SIB Prospectus - London Stock Exchange

IMPORTANT NOTICE
NOT FOR DISTRIBUTION TO ANY U.S. PERSON OR TO ANY PERSON OR ADDRESS IN
THE U.S.
IMPORTANT: You must read the following disclaimer before continuing. The following
disclaimer applies to the prospectus following this page or otherwise received as a result of
such access and you are therefore advised to read this disclaimer carefully before reading,
accessing or making any other use of the attached prospectus. In accessing the attached
prospectus, you agree to be bound by the following terms and conditions, including any
modifications to them from time to time, each time you receive any information from us as a
result of such access.
Confirmation of Your Representation: By accessing this prospectus you have confirmed to HSBC
Bank plc (the Lead Manager), European Islamic Investment Bank plc, Kuwait Finance House KSC
and Mashreq Bank PSC (the co-managers, together with the Lead Manager, the Managers), SIB
Sukuk Company Limited and Sharjah Islamic Bank that (i) you have understood and agree to the
terms set out herein, (ii) you are not a U.S. person (within the meaning of Regulation S of the U.S.
Securities Act 1933, as amended (the Securities Act)) or acting on behalf of any U.S. person and
that the electronic mail address you have given to us is not located in the United States, its
territories and possessions, and (iii) you consent to delivery by electronic transmission.
This prospectus has been made available to you in electronic form. You are reminded that
documents transmitted via this medium may be altered or changed during the process of
transmission and consequently neither the Managers nor any of their respective affiliates accept
any liability or responsibility whatsoever in respect of any difference between the prospectus
distributed to you in electronic format and the hard copy version.
You are reminded that the attached prospectus has been delivered to you on the basis that you
are a person into whose possession this prospectus may be lawfully delivered in accordance with
the laws of the jurisdiction in which you are located and you may not nor or are you authorized to
deliver this prospectus, electronically or otherwise, to any other person and in particular to any
U.S. person or to any U.S. address. Failure to comply with this directive may result in a violation
of the Securities Act or the applicable laws of other jurisdictions.
Restrictions: NOTHING IN THIS ELECTRONIC TRANSMISSION CONSTITUTES AN OFFER OF
SECURITIES FOR SALE IN THE UNITED STATES OF AMERICA OR ANY OTHER JURISDICTION
WHERE IT IS UNLAWFUL TO DO SO.
Under no circumstances shall this prospectus constitute an offer to sell or the solicitation of an
offer to buy nor shall there be any sale of Certificates in any jurisdiction in which such offer,
solicitation or sale would be unlawful. Recipients of this prospectus who intend to subscribe for
or purchase the Certificates are reminded that any subscription or purchase may only be made
on the basis of the information contained in the final prospectus.
Any Certificates to be issued have not been, and will not be, registered under the Securities Act or
with any securities regulatory authority of any state or other jurisdiction of the United States. Any
Certificates to be issued may not be offered, sold or delivered in the United States or to U.S.
persons (as such terms are defined in Regulation S under the Securities Act) unless registered
under the Securities Act or pursuant to an exemption from such registration.
The Certificates represent interests in a collective investment scheme (as defined in the Financial
Services and Markets Act 2000) which has not been authorised, recognised or otherwise
approved by the U.K. Financial Services Authority. Accordingly, the prospectus is not being
distributed to, and must not be passed on to, the general public in the U.K. Rather, the
communication of the prospectus as a financial promotion is only being made to those persons
falling within Article 19(5) or Article 49 of the Financial Services and Markets Act 2000 (Financial
Promotion Order 2005) and within Article 14(5) or Article 22 of the Financial Services and Markets
Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001, or any person
to whom it may otherwise lawfully be made. This communication is directed only at persons
having professional experience in matters relating to investments and any investment or
investment activity to which this communication relates will be engaged in only with such
persons. No other person should rely on it.
SIB Sukuk Company Limited
(incorporated in the Cayman Islands with limited liability)
US$225,000,000 Trust Certificates due 2011
The issue price of the US$225,000,000 Trust Certificates due 2011 (the Certificates or the Sukuk) of SIB Sukuk Company
Limited (the Issuer) is 100 per cent. of their principal amount. Unless previously redeemed in the circumstances described
in Condition 11, the Certificates will be redeemed on the Periodic Distribution Date falling in (or immediately following)
October 2011.
The Certificates will be constituted by a declaration of trust (the Declaration of Trust) dated on or about 12 October 2006
(the Closing Date) made by the Issuer. Pursuant to the Declaration of Trust, the Issuer will declare that it will hold
88.3 per cent. of the undivided Co-owned Assets (as defined herein) upon trust absolutely for the holders of the
Certificates pro rota according to the principal amount of Certificates held by each registered holder from time to time
(each a Certificateholder and together the Certificateholders) in accordance with the Declaration of Trust and the terms
and conditions of the Certificates (the Conditions).
On the 12th day of each January, April, July and October, or if any such day is not a Business Day (as defined herein), the
following Business Day, commencing on 12 January 2007 and through to and including 12 October 2011 (each, a Periodic
Distribution Date), the Issuer will make a Periodic Distribution Amount (as defined herein), to Certificateholders calculated
on the basis of LIBOR (as defined herein) plus 0.65 per cent. per annum, calculated on the outstanding principal amount of
the Certificates as at the beginning of the Periodic Distribution Period (as defined herein) and on the basis of a 360 day
year.
The Issuer will pay the Periodic Distribution Amount from the proceeds received in respect of the Trust Assets (as defined
herein). Such proceeds are expected to be sufficient to cover the Periodic Distribution Amount payable to
Certificateholders on each Periodic Distribution Date. In order to facilitate the payment of the Periodic Distribution
Amounts, Sharjah Islamic Bank (SIB), in its capacity as Managing Agent (as defined herein), shall provide Shariah
compliant funding (without recourse to the Co-owned Assets) to ensure, among other matters, the Issuer’s entitlement to
the Co-ownership Revenues (as defined herein) is paid to the Issuer on a timely basis and in accordance with the
provisions of the Management Agreement.
The funds required to redeem the Certificates on their due dates for redemption will be obtained from the sale of the
Issuer’s interest in the Co-owned Assets to SIB pursuant to a Purchase Undertaking (as defined herein) to be entered into
by SIB on the Closing Date.
The Shariah Supervisory Board of SIB has approved the structure of this transaction.
The Certificates will constitute limited recourse obligations of the Issuer. Investing in the Certificates involves risks. See
Risk Factors beginning on page 15 to read about the factors that investors should consider before investing in the
Certificates.
Application has been made to the Financial Services Authority in its capacity as competent authority under the Financial
Services and Markets Act 2000 (the UK Listing Authority) for the Certificates to be admitted to the official list of the
UK Listing Authority (the Official List) and to the London Stock Exchange plc (the London Stock Exchange) for such
Certificates to be admitted to trading on the London Stock Exchange’s Gilt Edged and Fixed Interest Market (the Market).
References in this Prospectus to Certificates being ‘‘listed’’ (and all related references) shall mean that such Certificates
have been admitted to trading on the Market and have been admitted to the Official List. The Market is a regulated market
for the purposes of the Investment Services Directive 93/22/EC.
It is a condition to the issuance of the Certificates that they be rated at least BBB by Standard & Poor’s Ratings Services, a
Division of the McGraw Hill Companies, Inc. (S&P). A rating is not a recommendation to buy or sell or hold the Certificates
(or beneficial interests therein) and is subject to revision or withdrawal in the future by S&P.
The Certificates have not been and will not be registered under the United States Securities Act of 1933, as amended
(the Securities Act) or with any securities regulatory authority of any state or other jurisdiction of the United States and
may not be offered, sold or delivered within the United States or to U.S. Persons except pursuant to an exemption from, or
in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Certificates are being
offered, sold or delivered solely to non-U.S. Persons (as defined in Regulation S) outside the United States in reliance on
Regulation S under the Securities Act (Regulation S). Each purchaser of the Certificates is hereby notified that the offer
and sale of Certificates to it is being made in reliance on the exemption from the registration requirements of the
Securities Act provided by Regulation S.
Delivery of the Certificates in book-entry form will be made on the Closing Date. The Certificates will be issued in
registered form in minimum denominations of US$100,000 and integral multiples of US$10,000 in excess thereof.
Certificates will be represented at all times by interests in a registered form global certificate without coupons attached
(the Global Certificate), deposited on or about the Closing Date with a common depositary for Euroclear Bank S.A/N.V. as
operator of the Euroclear System (Euroclear) and Clearstream Banking, société anonyme (Clearstream, Luxembourg).
Interests in the Global Certificate will be shown on, and transfers thereof will be effected only through, records maintained
by Euroclear and Clearstream, Luxembourg. Definitive Certificates evidencing holdings of interests in the Certificate will
be issued in exchange for interests in the Global Certificate only in certain limited circumstances described herein.
Lead Manager and Sole Bookrunner
HSBC
Co-managers
European Islamic Investment Bank plc
Kuwait Finance House
The date of this Prospectus is 11 October 2006
MashreqBank PSC
This Prospectus comprises a prospectus for the purposes of Article 5.4 of Directive 2003/7/EC (the
Prospectus Directive) and for the purpose of giving information with regard to the Issuer, Sharjah
Islamic Bank (SIB) and its subsidiaries and affiliates taken as a whole (the Group) and the
Certificates which is necessary to enable investors to make an informed assessment of the assets
and liabilities, financial position, profit and losses and prospects of the Issuer, SIB and the Group.
The Issuer and SIB accept responsibility for the information contained in this document. To the
best of their knowledge and belief (having taken all reasonable care to ensure that such is the
case), the information contained in this document is in accordance with the facts and does not
omit anything likely to affect the import of such information.
Neither the Issuer nor SIB has authorised the making or provision of any representation or
information regarding the Issuer and SIB or the Certificates other than as contained in this
Prospectus or as approved for such purpose by the Issuer and SIB. Any such representation or
information should not be relied upon as having been authorised by the Issuer and SIB or HSBC
Bank plc (the Lead Manager), European Islamic Investment Bank plc, Kuwait Finance House KSC
and MashreqBank PSC (the Co-managers) (together with the Lead Manager, the Managers).
Neither the delivery of this Prospectus nor the offering, sale or delivery of any Certificate shall in
any circumstances create any implication that there has been no adverse change, or any event
reasonably likely to involve any adverse change, in the condition (financial or otherwise) of SIB
and the Issuer since the date of this Prospectus.
This Prospectus does not constitute an offer of, or an invitation by or on behalf of the Issuer and
the Managers to subscribe or purchase, any of the Certificates. The distribution of this Prospectus
and the offering of the Certificates in certain jurisdictions may be restricted by law. Persons into
whose possession this Prospectus comes are required by the Issuer and the Managers to inform
themselves about and to observe any such restrictions. For a description of further restrictions on
offers and sales of Certificates and distribution of this Prospectus see Subscription and Sale.
No person is authorised to give any information or to make any representation not contained in
this Prospectus and any information or representation not so contained must not be relied upon
as having been authorised by or on behalf of the Issuer or the Managers. The delivery of this
Prospectus at any time does not imply that the information contained in it is correct as at any
time subsequent to its date.
The Managers have not separately verified the information contained herein. Accordingly, no
representation, warranty or undertaking, express or implied, is made and no responsibility or
liability is accepted by the Managers or any of them as to the accuracy or completeness of the
information contained in this Prospectus or of any other information provided by the Issuer or
SIB in connection with the Certificates.
In this Prospectus, unless otherwise specified, references to UAE Dirham and AED are to the
lawful currency, for the time being, of the UAE and references to US dollars, U.S. dollar or US$
are to the currency of the United States of America. The UAE Dirham has been officially pegged
to the US dollar since 22 November 1980. The mid point between the official buying and selling
for the UAE Dirham is at a fixed rate of AED3.6725 = US$1.00. References to billions are to
thousands of millions.
Certain figures included in this Prospectus have been subject to rounding adjustments.
Accordingly, figures shown for the same category presented in different tables may vary
slightly and figures shown as totals in certain tables may not be an arithmetic aggregation of the
figures which precede them.
Prospective investors should rely only on the information contained in this document or to which
reference is made herein. Neither the Issuer nor SIB has authorised anyone to provide
prospective investors with information that is different. This document may only be used where
it is legal to sell these securities.
2
Notice to UK residents
The Certificates represent interests in a collective investment scheme (as defined in the Financial
Services and Markets Act 2000 (FSMA)) which has not been authorised, recognised or otherwise
approved by the U.K. Financial Services Authority (FSA). Accordingly, this Prospectus is not
being distributed to, and must not be passed on to, the general public in the United Kingdom.
The distribution in the United Kingdom of this Prospectus and any other marketing materials
relating to the Certificates (A) if effected by a person who is not an authorised person under
FSMA, is being addressed to, or directed at, only the following persons: (i) persons who are
Investment Professionals as defined in Article 19(5) of the FSMA (Financial Promotion) Order
2005 (the Financial Promotion Order) and (ii) persons falling within any of the categories of
persons described in Article 49 (High net worth companies, unincorporated associations, etc) of
the Financial Promotion Order and (B) if effected by a person who is an authorised person under
FSMA, is being addressed to, or directed at, only the following persons: (i) persons falling within
one of the categories of Investment Professional as defined in Article 14(5) of the FSMA
(Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (the Promotion of CISs
Order), (ii) persons falling within any of the categories of person described in Article 22 (High net
worth companies, unincorporated associations, etc.) of the Promotion of CISs Order and (iii) any
other person to whom it may otherwise lawfully be made in accordance with the Promotion of
CISs Order. Persons of any other description in the United Kingdom may not receive and should
not act or rely on this Prospectus or any other marketing materials in relation to the Certificates.
This communication is directed only at persons having professional experience in matters
relating to investments and any investment or investment activity to which this communication
relates will be engaged in only with such persons. No other person should rely on it.
Potential investors in the United Kingdom are advised that all, or most, of the protections
afforded by the United Kingdom regulatory system will not apply to an investment in the
Certificates and that compensation will not be available under the United Kingdom Financial
Services compensation Scheme.
Any individual intending to invest in any investment described in this Prospectus should consult
his professional adviser and ensure he fully understands all the risks associated with making
such an investment and has sufficient financial resources to sustain any loss that may arise from
it.
Notice to Cayman Islands residents
No invitation may be made to members of the public of the Cayman Islands to subscribe for the
Certificates.
Forward looking Statements
Some statements in this Prospectus may be deemed to be ‘‘forward-looking statements’’.
Forward-looking statements include statements concerning the Issuer’s and SIB’s plans,
objectives, goals, strategies and future operations and performance and the assumptions
underlying these forward-looking statements. When used in this document, the words
‘‘anticipates’’, ‘‘estimates’’, ‘‘expects’’, ‘‘believes’’, ‘‘intends’’, ‘‘plans’’, ‘‘aims’’, ‘‘seeks’’, ‘‘may’’,
‘‘will’’, ‘‘should’’ and any similar expressions generally identify forward-looking statements.
These forward-looking statements are contained in ‘‘Summary of the Offering’’, ‘‘Risk Factors’’,
‘‘Business’’ and other sections of this document. Each of the Issuer and SIB has based these
forward-looking statements on the current view of the Issuer’s or, as the case may be, SIB’s
management with respect to future events and financial performance. These views reflect the
best judgment of the Issuer’s or, as the case may be, SIB’s forward-looking actual results to differ
materially from those predicted in the Issuer’s or, as the case may be, SIB’s forward-looking
statements and from past results, performance or achievements. Although the Issuer or, as the
case may be, SIB believes that the expectations, estimates and projections reflected in the
Issuer’s or, as the case may be, SIB’s forward-looking statements are reasonable, if one or more
of the risks or uncertainties materialise, including those which the Issuer or, as the case may be,
SIB has identified in this Prospectus, or if any of the Issuer’s or, as the case may be, SIB’s
underlying assumptions prove to be incomplete or inaccurate, the Issuer’s or, as the case may
be, SIB’s actual results of operation may vary from those expected, estimated or predicted.
3
These forward-looking statements speak only as at the date of this Prospectus. Without prejudice
to any requirements under applicable laws and regulations, each of SIB and the Issuer expressly
disclaims any obligation or undertaking to disseminate after the date of this Prospectus any
updates or revisions to any forward-looking statements contained herein to reflect any change in
expectations thereof or any change in events, conditions or circumstances on which any such
forward-looking statement is based.
4
CONTENTS
Summary of the Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
15
Terms and Conditions of the Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
19
Global Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37
SIB Sukuk Company Limited. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
38
Description of Sharjah Islamic Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
The Trust Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
55
Overview of the United Arab Emirates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
The United Arab Emirates Banking Sector and Regulations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62
Clearance and Settlement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65
Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
67
Subscription and Sale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
70
General Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
73
Index to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
75
Condensed Consolidated Interim Financial Statements as at 30 June 2006 . . . . . . . . . . .
F1
Financial Statements as at 31 December 2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F11
Financial Statements as at 31 December 2004. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F32
5
SUMMARY OF THE OFFERING
The following summary does not purport to be complete and is qualified in its entirety by
reference to, and must be read in conjunction with, the detailed information appearing elsewhere
in this Prospectus and related documents referred to herein.
Reference to a Condition is to a numbered condition of the Terms and Conditions of the
Certificates.
Parties
Issuer
SIB Sukuk Company Limited, a company incorporated in
accordance with the laws of, formed and registered in the
Cayman Islands (the Issuer).
Obligor
SIB will enter into the Purchase Undertaking (as defined herein)
in favour of the Trustee. Under the Purchase Undertaking, SIB
will undertake to purchase the Issuer’s rights, benefits and
entitlements in and to the Co-owned Assets (as defined herein)
in consideration for the payment of a US dollar sum equal to
the Relevant Exercise Price following the delivery of an exercise
notice (Exercise Notice) by the Trustee on SIB following either
(i) the occurrence of a Dissolution Event (as set out in Condition
11) (the Early Redemption Exercise) or (ii) on any day during the
ten day period immediately preceding the fifth anniversary of
the date of the Purchase Undertaking (the Scheduled
Redemption Exercise).
Relevant Exercise price means a US dollar sum equal to the
aggregate of:
(a)
US$225,000,000; plus
(b)
any unpaid Periodic Distribution Amount, which, in the
case of an Early Redemption Exercise, shall be adjusted,
pro rata to, but excluding, the date the Relevant Exercise
Price is due, on an actual/360 day basis.
Ownership of the Issuer
The authorised share capital of the Issuer is US$50,000
consisting of 50,000 shares of US$1 each of which 250 shares
are fully paid up and issued. The Issuer’s entire issued share
capital is held by Maples Finance Limited, P.O. Box 1093GT,
Queensgate House, South Church Street, George Town, Grand
Cayman, Cayman Islands under the terms of a trust for
charitable purposes.
Seller
SIB (in such capacity, the Seller) will sell to the Issuer (as trustee
for and on behalf of the Certificateholders) 88.3 per cent. of the
Seller’s undivided right, title and interest in the assets which are
subject to the Lease Transaction Documents (as defined herein)
and described in the Purchase Agreement (the Original Leased
Assets).
Managing Agent
Pursuant to the Management Agreement (as defined herein)
SIB will be the managing agent (in such capacity, the Managing
Agent) of the Co-owned Assets.
Lead Manager and Sole
Bookrunner
HSBC Bank plc.
Co-managers
European Islamic Investment Bank plc, Kuwait Finance House
KSC and MashreqBank PSC.
Trustee
The Issuer will act as a trustee in respect of the Trust Assets (as
defined below) (the Trustee) for the benefit of Certificateholders
in accordance with the Declaration of Trust and the Conditions.
6
Pursuant to the Declaration of Trust, the Trustee will hold the
Trust Assets for and on behalf of the Certificateholders. Under
the Declaration of Trust, the Trustee will unconditionally and
irrevocably delegate authority to HSBC Trustee (C.I.) Limited
(the Delegate) to take all necessary actions on its behalf to
enforce or realise the Trust Assets should a Dissolution Event
(as defined in the Declaration of Trust) occur.
Payment Administrator
HSBC Bank plc will act as payment administrator (the Payment
Administrator) under the Agency Agreement. The Payment
Administrator is authorised to transfer funds standing to the
credit of the Transaction Account to an account of the Principal
Paying Agent in order to enable the Issuer to make payments in
respect of the Certificates, subject to and in accordance with the
Agency Agreement.
Principal Paying Agent,
Reference Agent,
Transfer Agent,
Replacement Agent,
Reference Agent and
Registrar (together the
Agents)
HSBC Bank plc.
Transaction
Administrator
HSBC Bank plc as transaction administrator (the Transaction
Administrator) will receive certain notices in relation to the
transactions underlying the Sukuk and, subject to such receipt,
deliver an Exercise Notice on behalf of the Trustee following a
Dissolution Event.
Summary of Certificates
Certificates
US$225,000,000 trust certificates due 2011 (the Certificates or
the
Sukuk).
Closing Date
12 October 2006.
Issue Price
100 per cent. of the aggregate principal amount of the
Certificates.
Denominations
The Certificates will be issued in minimum denominations of
US$100,000 and integral multiples of US$10,000 in excess
thereof.
Status
Each Certificate represents an undivided beneficial ownership
in the Trust Assets and will rank pari passu, without any
preference, with the other Certificates. The Certificates are
limited recourse obligations (see Condition 3.2).
Rating Agency
S&P.
Required Rating
The Certificates are expected to be rated BBB by S&P. A rating
of the Certificates is not a recommendation to buy, hold or sell
the Certificates and is subject to revision or withdrawal at
anytime by S&P.
Listing
Application will be made to list the Certificates on the London
Stock Exchange. See General Information.
Form and Delivery of the
Certificates
The Certificates will be issued in registered global form without
coupons attached. The Certificates will be represented by
interests in the Global Certificate deposited with a common
depositary for Euroclear and Clearstream, Luxembourg. Other
than in certain limited circumstances only, Definitive
7
Certificates evidencing holdings of Certificates will not be
issued. See Global Certificate and Clearance and Settlement.
Clearance and Settlement
Certificateholders will hold their interest in the Global
Certificate in book-entry form through each of Euroclear or
Clearstream, Luxembourg. Transfers within Euroclear or
Clearstream, Luxembourg will be in accordance with the
usual rules and operating procedures of the relevant
clearance system. See Clearance and Settlement.
Periodic Distribution Dates
The 12th day of each of January, April, July and October, or if
any such day is not a Business Day, the immediate following
Business Day, commencing 12 January 2007 and through to
and including 12 October 2011 (Periodic Distribution Dates).
Business Day means any day on which commercial banks and
foreign exchange markets settle payments and are open for
general business in Sharjah, London and New York.
Periodic Distribution Amount
On each Periodic Distribution Date, a periodic distribution
amount calculated in accordance with Condition 6 (the Periodic
Distribution Amount) will be paid to Certificateholders from
revenues relating to return on account of profit derived from the
Co-owned Assets.
Periodic Distribution Period
The period from and including the Closing Date to but
excluding the first Periodic Distribution Date and each
successive period from and including a Periodic Distribution
Date to but excluding the next succeeding Periodic Distribution
Date is called a Periodic Distribution Period.
Tax Considerations
See Tax Considerations for a description of certain United Arab
Emirates, Cayman Islands, United Kingdom and European
Union taxation considerations applicable to the Certificates.
Transfer Restrictions
Certain purchase and transfer restrictions applicable to the
Certificates are set forth under Subscription and Sale.
Co-ownership Account
The Managing Agent must credit all rental, sale proceeds,
damages, total loss insurance proceeds, compensation, or
other sums payable in whatever currency arising in
connection with any Co-owned Assets that are, at any time,
the subject of any Lease Transaction Documents (the Co-owned
Leased Assets) to a US dollar denominated account in the
books of the Managing Agent (the Co-ownership Account).
Co-owned Assets
Co-owned Assets means (i) the Original Leased Assets, (ii)
other than Shariah Compliant Authorised Investments, any
assets at any time replacing the Co-owned Assets in accordance
with the Management Agreement and (iii) Shariah Compliant
Authorised Investments.
Shariah Compliant
Authorised Investments
Shariah Compliant Authorised Investments means Shariah
compliant income generating assets, including sukuk, which
are rated at least BBB+ by S&P or Baa1 by Moody’s Investors
Service Inc. in respect of which the principal amount to be
returned shall not be less than the principal amount originally
invested.
Purchase Undertaking
SIB will enter into the purchase undertaking (the Purchase
Undertaking) in favour of the Issuer (as Trustee), pursuant to
which SIB will undertake irrevocably to purchase the Issuer’s
(as Trustee) rights, benefits and entitlements in and to the
Co-owned Assets at the Relevant Exercise Price when the
Trustee exercises its right thereunder (i) on the Scheduled
8
Redemption Date or, if earlier (ii) on the relevant date specified
following the occurrence of a Dissolution Event.
Certificateholders should note that any failure by SIB to comply
with its obligations under the Purchase Undertaking, including
without limitation on the exercise by the Trustee of its right
thereunder on the occurrence of a Dissolution Event, will only
give rise to a right of action against SIB itself and
Certificateholders will not have any right of action in relation
to the Co-owned Assets. See Condition 12.3.
Management Agreement
Under the terms of the management agreement dated the
Closing Date between the Trustee and SIB (as the co-owners of
the Co-owned Assets) and SIB as Managing Agent (the
Management Agreement), the Managing Agent will, amongst
other things, be responsible on behalf of the Issuer (as Trustee)
and SIB for providing the services specified in the Management
Agreement.
