Qatar Alaqaria Sukuk Company

Transcription

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 attached 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, Masraf Al Rayan, Qatar International Islamic Bank, Qatar Islamic Bank, Emirates Bank
International PJSC, Gulf International Bank B.S.C., Mashreqbank psc, National Bank of Abu Dhabi
P.J.S.C. and Landsbanki Íslands hf. (the Managers), Qatar Alaqaria Sukuk Company and Qatar Real
Estate Investment Company Q.S.C. that (i) you have understood and agree to the terms set out
herein, (ii) you are not (or, if you are acting on behalf of another person, such person is not) a U.S.
person (within the meaning of Regulation S of the U.S. Securities Act 1933, as amended (the
Securities Act)) 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 affiliates nor the Issuer accepts 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 are you authorised to deliver this
prospectus, electronically or otherwise, to any other person. 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 these certificates in any jurisdiction in which such offer,
solicitation or sale would be unlawful.
Any certificates to be issued will not be registered under 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 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 (FSA). 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
(Financial Promotion Order) and within Article 14(5) or Article 22 of the Financial Services and
Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (Promotion
of CISs Order), or any person to whom it may otherwise lawfully be made.
This prospectus is directed only at persons having professional experience in matters relating to
investments (being either investment professionals for the purposes of Article 19 of the Financial
Promotion Order and Article 22 of the Promotion of CIS Order) or high net worth companies,
unincorporated associations, trustees of high value trusts or any other person to whom paragraph (2)
of each of those two Articles apply for the purposes of Article 49 of the Financial Promotion Order
and Article 22 of the Promotion of CIS Order and any investment or investment activity to which
this prospectus relates is available only to such persons and will be engaged in only with such
persons. No other person should rely on this prospectus.
QATAR ALAQARIA SUKUK COMPANY
(incorporated in the Cayman Islands with limited liability)
U.S.$300,000,000 Trust Certificates due 2012
The issue price of the U.S.$300,000,000 Trust Certificates (the Certificates or the Sukuk) of Qatar Alaqaria Sukuk Company
(the Issuer) is 100 per cent. of their principal amount.
The Certificates will be constituted by a declaration of trust (the Declaration of Trust) dated on or about 2 August 2007 (the
Closing Date) made by Qatar Alaqaria Sukuk Company, Qatar Real Estate Investment Company Q.S.C. (ALAQARIA) and
HSBC Trustee (C.I.) Limited (in its capacity as delegate, the Delegate). Pursuant to the Declaration of Trust, Qatar Alaqaria
Sukuk Company (in its capacity as the trustee for and on behalf of the Certificateholders (as defined below), the Trustee) will
declare that it will hold certain assets, primarily consisting of all of its rights, title and interest in, to and under the investment
management agreement (the Investment Management Agreement) dated on or about the Closing Date and entered into between
Qatar Alaqaria Sukuk Company and ALAQARIA (in its capacity as investment manager, the Investment Manager), the
purchase undertaking dated on or about the Closing Date (the Purchase Undertaking) granted by ALAQARIA (in its capacity
as obligor, the Obligor), certain of the other Transaction Documents, the Transaction Account (each as defined herein) and all
proceeds of the foregoing, upon trust absolutely for the Certificateholders pro rata according to the principal amount of
Certificates held by each Certificateholder. On the Closing Date, Qatar Alaqaria Sukuk Company shall transfer the proceeds of
the Certificates to the Investment Manager to be invested on the terms set out in the Investment Management Agreement.
On each 2 August, 2 November, 2 February and 2 May or if any such day is not a Business Day (as defined herein) the
following Business Day, unless it would thereby fall into the next calendar month, in which event such day should be the
immediately preceding Business Day, commencing on 2 November 2007 (each a Periodic Distribution Date), Certificateholders
will receive from proceeds received from and in respect of the Trust Assets (as defined below), a periodic distribution equal to
0.73 per cent. per annum plus LIBOR (as defined herein) calculated on the outstanding aggregate principal amount of the
Certificates as at the beginning of the relevant Periodic Distribution Period (as defined herein) on an actual/360 basis (the
Periodic Distribution Amount). In the event that there is insufficient cash to pay the relevant profit distributions in accordance
with the Investment Management Agreement, the Investment Manager shall provide Sharia compliant liquidity funding (the
Liquidity Facility) to cover any such shortfall.
Unless previously redeemed in the circumstances described in Condition 6, the Certificates will be redeemed at 100 per cent. of
their principal amount on 2 August 2012 (the Scheduled Redemption Date).
Application has also 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). The Market is
a regulated market for the purposes of the Investment Services Directive 93/22/EEC. References in this Prospectus to
Certificates being listed (and all related references) shall mean that such Certificates have been admitted to trading on the
London Stock Exchange’s Gilt Edged and Fixed Interest Market and have been admitted to the Official List.
The Certificates are expected to be assigned a rating of A2 by Moody’s Investor Services Inc. (Moody’s) and BBB+ by Fitch
Ratings Ltd (Fitch). A rating is not a recommendation to buy, sell or hold securities, does not address the likelihood or timing
of repayment and may be subject to revision, suspension or withdrawal at any time by the assigning rating organisation.
The Certificates will be limited recourse obligations of the Issuer. Investing in the Certificates involves certain risks as more fully
described in Risk Factors.
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 of the Securities Act (Regulation S)) outside the United
States in reliance on 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 U.S.$100,000 and integral multiples of U.S.$1,000 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. Individual Certificates evidencing holdings of interests in the Certificates will be issued in exchange for interests in
the Global Certificate only in certain limited circumstances described herein.
Sole Bookrunner and Lead Manager
HSBC
Senior Co-Lead Managers
Masraf Al Rayan
Qatar International Islamic Bank
Qatar Islamic Bank
Co-Lead Managers
Emirates Bank International PJSC
Gulf International Bank
National Bank of Abu Dhabi
Mashreq
Landsbanki Íslands hf.
The date of this Prospectus is 31 July 2007
This Prospectus comprises a prospectus for the purposes of Article 5.3 of Directive 2003/71/EC (the
Prospectus Directive) and for the purpose of giving information with regard to the Issuer,
ALAQARIA and the Certificates which is necessary to enable investors to make an informed
assessment of the assets and liabilities, financial position, profits and losses and prospects of the
Issuer and ALAQARIA, and the rights attaching to the Certificates.
Each of ALAQARIA and the Issuer (having taken all reasonable care to ensure that such is the case)
confirm that the information contained in this Prospectus is, to the best of its knowledge, in
accordance with the facts and contains no omission likely to affect its import. Accordingly, each of
ALAQARIA and the Issuer accept responsibility for the information contained in this Prospectus.
No person has been authorised to give any information or to make any representation regarding the
Issuer and ALAQARIA respectively, or the Certificates other than as contained in this Prospectus or
as approved for such purpose by the Issuer or ALAQARIA in connection with the offering of the
Certificates. Any such representation or information should not be relied upon as having been
authorised by the Issuer, ALAQARIA, the Managers (as defined in Subscription and Sale), the
Delegate or the Agents. 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 (economic,
political, financial or otherwise) of the Issuer or ALAQARIA since the date of this Prospectus.
None of the Managers, the Delegate and the Agents has verified the information contained herein.
Accordingly, no representation or warranty is made or implied by any of the Managers, the Delegate
or the Agents or any of their respective affiliates and none of the Managers, the Delegate and the
Agents (or any of their affiliates) makes any representation or warranty or accepts any responsibility
as to the accuracy or completeness of the information contained in this Prospectus or any other
information provided by the Issuer in connection with the Certificates, their distribution or their
future performance.
This Prospectus does not constitute an offer of, or an invitation to subscribe for or purchase, any
Certificates. They are intended only to provide information to assist potential investors in deciding
whether or not to subscribe for or purchase Certificates in accordance with the terms and conditions
specified by the Managers. The Certificates may not be offered or sold, directly or indirectly, and this
Prospectus may not be circulated, in any jurisdiction except in accordance with the legal requirements
applicable to such jurisdiction.
The distribution of this Prospectus and the offering, sale and delivery of Certificates in certain
jurisdictions may be restricted by law. Persons into whose possession this Prospectus comes are
required by the Issuer, ALAQARIA and the Managers to inform themselves about and to observe
any such restrictions. This Prospectus may not be used for the purpose of an offer to, or a
solicitation by, anyone in any jurisdiction or in any circumstances in which such an offer or
solicitation is not authorised or is unlawful. For a description of certain restrictions on offers, sales
and deliveries of Certificates and on distribution of this Prospectus and other offering material
relating to the Certificates – see the section entitled Subscription and Sale. Save as mentioned under
Subscription and Sale, no action has been or will be taken to permit a public offering of the
Certificates in any jurisdiction where any act would be required for that purpose.
Neither this Prospectus nor any other information supplied in connection with the Certificates is
intended to provide the basis of any credit or other evaluation or should be considered as a
recommendation by the Issuer, ALAQARIA, the Managers, the Delegate or the Agents that any
recipient of this Prospectus should purchase any of the Certificates. Each investor contemplating
purchasing any Certificates should make its own independent investigation of the financial condition
and affairs, and its own appraisal of the creditworthiness, of the Issuer and ALAQARIA.
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 (the FSA). Accordingly, this Prospectus is not
being distributed to, or promoted to and must not be passed on to persons in the United Kingdom
by any person authorised under FSMA except in accordance with an exemption.
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
i
as defined in Article 19(5) of 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 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 prospectus is directed only at persons having professional experience in matters relating to
investments (being either investment professionals for the purposes of Article 19 of the Financial
Promotion Order and Article 22 of the Promotion of CIS Order) or high net worth companies,
unincorporated associations, trustees of high value trusts or any other person to whom paragraph (2)
of each of those two Articles apply for the purposes of Article 49 of the Financial Promotion Order
and Article 22 of the Promotion of CIS Order and any investment or investment activity to which
this prospectus relates is available only to such persons and will be engaged in only with such
persons. No other person should rely on this prospectus.
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.
The contents of this Prospectus as amended or supplemented from time to time have not been
approved by an authorised person in accordance with the rules of the FSA.
Individuals intending to invest in any investment described in this Prospectus should consult their
professional advisers and ensure that they fully understand all risks associated with making such an
investment and have sufficient financial resources to sustain any loss that may arise from it.
Notice to Cayman Islands Residents
No invitation may be made to the public in the Cayman Islands to subscribe for the Certificates.
Notice to Bahrain Residents
The Central Bank of Bahrain and the Bahrain Stock Exchange assume no responsibility for the
accuracy and completeness of the statements and information contained in this document and
expressly disclaim any liability whatsoever for any loss howsoever arising from reliance upon the
whole or any part of the contents of this document.
Each potential investor subscribing for Certificates on the Closing Date (each, a potential investor) will
be required provide satisfactory evidence of identity and, if so required, the source of funds to
purchase Certificates within a reasonable time period determined by the Issuer, ALAQARIA and the
Managers. Pending the provision of such evidence, an application to subscribe for Certificates will be
postponed. If a potential investor fails to provide satisfactory evidence within the time specified, or if
a potential investor provides evidence but neither the Issuer nor the Managers are satisfied therewith,
its application to subscribe for Certificates will be rejected immediately in which event any money
received by way of application will be returned to the potential investor (without any additional
amount added thereto and at the risk and expense of such potential investor).
In respect of any Bahraini potential investors, the Issuer and ALAQARIA will comply with Bahrain’s
Legislative Decree No. (4) of 2001 with respect to Prohibition and Combating of Money Laundering
and various Ministerial Orders issued thereunder including, but not limited to, Ministerial Order No.
(7) of 2001 with respect to Institutions’ Obligations Concerning the Prohibition and Combating of
Money Laundering.
ii
PRESENTATION OF FINANCIAL AND OTHER INFORMATION
Presentation of Financial Information
Unless otherwise indicated, the financial information herein has been derived from the audited
financial statements of ALAQARIA as of and for the years ended 31 December 2005 and
31 December 2006 and the reviewed financial statements for the six month period ending 30 June 2007
(together, the Financial Statements).
The Financial Statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) issued by the International Accounting Standards Board.
Certain Defined Terms and Conventions
Certain figures included in this Prospectus have been subject to rounding adjustments; accordingly
figures shown in 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.
All references in this document to U.S. dollars, U.S.$ and $ refer to United States dollars being the
legal currency for the time being of the United States of America and references to QR or
Qatari Riyal are to the lawful currency for the time being of Qatar.
References to a billion are to a thousand million.
iii
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/or ALAQARIA’s plans, objectives, goals,
strategies, 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 Overview of the Offering, Risk Factors,
ALAQARIA – Business Description and other sections of this Prospectus. Each of the Issuer and
ALAQARIA has based these forward-looking statements on the current view of the Issuer’s or, as
the case may be, ALAQARIA’s management with respect to future events and financial performance.
Although the Issuer or, as the case may be, ALAQARIA believes that the expectations, estimates and
projections reflected in the Issuer’s or, as the case may be, ALAQARIA’s forward-looking statements
are reasonable as of the date of this Prospectus, if one or more of the risks or uncertainties
materialise, including those which the Issuer or, as the case may be, ALAQARIA has identified in
this Prospectus, or if any of the Issuer’s or, as the case may be, ALAQARIA’s underlying
assumptions prove to be incomplete or inaccurate, the Issuer’s or, as the case may be, ALAQARIA’s
actual results of operation may vary from those expected, estimated or predicted.
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 ALAQARIA 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
statements are based.
iv
ENFORCEABILITY OF JUDGMENTS
ALAQARIA is organised under the laws of the State of Qatar.
While it is possible for the Qatari courts to declare a company bankrupt or insolvent, there has not
been until very recently any substantive bankruptcy or insolvency laws under the domestic law of the
State of Qatar. The Qatari courts have discretion to grant a grace period for repayment of debts
under Article 375 of the Civil Law No. 22 of 2004. Article 374 of the Civil Law No. 22 of 2004
provides for a company to be declared bankrupt in certain circumstances including failure to pay
debts. Pursuant to Commercial Law No. (27) of 2006 (which came into force on 13 May 2007) upon
a person being declared bankrupt by a Qatar court all the debts of the debtor become due and
owing, and a bankruptcy administrator is appointed by unsecured creditors to realise, with the
approval of the court, the unsecured assets of the bankrupt for distribution to unsecured creditors in
accordance with the law. The Qatar courts have not to date given any firm indication as to the effect
bankruptcy and insolvency have on contracts of a party that is subsequently declared bankrupt or
insolvent. The Commercial Companies Law No. 5 of 2002 also provides for the insolvency of
companies and some direction as to what happens upon insolvency. The provisions particularly as
regards the rights of all creditors are limited however. There is no text of law which expressly
restricts or abrogates specific rights or obligations of contracting parties as a result of the initiation of
bankruptcy or insolvency proceedings in respect of one of them.
The Qatar Civil Law No. 22 of 2004 provides under Article 269 that all creditors of a debtor are
considered equal except those that have priority as a result of a provision of law. Creditors that have
priority fall into two general groups: those that have priority by reason of having security over
particular assets, and those that are generally preferred by reason of a statutory provision. Under the
first group a creditor may therefore have priority to the extent assets are secured in accordance with
a recognised security under Qatari law. Under the second group the law does identify certain
statutorily preferred creditors. Article 304 of the Commercial Companies Law No. 5 of 2002 provides
that a liquidator of a company shall pay the debts of a company after deducting liquidation expenses
including the remuneration of the liquidator by first paying amounts payable to the company’s
employees, then amounts due to the State, then rents payable to the owner of any real estate leased
to the company and then other due amounts in accordance with priorities according to law. These
amounts are not defined further in the Commercial Companies Law No. 5 of 2002.
In addition, the Labour Law No 14 of 2004, which came into force in January 2005, provides that all
sums due thereunder to a worker shall have a preferential claim over all other debts and on the
property, movable or immovable, of the employer, and that all such sums shall be preferred over
debts owed by the employer to the State of Qatar. Article 168 of the Qatar Customs Law No. 40 of
2002 provides that Qatar Customs Department claims are to be considered as privileged debts. All
previous exemptions granted to ministries, government bodies, general corporations or companies
were abolished by this new customs law.
There can be no assurances that a Qatari court would compel a liquidator of ALAQARIA to
perform or cause to be performed any of its respective obligations under any of the Transaction
Documents during a winding-up period.
In any proceedings before the Qatar courts all documentation has to be in Arabic; for any
documentation originally in English, the Arabic translation submitted to the Qatar court would,
despite any provision to the contrary therein, be deemed to be the definitive version for the purposes
of the proceedings. The Qatar courts have a discretion to require further evidence or procedures as to
the authenticity of any document and accuracy of any Arabic translation in relation thereto before
accepting a document for submission.
The enforcement of the express terms of any agreement before the Qatar courts may also be affected
by mandatory provisions of Qatar Civil law. Such a provision is Article (402) of the Qatar Civil Law
which provides that if a debtor establishes that settlement of an obligation has become impossible due
to a reason that is beyond the debtor’s control and to which the debtor did not contribute, the
obligation may be extinguished. Similarly Article (171) of the Qatar Civil Law reads:
‘‘….should any general exceptional events occur which events could not be foreseen, and as
a consequence of which the performance of the contractual obligation, though not
impossible, has become a heavy burden to the debtor threatening him with excessive loss,
v
the court may, according to circumstances, and after comparison between the interest of
both parties, reduce the onerous obligation to a reasonable extent. Any agreement to the
contrary shall be void.’’
This rule has its roots in the civil law doctrine of ‘‘imprevision’’ and similar rules will be found in the
laws of various other Arab countries. It should, however, be noted that the event must be ‘‘general’’,
‘‘exceptional’’ and one which ‘‘could not be foreseen’’. The performance must have become a ‘‘heavy
burden’’ threatening ‘‘excessive loss’’ and the Qatar court must carry out a ‘‘comparison between the
interests of both parties’’ before he ‘‘may’’ ‘‘reduce the onerous obligation to a reasonable extent’’.
Qatari domestic law relating to the enforcement of arbitral awards and foreign judgments is relatively
undeveloped. Pursuant to Decree No. 29 of 2003 Approving the State of Qatar Joining the
Agreement on Recognition and Implementation of Foreign Arbitration Awards, the State of Qatar
acceded to and implemented the principles of the United Nations Convention on the Recognition and
enforcement of Foreign Arbitral Awards (New York, 1958) on March 30, 2003. However, there have
not been any foreign arbitral awards determined in accordance with the UNCITRAL Arbitration
Rules that have been brought before Qatari courts for enforcement.
As a matter of Qatari domestic law, Qatari courts will enforce a foreign judgment or arbitral award
upon the conditions determined in the foreign jurisdiction for the enforcement of Qatari judgments
and arbitral awards as long as (a) the foreign judgment or arbitral award is a final award that has
been handed down by a court of competent jurisdiction or a duly constituted arbitral panel, (b) the
party against whom the foreign judgment or arbitral award is to be enforced was properly served and
represented in the proceedings in the foreign jurisdiction, (c) the foreign judgment or arbitral award
does not violate the public policy of the State of Qatar, (d) the issue in question was not res judicata
in Qatar and (e) the subject matter was not reserved for the exclusive jurisdiction of the Qatari
courts.
There can be no assurance that any foreign arbitral award rendered against ALAQARIA pursuant to
the Transaction Documents would be enforced by the courts of Qatar.
Even if an arbitral award is effectively enforced in Qatar, there can be no assurances that arbitration in
respect of the Transaction Documents would protect the interests of the Certificateholders to the same
extent, as would some foreign jurisdictions or Qatari courts in original proceedings.
vi
EXCHANGE RATE INFORMATION
The official currency of Qatar, where all of ALAQARIA’s assets and operations are located, is the
Qatari Riyal. The Qatari Riyal is currently pegged to the U.S. dollar. The rates of exchange of the
Qatari Riyal to the U.S. dollar for the years 2004 to 2006 were as follows:
Year
2004
2005
2006
Buying Rate of U.S.$
QR3.6385
QR3.6385
QR3.6385
Selling Rate of U.S.$
QR3.6415
QR3.6415
QR3.6415
The current buying rate for U.S.$ is QR 3.6385 and the current selling rate for U.S.$ is QR3.6415.
vii
TABLE OF CONTENTS
Presentation of Financial and Other Information...................................................................
Forward Looking Statements ..................................................................................................
Enforceability of Judgments ....................................................................................................
Exchange Rate Information.....................................................................................................
Structure Diagram and Cashflows...........................................................................................
Overview of the Offering .........................................................................................................
Risk Factors.............................................................................................................................
Terms and Conditions of the Certificates................................................................................
Global Certificate.....................................................................................................................
Use of Proceeds .......................................................................................................................
ALAQARIA – Selected Financial Information ......................................................................
ALAQARIA – Financial Review and Analysis ......................................................................
ALAQARIA – Business Description.......................................................................................
The Issuer ................................................................................................................................
Overview of the State of Qatar................................................................................................
Summary of the Principal Transaction Documents ................................................................
Taxation...................................................................................................................................
Clearance and Settlement ........................................................................................................
Subscription and Sale ..............................................................................................................
General Information ................................................................................................................
Appendix – Financial Statements ............................................................................................
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F-1
STRUCTURE DIAGRAM AND CASHFLOWS
The following is an overview of the structure and cashflows relating to the Certificates. This overview
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. Potential investors
should read the entire Prospectus, especially the risks in relation to investing in the Certificates discussed
under Risk Factors.
Qatar Real Estate
Investment Company
Q.S.C.
(Investment Manager)
Proceeds 1
Investment
Management
Agreement
Purchase
and Sale
Undertakings
Qatar Real Estate
Investment
Company Q.S.C.
(Obligor)
Profit Distributions and
Liquidity Amounts 3
Qatar Alaqaria Sukuk
Company
Exercise Price 2
(Issuer and Trustee)
Assets
DeclarationofofTrust
Declaration
Trust
Proceeds
Periodic Distribution
Amounts and
Redemption Amount
Certificateholders
1
2
3
The Investment Manager will use the proceeds transferred to it by Qatar Alaqaria Sukuk Company to invest in accordance with
the Investment Management Agreement and purchase the Assets on the Closing Date.
