“SURVEY OF CURRENT SUKUK STRUCTURES – SCOPE FOR FUTURE DEVELOPMENT OF HYBRID, EXCHANGEABLE & DERIVATIVE SUKUK”

Badliysah Abdul GhaniExecutive Director / CEO CIMB Islamic Bank Berhad

21 June 2007

The Sukuk Summit 2007

Contents

Section 1 Development of Sukuk Structures

Section 2 Current Trends: Hybrid Sukuk

Section 3 Features of Future Sukuk

Section 4 Conclusion

Development of Sukuk Structures Section 1

Malaysia – The land of Sukuk innovation

2006 RM Sukuk by Shariah principle

Source: SC Annual Report 2006

The world’s various Sukuk structures originated from Malaysia:-

1990 - 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

Bai' Bithaman Ajil6.2%

Murabahah9.4%

Istisna'2.1%

Ijarah4.9%

Musyarakah70.0%

Mudharabah7.5%

Source : Bloomberg Q1 2007

Issuer Principle Amount Year Rating

Kumpulan Guthrie Bhd. Ijarah USD150 million2001(expired in

2006) BBB+(MARC)

Malaysia Global Sukuk Inc. Ijarah USD 600 million 2002 A3 (Moody’s), A- (S&P)

LMC Bahrain Sukuk Co. Ijarah USD 250 million 2003 A (S&P)

Solidarity Trust Service Ijarah USD 400 million 2003 BBB (S&P)

Qatar Global Sukuk Ijarah USD700 million 2003 AA-(S&P)

BMA International Sukuk Ijarah USD 250 million 2004 A (S&P)

Sarawak Corp Sukuk Inc. Ijarah USD 350 million 2004 Aaa1(Moody’s), A-(S&P)

Gold Sukuk DMCC Musyarakah USD 200 million 2005 A(S&P)

IDB Trust Services Ltd. Ijarah USD500 million 2005 AAA(S&P)

Pakistan Int. Sukuk Co. Ijarah USD600 million 2005 B1(Moody’s), B+(S&P)

Abu Dhabi Islamic Bank Musyarakah USD800 million 2006 A2(Moody’s), A (Fitch)

East Cameron Gas Musyarakah USD165.75 million 2006 CCC+ (S&P)

SIB Sukuk Co. Ltd. Musyarakah USD225 million 2006 BBB(S&P)Tabreed 06 Financing Corporation Istisna’ / Ijarah USD200 million 2006 BBB-(S&P)

DIB Sukuk Musharakah USD750 million 2007 A1(Moody’s),A(S&P)

MBB Sukuk Musharakah USD300 million 2007 BBB+(S&P)

DIFC Sukuk Mudharabah USD1.5 billion 2007 A+ (S&P)

Sukuk Development in the Global Market

List of Rated USD Sukuk

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

Current Trends: Hybrid Sukuk Section 2

Scope for HybridsIslamic Convertible Bonds

Year IssuerAmount (USDmil)

Islamic Principle

Tenure Country

2006 PCFC Development FZCO 3,500 Musyarakah 2 years UAE

2007 Aldar Properties PJSC 2,530 Mudharabah 5 years UAE

2007 IIG Funding Limited 200 Mudharabah 5 years 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

Middle East27%

Others73%

Distribution by Geography

The Features of Future Sukuk Section 3

The Features of Future Sukuk – Derivatives

Islamic derivative products in Malaysia that have been approved by the Central Bank of Malaysia consist of:-

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

Islamic Profit Rate Swap (IPRS)Islamic Cross Currency Swap (ICCS)Forex Forward / Forex swapShariah Compliant Option based on Urbun conceptCall WarrantsCommodity Futures

Malaysia has been at the forefront of developing the Islamic financial derivatives market.

Recent Developments

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

Conclusion Section 4

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

Conclusion

Contact Details

Badlisyah Abdul GhaniExecutive Director / CEO CIMB Islamic Bank Berhad1s Floor, Menara Promet, Jalan Sultan Ismail,50250 Kuala Lumpur, Malaysia. Tel: +603 2116 1234, Fax: +603 2144 8509Email: badlisyah.abdulghani@cimb.comWebsite: www.cimbislamic.com

Appendix

Appendix

Islamic structure for Khazanah’s Islamic Exchangeable Bonds

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.

Periodic distribution

Periodic distribution

Proceeds (principal)

Proceeds (principal)

Proceeds (principal)

Sukukholders

Rafflesia

Orchid

Khazanah

Certificates

Exchange Property

Exchange Property

Sukukholders

Orchid

Khazanah

Rafflesia