Insurance/Total Loss
Pursuant to the terms of the Management Agreement, the
Managing Agent shall procure the takaful or insurance of any
Co-owned Leased Assets against such risks (including without
limitation, fire, flooding, natural perils) in an amount sufficient
to reinstate the assets in full, and shall:
(a)
ensure that such insurance is provided by a reputable
insurer and one which is at all times in good financial
standing;
(b)
make such enquiries and obtain such assurances as it
deems fit to ensure that paragraph (a) above is, and
shall at all times be, fully complied with;
(c)
ensure that such insurance is otherwise satisfactory to
ensure compliance with the Managing Agent’s
obligations under the Management Agreement;
(d)
diligently make and pursue any claim under such
insurance; and
(e)
ensure that nothing is done or omitted to be done which
is contrary to the terms of any such insurance, or which
might result in such insurance being restrained,
repudiated, vitiated, cancelled, made void or voidable,
or otherwise become prejudiced or impaired.
In discharging such obligations the Managing Agent shall
ensure that those obligations are delegated to a Lease
Transaction Party acting as servicing agent (in a manner and
on such terms as are compliant with the Shariah) in accordance
with the Lease Transaction Documents to which such servicing
agent is or will become a party.
The Managing Agent shall also provide Shariah compliant
funding to ensure payment in full of the Co-ownership
Revenues to the Co-owners in accordance with the
Management Agreement.
If the Managing Agent breaches its obligations, including its
obligations in relation to insurance and total loss, under the
Management Agreement, the Managing Agent shall be liable to
indemnify the Issuer in accordance with the Management
Agreement.
9
The total loss and insurance proceeds will be treated as
Co-ownership Revenues and applied in accordance with the
Management Agreement. See Trust Assets.
For these purposes:
Co-ownership Revenues means all rental, sale proceeds or
other income or consideration, damages, total loss, insurance
proceeds, compensation, or other sums payable to the
Managing Agent (including sale proceeds and rentals) in
whatever currency in connection with the Co-owned Assets.
Lease Transaction Documents means the Ijara contracts in
connection with the Co-owned Assets and any related
documentation entered into by any Lease Transaction Party,
including documents for the sale or purchase of the assets that
are the subject of any such Ijara contract and the grant of
Security to secure the obligations of any Lease Transaction
Party, each as more particularly described in the Purchase
Agreement.
Lease Transaction Party means, other than the Seller, any
person which is party to a Lease Transaction Document.
Security means any mortgage, charge, assignment by way of
security, pledge, hypothecation, lien, right of set-off, retention
of title provision, trust or flawed asset arrangement (for the
purpose of, or which has the effect of, granting security) or any
other security interest of any kind whatsoever, or any
agreement, whether conditional or otherwise, to create any of
the same.
Purchase Agreement
Pursuant to the Purchase Agreement, the Seller will sell to the
Issuer (acting as trustee for the Certificateholders) the Original
Leased Assets. The proceeds received by the Issuer from the
issuance and sale of the Certificates will be used to pay the
purchase price payable by the Issuer (as Trustee) under the
Purchase Agreement.
The Trust Assets
The Trust is the trust constituted by the Issuer under the
Declaration of Trust.
The Trust Assets are (a) the Issuer’s share in and to the Coowned Assets, (b) all of the Issuer’s rights, title, interest and
benefit, present and future, in, to and under the Transaction
Documents (c) the Transaction Account, and (d) all proceeds of
the foregoing.
Co-ownership Interests
The undivided interest to the Co-owned Assets of the Issuer is
88.3% and SIB is 11.7%.
Dissolution of the Trust
Unless earlier dissolved as a result of the occurrence of a
Dissolution Event, the Trust will be dissolved on the Periodic
Distribution Date falling in (or immediately following) October
2011 (the Scheduled Redemption Date) and the Trustee will
redeem the Certificates on such date.
Unscheduled Dissolution
Other than as a result of the occurrence of a Dissolution Event,
the Trust will not be subject to early dissolution, and the
Certificates will not be redeemed, prior to the Scheduled
Redemption Date. See Condition 8.
Dissolution Events
The Dissolution Events are set out in Condition 11.
If any Dissolution Event shall occur, the Trustee will give notice
of the occurrence of such Dissolution Event to the
10
Certificateholders with a request to such holders to indicate if
they wish the Trust to be dissolved. If so requested in writing by
the Certificateholders of at least 25 per cent. in aggregate of the
principal amount of the Certificates then outstanding or if so
directed by an Extraordinary Resolution (as defined in the
Conditions) of the Certificateholders, the Trustee shall (subject
in each case to being indemnified to its satisfaction), or, if the
Trustee so decides in its discretion, may give notice to all the
Certificateholders that the Trust is to be dissolved and the
Certificates are, and they shall accordingly forthwith become,
due and repayable at an amount equal to the Dissolution
Distribution Amount on the date specified in accordance with
Condition 8.2.
Negative Pledge
In the Purchase Undertaking, the Obligor undertakes that, until
Certificates have been redeemed in accordance with the
Conditions, it shall not, and it shall procure that none of its
Subsidiaries will, create or permit to subsist any Security upon
the whole or any part of its present or future assets or revenues
(including uncalled capital) to secure any of its Indebtedness or
any Guarantee of Indebtedness given by it, other than
Permitted Security, without (i) at the same time or prior
thereto security equally and rateably therewith its obligations
under the Transaction Documents to which it is, in whatever
capacity, a party, or (ii) providing such other Security for those
obligations as may be approved by the Certificateholders by an
Extraordinary Resolution (as defined in the Declaration of
Trust).
For these purposes:
Guarantee means, in relation to any Indebtedness of any
person, any obligation of another person to pay such
Indebtedness following demand or claim on that person,
including (without limitation):
(a)
any obligation to purchase such Indebtedness;
(b)
any obligation to extend financing, to purchase or
subscribe shares or other securities or to purchase
assets or services in order to provide funds for the
payment of such Indebtedness;
(c)
any indemnity against the consequences of a default in
the payment of such Indebtedness; and
(d)
any other agreement to be responsible for such
Indebtedness.
Indebtedness means any present or future indebtedness of any
person for or in respect of any money borrowed or raised
including (without limitation) any borrowed money or liability
arising under or in respect of any acceptance or acceptance
credit or evidenced by any notes, bonds, debentures, debenture
stock, loan stock or other securities or any moneys raised under
any transaction having the commercial effect of borrowing or
raising money.
Permitted Security means:
(a)
any Security created or outstanding with the approval of
an Extraordinary Resolution;
(b)
any Security arising by operation of law, provided that
such Security is discharged within 30 days of arising;
11
(c)
any Security granted by a Subsidiary in favour of the
Obligor;
(d)
any Security arising in the ordinary course of banking
transactions (such as sale and repurchase transactions
and share, loan and sukuk transactions) provided that
the Security is limited to the assets which are the
subject of the relevant transactions;
(e)
any Security created by the operation of a reservation of
title clause contained in a vendor’s or supplier’s
standard terms and conditions of sale in respect of
goods acquired by the Obligor or a Subsidiary in the
ordinary course of its business;
(f)
any Security on assets or property existing at the time
the Obligor or any Subsidiary acquired such assets or
property provided that such Security was not created in
contemplation of such acquisition and does not extend
to other assets or property (other than proceeds of such
acquired assets or property), provided that the
maximum amount of Indebtedness thereafter secured
by such Security does not exceed the purchase price of
such property or the Indebtedness incurred solely for
the purpose of financing the acquisition of such
property;
(g)
any Security securing Indebtedness of any person
and/or its Subsidiaries existing at the time that such
person is merged into or consolidated with the Obligor
or a Subsidiary provided that such Security was not
created in contemplation of such merger or
consolidation and does not extend to any other assets
or property of the Obligor or any Subsidiary;
(h)
any other Security provided that the aggregate
outstanding amount secured by that Security and any
other Security permitted to be created and in effect
under Clause 4.2.2 of this Purchase Undertaking does
not, at any time, exceed 10 per cent. of the aggregate
share capital and reserves of the Obligor as shown in its
most recent audited consolidated (if then prepared by
the Obligor) or non-consolidated (if consolidated
financial statements are not then prepared by the
Obligor) financial statements prepared in accordance
with International Financial Reporting Standards; and
(i)
any renewal of or substitution for any Security
permitted by any of the preceding sub-clauses (a)
through (h), provided that with respect to any such
Security incurred pursuant to this sub-clause (i), the
principal amount secured has not increased and the
Security has not been extended to any additional
property (other than the proceeds of such property).
Security means any mortgage, pledge, lien, charge, assignment
by way of security, hypothecation or security interest or any
other agreement or arrangement having the effect of conferring
security.
Subsidiary means in relation to any person (the first person) at
any particular time, any other person (the second person):
12
(a)
whose affairs and policies the first person controls or
has power to control, whether by ownership of share
capital, contract, the power to appoint or remove
members of the governing body of the second person
or otherwise; or
(b)
whose financial statements are, in accordance with
applicable law and generally accepted accounting
principles, consolidated with those of the first person.
Limitations on Recourse
Each Certificate represents solely an undivided beneficial
ownership interest in the Trust Assets. Certificateholders will
have no recourse to any assets of the Issuer other than the Trust
Assets. Proceeds of the Trust Assets are the sole source of
payments on the Certificates. The Certificates do not represent
an interest in any of the Issuer, the Trustee, the Delegate, SIB,
the Agents, the Transaction Administrator or the Payment
Administrator or any of their affiliates. Accordingly,
Certificateholders will have no recourse to any assets of the
Issuer (other than the Trust Assets), the Trustee (including in
particular other assets which may be comprised in other trusts,
if any), the Delegate, SIB (to the extent it fulfils all of its
obligations under the Transaction Documents to which it is a
party), the Agents, the Transaction Administrator or the
Payment Administrator or any of their affiliates in respect of
any shortfall in the expected amounts from the Trust Assets.
However, SIB is obliged to make the payments under the
Transaction Documents to which it is a party directly to the
Issuer, and the Issuer, as trustee for and on behalf of the
Certificateholders, will have direct recourse against SIB to
recover payments due to the Issuer from SIB pursuant to the
Transaction Documents to which SIB is a party. However, upon
any enforcement or exercise of any rights following the
occurrence of any Dissolution Event, Certificateholders will
not have any right of action in relation to the Co-owned Assets.
Enforcement
Following the distribution of the Trust Assets to the
Certificateholders in accordance with the Conditions and the
Declaration of Trust, the Trustee shall not be liable for any
further sums, and accordingly the Certificateholders may not
take any action against the Trustee or any other person to
recover any such sum or asset in respect of the Certificates or
the Trust Assets.
Neither the Trustee nor the Delegate shall be bound in any
circumstances to take any action to enforce or to realise such
Trust Assets or take any action against SIB under any
Transaction Documents to which SIB is a party unless
directed or requested to do so by the Certificateholders in
accordance with the Conditions, and then only to the extent
indemnified to its satisfaction.
No Certificateholder shall be entitled to proceed directly against
SIB unless (i) the Trustee, having become bound so to proceed,
fails to do so within 30 days of becoming so bound and such
failure is continuing and (ii) the relevant Certificateholder (or
such Certificateholder together with the other Certificateholders
who propose to proceed directly against SIB) holds at least
25 per cent. of the aggregate principal amount of the
Certificates then outstanding.
13
The foregoing is subject to the following: after enforcing or
realising such Trust Assets and distributing the net proceeds of
the Trust Assets in accordance with Condition 4.2, the
obligations of the Trustee in respect of such Certificates shall
be satisfied and no Certificateholder may take any further steps
against the Trustee to recover any further sums in respect of
such Certificates and the right to receive any such sums unpaid
shall be extinguished. Under no circumstances shall the
Trustee, the Delegate or any Certificateholder have any right
to cause the sale or other disposition of any of the Trust Assets
except pursuant to the Purchase Undertaking, and the sole right
of the Trustee, the Delegate and the Certificateholders against
SIB shall be to enforce the obligation of SIB to pay the
Dissolution Distribution Amount.
Withholding Tax
All payments under the Certificates are to be made without
withholding or deduction for or on account of taxes imposed or
levied by or on behalf of any Relevant Jurisdiction (as defined in
Condition 9), and all charges, penalties or similar liabilities
(Taxes) unless the withholding or deduction of the Taxes is
required by law. In the event that such a withholding for or on
account of Taxes becomes applicable to the payment to
Certificateholders, SIB will be required, pursuant to the
Purchase Undertaking to pay to the Issuer, additional
amounts so that, subject to certain exceptions, the full
amount which would otherwise be due and payable under the
Certificates is received by the parties entitled hereto. See
Condition 9.
Certificateholder Meetings
A summary of the provisions for convening meetings of
Certificateholders to consider matters relating to their
interests as such are set forth under Condition 14.
Transaction Documents
Transaction Documents mean the Purchase Agreement, the
Management Agreement, the Transaction Administration Deed,
the Purchase Undertaking, the Declaration of Trust, the Costs
Undertaking, the Agency Agreement, the Certificate Purchase
Agreement, the Certificates and any other agreements and
documents delivered or executed in connection therewith (each
as defined in the Conditions).
Governing Law and
Jurisdiction
The Declaration of Trust, the Certificate Purchase Agreement,
the Agency Agreement, the Transaction Administration Deed
and the Certificates will be governed by English law and
subject, to the non-exclusive jurisdiction of the English Courts.
The remaining Transaction Documents will be governed by the
federal laws of the UAE. The courts of Sharjah have nonexclusive jurisdiction to hear all disputes relating to them.
In respect of dispute under the Purchase Agreement, the
Management Agreement, the Costs Undertaking and the
Purchase Undertaking, SIB has consented to arbitration in
accordance with the Rules of The London Court of International
Arbitration if the Issuer (as Trustee) so requires.
14
RISK FACTORS
Prior to investing in any Certificates potential investors should carefully consider, together with
all other information contained in this Prospectus, the considerations described below. These
considerations are not exhaustive and other considerations, including some which may not be
presently known to the Issuer or SIB, or which the Issuer or SIB currently deem immaterial, may
impact on any investment in the Certificates.
Risk factors relating to the Issuer
No secondary market. There can be no assurances that a secondary market for the Certificates
will develop or, if a secondary market does develop, that it will provide the Certificateholders
with liquidity of investment or that it will continue for the life of the Certificates. The market value
of Certificates may fluctuate. Consequently, any sale of Certificates by Certificateholders in any
secondary market which may develop may be at a discount from the original purchase price of
such Certificates. Hence an investor in the Certificates must be prepared to hold the Certificates
for an indefinite period of time or until their maturity. Application will be made for the listing of
the Certificates on the London Stock Exchange but there can be no assurance that such listings
will occur on or prior to the Closing Date or at all.
No operating history. The Issuer is a newly formed entity and has no operating history. The
Issuer will have no material assets other than their interest in the Co-owned Assets, which
represent owner and lessor rights in certain assets co-owned with SIB. Payments pursuant to the
Management Agreement and the Purchase Undertaking, which payments are direct obligations
of SIB to the Issuer, will be the Issuer’s principal source of funds.
Limited Recourse. Recourse to the Issuer is limited to the Trust Assets and proceeds of the Trust
Assets are the sole source of payments on the Certificates. Upon occurrence of a Dissolution
Event, the only remedy available to Certificateholders will be to exercise the right under the
Purchase Undertaking to require SIB to purchase the Co-owned Assets at the Relevant Exercise
Price. Certificateholders will otherwise have no recourse to any assets of SIB (to the extent it
fulfils all of its obligations under the Transaction Documents to which it is a party), the Managers,
the Delegate, the Agents, the Transaction Administrator or the Payment Administrator or any
affiliate of any of the foregoing entities in respect of any shortfall in the expected amounts from
the Trust Assets. SIB is obliged to make its payments under the Transaction Documents to which
it is a party directly to the Issuer, and the Issuer, as trustee for the benefit of the
Certificateholders, will have direct recourse against SIB to recover payments due to the Issuer
from SIB pursuant to the Transaction Documents to which SIB is a party. There can be no
assurance that the net proceeds of the realisation of, or enforcement with respect to, the Trust
Assets will be sufficient to make all payments due in respect of the Certificates. Furthermore,
under no circumstances shall any Certificateholder or the Trustee have any right to cause the sale
or other disposition of any of the Trust Assets except pursuant to the Purchase Undertaking and
the sole right of the Trustee and the Certificateholders against SIB shall be to enforce the
obligation of SIB to pay the Relevant Exercise Price under the Purchase Undertaking.
Consents to Variation of Transaction Documents and other Matters. The Declaration of Trust
contains provisions permitting the Trustee, (acting on behalf of the Certificateholders), from time
to time and at any time without any consent or sanction of the Certificateholders to make any
modification to the Declaration of Trust if in the opinion of the Trustee such modification (a) is of
a formal, minor or technical nature, or (b) is made to correct a manifest or proven error, or (c) is
not materially prejudicial to the interest of Certificateholders. Unless the Trustee otherwise
decides, any such modification shall as soon as practicable thereafter be notified to the
Certificateholders and shall in any event be binding upon the Certificateholders.
Risk Factors relating to the Business of SIB
In the course of its business activities, SIB is exposed to a variety of risks, the most significant of
which are credit risk, operational risk and liquidity risk. Whilst SIB believes it has implemented
the appropriate policies, systems and processes to control and mitigate these risks, investors
should not that any failure to adequately control these risks could be greater than anticipated
which could result in adverse effects on SIB’s financial condition and reputation.
15
Credit Risk. Risks arising from adverse changes in the credit quality and recoverability of loans,
advances and amounts due from counterparties are inherent in a wide range of SIB’s businesses.
Credit risks could arise from a deterioration in the credit quality of specific counterparties of SIB,
or from a general deterioration in local or global economic conditions, or from systemic risks
with the financial systems, which could affect the recoverability and value of SIB’s assets and
require an increase in SIB’s provisions for the impairment of its assets and other credit
exposures. A description of SIB’s exposure to credit risk is included on pages 44 and 45.
Operational Risk. Operational Risk and losses can result from fraud, error by employees, failure
to document transactions properly or to obtain proper internal authorisation, failure to comply
with regulatory requirements and conduct of business rules, system and equipment failures,
natural disasters or the failure of external systems (for example those of SIB’s counterparties or
vendors).
Although SIB has implemented risk controls and loss mitigation strategies, and substantial
resources are devoted to developing efficient procedures and to staff training, it is not possible to
eliminate entirely each of the operational risks. A description of SIB’s exposure to operational risk
is included on page 45.
Liquidity Risk. Liquidity Risk could arise from the inability of SIB to anticipate and provide for
unforeseen decreases or changes in funding sources which could have adverse consequences on
SIB’s ability to meet its obligations when they fall due. A description of SIB’s exposure to liquidity
risk is included on page 45.
Foreign exchange movements may adversely affect SIB’s profitability. SIB maintains its
accounts, and reports its results, in AED. The UAE dirham has been ’pegged’ at a fixed
exchange rate to the U.S. dollar since 22 November 1980. SIB is exposed to the potential impact
of any alteration to, or abolition of, this foreign exchange ’peg’.
Risk Factor relating to Trust Assets
Transfer of Trust Assets. No investigation has been made as to whether the Trust Assets may be
transferred as a matter of UAE federal or applicable Emirati law. No investigation has been made
to determine if the Purchase Agreement has the effect of transferring the Trust Assets (and in
particular those assets that are real estate based) to the Issuer. Accordingly, no assurance is
given that the Trust Assets have actually been or will be transferred to the Issuer.
Nevertheless, as indicated earlier, the Certificateholders will not have any rights of enforcement
as against the Trust Assets and their rights are limited to enforcement against SIB of its
obligation to purchase the Issuer’s share in and to the Co-owned Assets pursuant to the terms of
the Purchase Undertaking. Accordingly, any such restriction on the ability of the Seller to make a
‘‘true sale’’ of the Trust Assets to the Issuer is likely to be of limited consequence to the rights of
the Certificateholders.
Risk factors relating to enforcement
UAE Bankruptcy Law. In the event of SIB’s insolvency, UAE bankruptcy law may adversely affect
SIB’s ability to perform under the Purchase Undertaking and therefore the Issuer’s ability to make
payments to Certificateholders. There is little precedent to predict how the claims on behalf of
Certificateholders would be resolved in the case of SIB.
Enforcement of Liabilities. Ultimately the payments under the Certificates are dependent upon
SIB making payments to the Issuer under the Purchase Undertaking. If SIB fails to do so, it may
be necessary to bring an action against SIB to enforce its obligations before the UAE courts
which may be costly and time consuming.
Enforcing foreign judgments in Sharjah. The Sharjah courts are unlikely to enforce an English
judgment without re-examining the merits of the claim and may not observe the choice by the
parties of English law as the governing law of the transaction.
Judicial precedent in the United Arab Emirates has no binding effect on subsequent decisions. In
addition, there is no formal system of reporting court decisions in the United Arab Emirates.
These factors create greater judicial uncertainty.
16
Additional risk factors
Currency fluctuations. The Certificates are denominated in US dollars and the Periodic
Distribution Amount will be paid in US dollars. SIB’s customers for the most part pay rental to
SIB in UAE Dirham. The UAE Dirham has been officially pegged at a fixed exchange rate to the
U.S. dollar since 22 November 1980. SIB and the Issuer are exposed to the potential impact of any
alteration to, or abolition of, the foreign exchange peg of the UAE Dirham to the U.S. dollar.
Suitability of Investment. The Certificates may not be a suitable investment for all investors.
Each potential investor in the Certificates must determine the suitability of that investment in
light of its own circumstances. In particular, each potential investor should:
(a)
have sufficient knowledge and experience to make a meaningful evaluation of the
Certificates, the merits and risks of investing in the Certificates and the information
contained in this Prospectus;
(b)
have access to, and knowledge of, appropriate analytical tools to evaluate, in the context of
its particular financial situation, an investment in the Certificates and the impact the
Certificates will have on its overall investment portfolio;
(c)
have sufficient financial resources and liquidity to bear all of the risks of an investment in
the Certificates or where the currency for principal is different from the potential investor’s
currency;
(d)
understand thoroughly the terms of the Certificates and be familiar with the behaviour of
any relevant indices and financial markets; and
(e)
be able to evaluate (either alone or with the help of a financial adviser) possible scenarios
for economic and other factors that may affect its investment and its ability to bear the
applicable risks.
Emerging Markets. Investors in emerging markets should be aware that these markets are
subject to greater risks that more developed markets, including in some cases significant legal,
economic and political risks. Accordingly, investors should exercise particular care in evaluating
the risks involved and must decide for themselves whether, in the light of those risks, their
investment is appropriate. Generally, investment in emerging markets is only suitable for
sophisticated investors who fully appreciate the significance of the risk involved.
Change of Law. The structure of the issue of the Certificates is based on English law, UAE law
and administrative practice in effect as at the date of this Prospectus. No assurance can be given
as to the impact of any possible change to English law, UAE law or administrative practice after
the date of this Prospectus, nor can any assurance be given as to whether any such change could
adversely affect the ability of the Issuer to make payments under the Certificates.
Political, Economic and Related Considerations. The UAE has seen significant economic growth
and relative political stability. There can be no assurance that such growth or stability will
continue. Moreover, while the UAE’s federal government policies have generally resulted in
improved economic performance, there can be no assurance that such level of performance can
be sustained. SIB may also be adversely affected generally by political and economic
developments in or affecting the UAE.
No assurance can be given that the UAE government will not implement regulations or fiscal or
monetary policies, including policies or new regulations or new legal interpretations of existing
rates or exchange controls, or otherwise take actions which could have a material adverse effect
on SIB’s business, financial condition, results of operations or prospects or which could
adversely affect the market price and liquidity of the Certificates.
The Issuer and/or SIB may be affected if there are regional, political or economic events that
prevent the Issuer and/or SIB from delivering their services. It is not possible to predict the
occurrence of such events or circumstances or the impact of such occurrences and no assurance
can be given that the Issuer and/or SIB would be able to fulfil their respective obligations if such
events or circumstances were to occur. A general UAE downturn or instability in certain sectors
of the UAE or regional economy could have an adverse effect on SIB’s business, financial
condition, results of operations or prospects.
17
Competition. The banking market in the UAE has generally been a relatively protected market
with high regulatory and other barriers to entry for foreign financial institutions. However, should
some of these barriers be removed or eased in the future, either voluntarily or as a result of
World Trade Organisation, Gulf Cooperation Council or other obligations on the part of the UAE,
it is likely to lead to a more competitive environment for SIB and other domestic financial
institutions.
18
TERMS AND CONDITIONS OF THE CERTIFICATES
The following is the text of the terms and conditions of the Certificates which will (subject to
modification) be endorsed on each Certificate in definitive form (if issued):
Each of the US$225,000,000 trust certificates due 2011 (the Certificates) represents an undivided
beneficial ownership in the Trust Assets (defined in Condition 4.1) (Summary of the Trust) held
on trust (the Trust) for the registered holders from time to time of the Certificates
(Certificateholders) pursuant to a declaration of trust (the Declaration of Trust) dated on or
about 12 October 2006 (the Closing Date) made by the Issuer (as described in Condition 4.1)
(Summary of the Trust).