Exercise Price shall be equal to the required Redemption Amount (as defined below).
The aggregate of the Profit Distributions and, as and when required, Liquidity Amounts paid under the Investment Management
Agreement shall be equal to the Periodic Distribution Amounts.
Cashflows
Set out below is a simplified description of the principal cashflows underlying the transaction. Potential
investors are referred to the terms and conditions of the Certificates and the detailed descriptions of the
relevant Transaction Documents set out elsewhere in this document for a fuller description of certain
cashflows and for an explanation of the meaning of certain capitalised terms used below.
Payments by the Certificateholders and the Issuer
On the Closing Date, the Certificateholders will pay the issue price in respect of the Certificates to
Qatar Alaqaria Sukuk Company and Qatar Alaqaria Sukuk Company will transfer such sum to
ALAQARIA (in its capacity as investment manager, the Investment Manager) to be invested in
accordance with an agreed investment plan prepared by the Investment Manager. This investment
plan permits, amongst other matters, investments to be made in ALAQARIA’s business.
Periodic Payments by the Issuer
Prior to each Periodic Distribution Date, the Investment Manager shall distribute any profit generated
in accordance with the terms of the Investment Management Agreement to both Qatar Alaqaria
Sukuk Company and the Investment Manager. Such profit shall be distributed in accordance with the
1
pre-agreed profit sharing percentages of the income from the Assets contained in the Investment
Management Agreement (such distributions, the Profit Distributions). Qatar Alaqaria Sukuk Company
shall apply its Profit Distribution on each Periodic Distribution Date to pay the Periodic Distribution
Amount due on such date. In the event that there is insufficient cash to pay the relevant Profit
Distribution due to Qatar Alaqaria Sukuk Company under the Investment Management Agreement,
the Investment Manager shall, in the absence of sufficient Excess Profit (as defined below) provide
Sharia compliant liquidity funding (the Liquidity Facility) to cover any such shortfall.
To the extent that the Profit Distribution payable to Qatar Alaqaria Sukuk Company is greater than
the corresponding Periodic Distribution Amount, the Investment Manager shall be entitled to retain
such excess (the Excess Profit) on behalf of Qatar Alaqaria Sukuk Company. Qatar Alaqaria Sukuk
Company shall be entitled at any time to demand payment of the Excess Profit. To the extent that
there is insufficient cash to pay any further Profit Distribution, the Investment Manager shall be
entitled to use any Excess Profit to pay the shortfall prior to providing the Liquidity Facility. Any
remaining Excess Profit (following redemption of the Certificates in full) shall be retained by the
Investment Manager for its own account by way of an incentive payment.
Redemption Payments
On the Scheduled Redemption Date, Qatar Alaqaria Sukuk Company (or the Delegate on its behalf)
will have the right to require ALAQARIA (as obligor under the Purchase Undertaking) to purchase
all of the Assets, and the Exercise Price payable by ALAQARIA is intended to fund the Redemption
Amount (as defined below) payable by the Issuer under the Certificates.
The Trust may be dissolved prior to the Scheduled Redemption Date in full following a Dissolution
Event. In such circumstances, the amounts payable by Qatar Alaqaria Sukuk Company on the
relevant Redemption Date will be funded by requiring ALAQARIA (as obligor under the Purchase
Undertaking) to purchase all of the Assets, and pay the corresponding Exercise Price to (or to the
order of) Qatar Alaqaria Sukuk Company.
In addition the Trust may be dissolved prior to the Scheduled Redemption Date for Cayman Islands
or Qatar tax reasons. In such circumstances, the amounts payable by Qatar Alaqaria Sukuk
Company on the relevant Redemption Date will be funded by ALAQARIA’s purchase of all of the
Assets (as contemplated by the Sale Undertaking) and payment of the corresponding Exercise Price to
(or to the order of) Qatar Alaqaria Sukuk Company.
2
OVERVIEW OF THE OFFERING
The following overview 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.
Reference to a Condition is to a numbered condition of the Terms and Conditions of the Certificates.
Certificateholders should note that, through a combination of the Investment Management
Agreement, the Purchase Undertaking and the Sale Undertaking, the ability of Qatar Alaqaria Sukuk
Company to pay and/or deliver amounts due under the Certificates will depend, among other things,
on ALAQARIA complying with its obligations under the Transaction Documents to which it is a
party.
Parties
Issuer
Qatar Alaqaria Sukuk Company (an exempted limited
liability company incorporated in the Cayman Islands) (in
such capacity, the Issuer).
The authorised share capital of the Issuer is U.S.$50,000
consisting of 50,000 shares with a nominal value of U.S.$1.00
each. 250 of the Issuer’s shares have been issued and are held
by Maples Finance Limited on trust for charitable purposes.
ALAQARIA
Qatar Real Estate Investment Company Q.S.C., a public
corporation established by Emiri Decree No. 49 issued on 3
July 1995.
Investment Manager
ALAQARIA (in such capacity, the Investment Manager).
Obligor
ALAQARIA (in such capacity, the Obligor).
Sole Bookrunner and Lead Manager
HSBC Bank plc.
Senior Co-Lead Managers
Masraf Al Rayan, Qatar International Islamic Bank and
Qatar Islamic Bank
Co-Lead Managers
Emirates Bank International PJSC, Gulf International Bank
B.S.C., Mashreqbank psc, National Bank of Abu Dhabi
P.J.S.C. and Landsbanki Íslands hf.
Trustee
Qatar Alaqaria Sukuk Company will act as trustee (in such
capacity, the Trustee) in respect of the Trust Assets (as defined
below) for the benefit of Certificateholders in accordance with
the Declaration of Trust and the Conditions. Under the
Declaration of Trust, the Trustee will unconditionally and
irrevocably delegate certain of its present and future duties,
powers, trusts, authorities and discretions under the
Declaration of Trust to the Delegate (with effect from the
Closing Date).
Delegate
HSBC Trustee (C.I.) Limited will act as delegate of the
Trustee (in such capacity, the Delegate) in respect of certain of
the Trustee’s functions under the Declaration of Trust.
Principal Paying Agent, Transfer Agent,
Calculation Agent and Replacement
Agent
Qatar Alaqaria Sukuk Company will appoint HSBC Bank plc
as the principal paying agent, transfer agent, calculation agent
and replacement agent (each an Agent and together the
Agents). The principal paying agent may appoint further
paying agents (together the Paying Agents) for the purposes
of effecting payment to Certificateholders under the
Conditions.
In acting under the Agency Agreement and in connection
with the Certificates the Paying Agents shall act solely as
agents of the Issuer and Trustee and do not assume any
obligations towards or relationship of agency or trust for or
with any Certificateholders.
Registrar
HSBC Bank plc.
3
Summary of the Transaction Documents
Investment Management Agreement
Pursuant to the investment management agreement (the
Investment Management Agreement) dated on or about the
Closing Date and entered into between the Investment
Manager and Qatar Alaqaria Sukuk Company, Qatar
Alaqaria Sukuk Company shall appoint the Investment
Manager to manage and invest (with discretionary
authority) the proceeds of the sale of the Certificates (the
Capital). The Capital shall be invested on the Closing Date in
accordance with an investment plan prepared by the
Investment Manager in the form attached to the Investment
Management Agreement (the Investment Plan). The
Investment Plan provides that, among other things, part of
the Capital shall always be invested in Property (as defined
below).
Pursuant to the Investment Management Agreement, the
Investment Manager shall be entitled to commingle its own
assets with the Assets (as defined below).
In addition, the Investment Manager shall agree to pay Qatar
Alaqaria Sukuk Company an amount equal to any tax
liability imposed by the State of Qatar arising in respect of, or
by reference to, any income, profits or gains arising in respect
of the investments made by the Investment Manager on
behalf of Qatar Alaqaria Sukuk Company.
Assets
The Investment Manager shall invest the Capital on the
Closing Date in tangible and non-tangible assets (the Assets)
that the Investment Manager determines to be Sharia
compliant in accordance with the Investment Plan. The
Investment Manager shall undertake that from, and
including, the Closing Date not less than one third of the
Capital shall be invested in Tangible Assets (as defined
below). A schedule of the initial values (as determined in
accordance with the agreed valuation methodology set out in
the Investment Plan, the Initial Value) of the Assets as at the
Closing Date shall be annexed to the Investment Plan.
For the purposes of the foregoing:
Cash means, at any time, cash in hand or cash at bank.
Eligible Shares means any and all shares, interests,
partnership interests (whether general or limited),
participations, rights in or other equivalents (however
designated) in any equity and any other interest or
participation that confers a right to receive a share of
the profits and losses, or distributions of assets of any
person which, in each case, the Investment Manager
determines (in accordance with the terms of the
Investment Management Agreement) are Sharia
compliant.
Non-QP Property means any property development or
project undertaken on property other than QP Property.
Non-Tangible Assets means any Assets other than
Tangible Assets and Cash.
Other Tangible Assets means any tangible assets other
than QP Property, Non-QP Property and Eligible
Shares.
4
QP Property means any property development or
project on property owned or controlled by Qatar
Petroleum.
Tangible Assets means any and all QP Property,
Non-QP Property, Eligible Shares and Other Tangible
Assets but, for the avoidance of doubt, not including
any Non-Tangible Assets or Cash.
Neither Qatar Alaqaria Sukuk Company nor the Managers are
responsible for the performance or the profitability of the Assets
or the share and amount of the profit distributions made to the
Issuer. Further, the Managers do not make any representation
or accept any responsibility as to the feasibility of the
Investment Plan or whether its objectives can or will be
achieved.
Purchase of Assets
Under the terms of the Investment Management Agreement,
ALAQARIA shall be entitled to purchase any Asset at any
time prior to the Redemption Date at its Initial Value
provided that:
(a)
no Event of Default or Dissolution Event has occurred
and is continuing and no Exercise Notice has been
served under either the Purchase Undertaking or the
Sale Undertaking;
(b)
the Investment Manager certifies in writing to the
Delegate that (i) no Event of Default or Dissolution
Event has occurred or is continuing, (ii) no Exercise
Notice has been served under the Purchase Undertaking
or Sale Undertaking, and (iii) immediately following the
proposed purchase, the aggregate of the Initial Value of
the remaining Tangible Assets shall constitute not less
than U.S.$100,000,000 (being one third of the Capital).
In the event that the aggregate of the Initial Value of the
remaining
Tangible
Assets
is
less
than
U.S.$100,000,000, the Investment Manager will be
required to confirm that the Value of all remaining
Tangible Assets is U.S.$100,000,000 (being one third of
the Capital) or more, and any valuation of the
remaining Tangible Assets shall be undertaken on a
basis that is consistent with the valuation methodology
used in determining Initial Values (provided always that
the Investment Manager shall be required to request a
valuation from an Independent Appraiser to confirm
the relevant Value of any Non-QP Property and/or
Other Tangible Assets). In addition, the certification of
the Investment Manager shall, except in the case of
manifest or proven error, be deemed conclusive and
binding.
ALAQARIA and the Trustee shall enter into a sale
agreement, evidencing the sale of such Assets to
ALAQARIA, and the purchase price payable shall be
deferred until the Certificates have been redeemed in full.
The purchase price due shall be set off against the incentive
fees due to the Investment Manager on such date, and
accordingly no cash payment will be made on the date of
acquisition of such Asset by ALAQARIA.
5
Value means:
(a)
in respect of QP Property, the book value ascribed
thereto in the Relevant Accounts;
(b)
in respect of unlisted Eligible Shares, the book
value ascribed thereto in the Relevant Accounts;
(c)
in respect of listed Eligible Shares, the closing
price of such Eligible Shares on the relevant
exchange on the relevant trading day;
(d)
in respect of Non-QP Property, the market value
ascribed thereto by an Independent Appraiser (in
a valuation dated no earlier than 6 months prior to
the date of the Investment Manager’s certification)
or, in the event it is not possible to obtain a
valuation by an Independent Appraiser, the book
value ascribed thereto in the Relevant Accounts;
(e)
in respect of Other Tangible Assets, the market
value ascribed thereto by an Independent
Appraiser (in a valuation dated no earlier than 6
months prior to the date of the Investment
Manager’s certification) or, in the event it is not
possible to obtain a valuation by an Independent
Appraiser, the book value ascribed thereto in the
Relevant Accounts;
(f)
in respect of Cash, the book value ascribed thereto
in the Relevant Accounts; and
(g)
in respect of other Non-Tangible Assets, such
other valuation methodology as may be selected
by the Investment Manager (acting reasonably).
Independent Appraiser means any independent firm of
property surveyors, appraisers or assessors, in each case,
suitably qualified and selected by the Investment
Manager.
Relevant Accounts means, at any time, the most recently
available annual audited or interim reviewed financial
statements of ALAQARIA, prepared in accordance
with International Financial Reporting Standards.
Profit distribution
The terms of the Investment Plan contemplate that the
Investment Manager’s investments will generate a profit
which shall be distributed by it two Business Days prior to
each Periodic Distribution Date in accordance with the
following proportions:
90 per cent.
Investment Manager
10 per cent.
In the event that there is insufficient cash to pay the relevant
Profit Distributions by Qatar Alaqaria Sukuk Company in
accordance with the Investment Management Agreement, the
Investment Manager will, in the absence of sufficient Excess
Profit (as defined below), provide Sharia compliant liquidity
funding (the Liquidity Facility) to ensure that Qatar Alaqaria
Sukuk Company receives the payment expected under the
Investment Plan. All amounts advanced under the Liquidity
Facility shall only be repayable on the Redemption Date.
If such Profit Distribution payable to Qatar Alaqaria Sukuk
Company is greater than the relevant Periodic Distribution
Amount, the Investment Manager shall be entitled to retain
6
such excess profit (the Excess Profit) and hold it on behalf of
Qatar
Alaqaria
Sukuk
Company
provided
that
Qatar Alaqaria Sukuk Company shall, at any time, be
entitled to demand payment to it of any Excess Profit.
To the extent that there is insufficient cash to pay any further
Profit Distributions, the Investment Manager shall be entitled
to first use any Excess Profit to pay the shortfall prior to
providing the Liquidity Facility. Any remaining Excess Profit
(following redemption of the Certificates in full) shall be
retained by the Investment Manager for its own account by
way of an incentive payment.
All Excess Profits generated by the investments undertaken in
accordance with the Investment Plan shall be recorded in the
accounts the Investment Manager maintains in accordance
with the Investment Management Agreement.
Purchase Undertaking
The Obligor shall execute the Purchase Undertaking in favour
of Qatar Alaqaria Sukuk Company. Under the Purchase
Undertaking, the Obligor undertakes that, upon Qatar
Alaqaria Sukuk Company (or the Delegate on its behalf)
exercising its option to oblige the Obligor to purchase all of
Qatar Alaqaria Sukuk Company’s rights, benefits and
entitlements in and to the Assets (including, without
limitation, any claim under the Investment Management
Agreement in respect of the Assets), the Obligor shall enter
into an agreement to purchase the same on the relevant
Exercise Date following the issue of an exercise notice by
Qatar Alaqaria Sukuk Company under the Purchase
Undertaking. Such exercise notice shall be in the form
prescribed by the terms of the Purchase Undertaking.
On exercise of Qatar Alaqaria Sukuk Company’s option
under the Purchase Undertaking immediately preceding the
Scheduled Redemption Date or, as the case may be, the Early
Redemption Date, the Obligor shall purchase all of Qatar
Alaqaria Sukuk Company’s rights, benefits and entitlements
in and to the Assets (including, without limitation, any claim
under the Investment Management Agreement in respect of
the Assets) at a cash exercise price equal to the Exercise Price
(as defined below).
Covenants and Events of Default
The Purchase Undertaking also contains certain covenants of
the Obligor including, but not limited to, maintenance of a
minimum Consolidated Tangible Net Worth (as defined
below) and restrictions on the grant of Security (as defined
below). These are set out in full in the section Summary of the
Principal Transaction Documents below.
In addition, the Purchase Undertaking contains certain events
of default. These are set out in full in the definition of Event
of Default contained in the Conditions. See Condition 22
(Definitions).
Sale Undertaking
Qatar Alaqaria Sukuk Company shall execute a sale
undertaking (the Sale Undertaking) in favour of
ALAQARIA. Pursuant to the Sale Undertaking, subject to
Qatar Alaqaria Sukuk Company being entitled to redeem the
Certificates early pursuant to Condition 6.3 (Redemption for
Taxation Reasons), ALAQARIA may, by exercising its
option under the Sale Undertaking and serving notice on
Qatar Alaqaria Sukuk Company no later than 45 days and
not earlier than 60 days prior to the Tax Redemption Date,
7
oblige Qatar Alaqaria Sukuk Company to sell and assign all
of Qatar Alaqaria Sukuk Company’s rights, benefits and
entitlements in and to the Assets (including, without
limitation, any claim under the Investment Management
Agreement in respect of the Assets) to ALAQARIA at a cash
exercise price equal to the Exercise Price (as defined below) on
the Exercise Date (as defined below).
Exercise Price
For the purposes of the Sale Undertaking and the Purchase
Undertaking, the Exercise Price payable by the Obligor shall
be an amount (in U.S. dollars) equal to the aggregate of the
Property Exercise Price, the Securities Exercise Price and the
Remaining Assets Exercise Price less any Liquidity Amount.
For these purposes:
Exercise Date means the date on which an Exercise
Notice is delivered to ALAQARIA in accordance with
the Purchase Undertaking or the Sale Undertaking
respectively.
Liquidity Amount means the amount in U.S. dollars (if
any) owed by Qatar Alaqaria Sukuk Company to the
Investment Manager on the Exercise Date under the
liquidity facility made available to Qatar Alaqaria
Sukuk Company by the Investment Manager pursuant
to the terms of the Investment Management Agreement.
Property means as at the Exercise Date, those Assets
that are QP Property and Non-QP Property, for the
avoidance of doubt, not including any Cash.
Property Exercise Price means the greater of:
(a)
U.S.$1,000; and
(b)
an amount in U.S. dollars calculated as
follows:
PEP = (RA + LA) – (RAEP + SEP)
Where:
LA means Liquidity Amount
PEP means Property Exercise Price
RA means Redemption Amount
RAEP means Remaining Assets Exercise
Price
SEP means the Securities Exercise Price
Redemption Amount
Condition 22.
has
the
meaning
given
in
Remaining Assets means the Assets (as at the Exercise
Date) which are not either Property or Eligible Shares.
Remaining Assets Exercise Price means an amount
(in U.S. dollars) equal to the Value of the Capital that
was not invested in either Property or Eligible Shares.
Securities Exercise Price means an amount
(in U.S. dollars) equal to the Value of the Eligible
Shares as at the Exercise Date.
Summary of the Certificates
Certificates
U.S.$300,000,000
Certificates)
Closing Date
2 August 2007
8
Trust
Certificates
due
2012
(the
Scheduled Redemption Date
2 August 2012
Issue Price
100 per cent. of the aggregate principal amount of the
Certificates.
Status
Each Certificate represents an undivided beneficial ownership
in the Trust Assets held on trust for the holders of such
Certificates pursuant to the Declaration of Trust and will
rank pari passu, without any preference, with the other
Certificates. The Certificates are limited recourse obligations
of Qatar Alaqaria Sukuk Company (see Condition 3 (Status
and Limited Recourse) and Condition 14 (Enforcement and
Exercise of Rights)).
Periodic Distribution Dates
2 August, 2 November, 2 February and 2 May of each year
commencing 2 November 2007 or if any such day is not a
Business Day, the following Business Day unless it would
thereby fall into the next calendar month, in which event such
day shall be the immediately preceding Business Day.
Business Day means a day (other than a Friday) on
which commercial banks and foreign exchange markets
are open for general business in Doha, London and, if a
payment in U.S. dollars is required on such day, New
York.
Periodic Distributions
On each Periodic Distribution Date, Certificateholders will
receive a distribution in relation to the Certificates from
moneys received in respect of the Trust Assets equal to the
product of (a) the Margin plus LIBOR; (b) the Aggregate
Face Amount; and (c) the actual number of days in the related
Periodic Distribution Period divided by 360 (the Periodic
Distribution Amount). See Condition 5 (Periodic
Distributions).
Aggregate Face Amount means, at any time, the
aggregate principal amount of the outstanding
Certificates which shall be U.S.$300,000,000.
LIBOR means for each Periodic Distribution Date, the
London inter-bank offered rate for three-month U.S.
dollar deposits determined in accordance with
Condition 5.2 (LIBOR Determinations).
Margin means 0.73 per cent. per annum.
Periodic Distribution Period means 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 immediately following Periodic
Distribution Date.
Redemption
Unless previously redeemed, the Certificates shall be
redeemed in full by Qatar Alaqaria Sukuk Company on the
Scheduled Redemption Date in full in cash for an amount
equal to the aggregate principal amount of the Certificates
then outstanding plus all unpaid accrued Periodic
Distribution Amounts as of such date (the Redemption
Amount) and the Trust shall be dissolved following such
payment in full.
See Condition 6.1 (Scheduled Redemption).
9
Dissolution Event – Early Redemption
Following the occurrence of a Dissolution Event, the
Certificates may, subject to Condition 13, be redeemed in
full on the Early Redemption Date in cash at the Redemption
Amount, and the Trust shall be dissolved following such
payment in full.
See Condition 6.2 (Dissolution Event – Early Redemption).
Redemption for Taxation Reasons
Where either:
(a)
Qatar Alaqaria Sukuk Company has or will become
obliged to pay any additional amounts pursuant to
Condition 11 (Taxation) as a result of the change to any
tax law: or
(b)
either the Obligor or the Investment Manager has or
will become obliged to pay any additional amounts
pursuant to the terms of either the Purchase
Undertaking or, as the case may be, the Investment
Management Agreement,
Qatar Alaqaria Sukuk Company will, provided that
ALAQARIA has exercised its option under the Sale
Undertaking, be entitled to redeem all the Certificates at the
Redemption Amount.
