3

2012

Government

of

Dubai

Two International Sovereign Sukuk issuances, Al Ijarah, avg. profit 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 reflected in the strong performance of some previously unloved but relatively higher yielding issuers.

While more depth is created in the Sukuk market, the issuance of Non-Local Currency Sukuk by foreign issuers is a positive development and will contribute in the growth of the Sukuk market. These issuances have also highlighted the need of currency hedging which is one of the key contributions of IIFM to the Islamic Financial Services Industry and standards developed by IIFM will be extremely beneficial in the risk mitigation arising from such Sukuk issuances.

Following Table will give a clear picture on the Non-Local Currency hallmark global Sukuk issuances during last 2 years:

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

Most of the Sukuk being issued of late has been fixed rate, which is good for the Sukuk issuer as it locks in its funding cost at historic low rate. While the investor may well be pleased with its fixed return for now, but as soon as the global economy shows signs of growth, the yield will jack up and the investor may carry a book loss. Since IIFM has developed the ISDA / IIFM Tahawwut agreement, it would be prudent to keep an eye on the returns and at some point consider hedging to lock in a profit and Islamic Profit Rate Hedging is already used by several institutions based in GCC & Malaysia.

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 52012

National 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 National Energy Company

MYR


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 22012

Development Bank of Kazakhstan

MYR

Kazakhstan

Quasi-Sovereign

Sukuk Al

Murabahah

76.71 5

2012

Gulf Investment Corporation

MYR

Kuwait

Corporate

Sukuk Al

Wakalah

101.08 13

2011


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 Profit Rate Sukuk Issuances during Jan 2011 Jan 2013 period :

Table: 3 - Landmark Fixed Profit Rate Sukuk Issuances

2.3 Distribution of the Global Sukuk Issuance by Issuer Status

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

24-Jan-13 Government of Dubai Sovereign International Sukuk Al Ijarah 750 3.88%

16-Nov-12 Government of Indonesia Sovereign International Sukuk Al Ijarah 1,000 3.30%

12-Nov-12 Abu Dhabi Islamic Bank Corporate International Hybrid Sukuk 1,000 6.38% 11-Oct-12 Qatar International Islamic

Bank Corporate

International

Hybrid

Sukuk

700

2.69%

3-Oct-12 Qatar Islamic Bank Corporate International Sukuk Al

Wakalah 750 2.50%

26-Sep-12 Government of Turkey Sovereign International Sukuk Al Ijarah 1,500 2.80%

18-Jul-12 Emaar Properties, Dubai Corporate International Sukuk Al Ijarah 500 6.40%

11-Jul-12 Government of Qatar Sovereign International Sukuk Al Ijarah 2,000 2.10%

11-Jul-12 Government of Qatar Sovereign International Sukuk Al Ijarah 2,000 3.24% 25-Jun-12

Islamic Development Bank Quasi-

Sovereign International

Sukuk Al Wakalah

800

1.36%

19-Jun-12 Jebel Ali Free

Zone,

Dubai

Corporate

International

Sukuk Al Wakalah

650

7.00%

15-Jun-12 National Higher Education Fund Corporation Malaysia

Quasi-Sovereign

Domestic

Sukuk Al Murabahah

789

3.85%

14-Jun-12

Johor Corporation,Malaysia

Corporate

Domestic

Sukuk Al Wakalah

564

3.84%

30-May-12

Dubai Islamic Bank,UAE Corporate

International

Sukuk

Al

Ijarah

500

4.75%

22-May-12

Banque

Saudi

Fransi

Corporate

International

Sukuk Al Wakalah

750

2.95%

25-Apr-12 Government of Dubai Sovereign International Sukuk Al Ijarah 650 6.45%

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

Electricity

Company

Quasi-Sovereign

International

Sukuk Al

Ijarah

500

2.67%

28-Mar-12 Saudi Electricity

Company

Quasi Sovereign

International

Sukuk Al Ijarah

1,250

4.21%

18-Jan-12

General Authority Of Civil Aviation,Saudi Arabia

Quasi-Sovereign

Domestic

Sukuk Al Murabahah

4,000

2.50%

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

Bank,UAE Corporate

International

Hybrid

Sukuk

500

3.78%

22-Nov-11 Central Bank of Bahrain Sovereign International Sukuk Al Ijarah 750 6.27%