A transaction administration deed dated on or about the Closing Date (the Transaction
Administration Deed) will be made between the Issuer and HSBC Bank plc, in its capacity as
transaction administrator (the Transaction Administrator) pursuant to which the Transaction
Administrator will receive certain notices in relation to the transactions underlying the
Certificates, and, subject to such receipt, deliver an exercise notice (Exercise Notice) on behalf
of the Trustee following a Dissolution Event, as described further in Condition 11 (Dissolution
Events).
Payments relating to the Certificates will be made pursuant to an agency and administration
agreement dated on or about the Closing Date (the Agency Agreement) made between the
Issuer,HSBC Bank plc, in its capacity as payment administrator (the Payment Administrator),
principal paying agent (the Principal Paying Agent), reference agent (the Reference Agent),
replacement agent (the Replacement Agent), transfer agent (the Transfer Agent) and registrar
(the Registrar) each in respect of the Certificates. References to the Transaction Administrator,
the Principal Paying Agent, the Transfer Agent, the Replacement Agent, the Reference Agent, the
Payment Administrator and the Registrar shall include any successors thereto in each such
capacity.
The Principal Paying Agent, the Reference Agent, the Transfer Agent, the Replacement Agent and
the Registrar are together referred to as the Agents.
The statements in these Conditions include summaries of, and are subject to, the detailed
provisions of the Declaration of Trust and the Agency Agreement. Copies of the Transaction
Documents (as defined in Condition 4.1) (Summary of the Trust) are available for inspection by
Certificateholders during normal business hours on any weekday (excluding Fridays and public
holidays) at the specified offices of the Trustee, being at the Closing Date and until further notice,
the office of the Transaction Administrator set out at the end of these Conditions. The
Certificateholders are entitled to the benefit of, are bound by, and are deemed to have notice of,
all the provisions of the Declaration of Trust and the Agency Agreement applicable to them. Each
initial Certificateholder, by its acquisition and holding of its interest in a Certificate, shall be
deemed to authorise and direct the Issuer (acting as trustee on behalf of the Certificateholders) to
apply the sums paid by it in respect of its Certificates to purchase from SIB 88.7 per cent of SIB’s
undivided rights, title interest in the Original Leased Assets (as defined herein), and to enter into
each Transaction Document (as defined in Condition 4.1 (Summary of the Trust)) to which it is a
party, subject to the terms and conditions of the Declaration of Trust and these Conditions.
1
1.1
Form, Denomination and Title
Form and Denomination
The Certificates are issued in registered form in denominations of US$10,000. Certificates
may be held in the aggregate principal amount of US$100,000 and integral multiples of
US$10,000 in excess thereof (each an Authorised Holding). A Certificate will be issued to
each Certificateholder in respect of its registered holding of Certificates. Each Certificate will
be numbered serially with an identifying number which will be recorded on the relevant
Certificate and in the register (the Register) of Certificateholders which the Issuer will cause
to be kept by the Registrar.
1.2
Title
The Registrar will maintain the Register in respect of the Certificates in accordance with the
provisions of the Agency Agreement. Title to the Certificates passes only by registration in
19
the register of Certificateholders kept by the Registrar. Each Certificateholder shall (except
as otherwise required by law) be treated as the absolute owner of such Certificate for all
purposes (whether or not it is overdue and regardless of any notice of ownership, nominee
arrangement or any other interest therein).
2
Transfers of Certificates and Issue of Certificates
2.1
Transfers
Transfers shall only be fully effective as and when the Registrar shall have registered the
transferee as the holder of the transferred Certificates in the Register in place of the
transferor. The Registrar may also request evidence satisfactory to itself of the authority of
the individuals who have executed an applicable form of transfer. A Certificate may not be
transferred unless the principal amount of Certificates transferred and (where not all of the
Certificates held by a Certificateholder are being transferred) the principal amount of the
balance of Certificates not transferred are Authorised Holdings.
2.2
Charges
The transfer of a Certificate will be effected without charge by or on behalf of the Issuer. The
Registrar may, however, charge a fee for its own services.
2.3
Closed Period
No Certificateholder may require the transfer of a Certificate to be registered during the
period of seven Business Days ending on the due date for the payment of any Periodic
Distribution Amount (as defined in Condition 6.1) (Periodic Distribution Dates) or any
Scheduled Redemption Amount (as defined in Condition 6.4) (Scheduled Redemption
Amount) or any Dissolution Distribution Amount (as defined in Condition 8.2) (Summary of
Dissolution) on that Certificate.
Furthermore, no Certificateholder shall be entitled to transfer any Certificates during the
period commencing at the opening of business on the Business Day immediately preceding
any meeting of Certificateholders (which shall include any reconvened or adjourned
meeting) held in accordance with Condition 14 (Meetings of Certificateholders,
Modification, Waiver, Authorisation and Determination) and ending at the close,
postponement or adjournment of such meeting (as the case may be).
2.4
Regulations
All transfers of Certificates and entries on the Register will be made subject to the detailed
regulations concerning the transfer of Certificates scheduled to the Agency Agreement. A
copy of the current regulations will be mailed (free of charge) by the Registrar to any
Certificateholder who requests in writing a copy of the regulations.
3
3.1
Status and Limited Recourse
Status
Each Certificate evidences an undivided beneficial ownership of the Trust Assets and will
rank pari passu, without any preference with the other Certificates.
3.2
Limited Recourse
Proceeds of the Trust Assets are the sole source of payments on the Certificates. The
Certificates do not represent an interest in any of the Issuer, the Trustee, Sharjah Islamic
Bank (SIB), the Delegate, the Agents, the Transaction Administrator, the Payment
Administrator or any of their respective affiliates. Accordingly, Certificateholders will have
no recourse to any assets of the Issuer (other than the Trust Assets), the Trustee (including,
in particular other assets comprised in other trusts, if any), SIB (to the extent it fulfils all of its
obligations under the relevant Transaction Documents to which it is a party), the Delegate,
the Transaction Administrator, the Agents, the Payment Administrator or any of their
respective affiliates in respect of any shortfall in the expected amounts from the Trust
Assets. However, SIB is obliged to make the payments under the relevant Transaction
Documents to which it is a party directly to the Issuer and the Issuer, as trustee for and on
20
behalf of Certificateholders, will have direct recourse against SIB to recover payments due
to the Issuer from SIB pursuant to such Transaction Documents.
The net proceeds of the realisation of, or enforcement with respect to, the Trust Assets may
not be sufficient to make all payments due in respect of the Certificates. If, following
distribution of such proceeds, there remains a shortfall in payments due under the
Certificates, subject to Condition 12 (Enforcement and Exercise of Rights), no
Certificateholder will have any claim against the Issuer, the Trustee, the Delegate, the
Transaction Administrator, the Agents, the Payment Administrator or SIB (to the extent it
fulfils all of its obligations under the relevant Transaction Documents to which it is a party)
or any of their affiliates or other assets in respect of such shortfall and any unsatisfied
claims of the Certificateholders shall be extinguished. In particular, no Certificateholder will
be able to petition for, or join any other person in instituting proceedings for, the
reorganisation, liquidation, winding up or receivership of the Issuer, the Trustee, SIB (to the
extent it fulfils all of its obligations under the relevant Transaction Documents to which it is
a party) or any of their affiliates as a consequence of such shortfall or otherwise.
3.3
Agreement
By purchasing the Certificates, each Certificateholder agrees that:
3.3.1 Notwithstanding anything to the contrary contained herein or in any other Transaction
Document, no payment of any amount whatsoever shall be made by any of the Issuer, the
Trustee or the Trust or any of their respective agents on their behalf except to the extent
funds are available therefor from the Trust Assets and further agrees that no recourse shall
be had for the payment of any amount owing hereunder or under any other Transaction
Document, whether for the payment of any fee or other amount hereunder or any other
obligation or claim arising out of or based upon the Declaration of Trust or any other
Transaction Document, against any of the Issuer, the Trustee or the Trust to the extent the
Trust Assets have been exhausted following which all obligations of the Issuer, the Trustee
and the Trust shall be extinguished.
3.3.2 Notwithstanding anything to the contrary contained herein or in any other Transaction
Document, prior to the date which is one year and one day after the date on which all
amounts owing by the Issuer (as Trustee wherever applicable) under the Transaction
Documents to which it is a party have been paid in full, it will not institute against, or join
with any other person in instituting against the Issuer, the Trustee or the Trust, any
bankruptcy, reorganisation, arrangement or liquidation proceedings or other proceedings
under any bankruptcy or similar law.
4
4.1
Trust
Summary of the Trust
SIB Sukuk Company Limited, formed under the laws of the Cayman Islands (the Issuer), will
act as trustee for and on behalf of the Certificateholders pursuant to the Declaration of Trust
(in such capacity, the Trustee).
The Trustee has delegated to HSBC Trustee (C.I.) Limited (the Delegate) its rights to enforce
or realise the Trust Assets upon the occurrence of a Dissolution Event (as defined in
Condition 11 below) subject to and in accordance with the Declaration of Trust.
The Issuer (in such capacity, the Trustee) will enter into a purchase agreement on or about
the Closing Date with SIB (the Seller) (the Purchase Agreement). Pursuant to the Purchase
Agreement, the Seller will sell to the Issuer and the Issuer will purchase from the Seller
88.3 per cent. of the Seller’s undivided right, title and interest in the assets (which are
subject to the Lease Transaction Documents (as defined herein)) and described in Schedule
1 to the Purchase Agreement (the Original Leased Assets).
Under the terms of the Management Agreement and the Purchase Undertaking, all amounts
due to the Issuer shall be paid to an account in the Issuer’s name (the Transaction Account).
Pursuant to the Declaration of Trust, the Issuer will declare a trust over (a) the Issuer’s share
in and to the Co-owned Assets, (b) all of its right, title, interest and benefit, present and
future, in, to and under the Transaction Documents, (c) all monies standing to the credit of
21
the Transaction Account and (d) all the proceeds of the foregoing (together, the Trust
Assets).
The Purchase Agreement, the Management Agreement, the Costs Undertaking, the
Purchase Undertaking, the Transaction Administration Deed, the Declaration of Trust, the
Agency Agreement, the Certificate Purchase Agreement, the Certificates and any other
agreements and documents delivered or executed in connection therewith are collectively
referred to as the Transaction Documents.
In these Conditions:
Certificate Purchase Agreement means the agreement entered into on or about the Closing
Date between SIB, the Issuer, HSBC Bank plc (the Lead Manager), European Islamic
Investment Bank plc, Kuwait Finance House KSC and MashreqBank PSC (the Co-managers).
Co-owned Assets means (i) the Original Leased Assets, (ii) other than Shariah Compliant
Authorised Investments, any assets at any time replacing the Co-owned Assets in
accordance with the Management Agreement and (iii) Shariah Compliant Authorised
Investments.
Co-owners means SIB and the Issuer and Co-owner shall be construed accordingly.
Management Agreement means the management agreement dated on or about the Closing
Date between the Issuer (in its capacity as Trustee) and SIB (in its capacity as a Co-owner
and as managing agent (Managing Agent)).
Purchase Undertaking means the purchase undertaking provided by SIB in favour of the
Trustee on or about the Closing Date, in which it irrevocably undertakes to the Trustee that
upon the exercise by the Trustee of the option right granted to it, SIB shall purchase the
Trustee’s rights, benefits and entitlements in and to the Co-owned Assets.
4.2
Application of Proceeds from Trust Assets
Pursuant to the Declaration of Trust, the Trustee holds the Trust Assets for and on behalf of
the Certificateholders. On the Business Day immediately preceding each Periodic
Distribution Date or on any Unscheduled Dissolution Distribution Date (as defined in
Condition 8.2 below), the Payment Administrator, notwithstanding any instructions to the
contrary from the Trustee, will apply the monies standing to the credit of the Transaction
Account in the following order of priority:
5
(a)
first, to the Delegate in respect of all amounts owing to it under the Transaction
Documents in its capacity as Delegate;
(b)
second, to the Principal Paying Agent for application in or towards payment pari
passu and rateably of the Periodic Distribution Amount due on that date and unpaid;
and
(c)
third, to the Principal Paying Agent for application in or towards payment pari passu
and rateably of the principal amount of the Certificates then outstanding and due for
payment.
Covenants
The Issuer has covenanted in the Declaration of Trust that, among other things, for so long
as any Certificate is outstanding, it shall not:
5.1.1
incur any indebtedness in respect of borrowed money whatsoever, or give any
guarantee in respect of any obligation of any person or issue any shares (or rights,
warrants or options in respect of shares or securities convertible into or
exchangeable for shares) other than those in issue as at the Closing Date;
5.1.2
secure any of its present or future indebtedness for borrowed money by any lien,
pledge, charge or other security interest upon any of its present or future assets,
properties or revenues (other than those arising by operation of law);
5.1.3
sell, transfer, assign, participate, exchange, or pledge, mortgage, hypothecate or
otherwise encumber (by security interest, lien (statutory or otherwise), preference,
22
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever or otherwise or permit such to occur or suffer such to exist other
than a Permitted Encumbrance (as defined below)), any part of (i) its title to the Coowned Assets or any interest therein except pursuant to any Transaction Document
or (ii) its interests in any of the other Trust Assets except pursuant to any
Transaction Document;
5.1.4
use the proceeds of the issue of the Certificates for any purpose other than as set out
in this Prospectus;
5.1.5
subject to Clause 12 (Modifications) of the Declaration of Trust, amend or agree to
any material amendment of any Transaction Document to which it is a party or its
constitutional documents;
5.1.6
exercise its right under the Purchase Undertaking except in its capacity as Trustee;
5.1.7
act as trustee in respect of any trust other than the Trust or as in respect of any
parties other than the Certificateholders;
5.1.8
have any subsidiaries or employees;
5.1.9
redeem any of its shares or pay any dividend or make any other distribution to its
shareholders;
5.1.10 put to its directors or shareholders any resolution for or appoint any liquidator for its
winding up or any resolution for the commencement of any other bankruptcy or
insolvency proceeding with respect to it; or
5.1.11 enter into any contract, transaction, amendment, obligation or liability other than
the Transaction Documents to which it is a party or as expressly permitted or
required thereunder or engage in any business or activity other than:
(a)
as provided for or permitted in the Transaction Documents;
(b)
the ownership, management and disposal of the Trust Assets as provided in
the Transaction Documents; and
(c)
such other matters which are incidental thereto or in relation to its general
corporate maintnance.
For the purposes of Condition 5.1.3:
Permitted Encumbrance means any Encumbrance:
(a)
arising solely by operation of law;
(b)
that is granted to any third party and which has been disclosed to the Trustee
as at the date of the Purchase Agreement or to which the Trustee subsequently
agrees.
Encumbrance means any lien, pledge, mortgage, security interest, deed of trust, charge or
other encumbrance or arrangement having a similar effect.
6
6.1
Periodic Distributions
Periodic Distribution Dates
Subject to Condition 3.2 (Limited Recourse), each Certificateholder shall be paid a
distribution equal to its pro-rata share of the applicable Periodic Distribution Amount on
each Periodic Distribution Date.
In these Conditions:
LIBOR means, for each Periodic Distribution Period, the London inter-bank offered rate for
three-month U.S. dollar deposits determined in accordance with Condition 6.2 (LIBOR
Determination).
Margin means 0.65 per cent. per annum.
23
Periodic Distribution Amount means for each Periodic Distribution Date, an amount equal
to the product of:
(i)
LIBOR for such Periodic Distribution Period immediately preceding such Periodic
Distribution Date plus the Margin;
(ii)
US$225,000,000; and
(iii)
the actual number of days in the applicable Periodic Distribution Period divided by
360.
Periodic Distribution Dates means the 12th of each January, April, July and October
commencing on 12 January 2007 through and including 12 October 2011. If any such day is
not a Business Day, the Periodic Distribution Date will be the next following Business Day.
The period from and including the Closing Date to but excluding the first Periodic
Distribution Date and each successive period from and including a Periodic Distribution
Date to but excluding the next succeeding Periodic Distribution Date is defined as a Periodic
Distribution Period.
In these Conditions, except where otherwise defined, Business Day means any day on
which commercial banks and foreign exchange markets settle payments and are open for
general business in Sharjah, London and New York.
6.2
LIBOR Determination
LIBOR for each Periodic Distribution Period shall be determined by or on behalf of the Issuer
in accordance with the following provisions:
6.2.1
on each LIBOR Determination Date, the Reference Agent on behalf of the Issuer will
determine the Screen Rate at approximately 11.00 a.m. (London time) on such
LIBOR Determination Date and such Screen Rate shall be the value of LIBOR for the
forthcoming Periodic Distribution Period;
6.2.2
if the Screen Rate is unavailable, the Reference Agent on behalf of the Issuer shall
request the principal London office of each Reference Bank to provide it with the rate
at which deposits in U.S. dollars are offered by it to prime banks in the London interbank market for a period of three months at approximately 11.00 a.m. (London time)
on such LIBOR Determination Date and for a Representative Amount and, so long as
at least two of the Reference Banks provide such rates, the arithmetic mean of such
rates (rounded if necessary to the fifth decimal place, with 0.000005 rounded
upwards) as calculated by the Reference Agent, on behalf of the Issuer, shall be the
value of LIBOR for the forthcoming Periodic Distribution Period;
6.2.3
if fewer than two of the Reference Banks provide rates, the value of LIBOR for the
forthcoming Periodic Distribution Period shall be the arithmetic mean of the rates
quoted by such major banks in New York, as may be selected by the Reference
Agent, on behalf of the Issuer, at approximately 11.00 a.m. (New York time) on the
first day of such Periodic Distribution Period for loans in U.S. dollars to leading
European banks for a period of three months commencing on the first day of such
Periodic Distribution Period and for a Representative Amount;
6.2.4
if LIBOR cannot be determined in accordance with the above provisions, the value of
LIBOR for the forthcoming Periodic Distribution Period shall be as determined on
the preceding LIBOR Determination Date; and
6.2.5
the following terms used in this Condition 6 have the meanings set forth below:
(a)
London Business Day means a day (other than a Saturday or a Sunday) on
which commercial banks in London are open for general business;
(b)
LIBOR Determination Date means the second London Business Day preceding
the first day of each Periodic Distribution Period;
(c)
Reference Banks means the principal London office of each of four major banks
engaged in the London interbank market selected by or on behalf of the Issuer
provided that once a Reference Bank has first been selected by the Reference
24
Agent on behalf of the Issuer, such Reference Bank shall not be changed unless
it ceases to be capable of acting as such;
6.3
(d)
Representative Amount means the aggregate principal amount of Certificates
from time to time outstanding; and
(e)
Screen Rate means the rate for three-month deposits in U.S. dollars which
appears on Telerate page 3750 (or such replacement page on that service or
any successor service which displays the same information).
Notification of LIBOR and Periodic Distribution Amount
Following determination of each of LIBOR and the Periodic Distribution Amount for the
forthcoming Periodic Distribution Period and the related Periodic Distribution Date by the
Reference Agent, the Reference Agent shall notify, or shall procure the notification to, each
stock exchange on which the Certificates are listed at the relevant time, as soon as
practicable after the determination thereof but in no event later than the first day of the
relevant Periodic Distribution Period, details of such LIBOR and Periodic Distribution
Amount. The Principal Paying Agent shall arrange for such LIBOR and Periodic Distribution
Amount to be published in accordance with Condition 13 (Notices) as soon as practicable
after their determination but in no event later than the fourth London Business Day
thereafter. Each Periodic Distribution Amount and Periodic Distribution Date may
subsequently be amended (or appropriate alternative arrangements made by way of
adjustment) without notice in the event of an extension or shortening of the Periodic
Distribution Period. In the event of any such amendment, the Reference Agent shall as soon
as practicable thereafter, notify each stock exchange on which the Certificates are listed at
the relevant time of the amended Periodic Distribution Amount and Periodic Distribution
Date. The Principal Paying Agent shall arrange for such amended Periodic Distribution
Amount and Periodic Distribution Date to be published in accordance with Condition 13
(Notices) as soon as practicable after determination of such amendment but in no event
later than the fourth London Business Day thereafter.
6.4
Scheduled Redemption Amount
Unless the Certificates are previously redeemed or cancelled, the Certificates will be
redeemed on the Periodic Distribution Date falling in (or immediately following)
October 2011 (Scheduled Redemption Date) and each Certificateholder shall receive its
pro-rata to entitlement to aggregate principal amount outstanding at the Certificates on the
Scheduled Redemption Date (Scheduled Redemption Amount).
6.5
Cessation of Accrual
No further amounts will be payable on any Certificate from and including its due date for
redemption.
7
Payment
7.1
Payments in respect of Certificates
Payment of all Periodic Distribution Amounts, Scheduled Redemption Amounts and
Dissolution Distribution Amounts (the Sukuk Payments) will be made by the Principal
Paying Agent by wire transfer in same day funds to the registered account of each
Certificateholder or, by US dollar cheque drawn on a bank that processes payments in US
dollars mailed to the registered address of the Certificateholder if it does not have a
registered account. All Sukuk Payments due otherwise than on a Periodic Distribution Date
will only be made against surrender of the relevant Certificate at the specified office of any
of the Principal Paying Agent. All Sukuk Payments on Certificates due on a Periodic
Distribution Date will be paid to the holder shown on the register of Certificateholders at the
close of business on the date (the record date) being the seventh day before the relevant
Periodic Distribution Date.
For the purposes of this Condition 7.1, a Certificateholder’s registered account means the
Dollar denominated account maintained by or on behalf of it with a bank that processes
payments in Dollars, details of which appear on the Register at the close of business, in the
25
case of the Dissolution Distribution Amount, on the second Business Day before the due
date for payment and, in all other cases, on the relevant record date, and a
Certificateholder’s registered address, which is the address appearing on the Register at
that time.
7.2
Payments subject to applicable laws
Payments in respect of Certificates are subject in all cases to any fiscal or other laws and
regulations applicable in the place of payment, but without prejudice to the provisions of
Condition 9 (Taxation).
7.3
Payment only on a Payment Business Day
Where payment is to be made by transfer to registered account, payment instructions (for
value the due date or, if that is not a Payment Business Day, for value the first following day
which is a Payment Business Day) will be initiated and, where payment is to be made by
cheque, the cheque will be mailed, in each case by the Principal Paying Agent, on the
Payment Business Day preceding the due date for payment or, in the case of a payment of
the Dissolution Distribution Amount, if later, on the Payment Business Day on which the
relevant Certificate is surrendered at the specified office of a Principal Paying Agent.
Certificateholders will not be entitled to any Periodic Distribution Amount or other payment
for any delay after the due date in receiving the amount due if the due date is not a Payment
Business Day, if the relevant Certificateholder is late in surrendering its Certificate (if
required to do so) or if a cheque mailed in accordance with this Condition 7 arrives after the
due date for payment.
In this paragraph, Payment Business Day means any day on which banks are open for
general business (including dealing in foreign currencies) in New York and, in the case of
surrender (or, in the case of part payment only, endorsement) of a Certificate (in definitive
form), in the place in which the Certificate (in definitive form) is surrendered (or, as the case
may be, endorsed).
7.4
Notification to be Final
All notifications, opinions, determinations, certificates, calculations, quotations and
decisions given, expressed, made or obtained for the purposes of this Condition 7,
whether by the Principal Paying Agent or the Reference Agent, shall (in the absence of wilful
default, fraud or manifest error) be binding on the Issuer and all Certificateholders and (in
the absence of wilful default, fraud or manifest error) no liability to the Certificateholders
shall attach to the Principal Paying Agent or the Reference Agent in connection with the
exercise or non-exercise by them or any of them of their powers duties and discretions
under this Condition 7.
7.5
Maintenance of Agents
The Issuer will at all times maintain a Registrar, a Replacement Agent, a Transfer Agent, a
Reference Agent and a Payment Administrator and, for so long as the Certificates are listed
on the Official List of the UK Listing Authority, a Principal Paying Agent in London. For so
long as any Certificate is outstanding, the Issuer undertakes that there will at all times be a
Principal Paying Agent located in an EU Member State that is not obliged to withhold or
deduct tax pursuant to European Council Directive 2003/48/EC or any law implementing or
complying with, or introduced in order to conform to any such Directive.
The Issuer reserves the right, at any time, to vary or termination the appointment of the
Principal Paying Agent and to appoint additional or other paying agents.
Notice of any change in the Principal Paying Agent or in its specified offices shall promptly
be given to the Certificateholder in accordance with Condition 13 (Notices).
7.6
Agents act solely as agents of Issuer
In acting under the Agency Agreement and in connection with the Certificates, the Agents
act solely as agents of the Issuer and (to the extent provided therein) the Trustee and do not
26
assume any obligations towards or relationship of agency or trust for or with any of the
Certificateholders.
7.7
Agents
The names of the initial Agents and their initial specified offices are set out at the end of
these Conditions.
8
8.1
Dissolution of Trust
Scheduled Dissolution
Unless the Certificates are previously redeemed (and the Trust is dissolved after such
redemption) pursuant to a Dissolution Event, the Certificates will be redeemed as set out in
Condition 6.4 (Scheduled Redemption Amount) on the Scheduled Redemption Date and the
Trust will thereafter be dissolved.