See Condition 6.3 (Redemption for Tax Reasons).
Role of the Delegate
The Delegate shall be appointed pursuant to the Declaration
of Trust to act as delegate of the Trustee in respect of certain
of the Trustee’s functions under the Declaration of Trust
including, without limitation, the power to take all necessary
action on the Trustee’s behalf under any of Condition 13
(Dissolution Events), Condition 14 (Enforcement and Exercise
of Rights), Condition 17 (Meetings and Waivers) and the
power to make certain confirmations in respect of a sale of an
Asset to ALAQARIA (at its Initial Value) in accordance with
the terms of the Investment Management Agreement. The
Trustee’s delegation of such functions shall be irrevocable and
unconditional, and shall take effect as from the Closing Date.
Form and Delivery of the Certificates
The Certificates will be represented by interests in the Global
Certificate deposited with a common depositary for Euroclear
and Clearstream, Luxembourg.
Individual Certificates evidencing holdings of Certificates will
only be issued in exchange for interests in the Global
Certificate in certain limited circumstances.
See Global Certificate and Clearance and Settlement.
Clearance and Settlement
Holders of the Certificates may elect to hold their interest in
the Global Certificate in book-entry form through each of
Euroclear or Clearstream, Luxembourg. Transfers within
Clearstream, Luxembourg or Euroclear will be in accordance
with the usual rules and operating procedures of the relevant
clearance system. See Clearance and Settlement.
Denominations
The Certificates will be issued in minimum denominations of
U.S.$100,000 and integral multiples of U.S.$1,000 in excess
thereof.
The Trust Assets
Pursuant to the Declaration of Trust, Qatar Alaqaria Sukuk
Company will declare a trust (the Trust) for the benefit of the
Certificateholders over all of its rights, title, interest and
benefit, present and future, in, to and under the Assets and
each of the Transaction Documents (other than the
Declaration of Trust and in relation to any representations
10
given to Qatar Alaqaria Sukuk Company by the Obligor or
the Investment Manager pursuant to any of the Transaction
Documents), all moneys, which may now be, or hereafter
from time to time are, standing to the credit of the
Transaction Account and all proceeds of the foregoing
(together, the Trust Assets).
Transaction Account
All payments by either the Investment Manager or the
Obligor to Qatar Alaqaria Sukuk Company for the
Certificateholders under each Transaction Document to
which it is party will be deposited into a Shariah compliant
account of Qatar Alaqaria Sukuk Company maintained for
such purpose (the Transaction Account).
The Principal Paying Agent will maintain the Transaction
Account on behalf of the Trust. Distributions of moneys
deriving from the Trust Assets will be made to the
Certificateholders from funds standing to the credit of the
Transaction Account.
Priority of Distributions
Limited Recourse
On each Periodic Distribution Date or on a date specified in
accordance with those Certificates for the redemption of the
Certificates (each a Redemption Date), the Trustee shall apply
the moneys standing to the credit of the Transaction Account
in the following order of priority:
(a)
first, to pay the Delegate an amount equal to any sum
payable to it on account of its properly incurred fees,
costs, charges and expenses and to pay or provide for
the payment or satisfaction of any Liability incurred (or
reasonably expected to be incurred) by the Delegate
pursuant to the Declaration of Trust or in connection
with any of the other Transaction Documents or the
Certificates, if any, arising on or after the occurrence of
a Dissolution Event;
(b)
second, only if payment is due on a Periodic
Distribution Date, to the Principal Paying Agent for
application in or towards payment pari passu and
rateably of all Periodic Distribution Amounts due but
unpaid;
(c)
third, only if such payment is on a Redemption Date, to
the Principal Paying Agent for application in or towards
payment pari passu and rateably of the Redemption
Amount;
(d)
fourth, only if such payment is on a Redemption Date,
to pay the Investment Manager any outstanding
Liquidity Amounts;
(e)
fifth, only if such payment is on the Scheduled
Redemption Date, in payment of the surplus (if any)
to the Investment Manager.
Each Certificate represents solely an undivided beneficial
ownership interest in the Trust Assets. No payment and/or
delivery of any amount whatsoever shall be made in respect of
the Certificates by the Trustee or the Trust or any agents
thereof except to the extent that funds are available therefor
from the Trust Assets. Proceeds of the Trust Assets are the
sole source of payments on the Certificates. See Condition 3.2
(Limited Recourse).
11
Costs Undertaking
Pursuant to the costs undertaking (the Costs Undertaking) to
be executed by ALAQARIA, ALAQARIA will agree to pay
certain fees and expenses arising in connection with the issue
of the Certificates.
Withholding Tax
All payments in respect of either the Purchase Undertaking or
the Investment Management Agreement shall be made
without withholding or deduction for, or on account of, any
present or future taxes, levies, duties, fees, assessments or
other charges of whatever nature, and all charges, penalties or
similar liabilities with respect thereto (Taxes) unless the
withholding or deduction of such Taxes is required by law. In
such event the Obligor will be required pursuant to the
Purchase Undertaking, and the Investment Manager will be
required pursuant to the Investment Management
Agreement, to pay to Qatar Alaqaria Sukuk Company
additional amounts (which amounts will be applied towards
payment in respect of the Certificates) so that Qatar Alaqaria
Sukuk Company will receive the full amount which would
otherwise be due and payable.
All payments in respect of the Certificates shall be made
without withholding or deduction for, or on account of,
Taxes imposed or levied by or on behalf of a Relevant
Jurisdiction unless the withholding or deduction of such
Taxes is required by law. In such event, the Obligor will be
required pursuant to the terms of the Purchase Undertaking,
and the Investment Manager will be required pursuant to the
Investment Management Agreement, to pay to Qatar
Alaqaria Sukuk Company additional amounts as may be
necessary, so that the full amount which otherwise would
have been due and payable under the Certificates is received
by the Certificateholders.
Relevant Jurisdiction means the State of Qatar and the
Cayman Islands or any political subdivision or any
authority thereof or therein having power to tax.
See Condition 11 (Taxation).
Use of Proceeds
The proceeds of the issue of the Certificates will be transferred
by Qatar Alaqaria Sukuk Company to the Investment
Manager to be invested by the Investment Manager in
accordance with the Investment Plan and the terms of the
Investment Management Agreement.
Listing
Application has been made to the UK Listing Authority for
the Prospectus to be approved as a prospectus for the
purposes of the Prospectus Directive and for the Certificates
to be admitted to the Official List and to the London Stock
Exchange for such Certificates to be admitted to trading on
the Market. See General Information.
Rating
The Certificates are expected to be assigned a rating of A2 by
Moody’s and BBB+ by Fitch. A rating is not a
recommendation to buy, sell or hold securities, does not
address the likelihood or timing of repayment and may be
subject to revision, suspension or withdrawal at any time by
the assigning rating organisation.
12
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 17 (Meetings
of Certificateholders, Modification, Waiver, Authorisation and
Determination).
Tax Considerations
See Taxation for a description of certain Qatari, Cayman
Island and European Union tax considerations applicable to
the Certificates.
Selling Restrictions
There are certain restrictions on the offer, sale and transfer of
the Certificates (including in the United States, the United
Kingdom and the Cayman Islands) which are set forth under
Subscription and Sale.
Transaction Documents
The Transaction Documents are the Investment Management
Agreement, the Purchase Undertaking, the Sale Undertaking,
the Declaration of Trust, the Costs Undertaking, the Agency
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 Transaction Documents will be governed by English law.
The courts of England shall have non-exclusive jurisdiction to
settle any dispute arising out of or in connection with the
Transaction Documents provided always that, in respect of
certain Transaction Documents, the relevant parties agree
that if the Trustee (or Delegate acting as its agent) so requires,
any claim or dispute shall be referred to (and resolved by) an
arbitration pursuant to the Rules of Arbitration of the
International Chamber of Commerce.
Waiver of Sovereign Immunity
ALAQARIA acknowledges in the Transaction Documents to
which it is a party that the transactions contemplated by the
Transaction Documents are commercial transactions and to
the extent that it may in any jurisdiction claim for itself or its
assets or revenues immunity from suit, execution, attachment
(whether in aid of execution, before judgment or otherwise) or
other legal process and to the extent that such immunity
(whether or not claimed) may be attributed to it or its assets
or revenues, it agrees not to claim and irrevocably and
unconditionally waives such immunity in relation to any
proceedings.
13
RISK FACTORS
Prior to making an investment decision, prospective purchasers of the Certificates should consider
carefully, in light of the circumstances and their investment objectives, the information contained in this
entire Prospectus. Prospective purchasers should nevertheless consider, among other things, the investment
considerations relating to the State of Qatar, Qatar Alaqaria Sukuk Company and ALAQARIA not
normally associated with investments in other countries and other issuers, including those set out below.
Each of Qatar Alaqaria Sukuk Company and ALAQARIA believes that the factors described below
represent the material risks inherent in investing in the Certificates, but Qatar Alaqaria Sukuk Company
and ALAQARIA do not represent that such statements below regarding the risks of holding any
Certificates are exhaustive. Prospective investors should also read the detailed information set out
elsewhere in this Prospectus and reach their own views prior to making any investment decision.
Prospective investors should also consult their own financial and legal advisers about risks associated
with an investment in any Certificates and the suitability of investing in such Certificates in light of their
particular circumstances, without relying on Qatar Alaqaria Sukuk Company, ALAQARIA or the
Managers. Investors are advised to make, and will be deemed by the Managers, Qatar Alaqaria Sukuk
Company and ALAQARIA to have made, their own investigations in relation to such factors before
making any investment decisions in relation the Certificates.
Risk Factors relating to Qatar
General Risk; Emerging Market Risk
The Issuer and ALAQARIA have all of their respective operations and all of their respective assets in
Qatar and, accordingly, the Issuer’s and ALAQARIA’s business may be affected by the financial,
political and general economic conditions prevailing from time to time in Qatar and/or the Middle
East generally. Moreover, investors should note that the Issuer’s and ALAQARIA’s business and
financial performance could be adversely affected by political, economic and related developments
both within and outside countries in which the Issuer and ALAQARIA operate because of the interrelationship with global markets.
Investors should also be aware that investments in emerging markets, such as Qatar, are subject to
greater risks than investments in more developed markets, including in some cases significant legal,
economic and political risks. Moreover, although economic conditions are different in each country,
investors’ reactions to developments in one country may affect securities of issuers in other countries,
including Qatar. Accordingly the market prices of Certificates may be subject to significant
fluctuations, which may not necessarily be related to the financial performance of either the Issuer or
ALAQARIA. Investors should exercise particular care in evaluating the risks involved and must
decide for themselves whether, in light of those risks, their investment is appropriate. Generally, an
investment in Certificates is only suitable for sophisticated investors who fully appreciate the
significance of the risks involved.
Political, Economic and Related Considerations
While historically Qatar has enjoyed significant economic growth and relative political stability, there
can be no assurance that such growth or stability will continue, particularly in light of regional strife
and instability. ALAQARIA may also be adversely affected generally by political and economic
developments in or affecting Qatar or the region.
Moreover, although the Qatari government’s policies have generally resulted in improved economic
performance, no assurance can be given that the Qatari government will not implement regulations,
fiscal or monetary policies, including policies or regulations, or new legal interpretations of existing
policies or regulations, relating to or affecting taxation, interest rates or exchange controls, or
otherwise take actions, which could have a material adverse effect on such performance and, in turn,
on ALAQARIA’s business, financial condition, results of operations or prospects which could
adversely affect the market price and liquidity of the Certificates.
In addition, much of the revenue of Qatar is generated by the delivery of oil and gas services. The
flow of revenue could be disrupted or affected by the occurrence of events or circumstances such as
war, terrorist activity, attacks on oil installations and other similar events.
ALAQARIA’s business may be affected if there are political, economic or social events that prevent
ALAQARIA from delivering its services. It is not possible to predict the occurrence of events or
circumstances such as or similar to war, terrorist activity or other regional conflict or turmoil or the
14
impact of such events or circumstances and no assurance can be given that ALAQARIA would be
able to sustain its current profit levels if such events or circumstances were to occur.
Risk Factors relating to ALAQARIA’s business
Rapid Growth
ALAQARIA continues to consolidate its position in the market by expanding its property
investments and plans to acquire stakes in related sectors. See ALAQARIA – Business Description.
Such expansion may entail significant investment, as well as increased operating costs. There is no
guarantee that ALAQARIA will be able to achieve a positive return on the investment it makes in
the development of its business.
Overall growth in ALAQARIA’s business will require greater allocation of management resources
away from daily operations, continued development of ALAQARIA’s financial and information
management control systems, continued training of management and other personnel, adequate
supervision and maintenance of consistency in the provision of client services. If ALAQARIA fails to
manage its growth in this fashion, this failure may have a material adverse effect on its business,
financial condition, results of operations and prospects.
Dependence on Key Personnel
ALAQARIA’s success in growing its business will depend, in part, on its ability to continue to
attract, retain and motivate qualified and skilled personnel. ALAQARIA relies on its senior
management for the implementation of its strategy and its day-to-day operations. Competition for
skilled personnel, especially at the senior management level, is intense due to a disproportionately low
number of available qualified and/or experienced individuals compared to demand. If ALAQARIA is
unable to retain key members of its senior management and cannot hire new qualified personnel in a
timely manner, this could have a material adverse effect on the business, results of operations,
financial condition or prospects of ALAQARIA and could, in turn, adversely affect the market price
and liquidity of the Certificates.
Residual Value
The liquidation value of the properties owned, completed and leased by ALAQARIA may be
adversely affected by risks generally incidental to interests in real property, including, but not limited
to, (i) changes in political and economic conditions or in specific industry segments; (ii) a decline in
property values; (iii) a decline in rental or occupancy rates; (iv) an increase in interest rates; (v)
changes in governmental rules, regulations and fiscal and other policies; (vi) terrorism; (vii) flooding;
and (viii) other factors which are beyond the control of ALAQARIA.
Insurance
Insurance during the construction phase of ALAQARIA’s development projects is taken out by
ALAQARIA’s contractors, and ALAQARIA is named as a loss payee on the relevant policy. On
completion of a development project, ALAQARIA obtains certain insurances covering property risk,
loss of income and workmen compensation (the Insurance Policies). The insured risks comprise,
principally, typical property insurance risks for properties of the type owned by ALAQARIA. The
Insurance Policies are due to expire on varying dates depending on the policy with tacit renewal for a
certain period thereafter. No assurances can be given that the Insurance Policies will be renewed on
the same terms or will be renewed at all. The amount of cover provided under the Insurance Policies
varies and deductibles apply.
In addition certain types of risks and losses (for example, losses resulting from terrorism) are not
economically insurable or are not covered by the Insurance Policies. If an uninsured or uninsurable
loss were to occur, ALAQARIA might not have sufficient funds to repay in full all amounts owing
by it under the Transaction Documents.
Environment Risks
If an environmental liability arises in relation to any project owned, operated or leased by
ALAQARIA and it is not remedied, or it is not capable of being remedied, this may adversely affect
such project and the business of ALAQARIA (either because of the cost implications for
ALAQARIA or because of disruption to services provided at the relevant project or property). It
may also result in a reduction of the value of the relevant project or property or affect the ability of
ALAQARIA to dispose of such project or property.
15
General
Real property investments are subject to varying degrees of risk. Rental revenues, property values and
the demands of tenants are affected by changes in the general economic climate and local conditions
such as an over supply of space, a reduction in demand for residential or commercial property in an
area, competition from other available space or increased operating costs. Rental revenues and
property values are also affected by such factors as political developments, government regulations
and changes in planning laws or policies or tax laws, interest rate levels, inflation, wage rates, levels
of employment and the availability of credit. Further, the ability to attract the appropriate types of
numbers of purchasers or tenants paying rent levels sufficient to allow ALAQARIA to make
payments under the Transaction Documents will be dependent, among other things, on the
performance generally of the real property market in Qatar. Rental revenues and values are sensitive
to such factors which can sometimes result in rapid, substantial increases and decreases in rental and
valuation levels. Any resulting decline in market value may adversely affect the ability of
ALAQARIA to meet its obligations under the Transaction Documents.
Strategy
The growth strategy of ALAQARIA is based on certain assumptions relating to, inter alia, economic
conditions, market for rental properties and labour camps, and demographic conditions in Qatar.
Although ALAQARIA has no reason to believe that these assumptions are inappropriate, it cannot
be excluded that these assumptions turn out to be incorrect. This could, for example, have an impact
on the rental income available to ALAQARIA and the value of its projects, which could affect its
ability to make payments under the Transaction Documents.
Regulatory
ALAQARIA is subject to varying degrees of local, regional and national regulation, covering
environmental, safety and maintenance standards, and other factors that affect the property market.
There can be no assurance that such laws or regulations or the interpretation or enforcement of or
change in any such laws or regulations will not have an adverse effect on the value of the projects or
require ALAQARIA to incur additional costs or otherwise adversely affect the management of its
projects, which could adversely affect the results of operations and financial condition of
ALAQARIA.
Significant contributions from a major customer
A significant proportion of ALAQARIA’s revenue comes from Qatar Petroleum and its affiliates
which contribute significantly to ALAQARIA’s business and revenue. The loss of Qatar Petroleum
(or its affiliates) as a customer may adversely affect ALAQARIA’s existing operations and thereby
have a material adverse effect on its business, financial condition, operating results and the future
prospects and could cause the price of the Certificates to fall.
In addition, ALAQARIA’s relationship with Qatar Petroleum (and its affiliates), the government of
Qatar and certain Qatari government joint venture and state owned entities has contributed
significantly to the growth of ALAQARIA’s business and revenues. There can be no guarantee that
this relationship will continue on the same basis in the future.
Counterparty credit risk
A significant proportion of ALAQARIA’s current business is derived from customers involved in the
oil and gas industry. The results of such companies would be affected by international oil and natural
gas prices, which have fluctuated widely over the past two decades. International prices for natural
gas have fluctuated significantly in the past depending upon global supply and demand and the
availability and price of alternative energy sources. International prices for crude oil have also
fluctuated substantially as a result of many factors, including global and regional economic and
political developments in crude oil-producing regions, particularly the Middle East, demand for oil
and natural gas, changes in governmental regulations, weather, general economic conditions and
competition from other energy sources.
In addition, certain of ALAQARIA’s key clients are subject to various governmental and
environmental regulations and policies wherever they operate. Changes in such regulations and/or
policies may materially affect their financial performance or operations and therefore this could
impact on their ability to perform under the contractual arrangements with ALAQARIA.
16
ALAQARIA is subject to project development and approval risks
There are a number of construction, financing, operating and other risks associated with project
developments in the jurisdictions in which ALAQARIA operates. Projects of the types undertaken by
ALAQARIA typically require substantial capital expenditures during the construction phase and
usually take many months, sometimes years, before they become operational and generate revenue.
The time taken and the costs involved in completing construction can be adversely affected by many
factors, including shortages of materials, equipment and labour, adverse weather conditions, natural
disasters, labour disputes, disputes with sub-contractors, accidents, changes in governmental priorities
and other unforeseen circumstances. Any of these could give rise to delays in the completion of
construction and/or to cost overruns. In relation to some of ALAQARIA’s projects, certain
government approvals, permits, licences or consents may need to be obtained. Delays in the process
of obtaining, or a failure to obtain, the requisite licences, permits or approvals from government
agencies or authorities can also increase the cost or delay or prevent the commercial operation of a
business, which could adversely affect the financial performance of ALAQARIA’s business.
Construction delays can result in the loss of revenues. The failure to complete construction according
to its specifications may result in liabilities, reduced efficiency and lower financial returns. Although
the majority of ALAQARIA’s infrastructure projects have been completed on schedule, there can be
no assurance that this will remain the case or that future infrastructure projects will be completed on
time, or at all, and generate satisfactory returns. Finally, the acquisition or transfer of interests in
such projects may be subject to governmental approvals, which can impact on ALAQARIA’s ability
to dispose of such projects.
ALAQARIA’s projects could be exposed to catastrophic events, including terrorist attacks, over which it has
no control
ALAQARIA’s facilities may be exposed to effects of natural disasters and other potentially
catastrophic events, such as major accidents and terrorist attacks. Although constructed, operated and
maintained to withstand certain of these occurrences, ALAQARIA’s facilities may not be adequately
protected in all circumstances. Such occurrences may adversely affect ALAQARIA’s business and
operations.
ALAQARIA has significant construction and capital expenditure requirements
Many of ALAQARIA’s developments are under construction or in the initial stages of development
and have significant capital expenditure requirements. Additionally, there are certain investment
properties that ALAQARIA currently owns and leases to third parties. ALAQARIA’s investment
properties will need renovations and other capital improvements, including replacements, from time to
time, of property, plant and equipment. Some of these capital improvements are mandated by health,
safety or other regulations. Construction of new investment properties, which ALAQARIA intends to
own and operate, and capital improvements of operating investment properties, which ALAQARIA
may own and operate, may give rise to the following risks:
(a)
possible structural and environmental problems;
(b)
construction cost over-runs and delays;
(c)
disruption in service and access to third parties causing reduced demand, occupancy and rents;
(d)
possible shortage of available cash to fund construction and capital improvements and the
related possibility that financing for these capital improvements may not be available to
ALAQARIA on affordable terms; and
(e)
uncertainties as to market demand or a loss of market demand after construction capital
improvements have begun.
The cost of construction and capital improvements could have a material adverse effect on
ALAQARIA’s business, financial condition and results of operations.
