2. Badliysah Abdul Ghani Executive Director / CEO
The Sukuk Summit 2007
“SURVEY OF CURRENT SUKUK STRUCTURES – SCOPE FOR FUTURE DEVELOPMENT OF HYBRID, EXCHANGEABLE & DERIVATIVE SUKUK”
Badliysah Abdul Ghani Executive Director / CEO
CIMB Islamic Bank Berhad
21 June 2007

3. Contents Section 1 Development of Sukuk Structures
Section 2 Current Trends: Hybrid Sukuk
Section 3 Features of Future Sukuk
Section 4 Conclusion

4. Development of Sukuk Structures
Section 1
Development of Sukuk Structures

5. Malaysia – The land of Sukuk innovation
The world’s various Sukuk structures originated from Malaysia:-
First Bai-Bithaman Ajil Islamic debt securities – Shell MDS Sdn Bhd
1994 – First Sukuk Mudharabah – Cagamas Berhad – World’s first IRMBS
2001 – First Sukuk Ijarah corporate bond – Kumpulan Guthrie Berhad
2002 – First Sukuk Ijarah sovereign bond – Government of Malaysia
2003 – First tradable Sukuk Istisna – SKS Power Sdn Bhd
2005 – First Sukuk Musyarakah – Musyarakah One Capital Berhad
2006 RM Sukuk by Shariah principle
Source: SC Annual Report 2006

6. Sukuk Development in the Global Market
List of Rated USD Sukuk
Issuer
Principle
Amount
Year
Rating
Kumpulan Guthrie Bhd.
Ijarah
USD150 million
2001(expired in 2006)
BBB+(MARC)
Malaysia Global Sukuk Inc.
USD 600 million
2002
A3 (Moody’s), A- (S&P)
LMC Bahrain Sukuk Co.
USD 250 million
2003
A (S&P)
Solidarity Trust Service
USD 400 million
BBB (S&P)
Qatar Global Sukuk
USD700 million
AA-(S&P)
BMA International Sukuk
2004
Sarawak Corp Sukuk Inc.
USD 350 million
Aaa1(Moody’s), A-(S&P)
Gold Sukuk DMCC
Musyarakah
USD 200 million
2005
A(S&P)
IDB Trust Services Ltd.
USD500 million
AAA(S&P)
Pakistan Int. Sukuk Co.
USD600 million
B1(Moody’s), B+(S&P)
Abu Dhabi Islamic Bank
USD800 million
2006
A2(Moody’s), A (Fitch)
East Cameron Gas
USD million
CCC+ (S&P)
SIB Sukuk Co. Ltd.
USD225 million
BBB(S&P)
Tabreed 06 Financing Corporation
Istisna’ / Ijarah
USD200 million
BBB-(S&P)
DIB Sukuk
Musharakah
USD750 million
2007
A1(Moody’s),A(S&P)
MBB Sukuk
USD300 million
BBB+(S&P)
DIFC Sukuk
Mudharabah
USD1.5 billion
A+ (S&P)
The bulk of USD Sukuk are issued by companies within the GCC
Most USD Sukuk adopt Ijarah or Musyarakah as the underlying Islamic principle
The first Ijarah and Musyarakah deals in the GCC were executed after Malaysia had done the same in 2001 and 2005 for Kumpulan Guthrie Bhd and Musyarakah One Capital Bhd respectively
Source : Bloomberg Q1 2007

7. Current Trends: Hybrid Sukuk
Section 2
Current Trends: Hybrid Sukuk

8. Scope for Hybrids Islamic Convertible Bonds Began in 2006
Year
Issuer
Amount (USDmil)
Islamic Principle
Tenure
Country
2006
PCFC Development FZCO
3,500
Musyarakah
2 years
UAE
2007
Aldar Properties PJSC
2,530
Mudharabah
5 years
IIG Funding Limited
200
Kuwait
Began in 2006
Occurring in GCC
Trend expected to follow
In 2007, two companies based in the U.A.E have announced plans to issue convertible Sukuk worth a combined total of USD1.3 billion.
Islamic Exchangeable Bonds
In 2006, Khazanah Nastional Berhad (the Malaysian Government’s investment arm) issued the world’s first Shariah-compliant exchangeable bond
Largest exchangeable instrument issued out of Asia ex Japan in the year 2006 to date
Largest ever exchangeable bond out of Malaysia
USD750 million Sukuk exchangeable into ordinary shares of RM1.00
each of Telekom Malaysia
Listed on Labuan International Financial Exhange and Hong Kong Stock Exchange
Certificates immediately traded up after pricing
Still remains as the only Islamic exchangeable bond in the world
Distribution by Geography

9. The Features of Future Sukuk
Section 3
The Features of Future Sukuk

10. The Features of Future Sukuk – Derivatives
Malaysia has been at the forefront of developing the Islamic financial derivatives market.
Islamic Profit Rate Swap (IPRS)
Islamic Cross Currency Swap (ICCS)
Forex Forward / Forex swap
Shariah Compliant Option based on Urbun concept
Call Warrants
Commodity Futures
Islamic derivative products in Malaysia that have been approved by the Central Bank of Malaysia consist of:-
Recent Developments
In November 2006, two Malaysian Islamic financial institutions broke new ground in Islamic finance with
both banks agreeing to execute a derivative master agreement to document Islamic Derivative
transactions.
The document is the first of such industry initiative in the world to standardize a document governing
Islamic derivative transactions
In July 2006, two banks in Malaysia signed the first Islamic cross currency swap deal
There is immense potential in the Derivative Sukuk universe and Malaysia will undoubtedly spearhead the
innovation

11. Section 4
Conclusion

12. Conclusion
Due credit should be given to the Government of Malaysia for encouraging product innovation
in the Islamic capital market
The Sukuk market is vibrant and dynamic in Malaysia and the GCC. It is encouraging to see issuers from other parts of the world following suit.
It is inevitable for new products to enter the Sukuk market as the industry grows
It is true that the Sukuk market is now relatively more sophisticated than what it once was but
much more work needs to be done in the future

13. Contact Details Badlisyah Abdul Ghani Executive Director / CEO
CIMB Islamic Bank Berhad
1s Floor, Menara Promet, Jalan Sultan Ismail,
50250 Kuala Lumpur, Malaysia.
Tel: , Fax:
Website:

14. Appendix

15. Appendix Islamic structure for Khazanah’s Islamic Exchangeable Bonds
Sukukholders
Orchid
Khazanah
Rafflesia
i. Two special purpose companies, Rafflesia Capital Ltd. (“Rafflesia”) (the Issuer) and Orchid Capital Ltd. (“Orchid”) will be held in trust for the benefit of charities to be nominated by Khazanah.
ii. Khazanah will sell the Exchange Property, comprising the beneficial ownership of Shariah- compliant assets, i.e. shares to Orchird, which in turn sells the beneficial ownership in the shares to Rafflesia.
iii. Khazanah will retain the voting rights attached to TM shares. Rafflesia has the beneficial interest over TM shares which it holds in trust for the Sukuk holders.
iv. The Issuer then issues the Exchangeable Trust Certificates which evidence the beneficial ownership interests of Sukuk holders in the shares.
v. Expected fixed periodic payments will be provided in cash out of the dividends paid out by the shares.