8.2
Summary of Dissolution
Pursuant to the Purchase Undertaking, SIB will undertake to purchase from the Trustee any
and all of the Trustee’s rights, benefits and entitlements in and to the Co-owned Assets
upon the Trustee exercising the option to:
(a)
redeem in full the Certificates in US dollars by delivering an Exercise Notice to SIB
following the occurrence of a Dissolution Event (the Early Redemption Exercise);
and
(b)
redeem the Certificates in US dollars by delivering an Exercise Notice to SIB on any
day during the 10 day period immediately preceding the fifth anniversary of the date
of the Purchase Undertaking (the Scheduled Redemption Exercise).
Upon the occurrence of a Dissolution Event, the Trustee may, or if so requested in writing by
the holders of at least 25 per cent. of the aggregate principal amount of the Certificates then
outstanding or if so directed by an Extraordinary Resolution of the Certificateholders, shall
exercise the Trustee’s rights under the Purchase Undertaking by giving notice thereunder to
SIB. The date of the purchase by SIB of all of the Trustee’s rights, benefits and entitlements
in and to the Co-owned Assets following the occurrence of a Dissolution Event shall be the
date specified as such by the Trustee to the Certificateholders in accordance with Condition
11 (Dissolution Events) (the Unscheduled Dissolution Distribution Date).
Following the delivery of an Exercise Notice in connection with an Early Redemption
Exercise or an Scheduled Redemption Exercise, as the case may be, SIB shall be obliged to
purchase all, or if applicable, part of the Trustee’s rights, benefits and entitlements in and to
the Co-owned Assets on an ‘‘as is’’ basis, at the Relevant Exercise Price by paying the same
into the Transaction Account either on the Unscheduled Dissolution Distribution Date (in the
case of an Early Redemption Exercise), or on the second Business Day prior to the next
Periodic Distribution Date (in the case of a Scheduled Redemption Exercise).
In these Conditions:
Dissolution Distribution Amount means, as of any date, the aggregate principal amount of
the Certificates then outstanding plus accrued and unpaid Periodic Distribution Amounts as
of such date.
Dissolution Events means each of the other events as set out in Condition 11 (Dissolution
Events).
Extraordinary Resolution means (a) a resolution passed at a meeting of Certificateholders
duly convened and held in accordance with these presents by a majority consisting of not
less than two-thirds of the persons voting thereat upon a show of hands or if a poll is duly
demanded by a majority consisting of not less than two-thirds of the votes cast on such poll
or (b) a resolution in writing signed by or on behalf of Certificateholders holding in the
aggregate not less than 90 per cent. of the principal amount of the Certificates or, as the case
may be, the Certificates for the time being outstanding, which resolution in writing may be
contained in one document or several documents in like form each signed by or on behalf of
one or more Certificateholders.
27
Relevant Exercise Price means a US dollar sum equal to the aggregate of:
8.3
(a)
US$225,000,000; plus
(b)
any unpaid Periodic Distribution Amount, which, in the case of an Early Redemption
Exercise, shall be adjusted, pro rata to, but excluding, the date the Relevant Exercise
Price is due, on an actual/360 day basis.
Dissolution following a Dissolution Event
Upon the occurrence of a Dissolution Event, in accordance with Condition 11 (Dissolution
Events), the Certificates may be redeemed at the Dissolution Distribution Amount and the
Trust will thereafter be dissolved.
9
Taxation
All payments in respect of the Certificates shall be made without withholding or deduction,
for, or on account of, any present or future taxes, levies, duties, fees, assessments or other
charges or withholding of whatever nature, imposed or levied by or on behalf of the
Relevant Jurisdiction (defined below), and all charges, penalties or similar liabilities with
respect thereto (Taxes), unless the withholding or deduction of the Taxes is required by law.
In the event that such a withholding or deduction for or on account of Taxes becomes
applicable to payments to Certificateholders and in the event that any other withholding or
deduction for or on account of Taxes becomes applicable (as contemplated by the last
sentence), SIB will be required, pursuant to the Purchase Undertaking to pay to the Issuer
additional amounts as may be necessary on amounts payable by it under these documents,
so that the full amount which otherwise would have been due and payable under the
Certificates is received by the parties entitled thereto, except that no such additional amount
shall be payable to any Certificateholder:
(a)
who is liable for such Taxes in respect of such Certificate by reason of having some
connection with any Relevant Jurisdiction other than the mere holding of such
Certificate;
(b)
who would not be liable or subject to the withholding or deduction by making a
declaration of non-residence or other similar claim for exemption to the relevant tax
authority;
(c)
who presented such Certificate for payment more than 30 days after the Relevant
Date (as defined in Condition 10 (Prescription)) except to the extent that a holder
would have been entitled to additional amounts on presenting the same for
payment on the last day of the period of 30 days assuming, whether or not such is in
fact the case, that day to have been a Business Day;
(d)
where such withholding or deduction is imposed on a payment to an individual and
is required to be made pursuant to European Council Directive 2003/48/EC or any
law implementing or complying with, or introduced in order to conform to, such
Directive; or
(e)
who would have been able to avoid such withholding or deduction by presenting
the relevant Certificate to another paying agent in a Member State of the European
Union.
In these Conditions:
Relevant Jurisdiction means the United Arab Emirates and each emirate within the United
Arab Emirates, Cayman Islands or any political subdivision or any authority thereof or
therein having power to tax.
10
Prescription
Claims for payment in respect of the Certificates will become void unless presented for
payment within periods of ten years (in the case of Dissolution Distribution Amounts) and
five years (in the case of Periodic Distribution Amounts) from the Relevant Date in respect of
the Certificates, subject to the provisions of Condition 7 (Payment). In these Conditions
Relevant Date means the date on which the payment first becomes due but, if the full
28
amount of the money payable has not been received by the Principal Paying Agent or the
Trustee on or before the due date, it means the date on which, the full amount of the money
having been so received, notice to that effect shall have been duly given to the
Certificateholders by the Trustee in accordance with Condition 13 (Notices).
11
Dissolution Events
Upon the occurrence and continuation of the following events (each a Dissolution Event
and together the Dissolution Events):
(a)
Non-payment: a default is made in payment of any Periodic Distribution Amount or
any Scheduled Redemption Amount in respect of any Certificate and such default
continues for a period of 7 days of the due date for payment in the case of any
Periodic Distribution Amount or 14 days of the due date for payment in the case of
any Scheduled Redemption Amount; or
(b)
Misrepresentation: any representation, warranty or statement made or given or
deemed to be made or given by the Issuer under any Transaction Document is or
proves to have been incorrect or misleading in any material respect when made or
deemed to be made unless such representation is capable of remedy without
material prejudice to the Certificateholders and is remedied within 14 days of the
Trustee giving notice in writing to the Issuer; or
(c)
Breach of other obligations: the Issuer defaults in the performance or observance of
any of its other material obligations under or in respect of the Transaction
Documents, unless the default is capable of remedy and is remedied within 30 days
after written notice thereof, addressed to the Issuer by the Trustee and/or
Transaction Administrator, has been delivered to the Issuer; or
(d)
Purchase Undertaking Event of Default: a Purchase Undertaking Event of Default
occurs; or
(e)
Repudiation: the Issuer repudiates or challenges the valid, legal, binding and
enforceable nature of any or any part of a Transaction Document to which it is a
party or does or causes to be done any act or thing evidencing an intention to
repudiate or challenge the valid, legal, binding and enforceable nature of any
Transaction Document to which it is a party; or
(f)
Illegality: at any time it is or will become unlawful for the Issuer to perform or
comply with any or all of its obligations under the Transaction Documents or any of
the obligations of the Issuer under the Transaction Documents are not, or cease to
be legal, valid, binding and enforceable; or
(g)
Failure to take action etc: any action, condition or thing at any time required to be
taken, fulfilled or done in order (i) to enable the Issuer lawfully to enter into, exercise
its rights and perform and comply with its obligations under and in respect of the
Transaction Documents or (ii) to ensure that those obligations are legal, valid,
binding and enforceable, is not taken, fulfilled or done within 14 days of the Trustee
giving notice in writing to the Issuer; or
(h)
Insolvency etc: (i) the Issuer becomes insolvent or is unable to pay its debts as they
fall due, (ii) an administrator, receiver or liquidator of the Issuer or the whole or any
part of the undertaking, assets and revenues of the Issuer is appointed (or
application for any such appointment is made and such application is not set
aside, discharged or struck out within 21 days), (iii) the Issuer takes any action or
commences any negotiations or proceedings with a view to (A) any adjustment of a
material proportion of the whole or a specified class or category of Indebtedness, or
(B) any deferment of any of its obligations or (C) making a general assignment or an
arrangement or composition with or for the benefit of its creditors or (iv) the Issuer
ceases or threatens to cease to carry on all or any substantial part of its business; or
(i)
Winding up etc: an order or decree is made or an effective resolution is passed for
the winding up, liquidation or dissolution of the Issuer; or
29
(j)
Analogous event: any event occurs which has an analogous effect to any of the
events referred to in paragraphs (h) and (i) (inclusive) above,
the Trustee shall give notice of the occurrence of such Dissolution Event to the holders of
Certificates in accordance with Condition 13 (Notices) with a request to such holders to
indicate if they wish the Trust to be dissolved. If so requested in writing by the holders of at
least 25 per cent. of the aggregate principal amount of the Certificates then outstanding or if
so directed by an Extraordinary Resolution of the Certificateholders, the Trustee shall
(subject in each case to being indemnified to its satisfaction) or, if the Trustee so decides in
its discretion, may give notice to all the holders of Certificates in accordance with Condition
13 (Notices) that the Certificates are to be redeemed at the Dissolution Distribution Amount
on the date specified in such notice and that the Trust is to be dissolved on the day after the
last outstanding Certificate has been redeemed.
In this Condition:
Purchase Undertaking Event of Default means each of the following events:
(i)
Non-payment: SIB fails to pay any amount payable pursuant to any
Transaction Document (to which it is a party) and such default continues for
a period of 7 days of the due date for payment or, in the case of any amount
due on the Scheduled Redemption Date only, such default continues for a
period of 14 days of the due date for payment; or
(ii)
Misrepresentation: any representation, warranty or statement made or given
or deemed to be made or given by SIB under any Transaction Document is or
proves to have been incorrect or misleading in any material respect when
made or deemed to be made unless such representation is capable of remedy
without material prejudice to the Issuer and is remedied within 14 days of the
Trustee giving notice in writing to SIB; or
(iii) Breach of other obligations: SIB defaults in the performance or observance of
any of its other material obligations under or in respect of the Transaction
Documents, unless the default is capable of remedy and is remedied within
30 days after written notice thereof, addressed to SIB by the Trustee and/or
Transaction Administrator, has been delivered to SIB; or
(iv) Repudiation: SIB repudiates or challenges the valid, legal, binding and
enforceable nature of any or any part of a Transaction Document to which it
is a party or does or causes to be done any act or thing evidencing an intention
to repudiate or challenge the valid, legal, binding and enforceable nature of any
Transaction Document to which it is a party; or
(v)
Illegality: at any time it is or will become unlawful for SIB to perform or comply
with any or all of its obligations under the Transaction Documents or any of the
obligations of SIB under the Transaction Documents are not, or cease to be
legal, valid, binding and enforceable; or
(vi) Moratorium: if SIB for any reason declares a moratorium on the payment of
any Indebtedness or in respect of any Guarantee of any Indebtedness given by
it; or
(vii) Cross acceleration: any Indebtedness of SIB becomes due and payable prior to
the stated maturity thereof (other than at the option of the debtor) or SIB shall
fail to make any payment of principal in respect of any Indebtedness of SIB or
to make any payment under any Guarantee of any Indebtedness on which such
payment is due and payable at the expiration of any grace period originally
applicable thereto, unless the aggregate amount of the Indebtedness relating
to all the above events is less than US$10,000,000 (or its equivalent in any other
currency); or
(viii) Failure to take action etc: any action, condition or thing at any time required to
be taken, fulfilled or done in order (A) to enable SIB lawfully to enter into,
exercise its rights and perform and comply with its obligations under and in
respect of the Transaction Documents or (B) to ensure that those obligations
30
are legal, valid, binding and enforceable, is not taken, fulfilled or done within 14
days of the Trustee giving notice in writing to SIB; or
(ix) Insolvency etc: (A) SIB becomes insolvent or is unable to pay its debts as they
fall due, (B) an administrator, receiver or liquidator of SIB or the whole or any
part of the undertaking, assets and revenues of SIB is appointed (or application
for any such appointment is made and such application is not set aside,
discharged or struck out within 21 days), (C) SIB takes any action or
commences any negotiations or proceedings with a view to (aa) any
adjustment of a material proportion of the whole or a specified class or
category of Indebtedness, or (bb) any deferment of any of its obligations or (cc)
making a general assignment or an arrangement or composition with or for the
benefit of its creditors or (D) SIB ceases or threatens to cease to carry on all or
any substantial part of its business provided always that this sub paragraph
(ix)(C) or (D) shall not apply to any step or procedure which is part of a solvent
reconstruction or amalgamation approved by any court of competent
jurisdiction or other competent authority; or
(x)
Winding up etc: an order or decree is made or an effective resolution is passed
for the winding up, liquidation or dissolution of SIB provided always that this
paragraph (x) shall not apply to any step or procedure which is part of a solvent
reconstruction or amalgamation approved by any court of competent
jurisdiction or other competent authority; or
(xi) Analogous event: any event occurs which has an analogous effect to any of the
events referred to in paragraphs (ix) and (x) (inclusive) above.
Guarantee means, in relation to any Indebtedness of any person, any obligation of another
person to pay such Indebtedness following demand or claim on that person, including
(without limitation):
(a)
any obligation to purchase such Indebtedness;
(b)
any obligation to extend financing, to purchase or subscribe shares or other
securities or to purchase assets or services in order to provide funds for the payment
of such Indebtedness;
(c)
any indemnity against the consequences of a default in the payment of such
Indebtedness; and
(d)
any other agreement to be responsible for such Indebtedness.
Indebtedness means any present or future indebtedness of any person for or in respect of
any money borrowed or raised including (without limitation) any borrowed money or
liability arising under or in respect of any acceptance or acceptance credit or evidenced by
any notes, bonds, debentures, debenture stock, loan stock or other securities or any moneys
raised under any transaction having the commercial effect of borrowing or raising money.
12
Enforcement and Exercise of Rights
12.1 Following the distribution of the proceeds of the Trust Assets in respect of the Certificates to
the Certificateholders in accordance with these Conditions and the Declaration of Trust, the
Trustee shall not be liable for any further sums, and accordingly Certificateholders may not
take any action against the Trustee or any other person to recover any such sum in respect
of the Certificates or Trust Assets.
12.2 Neither the Trustee nor the Delegate shall be bound in any circumstances to take any action
to enforce or to realise the Trust Assets or take any action against SIB under any Transaction
Document to which SIB is a party unless directed or requested to do so (a) by an
Extraordinary Resolution or (b) in writing by the holders of at least 25 per cent. in aggregate
principal amount of the Certificates then outstanding and in each case then only if it shall be
indemnified to its satisfaction. The Trustee has, in accordance with the Declaration of Trust,
delegated to the Delegate its rights to enforce or realise the Trust Assets upon the
occurrence of a Dissolution Event.
31
12.3 No Certificateholder shall be entitled to proceed directly against the Issuer or SIB unless (i)
the Trustee, having become bound so to proceed, fails to do so within 30 days of becoming
so bound and such failure is continuing and (ii) the relevant Certificateholder (or such
Certificateholder together with the other Certificateholders who propose to proceed directly
against SIB) holds at least 25 per cent. of the aggregate principal amount of the Certificates
then outstanding. Under no circumstances shall the Trustee, the Delegate or any
Certificateholders have any right to cause the sale or other disposition of any of the Trust
Assets except pursuant to the Purchase Undertaking, and the sole right of the Trustee, the
Delegate and Certificateholders against SIB shall be to enforce the obligation of SIB to pay
the Dissolution Distribution Amount.
12.4 The foregoing Conditions 12.1, 12.2 and 12.3 are subject to this Condition 12.4. After
distributing the net proceeds of the Trust Assets in accordance with Condition 4.2
(Application of Proceeds from Trust Assets), the obligations of the Trustee in respect of the
Certificates shall be satisfied and no Certificateholder may take any further steps against the
Trustee to recover any further sums in respect of the Certificates and the right to receive any
such sums unpaid shall be extinguished. In particular, no Certificateholder shall be entitled
in respect thereof to petition or to take any other steps for the winding up of the Trustee nor
shall any of them have any claim in respect of the trust assets of any other trust established
by the Trustee.
13
Notices
All notices to Certificateholders will be valid if mailed to them by first class pre-paid
registered mail (or its equivalent) or (if posted to an overseas address) by air mail at their
respective addresses in the Register of Certificateholders maintained by the Registrar. The
Issuer shall also ensure that notices are duly given or published in a manner which complies
with the rules and regulations of any stock exchange on which the Certificates are for the
time being listed. Any notice shall be deemed to have been given on the seventh day after
being so mailed or on the date of publication or, if so published more than once or on
different dates, on the date of the first London publication.
So long as the Certificates are listed on the Official List of the UK Listing Authority and
admission to trading on the London Stock Exchange’s regulated market for listed securities,
all notices to be given to Certificateholders will also be published in a daily newspaper
having general circulation in London which is expected to be the Financial Times and a daily
newspaper (which will be in a leading English language newspaper having general
circulation) in the Gulf region.
14
Meetings of Certificateholders, Modification, Waiver, Authorisation and Determination
14.1 The Declaration of Trust contains provisions for convening meetings of Certificateholders to
consider any matter affecting their interests, including the modification or abrogation by
Extraordinary Resolution of these Conditions or the provisions of the Declaration of Trust.
The quorum at any meeting for passing an Extraordinary Resolution will be two or more
persons present holding or representing more than two-thirds in aggregate principal
amount of the Certificates for the time being outstanding, or at any adjourned such meeting
two or more persons present whatever the principal amount of the Certificates held or
represented by him or them except that any meeting the business of which includes the
modification of certain provisions of the Certificates (including modifying the Scheduled
Redemption Date, reducing or cancelling any amount payable in respect of the Certificates
or altering the currency of payment of the Certificates or amending certain covenants given
by the Issuer in the Declaration of Trust), the quorum shall be two or more persons present
holding or representing not less than 90 per cent. in aggregate face amount of the
Certificates for the time being outstanding, or at any adjourned such meeting two or more
persons present holding or representing not less than 90 per cent. in aggregate face amount
of the Certificates for the time being outstanding. An Extraordinary Resolution passed at
any meeting of Certificateholders will be binding on all holders of the Certificates, whether
or not they are present at the meeting.
14.2 The Trustee may agree, with the consent of the Certificateholders (such consent to be given
in the manner described in Condition 14.1), to any modification of, or to the waiver or
32
authorisation of any breach or proposed breach of, any of these Conditions or any of the
provisions of the Declaration of Trust.
14.3 In connection with the exercise by it of any of its trusts, powers, authorities and discretions
(including, without limitation, any modification, waiver, authorisation or determination), the
Trustee shall have regard to the general interests of Certificateholders as a class but shall
not have regard to any interests arising from circumstances particular to individual
Certificateholders (whatever their number) and, in particular but without limitation, shall not
have regard to the consequences of any such exercise for individual Certificateholders
(whatever their number) resulting from their being for any purpose domiciled or resident in,
or otherwise connected with, or subject to the jurisdiction of, any particular territory or any
political subdivision thereof and the Trustee shall not be entitled to require, nor shall any
Certificateholder be entitled to claim, from the trustee or any other person any
indemnification or payment in respect of any tax consequence of any such exercise upon
individual Certificateholders.
14.4 Any modification, abrogation, waiver, authorisation, determination or substitution shall be
binding on Certificateholders and any modification, abrogation, waiver, authorisation,
determination or substitution shall be notified by the Trustee to Certificateholders as soon
as practicable thereafter in accordance with Condition 13 (Notice).
15
Indemnification and Liability of the Trustee
15.1 The Declaration of Trust contains provisions for the indemnification of the Trustee in certain
circumstances and for its relief from responsibility, including provisions relieving it from
taking action unless indemnified to its satisfaction. In particular, in connection with the
exercise of any of its rights in respect of the Trust Assets, the Trustee shall in no
circumstances take any action unless directed to do so in accordance with Condition 12.2
(Enforcement and Exercise of Rights), and then only if it shall have been indemnified to its
satisfaction. Subject thereto, the Trustee waives any right to be indemnified by the
Certificateholders in circumstances where the Trust Assets are insufficient therefor.
15.2 The Trustee makes no representation and assumes no responsibility for the validity,
sufficiency or enforceability of the obligations of SIB under any Transaction Document to
which SIB is a party and shall not under any circumstances have any liability or be obliged
to account to the Certificateholders in respect of any payment which should have been
made by SIB, but is not so made, and shall not in any circumstances have any liability
arising from the Trust Assets other than as expressly provided in these Conditions or in the
Declaration of Trust.
15.3 The Trustee is exempted from (i) any liability in respect of any loss or theft of the Trust
Assets or any cash, (ii) any obligation to insure the Trust Assets or any cash and (iii) any
claim arising from the fact that the Trust Assets or any cash are held by or on behalf of the
Trustee or on deposit or in an account with any depository or clearing system or are
registered in the name of the Trustee or its nominee, unless such loss or theft arises as a
result of default, negligence or misconduct of the Trustee.
16
Replacement of Certificates
Should any Certificate be lost, stolen, mutilated, defaced or destroyed it may be replaced at
the specified offices of the Replacement Agents upon payment by the claimant of the
expenses incurred in connection with the replacement and on such terms as to evidence
and indemnity as the Trustee may reasonably require. Mutilated or defaced Certificates
must be surrendered before replacements will be issued.
17
Contracts (Rights of Third Parties) Act 1999
No rights are conferred on any person under the Contracts (Rights of Third Parties) Act 1999
to enforce any term of these Conditions, but this does not affect any right or remedy of any
person which exists or is available apart from that Act.
33
18
Governing law and submission to jurisdiction
18.1 The Declaration of Trust, the Agency Agreement, the Transaction Administration Deed and
the Certificates are governed by, and will be construed in accordance with, English law.
18.2 The Issuer has in the Declaration of Trust irrevocably and unconditionally agreed for the
benefit of the Trustee and Certificateholders that the courts of England are to have nonexclusive jurisdiction to settle any disputes which may arise out of or in connection with the
Declaration of Trust or the Certificates and that accordingly any suit, action or proceedings
arising therefrom or in connection therewith (together referred to as Proceedings) may be
brought in the courts of England.
18.3 The Issuer has in the Declaration of Trust irrevocably and unconditionally waived and
agreed not to raise any objection which it may have now or subsequently to the laying of the
venue of any Proceedings in the courts of England and any claim that any Proceedings have
been brought in an inconvenient forum and has further irrevocably and unconditionally
agreed that a judgement in any Proceedings brought in the courts of England shall be
conclusive and binding upon the Issuer and may be enforced in the courts of any other
jurisdiction. Nothing in this Condition 18.3 shall limit any right to take Proceedings against
the Issuer in any other court of competent jurisdiction, nor shall the taking of Proceedings in
one or more jurisdictions preclude the taking of Proceedings in any other jurisdiction,
whether concurrently or not.
18.4 The Issuer has in the Declaration of Trust irrevocably and unconditionally appointed an
agent for service of process in England in respect of any Proceedings and has undertaken
that in the event of such agent ceasing so to act it will appoint such other person as the
Trustee may approve as its agent for that purpose. In the event that no such replacement
agent for service of process in England has been appointed by the Issuer within 14 days, the
Trustee shall have the power to appoint, on behalf of and at the expense of the Issuer, a
replacement agent for service of process in England.
34
GLOBAL CERTIFICATE
The Global Certificate contains the following provisions which apply to the Certificates in respect
of which they are issued whilst they are represented by the Global Certificate, some of which
modify the effect of the Conditions. Terms defined in the Conditions have the same meaning in
paragraphs 1 to 5 below.
1
Holders
For so long as all of the Certificates are represented by the Global Certificate and the Global
Certificate is held on behalf of a clearing system, each person (other than another clearing
system) who is for the time being shown in the records of Euroclear or Clearstream, Luxembourg
(as the case may be) as the holder of a particular aggregate principal amount of such Certificates
(each, a Holder) (in which regard any certificate or other document issued by Euroclear or
Clearstream, Luxembourg (as the case may be) as to the aggregate principal amount of such
Certificates standing to the account of any person shall be conclusive and binding for all
purposes) shall be treated as the holder of such aggregate principal amount of such Certificates
(and the expression Certificateholders and references to holding of Certificates and to holder of
Certificates shall be construed accordingly) for all purposes other than with respect to payments
on such Certificates, the right to which shall be vested, as against the Issuer and the Trustee
solely in the common depositary for the relevant clearing system (the Common Depositary) in
accordance with and subject to the terms of the Global Certificate. Each Certificateholder must
look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for its share of each
payment made to the common depositary.
2
Payments
Payments of any Dissolution Distribution Amount, Scheduled Redemption Amount and Periodic
Distribution Amount in respect of Certificates represented by the Global Certificate will be made
upon presentation or, if no further payment falls to be made in respect of the Certificates, against
presentation and surrender of the Global Certificate to or to the order of the Registrar or such
other Agent as shall have been notified to the holder of the Global Certificate for such purpose.