ALAQARIA may be unable to complete its projects that are under construction or in initial stages of
development
As of the date of this Prospectus, ALAQARIA had approximately nine projects under construction
or in initial stages of development. ALAQARIA intends to continue to develop new properties in the
markets in which it currently operates and in new markets. ALAQARIA’s current and future
development and construction activities involve a number of risks, including the following significant
risks:
17
(a)
inability to obtain desirable property locations at moderate prices;
(b)
inability to obtain construction financing on favourable terms;
(c)
requirement to make significant current capital expenditures for certain properties without
receiving revenue from these properties until future periods;
(d)
inability to complete development projects on schedule or within budgeted amounts;
(e)
delays or refusals in obtaining all necessary zoning, land use, building, occupancy and other
required governmental permits and authorisations; and
(f)
fluctuations in occupancy rates at newly developed properties due to a number of factors,
including market and economic conditions, that may result in ALAQARIA’s investment not
being profitable.
There can be no assurance that ALAQARIA’s current or future construction projects will be
completed and ALAQARIA’s inability to complete a project could have a material adverse effect on
its business, financial condition and results of operations.
The bankruptcy or insolvency of any of ALAQARIA’s contractors or suppliers may adversely affect the
construction of certain construction projects and impact ALAQARIA’s ability to fulfil its obligations under its
contracts with its customers
There has been a significant rise in the amount of property development in the Middle East-North
Africa (MENA) region and the Indian sub-continent. As a result, the number of contractors and
suppliers available to meet demand is limited. Therefore, if one of ALAQARIA’s contractors or
suppliers declares bankruptcy or is declared to be insolvent while a project is being developed, there
is a strong likelihood that ALAQARIA will not be able to find a replacement contractor or supplier
promptly. Further, even assuming that ALAQARIA were able to find a replacement contractor or a
supplier in a timely fashion, that contractor or supplier may need time to familiarise himself with the
ongoing project or produce the needed product, thus causing a delay in the completion of the project.
In addition, there is no guarantee that the replacement contractor or supplier that is retained will be
one that ALAQARIA has employed before and thus may not meet ALAQARIA’s high standards for
quality workmanship and product, respectively. If any of these events were to occur, it could have a
material adverse affect on ALAQARIA’s business, financial condition or results of operations.
If ALAQARIA’s contractors’ relationship with their employees were to deteriorate, ALAQARIA may be
faced with labour shortages or stoppages, which would adversely affect its ability to develop and/or operate its
properties
As of the date of this Prospectus, ALAQARIA has hired approximately 15 contractors in Qatar, each
of whom employs its own workers. ALAQARIA’s contractors’ relations with their employees
(including employees in various countries and employees represented by labour unions) could
deteriorate due to disputes related to, among other things, wage or benefit levels or their response to
changes in government regulation of workers and the workplace. ALAQARIA’s business model relies
heavily on contractors providing high-quality personal service, and any labour shortage or stoppage
caused by poor relations between a contractor and its employees, including labour unions, could
adversely affect ALAQARIA’s ability to stay on schedule, which could impact its ability to abide by
its promises to its customers and tarnish its reputation.
The illiquidity of real estate investments and the lack of alternative uses of commercial and/or residential
properties could significantly limit ALAQARIA’s ability to respond to adverse changes in the performance of
its properties and harm its financial condition
Because real estate investments, in general, and real estate investments in Qatar, in particular, are
relatively illiquid, ALAQARIA’s ability to promptly sell one or more of its properties in response to
changing economic, financial and investment conditions is limited. The real estate market is affected
by many factors, such as general economic conditions, availability of financing, interest rates and
other factors, including supply and demand, that are beyond ALAQARIA’s control. The management
of ALAQARIA cannot predict whether ALAQARIA will be able to sell any property for the price or
on the terms set by it, or whether any price or other terms offered by a prospective purchaser would
be acceptable to it. The management of ALAQARIA also cannot predict the length of time needed
to find a willing purchaser and to close the sale of a property.
In addition, certain commercial and/or residential properties may not be readily converted to
alternative uses if they were to become unprofitable due to competition, age of improvements,
18
decreased demand or other factors. The conversion of such commercial and/or residential property to
alternative uses would generally require substantial capital expenditures. In particular, ALAQARIA
may be required to expend funds to correct defects or to make improvements before a property can
be sold. There can be no assurance that ALAQARIA will have funds available to correct defects or
to make improvements. These factors and any others that would impede ALAQARIA’s ability to
respond to adverse changes in the performance of its properties could have a material adverse effect
on its business, financial condition and results of operations.
ALAQARIA’s business requires capital investment
ALAQARIA may require additional financing to fund capital expenditures, to support the future
growth of its business and/or to refinance existing debt obligations. ALAQARIA’s ability to obtain
external financing and the cost of such financing are dependent on numerous factors including general
economic and capital market conditions, interest rates, credit availability from banks or other lenders,
investor confidence in ALAQARIA, the success of ALAQARIA’s business, provisions of tax and
securities laws that may be applicable to ALAQARIA’s ability to raise capital and political and
economic conditions in any relevant jurisdiction.
Legal and regulatory systems may create an uncertain environment for investment and business activities
The State of Qatar is in the process of developing institutions and legal and regulatory systems which
are not yet as firmly established as they are in Western Europe and the United States. The State of
Qatar is also in the process of transitioning to a market economy and, as a result, may experience
changes in its economy and government policies (including, without limitation, policies relating to
foreign ownership, repatriation of profits, property and contractual rights and planning and permitgranting regimes) that may affect ALAQARIA’s business.
The State of Qatar has enjoyed significant economic growth and political stability. There can be no
assurance that such growth or stability will continue. Moreover, while the Government’s policies have
generally resulted in improved economic performance, there can be no assurance that such level of
performance can be sustained.
No assurance can be given that the government will not implement regulation or fiscal or monetary
policies, including policies, regulations, or new legal interpretations of existing regulations, relating to
or affecting taxation, interest rates or exchange controls, or otherwise take actions which could have
a material adverse effect on ALAQARIA’s business, financial condition, results of operations or
prospects.
Safety standards adopted by ALAQARIA
ALAQARIA has adopted safety standards to comply with applicable laws and regulations in the
State of Qatar. In addition, safety requirements are contractually agreed to by ALAQARIA’s
contractors. If ALAQARIA and/or its contractors fail to comply with the relevant standards, either
or both may be liable to penalties and the operation and/or reputation of ALAQARIA might be
materially and adversely affected.
In addition, any amendments to the existing laws and regulations relating to environmental and safety
standards may impose more burdensome requirements and ALAQARIA’s compliance with such laws
or regulations may require it to incur significant capital expenditure or other obligations or liabilities,
which could have a material adverse effect on ALAQARIA’s business, results of operation and
financial condition.
Foreign exchange movements may adversely affect profitability
ALAQARIA maintains its accounts, and reports its results, in Qatari Riyal, while the Certificates are
denominated and payable in U.S. dollars. Although the Qatari Riyal has been ‘‘pegged’’ at a fixed
exchange rate to the U.S. dollar, ALAQARIA is exposed to the potential impact of any alternation
to, or abolition of, this foreign exchange ‘‘peg’’.
Risks relating to the Issuer
No operating history
Qatar Alaqaria Sukuk Company is a newly formed entity and has no operating history. Qatar
Alaqaria Sukuk Company will have no material assets other than the Trust Assets. Qatar Alaqaria
Sukuk Company’s principal source of funds will be its entitlement to its share of profit under the
Investment Management Agreement and amounts payable by the Obligor under the terms of the
19
Purchase Undertaking and Sale Undertaking. Distributions of profit under the Investment
Management Agreement will depend on the successful implementation of the Investment Plan.
Limited Recourse
The Certificates are not debt obligations of Qatar Alaqaria Sukuk Company. In particular, the
Certificates do not represent bonds or notes issued by Qatar Alaqaria Sukuk Company. The
Certificates represent entitlements solely to the Trust Assets. Recourse to Qatar Alaqaria Sukuk
Company 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 require Qatar Alaqaria Sukuk Company to serve an Exercise Notice and
exercise the option under the Purchase Undertaking to require the Obligor to purchase the Assets at
the Exercise Price. Certificateholders will otherwise have no recourse to any assets of Qatar Alaqaria
Sukuk Company (including its directors and corporate services provider), the Delegate, the Managers
or the Agents or any affiliate of any of the foregoing entities in respect of any shortfall in any
amounts realised from the Trust Assets. The Obligor is obliged to make its payments under the
Transaction Documents to which it is a party directly to Qatar Alaqaria Sukuk Company, and Qatar
Alaqaria Sukuk Company, as trustee for the benefit of the Certificateholders (or the Delegate on its
behalf), will have direct recourse against the Obligor to recover payment due to Qatar Alaqaria
Sukuk Company from the Obligor pursuant to the Transaction Documents to which the Obligor is a
party. Accordingly, investors have no direct recourse to the Obligor and there can be no assurance
that the proceeds of the realisation of, or the enforcement with respect to, the Trust Assets will be
sufficient to make all payments due in respect of the Certificates.
Risks relating to the Certificates
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 that may develop
could be at a discount from the original purchase price of such Certificates and accordingly an
investor in the Certificates must be prepared to hold the Certificates until the Certificates have been
redeemed or all amounts then due have been paid in full. Application has been 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 first payment date under the terms of the Certificates or at all.
Credit Ratings may not reflect all risks
One or more independent credit rating agencies may assign credit ratings to the Certificates. The
ratings may not reflect the potential impact of all risks related to the transaction structure, the
market, the additional factors discussed above or any other factors that may affect the value of the
Certificates. A credit rating is not a recommendation to buy, sell or hold securities and may be
revised or withdrawn by the rating agency at any time.
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 including 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
20
(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.
Qatari Bankruptcy Law
In the event of ALAQARIA’s insolvency, Qatari bankruptcy law may adversely affect ALAQARIA’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 ALAQARIA becoming insolvent.
Qatari Taxation
Qatar tax law imposes taxation on the income of non-Qatari entities derived from their activities in
the State of Qatar. Pursuant to the terms of the Transaction Documents Qatar Alaqaria Sukuk
Company may obtain profits derived from the Trust Assets situated in Qatar. Consequently there can
be no assurances that such profits will not be subject to taxation imposed by the Qatar Tax
Authorities. Under the terms of the Investment Management Agreement, ALAQARIA will agree to
indemnify Qatar Alaqaria Sukuk Company against any such taxes.
Consents to Variation of Transaction Documents and other Matters
The Declaration of Trust contains provisions permitting the Trustee and the Delegate (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 or, as the case may be, the Delegate 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.
Change in law
The structure of the issue of the Certificates is based on English law and the laws and administrative
practice of Qatar, each as at the date of this Prospectus. No assurance can be given as to the impact
of any possible change in such laws 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.
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TERMS AND CONDITIONS OF THE CERTIFICATES
The following is the text of the Terms and Conditions of the Certificates which (subject to completion
and amendment and save for the text in italics) will be endorsed on each Certificate in definitive form
(if issued) and will be attached and (subject to the provisions thereof) apply to the Global Certificate:
Each of the U.S.$300,000,000 Trust Certificates due 2012 (the Certificates) represents an undivided
beneficial ownership of the Trust Assets held on trust for the holders of such Certificates pursuant to
a declaration of trust (the Declaration of Trust) dated 2 August 2007 (the Closing Date) made
between Qatar Alaqaria Sukuk Company (the Issuer and, in its capacity as trustee, the Trustee) and
HSBC Trustee (C.I.) Limited (as the delegate in respect of certain of the functions of the Trustee, the
Delegate) and Qatar Real Estate Investment Company Q.S.C. (ALAQARIA). The Certificates are
constituted by the Declaration of Trust.
Payments and any delivery relating to the Certificates will be made in accordance with a paying
agency agreement dated the Closing Date (as amended or supplemented from time to time, the
Agency Agreement) made between Qatar Alaqaria Sukuk Company, HSBC Bank plc as principal
paying agent (in such capacity, the Principal Paying Agent and, together with any further or other
paying agents appointed from time to time in respect of the Certificates, the Paying Agents), as
transfer agent (in such capacity, the Transfer Agent and, together with any further or other transfer
agents appointed from time to time in respect of the Certificates, the Transfer Agents), as replacement
agent (in such capacity, the Replacement Agent and, together with any further or other replacement
agents appointed from time to time in respect of the Certificates, the Replacement Agents), as
calculation agent (in such capacity, the Calculation Agent and, together with any further or other
calculation agents appointed from time to time in respect of the Certificates, the Calculation Agents)
and as registrar (in such capacity, the Registrar). References to the Principal Paying Agent, the
Paying Agents, the Transfer Agents, the Replacement Agents, the Calculation Agent and the
Registrar shall include any successor thereto in each case in such capacity.
The statements in these Terms and Conditions (the Conditions) include summaries of the detailed
provisions of the Declaration of Trust, the Agency Agreement, the Investment Management
Agreement, the Purchase Undertaking and the Sale Undertaking. Unless given a defined meaning
elsewhere in these Conditions or the context requires otherwise, capitalised terms used in these
Conditions shall have the meanings given in Condition 22 (Definitions and Interpretation). In addition,
(and unless the context requires otherwise) words and expressions defined and rules of construction
and interpretation set out in the Declaration of Trust shall, unless defined herein or unless the
context otherwise requires, have the same meanings herein. Copies of the Transaction Documents are
available for inspection by Certificateholders during normal business hours at the specified offices of
the Paying Agents. 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 Trustee to transfer the sums paid by it in respect of its
Certificates to the Investment Manager, and to enter into each Transaction Document to which it is a
party, subject to the terms and conditions of the Declaration of Trust and these Conditions.
1
FORM, DENOMINATION, TITLE AND DESCRIPTION
1.1 Form and Denomination
The Certificates are issued in registered form in principal amounts of U.S.$100,000 and integral
multiples of U.S.$1,000 in excess thereof. 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.
Upon issue, the Certificates will be represented by a Global Certificate deposited with a common
depositary for, and representing Certificates registered in the name of a nominee of the common
depositary for, Euroclear Bank S.A./N.V., as operator of the Euroclear System and Clearstream
Banking, société anonyme. The Conditions are modified by certain provisions contained in the Global
Certificate. Except in the limited circumstances described in the Global Certificate, owners of interests in
Certificates represented by the Global Certificate will not be entitled to receive individual Certificates in
respect of their individual holdings of Certificates. The Certificates are not issuable in bearer form.
22
1.2 Title
The Issuer will cause the Registrar to 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 the register of Certificateholders kept by the Registrar. The registered holder of any
Certificate will (except as otherwise required by law) be treated as its absolute owner for all purposes
(whether or not any payment thereon is overdue and regardless of any notice of ownership, trust or
any interest or any writing on, or the theft or loss of, the Certificate issued in respect of it) and no
person will be liable for so treating the holder of any Certificate. In these Conditions,
Certificateholder and (in relation to a Certificate) holder have the definitions given thereto in the
Declaration of Trust.
2
TRANSFERS OF CERTIFICATES AND ISSUE OF CERTIFICATES
2.1 Transfers
Subject to Conditions 2.4 (Transfers after Transfer Record Date) and 2.5 (Regulations), and to the
limitations as to transfer set out in Condition 1.2 (Title) and the terms of the Agency Agreement, a
Certificate may be transferred by depositing the certificate issued in respect of that Certificate, with
the form of transfer duly completed and signed, at the specified office of any of the Transfer Agents.
Transfers of interests in the Certificates represented by the Global Certificate will be effected in
accordance with the rules of the relevant clearing systems.
2.2 Delivery of New Certificates
Each new certificate to be issued upon transfer of Certificates will, within five business days of receipt
by the relevant Transfer Agent of the duly completed form of transfer provided at the offices of the
Transfer Agent, be mailed by uninsured mail at the risk of the holder entitled to the Certificate to the
address specified in the form of transfer.
Where some but not all of the principal amount of the Certificates in respect of which a certificate is
issued are to be transferred, a new certificate in respect of the principal amount of the Certificates not
so transferred will, within five business days of receipt by the relevant Transfer Agent of the original
certificate, be mailed by uninsured mail at the risk of the holder of the principal amount of the
Certificates not so transferred to the address of such holder appearing on the register of
Certificateholders or as specified in the form of transfer.
Except in the limited circumstances described in the Global Certificate, owners of interests in the
Certificates will not be entitled to receive physical delivery of Certificates.
For the purposes of this Condition, business day shall mean a day on which banks are open for
business in the city in which the specified office of the Transfer Agent with whom a certificate is
deposited in connection with a transfer is located.
2.3 Formalities Free of Charge
Registration of transfers of Certificates will be effected without charge by or on behalf of the Issuer
or any Transfer Agent but upon payment (or the giving of such indemnity as the Issuer or any
Transfer Agent may reasonably require) by the transferee in respect of any tax or other governmental
charges which may be imposed in relation to such transfer.
2.4 Transfers after Transfer Record Date
No Certificateholder may require the transfer of a Certificate to be registered during the period of
seven days ending on the due date for any payment of the Redemption Amount or any Periodic
Distribution Amount on that Certificate.
2.5 Regulations
All transfers of Certificates and entries on the Register will be made subject to the detailed
regulations concerning transfer of Certificates scheduled to the Agency Agreement. The regulations
may be changed by the Issuer from time to time with the prior written approval of the Registrar. 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.
23
3
STATUS AND LIMITED RECOURSE
3.1 Status
The beneficial owners of the Trust Assets are the Certificateholders. Each Certificate evidences an
undivided beneficial ownership interest in the Trust Assets and ranks pari passu, without any
preference, with the other Certificates.
3.2 Limited Recourse
Notwithstanding anything to the contrary contained herein or in any other Transaction Document,
no payment of any amount whatsoever shall be made in respect of the Certificates by the Trustee or
the Trust or any agents or delegates thereof except to the extent that, in the case of payments, funds
are available therefor from the Trust Assets.
The Certificates do not represent an interest in any of the Issuer, the Obligor, the Investment
Manager, the Trustee, the Delegate, the Agents or any of their respective affiliates. Certificateholders
by subscribing for or acquiring the Certificates acknowledge that no recourse may be had for the
payment of any amount owing in respect of the Certificates to any assets of the Issuer (other than
the Trust Assets), or to any assets of the Obligor or the Investment Manager (to the extent that each
fulfils all of its obligations under the relevant Transaction Documents to which it is a party), or to
any assets of the Trustee, the Delegate, the Agents or the Trust to the extent the Trust Assets have
been exhausted.
No recourse under any obligation, covenant, or agreement contained in these Conditions shall be had
against any shareholder, member, officer, agent or director of the Issuer, by the enforcement of any
assessment or by any proceeding, by virtue of any statute or otherwise. The obligations of the Issuer
under these Conditions are corporate or limited liability obligations of the Issuer and no personal
liability shall attach to or be incurred by the shareholders, members, officers, agents or directors of
the Issuer save in the case of their wilful default, fraud, or gross negligence.
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, no Certificateholder will
have any claim against the Issuer, or against the Obligor or the Investment Manager (to the extent
that each fulfils all of its obligations under the relevant Transaction Documents to which it is a
party), or to the Trustee, the Trust, the Delegate, the Agents or any of their affiliates or recourse to
any of their assets in respect of such shortfall and any unsatisfied claims of Certificateholders shall be
extinguished. In addition, 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 any of the
Issuer, the Obligor and the Investment Manager (to the extent that each fulfils all of its obligations
under the relevant Transaction Documents to which it is a party), or any of the Trustee, the Trust,
the Delegate, the Agents or any of their affiliates as a consequence of such shortfall or otherwise.
4
TRUST
4.1 Summary of the Trust
Qatar Alaqaria Sukuk Company will act as trustee for and on behalf of Certificateholders pursuant
to the Declaration of Trust.
On the Closing Date, the Qatar Alaqaria Sukuk Company will enter into an investment management
agreement (the Investment Management Agreement) with ALAQARIA (in its capacity as investment
manager, the Investment Manager). Pursuant to the Investment Management Agreement, Qatar
Alaqaria Sukuk Company will transfer U.S.$300,000,000 to the Investment Manager who will invest
such capital by purchasing certain assets (the Assets) on the Closing Date in accordance with the
investment plan prepared by the Investment Manager and scheduled to the Investment Management
Agreement (the Investment Plan). Under the terms of the Investment Management Agreement, 90 per
cent. of the profits generated as a result of the investments made shall be distributed to Qatar
Alaqaria Sukuk Company and the remaining 10 per cent. shall be distributed to the Investment
Manager. The Investment Manager shall, in certain circumstances, provide Sharia compliant liquidity
funding (the Liquidity Amounts) to Qatar Alaqaria Sukuk Company. The Liquidity Amounts shall be
repayable by Qatar Alaqaria Sukuk Company to the Investment Manager on the Redemption Date in
accordance with Condition 4.2 (Application of Proceeds from Trust Assets).
To the extent that the profits distributable to Qatar Alaqaria Sukuk Company are greater than the
corresponding Periodic Distribution Amount, the Investment Manager shall be entitled to retain such
24
excess (the Excess Profit) on behalf of Qatar Alaqaria Sukuk Company. Qatar Alaqaria Sukuk
Company shall be entitled at any time to demand payment of the Excess Profit. To the extent that
there is insufficient cash to pay any further profits distributable to Qatar Alaqaria Sukuk Compay,
the Investment Manager shall be entitled to use any Excess Profit to pay the shortfall prior to
providing the Liquidity Facility. Any remaining Excess Profit (following redemption of the Certificates
in full) shall be retained by the Investment Manager for its own account by way of an incentive
payment.
Pursuant to the purchase undertaking (the Purchase Undertaking) dated on the Closing Date granted
by ALAQARIA as obligor (the Obligor) in favour of Qatar Alaqaria Sukuk Company, the Obligor
shall undertake to purchase all of Qatar Alaqaria Sukuk Company’s rights, benefits and entitlements
in and to the Assets at the Exercise Price on the relevant Exercise Date following the issue of a
notice under the Purchase Undertaking from Qatar Alaqaria Sukuk Company (or the Delegate on its
behalf), which Qatar Alaqaria Sukuk Company shall serve on the Obligor. On a Redemption Date,
the Obligor shall, following service of the relevant exercise notice by Qatar Alaqaria Sukuk Company
(or the Delegate on its behalf), purchase all of Qatar Alaqaria Sukuk Company’s rights, benefits and
entitlements in and to the Assets at the Exercise Price.