21-Nov-11 Government of Indonesia Sovereign International Sukuk Al Ijarah 1,000 4.00%

25-Aug-11 Nakheel Group ,UAE Corporate Domestic Sukuk Al Ijarah 1,034 10.00%

2-Aug-11 First Gulf Bank Sukuk,UAE Corporate International Hybrid Sukuk 650 3.80% 2-Jun-11 HSBC Bank Middle East

Limited,UAE Corporate

International

Hybrid

Sukuk

500

3.58%

25-May-11

Islamic

Development

Bank

Quasi-Sovereign

International

Sukuk Al Wakalah

750

2.35%

3-Feb-11 Emaar Properties, Dubai Corporate International Sukuk Al Ijarah 500 8.50%

Issue

Date

Issuer

Type of Issued Sukuk

International

or Domestic

Structure


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 first 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

International

or

Domestic

Structure


Average Tenor

(Years)

2013

Government of

Dubai

1


International

Sukuk Al

Ijarah

750

10

2012

Government of Malaysia

7

Malaysia

Domestic

Sukuk Al Murabahah

2,527

12

2012

Government of Indonesia

1

Indonesia

International

Sukuk Al

Ijarah

1,000

10

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

Central Bank of Bahrain

1

Bahrain

Domestic

Sukuk Al

Ijarah

424

5

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


13

Indonesia

Domestic

Sukuk Al

Ijarah

3,620

9

2012

Government of Pakistan

6

Pakistan

Domestic

Sukuk Al

Ijarah

3,135

3

2012

Government

of

Dubai

2


International

Sukuk Al

Ijarah

1,250

8

2011


1

Bahrain

International

Sukuk Al

Ijarah

750

7

2011


1

Indonesia

International

Sukuk Al

Ijarah

1,000

7

2011


5

Indonesia

Domestic

Sukuk Al Ijarah

2,033

10

2011 Government of 2 Malaysia International Sukuk Al 2,000 8

Malaysia Wakalah

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


2

Malaysia

Domestic

Sukuk Al Murabahah

984

9

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

15

Table: 6 - Global Corporate Sukuk Issues -Selected Value Leaders 2011- Jan 2013 - Year wise latest first US $ 100 Millions or greater (International & Domestic)

Issue

Year

Issuer

Number of Issues

Issuer

Country

International

or

DomesticStructure

Amount in Millions

USD or USD Equivalent

Average Tenor

(Years)

2013 Sime Darby Berhad 2 Malaysia International Sukuk Al Ijarah 800 8 2013 Savola Group 1 Saudi Arabia Domestic Hybrid Sukuk 400 7 2013

Malakoff Corporation Berhad

3

Malaysia

Domestic

Sukuk Al

Murabahah

696

9

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

UEM Land Holdings Berhad

1

Malaysia

Domestic

Sukuk Al

Murabahah

196

5

2012

Banque

Saudi

Fransi

1 Saudi

Arabia

Domestic

Sukuk Al Mudharabah

507

7

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

National Bank of Abu Dhabi

1


International

Sukuk Al Murabahah

163

15

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

Golden Agri-Resources Ltd

1

Indonesia

International

Sukuk Al

Murabahah

Sukuk

Al

Murabahah

481

5

2012

Abu Dhabi

Islamic

Bank

1


International

1,000

Perpetual

2012


1

Qatar

International

Hybrid Sukuk

700

5

2012 Qatar Islamic Bank 1 Qatar International Sukuk Al Wakalah 750 5 2012 HSBC Amanah 1 Malaysia Domestic Sukuk Al Wakalah 162 5 2012