Distributions of amounts with respect to book-entry interests in the Certificates held through
Euroclear or Clearstream, Luxembourg will be credited, to the extent received by the Registrar, to
the cash accounts of Euroclear or Clearstream, Luxembourg participants in accordance with the
relevant system’s rules and procedures.
A record of each payment and delivery made will be endorsed on the appropriate schedule to the
Global Certificate by or on behalf of the Registrar and shall be prima facie evidence that payment
has been made.
3
Notices
So long as all the Certificates are represented by one or both of the Global Certificate and the
Global Certificate is held on behalf of a clearing system, notices to Certificateholders may be
given by delivery of the relevant notice to that clearing system for communication by it to entitled
Certificateholders in substitution for notification as required by the Conditions except that, so
long as the Certificates are listed on any stock exchange, notices shall also be published in
accordance with the rules of such stock exchange. Any such notice shall be deemed to have been
given to the Certificateholders on the third day after the day on which such notice is delivered to
the relevant clearing systems.
4.
Transfers
Transfers of book-entry interests in the Certificates will be effected through the records of
Euroclear or Clearstream, Luxembourg and their respective participants in accordance with the
rules and procedures of Euroclear or Clearstream, Luxembourg and their respective direct and
indirect participants, as more fully described under Clearance and Settlement.
35
5.
Cancellation
Cancellation of any Certificate following its redemption by the Issuer will be effected by reduction
in the aggregate principal amount of the Certificates in the register of Certificateholders and by
the annotation of the appropriate schedule to the Global Certificate.
6.
Registration of Title
Registration of title to Certificates in a name other than that of the Common Depositary will not
be permitted unless Euroclear or Clearstream, Luxembourg, as appropriate, notifies the Issuer
that it is unwilling or unable to continue as a clearing system in connection with the Global
Certificate, and in each case a successor clearing system approved by the Trustee is not
appointed by the Issuer within 90 days after receiving such notice from Euroclear or Clearstream,
Luxembourg. In these circumstances title to a Certificate may be transferred into the names of
holders notified by the Common Depositary in accordance with the Conditions, except that
Certificates in respect of Certificates so transferred may not be available until 21 days after the
request for transfer is duly made.
7.
Definitive Certificates
Interests in the Global Certificate will be exchangeable or transferable, as the case may be, for
Certificates in definitive form (Definitive Certificates) upon the occurrence of an Exchange Event.
For these purposes, Exchange Event means that (i) a Dissolution Event has occurred and is
continuing or (ii) the Issuer has been notified that both Euroclear and Clearstream, Luxembourg
have been closed for business for a continuous period of 14 days (other than by reason of
holiday, statutory or otherwise) or have announced an intention permanently to cease business
or have in fact done so and no successor clearing system is available. In any such event, the
Issuer will issue Definitive Certificates (in exchange for the whole of the Global Certificate) within
45 days of the occurrence of the relevant Exchange Event upon presentation of the Global
Certificate by the person in whose name the Global Certificate is registered in the register kept by
the Registrar in respect of the Certificates on any day (other than a Saturday or Sunday) on which
banks are open for business in the city in which the Registrar has its office.
36
USE OF PROCEEDS
The proceeds of the issue of the Certificate will be used by the Issuer to purchase the Original
Leased Assets from SIB as Seller, pursuant to the Purchase Agreement.
37
SIB SUKUK COMPANY LIMITED
SIB Sukuk Company Limited was incorporated in the Cayman Islands under registration
number 173141 as an exempted company with limited liability on 28 August 2006 in accordance
with the Companies Law (2004 Revision). The registered office of the Issuer is at the offices of
Maples Finance Limited, PO Box 1093GT, Queensgate House, South Church Street, George
Town, Grand Cayman, Cayman Islands and its telephone number is +1345 945 7099.
The Issuer has been formed solely for the purpose of participation in the transactions
contemplated in the Transaction Documents.
The authorised and issued share capital of the Issuer is US$50,000 divided into 50,000 shares
with a par value of US$1 each of which 250 shares are fully paid up and issued. The Issuer’s entire
issued share capital is held by Maples Finance Limited, P.O. Box 1093GT, Queensgate House,
South Church Street, George Town, Grand Cayman, Cayman Islands under the terms of a
charitable purpose trust.
The directors of the Issuer and their principal occupations are as follows:
Director
Principal Occupation
Guy Major
Senior Vice President, Maples Finance Limited
Carlos Farjallah
Vice President, Maples Finance Limited
Stephen O’Donnell
Senior Vice President, Maples Finance Limited
Maples Finance Limited shall provide administrative services to the Issuer pursuant to the terms
of an administrative agreement between the Issuer and Maples Finance Limited.
The business address of the Directors of the Issuer is the offices of Maples Finance Limited,
PO Box 1093GT, Queensgate House, South Church Street, George Town, Grand Cayman,
Cayman Islands.
There are no potential conflicts of interest between the private interests or other duties of the
Directors listed above and their duties to the Issuer.
The Issuer has no employees and will have no employees as at the Closing Date. The objects of
the Issuer, as set out in its Memorandum of Association, permits issue of the Certificates,
execution of the Transaction Documents to which it is a party and other agreements necessary
for the performance of its obligations under the transactions contemplated thereby and
undertake activities pursuant to or that are not inconsistent with the terms and conditions of the
Certificates.
The Issuer’s auditor is KPMG at P.O. Box 28653, 2002 Al Batha Tower, Buhaira Corniche, Sharjah,
UAE. The Issuer has not published any accounts since the date of its incorporation.
Other than as described above, the Issuer does not have any loan, capital, borrowings or
contingent liabilities and has not changed its equity capital.
38
DESCRIPTION OF SHARJAH ISLAMIC BANK
1.
OVERVIEW OF THE BANK
Sharjah Islamic Bank (the Bank or SIB) was originally incorporated as a commercial bank in 1975
as National Bank of Sharjah, under an Emiri decree issued by H.H. Dr. Sultan Bin Mohammed Al
Qassimi, Member of the UAE Supreme Council, and Ruler of Sharjah.
In 2001, a decision was made by the shareholders of the Bank to change the Bank’s status to
become an Islamic bank by undertaking all its banking activities in compliance with Shariah rules
and regulations. The conversion process was completed by 1st of July 2002 making SIB the first
bank to convert fully from a conventional banking system to an Islamic banking system.
The Bank, during its conversion process, formed a strategic alliance with Kuwait Finance House
(KFH), under which KFH acquired a 20% shareholding in the Bank from the Government of
Sharjah. KFH, which is based in Kuwait, is one of the largest Islamic financial institutions in the
world. This strategic alliance with KFH has not only enabled the Bank to increase its funding base
but has also allowed the Bank to access KFH’s product expertise as well as planning capabilities
(helped in part by the two seats on the board which are effectively reserved for KFH
representatives).
In 2005, the Bank’s paid up share capital was increased from AED 386 million to its current level
of AED 1 billion. In the same year the Bank also changed its name to Sharjah Islamic Bank.
The Government of Sharjah and KFH currently own 27.4% and 20% of the Bank respectively while
the balance of the capital is held by various individuals and institutions, none of whom
individually hold more than 4%. The Bank’s shares are listed on the Abu Dhabi Securities Market.
The two major shareholders of the Bank have indicated their long term commitment to the Bank
and towards its growth and development. SIB aspires to become one of the major players in the
Islamic banking industry in the region.
The Bank enjoyed a successful financial year in 2005 with year end results compared with figures
for the previous financial year showing a 161% increase in net profit to AED 186 million, a 53%
increase in total assets to AED 5.3 billion and a 19% increase in the level of customer deposits to
AED 2.9 billion.
2.
DESCRIPTION OF THE BANK’S BUSINESS
The Bank’s principal business strategy is geared to the further development of its three core
Business units, namely:
r
Retail Banking Group
r
Corporate Banking Group
r
Investment Banking Group
In terms of general break-down between the Bank’s business groups, as at 31 December, 2005,
Corporate Banking Group accounted for approximately 44% of the Bank’s assets (excluding
unallocated assets) and 53% of its net profit (excluding unallocated income/expenses); the Retail
Banking Group approximately 21% of the Bank’s assets (excluding unallocated assets) and 17%
of its net profit (excluding unallocated income/expenses); and the Investment Banking Group
approximately 35% of the Bank’s assets (excluding unallocated assets) and 30% of its net profit
(excluding unallocated income/expenses).
2.1
Core Business Units
2.1.1 Retail Banking Group (RBG)
The RBG provides a wide range of Islamic financial services to the individual customers of
the Bank, principally through the Bank’s countrywide branch network. The current retail
banking products offered by the Bank include:
(i)
Shariah compliant savings accounts and account related services such as fund
transfer services;
(ii)
Islamic credit cards;
39
(iii)
Personal finance mainly by way of financing receivables (Murabaha) and Ijara
(leased assets); and
(iv)
Financial Advisory Services.
The Bank currently has a strong network of 12 full service branches located in different
regions of the UAE and it is planned that a further 2 branches will be opened shortly to make
the total number of branches to 14 by the end of 2006. A minimum of three additional
branches are also planned for 2007.
Concurrent to the branch expansion programme, the Bank has also undertaken major
refurbishment of all its existing branches with the aim of making the branches more friendly
and more attractive places to do business.
In addition to the branches, the Bank’s distribution channels also include a marketing unit
and a call centre. The Bank has a total of 38 ATMs which it plans to increase further in the
months ahead. Nevertheless, the Bank’s ATM card holders can access to over 750 ATMs in
the country through the UAE ATM Switch Network.
The Bank also focuses on creating innovative products. For example, in December 2004, it
launched the world’s first dedicated Islamic banking card (the Affinity card) for university
students in conjunction with Visa International and the American University of Sharjah. This
Shariah compliant payment card is an alternative to a conventional credit card. The Affinity
card is designed to increase financial awareness amongst university students and has no
signing up fee, an easy application process and convenient payback schemes that allow
students to carry the balance forward and pay in monthly instalments.
The Bank’s retail products are supported by the adoption of stringent credit criteria. The
management of the Bank believes that delinquency rates have been relatively low in all
retail product categories.
The Bank, which is a notable player in the UAE retail market, aims to capture an even larger
share of the market through the planned branch and ATM expansions, and by offering
increased number of products and exemplary customer services.
2.1.2 Corporate Banking Group (CBG):
The CBG provides large and medium sized corporates as well as government institutional
clients with a wide range of financial products and services that are sufficiently flexible to
meet their various business needs. CBGs clients are managed through relationship
managers assigned to handle the specific requirements of their clients and to enable the
provision of tailor-made solutions and services for such clients.
The services provided by CBG to its clients include various customised services such as
cash management services, account operations, payments and collections as well as
liquidity management which is also backed by comprehensive reporting so that clients can
be kept up to date as to their exact financial position.
The Bank also handles all forms of guarantees and letters of credit (transferable, revolving,
standby, etc.) for imports, whether for local consumption or re-export. It also provides
letters of guarantee including bid bonds, performance bonds, advance payment guarantees
and guarantees for retention monies, maintenance, labour guarantees and customs duty.
In addition to the above, real estate financing is also undertaken as part of corporate
business activities.
Although the Emirate of Sharjah was initially the primary target market for the CBG, the
Bank has lately extended its marketing initiatives to include large corporates throughout the
UAE. With this in mind, the Bank has opened a corporate banking office in Dubai and Abu
Dhabi. Eventually, it is planned that corporate banking units will be established throughout
all branches of SIB.
2.1.3 Investment Banking Group (IBG):
The IBG is responsible for the Bank’s Investment strategies and undertakes proprietary
investment activities for the Bank’s own balance sheet in addition to providing fee based
40
investment services targeted to the Bank’s clientele. The various activities undertaken by the
group include the following:
(i)
Structured finance transactions – this includes bilateral deals, syndicated deals and
club deals;
(ii)
Collective investment schemes – investment of the Bank’s own funds, as well as
clients’ funds in third party (as well as the Bank’s own) collective investment
schemes such as mutual funds and investment portfolios;
(iii)
Direct Investments (equity holdings) – the Bank invests in marketable securities,
private equity and start ups/joint ventures; and
(iv)
Other investments – such as direct foreign property acquisitions and project finance.
One of the key roles of the IBG is to recommend, approve and implement policies and
decisions relating to the Bank’s investment portfolio. The group invests in different
geographical locations through a variety of investment banking activities which include
structured finance, collective investment schemes and direct investments.
The Bank also maintains excellent correspondent banking relationships with financial
institutions all over the world, something which has been recognised as one of the Bank’s
strengths. In May 2006 and for the second year running, the Bank won the Wachovia award
for being the UAE’s top financial institution for its accurate funds transfer services.
The Bank’s investments including investment properties as at the 2005 year end stood at
AED 427.6 million (312% above the previous year).
2.1.4 The IBG also handles treasury and money market operations with other financial
institutions and plays an important role in managing the Bank’s liquidity requirements.
The Bank’s main treasury activity is the placement of funds through Wakala Deposits and
international Murahaba products with other banks or financial institutions in the region.
Current significant investments include transactions with holdings in Arab Banking
Corporation, Saudi Hollandi Bank, Gulf International Bank and Gulf Bank. The treasury
mainly acts as a cover operation for all foreign exchange and funding requirements,
providing liquidity to the accounts and monitoring for any potential asset/liability
mismatches. The Bank has established several relationships with major banks and
financial institutions and offers the following products to its clients:
2.2
(i)
Special fixed deposits – Shariah approved fixed deposit transactions structured to
offer higher profit margins.
(ii)
Tawfiq (commodity transactions) – Execution of structured commodity transactions
(usually metal) to assist clients wishing to change to Islamic banking to pay off their
conventional loans. This is mainly done through brokers based in the London Metal
Exchange.
(iii)
SIB Forex Investments – Trading of foreign currencies to take advantage of positive
price movements.
Key Products
The Bank offers a number of Shariah compliant products across its business divisions,
including but not limited to the following:
(i)
Murabaha – a sale contract whereby the Bank sells an item to a customer at a preagreed selling price which includes a pre-agreed mark up over its cost. This usually
involves deferred payment terms;
(ii)
Ijara – a form of leasing contract which involves the Bank buying and then leasing an
item, such as a consumer durable, to a customer for a specified rental over a specific
period. The duration of the lease, as well as the basis for rental, are set and agreed in
advance. The Bank retains ownership of the item throughout the arrangement and
the client will pay periodic lease rentals to the Bank;
41
2.3
(iii)
Istisna’a – a sale contract of specified items to be manufactured with an obligation
on the part of the manufacturer to deliver them to the customer upon completion;
and
(iv)
Musharaka – a partnership in which the Bank participates in financing new or
existing projects and shares in the capital and the returns.
Quality of Service
The Bank sees quality of services as being key to maintaining client and customer
satisfaction. To this end, the Bank has recently established a separate business quality and
process engineering unit as part of the Bank’s Human Resources Group which reports
directly to the Bank’s Chief Executive Officer (CEO). This newly formed division trains all
employees on aspects of providing an efficient and customer friendly service. It also
regularly assesses the Bank’s competitive position in the marketplace, as well as
recommending business practice improvements.
2.4
Relationships and Strategic Alliances
The Bank enjoys close relationships with the Government of Sharjah and Kuwait Finance
House, which being the Bank’s two major shareholders provide various forms of essential
support. For instance, the Government of Sharjah is the Bank’s single largest customer
since a number of major departments of the Government utilise the services of the Bank.
The Bank also has alliances with other reputable UAE based entities such as Shuaa Capital
(Shuaa) and Daman Securities (Daman). The Bank intends to continue to create new
alliances whenever suitable opportunities arise. In addition to managing the Bank’s
proprietary fund Shuaa also manages an open-ended three-year GCC equity investment
fund (Tharwa Islamic Equity Fund) which was launched by the Bank in 2005 for customer
subscriptions.
In May 2006, the Bank acquired the Sharjah National Hotel Corporation (SNHC) from the
Government of Sharjah. SNHC owns 3 high-end hotels and resorts – the Marbella Resort,
the Holiday International Hotel and the Khorfakkan Oceanic Beach Hotel (all located in
Sharjah). The hotels represent income generating businesses and valuable land assets for
the Bank in addition to being in line with the Bank’s general objective of diversifying
investments.
Following the above acquisition, the Bank continues to look for other suitable investment
opportunities both inside and outside the UAE.
2.5
Information Technology (IT)
Contrary to the traditional role occupied by technology, SIB envisages the role of
technology to be that of a catalyst in ensuring the Bank remains responsive and flexible
to the competitive and dynamic forces of the environment that it operates within.
Accordingly, the Bank invests in technology continuously to ensure that it is in line with
modern banking IT requirements. The Bank also compliments its technology investments
with proportionate investments in its human resources through continuous training and
certification.
Business process automation, consolidation of technology assets and continuous
replacement of obsolete and redundant technology is intended to ensure that the Bank’s
technology support infrastructure functions in an operationally productive and cost efficient
environment.
The Bank’s technology investment strategy is focused towards continuously improving the
cost efficiency and the quality of the services that the Bank provides to its customers.
Further details are set out in paragraph 11 below.
42
3.
COMPETITIVE ADVANTAGES
The Bank enjoys a number of key competitive advantages, including the following:
3.1
Diversified distribution channels and accessibility to customers
The Bank sells its products through a variety of channels which includes its branch network,
ATMs, a direct sales force and a call centre. There are also plans in place for the imminent
introduction of internet banking. The proposed increase in the number of branches over the
next three years is intended to enhance the Bank’s accessibility to its customers. Moreover,
the Bank prides itself on having a diverse client base ranging from high net worth
individuals to low income earners who maintain an account in order to take advantage of
certain specific types of services, such as car and home financing facilities.
3.2
Quality of service and speed of response time
In the opinion of the Bank it can distinguish itself by providing a very high quality of
customer service. Employees are trained regularly in client service techniques, new product
and market developments so as to provide a better service to clients and to enable new
products and services to be introduced to the market.
3.3
Shariah compliance credibility
The Bank aims for high levels of Shariah compliance by offering all its products and services
in strict conformity with the Shariah Supervision parameters approved by the Shariah
Supervisory Board. To this end, the Bank has established a Shariah Control Division (SCD)
comprised of competent employees, who ensure that Shariah principles are applied strictly
to all new products and services. This helps to ensure that the Bank’s reputation as a
premier Islamic bank is maintained at all times.
3.4
Experienced committed management
The Bank has a relatively high employee retention rate. The majority of the Bank’s senior
management team has been with the Bank for several years and, prior to joining the Bank,
most have had many years of earlier experience with other international banks.
3.5
Strength in staff training
The Bank provides regular training to staff at all levels to enable them to improve their skills.
This is done through a dedicated training division within the Bank. To illustrate this all new
employees of the Bank are required to attend a dedicated orientation programme
‘‘Marhaba’’ which introduces them comprehensively to the Banks products and services.
The Bank also aims to enhance its role in expanding the knowledge base of banking in
general and Islamic banking through its innovative career development programmes. The
Bank confirms that the continuous efforts and developmental programmes provided over
the past years by the Bank have contributed to the high level of skill in the industry.
3.6
Stable funding base
The Bank has a diversified deposit base that includes retail and corporate customers,
government bodies and public sector agencies which, taken together, are regarded by the
Bank as a relatively stable and a low cost source of funding.
3.7
Links with the community
The Bank has always maintained strong links with the local community and intends to
continue to promote the development of society in the UAE. It sees this as an important
feature in enhancing its position as a premier Islamic bank. For example, it has been active
in promoting ‘‘Emiratisation’’, the process of employing and nurturing UAE nationals with a
view to encouraging them to participate in and improve the economy of the UAE.
The Bank enjoys one of the highest Emiratisation levels in the UAE banking sector, due to its
innovative initiatives to attracting UAE nationals into the industry. In March 2006, the Bank
was awarded a top award in the UAE financial sector by the Human Resources Development
Award in Banking for its commitment to support Emiratisation policies and attract more
43
UAE nationals into the banking industry in general, and the Islamic financing sector in
particular.
4.
COMPETITION
The Bank faces competition in all of its principal business areas. In its Retail Banking and
Corporate Banking businesses, the Bank’s principal competitors include both banks that are
locally incorporated (conventional and Islamic) as well as certain foreign banks operating in the
UAE. As at 30 June 2005 there were 47 banks holding full commercial banking licences in the
UAE, of which 24 were locally incorporated. In the Islamic banking market, the Bank’s direct
competitors include, Emirates Islamic Bank, Dubai Islamic Bank and Abu Dhabi Islamic Bank, all
of whom are also incorporated in the UAE.
Despite the relatively high level of competition in the banking sector in the UAE, the Bank expects
the recent and continuing growth of the economy to lead to an overall growth in demand for
banking services, particularly in the Islamic sector. The Bank’s objective is to participate in this
growth and to increase its market share, based on its selling skills, service quality standards,
personalised customer care and continuing product development.
Over the course of its successful conversion from a conventional bank to an Islamic bank, the
Bank developed a considerable amount of expertise and know-how relating to the operational
problems surrounding the conversion process, which ultimately puts the Bank in the position of
being able to offer certain types of rarely available consultancy services (on a fee-paying basis) to
other financial institutions who may themselves be contemplating such a conversion.
5.
RISK MANAGEMENT
The activities of the Bank require the continuous management of particular risks or combinations
of risks. Risk management is the identification, analysis, evaluation and management of the
factors that could adversely affect the Bank’s resources, operations and financial results. The risk
factors mostly concerning the Bank are market, structural, liquidity, fiduciary, operational and
credit risks. In the opinion of the Bank’s management its exposure to these risks are managed
conservatively.
In 2005 the Bank consolidated all its risk management activities through the formation of a
dedicated Enterprise Risk Management Division (ERMD). This division headed by a Chief Risk
Officer reports directly to the Bank’s Board of Directors and is responsible for maintaining the
integrity of the Bank’s risk architecture. This includes the review and modification of risk
management policies, procedures and systems to reflect any operational changes either
internally or in the markets in which the Bank operate.
In particular, the EMRD’s responsibilities include:
r
identifying and measuring the risks that the Bank is exposed to and considering whether
those risks are significant;
r
developing and recommending for approval, appropriate risk management policies and
procedures regarding those activities and units which incur significant risk, including
business continuity plans. All risk management policies and procedures must be approved
by the Board of Directors;
r
providing direction regarding the Bank’s overall risk philosophy and appetite, including
consideration and acceptability of new or unusual risk;
r
monitoring adherence to risk management policies and procedures;
r
reporting any policy or major practice changes, unusual situations, significant exceptions
and new strategies to the Board of Directors for review, approval and/or ratification; and
r
implementation and compliance of Basel II framework to the satisfaction of Central Bank of
UAE.
5.1
Credit Risk
Credit risk is a risk that will arise if a customer or counterparty of the Bank fails to meet its
obligations in accordance with the agreed terms and in doing so will cause the Bank to incur
44
a financial loss. The Bank is exposed to credit risk through its lending, trading and investing
activities and when it acts as an intermediary on behalf of customers or other third parties or
issues guarantees.
The Bank’s primary exposure to credit risk arises through its loans and advances to
customers. The amount of credit exposure is a function of carrying assets on the
consolidated balance sheet. The Bank is also exposed to off balance sheet credit risk
through contingent liabilities assumed by it. The Bank’s credit risk, both on and off – balance
sheet is managed and monitored within defined credit policies and procedures. The
creditworthiness of each counterparty is evaluated and appropriate credit limits are
established. To reduce individual counterparty credit risk, the Bank ensures whenever
necessary that all receivables are secured by an acceptable form of collateral.
Credit limits are also established for countries, industries and products to ensure the Bank’s
credit risk profile is diversified. The Bank’s credit risk limits and actual levels of exposure are
regularly reviewed by the Executive Committee and the Bank’s Board of Directors.
5.2
Operational Risk
Operational risk is the risk of loss resulting from inadequate or failed internal process and
systems, human error or external events. This type of risk includes fraud, unauthorized
activities, errors and settlement risk arising from the large number of daily banking
transactions occurring in the normal course of business. There is also a wide variety of
business risks such as legal, regulatory, human resources and reputation inherent in all
business activities.
The Bank has standard policies and procedures for managing each functions/departments/
branches, which aim to minimize loss through a framework requiring all units to identify,
assess, monitor and control operational risk. This standard procedure is subject to review
and approval by the ERMD.
The Bank manages operational risk through disciplined application and evaluation of
internal controls, appropriate segregation of duties, independent authorization of
transactions and regular, systematic reconciliation and monitoring of transactions. This
control structure is complemented by independent and periodic reviews by the Bank’s
Internal Audit Department.
In addition to an enterprise risk management process, the Bank has also established a
business continuity planning team which ensures that the Bank can continue to service its
customers’ needs in the event of any major business disruption. The establishment of a
back up facility in Dubai has increased the Bank’s recovery capabilities for key businesses.
5.3
Market Risk
Market Risk is a financial condition risk resulting from adverse movements in market or
prices such as profit rates, foreign exchange rates etc. Market Risk is managed through risk
limits set out by the Assets and Liabilities Committee (ALCO) of the Bank and approved by
the Bank’s Board of Directors. Risk limits are reviewed and set by ALCO on a annual basis.
The Market Risk Limits are monitored independently by ERMD on regular basis, and
exceptions, if any, are reported to the senior management and ALCO.