On the Closing Date, Qatar Alaqaria Sukuk Company shall execute a sale undertaking (the Sale
Undertaking) in favour of ALAQARIA. Pursuant to the Sale Undertaking, subject to Qatar Alaqaria
Sukuk Company being entitled to redeem the Certificates early pursuant to Condition 6.3
(Redemption for Taxation Reasons), ALAQARIA may, by exercising its option under the Sale
Undertaking and serving notice on Qatar Alaqaria Sukuk Company no later than 45 days and no
more than 60 days prior to relevant Tax Redemption Date oblige Qatar Alaqaria Sukuk Company to
sell and assign all of Qatar Alaqaria Sukuk Company’s rights, benefits and entitlements in and to the
Assets at the Exercise Price to ALAQARIA.
Pursuant to the Declaration of Trust, Qatar Alaqaria Sukuk Company will declare a trust (the Trust)
for the benefit of the Certificateholders over all of its rights, title, interest and benefit, present and
future, in, to and under the Assets and each of the Transaction Documents (other than the
Declaration of Trust, and in relation to any representations given to Qatar Alaqaria Sukuk Company
by the Obligor or the Investment Manager pursuant to any of the Transaction Documents), all
moneys, which may now be, or hereafter from time to time are, standing to the credit of the
Transaction Account and all proceeds of the foregoing (together, the Trust Assets). All payments by
either the Investment Manager, or the Obligor to Qatar Alaqaria Sukuk Company for the
Certificateholders under each Transaction Document to which it is party will be deposited into an
account of Qatar Alaqaria Sukuk Company maintained for such purpose (the Transaction Account).
The Investment Management Agreement, the Purchase Undertaking, the Sale Undertaking, the
Declaration of Trust, the Agency Agreement, the Costs Undertaking, the Certificates and any other
agreements and documents designated as such by Qatar Alaqaria Sukuk Company and the Obligor
are collectively referred to as the Transaction Documents.
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 each Periodic Distribution Date, or on a date specified in accordance with
those Certificates for the redemption of the Certificates (each a Redemption Date), the Trustee shall
apply the moneys standing to the credit of the Transaction Account in the following order of
priority:
(a)
first, to pay the Delegate an amount equal to any sum payable to it on account of its properly
incurred fees, costs, charges and expenses and to pay or provide for the payment or satisfaction
of any Liability incurred (or reasonably expected to be incurred) by the Delegate pursuant to
the Declaration of Trust or in connection with any of the other Transaction Documents or these
Conditions, if any, arising on or after the occurrence of a Dissolution Event;
(b)
second, only if payment is due on a Periodic Distribution Date, to the Principal Paying Agent
for application in or towards payment pari passu and rateably of all Periodic Distribution
Amounts due but unpaid;
(c)
third, only if such payment is on a Redemption Date, to the Principal Paying Agent for
application in or towards payment pari passu and rateably of the Redemption Amount;
(d)
fourth, only if such payment is on a Redemption Date, to pay the Investment Manager any
outstanding Liquidity Amounts; and
25
(e)
fifth, only if such payment is on the Scheduled Redemption Date, in payment of the surplus (if
any) to the Investment Manager.
The Principal Paying Agent shall apply the moneys so received towards the payments set forth above.
4.3 Late Payment Amounts Received
If Qatar Alaqaria Sukuk Company receives any Late Payment Amounts, then Qatar Alaqaria Sukuk
Company will in each case notify each Certificateholder of the aggregate amount so received and
shall donate such late payment amounts on behalf of ALAQARIA to The Red Crescent Society.
5
PERIODIC DISTRIBUTIONS
5.1 Periodic Distribution Amounts and Periodic Distribution Dates
A distribution amount, representing a defined share of the profit in income with respect to the Trust
Assets derived from the payments made to Qatar Alaqaria Sukuk Company under the Investment
Management Agreement will accrue and be payable on the Certificates and be distributed in
accordance with these Conditions.
Subject to Condition 4.2 (Application of Proceeds from Trust Assets) and Condition 10 (Dissolution of
Trust) below, the Trustee shall distribute to holders of the Certificates pro rata, out of amounts
collected in the Transaction Account, a distribution in relation to the Certificates on each Periodic
Distribution Date an amount equal to the product of (a) the Margin plus LIBOR; (b) the Aggregate
Face Amount; and (c) the actual number of days in the related Periodic Distribution Period divided
by 360 (the Periodic Distribution Amount).
Distributions on the Certificates will be made in arrear on 2 August, 2 November, 2 February and 2
May each year or if any such day is not a Business Day, the following Business Day unless it would
thereby fall into the next calendar month, in which event such day shall be the immediately preceding
Business Day, commencing on the Closing Date (each a Periodic Distribution Date). The period from
and including 2 August 2007 to but excluding the first Periodic Distribution Date and each successive
period from and including a Periodic Distribution Date to but excluding the immediately following
Periodic Distribution Date is called a Periodic Distribution Period.
5.2 LIBOR Determinations
LIBOR for each Periodic Distribution Period shall be determined by or on behalf of the Issuer in
accordance with the following provisions:
(a)
on each LIBOR Determination Date, the Calculation 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;
(b)
if the Screen Rate is unavailable, the Calculation Agent 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 inter-bank market for a period of three months at
approximately 11.00 a.m. (London time) on such LIBOR Determination Date 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 fourth decimal place, with 0.00005 rounded upwards) as calculated by the
Calculation Agent shall be the value of LIBOR for the forthcoming Periodic Distribution
Period; and
(c)
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.
5.3 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
Calculation Agent, the Calculation Agent shall, if required to do so by the rules of the relevant stock
exchange, notify, or shall procure the notification to, the 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
26
Distribution Amount to be published in accordance with Condition 16 (Notices) as soon as
practicable after their determination but in no event later than the fourth 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 related Periodic Distribution Period. In the event of any such
amendment, the Calculation Agent shall, as soon as practicable thereafter, notify the 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 16
(Notices) as soon as practicable after determination of such amendment but in no event later than the
fourth Business Day thereafter.
5.4 Cessation of Accrual
No further amounts will be payable on any Certificate from and including its due date for
redemption.
5.5 Calculation of Distribution in respect of Broken Periodic Distribution Amounts
When a distribution is required to be calculated in respect of a period of less than a full Periodic
Distribution Period, it shall be calculated on the basis of the actual number of days elapsed in such
period and an actual/360 basis.
6
REDEMPTION
6.1 Scheduled Redemption
Unless previously redeemed, the Certificates shall be redeemed in full by the Issuer on the Scheduled
Redemption Date in cash for an amount equal to the Redemption Amount as of such date, and the
Trust shall be dissolved following such payment in full.
The Redemption Amount shall be distributed on the Scheduled Redemption Date pro rata amongst
the Certificates. The Calculation Agent will calculate the amount payable in respect of any Certificate
by multiplying the Redemption Amount by a fraction of which the numerator is the principal amount
of the relevant Certificate and the denominator is the Aggregate Face Amount on the Scheduled
Redemption Date and rounding the resultant figure to the nearest U.S.$0.01, U.S.$0.005 being
rounded upwards.
6.2 Dissolution Event—Early Redemption
Following the occurrence of a Dissolution Event, the Certificates may, subject to Condition 13
(Dissolution Events), be redeemed in full on the Early Redemption Date in cash at an amount equal
to the Redemption Amount as of such date (together with all accrued but unpaid amounts due under
these Conditions), and the Trust shall be dissolved following such payment in full.
The Redemption Amount shall be distributed on the Early Redemption Date pro rata amongst the
Certificates. The Calculation Agent will calculate the amount payable in respect of any Certificate by
multiplying the Redemption Amount by a fraction of which the numerator is the principal amount of
the relevant Certificate and the denominator is the Aggregate Face Amount on the Early Redemption
Date and rounding the resultant figure to the nearest U.S.$0.01, U.S.$0.005 being rounded upwards.
6.3 Redemption for Taxation Reasons
The Trust shall be dissolved at the option of the Trustee (if ALAQARIA shall have first exercised its
option under the Sale Undertaking) and in such case the Certificates will be redeemed by the Issuer
in whole, but not in part, not less than 45 days nor more than 60 days prior to such Tax
Redemption Date at the Redemption Amount on the Periodic Distribution Date specified in the
notice (Tax Redemption Date) given by the Issuer to Certificateholders in accordance with Condition
16 (which notice shall be irrevocable):
(a)
if (i) the Issuer has or will become obliged to pay additional amounts pursuant to Condition 11
(Taxation) as a result of any change in, or amendment to, the laws or regulations of any
Relevant Jurisdiction, or any change in the application or official interpretation of such laws or
regulations (including a holding by a court of competent jurisdiction), which change or
amendment becomes effective on or after 31 July 2007, and (ii) such obligation cannot be
avoided by the Issuer taking reasonable measures available to it; or
27
(b)
if (i) the Issuer has received notice from either the Obligor or the Investment Manager that the
Obligor or, as the case may be, the Investment Manager has or will become obliged to pay any
additional amounts pursuant to the terms of the Purchase Undertaking or, as the case may be,
Investment Management Agreement as a result of any change in, or amendment to, the laws or
regulations of any Relevant Jurisdiction, or any change in the application or official
interpretation of such laws or regulations (including a holding by a court of competent
jurisdiction), which change or amendment becomes effective on or after 31 July 2007, and (ii)
such obligation cannot be avoided by the Obligor or, as the case may be, the Investment
Manager taking reasonable measures available to it,
provided that no such notice of redemption shall be given earlier than 60 days prior to the earliest
date on which, in the case of Condition 6.3(a)(i), the Issuer would be obliged to pay such additional
amounts were a payment in respect of the Certificates then due.
Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall
deliver to the Principal Paying Agent (x) a certificate signed by two directors of the Issuer (in the
case of Condition 6.3(a)(i)), or the Obligor or, as the case may be, the Investment Manager (in the
case of Condition 6.3(a)(ii)) stating that the obligation referred to in (i) or (ii) above cannot be
avoided by the Issuer or, as the case may be, the Obligor or the Investment Manager (having taken
reasonable measures available to it) and (y) an opinion of independent legal or tax advisors of
recognised international standing to the effect that such change or amendment has occurred
(irrespective of whether such amendment or change is then effective) and the Principal Paying Agent
shall (without any investigation required of it) accept such certificate and opinion as sufficient
evidence thereof in which event it shall be conclusive and binding on the Certificateholders.
Following satisfaction of the conditions set out above in Condition 6.3, the Certificates shall be
redeemed in full by the Issuer on the Tax Redemption Date in cash for an amount equal to the
Redemption Amount as of such date, and the Trust shall be dissolved following such payment in full.
The Redemption Amount shall be distributed on the Tax Redemption Date pro rata amongst the
Certificates. The Calculation Agent will calculate the amount payable in respect of any Certificate by
multiplying the Redemption Amount by a fraction of which the numerator is the principal amount of
the relevant Certificate and the denominator is the Aggregate Face Amount on the Scheduled
Redemption Date and rounding the resultant figure to the nearest U.S.$0.01, U.S.$0.005 being
rounded upwards.
6.4 No other Dissolution
The Issuer shall not be entitled to redeem the Trust Certificates, and the Trustee shall not be entitled
to dissolve the Trust otherwise than as provided in this Condition 6 and Condition 13.
7
COVENANTS
Qatar Alaqaria Sukuk Company has covenanted in the Declaration of Trust that, among other
things, for so long as any Certificate is outstanding, it shall not:
(a)
incur any
respect of
respect of
issue as at
indebtedness in respect of borrowed money whatsoever, or give any guarantee in
any obligation of any person or issue any shares (or rights, warrants or options in
shares or securities convertible into or exchangeable for shares) other than those in
the Closing Date;
(b)
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) except pursuant to any Transaction Document;
(c)
sell, transfer, assign, participate, exchange, or pledge, mortgage, hypothecate or otherwise
encumber (by security interest, lien (statutory or otherwise), preference, 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), any part of its title to any of the Trust Assets or
any interest therein except pursuant to any Transaction Document;
(d)
use the proceeds of the issue of the Certificates for any purpose other than pursuant to the
Investment Plan;
(e)
amend or agree to any amendment of any of the Transaction Documents to which it is a party
or to its constitutional documents;
(f)
exercise its option under either the Purchase Undertaking except in its capacity as Trustee;
28
(g)
act as trustee in respect of any trust other than the Trust, or in respect of any parties other
than the Certificateholders and/or act as agent for any trust arrangement (other than the Trust);
(h)
have any subsidiaries or employees;
(i)
redeem any of its shares or pay any dividend or make any other distribution to its shareholders;
(j)
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 proceedings
with respect to it; or
(k)
enter into any contract, transaction, amendment, obligation or liability other than the
Transaction Documents and any subscription agreement connected to the issue of the
Certificates to which it is a party or engage in any business or activity other than:
(i)
as provided for or permitted in the Transaction Documents;
(ii)
the ownership, management and disposal of the Trust Assets as provided in the
Transaction Documents; and
(iii) such other matters which are incidental thereto.
8
CALCULATION AGENT
8.1 Appointment
Qatar Alaqaria Sukuk Company shall procure that so long as any of the Certificates remains
outstanding there shall at all times be a Calculation Agent to undertake all necessary calculations
and/or determinations required pursuant to the Conditions and the Transaction Documents for the
purposes of calculating the relevant amounts due to be paid and/or delivered on the Certificates
provided that Qatar Alaqaria Sukuk Company may terminate the appointment of such Calculation
Agent in accordance with the provisions of the Agency Agreement. Unless otherwise specified, all
such calculations shall be undertaken in respect of each U.S.$1,000 in principal amount of
Certificates. In the event of the appointed office of any bank being unable or unwilling to continue to
act as the Calculation Agent or failing duly to determine the amount due to be paid or delivered on
any Periodic Distribution Date or Redemption Date, Qatar Alaqaria Sukuk Company shall appoint
the London office of another major bank engaged in the London interbank market to act in its place.
If Qatar Alaqaria Sukuk Company shall fail, within a reasonable time, to appoint any such
replacement, the Trustee shall be entitled (but not obliged) to make such appointment. The
Calculation Agent may not resign its duties or be removed without a successor having been
appointed.
8.2 Determinations binding
Any determination or calculation made by the Calculation Agent shall (in the absence of manifest or
proven error) be final and binding on the Issuer, the Trustee, the Obligor, the Investment Manager,
the Certificateholders and the other Agents. The Calculation Agent may consult on any matter with
any legal or other adviser selected by it and it shall not be liable in respect of anything done or
omitted to be done relating to that matter in good faith in accordance with that adviser’s opinion.
9
PAYMENT
9.1 Payments in Respect of Certificates
Subject to Condition 9.2, payment of any Redemption Amount will be made on the relevant due date
for payment by the Principal Paying Agent by wire transfer in same day funds to the registered
account of each Certificateholder or by a U.S. dollar cheque drawn on a bank that processes
payments in U.S. dollars and mailed to the registered address of the Certificateholder if it does not
have a registered account. Payments of any Redemption Amount due will only be made against
surrender of the relevant Certificate at the specified office of any of the Paying Agents.
Subject to Condition 9.2, payment of any Periodic Distribution Amount will be made on the relevant
due date for payment by the Principal Paying Agent by wire transfer in same day funds to the
Certificateholder shown on the Register at the close of business on the seventh day before the
Periodic Distribution Date. Such payment will be made to the registered account of each
Certificateholder or by a U.S. dollar cheque drawn on a bank that processes payments in U.S. dollars
and mailed to the registered address of the Certificateholder if it does not have a registered account.
29
For the purposes of this Condition, a Certificateholder’s registered account means the U.S. dollar
account maintained by or on behalf of it with a bank that processes payments in U.S. dollars, details
of which appear on the Register at the close of business on the second Business Day before the due
date for payment and a Certificateholder’s registered address means its address appearing on the
Register at that time.
9.2 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 11
(Taxation).
9.3 Payment only on a Payment Business Day
Where payment is to be made by transfer to a 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 date for payment or if later, on the
Business Day on which the relevant Certificate is surrendered at the specified office of a Paying
Agent.
Certificateholders will not be entitled to any Periodic Distribution Amount and/or Redemption
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 arrives after
the due date for payment.
If the amount of the Periodic Distribution Amount and/or Redemption Amount is not paid in full
when due, the Registrar will annotate the Register with a record of the amount actually paid.
In this Condition, Payment Business Day means a day on which commercial banks in London and
New York are open for general business and, in the case of presentation of a Certificate, in the place
in which the Certificate is presented.
9.4 Agents
The names of the initial Agents and their initial specified offices are set out at the end of these
Conditions. Qatar Alaqaria Sukuk Company reserves the right at any time to vary or terminate the
appointment of any Agent and to appoint additional or other Agents provided that it will (a) for so
long as the Certificates are listed on the Official List of the UK Listing Authority, maintain a Paying
Agent in London, and (b) ensure that it maintains a Paying Agent in a Member State of the
European Union that will not be 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 such Directive. Notice of any termination or appointment and of any changes in specified offices
will be given to Certificateholders promptly by the Issuer in accordance with Condition 16 (Notices).
10
DISSOLUTION OF TRUST
10.1 Scheduled Dissolution
Unless the Certificates are previously redeemed in full (and the Trust is dissolved after such
redemption) following a Dissolution Event pursuant to Condition 6.2 or for taxation reasons
pursuant to Condition 6.3, the Certificates will be redeemed in full by the Issuer on the Scheduled
Redemption Date in accordance with Condition 6.1, and the Trust will only be dissolved following
such payment in full.
10.2 Dissolution following a Dissolution Event
Subject to Condition 13 (Dissolution Events), the Certificates shall be redeemed in full by the Issuer
on the Early Redemption Date in accordance with Condition 6.2, and the Trust will only be
dissolved following such payment in full.
The Periodic Distribution Period shall be adjusted to represent the period from, and including, the
immediately preceding Periodic Distribution Date (or the Closing Date, as the case may be) to, but
excluding, the Early Redemption Date, and the corresponding Periodic Distribution Amount shall be
adjusted accordingly.
30
Upon payment in full of such amounts, the Certificates shall cease to represent interests in the Trust
Assets and no further amounts shall be payable in respect thereof.
10.3 Cancellation
All Certificates which are redeemed will forthwith be cancelled and accordingly may not be held,
reissued or sold.
11 TAXATION
All payments in respect of the Certificates shall be made in full without withholding or deduction for,
or on account of, any present or future taxes, levies, duties, fees, assessments or other charges of
whatever nature, imposed or levied by or on behalf of a Relevant Jurisdiction and all charges,
penalties or similar liabilities with respect thereto (Taxes), unless the withholding or deduction of such
Taxes is required by law. In such event, the Issuer shall be required to pay additional amounts so
that the full amount which otherwise would have been due and payable under the Certificates (if no
such withholding or deduction had been made or required to be made) is received by parties entitled
thereto, except that no such additional amount shall be payable by the Issuer in relation to any
payment in respect of any Certificate:
(a)
presented for payment by or on behalf of a holder 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; or
(b)
presented for payment more than 30 days after the Relevant Date 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 Payment Business Day; or
(c)
where such withholding or deduction is imposed on a payment to an individual and is
required to be made pursuant to the European Council Directive 2003/48/EC or any law
implementing or complying with, or introduced in order to conform to, such Directive; or
(d)
presented for payment by or on behalf of a Certificateholder who would be able to avoid
such withholding or deduction by presenting the relevant Certificate to another Paying
Agent in a Member State of the European Union.
12 PRESCRIPTION
Claims in respect of amounts due in respect of the Certificates will become prescribed unless made
within periods of 10 years (in the case of principal) 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 9 (Payment).
13 DISSOLUTION EVENTS
The occurrence of any of the following events shall constitute a Dissolution Event:
(a)
a default is made in the payment of any Periodic Distribution Amount or Redemption
Amount due in respect of any Certificate and such default continues for a period of seven
days; or
(b)
the Issuer defaults in the performance or observance of any of its other obligations under
or in respect of the Declaration of Trust or the Agency Agreement and (except in any case
where the failure is incapable of remedy) such default remains unremedied for 21 days
after written notice thereof, addressed to the Issuer by the Trustee, has been delivered to
the Issuer; or
(c)
an Event of Default occurs under the Purchase Undertaking; or
(d)
the Issuer repudiates any Transaction Document to which it is a party or does or causes
to be done any act or thing evidencing an intention to repudiate any Transaction
Document to which it is a party; or
(e)
at any time it is or will become unlawful for the Issuer (by way of insolvency or
otherwise) to perform or comply with any of its obligations under the Transaction
Documents to which it is a party or any of the obligations of the Issuer under the
Transaction Documents to which it is a party are not, or cease to be, legal, valid, binding
and enforceable; or
31
(f)
either (i) the Issuer becomes insolvent or is unable to pay its debts as they fall due; (ii) an
administrator or liquidator of the whole or substantially the whole of the undertaking,
assets and revenues of the Issuer is appointed (or application for any such appointment is
made); (iii) the Issuer takes any action for a readjustment or deferment of any of its
obligations or makes a general assignment or an arrangement or composition with or for
the benefit of its creditors or declares a moratorium in respect of any of its indebtedness
or any guarantee or any indebtedness given by it; (iv) the Issuer ceases or threatens to
cease to carry on all or substantially the whole of its business (otherwise than for the
purposes of or pursuant to an amalgamation, reorganisation or restructuring whilst
solvent); or
(g)
any event occurs which under the laws of Cayman Islands has an analogous effect to any
of the events referred to in paragraph (f).
Upon the occurrence of a Dissolution Event, the Trustee shall give notice of the occurrence of such
Dissolution Event to the Certificateholders (in accordance with Condition 16 (Notices)) and the
Delegate with a request to such Certificateholders to indicate if they wish the Trust to be dissolved.