Kuala Lumpur Kepong Berhad

1

Malaysia

Domestic

Sukuk Al

Ijarah

320

10

2012


1

Malaysia

Domestic

Sukuk Al

Musharakah

576

30

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

DanaInfra Nasional Berhad

3

Malaysia

Domestic

Sukuk Al

Murabahah

665

12

2012

Emaar

Properties

1


International

Sukuk Al Ijarah

500

7

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

Emirates

Islamic

Bank

2


International

Sukuk Al

Musharakah

1,000

6

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

Jebel

Ali

Free

Zone

1


International

Sukuk Al Wakalah

650

7

2012 Johor Corporation 3 Malaysia Domestic Sukuk Al Wakalah 941 7

16

Continue in next page

2012

Dubai Islamic

Bank

1


International

Sukuk Al

Ijarah

500

5

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

Saudi Arabia National Industrialisation Company

1 Saudi Arabia

Domestic

Hybrid

Sukuk

533

7

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

Abu Dhabi National Energy Company

1


International Sukuk

Al Murabahah

212

10

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

Majid Al Futtaim Properties 1


International

Sukuk Al

Wakalah

400

5

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

First

Gulf

Bank

1


International

Hybrid Sukuk

500

5

2012

Tamweel Funding

1


International

Hybrid Sukuk

300

5

2011

Abu Dhabi Commercial Bank

1


International

Hybrid Sukuk

500

5

2011

Manjung Island Energy Berhad 7

Malaysia

Domestic

Sukuk Al

Ijarah

1,242

9

2011

Kuveyt Trk Kat l m Bankas

1

Turkey

International

Hybrid Sukuk

350

5

2011

Saudi Arabian Aramco Total Services Company

1

Saudi Arabia

Domestic Sukuk

Al Musharakah

1,000

14

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

Nakheel

Group

1


Domestic

Sukuk Al

Ijarah

1,034

5

2011

SapuraKencana Petroleum

1

Malaysia

Domestic

Sukuk Al Mudharabah

158

5

2011

Kencana Petroleum

Bhd

1

Malaysia

Domestic

Sukuk Al Mudharabah

167

5

2011


2

Kuwait

International

Sukuk Al

Wakalah

451

5

2011

First

Gulf

Bank

1


International

Hybrid Sukuk

650

5

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

Saudi International Petrochemical Company

1

Saudi Arabia

Domestic

Sukuk Al Mudharabah

480

5

2011

Bank Muamalat Malaysia Berhad

1

Malaysia

Domestic

Sukuk Al

Musharakah

132

10

2011

HSBC Bank Middle East Limited

1


International

Hybrid Sukuk

500

5

2011

Sharjah

Islamic

Bank

1


International

Sukuk Al

Wakalah

400

5

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

First Investment Company

1

Kuwait

Domestic

Sukuk Al

Wakalah

332

5

2011

Emaar Properties

1


International

Sukuk Al

Ijarah

500

6

17

Table: 7 - Global Quasi-Sovereign Sukuk Issues -Selected Value Leaders 2011-2012 Year wise latest first 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 finance activities grows around the globe, more countries will issue Sukuk in their home currency as part of the Government own funding needs and to develop bench mark curve to facilitate growth of their domestic market.

Issue

Year

Issuer

Number of

Issues

Issuer

Country

International

or

Domestic

Structure


AverageTenor

(Years)

2012

Malaysia Airports Capital Berhad

1

Malaysia

Domestic

Sukuk Al Ijarah

196

12

2012

Islamic

Development

Bank

2

Saudi

Arabia

International

Sukuk Al Wakalah

1,300

5

2012

Khazanah Nasional

Bhd

4

Malaysia

Domestic

Sukuk Al Musharakah

1,450

15

2012

National Higher Education Fund Corporation Malaysia

2

Malaysia

Domestic

Sukuk Al Murabahah

1,118

10

2012

Malaysian Airline System Berhad

2

Malaysia

Domestic

Sukuk Al Musharakah

479

10

2012

Syarikat Prasarana Negara Berhad

2

Malaysia

Domestic

Sukuk Al Murabahah

642

13

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

Khazanah

Nasional

Bhd

1

Malaysia

International

Sukuk Al Musharakah

358 7

2012

General Authority Of Civil Aviation

1

Saudi Arabia

Domestic

Sukuk Al Murabahah

4,000

1

2012

PLUS Berhad

23

Malaysia

Domestic

Sukuk Al Musharakah

9,728

16

2011

Pengurusan Aset Air Berhad

9

Malaysia

Domestic

Sukuk Al Murabahah

2,576

7

2011

Syarikat Prasarana Negara Berhad

2

Malaysia

Domestic

Sukuk Al

Ijarah

673

13

2011

Islamic

Development

Bank

1

Saudi

Arabia

International

Sukuk Al Wakalah

750

5

2011

Khazanah Nasional

Bhd

1

Malaysia

Domestic

Sukuk Al Musharakah

334

20

Domestic 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%

Domestic 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 confidence in the Sukuk as an acceptable and viable instrument. (Eg; Bahrain, Dubai, Malaysia, Qatar, and IDB)

The fallout from the Financial crisis lead investors to move towards safe haven investment strategy and the Sovereign and Quasi Sovereign stepped up to provide confidence and stability.