5.4
Liquidity Risk
Liquidity risk is the risk that the Bank may be unable to meet its funding requirements. This
can be caused by political uncertainty, market disruptions or deterioration in the Bank’s
credit ratings. To address this risk, the Bank uses a diverse range of funding sources. Funds
are raised using a broad range of instruments including customer deposits, bank deposits,
international murabaha and capital. The ERM monitors the maturity profiles of its funding
sources to ensure that adequate liquidity is always maintained. This enhances funding
flexibility and limits dependence on any one source of funds.
45
6.
SHARIAH COMPLIANCE
Every transaction that the Bank undertakes and all products that it offers must be in strict
compliance with the principles of Shariah, as interpreted by the Shariah Supervisory Board (SSB)
of the Bank. Such compliance is undertaken through a Shariah Control Division (SCD) within the
Bank which is entrusted with the day to day responsibilities of Shariah control. The management
of the Bank with the consent of the SSB, nominates an employee of the Bank as a secretary to
co-ordinate with the Shariah Supervisory Board. In order to assist in the liaison between the SSB
and the SCD and to improve turnaround time for the SSB’s approval, the Head of the SCD
normally takes up the position of the secretary to the SSB. All matters requiring the SSB’s
approval must be delivered first to the SCD, either in a formal meeting or by circulation.
However, in order to be able to offer products and undertake certain types of transaction quickly
and efficiently, the SCD has the authority to draft standard contracts for the various products
which have been declared Shariah compliant by the SSB. Once these standard form contracts
have been approved by the SSB, their future use does not usually require approval from the SSB
other than in circumstances where any material amendments are required.
7.
CREDIT APPROVAL PROCEDURES
7.1
Credit Approval Matrix
The Bank adopts a comprehensive approach to credit applications. Every product (whether
retail or corporate) has detailed policy guidelines, which are approved by the Board of
Directors of the Bank. Credit applications are sourced through the Bank’s distribution
network.
Decisions on credit for retail customers are taken either by the branch managers or the Head
of the Credit Division, depending on the amounts in question. Decisions on corporate credit
proposals, revisions and reports are made by various managers or branch managers, the
Head of the Credit Division, the Credit Committee, Executive Committee and the Board of
Directors depending on the nature and total amount of customer limits and whether the
credit is secured or unsecured.
7.2
Credit Division
The Bank has a dedicated Credit Division that is responsible for evaluating all matters
relating to credit risks (for Retail, Corporate and Treasury) and comprises the following
units:
(i)
Remedial Management and Corporate Credit Unit – responsible for managing all
adversely classified credit;
(ii)
Legal Advisory & Shares Unit – providing legal advice on litigation to protect the
legal position of the Bank; and
(iii)
Recovery and Collection Unit.
The Head of the Credit Division oversees these three units and reports to the Chief Executive
Officer.
7.3
Credit Committee
The Credit Committee approves all credit extensions within the parameters prescribed by
the Board of Directors and the Executive Committee. It also approves any new products,
schemes and policies and will oversee any litigation and settlement arrangements for
classified accounts and any rescheduling or restructuring of credit.
The permanent members of Credit Committee are as follows:
Chief Executive Officer
Deputy Chief Executive Officer
Credit Division Head
Chief Operating Officer
Head of Corporate Banking
Head of Prime Business Division
Chairman
Deputy Chairman
Member & Secretary
Member
Member
Member
46
7.4
Risk Rating System
The Bank adopts a conservative risk rating system for transactions. Risk rating is a credit
management tool where any risks taken on the Bank’s books are rated against a set of predetermined standards set up in accordance with the UAE Central Bank’s guidelines. The
principal objectives of establishing the risk rating system are to:
(i)
ensure the application of uniform standards to credits to ensure a common
approach to assess the quality of individual borrowers and hence the total portfolio;
and
(ii)
act as an effective tool for determining the degree of risk and its mitigating factors.
The ratings will determine the pricing of the individual account. Risk ratings require the
approval of the Credit Division on an on-going basis. Risks are classified according to the
ultimate market value of the asset or risk and the likelihood of non-payment.
7.5
Loss Provision and Write-offs
7.5.1 Loss provisioning policy: The Bank has formulated a prudent loss provisioning policy to
sustain the quality of the Bank’s asset portfolio. The risk-rating criteria set out above and the
classification of accounts as sub-standard and below are used as the basis for the Bank’s
provisioning policy. The procedures in place for watch-list accounts and those accounts
which have been classified as sub-standard or doubtful include:
(i)
Non-accrual activation;
(ii)
Provisions for facility losses;
(iii)
Write-offs of bad and doubtful facilities; and
(iv)
Reporting requirements of classified exposures.
The provisioning exercise is conducted quarterly and is based on the reports on classified
accounts related to the previous quarter or any new entrant during the period under review.
All recommended provisions will require the approval of the Executive Committee/Board of
Directors via the Credit Committee. Provisions are made on the basis of outstanding
amounts less (i) any cash margin or deposit held; (ii) profit in suspense; and (iii) the
estimated salvage value of any security held.
The Bank’s provisioning and write-offs for the years 2003-2005 is shown in the following
table:
31-Dec-05
Opening balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Written off during the year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recoveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
31-Dec-04 31-Dec-03
AED thousand
181,096
184,703
186,513
273
263
131
8,352
2,611
580
(508)
(93)
(1,456)
(1,871)
(6,388)
(1,065)
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
187,342
181,096
184,703
The above provisions mainly relate to non-performing loans and advances, which have
been carried forward from the conventional books of the Bank prior to its conversion to
Islamic banking.
7.5.2 Write-off policy: All write-offs require the approval from the Board of Directors through the
Credit Committee or Executive Committee and based on the recommendation of the
Remedial Management Unit which is a sub-division of the Credit Division. Write-offs are
approved according to the following guidelines:
(a)
all funded outstanding amounts are to be considered for any write-off
recommendation. For any non-funded outstanding, a decision to write-off will be
based on a careful assessment of the risks of it become a funding amount exposure;
(b)
write-off actions can be deferred or accelerated on a case by case basis. However,
prior to any write-off, various steps must have been exhausted including:
47
(i)
that all efforts to recover the outstanding amounts by the Bank have not
yielded any positive results for a period of 12 months (this excludes any cases
which have gone to litigation);
(ii)
that the borrower’s bankruptcy will be taken into account;
(iii) that any litigation has not yielded any positive results for the last 2 years and
are proving costly; and
(iv) the shortfall in collateral has reached a point where the outstanding amounts
are devoid of any significant coverage and the net realisable value of collateral
by a forced sale is equal or less than the cost involving the sale.
The Bank adheres to International Financial Reporting Standards which lay down strict
principles and guidelines for the recognition and provisioning of impaired loans and
advances.
8.
INDUSTRY REGULATION AND SUPERVISION
The principal source of banking regulation in the UAE is the UAE Central Bank. The Central Bank
provides prudential supervision of each bank’s capital adequacy, liquidity and anti-money
laundering controls and its general banking activities. Monitoring by the Central Bank is
undertaken by way of regular inspections of banks and their records and the requirement for
regular submission of data including, but not limited to, deposited funds, loans and mortgage
business, liquidity status and anti-money laundering measures.
The Bank submits monthly, quarterly and annual reports to the Banking Supervision and
Examination Department of the Central Bank. The Bank’s Memorandum and Articles of
Association, the audited financial statements, the distribution of dividends and other
documents are all required to be approved by the Central Bank.
As a UAE company, the Bank is also subject to supervision and regulation at a corporate level by
both the UAE Ministry of Economy and Planning and by the local regulatory authorities within
each of the emirates of the UAE in relation to branches located in those emirates.
8.1
Regulation of Islamic Banks
The Bank operates under a commercial banking licence granted to it by the UAE Central
Bank to undertake Islamic banking activities. The licensing of Islamic banks requires the
appointment of a Shariah Committee which ensures the adherence to Shariah principles in
the banks’ operations and contracts.
8.2
Shariah Supervisory Board
The Shariah Supervisory Board (SSB) oversees the application of different aspects of
Shariah within the Bank and ensures that all transactions are in strict compliance with
Shariah principles. The Board of Directors of the Bank is obliged to obey the fatwa
(Judgements) of the SSB regardless of whether a unanimous or majority vote secured the
decision. SSB meetings are held periodically or whenever the need arises.
The current 3 members of the Bank’s SSB are;
Dr Hussein Hamid Hassan (Chairman) received a PhD from the Faculty of Shariah at Al Azhar
University in Cairo, Egypt in 1965 and also served as Professor of Shariah at Cairo University
until 2002. He is the author of 21 books on Islamic law and serves as a member of the Islamic
supervisory board of a number of other financial institutions.
Dr Abdul Sattar Abu Ghuddah (Member) holds a PhD in Islamic law and comparative Fiqh
from Al Azhar University Cairo, Egypt. He has taught at various institutes, including at Imam
Al Da’awa Institute (Riyadh), Religious Institute (Kuwait), and at the Shariah College of the
Law Faculty in Kuwait University. He is an active member of Islamic Fiqh Academy and the
Accounting & Auditing Organization of Islamic Financial Institutions.
Dr. Ajeel Jasim al Nashmy (Member) is currently a Professor at Kuwait University where he
works in the Faculty of Shariah and Islamic Studies. Having completed his academic career
at Al Azahr University and Kuwait University he achieved a PHD in Islamic Fiqh from Al
48
Azahr. He has published in excess of 7 books and 15 papers on contemporary matters
relating to Islamic Shariah issues.
The SSB structures Shariah compliant transactions, templates and banking products which
enable the Bank to follow market trends while maintaining the highest levels of Shariah
compliance. It also analyses unprecedented cases which have not been covered by an
existing fatwa in order to ensure Shariah compliance before any new products are
introduced or a new procedure is implemented.
8.3
Shariah Control Division
The Shariah Control Division (SCD) determines the level of compliance of the Bank’s
activities within the requisite Shariah rules approved by the SSB. It acts as a conduit
between the various divisions of the Bank and the SSB. It also solves any daily queries
relating to Shariah compliance and will refer to the SSB if necessary. In addition, it refines
and improves contracts and processes underlying current Islamic products and acts
together with the SSB in creating new products.
9.
INTERNAL AUDIT AND COMPLIANCE
Internal Audit & Compliance Division functions under a charter approved by the Board of
Directors of the Bank. Internal Audit & Compliance comprising 9 members are independent of
other operations of the Bank and report directly to the Board of Directors. This allows them to
carry out their work independently and objectively.
The scope of audits encompass the examination and evaluation of the adequacy and
effectiveness of the organization’s systems of internal controls and the quality of performance
in carrying out assigned responsibility. Further more, it monitors compliance with internal
policies as well as requirements of the regulatory authorities in UAE.
Types of audit assignments conducted include:
r
Operational: comprehensive review of the varied functions to appraise the efficiency and
effectiveness of those functions in fulfilling set objectives with consideration of the
adequacy of the internal controls systems.
r
IT audits: appraising the internal control environment of automated information processing
systems as well as evaluating integrity, confidentiality and availability of IT systems
generated information.
r
Compliance: adherence to organization policies, plans, procedures, as well as laws and
regulations.
10.
SUBSIDIARY COMPANIES
At present, the Bank has just two subsidiaries: Sharjah National Hotel Corporation (SNHC) and
Sharjah Islamic Finance Services (SIFS) both of which are wholly owned subsidiaries. The
principal assets of SNHC are listed in paragraph 2.4 above. SIFS provides brokerage services and
undertakes Shariah compliant stocks and bonds trading in both Dubai Financial Market (DFM)
and Abu Dhabi Stock Market (ADSM).
11.
INFORMATION TECHNOLOGY
The Bank considers Information Management & Technology to be a strategic cornerstone in
assisting the Bank realize its objectives of growth, expansion and competitive market
positioning. There is a strong alignment of the Bank’s business plans and its Information
Management & Technology plans.
Substantial investments have been made in improving the Bank’s overall IT infrastructure with a
view to assuring availability, reliability and integrity of business services to customers as well as
enhance internal efficiencies. New systems have been implemented to support new delivery
channels and full fledged businesses in addition to improving the features of existing products
being offered by the Bank.
Strategic alliances with global partners including IBM, Oracle, Microsoft, Avaya, Datawatch,
Misys, S1, Ultimus ensure the Bank’s commitment to products that enable it to remain abreast
49
with cutting edge technology thereby enabling the Bank to innovate as well as optimize
shareholder value through investment protection on its technology investments.
In addition to infrastructure and core system implementations and enhancements, the Bank uses
modern technology to enhance its business performance management through deploying
analytical tools or process automation through digitization, work flow management or by
creating knowledge management portals for disseminating information internally within the
Bank.
The Bank is also embarking on incorporating base line standards from the wider IT governance
framework in order to ensure that best practices are embedded within the management of
technology resources and information. ISO based standards are being applied with an intent
towards certification, thereby assuring consistency and quality in its delivery model.
The Bank has plans for enhancing its remote and self service enabled delivery channels to ensure
that customers may choose the medium in which they want to bank with SIB and when they want
to conduct their banking.
12.
DIRECTORS
The current Board of Directors of the Bank consists of nine elected members including the
Chairman, H.H.Sheikh Sultan Bin Mohamed Bin Sultan Al Qassimi (the Crown Prince of Sharjah).
All Board members are non-executive. Further details relating to the Board of Directors are set
out in paragraph 14.1.1 below.
13.
SELECTED FINANCIAL INFORMATION
The following tables set out in summary form the balance sheet and income statement
information relating to the Bank. Such information is extracted from the un-audited condensed
consolidated interim financial statements of the Bank as at, and for the six months, ended
30 June 2006 and from the audited financial statements of the Bank as at, and for the years,
ended 31 December 2004 and 31 December 2005. Such financial statements together with the
auditors reports of KPMG and the accompanying notes, appear elsewhere in this Prospectus. The
financial information presented below should be read in conjunction with such financial
statements, reports and the notes thereto.
13.1 Customer and Bank Deposits
The Bank’s main source of funding has been customer and other banks’ deposits and
shareholders’ equity. The following table sets out certain details of such funding for the
Bank as at 30 June 2006 (unaudited), 31 December 2005 and 31 December 2004 (audited):
Description
Customer Deposits. . . . . . . . . . . . . . . . . . . . . . . . . .
Due to Banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . .
Unaudited for
30 June 2006
AED millions
3,740
55
2,018
Audited for
31 Dec 2005
AED millions
2,947
126
2,108
Audited for
31 Dec 2004
AED millions
2,481
177
705
13.2 Assets and Investments
The following summarises the position in relation to some of the Bank’s principal assets
and investments as at 30 June 2006 (unaudited), 31 December 2005 and 31 December 2004
(audited):
Leased Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Properties . . . . . . . . . . . . . . . . . . . . . .
Property and Equipment . . . . . . . . . . . . . . . . . . .
Cash and Balances with Banks and
Financial Institutions . . . . . . . . . . . . . . . . . . . . .
Financing Receivables . . . . . . . . . . . . . . . . . . . . . .
30 June 2006
AED millions
2,773
396
156
558
31 Dec 2005
AED millions
2,769
311
116
51
31 Dec 2004
AED millions
1,857
92
12
35
432
888
343
690
385
545
50
13.3 Loans and Advances
The following table summarises the movement of loans and advances and related provision
for impairment as at 30 June 2006 (unaudited),31 December 2005 and 31 December 2004
(audited):
Loans and advances . . . . . . . . . . . . . . . . . . . . . . . .
Provisions for impaired loans and
advances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loans and advances (net position) . . . . . .
30 June 2006
AED millions
184
(175)
9
31 Dec 2005
AED millions
187
(177)
10
31 Dec 2004
AED millions
258
(175)
83
13.4 Contingent Liabilities and Commitments
The following summarises the position in relation to the Bank’s contingent liabilities and
commitments as at 30 June 2006 (unaudited), 31 December 2005 and 31 December 2004
(audited):
Letters of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . .
Letters of Guarantee . . . . . . . . . . . . . . . . . . . . . .
30 June 2006
AED (millions)
492
490
31 Dec 2005
AED (millions)
408
337
31 Dec 2004
AED (millions)
334
234
13.5 Risk Asset Ratio and Leverage
The Risk Asset Ratio (RAR) as reported to the Central Bank closed at 83.56% for the year
ended 31 December 2005 and 56.75% as at 30 June 2006. This remains above the regulatory
minimum 10% set by the Central Bank of the UAE. In the opinion of the Bank it has adequate
capital to meet its requirements.
13.6 Related Party Transactions
The Bank enters into transactions with major shareholders, directors, senior officers and
their related concerns in the ordinary course of business on a commercial arms-length
basis. All the such dealings with related parties are performing financings and are free of
any provision for possible losses. Related party transactions with the Government are
specifically excluded from related party disclosures in accordance with International
Financial Reporting Standards and accordingly are not reported.
51
14.
MANAGEMENT AND EMPLOYEES
The Bank’s management structuring is summarised in diagraphic form in the Organisation Chart
set out below.
14.1 Management
14.1.1 Board of Directors: The Bank operates under the direction of a Board of Directors, which is
comprised of nine members vested with the power to manage the Bank and conduct its
business in accordance with its objects and with Federal Law No. 8 of 1984 concerning
commercial companies of the UAE (the Commercial Companies Law), the Bank’s Articles
of Association and resolutions of the shareholders. The Board of Directors is elected as a
body by the shareholders for a term of three years. The Board of Directors is fully
responsible for the Bank’s performance and for reporting to the shareholders. The
following table sets out the names of the Bank’s Board of Directors, together with details
of their principal outside activities of significance to the Bank:
Name
Position
Representation
HH Sheikh Sultan Bin Mohammed Bin
Sultan Al Qassimi – Crown Prince of
Sharjah
Chairman
Government of
Sharjah
Mr Mohammed Al Husseini
Vice Chairman
Personal ownership
Mr Abdul Rahman Nassir Al Owais –
Minister of Culture, Youth and Community
Development
Board Member
Personal ownership
Mr Othman Sharif Zaman
Board Member
Personal ownership
Mr Ahmed Al Shamsi
Board Member
Government of
Sharjah
52
Name
Position
Representation
Mr Ali Bin Salim Al Mazroui
Board Member
Government of
Sharjah
Mr Ahmed Ghanim Al Suwaidi
Board Member
Government of
Sharjah
Mr Jassar Dhakil Al Jassar
Board Member
KFH
Mr Salah Al Bassam
Board Member
KFH
No member of the Board of Directors has any actual or potential conflict of interest
between his duties to the Bank and his private interests or other duties. None of the
directors have an employment contract with the Bank.
The business address of the Board of Directors is P. O. Box. 4, Sharjah, United Arab
Emirates.
14.1.2 Senior Management:
Name
Area of Responsibility
Year of Joining
Hussain A Al Qemzi
Chief Executive Officer
2004
BSc with 22 years of banking experience with major banks including Citibank, HSBC
and First Gulf Bank as well as COO of the Dubai International Financial Centre for 2
years
Mohamed A Abdulla
Deputy Chief Executive Officer
1984
B.A with 22 years of diversified banking experience
Ahmed Saad Ibrahim
Chief Operating Officer
1998
B.Com, Certified Accountant with 21 years of banking experience, including 6 years with
Qatar National Bank and 7 years with Commercial International Bank Egypt (formerly
Chase National Bank)
Ossama Salah
Acting Head of Retail Banking
2005
BSc with 22 years of banking experience, including 12 with Citibank, 4 with Arab
Banking Corporation and 3 with Credit Agricole
Saeed M Al Amiri
Head of Human Resources
2002
MBA with 8 years of Banking and Government business experience with emphasis on
HR matters
Mohammed Rizwan
Chief Risk Officer
1999
MA with 23 years experience in banking, including 9 years with ABN Amro and 7 years
with Hong Kong Metropolitan Bank
Mohammed Ibrahim
Head of Treasury and Brokerage
Services
2004
M.Com with 29 years of banking experience, including 24 with Citibank and more than
3 years with Abu Dhabi Islamic Bank
Nathif J Adam
Head of Investments and
International Banking
2002
MBA Certificate in Trade Finance and Associate of the UK Chartered Institute of Bankers
(ACIB), with over 20 years of diversified Banking experience including 7 years with AI
Rajhi Bank, Saudi Arabia
Ahmad Meshari Muhaidi
Head of Corporate Banking
2006
MBA with 8 years of experience and worked as Head of Corporate Banking at Qatar
Islamic Bank prior to joining SIB
53
Name
Area of Responsibility
Year of Joining
Ahmed Kalim
Chief Information Officer
2005
BSc in Business Management & Finance, BSc in Electrical Engineering with 14 years of
experience in banking including 9 yeas with Citibank
Hussam Abu Aisheh
Chief of Internal Audit and
Compliance Division
2002
BSc, Certified Public Accountant with 7 years of experience in auditing and 5 years of
experience in banking
Mohamed Azmeer
Head of Credit Division
2006
MBA with 23 years of banking experience including 12 years with Citibank
As at the date of this Prospectus, there are no existing or potential conflicts of interests
between any duties owed to the Bank by its senior management referred to above and the
private interests or external duties of those directors and senior management.
14.2
Employees
As of 31 December 2005, the Bank had a total of 382 staff. The Bank is committed to the
development of UAE nationals under the Bank’s Emiratisation programme. UAE nationals
now form approximately 44% of the workforce of the Bank, one of the highest percentages
for banks operating in the UAE.
15.
FREEHOLD LAND AND BUILDINGS
As at 31 December 2005, the Bank owned land and buildings shown in its accounts at a net book
value of AED 24.6 million.
16.
ANTI-MONEY LAUNDERING POLICIES
The Bank has implemented detailed anti-money laundering and know your customer policies
and procedures. The responsibility for implementation and compliance rests with the Central
Compliance Officer (CCO) who is assisted by the Internal Audit and Compliance Division (IACD).
The Central Compliance Officer will act as the main coordinator and point of contact between the
Bank and the Anti-Money Laundering and Suspicious Cases Unit of the Central Bank (AMLSCU).
All cash transactions are closely monitored and suspicious transactions are reported to the
AMLSCU. The CCO ensures that all black listed names circulated by the regulatory bodies are
checked against the Bank’s customer database and will respond accordingly. If a suspicious case
arises, the CCO will investigate and undertake appropriate action including reporting the case to
AMLSCU if necessary.
All employees of the Bank are required to attend an anti-money laundering workshop. An
independent unit of the Bank conducts a know your customer check, which is mandatory for all
new accounts.
17.
OTHER INFORMATION
The Bank’s trade registration number is 12088. The registered office of the Bank is P.O. Box 4,
Sharjah, United Arab Emirates. The Bank’s telephone number is +971 6 5681000.
54
THE TRUST ASSETS
Pursuant to the Declaration of Trust, the Issuer will declare that it will hold the Trust Assets upon
trust absolutely for the Certificateholders pro rota according to the principal amount of
Certificates held by each Certificateholder in accordance with the Declaration of Trust, the
Agency Declaration and the Conditions.
Trust Assets means (a) the Issuer’s share in and to Co-owned Assets, (b) all of the Issuer’s rights,
title, interest and benefit, present and future, in, to and under the Transaction Documents and
any other agreements and documents delivered or executed in connection therewith, (c) the
Transaction Account, and (d) all proceeds of the foregoing.
The Declaration of Trust is governed by English law and is subject to the non-exclusive
jurisdiction of the English courts. The laws of the UAE (UAE law) do not recognise the concept of
a commercial trust and, accordingly, there is no certainty that the terms of the Declaration of
Trust would be enforced by the courts of Sharjah. The concept of agency is, however, recognised
under UAE law,
Article 235 of the UAE Civil Procedure Code deals with the enforcement of foreign judgments and
provides (being an unofficial translation from the official Arabic text) as follows:
‘‘1
An order may be made for the enforcement in the UAE of judgments and orders made in a
foreign country on the same conditions laid down in the law of that country for the
execution of judgments and orders issued in the state.
2.
An order for enforcement shall be applied for before the court of first instance within the
jurisdiction of which it is sought to enforce, under the usual procedures for bringing a claim,
and an enforcement order may not be made until after the following matters have been
verified:(a)
that the courts of the UAE had no jurisdiction to the dispute in which the order or
judgment was made, and that the foreign courts which issued it did have jurisdiction
thereunder in accordance with the rules governing international judicial jurisdiction
laid down in their law,
(b)
that the judgment or order was issued by a court having jurisdiction in accordance
with the law of the country in which it was issued,
(c)
that the parties to the action in which the foreign judgment was issued were
summoned to attend, and were validly represented,
(d)
that the judgment or order has acquired the force of res judicata in accordance with
the law of the court which issued it, and
(e)
that it does not conflict with a judgment or order already made by a court in the
State, and contains nothing to conflict with morals or public order therein.’’
In respect of any dispute under the Purchase Agreement, the Management Agreement and the
Purchase Undertaking, SIB has consented to arbitration in accordance with the Rules of The
London Court of International Arbitration if the Issuer so requires.
Co-owned Assets
The Co-owned Assets means (i) the Original Leased Assets, (ii) other than Shariah Compliant
Authorised Investments, any assets at any time replacing the Co-owned Assets in accordance
with the Management Agreement and (iii) Shariah Compliant Authorised Investments.