Upon the occurrence of a Dissolution Event following the issuance of a notice pursuant to the
preceding paragraph, the Trustee in its sole discretion may, and if so requested in writing by the
holders of at least 25 per cent. in aggregate principal amount of such Certificates then outstanding, or
if so directed by an Extraordinary Resolution of the holders of the Certificates shall (subject in each
case to being indemnified and/or secured to its satisfaction) give notice to all the holders of such
Certificates in accordance with Condition 16 (Notices) that the Certificates are to be redeemed at the
Redemption Amount on the date specified in such notice (the Early Redemption Date) and that the
Trust is to be dissolved on the day after the last outstanding Certificate has been paid in full.
For the purpose of (a) above, amounts shall be considered due in respect of the Certificates
(including any amounts calculated as being payable under Condition 5 (Periodic Distributions) and
Condition 6 (Redemption)) notwithstanding that the Issuer or the Trustee has at the relevant time
insufficient funds or Trust Assets to pay such amounts.
The Trustee has delegated to the Delegate certain of its rights and obligations under this Condition
(including, but not limited to the right to give notice to the Issuer under Condition 13(b) as well as
the right to give notice to the Certificateholders of (i) the occurrence of a Dissolution Event and (ii)
the fact that the Certificates are to be redeemed and the Trust dissolved).
14 ENFORCEMENT AND EXERCISE OF RIGHTS
14.1 Upon the occurrence of a Dissolution Event, to the extent that the amounts payable in respect
of the Certificates have not been paid and/or delivered in full, the Trustee shall (acting on behalf
of the Certificateholders) take one or more of the following steps:
(a)
enforce the provisions of the Purchase Undertaking against the Obligor; or
(b)
take such other steps as the Trustee may consider necessary to recover amounts due and/or
deliverable to the Certificateholders.
Notwithstanding the foregoing, the Trustee may at any time, at its discretion and without
notice, take such proceedings and/or other steps as it may think fit against or in relation to the
Issuer and/or the Obligor to enforce their respective obligations under the Transaction
Documents, the Conditions and the Certificates.
14.2 The Trustee shall not be bound to take any action in relation to the Trust Assets or any
Dissolution Event or to take any proceedings or any other steps under these Conditions or the
Transaction Documents unless required to do so (i) by an Extraordinary Resolution or (ii) in
writing by Certificateholders holding 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 or secured to
its satisfaction against all Liability to which it may render itself liable or which it may incur by
so doing.
14.3 No Certificateholder shall be entitled to proceed directly against the Issuer or ALAQARIA
unless (a) 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 (b) the relevant Certificateholder (or such
Certificateholders together with any other Certificateholders who propose to proceed directly
against any of the Issuer or ALAQARIA) holds at least 25 per cent. of the then aggregate
principal amount of the Certificates then outstanding. Under no circumstances shall the Trustee
32
or any Certificateholders have any right to cause the sale or other disposition of any of the
Trust Assets, and the sole right of the Trustee and Certificateholders against the Issuer and
ALAQARIA shall be to enforce their respective obligations under the Transaction Documents.
14.4 Conditions 14.1, 14.2, and 14.3 are subject to this Condition 14.4. After enforcing and
distributing or realising the Trust Assets and 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
steps against the Trustee to recover any 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 Issuer
or the Trustee, nor shall any of them have any claim in respect of the Trust Assets of any other
trust established by the Trustee.
The Trustee has delegated to the Delegate certain of its rights and obligations under this
Condition.
15 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 or an indemnity given
before replacements will be issued.
16 NOTICES
16.1 All notices to the Certificateholders will be valid if:
(a)
published in a daily newspaper (which will be in a leading English language newspaper
having general circulation) in the Gulf region and a daily newspaper having general
circulation in London (which is expected to be the Financial Times) both approved by the
Trustee; or
(b)
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.
In addition, the Issuer shall also ensure that notices are duly given or published in a manner
which complies with the rules and regulations of any listing authority, stock exchange and/or
quotation system (if any) by which the Certificates have then been admitted to listing, trading
and/or quotation. 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 publication.
16.2 Notices to be given by any Certificateholder shall be given in writing and given by lodging the
same (together with the relevant Certificates) with the Registrar and any relevant Agent.
17
MEETINGS OF CERTIFICATEHOLDERS, MODIFICATION, WAIVER, AUTHORISATION
AND DETERMINATION
17.1 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
Certificateholders, proxies or representatives holding or representing more than half in aggregate
principal amount of the Certificates for the time being outstanding, or at any adjourned such
meeting two or more Certificateholders, proxies or representatives present whatever the principal
amount of the Certificates held or represented by him or them. To be passed, an Extraordinary
Resolution requires a majority in favour consisting of not less than three-quarters of the persons
voting on a show of hands or, if a poll is demanded, a majority of not less that three-quarters
of the votes cast on such poll. An Extraordinary Resolution duly passed at any meeting of
Certificateholders will be binding on all holders of the Certificates, whether or not they are
present at the meeting and whether or not voting. In addition, a resolution in writing signed by
or on behalf of representatives holding or representing more than ninety per cent. (90 per cent.)
in aggregate of the principal amount of the Certificates will take effect as if it were an
33
Extraordinary Resolution. Such a resolution in writing may be contained in one document or
several documents in the same form, each signed by or on behalf of the relevant
Certificateholders.
17.2 The Trustee may agree to, without the consent or sanction of the Certificateholders, to any
modification of, or to the waiver or authorisation of any breach or proposed breach of, any of
these Conditions or any of the provisions of the Declaration of Trust, or determine, without any
such consent as aforesaid, that any Dissolution Event or Potential Dissolution Event shall not
be treated as such, which in any such case is not, in the opinion of the Trustee materially
prejudicial to the interests of Certificateholders or may agree, without any such consent as
aforesaid, to any modification which, in its opinion, is of a formal, minor or technical nature or
to correct a manifest or proven error.
17.3 In connection with the exercise by it of any of its trusts, powers, authorities and discretions
(including, without limitation, any modification, waiver, authorisation, determination or
substitution), 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
or groups of 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 except to the extent provided in Condition 11 (Taxation).
17.4 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 16 (Notices).
The Trustee has delegated to the Delegate certain of its rights and obligations under this
Condition.
18 INDEMNIFICATION AND LIABILITY OF THE TRUSTEE
18.1 The Declaration of Trust contains provisions for the indemnification of the Trustee (and its
agents and delegates) in certain circumstances and for its relief from responsibility, including
provisions relieving it from taking action unless indemnified and/or secured to its satisfaction. In
particular, in connection with the exercise of any of its rights in respect of the Trust Assets, the
Trustee shall not be required to take any action unless directed to do so in accordance with
Condition 14.2.
18.2 The Trustee makes no representation and assumes no responsibility for the validity, sufficiency
or enforceability of the obligations of ALAQARIA under the Transaction Documents to which
it is a party and shall not under any circumstances have any liability or be obliged to account
to Certificateholders in respect of any payments which should have been paid by ALAQARIA
but are not so paid 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.
18.3 The Trustee is excepted 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 depositary 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 or misconduct
of the Trustee.
19 CURRENCY INDEMNITY
The Issuer agrees to indemnify each Certificateholder against any loss incurred by such holder as a
result of any judgment or order being given or made for any amount due under such Certificate and
such judgment or order is expressed and paid in a currency (the Judgment Currency) other than U.S.
dollars and as a result of any variation as between (a) the rate of exchange at which the U.S. dollar
is converted into the Judgment Currency for the purpose of such judgment or order and (b) the rate
of exchange at which the holder on the date of payment of such judgment or order is able to
34
purchase U.S. dollars with the amount of the Judgment Currency actually received by the holder.
This indemnification will constitute a separate and independent obligation of the Issuer and will
continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term
rate of exchange includes any premiums and costs of exchange payable in connection with the
purchase of, or conversion into, U.S. dollars.
20 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.
21 GOVERNING LAW AND SUBMISSION TO JURISDICTION
21.1 The Transaction Documents are governed by, and will be construed in accordance with, English
law.
21.2 The Issuer has in the Declaration of Trust irrevocably and unconditionally agreed for the benefit
of the Trustee, the Delegate and Certificateholders that the courts of England are to have nonexclusive jurisdiction to settle any dispute (a Dispute) 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.
21.3 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
judgment 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 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.
21.4 Notwithstanding the above terms of this Condition, the Certificateholders may, at any time,
serve a notice upon the Issuer requiring that a particular Dispute be resolved by arbitration.
Upon service of such a notice, that Dispute shall be referred to and finally resolved by
arbitration pursuant to the Rules of Arbitration of the International Chamber of Commerce (the
Rules) from time to time in force. Those Rules are deemed to be incorporated by reference into
this Condition insofar as they do not conflict with its express provisions. The tribunal shall be
composed of three arbitrators appointed in accordance with the Rules. In the case of a multiparty dispute, the arbitrators shall be appointed in accordance with Article 10 of the Rules. The
seat of the arbitration shall be London, England and the language of the arbitration shall be
English.
21.5 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.
22
DEFINITIONS AND INTERPRETATION
22.1 Definitions
In these Conditions:
Agents means any of the Paying Agents, the Registrar, the Replacement Agent, the Calculation Agent
or the Transfer Agent appointed by the Trustee pursuant to the Agency Agreement.
Aggregate Face Amount means, at any time, the aggregate principal amount of the outstanding
Certificates which shall be U.S.$300,000,000.
Assets shall have the meaning given to such term in Condition 4.1.
35
Business Day means a day (other than a Friday) on which commercial banks and foreign exchange
markets are open for general business in Doha, London and, if a payment in U.S. dollars is required
on such day, New York
Dissolution Event shall have the meaning given to such term in Condition 13.
Early Redemption Date has the meaning given to such term in Condition 13.
Event of Default shall have the meaning given to such term in the Purchase Undertaking.
The events of default are defined as any of the events set out below:
(a) either ALAQARIA or the Investment Manager fails to pay any amount payable pursuant to
any of the Transaction Documents to which it is a party and such default continues for a
period of seven days;
(b) ALAQARIA fails to comply with any of the covenants contained in Clause 4 (Undertakings)
of the Purchase Undertaking;
(c) ALAQARIA (in any capacity) defaults in the performance or observance of any of its other
obligations under or in respect of the Transaction Documents to which it is a party;
(d) any of the following events occur (the Cross Default):
(i)
any Financial Indebtedness of ALAQARIA is not paid when due nor within any
applicable grace period;
(ii) any Financial Indebtedness of ALAQARIA is declared to be or otherwise becomes due
and payable prior to its specified maturity as a result of an event of default (however
described);
(iii) any commitment for any Financial Indebtedness of ALAQARIA is cancelled or
suspended by a creditor of ALAQARIA, as a result of an event of default (however
described);
(iv) any creditor of ALAQARIA becomes entitled to declare any Financial Indebtedness of
ALAQARIA, due and payable prior to its specified maturity as a result of an event of
default (however described),
provided that no Event of Default will occur under this paragraph if the aggregate amount of
Financial Indebtedness or commitment for Financial Indebtedness falling within subparagraphs (i) to (iv) above is less than U.S.$2,500,000 (or its equivalent in any other
currency or currencies);
(e) ALAQARIA is unable or admits inability to pay its debts, as they fall due, suspends making
payments on any of its debts or, by reason of actual or anticipated financial difficulties,
commences negotiations with one or more of its creditors with a view to a general
rescheduling of any of its Financial Indebtedness;
(f)
ALAQARIA takes any corporate action or other steps are taken or legal proceedings are
started for its winding-up, dissolution, administration, bankruptcy or re-organisation (whether
by way of voluntary arrangement, scheme of arrangement or otherwise) or for the
appointment of a liquidator, receiver, administrator, administrative receiver, conservator,
custodian, trustee or similar officer of ALAQARIA or of any or all of its revenues or assets,
provided that this paragraph shall not apply to any corporate action, legal proceedings or
other procedure presented by a creditor or any other person which is reasonably considered by
ALAQARIA to be a frivolous or vexatious claim and is being diligently contested in good
faith;
(g) any action, condition or thing at any time required to be taken, fulfilled or done in order (i)
to enable ALAQARIA or the Investment Manager lawfully to enter into, exercise its rights
and perform and comply with its obligations under and in respect of the Transaction
Documents (to which it is a party) or (ii) to ensure that the obligations are binding is not
taken or done within 30 days of the Trustee or the Delegate giving notice in writing to
ALAQARIA or the Investment Manager (as the case may be);
(h) ALAQARIA repudiates a Transaction Document or evidences an intention to repudiate a
Transaction Document;
36
(i)
any court or arbitration makes a final non-appealable judgment or arbitral award against
ALAQARIA the amount of which, when aggregated with any other unsatisfied final nonappealable judgments or arbitral awards against ALAQARIA, exceeds U.S.$2,500,000 and
which ALAQARIA fails to pay within 30 days of the date at which the obligation to pay
arises;
(j)
by or under the authority of any government:
(i)
the board of directors of ALAQARIA is displaced or the authority of ALAQARIA in
the conduct of its business is wholly or substantially curtailed; or
(ii) all or a majority of the issued share of ALAQARIA or the whole or any substantial
part (the book value of which is 40 per cent. or more of the book value of the whole)
of its revenues or assets is nationalised or expropriated; or
(k) at any time the government of Qatar, directly or indirectly, ceases to own at least twenty per
cent. of the issued capital in ALAQARIA.
Cure Periods
(1) Notwithstanding any of the above but subject to sub-clause (2), no Event of Default will
occur if the breach is capable of remedy and is remedied within five (5) Business Days of
ALAQARIA becoming aware of the breach and the Trustee or the Delegate giving notice to
ALAQARIA.
(2) No Event of Default under sub-clauses (c) or (d) above will occur if the breach is capable of
remedy and is remedied within fifteen (15) Business Days of the earlier of:
(i)
ALAQARIA notifying the Trustee and the Delegate of any Event of Default; and
(ii) the Trustee or the Delegate giving notice to ALAQARIA.
For these purposes:
Financial Indebtedness means any indebtedness for or in respect of:
(a)
moneys borrowed;
(b)
any amount raised by acceptance under any acceptance credit facility or dematerialised
equivalent;
(c)
any amount raised pursuant to any note purchase facility or the issue of bonds, notes,
debentures, loan stock or any similar instrument;
(d)
the amount of any liability in respect of any lease or hire purchase contract which would, in
accordance with International Financial Reporting Standards (IFRS), be treated as a finance
or capital lease;
(e)
receivables sold or discounted (other than any receivables to the extent they are sold on a
non-recourse basis);
(f)
any amount raised under any other transaction (including any forward sale or purchase
agreement) having the commercial effect of a borrowing;
(g)
any derivative transaction entered into in connection with protection against or benefit from
fluctuation in any rate or price (and, when calculating the value of any derivative transaction,
only the marked to market value shall be taken into account);
(h)
any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or
documentary letter of credit or any other instrument issued by a bank or financial institution
excluding any performance bonds;
(i)
any amount of any liability under an advance or deferred purchase agreement if one of the
primary reasons behind the entry into this agreement is to raise finance;
(j)
any obligations incurred in respect of any Islamic financing arrangements; and
(k)
(without double counting) the amount of any liability in respect of any guarantee or
indemnity for any of the items referred to in paragraphs (a) to (j) above.
Excess Profit shall have the meaning given to such term in Condition 4.1.
Exercise Date means the date on which the Exercise Price is due pursuant to the terms of the
Purchase Undertaking or the Sale Undertaking.
37
Exercise Price means the price payable by the Obligor to purchase the Assets under either the
Purchase Undertaking or the Sale Undertaking.
Investment Management Agreement shall have the meaning given to such term in Condition 4.1.
Investment Manager shall have the meaning given to such term in Condition 4.1.
Investment Plan shall have the meaning given to such term in Condition 4.1.
Late Payment Amount means any late payment amount paid by the Obligor pursuant to clause 3.5 of
the Purchase Undertaking or clause 3.6 of the Sale Undertaking.
Liability means any loss, damage, cost, charge, claim, demand, expense, judgment, action, proceeding
or other liability whatsoever (including, without limitation, in respect of taxes, duties, levies, imposts
and other charges) and including any value added tax or similar tax charged or chargeable in respect
thereof and properly incurred legal fees and expenses on a full indemnity basis.
LIBOR means for each Periodic Distribution Date, the London inter-bank offered rate for threemonth U.S. dollar deposits determined in accordance with Condition 5.2 (LIBOR determinations).
LIBOR Determination Date means the second London Business Day preceding the first day of each
Periodic Distribution Period.
Liquidity Amounts shall have the meaning given to such term in Condition 4.1.
London Business Day means a day on which commercial banks and foreign exchange markets are
open for general business in London.
Margin means 0.73 per cent. per annum.
Obligor shall have the meaning given to such term in Condition 4.1.
Periodic Distribution Amount shall have the meaning given to such term in Condition 5.1.
Periodic Distribution Date shall have the meaning given to such term in Condition 5.1.
Periodic Distribution Period shall have the meaning given to such term in Condition 5.1.
person means any individual, corporation, partnership, joint venture, association, joint stock company,
trust, unincorporated organisation, limited liability company or government or agency, or political
subdivision thereof, or other entity.
Potential Dissolution Event means any event which, with the giving of notice, lapse of time or
fulfilment of any other applicable condition (or any combination of any of the foregoing) would
constitute a Dissolution Event.
Proceedings shall have the meaning given to such term in Condition 21.2.
Purchase Undertaking shall have the meaning given to such term in Condition 4.1.
Redemption Amount means, as of any date, the aggregate principal amount of the Certificates then
outstanding plus all unpaid accrued Periodic Distribution Amounts as of such date and any
additional amounts that may be due pursuant to Condition 11 (Taxation).
Redemption Date shall have the meaning given to such term in Condition 4.2.
Reference Banks means the principal London office of each of four major banks engaged in the
London inter-bank market selected by, or on behalf, of the Issuer; provided that once a Reference
Bank has first been selected by the Issuer or its duly appointed representative, such Reference Bank
shall not be changed unless it ceases to be capable of acting as such.
Register shall have the meaning given to such term in Condition 1.1.
Regulation S means Regulation S of the U.S. Securities Act of 1933.
Relevant Date means, in respect of any payment in relation to a Certificate, the later of (a) the date
on which the payment first becomes due but, and (b) if the full amount payable has not been
received by the Principal Paying Agent on or before the due date, the date on which (the full amount
having been so received) notice to that effect has been given to the Certificateholders by the Issuer in
accordance with Condition 16.
Relevant Jurisdiction means the State of Qatar and the Cayman Islands or any political subdivision or
any authority thereof or therein having power to tax.
Sale Undertaking shall have the meaning given to such term in Condition 4.1.
Scheduled Redemption Date means 2 August 2012.
38
Screen Rate means in relation to LIBOR, the rate for three-month deposits in U.S. dollars, which
appears on Reuters screen page LIBOR 01 (or such replacement page on that service which displays
the same information).
Tax Redemption Date shall have the meaning given to such term in Condition 6.3.
Taxes shall have the meaning given to such term in Condition 11.
Transaction Account shall have the meaning given to such term in Condition 4.1.
Transaction Documents shall have the meaning given to such term in Condition 4.1.
Trust shall have the meaning given to such term in Condition 4.1.
Trust Assets shall have the meaning given to such term in Condition 4.1.
U.S.$ and U.S. dollars means United States dollars, being the legal currency for the time being of the
United States of America.
22.2 Interpretation
In these Conditions, unless otherwise specified or unless the context otherwise requires headings and
sub-headings are for ease of reference only and shall not affect the construction of these Conditions.
39
GLOBAL CERTIFICATE
The Global Certificate contains the following provisions which apply to the Certificates 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 the paragraphs below.
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
Holder must look solely to Euroclear or Clearstream, Luxembourg, as the case may be, for its share
of each payment made to the Common Depositary.
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.
Payments
Payment of the Redemption Amount and any 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.
Notices
So long as all the Certificates are represented by 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.
Registration of Title
Registration of title to Certificates in a name other than that of the Common Depositary or its
nominee 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.
40
The Registrar will not register title to the Certificates in a name other than that of the Common
Depositary or its nominee for a period of seven calendar days preceding the due date for any
payment of a Distribution Amount in respect of the Certificates.
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.
Individual Certificates
Interests in the Global Certificate will be exchangeable or transferable, as the case may be, for
Certificates in definitive form (Individual 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 Individual
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.
41
USE OF PROCEEDS
The proceeds of the issue of the Certificates, being U.S.$300,000,000, will be used by Qatar Alaqaria
Sukuk Company to invest with the Investment Manager in accordance with the terms of the
Investment Management Agreement.
42
ALAQARIA – SELECTED FINANCIAL INFORMATION
The financial data summarised below is derived from the ALAQARIA audited financial statements
for the years ended 31 December 2006 and 2005 and the reviewed, financial statements for the
six-month period ended 30 June 2007. Half yearly results are not necessarily indicative of the results
for a full year. The ALAQARIA financial statements are prepared in accordance with IFRS and
presented in Qatari Riyals.
This summary should be read together with the financial statements which appear elsewhere in this
Prospectus.