In addition many new Sovereign / Quasi Sovereign issuer lent support to the Sukuk market, (Eg; Saudi Civil Authourity, Turkey,). Not only these chunk size Sukuk issuance from high credit quality issuer helped absorbed some of the liquidity but in doing so, is paving the way for more Sovereign Debutant Sukuk.

Moreover, when putting the Global issues together from 2001 to Jan 2013, then the Sovereign and Quasi Sovereign takes almost 62% of all issuance to date. Between 2011 and Jan 2013, surprisingly Qatar Sovereign came in as the top issuer of combined Domestic and International with US $ 13 Billion, Indonesia with US $7.7 Billion and Malaysia with US $ 5.5 Billions. The standing changes considerably with Malaysia taking a handsome lead with US $ 36 Billions, followed by Qatar US $ 15 Billion, Saudi US $ 13 Billions and UAE with US $ 11 Billions when including Quasi Sovereign and Corporate.

A healthy development in the Sukuk Mutual Funds space is taking shape with number of banks having set up their own Sukuk Fund to offer to their private clients, this is a positive sign, that the Sukuk market is coming of age. Development of the Sukuk Fund is timely, as the current split between Sovereign and Corporate risk is very much desirable, since it offers investors and fund managers with a good mix of Sovereign and Corporate risk to consider. The choice offers the fund manager to not only diversify credit risk but also take into account their risk return profile in allocating to their portfolio.

2.4 International Sukuk Market

The year 2012 was record year in terms of International Sukuk issuances and the year closed at US$ 20 billion Sukuk issuances as compare to previous 2007 pre-crisis record of US$13.80 billion. Currently outstanding International Sukuk figure is approximately US$ 45 bio and it is expected that Q1 of 2013 will close with US$ 50 billion outstanding Sukuk market.

There were several landmark Sukuk issuances from Malaysia, Qatar, Turkey, UAE, Saudi Arabia, Indonesia, Bahrain etc., this indicates that Sukuk market has fully emerged from the declining trend witnessed in 2008 & 2009 and further double digit growth prospects are intact for next coming years and existing Sukuk issuance pipeline is the confirmation of this prediction.

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


1

Qatar

Corporate

Hybrid Sukuk

700

5

2012 Qatar Islamic Bank 1 Qatar Corporate Sukuk Al Wakalah 750 5 2012 Emaar Properties 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 Futtaim Properties

1


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 Sovereign2012

Khazanah Nasional Bhd

1

Malaysia

Quasi-Sovereign

Sukuk Al Musharakah

358

7

2012


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


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 Properties 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


1

Bahrain

Sovereign

Sukuk Al

Ijarah

750

7

2011


1

Indonesia

Sovereign

Sukuk Al

Ijarah

1,000

7

2011


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 field to the Islamic institutions.

The total outstanding Domestic Sukuk at Dec 2012 stood at US$ 191 billion and it is expected that 2013 will close with even higher figure as sovereigns, quasi sovereign & corporates in jurisdictions like Malaysia, Indonesia, Turkey and several other countries including GCC are getting more active in Sukuk issuances

Table: 10 - Regional break-up of the Total Domestic Sukuk Issuance 2001-Jan 2013

ASIA & FAR EAST Number of Issues Amount USD Millions % of Total Value

Malaysia 3026 314,820 79.8% Indonesia 146 12,029 3.1% Pakistan 43 6,045 1.5% Brunei Darussalam 84 3,929 1.0% 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 first US $ 100 Millions or greater (Corporate, Sovereign & Quasi-Sovereign)

2013


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 Imtiaz 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


1

Malaysia

Corporate

Sukuk Al

Musharakah

576

30

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