Purchase Agreement
Pursuant to the Purchase Agreement, SIB as Seller will sell to the Issuer (in its capacity as
Trustee) 88.3 per cent. of the Seller’s undivided right, title and interest in the Leased Assets
(described in the Purchase Agreement). The proceeds received by the Issuer from the issuance
and sale of the Certificates will be used to pay the purchase price payable to the Seller.
Article 1277 of the UAE Civil Code provides that ownership of real property or other rights in rem
over real property may not be transferred between two contracting parties, so as to be valid
against a third party save by such registration. Prior to the execution of the Purchase Agreement,
55
land comprising the Co-owned Assets was not registered with any land registration department
in the UAE and no registration following the transfer under the Purchase Agreement will be
made.
Management Agreement
Under the terms of the Management Agreement, SIB in its capacity as the Managing Agent for
the Issuer and itself will be responsible on behalf of the Co-owners for the following in respect of
the Co-owned Assets:
(a)
Lease Transaction Documents: it shall do all acts, things (including execution of such
documents, issue of notices and commencement of any proceedings) to ensure the
assumption and compliance by each Lease Transaction Party of its covenants, undertakings
or other obligations under the Lease Transaction Documents to which it is party in
accordance with applicable law and terms of the Lease Transaction Documents;
(b)
Co-ownership Revenues: it shall ensure the timely receipt of all Co-ownership Revenues,
investigate non-payment of Co-ownership Revenues and generally making all reasonable
efforts to collect or enforce the collection of such Co-ownership Revenues under any of the
Lease Transaction Documents as and when the same shall become due;
(c)
Shariah requirements: it shall discharge all obligations in respect of any Co-owned Leased
Assets required by the Shariah to be assumed by a lessor, including:
(d)
(i)
all structural repair and major maintenance without which the Co-owned Leased
Assets could not be reasonably and properly used by a lessee; and
(ii)
payment of all Taxes in relation to the Co-owned Leased Assets by law imposed,
charged or levied against a proprietor, but excluding all Taxes that are by law
imposed, charged or levied against a lessee.
Insurance: it shall procure the takaful or insurance of any Co-owned Leased Assets against
such risks (including without limitation, fire, flooding, natural perils) in an amount sufficient
to reinstate the assets in full, and shall:
(i)
ensure that such insurance is provided by a reputable insurer and one which is at all
times in good financial standing;
(ii)
make such enquiries and obtain such assurances as it deems fit to ensure that
paragraph (i) above is, and shall at all times be, fully complied with;
(iii)
ensure that such insurance is otherwise satisfactory to ensure compliance with the
Managing Agent’s obligations under the Management Agreement;
(iv)
diligently make and pursue any claim under such insurance; and
(v)
ensure that nothing is done or omitted to be done which is contrary to the terms of
any such insurance, or which might result in such insurance being restrained,
repudiated, vitiated, cancelled, made void or voidable, or otherwise become
prejudiced or impaired;
(e)
Shariah compliant delegation: in discharging its obligations under paragraphs (c) and (d)
above, it must ensure that those obligations are delegated to a Lease Transaction Party
acting as servicing agent (in a manner and on such terms as are compliant with the Shariah)
in accordance with the Lease Transaction Documents such servicing agent is or will become
a party to;
(f)
Co-ownership Account: it shall maintain the Co-ownership Account in accordance with the
Management Agreement;
(g)
Taxes: it shall pay all Taxes (if any) charged, levied or claimed in respect of the Co-owned
Assets by any relevant taxing or other authority;
(h)
Authorisations: it shall obtain all necessary Authorisations in connection with any of the Coowned Assets and its obligations under or in connection with the Management Agreement;
56
(i)
Liquidity: it shall provide Shariah compliant funding (without recourse to the Co-owned
Assets) to ensure payment in full of the Co-ownership Revenues to the Co-owners in
accordance with the Management Agreement.
For the purposes of the Management Agreement, Taxes means any tax, levy, impost, duty or
other charge or withholding of a similar nature (including any penalty payable in connection with
any failure to pay or any delay in paying any of the same).
Under the terms of the Management Agreement, all of the monies received in the Co-ownership
Account by SIB in its capacity as Managing Agent shall be applied in the following order of
priority:
(a)
first, payment of all or any due and payable Co-ownership Liabilities Amounts;
(b)
second, to the extent that the Co-ownership Revenues comprise return on account of profit
on Co-owned Assets (Return Co-ownership Revenues), to the Co-owners in accordance with
the Management Agreement;
(c)
third, to the extent that the Co-ownership Revenues do not comprise Return Co-ownership
Revenues, in investing in Shariah compliant rental generating assets whether existing or
future and for this purpose the Managing Agent is authorised to:
(d)
(i)
enter into Lease Transaction Documents with any person approved by its credit
committee and on such terms approved by its Shariah Supervisory Board; and
(ii)
pending such investment, invest in Shariah Compliant Authorised Investments and
liquidate or realise the same to ensure timely payment of Co-ownership Revenues to
the Co-owners in accordance with the Management Agreement;
fourth, to the extent that the Co-ownership Revenues comprise Return Co-ownership
Revenues and only to the extent permitted under the Management Agreement, payment of
incentive fees.
For these purposes:
Co-ownership Liabilities Amount means any amount due to the Managing Agent under the
Management Agreement and the amount of any claims, losses, costs and expenses properly
incurred or suffered by the Managing Agent in providing the services under the Management
Agreement;
Co-ownership Revenues means all rental, sale proceeds or other income or consideration,
damages, total loss, insurance proceeds, compensation, or other sums payable to the Managing
Agent (including sale proceeds and rentals) in whatever currency in connection with the
Co-owned Assets;
Lease Transaction Documents means the Ijara contracts in connection with the Co-owned Assets
and any related documentation entered into by any Lease Transaction Party, including
documents for the sale or purchase of the assets that are the subject of any such Ijara contract
and the grant of Security to secure the obligations of any Lease Transaction Party, each as more
particularly described in the Purchase Agreement;
Lease Transaction Party means, other than the Seller, any person which is party to a Lease
Transaction Document;
Security means any mortgage, charge, assignment by way of security, pledge, hypothecation,
lien, right of set-off, retention of title provision, trust or flawed asset arrangement (for the
purpose of, or which has the effect of, granting security) or any other security interest of any kind
whatsoever, or any agreement, whether conditional or otherwise, to create any of the same;
Shariah Compliant Authorised Investments means Shariah compliant income generating assets,
including sukuk, which are rated at least BBB+ by S&P or Baa1 by Moody’s Investors Service Inc
in respect of which the principal amount to be returned shall not be less than the principal
amount originally invested.
57
Purchase Undertaking
SIB will enter into the Purchase Undertaking on or about the Closing Date pursuant to which SIB
will undertake irrevocably to purchase the Issuer’s rights, benefits and entitlements in and to the
Co-owned Assets at the Relevant Exercise Price following the issue of a notice by the Trustee of
its right thereunder (i) on the Scheduled Redemption Date and (ii) following the occurrence of a
Dissolution Event or, if earlier, on the terms more specifically set out therein.
Relevant Exercise Price means a US dollar sum equal to the aggregate of:
(a)
US$225,000,000; plus
(b)
any unpaid Periodic Distribution Amount, which, in the case of an Early Redemption
Exercise, shall be adjusted, pro rata to, but excluding, the date the Relevant Exercise Price is
due, on an actual/360 day basis.
Costs Undertaking
Pursuant to a Costs Undertaking given by SIB, it will pay certain fees and expenses of, and
indemnify against, certain losses of, among others, the Trustee, the Delegate, the Principal
Paying Agent, the Payment Administrator, the Transfer Agent, the Replacement Agent, the
Reference Agent, the Registrar and the Transaction Administrator.
58
OVERVIEW OF THE UNITED ARAB EMIRATES
The UAE is a federation of seven emirates made up of Abu Dhabi, Dubai, Sharjah, Ajman,
Umm al-Qaywan, Fujairah and Ras Al-Khaima. Formerly known as the Trucial States, it was a
British protectorate until they achieved independence in December 1971 and merged to form the
United Arab Emirates. Each Emirate has a local government headed by the Ruler of the Emirate.
There is a federal government which is headed by the President. Each emirate enjoys significant
autonomy and has its own budget. The federal budget is principally funded by the two richest
Emirates Abu Dhabi and Dubai.
Location
The UAE is situated along the south-eastern tip of the Arabian Peninsula bordered by Saudi
Arabia to the west and south, and extends to the west coast of the Arabian Gulf from the base of
the Qatar peninsula to Ras Al Khaimah in the north, and across the Musandam peninsula to the
Gulf of Oman in the east, covering an area of 83,699 sq. km. The UAE, with over 700 kilometres of
coastline, has seaports located in both the Arabian Gulf and the Gulf of Oman, which has helped
to establish it as a leading trading hub.
Political Overview
The original constitution of the UAE was initially provisional and provided the legal framework
for the Federation. The constitution was made permanent pursuant to a constitutional
amendment in December 1996 (which also confirmed Abu Dhabi as the permanent capital of
the UAE Federation).
The major principle adopted by the Constitution was that jurisdiction for enacting substantive
legislation was confined to the federal government, but the local governments of the seven
Emirates were authorised to regulate those matters that were not the subject of legislation by the
federal government. Consequently, the individual Emirates have exclusive jurisdiction in overall
matters, including those relating to municipal work and natural resources.
The Constitution provided for the establishment of the Supreme Council of the Rulers of all the
Emirates as the foremost authority in the Federation and a Council of Ministers as the executive
branch of the Federation.
The Federation is governed by the Supreme Council of the Rulers. This is the highest federal
governing body and consists of the rulers of the seven Emirates. The Supreme Council elects
from its own membership the President and the Vice President (for renewable five-year terms).
Decisions relating to substantive matters are decided by a majority vote of five Emirates,
provided that the votes of both Dubai and Abu Dhabi are included in that majority, but matters
that are purely procedural are decided by a simple majority vote.
Policy decisions of the Supreme Council are implemented by the Federal Council of Ministers,
sometimes referred to as the cabinet. Upon the approval of the Supreme Council, the President
appoints the Prime Minister and the Federal Council of Ministers to assume the country’s
executive authority. Based in Abu Dhabi, the Cabinet is headed by the Prime Minister and
consists of the Deputy Prime Minister and a number of Ministers. These Ministers are normally
selected (for no fixed term) by the approval of the Supreme Council on the recommendation of
the Prime Minister.
The Constitution defines the responsibilities of the Cabinet, which include the issuing of
regulations, the preparation of draft laws and the drawing up of the annual federal budget.
Although most of the federal government ministries are based in Abu Dhabi, many also maintain
offices in Dubai.
The federal government is entrusted with the task of enacting legislation regulating the principal
and central aspects of the Federation such as foreign affairs, defence, security, the federal judicial
system, federal finance and loans and civil aviation. Federal matters are regulated through a
number of specially created federal ministries which include the Ministries of Foreign Affairs,
Defence, Justice, Finance and Industry and Economy and Commerce. The responsibility for the
armed forces in Dubai has, within the past three years, been transferred to the federal authorities.
The Federal National Council is composed of 40 members of the national community who are
recommended by the ruler of each Emirate. Each Emirate appoints members for a particular
number of seats, with a large proportion of members coming from Abu Dhabi and Dubai (with
59
eight members each). The members represent the UAE as a whole rather than their individual
Emirates.
Although the Federal National Council does not have any legislative powers, it is responsible for,
among other things, considering and reviewing draft federal laws or bills before they are
submitted to the President and the Supreme Council for consideration and subsequent
enactment. The Federal National Council can monitor and debate government policy but has
no power of veto or amendment and cannot initiate any legislation itself.
There are three primary sources or types of law in the UAE: federal laws and decrees, local laws
and Shariah. The secondary form of law is trade custom or practice. In the absence of federal
legislation on areas specifically reserved to federal authority, the Ruler or local government will
apply his or its own rules, regulations and practices. As is its right under the Constitution, Dubai,
like the Emirate of Ras Al Khaimah, has elected to maintain its own court system, separate from
that of the Federation, and the courts of Dubai have sole jurisdiction to hear cases brought in
Dubai. Although both federal and Dubai courts have a similar three-tier structure (Court of First
Instance, Court of Appeal and Court of Cassation/Supreme Court), Dubai has retained complete
autonomy over its courts in all matters, which includes the appointment of judges. In accordance
with the Constitution, however, the Dubai courts will first apply federal law where this exists and,
in its absence, the laws of Dubai.
Economic Overview
The UAE is the third largest economy in the Arab world after Saudi Arabia and Egypt. Though it
has a more diversified economy than most of the other countries in the Gulf Co-operation
Council (GCC) region, its wealth is largely based on oil and gas. The UAE has approximately 10
per cent. of proven global oil reserves, which generate approximately one-third of the UAE’s
gross domestic product (GDP) and approximately one-half of export earnings.
The performance of the UAE economy during 2003 and 2004 was very strong. GDP is estimated
to have reached US$90 billion in 2004. In addition to record oil prices, the major contribution to
GDP growth was from construction, manufacturing, tourism and the service sectors. The stock
markets reflected the general confidence in the economy and the market capitalisation of listed
stocks increased 50 per cent. in 2004 to reach US$69 billion.
Around 70 per cent. of UAE fiscal revenues come from oil, making government finances
vulnerable to the vagaries of the oil price. Deficits have been a constant feature of public finance
since 1986 but have been financed by investment income rather than borrowings. The use of oil
revenues to build up a large stock of overseas assets has been a long running fiscal policy and
has given the UAE a healthy net asset position of around 15 per cent, of GDP.
Abu Dhabi is the richest and largest of the seven emirates and the city of Abu Dhabi is also the
capital of the federation. During his long presidency, H.H. Sheikh Zayed oversaw massive
investment in the infrastructure of the UAE, which has transformed the country.
Credit Rating
Moody’s Investors Service, Inc. recognised the strong performance and growing strength of the
UAE economy by upgrading the long-term foreign currency rating bonds and bank deposits to
A-1 from A-2 and the short-term foreign currency rating to Prime-1 from Prime-2.
Membership of International Organisations
The UAE has ratified several international treaties and is a member of various organisations
including, inter alia, the United Nations, the Arab League, the Arab Gulf Cooperation Council, the
Organisation of Islamic Countries, the Organisation of Arab Petroleum Exporting Countries, the
Organisation of Petroleum Exporting Countries, the World Health Organisation, the International
Monetary Fund, the International Organisation for Industrial Development, the World Trade
Organisation and Asia-Pacific Economic Cooperation.
The UAE enjoys good relations with the other states in the GCC. However, it does have a
long-standing regional dispute with Iran over three islands in the Gulf and, as such; is not
immune to the political risks that have over-shadowed the region.
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The Emirate of Sharjah
The Emirate of Sharjah is the third largest emirate in the United Arab Emirates (UAE), and is the
only one to have land on both the Persian Gulf and the Gulf of Oman. Sharjah extends along
approximately 16 Kilometres of the UAE’s Persian Gulf coastline and for more than 80 kilometres
into the interior. The emirate covers 2,590 square kilometres, excluding its islands and is ruled by
His Highness Dr. Sheikh Sultan bin Mohammed al-Qasimi who is also a Member of the Supreme
Council of the UAE.
Sharjah has a total population of 636,000 (according to a 2003 census). It contains the main
administrative and commercial centres together with an array of cultural and traditional projects.
In 1998, the United Nations, Educational, Scientific and Cultural Organization designated Sharjah
as the cultural capital of the Arab world for its commitment to art, culture and the preservation of
heritage. The emirate is also known to be the Cultural Capital of the UAE.
Sharjah has 40 per cent of the country’s industrial establishments. The number grew from 931 in
2000 to 1,255 in 2004. The gross domestic product increased from AED 21.38 billion in 2000 to
AED 30.42 billion in 2004 (estimate provided by the Economic Development Department —
Government of Sharjah). Foreign Trade Imports of the emirate rose to AED 13.54 billion in 2004,
compared to AED 5.1 billion in 2000 and the Foreign Trade Exports rose to AED 10.52 billion in
2004, from AED 5.486 billion in 2000.
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THE UNITED ARAB EMIRATES BANKING SECTOR AND REGULATIONS
Summary
With 47 licensed banks (comprised of 21 locally-incorporated banks and 26 foreign banks)
serving a population estimated to be in the region of over 4 million, the UAE could be viewed as
an overbanked market, even by regional standards. UAE banks continue to be profitable and
generally free from asset quality problems. The UAE’s membership in the World Trade
Organisation (WTO) will require greater economic liberalisation but it is unclear to what extent
this will encourage foreign banks to expand their presence in the market. In the long-term,
however, it is likely to lead to increased competition both within the UAE and across the region
generally.
As a bank regulator, the Central Bank monitors banks through its Banking Supervision
Department. It conducts reviews of banks periodically based on the risk profile of each bank.
It also reviews all the returns submitted by the banks to the Central Bank. The Central Bank does
not act as a lender of last resort, a role which tends to fall on the individual emirs of each emirate.
Characteristics of the Banking System
Domestic Focus
The UAE banks are predominantly focused on the domestic market.
Expansion of retail operations has required heavy investment in distribution channels,
particularly ATM networks and telephone and Internet banking services. As a consequence, IT
costs have been a prominent feature of many banks’ expenses.
Limited Foreign Ownership
In 1987, the Government placed a freeze on new foreign banks opening operations in the UAE.
At the same time, existing foreign banks were limited to a maximum of eight branches. The
26 foreign banks in the country currently have a 25 per cent. share of the market. As noted above,
these restrictions are being reconsidered as part of the UAE’s compliance with the WTO
provisions. Under UAE law, locally-incorporated banks must be majority-owned by UAE
nationals.
Exposure to the Oil Sector
With much of the economy directly or indirectly dependent on the oil sector, the UAE banks are
vulnerable during long periods of low oil prices. In particular, oil revenues tend to drive levels of
liquidity.
Developing Capital Markets
The absence of mature bond and equity markets in the UAE means that banks have tended to
shoulder the burden of long-term financing. This has tended to create a maturity mismatch in
their balance sheets, as most of their liabilities are short-term customer deposits. However, the
two domestic stock markets, the Dubai Financial Market and the Abu Dhabi Securities Market
(both of which were established in 2000), and the recently established Dubai International
Financial Exchange in the Dubai International Financial Free Zone, continue to develop and the
number of listed companies continues to increase.
Government Involvement
There is a high degree of state involvement in the UAE banking sector. Most of the larger banks
have some degree of government ownership.
Supervision of Banks
The main piece of legislation covering the banking system is Union Law No. 10 of 1980 (the
Union Law) which established the Central Bank. The Central Bank’s primary roles are to
formulate and implement banking, credit, monetary and fiscal policy and to be responsible for
ensuring price and currency stability with free convertibility to foreign denominations.
It is also the ‘‘bank for banks’’ in the country, however, it is not the ‘‘lender of last resort’’. In the
event of a bank getting into financial difficulties or facing a solvency crisis, it would be expected
62
that long-term liquidity or equity support would be provided by the emirate in which the
institution is based. However, in the event of a run on the currency or a major banking crisis, it
would ultimately be the Government of Abu Dhabi who would stand as de facto defender of the
currency and the lender of last resort.
Income from overseas investments has been used to fund fiscal deficits, obviating the need for
the Central Bank to issue government debt. However, the Central Bank does issue certificates of
deposit to the banks, denominated in both U.S. dollars and dirham, in order to absorb excess
liquidity rather than to meet a specific funding need. There is no secondary market in these
securities, but they can be redeemed at face value at the Central Bank at any time.
The Central Bank is also responsible for regulating financial institutions in relation to money
laundering controls. It has established a Financial Intelligence Unit, issued a number of detailed
regulatory instructions in pursuit of anti money laundering policies and procedures, and hosted
teams from the Financial Action Task Force (FATF) and the International Monetary Fund who
reviewed, discussed and tested existing UAE laws and regulations. This led the FATF to decide in
January 2002 that the UAE had put in place adequate anti money laundering systems.
Structure of the Banking System
Banking institutions in the UAE fall into a number of categories, as defined by the Union Law.
Domestic commercial banks, also known as ‘‘local’’ banks, are required to be public shareholding
companies.
The Union Law also licenses ‘‘financial institutions’’ (institutions whose principal functions are to
extend credit, carry out financial transactions, invest in moveable property and other activities,
but are not permitted to accept funds in the form of deposits) and financial and monetary
intermediaries (money and stock brokers).
Recent trends in Banking
Profitability
The performance of the UAE economy is influenced by oil prices, which directly affect fiscal
revenues and hence determines government expenditure. High oil prices, high liquidity, strong
retail demand due to booming non-oil economy in the last few years improved the profitability of
the banking sector. Return on equity for most UAE banks compares well internationally,
reflecting the high margins that can be earned in the region, particularly on retail lending.
Position of Depositors
There is no formal deposit protection schemes in the UAE. Whilst no bank, so far, has been
permitted to fail, during the 1980s and early 1990s a number were rescued by the authorities.
Prudential Regulations
The Central Bank has supervisory responsibility for all banking institutions in the UAE.
Supervision is carried out through on-site inspections and review of periodic submissions
from the banks. The frequency of inspection depends on the perceived risk of the bank, but
inspections are carried out in all banks at least once every 18 months. Prudential returns are
made monthly, quarterly, semi-annually or annually, depending on the nature of the information
they contain. An improved risk management framework is currently being implemented, which is
designed to provide the Central Bank with more up-to-date information on credit, market and
operational risks within the banking sector.
Capital Adequacy
All banks are required to follow the principles of the Basel accord in calculating their capital
adequacy ratios. Since 1993, the Central Bank has imposed a 10 per cent. minimum total capital
ratio. The Tier 1 ratio must be above six per cent. and the Tier 2 capital must not exceed
67 per cent. of Tier 1 capital. Tier 2 capital includes undisclosed reserves, revaluations of assets
(limited to a maximum of 45 per cent. of the excess of market value over net book value and
property revaluation reserves are excluded), hybrid capital instruments and subordinated term
loans. Profits for the current period, goodwill, other intangibles, unrealised gains on investments
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and any shortfall in loan loss provisions are deducted from regulatory capital. GCC sovereign
debt is risk-weighted at zero per cent.
Under the Union Law, banks are required to transfer 10 per cent. of profit each year into a
statutory reserve until this reaches 50 per cent. of capital. Distributions cannot be made from this
reserve, except in special legally defined circumstances. All dividends paid by UAE banks have to
be authorised in advance by the Central Bank.
Liquidity of the Banking System
The Central Bank closely monitors the level of liquidity in the banking system. It also requires that
banks have adequate systems and controls to manage their liquidity positions, as well as
contingency plans to cope with periods of liquidity stress. Banks must also adhere to a maximum
utilisation of funds to stable source of funds ratio of 100 per cent. set by the Central Bank. For this
purpose, utilisations comprise loans and advances to customers and interbank assets maturing
after three months. Sources of funds comprise 85 per cent. of deposits, 100 per cent. of interbank
borrowings maturing after six months and free capital and reserves (net of fixed and illiquid
assets).
Reserve Requirements
Reserve requirements are used periodically by the Central Bank as a means of prudential
supervision and to control credit expansion.
Diversification of Risk
Banks are required to establish credit policies and procedures commensurate with their size and
activities. They must also have a proper credit assessment and approval process and adequate
controls in place to monitor credit concentrations to individual borrowers, economic sectors and
foreign countries.
Financial Statements
The Central Bank requires all UAE banks to prepare their financial statements in accordance with
International Financial Reporting Standards. With effect from 1st January, 2001, banks which at
the time of preparing their financial statements in accordance with International Financial
Reporting Standards were required to adopt IAS39 treatment of financial instruments.
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CLEARANCE AND SETTLEMENT
The information set out below is subject to any change in or reinterpretation of the rules,
regulations and procedures of Euroclear or Clearstream, Luxembourg currently in effect. The
information in this section concerning such clearing systems has been obtained from sources
that the Issuer believes to be reliable, but neither the Issuer, SIB nor the Lead Manager take any
responsibility for the accuracy of this section. The Issuer and SIB only takes responsibility for the
correct extraction and reproduction of the information in this section. Investors wishing to use
the facilities of any of the Clearing Systems are advised to confirm the continued applicability of
the rules, regulations and procedures of the relevant Clearing System. None of the Issuer and SIB
and any other party to the Agency Agreement will have any responsibility or liability for any
aspect of the records relating to, or payments made on account of, beneficial ownership interests
in the Certificates held through the facilities of any Clearing System or for maintaining,
supervising or reviewing any records relating to such beneficial ownership interests.
Clearing Systems
Euroclear and Clearstream, Luxembourg each hold securities for their customers and facilitate
the clearance and settlement of securities transactions by electronic book-entry transfer between
their respective account holders. Euroclear and Clearstream, Luxembourg provide various
services including safekeeping, administration, clearance and settlement of internationally
traded securities and securities lending and borrowing. Euroclear and Clearstream, Luxembourg
also deal with domestic securities markets in several countries through established depositary
and custodial relationships. Euroclear and Clearstream, Luxembourg have established an
electronic bridge between their two systems across which their respective participants may settle
trades with each other. Euroclear and Clearstream, Luxembourg customers are world-wide
financial institutions, including underwriters, securities brokers and dealers, banks, trust
companies and clearing corporations. Indirect access to Euroclear and Clearstream,
Luxembourg is available to other institutions that clear through or maintain a custodial
relationship with an account holder of either system.