Selected Balance Sheet Information:
June 30,
2007
(QR’000)
(Reviewed)
December 31,
2006
(QR’000)
(Audited)
December 31,
2005
(QR’000)
(Audited)
490,874
248,109
216,245
294,026
923,059
642,914
28,432
886,462
2,199
410,808
193,137
231,348
910,854
816,407
640,756
93,223
498,451
1,890
203,996
21,451
265,945
414,382
820,752
—
27,078
141,337
981
Total Assets
3,732,320
3,796,874
1,895,922
LIABILITIES AND EQUITY:
Liabilities:
Accounts payable and other credit balances
Unearned finance income
Loans
269,786
76,720
1,716,314
714,093
85,874
1,314,456
81,094
105,246
314,676
Total Liabilities
2,062,820
2,114,423
501,016
720,000
743,430
1,025
16,900
188,145
—
—
600,000
743,430
1,025
159,458
56,088
120,000
2,450
500,000
743,430
1,025
7,736
40,965
100,000
1,750
Total Equity
1,669,500
1,682,451
1,394,906
Total Liabilities and Equity
3,732,320
3,796,874
1,895,922
ASSETS:
Cash at banks
Accounts receivable and other debit balances
Finance lease receivable
Investments
Investment properties
Investment in associate company
Deferred finance charges
Projects in progress
Property and equipment
Equity:
Share capital
Legal reserve
General reserve
Investments revaluation reserve
Retained earnings
Proposed issue of bonus shares
Proposed Directors’ remuneration
43
Selected Income Statement Information:
Six-month
Period Ended
30 June
2007
(QR’000)
(Reviewed)
Six-month
Period Ended
30 June
2006
(QR’000)
(Reviewed)
Year Ended
December 31,
2005
(QR’000)
(Audited)
123,343
144,347
22,805
19,485
12,186
5,928
110,852
273
17,932
—
33,449
7,748
Rental income
Real estate investment income
Finance lease income
Share of profits from associate
Investments income (loss)
Other income
76,168
—
10,870
2,158
119,866
1,594
Total Income
210,656
121,602
328,094
170,254
Operations Cost
Depreciation for investment properties
Depreciation for property and equipment
General and administrative expenses
Finance charges
Foreign exchange (loss) gain
Impairment loss on investments
(24,506)
(16,844)
(418)
(8,909)
(26,712)
(1,210)
—
(11,949)
(12,073)
(286)
(6,696)
(7,308)
801
(14,900)
(20,744)
(25,500)
(734)
(17,100)
(27,698)
469
(99,214)
(19,961)
(23,374)
(362)
(9,507)
(13,851)
9,321
—
Profit for the Period/Year
132,057
69,191
137,573
112,520
1.83
0.96
1.91
1.56
Adjusted basic and diluted earnings
per share/QR
44
58,495
55,650
11,613
—
(5,610)
1,454
Year Ended
December 31,
2006
(QR’000)
(Audited)
ALAQARIA – FINANCIAL REVIEW AND ANALYSIS
The following discussion and analysis is derived from and should be read in connection with
ALAQARIA’s audited financial statements, and the related notes for the year ended 31 December
2006. ALAQARIA’s financial statements have been prepared in accordance with International
Financial Reporting Standards (IFRS). In addition, ALAQARIA has presented certain financial
information in the following discussion as at, and for the six months period ended, 30 June 2007. All
such half yearly financial information is derived from ALAQARIA’s unaudited interim financial
statements as at and for the six months period ended 30 June 2007.
1.
REVENUE ANALYSIS
ALAQARIA is Qatar’s main provider of commercial and housing facilities for energy sector related
industrial areas and cities.
The following chart shows the revenue breakdown of ALAQARIA’s business operations:
QR (million)
Revenue Breakdown
160
144
140
120
123
111
112
100
80
60
33
40
20
(20)
18
0
-
8
2005
23 20
36
29
12 6
2006
15
6 -
1
31/3/2006
-
6
1
1
31/3/2007
Year/Period
Rental Income
Real Estate Investment Income Finance Lease Income
Investment Income
Other Income
Finance leases provide stable, long term rental income for ALAQARIA as they are underpinned by
off-take arrangements, typically of between 10 to 15 years’ duration, with government owned entities
such as QP and Qatar Post. Under the finance leases that ALAQARIA has in place with its clients,
ownership is transferred to the lessee at the end of the lease. Payments under such leases are classified
as finance lease receivables by ALAQARIA. A finance lease receivable is stated as an amount equal
to the present value of the minimum lease payments at the inception of the lease.
ALAQARIA apportions lease payments between finance lease receivables and unearned finance
income so as to achieve a constant rate of return on the remaining balance of the receivable.
As at 31 December 2006 finance lease income had increased by 28 per cent. to QR 23 million
compared to QR 18 million for the year ended 31 December 2005.
No new finance lease projects have been completed in 2007, accordingly, ALAQARIA’s QR 11
million finance lease income for the first six months of 2007 is substantially the same as for the
corresponding period in 2006.
Rental Income
ALAQARIA’s rental income is derived from energy sector clients that ALAQARIA provides with
both residential and commercial developments. These clients are classified into two segments:
*
QP Related Clients: ALAQARIA provides residential facilities for Qatari Government joint
venture entities and state owned entities such as Qatar Gas, Ras Laffan Liquefied Natural Gas
Company, Dolphin Energy and other international oil majors and energy companies. These
projects are developed on land to which ALAQARIA has exclusive use rights granted by the
government to ALAQARIA. ALAQARIA enters into lease agreements for a period of between
5 and 25 years and provides the facilities management services for these properties during the
term of their lease. Guaranteed off-take agreements are signed before development commences
45
which provides ALAQARIA with a predetermined rate of return over the life of each project.
These agreements include a five year rental review, with the ability to pass increases in variable
operating costs for the facilities to the lessee.
Rental income derived from QP related clients totalled QR 99 million and QR 95 million for
the years ended 31 December 2006 and 2005 respectively.
New projects were completed towards the end of 2006 and early 2007. The completion of these
projects resulted in an increase in rental income from QP related clients from QR 48 million to
QR 54 million for the period ended 30 June 2006 and 30 June 2007 respectively.
*
Energy Related Clients: ALAQARIA provides labour accommodation for QP contractors on
land leased from the government in industrial cities throughout Qatar. ALAQARIA also
provides the facilities management services for these properties during the term of their leases.
The leases on these properties include an annual rental review, with the ability to pass through
increases in variable operating costs for facilities to the lessee.
Rental income from energy related clients increased from QR 11 million to QR 22 million for
the first six months of 2006 and 2007 respectively as a result of new projects completed during
the year 2006 and early 2007, and from QR 16 million to QR 24 million for the years ended
31 December 2005 and 2006 respectively.
Rental Income Breakdown
QR (million)
150
100
50
99
95
54
48
16
24
11
22
0
2005
2006
30/6/2006
30/6/2007
Year/Period
QP related clients
Energy related clients
Real Estate Investment Income
ALAQARIA has acquired a land bank for use in commercial development projects. Over the course
of 2006, ALAQARIA sold three pieces of land from this land bank. Additionally, ALAQARIA sold
a real estate project that it had been developing. The total income generated from these sale
transactions amounted to QR 144 million. ALAQARIA completed these transactions based on the
market conditions prevalent at the time that they were entered into and they do not represent an
on-going line of business for ALAQARIA.
Investment Income
ALAQARIA has made selective investments in closed companies, listed companies and real estate
funds. Income from these investments is received mainly in the form of dividends and profit from the
sale of such investments.
In March 2007, ALAQARIA sold its investment in Barwa Al Khor Ltd. and realised a net profit of
QR 105 million.
Due to the permanent decline in the Doha Securities Market over an extended period of time during
and before 2006, the Board of Directors of ALAQARIA decided to recognise certain impairment
losses that were previously recorded under equity into ALAQARIA’s income statement. This
impairment amounted to QR 99 million and was classified as ‘‘Impairment loss on investments’’ in
the statement of income for the year ended 31 December 2006.
46
Share of profits from Associate
In December 2006, ALAQARIA acquired 50 per cent. of ASAS. ALAQARIA’s share in ASAS’
profits amounted to QR 19 million for the year ended 31 December 2006 and QR 2.2 million for the
first six months of 2007. See Investment in associate company below.
Other income
Income which ALAQARIA classifies as ‘‘Other Income’’ is mainly generated from profits on Sharia
compliant deposits which ALAQARIA maintains on a short term basis to invest surplus funds.
‘‘Other Income’’ amounted to QR 6 million and QR 8 million for the years ended 31 December 2006
and 2005 respectively.
2.
OPERATIONS COST
QR (miliion)
Operations Cost Analysis
15
10
5
13
11
6
6
2
1
8
3
4
6
1 2
3
4 4
4
0
2005
2006
30/6/2006
30/6/2007
Year/Period
Staff Cost
Utilities
Repair and maintenance
Others
Operations costs are those costs incurred to maintain ALAQARIA’s investments properties, such as
maintenance, utilities and the costs of operations staff.
For the first six months of 2007 operating costs amounted to QR 25 million compared to
QR 12 million for the same period of 2006. The two primary reasons for the change are:
(a)
the increase in the number of operated projects during the 2007 period compared to 2006. This
increase has required greater investment in both personnel and resources; and
(b)
ALAQARIA has initiated a maintenance programme on the sewage system which services one
of its existing projects. The expected total cost is estimated at QR 9.5 million. As a matter of
prudence the amount was fully charged to the maintenance cost of the six months period ended
30 June 2007. However, ALAQARIA’s management will review and analyse the costs for the
possibility of further capitalisation upon completion of the programme.
3.
FINANCE CHARGES
Finance costs on projects under construction are capitalised as part of the cost of properties during
the construction period.
Accordingly, finance charges include the un-capitalised portion of the finance cost and the
amortisation of deferred finance charges.
Finance charges amounted to QR 28 million and QR 14 million for the years ended 31 December
2006 and 2005 respectively. The QR 14 million increase was primarily the result of an amortisation
charge of QR 9 million relating to the acquisition of Barwa Al Khor investment.
During the first half of 2007, finance charges increased by QR 19 million, mainly due to the increase
in ALAQARIA’s total debt.
4.
GENERAL AND ADMINISTRATIVE EXPENSES
ALAQARIA’s general and administrative expenses (the G&A) consist primarily of staff costs and
related staff expenses (housing allowance and rentals, travel and transportation, vacation and airline
tickets and bonus and incentives) in addition to other fixed head office expenditure. The increase in
47
the G&A during the year 2006 was mainly due to an increase in ALAQARIA’s G&A headcount.
This increase caused G&A related expenses to rise to QR 17 million from QR 10 million in 2005.
For the first half of 2007 the G&A related expenses increased to QR 9 million from QR 7 million in
the first half of 2006 due to the increased head count.
5.
ANALYSIS OF LIQUIDITY AND CASH FLOWS
The following table sets out a summary of ALAQARIA’s audited cash flows for the financial years
2006 and 2005, and reviewed cash flows the first six months of 2007 and 2006:
Period Ended Period Ended
Period Ended Period Ended 31 December 31 December
30 June 2007 30 June 2006
2006
2005
QR Million
QR Million
QR Million
QR Million
Net Cash from operating activities
Net Cash used in investing activities
Net Cash from financing activities
Cash at the end of period
171
(454)
363
491
95
(337)
107
69
138
(891)
960
411
137
(648)
626
204
Net Cash from operating activities
Net cash flow generated from operations stood at QR 171 million for the 6 month period ended 30
June 2007, vs. QR 95 million for the same period of 2006. There was a QR 2 million growth in net
cash flow generated from operations to QR 138 million for the year ended 31 December 2006 from
QR 137 million for 2005. The positive variance is driven by the number of projects completed over
that period and the increase in cash flows generated from these projects.
Net Cash used in investing activities
Cash flow used in investing activities amounted to QR 454 million for the 6 month period ended 30
June 2007 compared to QR 337 million for the same period of 2006 and QR 891 million for the year
ended December 2006 compared to QR 648 million for 2005. The increase in cash used in investing
activities is mainly attributable to the investments ALAQARIA is making in its new projects and the
acquisition of ASAS.
Net Cash from (used in) financing activities
ALAQARIA has diversified its funding sources by raising funds through regional and international
banks as well as international capital markets. As a result ALAQARIA generated a positive cash flow
of about QR 363 million from financing activities during the first half of 2007 and QR 960 million in
the year ended December 2006. This positive cash flow from financing activities has provided the cash
used in investing activities. During the year ended 31 December 2005, ALAQARIA increased its
capital by QR 237.5 million and had a share premium from this increase amounting to
QR 712.5 million. The total QR 950 million was used in part to pay QR 267 million of debt and
also directed towards various investments.
6.
BALANCE SHEET ANALYSIS
Assets
Cash at banks
Cash as of 30 June 2007 reached QR 491 million compared to QR 411 million as of
31 December 2006. The increase during the first half of 2007 was due to receiving the third and final
tranches of the USD 270 million Sukuk for USD 50 million and USD 70 million respectively.
Accounts Receivable
ALAQARIA’s accounts receivable consists mainly of advances to its contractors. As of 30 June 2007,
accounts receivable increased by QR 55 million compared to 31 December 2006 (QR 248 million and
QR 193 million respectively).
The majority of ALAQARIA’s rent receivables are from reputable off-takers (the Qatar government
and government related companies). The remainder are secured by bank guarantees and postdated
cheques. ALAQARI, during its twelve years of operations, has provided for only QR 200,000 worth
of bad debt.
48
Finance Lease Receivable
A finance lease receivable is stated at an amount equal to the present value of the minimum lease
payments at the inception of the lease.
Almost 95 per cent. of the finance lease receivables are due from QP. Approximately 5 per cent. of
the finance lease receivables are due from governmental entities.
Investments
Available-for-sale investments are financial assets that are not held for trading or held to maturity.
Available-for-sale instruments include local shares and private equity investments.
Gains and losses arising from a change in the fair value of available-for-sale investments are
recognised directly in equity. When the investments are sold, impaired, collected or otherwise disposed
of, the cumulative gain or loss recognised in equity is transferred to the income statement. When a
permanent decline in available-for-sale investments has taken place and there is objective evidence
that the asset is permanently impaired, the amount in excess of the cumulative profit that had been
recognised directly in equity is recognised in profit and loss even if the financial asset is not
derecognised.
Investments where the fair market price is not available are measured at cost, including transaction
costs less any impairment losses.
Details of ALAQARIA’s investments are:
Quoted investments:
Local shares
Managed funds at fair value
Unquoted investments:
Investments in unquoted local companies
Investments in unquoted foreign companies
Investments in real estate funds
Investment in Barwa Al Khor Ltd.*
Provision for impairment of unquoted local company investment
Total
*
30 June 2007
(QR million)
(Reviewed)
31 December
2006
(QR million)
(Audited)
115
27
201
25
142
226
38
5
110
—
(1)
152
17
5
110
553
(1)
684
294
910
In March 2007 ALAQARIA sold its investment in Barwa Al Khor Ltd. and realised a net profit of QR 105 million.
Investment Properties
Investment properties are investments in land and/or buildings in Qatar acquired or constructed to
earn rental income from such properties.
Investment properties are stated at cost less accumulated depreciation and any impairment losses.
Depreciation is calculated on a straight-line method. No depreciation is calculated on investments in
land. The rates of depreciation used are based on an estimate of the useful life of a ‘‘building’’
(investment property) as being between 20-33.3 years and the useful life of ‘‘infrastructure’’ being
50 years.
Gains or losses arising from the retirement or disposal of investment property are recognised as
income or loss in the statement of income.
The majority of ALAQARIA investment properties are located in industrial areas, where no active
market exists (ownership of property is restricted). Accordingly, in order for ALAQARIA
management to arrive at the fair value of the investment property and to test the assets impairment,
it uses other valuation techniques such as discounted future cash flows and best estimates of the
market value of similar assets.
49
Investment properties (net of depreciation) as of 30 June 2007 amounted to QR 923 million compared
to QR 816 million as of 31 December 2006.
Analysis of the balances according to the properties’ type of customers is as follows:
QR (million)
Investment Property Analysis
(Net of Depreciation)
700
600
500
400
300
200
100
0
591
160
544
164
160
8
106
6
June 30, 2007
December 31, 2006
As Of
Land
Buildings - Energy related clients
Buildings - QP related clients
Furniture and Equipment
Associates are those entities in which ALAQARIA holds, directly or indirectly, between 20 per cent.
and 50 per cent. of the voting power and exercises significant influence, but not control, over the
financial and operating policies. Investments in associated companies are accounted for under the
equity method of accounting. The financial statements include ALAQARIA’s share of the total
recognised gains and losses of associates on an equity accounted basis, from the date that significant
influence commences until the date that significant influence ceases. When ALAQARIA’s share of
losses exceeds its interest in an associate, ALAQARIA’s carrying amount is reduced to nil and
recognition of further losses is discounted except to the extent that ALAQARIA has incurred legal or
constructive obligations or made payments on behalf of an associate.
During the year 2006, ALAQARIA invested 50 per cent. in ASAS Real Estate (ASAS, a Qatari
company with limited liability (W.L.L) incorporated and registered on 11 December 2006). The paid
up capital of ASAS amounted to QR 5 million, of which QR 2.5 million was paid by ALAQARIA.
Investment in ASAS has been treated as an investment in an associate company, as the management
believe they can only exercise significant influence over the investee.
Each of the shareholders in ASAS has made an asset contribution to ASAS. The fair value of the
contributed assets amounted to QR 1,415 million of which ALAQARIA’s contribution is
QR 308 million (book value of QR 131 million).
As a result of this contribution, ALAQARIA has recognised a 50 per cent. of the gain from the sale
of its assets to the investee company into the income statement.
50
The following chart represents a summary of the financial information for ASAS for the periods
ended 30 June 2007 and 31 December 2006:
30 June 2007
(QR million)
(Reviewed)
31 December
2006
(QR million)
(Audited)
Total assets
Total liabilities
1,466
(3)
1,477
(18)
Net assets
1,463
1,459
ALAQARIA’s share of associate net assets
Less: Unrealised gains on acquiring investment
731
(88)
729
(88)
Net ALAQARIA’s share of associate
643
641
19
53
Net profit for the period
4
39
ALAQARIA’s share of associate’s profit for the period
2
19
Total revenue
Projects in progress are carried at cost, less any recognised impairment loss. Cost includes
professional fees and borrowing costs capitalised in accordance with ALAQARIA’s accounting policy.
Upon the completion of a project it will be either sold or recorded as an investment property or
financing lease as appropriate.
The value of ALAQARIA’s projects in progress has grown from QR 498 million as of 31 December
2006 to QR 886 million as of 30 June 2007.
An analysis of projects in progress as of 30 June 2007 by category of client is set out below:
QR (million)
Projects In Progress Analysis
800
700
600
500
400
300
200
100
0
692
82
QP and
Government
clients
17
Qp related
Clients
Energy related
clients
95
Commercial
Client Category
Deferred Finance Charges
Costs for acquiring investments financed by loans that will be settled in future periods are deferred at
the date of acquisition of investments and systematically expensed over the duration of the loans.
Finance costs on projects under construction are capitalised as part of the cost of properties during
the construction period.
51
As of 31 December 2006 deferred finance charges increased to QR 93 million compared to
QR 27 million as of 31 December 2005. The increase includes QR 60 million deferred finance charges
relating to the acquisition of ALAQARIA’s Barwa Al Khor investment. Subsequently, in the first half
of 2007 and upon selling the investment in Barwa Al Khor, the net balance outstanding postamortisation dropped to QR 28 million.
Liabilities
Accounts payable
ALAQARIA’s accounts payable are primarily amounts payable to ALAQARIA’s contractors and
accrued expenses. As of 31 December 2006 ALAQARIA’s payables increased by QR 633 million
(QR 714 million and 81 million as of 31 December 2006 and 2005 respectively). The main reason is
the instalments payable associated with ALAQARIA’s acquisition of ASAS and the Barwa Al Khor
investment.
Subsequently, in 2007, ALAQARIA has sold its investment in Barwa Al Khor, and the related
instalment payables of QR 375 million were discharged. Also, ALAQARIA has settled the instalment
related to the acquisition of ASAS. The payables balance as of 30 June 2007 is QR 270 million
comprised as follows:
Payables to
QR million
Contractors
Contractors – Retentions
Accrued expenses and others
60
89
121
Total
270
Loans
ALAQARIA funds its project developments through debt financing. The following is a summary of
its outstanding facilities.
Capital markets:
In 2006, ALAQARIA issued a Sukuk Al-Musharakah in the aggregate principal amount of
US$270 million. The balance drawn in 2006 amounted to US$150 million, and the outstanding
amounts were drawn in February 2007 (US$50 million) and May 2007 (US$70 million). The issue
(US$270 million) is repayable in equal instalments between November 2008 and August 2016.
ALAQARIA has a call option at the fifth year (2012) whereby ALAQARIA may redeem the Sukuk.
Syndicated Facilities:
In 2006, ALAQARIA borrowed US$145 million pursuant to a syndicated loan facility. This facility
matures in September 2007.
Bilateral Facilities:
Since inception and up to 2005, ALAQARIA borrowed on bilateral bases. These facilities are due on
different amortisation schedules.
Total borrowing under the bilateral facilities as of 30 June 2007 amounted to QR 350 million,
compared to QR 385 million as of 31 December 2006.
52
The following table sets forth the reviewed and audited capitalisation of ALAQARIA as at 30 June
2007 and 31 December 2006 respectively:
As at
30 June 2007
QR Million
(Reviewed)
As at
31 December
2006
QR Million
(Audited)
Current Debt
Secured
Unsecured
59
543
59
545
Total Current Debt
602
604
Non Current Debt
Secured
Unsecured
1,112
2
704
6
Total Non Current Debt
1,114
710
720
743
1
17
188
—
—
600
743
1
160
56
120
2
1,669
1,682
Equity
Share Capital
Legal Reserve
General Reserve
Investment Revaluation Reserve
Retained Earnings
Proposed directors remuneration
Total Equity
The following table sets forth the reviewed and audited indebtedness of ALAQARIA as at 30 June
2007 and 31 December 2006 respectively:
As at
30 June 2007
QR Million
(Reviewed)
As at
31 December
2006
QR Million
(Audited)
Liquidity
Cash at banks
491
411
Total Liquidity
491
411
602
(111)
604
(193)
Current Debt
Excess of total liquidity over total current debt
Non Current Debt
1,114
710
Net Financial Liquidity
1,225
903
53
ALAQARIA – BUSINESS DESCRIPTION
1.