Registration and Form
Book-entry interests in the Certificates will be represented by the Global Certificate registered in
the name of a common depositary for Euroclear and Clearstream, Luxembourg. Beneficial
ownership of book-entry interests in the Global Certificate will be held through financial
institutions as direct and indirect participants in Euroclear and Clearstream, Luxembourg.
The aggregate holdings of book-entry interests in the Global Certificate in Euroclear and
Clearstream, Luxembourg will be reflected in the book-entry accounts of each such institution.
Euroclear or Clearstream, Luxembourg, as the case may be, and every other intermediate holder
in the chain to the beneficial owner of book-entry interests in the Global Certificate will be
responsible for establishing and maintaining accounts for their participants and customers
having interests in the book-entry interests in the Global Certificate. The Registrar will be
responsible for maintaining a record of the aggregate holdings of the Global Certificate
registered in the name of a nominee for Euroclear and Clearstream, Luxembourg and/or, if
individual Certificates are issued in the limited circumstances described under the Global
Certificate, holders of Certificates represented by those individual Certificates. The Principal
Paying Agent will be responsible for ensuring that payments received by it from the Issuer for
holders of book-entry interests in the Global Certificate holding through Euroclear and
Clearstream, Luxembourg are credited to Euroclear or Clearstream, Luxembourg, as the case
may be.
The Issuer will not impose any fees in respect of holding the Global Certificate; however, holders
of book-entry interests in the Global Certificate may incur fees normally payable in respect of the
maintenance and operation of accounts in Euroclear or Clearstream, Luxembourg.
Clearance and Settlement Procedures
Initial Settlement
Upon their original issue, the Certificates will be in global form represented by the Global
Certificate. Interests in the Global Certificate will be in uncertified book-entry form. Purchasers
65
holding book entry interests in the Global Certificate through Euroclear and Clearstream,
Luxembourg accounts will follow the settlement procedures applicable to conventional
Eurobonds. Book-entry interests in the Global Certificate will be credited to Euroclear and
Clearstream, Luxembourg participants’ securities clearance accounts on the business day
following the Closing Date against payment (value the Closing Date).
Secondary Market Trading
Because the purchaser determines the place of delivery, it is important to establish at the time of
trading of any Certificates where both the purchaser’s and seller’s accounts are located to ensure
that settlement can be made on the desired value date.
Trading between Euroclear and/or Clearstream, Luxembourg participants
Secondary market trading between Euroclear participants and/or Clearstream, Luxembourg
participants will be settled using the procedures applicable to conventional Eurobonds in
same-day funds.
General
Neither of Euroclear and Clearstream, Luxembourg is under any obligation to perform or
continue to perform the procedures referred to above, and such procedures may be discontinued
at any time.
None of the Issuer, the Trustee or any of their agents will have any responsibility for the
performance by Euroclear or Clearstream, Luxembourg or their respective participants of their
respective obligations under the rules and procedures governing their operations or the
arrangements referred to above.
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TAXATION
The following is a general description of certain tax considerations relating to the Certificates. It
does not purport to be a complete analysis of all tax considerations relating to the Certificates.
Prospective purchasers of Certificates should consult their tax advisers as to the consequences
under the tax laws of the country of which they could be resident for any tax purposes and the tax
laws of the United Arab Emirates of acquiring, holding and disposing of Certificates and
receiving Periodic Distribution Amounts and/or other amounts under the Certificates. This
summary is based upon laws, decrees, rulings, administrative practice and judicial decisions as
in effect on the date of this Prospectus and is subject to any change in law that may take effect
after such date and which could have retroactive effect. Prospective purchasers of the Certificates
are advised to consult their own tax advisers as to the possible overall tax consequences of the
acquisition, delivery, holding and/or disposal and redemption of Certificates.
UAE Taxation
The following summary of the anticipated tax treatment in the UAE in relation to the payments
on the Certificates is based on the taxation law and practice in force at the date of this Prospectus,
and does not constitute legal or tax advice and prospective investors should be aware that the
relevant fiscal rules and practice and their interpretation may change. Prospective investors
should consult their own professional advisers on the implications of subscribing for, buying,
holding, selling, redeeming or disposing of Certificates and the receipt of any payments in
respect of any Periodic Distribution Amounts and distributions (whether or not on a winding-up)
with respect to such Certificates under the laws of the jurisdictions in which they may be liable to
taxation.
The Constitution of the UAE specifically reserves to the Federal Government of the UAE the right
to raise taxes on a Federal basis for purposes of funding its budget. It is not known whether this
right will be exercised in the future.
The United Arab Emirates has entered into Double Taxation Arrangements with a number of
countries, but these are not extensive in number.
United Kingdom Taxation
The following paragraphs are based on the Issuer’s and SIB’s understanding of United Kingdom
law and H.M. Revenue & Customs published practice as at the date hereof. They describe the
United Kingdom withholding tax treatment of payments under the Certificates, certain aspects of
United Kingdom income and corporation tax and the extent to which United Kingdom stamp
duty and stamp duty reserve tax may be payable on the issue, transfer and redemption of the
Certificates.
The comments made below do not deal with other United Kingdom tax aspects of acquiring,
holding or disposing of Certificates. Those comments are made on the basis of the following
assumptions, that:
(a)
the Issuer is not resident in the United Kingdom for any tax purpose or incorporated in the
United Kingdom;
(b)
no register of the Certificates is kept in the United Kingdom by or on behalf of the Issuer;
(c)
no payment to the Certificateholders, including any payment in respect of any Periodic
Distribution Amount, has a United Kingdom source for United Kingdom tax purposes;
(d)
the management of the Trust Assets is not under the day-to-day control of the
Certificateholders and any other person who participates in relation to the Trust Assets;
(e)
the Trust Assets do not include interests in land situated in the United Kingdom; and
(f)
the register of Certificateholders will not be kept in the United Kingdom.
Those comments relate only to the position of persons who are absolute beneficial owners of the
Certificates.
The following is a general guide and should be treated with appropriate caution.
Certificateholders who are in any doubt as to their tax position should consult their
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professional advisers. Certificateholders who may be liable to taxation in jurisdictions other than
the United Kingdom in respect of their acquisition, holding or disposal of the Certificates are
particularly advised to consult their professional advisers as to whether they are so liable (and if
so under the laws of which jurisdictions), since the following comments relate only to certain
United Kingdom taxation aspects in respect of the Certificates. In particular, Certificateholders
should be aware that they may be liable to taxation under the laws of other jurisdictions in
relation to payments in respect of the Certificates even if such payments may be made without
withholding or deduction for or on account of taxation under the laws of the United Kingdom.
United Kingdom Withholding Tax
Payments in respect of Periodic Distribution Amounts will be payable without withholding or
deduction for or on account of United Kingdom tax.
Information Reporting
Certificateholders should note that where any payment in respect of any Periodic Distribution
Amounts is paid to them (or to any person acting on their behalf) in respect of the Certificates by
the Issuer, or paid by any person in the United Kingdom acting on behalf of the Issuer
(a paying agent), or is received by any person in the United Kingdom acting on behalf of the
relevant Certificateholder (other than solely by clearing or arranging the clearing of a cheque)
(a collecting agent), then the Issuer, the paying agent or the collecting agent (as the case may be)
may, in certain cases, be required to supply to the H.M. Revenue & Customs details of the
payment and certain details relating to the Certificateholder (including the Certificateholder’s
name and address). These provisions will apply whether or not the payment has been paid
subject to withholding or deduction for or on account of United Kingdom income tax and
whether or not the Certificateholder is resident in the United Kingdom for United Kingdom
taxation purposes. Where the Certificateholder is not so resident, the details provided to
H.M. Revenue & Customs may, in certain cases, be passed by H.M. Revenue & Customs to the tax
authorities of the jurisdiction in which the Certificateholder is resident for taxation purposes.
United Kingdom Tax on Income
Certificateholders who are resident in the United Kingdom for United Kingdom tax purposes will
be subject to United Kingdom income tax or corporation tax on the payment of Periodic
Distribution Amounts or on the underlying income of the Trust. Such Certificateholders may also
be liable to income tax, capital gains tax or to corporation tax on a disposal of their Certificates.
United Kingdom Stamp Duty (Stamp Duty) and Stamp Duty Reserve Tax (SDRT)
No Stamp Duty will be payable on the issue of one or more of the Certificates.
No ad valorem Stamp Duty will be payable on the transfer of one or more of the Certificates
unless that transfer is a transfer on sale of other stock or marketable securities for which the
Certificates form the consideration (in whole or in part).
No SDRT will be payable on the issue of the Certificates to the common depositary for Euroclear
and/or Clearstream, Luxembourg.
No SDRT will be payable in respect of any agreement to transfer one or more of the Certificates.
EU Directive on the Taxation of Savings Income
Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is
required from 1 July 2005, to provide to the tax authorities of another Member State details of
payments of interest (or similar income) paid by a person within its jurisdiction to, or collected by
such a person for, an individual resident in that other Member State, except that, for a transitional
period, Belgium, Luxembourg and Austria may instead enforce a withholding tax in relation to
such payments by deducting amounts on account of tax at rates rising over time to 35%. This
transitional period is to end at the end of first full fiscal year following agreement by certain
non-EU countries and territories to the exchange of information relating to payments of interest.
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Cayman Islands Taxation
The Government of the Cayman Islands, will not, under existing legislation, impose any income,
corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon the
Issuer or the Certificateholders. The Cayman Islands are not party to any double taxation treaties.
The Issuer has applied for and can expect to receive an undertaking from the
Governor-in-Cabinet of the Cayman Islands that, in accordance with section 6 of the Tax
Concessions Law (1999 Revision) of the Cayman Islands, for a period of 20 years from the date of
the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on
profits, income, gains or appreciations shall apply to the Issuer or its operations and, in addition,
that no tax to be levied in profits, income, gains or appreciations or which is in the nature of
estate duty or inheritance tax shall be payable (i) on the shares, debentures or other obligations
of the Issuer or (ii) by way of the withholding in whole or in part of a payment of dividend or other
distribution of income or capital by the Issuer to its members or a payment of any Periodic
Distribution Amount, Scheduled Redemption Amount or Dissolution Distribution Amount under
their Certificates or other sums due under a debenture or other obligation of the Issuer.
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SUBSCRIPTION AND SALE
HSBC Bank plc as the Lead Manager, European Islamic Investment Bank plc, Kuwait Finance
House KSC and MashreqBank PSC as the Co-managers (together with the Lead Manager, the
Managers) have, in a certificate purchase agreement dated on or about 11 October 2006 (the
Certificate Purchase Agreement) and made between the Issuer, SIB and the Managers, upon the
terms and subject to the conditions contained therein, severally agreed to subscribe and pay for
the Certificates at their issue price of 100 per cent. of their principal amount. SIB has agreed to
pay to the Managers certain commissions for acting in such capacity. In addition, SIB has agreed
to reimburse the Managers for certain of their expenses in connection with the issue of the
Certificates. The Managers are entitled in certain circumstances to be released from their
obligations under the Certificate Purchase Agreement prior to the closing of the issue of the
Certificates.
Subject to certain conditions, the Managers have agreed to purchase the Certificates in the
amount set out in the Certificate Purchase Agreement at a price equal to 100 per cent. of the face
value of the Certificates.
United States of America
The Certificates have not been and will not be registered under the Securities Act and, subject to
certain exceptions, may not be offered or sold within the United States. The Certificates are being
offered and sold outside the United States in reliance on Regulation S of the Securities Act.
In addition, until 40 days after the commencement of the offering of the Certificates, an offer or
sale of the Certificates within the United States by any dealer (whether or not participating in the
offering) may violate the registration requirements of the Securities Act. Terms used in this
paragraph have the meaning given to them by Regulation S under the Securities Act.
United Arab Emirates
The Managers have represented and agreed:
(a)
the Certificates have not been and will not be offered, sold or publicly promoted or
advertised by them in the United Arab Emirates other than in compliance with any laws
application in the United Arab Emirates governing the issue, offering the sale of securities;
and
(b)
the information contained in this Prospectus does not constitute an offer of securities in the
United Arab Emirates in accordance with the Commercial Companies Law (Federal Law No.
8 of 1986 (as amended)) or otherwise and is not intended to be a public offer and the
information contained in the Prospectus is not intended to lead to the conclusions of any
contract of whatsoever nature within the territory of the United Arab Emirates.
Saudi Arabia
Any investor in the Kingdom of Saudi Arabia or who is a Saudi person (a Saudi Investor) who
acquires Certificates pursuant to the offering should note that the offer of Certificates is an
exempt offer under sub-paragraph (3) of paragraph (a) of Article 16 of the ‘‘Offer of Securities
Regulations’’ as issued by the Board of the Capital Market Authority resolution number 2-11-2004
dated 4 October 2004 and amended by resolution of the Board of the Capital Market Authority
resolution number 1- 33-2004 dated 21 December 2004 (the KSA Regulations). The Certificates
may be offered to no more than 60 Saudi Investors and the minimum amount payable per Saudi
Investor must be not less than Saudi Riyal (SR) 1 million or an equivalent amount. The offer of
Certificates is therefore exempt from the public offer of the KSA Regulations, but is subject to the
following restrictions on secondary market activity:
(a)
A Saudi Investor (the transferor) who has acquired Certificates pursuant to this exempt offer
may not offer or sell Certificates to any person (referred to as a transferee) unless the price
to be paid by the transferee for such Certificates equals or exceeds SR1 million.
(b)
If the provisions of paragraph (a) cannot be fulfilled because the price of the Certificates
being offered or sold to the transferee has declined since the date of the original exempt
offer, the transferor may offer or sell the Certificates to the transferee if their purchase price
during the period of the original exempt offer was equal to or exceeded SR1 million.
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(c)
If the provisions of (a) and (b) cannot be fulfilled, the transferor may offer or sell Certificates
if he/she sells his entire holding of Certificates to one transferee.
(d)
The provisions of paragraphs (a), (b) and (c) shall apply to all subsequent transferees of the
Certificates.
Bahrain
The Managers have represented, warranted and undertaken that they have not offered and will
not offer, Certificates to the Public (as defined in Articles 162-146 of the Commercial Companies
Law (decree Law No. 21/2001) of Bahrain) in Bahrain.
Singapore
The Prospectus has not been registered as a prospectus with the Monetary Authority of
Singapore (the MAS) under the Securities and Futures Act (Cap. 289) (the Securities and Futures
Act). Accordingly, the Certificates may not be offered or sold or made the subject of an invitation
for subscription or purchase nor may the Prospectus or any other document or material in
connection with the offer or sale, or invitation for subscription or purchase of the Certificates be
circulated or distributed, whether directly or indirectly, to the public or any member of the public
in Singapore other than: (i) to an institutional investor or other person falling within Section 274
of the Securities and Futures Act; (ii) to a sophisticated investor as defined, and in accordance
with the conditions specified, in Section 275 of the Securities and Futures Act; or (iii) pursuant to,
and in accordance with the conditions of, any other applicable exemption under the Securities
and Futures Act. Where the Certificates are subscribed or purchased under Section 275 by a
relevant person which is:
(a)
a corporation (which is not an accredited investor) the sole business of which is to hold
investments and the entire share capital of which is owned by one or more individuals, each
of whom is an accredited investor; or
(b)
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold
investments and each beneficiary is an accredited investor, shares, debentures and units of
shares and debentures of that corporation or the beneficiaries’ rights and interest in that
trust shall not be transferable for six months after that corporation or that trust has acquired
the Certificates under Section 275 except: (1) to an institutional investor under Section 274
of the SFA or to a 75 relevant person, or any person pursuant to Section 275(1A), and in
accordance with the conditions specified in Section 275 of the SFA; (2) where no
consideration is given for the transfer; or (3) by operation of law.
Hong Kong
The Managers have represented and agreed that:
(a)
they have not offered or sold and will not offer or sell in Hong Kong, by means of any
document, the Certificates other than (i) to persons whose ordinary business is to buy or sell
shares or debentures (whether as principal or agent); or (ii) in other circumstances which do
not result in the document being an offer to the public within the meaning of the Companies
Ordinance (Cap. 32) (the CO); or (iii) to ‘‘professional investors’’ within the meaning of the
Securities and Futures Ordinance (Cap. 571) (the SFO) and any rules made under the SFO; or
(iv) in other circumstances which do not result in the document being a ‘‘prospectus’’ which
do not constitute an offer to the public within the meaning of the CO; and
(b)
they have not issued or had in their possession for the purposes of issue, and will not issue
or have in their possession for the purposes of issue (in each case whether in Hong Kong or
elsewhere), any advertisement, invitation or document relating to the Certificates, which is
directed at, or the contents of which are likely to be accessed or read by, the public in
Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with
respect to the Certificates which are or are intended to be disposed of only to persons
outside Hong Kong or only to ‘‘professional investors’’ within the meaning of the SFO and
any rules made under the SFO.
71
Malaysia
The Managers have acknowledged that the offer of the Certificates in Malaysia can only be made
to investors specified in Schedules 2, 3 and 5 of the Securities Commission Act 1993 (i.e.
sophisticated investors, e.g. unit trust schemes, licensed dealers, closed-end funds, fund
managers, licensed financial institutions, licensed offshore banks, licensed insurance companies,
corporations with total net assets exceeding ten million Malaysian ringgit or its equivalent in
foreign currencies, statutory bodies and pension funds).
Dubai International Financial Centre
The Prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the
Dubai Financial Services Authority (DFSA). It is intended for distribution only to persons of a type
specified in those rules. It must not be delivered to, or relied on by, any other person. The DFSA
has no responsibility for reviewing or verifying any documents in connection with Exempt Offers.
The DFSA has not approved this document nor taken steps to verify the information set out in it
and has no responsibility for it. The securities to which this document relates may be illiquid and/
or subject to restrictions on their resale. Prospective purchasers of the securities offered should
conduct their own due diligence on the securities. If you do not understand the contents of this
document you should consult an authorised financial adviser.
United Kingdom
The Managers have represented and agreed that:
(a)
they have only communicated or caused to be communicated and will only communicate or
cause to be communicated any invitation or inducement to engage in investment activity
(within the meaning of section 21 of the Financial Services and Markets Act 2000 (the
FSMA)) received by them in connection with the issue or sale of any Certificates in
circumstances in which section 21(1) of the FSMA does not apply to the Issuer; and
(b)
they have complied and will comply with all applicable provisions of the FSMA with respect
to anything done by them in relation to the Certificates in, from or otherwise involving the
United Kingdom.
Cayman Islands
The Managers have represented and agreed that no offer or invitation to subscribe for the
Certificates has been or will be made to the public in the Cayman Islands.
General
No action has been taken by the Issuer or the Managers that would, or is intended to, permit a
public offer of the Certificates or possession or distribution of the Prospectus or any other
offering or publicity material relating to the Certificates in any country or jurisdiction where any
such action for that purpose is required. Accordingly, the Managers have represented, warranted
and agreed that they will not directly or indirectly, offer or sell any Certificates or distribute or
publish any offering circular, prospectus, form of application, advertisement or other document
or information in any country or jurisdiction except under circumstances that will, to the best of
their knowledge and belief, result in compliance with any applicable laws and regulations and all
offers and sales of Certificates by them will be made on the same terms.
72
GENERAL INFORMATION
1.
It is expected that listing of the Certificates on the Official List and admission of the
Certificates to trading on the Market will be granted on or about 13 October 2006, subject
only to the issue of the Global Certificate. Prior to official listing and admission to trading,
however, dealings will be permitted by the London Stock Exchange in accordance with its
rules. Transactions will normally be effected for settlement in U.S. dollars and for delivery
on the third working day after the day of the transaction. The Certificates will be governed
by English law and, under the Declaration of Trust, the Issuer will submit to the nonexclusive jurisdiction of the courts of England.
2.
The Issuer has obtained all necessary consents, approvals and authorisations in the Cayman
Islands in connection with the issue and performance of the Certificates. The issue of the
Certificates was authorised by the directors of the Issuer on 9 October 2006. The entry into
the Transaction Documents to which it is a party was authorised by the directors of SIB on
12 April 2006.
3.
There has been no significant change in the financial or trading position of the Issuer since
its date of incorporation and no material adverse change in the financial position or
prospects of the Issuer since the date of its incorporation.
4.
There has been no significant change in the financial or trading position of SIB since 30 June
2006 and no material adverse change in the financial position or prospects of SIB since
31 December 2005.
5.
The Issuer is not or has not been involved in any governmental, legal or arbitration
proceedings (including any such proceedings which are pending or threatened of which the
Issuer is aware) during the 12 months preceding the date of this Prospectus which may have
or have had in the recent past significant effects on the financial position or profitability of
the Issuer.
6.
SIB is not or has not been involved in any governmental, legal or arbitration proceedings
(including any such proceedings which are pending or threatened of which SIB is aware)
during the 12 month preceding the date of this Prospectus which may have or have had in
the recent past significant effects on the financial position or profitability of SIB.
7.
The Certificates have been accepted for clearance through the Euroclear and Clearstream,
Luxembourg systems (which are the entities in charge of keeping the records) with a
Common Code of 026904293. The International Securities Identification Number (ISIN) for
the Certificates is XS0269042932.
The address of Euroclear is 1 Boulevard du Roi Albert II, B-1210 Brussels, Belgium and the
address of Clearstream, Luxembourg is 42 Avenue JF Kennedy L-1855 Luxembourg.
8.
Information relating to the rating of the Certificates has been sourced from S&P. This
information has been accurately reproduced and as far as the Issuer is aware and is able to
ascertain from the information published by S&P no facts have been omitted which would
render the reproduced information inaccurate or misleading.
9.
For so long as any Certificates remain outstanding, copies (and English translations where
the documents in question are not in English) of the following documents will be available,
during usual business hours on any weekday (Saturdays and public holidays excepted), for
inspection at the offices of the Trustee and the Principal Paying Agent in London:
(a)
the Transaction Documents (other than the Certificate Purchase Agreement);
(b)
the Memorandum and Articles of Association of the Issuer;
(c)
the published annual report and audited accounts of SIB for the two financial years
ended 31 December 2005 and 31 December 2004; and
(d)
the Prospectus.
The Prospectus will be published on the website of the Regulatory News Service operated
by the London Stock Exchange at www.londonstockexchange.com/en-gb/pricesnews/
marketnews/.
73
10.
KPMG UAE, the UAE member firm of KPMG International, a Swiss Co-operative, has
rendered unqualified audit reports on the financial statements of SIB for the two years
ended 31 December 2005 and 31 December 2004.
11.
The expenses relating to the issue of the Certificates are expected to amount to
US$1,200,000.
74
INDEX TO THE FINANCIAL STATEMENTS
Page
Condensed consolidated interim financial statements as at 30 June 2006. . . . . . . . . . . . .
F1
Financial statements as at 31 December 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F11
Financial statements as at 31 December 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F32
75
F-1
F-2
F-3
F-4
F-5
F-6
F-7
F-8
F-9
F-10
F-11
F-12
F-13
F-14
F-15
F-16
F-17
F-18
F-19
F-20
F-21
F-22
F-23
F-24
F-25
F-26
F-27
F-28
F-29
F-30
F-31
F-32
F-33
F-34
F-35
F-36
F-37
F-38
F-39
F-40
F-41
F-42
F-43
F-44
F-45
F-46
F-47
F-48
F-49
F-50
THE ISSUER
SIB Sukuk Company Limited
The offices of Maples Finance Limited
P.O. Box 1093GT
Queensgate House
South Church Street
George Town
Grand Cayman
Cayman Islands
OBLIGOR
Sharjah Islamic Bank
PO Box 4
Sharjah
United Arab Emirates
PRINCIPAL PAYING AGENT, REFERENCE AGENT, TRANSFER AGENT,
REPLACEMENT AGENT AND REGISTRAR
HSBC Bank plc
8 Canada Square
London E14 5HQ
England
PAYMENT ADMINISTRATOR
HSBC Bank plc
8 Canada Square
London E14 5HQ
England
TRANSACTION ADMINISTRATOR
HSBC Bank plc
8 Canada Square
London E14 5HQ
England
DELEGATE
HSBC TRUSTEE (C.I.) LIMITED
PO Box 88
1 Grenville Street
St Helier
Jersey JE4 9PF
Channel Islands
LEGAL ADVISERS
To the Managers as to English law
Denton Wilde Sapte
One Fleet Place
London
EC4M 7WS, England
To the Managers as to UAE law
Denton Wilde Sapte
26th Floor API World Tower
Sheikh Zayed Road
PO Box 1756
Dubai, United Arab Emirates
To the Issuer as to Cayman
Islands law
Maples and Calder
The Exchange Building
5th Floor,
Dubai International Financial Centre
PO Box 119980
Dubai, United Arab Emirates
To Sharjah Islamic Bank as to English and
UAE laws
Clifford Chance LLP
The Exchange Building
3rd Floor,
Dubai International Financial Centre
PO Box 9380
Dubai, United Arab Emirates
AUDITORS
To the Issuer
KPMG
P.O. Box 28653
2002, Al Batha Tower
Buhaira Corniche
Sharjah
UAE
To Sharjah Islamic Bank
KPMG UAE,
the UAE member firm of KPMG International,
a Swiss Co-operative
P O Box 3800
Level 32
Emirates Towers
Sheikh Zayed Road
Dubai
Printed by St Ives Financial B837760/20941
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