OVERVIEW
Qatar Real Estate Investment Company (Q.S.C.) (ALAQARIA) was incorporated as a Qatari public
shareholding company by Emiri Decree No. 49 issued on 3 July 1995. ALAQARIA’s term was set
for a period of fifty calendar years, in accordance with its articles of incorporation, commencing from
its incorporation and renewable for a similar period. The government of Qatar has been a
shareholder in ALAQARIA since the company’s incorporation. The government has maintained the
same level of ownership (approximately 27 per cent.) during this time, including participating in a
rights offering put forward by the company in 2005. ALAQARIA was one of the first Qatari
companies listed on the Doha Securities Market (the DSM) since the inception of the DSM in
May 1997. The Company’s Articles of Association do not permit any single shareholder (other than
the government of Qatar) to hold any more than 5 per cent. of the shares in ALAQARIA.
ALAQARIA’s share capital is QR720 million made up of 72 million shares of QR10 each.
ALAQARIA was formed at the initiative of the Ministry of Energy as the primary provider of all
residential and commercial real estate needs to Qatar Petroleum (QP) and its affiliates for its
workforce in Qatar. Long term off-take agreements are being provided by QP and its affiliates to
allow ALAQARIA to finance its projects.
Since its establishment, ALAQARIA has focused on developing and catering to the real estate needs
of QP in major industrial areas in Qatar, such as Al Khor, Dukhan and Mesaieed. ALAQARIA has
been responsible for seventeen significant construction projects in Qatar over the last ten years,
primarily consisting of the establishment of residential and industrial housing projects, commercial
complexes and other facilities. The majority of rental income (88 per cent. for 2006) comes from
projects on account of QP and its affiliates. QP, a national corporation 100 per cent. owned by the
State of Qatar, is responsible for managing Qatar’s considerable petroleum and natural gas resources.
Qatar is rated AA- by S&P and AA3 by Moody’s.
Qatar is now experiencing strong economic growth, particularly in the oil and gas sectors. QP has
been actively involved in several large projects and has entered into a significant number of joint
ventures with international companies to develop Qatar’s oil and gas sector. The entrance of these
companies has promoted the development of other industrial areas where the supplementary industries
to the oil and gas sectors are located. Such developments in Qatar’s oil, gas and industrial sectors has
generated the demand and necessity for housing and residential facilities in those developing industrial
areas. Over the next twenty-four months, twelve large projects are due for completion together with
other projects in Doha City.
Following the implementation of Law No. 17 of 2004 (Qatar Property Law), ALAQARIA has the
ability to diversify its customer base. The Qatar Property Law allows non-Qataris to own real estate
in Qatar and has opened up the Qatar real estate market to foreign investment. The influx of new
investors from the GCC and abroad is expected to generate further growth for ALAQARIA. Its
experience in the market allows ALAQARIA to take advantage of potential commercial developments
in Qatar, either by directly investing in commercial developments or through partnerships such as the
one it has in relation to ASAS Real Estate, an associate through which ALAQARIA will pursue
commercial real estate projects. ALAQARIA aims to increase its income from the commercial arm of
its business to 20 per cent. of total revenues.
ALAQARIA views its relationship with the Government and QP, its planning and infrastructure
focus, its management leadership, its operational capabilities and its strategic projects as particular
strengths. For further detail see ‘‘Business Strengths’’.
ALAQARIA has a comprehensive business model which sets out the various processes it follows for
each stage of a particular project. For further detail see ‘‘Business Model’’.
ALAQARIA has developed a number of strategies with respect to the management and operation of
its business and associates. For further detail on ALAQARIA’s strategies see ‘‘Strategy’’.
2.
SUBSIDIARIES AND ASSOCIATES
Subsidiaries
ALAQARIA has no subsidiaries.
54
ASAS Real Estate
ALAQARIA operates in the commercial real estate sector through its associate ASAS Real Estate
(ASAS). ASAS is a limited liability Qatari company whose mandate is to develop real estate projects
in the commercial real estate sector in Qatar. ALAQARIA currently has a 50 per cent. ownership
interest in ASAS which is ALAQARIA’s only associate.
3.
BUSINESS MODEL
ALAQARIA focuses its projects on four key customer bases:
QP and Government Related Clients
ALAQARIA was established to provide residential and commercial facilities for QP in industrial
cities. Since its incorporation, ALAQARIA has been QP’s only provider for residential and
commercial facilities in the industrial cities in Qatar. These projects are completed on land provided
by QP/clients for the exclusive use of ALAQARIA. Guaranteed off-take agreements are signed to
provide ALAQARIA with a predetermined internal rate of return over the life of the project.
ALAQARIA is a strategic partner of QP and the parties work together from the initial stages of
QP’s contracts so there is no tendering process. ALAQARIA typically enters into turnkey contracts
for a period of between ten and fifteen years for housing projects, covering the construction of
buildings, public utilities, roads landscaping, water and drainage networks.
Having an established track record with QP, ALAQARIA has also utilised its strong relationships
with other government departments to provide development services to the Ministry of Finance,
MOWASALAT and Qatar Post using the same business model as it has developed with QP.
QP Related Clients
ALAQARIA provides residential facilities for the Qatari Government joint venture entities and state
owned entities such as Qatar Gas, Ras Laffan Liquefied Natural Gas Company, Dolphin Energy and
other international oil majors and energy companies. These projects are developed on land to which
ALAQARIA has exclusive use rights granted by the government to ALAQARIA.
ALAQARIA enters into lease agreements for a period of between five and twenty five years.
Guaranteed off-take agreements are signed before development commences which provide
ALAQARIA with a predetermined rate of return over the life of each project. ALAQARIA also
provides the facilities management services for these properties during the term of their lease. The
leases on these properties include a five year rental review, with the ability to pass through increases
in variable operating costs for facilities.
Energy Related Clients
ALAQARIA provides labour accommodation for QP contractors on land leased from the government
in industrial cities. ALAQARIA also provides the facilities management services for these properties
during the term of their lease. The leases on these properties include an annual rental review, with the
ability to pass through increases in variable operating costs for facilities to the lessee. Supported by
QP statistics and future planning requirements, ALAQARIA undertakes such developments only after
reviewing and analysing both current and future demand to ensure high occupancy, stable cash flows
and predictable returns.
Commercial – Non-government Related Clients
ALAQARIA intends to selectively develop and manage commercial real estate projects in Qatar,
directly or through partnerships it has entered to mitigate risk exposure. ALAQARIA will only
commit to engage in a commercial project if it concludes that the project will produce ALAQARIA’s
target rate of return. Upon concluding that the project will achieve a minimum return that exceeds
ALAQARIA’s weighted average cost of capital for the project, even in the event of a ‘‘worst case
scenario’’ formulated by ALAQARIA to include a potential sharp increase in construction costs, a
significant decline in rental rates and other potential costs to ALAQARIA over the life of the project,
ALAQARIA will pursue the project. In any event these activities are expected to be limited to no
more than 20 per cent. of ALAQARIA’s income for the medium term.
55
4.
PROPERTY DEVELOPMENT
The management of ALAQARIA believes that its business model of property development has been
very successful. The central element of its business model is to secure long term contracts with
reputable off-takers.
ALAQARIA typically undertakes one of four types of projects: Build and Transfer, Build, Operate
and Transfer, Build to Own and Commercial Real Estate Projects. Each of these types of project thus
requires a tailored property development plan which broadly follows the following four stages:
Pre-Construction
The Pre-Construction stage involves:
*
detailed feasibility studies being carried out;
*
consultation with supervisory bodies, designers, architects and utilities to establish the
infrastructure requirements for the project;
*
market studies being conducted; and
*
the preparation of a detailed business plan which includes the budget and marketing strategy.
Construction Management
At the construction management stage:
*
all the necessary regulatory approvals required in respect of each project are obtained from the
relevant authorities;
*
tenders for each development phase issued to potential contractors, who are chosen based on
their track record, their ability to complete the project and their relevant experience;
*
the submitted bids are evaluated in detail. The relevant project director evaluates each tender
and makes a recommendation to the Executive Management, which then reviews the bid and
makes a final decision as to whom the tender should be awarded to. This ‘‘final decision’’ is
then submitted for approval by the Board of Directors and the tender is then granted and the
construction process starts at this stage;
*
any variance to the budget, timeline and scope is reported by the project management
consultants through their cost reports, which are submitted monthly and are monitored by the
relevant project director and the Executive Management. In addition, mechanical, electrical and
plumbing testing and commissioning arrangements are all commenced and monitored during this
stage;
*
the relevant project director has relative autonomy to execute the project but must report any
material changes to the relevant master development plan and any expenditure in excess of
budget to the Executive Management; and
*
if any changes or additional expenditure are considered to have a possible material impact on
the project, the project will revert to the Concept Development Stage in order to ensure that
any implications of such changes or additional expenditure are considered.
Sales and Leasing
At the sales and leasing stage a marketing plan in relation to sales and leasing is developed for each
project, which includes advertising, branding and organising promotional events. Upon completion
sale or lease initiatives are launched for each project and administration of the property begins.
Service charges (including salaries of personnel in carrying out the operation, management, cleaning,
maintenance, replacement and repair; costs relating to compliance with health and safety matters;
costs of utilities; costs relating to insurance; rental costs of equipment; professional and consulting
fees; and depreciation of items including structures, furnishings, fixtures and machinery) are usually
included in the rent.
Asset Management
Once a project is finished and delivered, the management responsibilities are then carried out by the
Facility Management Department. Asset management includes property management and facilities
management (including infrastructure) which cover repairs and maintenance and lifecycle
refurbishments for each project.
56
5.
OUTSOURCING
ALAQARIA relies on third parties for much of the design and all of the construction of its projects.
The design of ALAQARIA’s real estate projects are done by third parties which are companies
graded by the government of Qatar although all designs are ultimately approved by ALAQARIA and
its clients, where applicable. Further, ALAQARIA hires third-party construction companies which are
also rated by the government of Qatar to construct its real estate developments.
In addition to ALAQARIA’s highly qualified supervision teams which are dedicated to each
individual project, ALAQARIA hires specialised supervision companies and consultants to monitor,
on a daily basis, its contractors’ performance, quality and adherence to time lines. This dual
supervision policy is an example of what ALAQARIA believes is an above average commitment to
quality and on-time delivery of its projects.
As all design, supervision and construction agreements are price fixed, the management of
ALAQARIA believes it is able to greatly reduce the risks associated with construction such as delays
and cost overruns. ALAQARIA generally retains the aid of construction and supply companies that
have previously proven the quality of their workmanship and supplies respectively, and has negotiated
standard contracts with these third-party contractors and suppliers. By hiring third parties who have
proven themselves in other projects to construct ALAQARIA’s real estate developments, having the
cost fixed upfront, maintaining sufficient security, performance bonds and advance payments
guarantees and retentions, ALAQARIA has been able to avoid construction delays and cost overuns
in the projects that it has completed to date.
6.
PROJECT DETAILS
The typical types of projects ALAQARIA undertakes are as follows:
Energy Sector Related Projects
Build and Transfer
For this type of project, clients approach ALAQARIA with their project needs such as specifications,
capacity, space and other requirements. Land is dedicated by clients for this purpose and
ALAQARIA does not purchase or rent the land. ALAQARIA then prepares a concept plan for client
approval before proceeding to the design stage. After the concept and design are approved,
ALAQARIA announces the project for tendering. Costs are determined based on approved
contractors’ tenders. Contractors are selected on the basis of their government grading, reputation,
previous performance and their technical and commercial offers. The client approves the contractors
and the cost. ALAQARIA then signs the construction and lease agreement with the client. Rent is
based on cost plus pre-agreed return to provide ALAQARIA with a constant internal rate of return
over the life of the project, with a rent period of usually between ten to fifteen years. After
completing the construction phase, ALAQARIA is only responsible for a four hundred day guarantee
covering infrastructure works carried out by ALAQARIA, and this guarantee is back to back with
construction contractor’s guarantee. ALAQARIA is not responsible for any running costs. When the
lease period matures, title to the buildings is transferred to the client.
ALAQARIA’s major clients for this type of project are QP, Qatar Post, the Ministry of Finance and
Mowasalat.
Since inception, ALAQARIA has completed six Build and Transfer type projects. Revenue from this
type of project represents 25 per cent. of total operating income for the year ended 31 December
2006.
Build, Operate and Transfer (BOT)
To cater for the highly increasing demand for labour accommodation and other commercial facilities,
ALAQARIA has been given a preferential status to be the only provider for labour accommodation
and commercial utilities in the industrial cities of Qatar.
Utilising land leased by ALAQARIA from the government of Qatar on attractive terms typically
between 20-25 years, ALAQARIA develops labour accommodation, residential and commercial units.
Currently such properties enjoy 100 per cent. occupancy rates. ALAQARIA’s leases on these
properties include annual rental review with the ability to pass through increases in variable operating
costs for facilities.
ALAQARIA’s major clients for this type of project are highly diversified QP contractors.
57
Build to Own
For Build to Own projects ALAQARIA acquires land through exclusive rights granted by the
government of Qatar to use and develop the land. ALAQARIA develops properties under long term
lease periods. ALAQARIA enters into lease agreements for a period of between five and twenty five
years, guaranteed off-take agreements are signed before development commences which provide
ALAQARIA with a predetermined rate of return over the life of the project. ALAQARIA also
provides the facilities management services for these properties during the term of their lease. The
leases on these properties include a five year rental review, with the ability to pass through increases
in variable operating costs for facilities. This type of project represents 63 per cent. of ALAQARIA’s
total operating income for the year ended 31 December 2006.
ALAQARIA’s primary clients for Build to Own projects are: Ras Gas, Qatar Gas, Dolphin and other
international energy majors.
Commercial Real Estate Projects
Private Projects:
Due to the high demand for real estate, ALAQARIA has acquired several parcels of land to
construct housing and commercial projects located in Doha City and its suburbs. ALAQARIA either
sells these projects or rents them, based on market conditions. ALAQARIA will only engage in
commercial projects of this nature if the project is able to achieve a minimum return that exceeds
ALAQARIA’s weighted average cost of capital for the construction of the project. ALAQARIA’s
projections in making this assessment include a ‘‘worst case scenario’’ which involves a sharp increase
in construction costs and a significant decline in rental rates. If the projected return is within the
target range despite these conditions ALAQARIA will proceed with the project.
Through Associates:
In furtherance of ALAQARIA’s strategy of diversifying its client base and creating a presence in the
commercial real estate field, in December 2006, ALAQARIA acquired 50 per cent. of ASAS through
a contribution of assets.
The major projects being developed by ASAS are:
*
two residential towers (320 apartments), located at Doha, West Bay. The apartments are rented
to international companies on long term lease bases (2-5yrs). Leasing started in February 2007
and currently the occupancy rate exceeds 70 per cent.;
*
development of a commercial and residential complex at Al Sadd area at Doha city. The
development provides for four commercial towers of 64,000m2 rentable and four residential
buildings providing 300 apartments. Currently the project is in the infrastructure preparation
stage, and
*
development of a self contained housing complex at Lusail area. The development is to be
divided into phases to provide for 800 villas. Currently the first phase which will provide for
200 villas is in the tendering stage.
Also ALAQARIA has acquired 17 per cent. of Barwa Albaraha, a limited liability company, whose
mandate is to develop a QR2.5 billion project to build truck parking and maintenance facilities in
Doha.
7.
BUSINESS STRENGTHS
The following factors give ALAQARIA a competitive advantage in the real estate industry in Qatar:
*
Strategic partnership with QP: ALAQARIA has an established track record of completing
housing projects with QP and its affiliates in a timely and satisfactory manner. A majority of
rental income, almost 88 per cent. for 2006, is derived from QP or QP related projects.
ALAQARIA’s historic and present strategic partnership with QP signifies that it is well
positioned to win new projects with QP. Given that QP is now experiencing considerable activity
and growth, this promises to be a substantial new opportunity for ALAQARIA. See ‘‘Existing
Projects under construction’’ and ‘‘Pipeline Projects’’.
58
*
Sovereign counter party credit risk: Since a significant source of ALAQARIA’s income is derived
from projects for QP and its affiliates, there is a relatively low counter party credit risk. Both
the governments of Qatar and QP have been given an AA-rating by Standard and Poor’s.
ALAQARIA, over the course of its twelve year history, has had to make provision for only
QR200,000 worth of bad debts.
*
Governmental support: The government of Qatar has been a shareholder in ALAQARIA since
ALAQARIA’s incorporation. The government has maintained the same level of ownership
(approximately 27 per cent.) during this time, including participating in a rights offering put
forward by ALAQARIA. ALAQARIA also enjoys a relationship with and access to
Governmental bodies such as Qatar Post, the Ministry of Finance and the Ministry of Energy
and Industry and has developed major projects for each of these departments. After its
incorporation, the government of Qatar granted ALAQARIA an exclusive right to use and
develop a parcel of land of approximately 2,600,000 m2 located in the Al Khor area to service
the needs of the oil and gas industry. ALAQARIA has this right for as long as ALAQARIA
continues to exist. This land was utilised to build the Qatar Gas, Ras Gas and Dolphin housing
projects. ALAQARIA is currently constructing Al Khor Project phases 3 and 4. These new
projects will be leased to QP affiliates and other international oil and gas companies operating
within the Al Khor area. ALAQARIA will continue to develop new projects on the remaining
tracts of land not yet utilised.
The government of Qatar is represented on the ALAQARIA board of directors by having two
appointees, the Chairman and the Vice Chairman.
*
Track record: ALAQARIA was the first Qatari Real Estate Public Shareholding Company
established since 1995 and has a track record of delivering major projects on time and within
budget. ALAQARIA is well positioned to take advantage of the growth of the real estate sector
in Qatar. For the past twelve years, ALAQARIA worked closely with QP to develop a number
of large residential projects.
*
Strong portfolio of real estate: A strong portfolio of real estate covering 16 completed projects
with a gross operating net income of QR 125 million in 2006, providing ALAQARIA with
stable cash flow stream from highly creditworthy tenants, with long lease maturities.
Currently, ALAQARIA owns four land sites with a combined surface area of 71,974 m2
acquired at a total cost of QR360 million.
ALAQARIA was granted an exclusive right to 2,600,000 m2 of land by the government of
Qatar for the construction of residential and commercial real estate supporting the oil and gas
sector. As of the date hereof, 1,809,755 m2 has been utilised, 596,665 m2 is under development
and 193,580 m2 is reserved for development in the near future.
*
Strategic Projects: Alaqaria’s projects support the energy sector in Qatar, are provided in a
range of development types and include projects for QP such as the Mesaieed Development
which is QP’s largest development. For more detail on ALAQARIA’s projects see ‘‘Projects’’.
*
Management Leadership: Alaqaria’s management team has extensive experience in the real estate
sector and with its primary clients. Alaqaria’s Chairman began his career with QP and is
familiar with QP’s procurement, projects, logistics, budgeting and planning processes. He is
currently the head of the Business and Investors Department in QP, Mesaieed Industrial City.
For more detailed information on the experience of Alaqaria’s Executive Management and
Board of Directors, see ‘‘Management’’.
*
Low Risk Operating Strategy: Given that most of its projects are for QP and QP affiliates,
ALAQARIA has been able to follow a low risk operating strategy as pricing and off-take
negotiations are based primarily on cost considerations and a fixed rate of return for
ALAQARIA.
8.
STRATEGY
ALAQARIA’s objectives include, to continue to leverage its mandate as the housing and commercial
provider for QP, to expand its activities with government entities and the industrial/energy sector and
to build a significant presence in the commercial real estate sector which will equate to 20 per cent. of
its overall operating income. To achieve these objectives, the strategy of ALAQARIA includes:
59
*
Maintaining strategic partnership with QP: ALAQARIA has always had a strategic relationship
with QP whose success in the oil and gas sector has increased the demand for residential and
commercial projects in industrial zones. ALAQARIA’s contracts with QP have enabled it to
become a major player in the real estate development market.
*
Focusing on the government’s fast growing need for workforce accommodation: Over the last two
years, ALAQARIA has undertaken developments for the Ministry of Finance, Mowasalat and
Qatar Post.
*
Maintaining cost/quality discipline: ALAQARIA has established a reputation with its customers
for completing its projects within budget and meeting or exceeding the standards set for it by its
clients.
*
Partnership with other leading companies: ALAQARIA has also started to expand alliances with
other large companies within Qatar including:
9.
(i)
Barwa Albaraha, a limited liability company, of which ALAQARIA has acquired 17 per
cent., whose mandate is to develop a QR2.5 billion project to build truck parking and
maintenance facilities; partners in Barwa Albaraha include Barwa Real Estate Company
and Gulf Warehousing Company (both are Qatari shareholding companies); and
(ii)
Qatar Investment and Project Development Company with whom ALAQARIA established
a 50/50 partnership to provide housing and commercial real estate developments in Qatar
through a limited liability company called ASAS Real Estate.
PROJECTS
Completed Projects
The following is a list of projects completed since the inception of ALAQARIA to date:
Project cost
(QR)
Type of customer
Project
Description
Type Of Project
Off-taker
QP and
Government
Dukhan Housing
Phases 1, 2 and 3
315 residential units
for QP
Build and
Transfer
QP, for 10 years
rent period
148 million
QP Head Quarter
Building at
Dukhan
630 offices at
35,000m2 built up
area and 160,000m2
development area
Build and
Transfer
QP, for 10 years
rent period
70 million
Mesaieed Medical
Centre
Medical centre
at Mesaieed
Industrial City
Build and
Transfer
QP, for 10 years
rent period
14 million
Mesaieed Post
Office
Post Office building
at Mesaieed
Industrial City
Build and
Transfer
Qatar Post,
for 15 years
rent period
7 million
Subtotal
6
Qatar Gas
Housing
at Al Khor area
and supporting
infrastructure
ALAQARIA
Controlled/
Owned Land
Qatar Gas,
for 25 years
rent period
280 million
Ras Gas Housing
at Al Khor area
and supporting
infrastructure
ALAQARIA
Controlled/
Owned Land
Ras Gas,
for 25 years
rent period
350 million
Al Khor Housing
Project Phases 1
and 2
172 residential
units, facilities and
infrastructure
ALAQARIA
Controlled/
Owned Land
Dolphin
for 5 years
101 million
Subtotal
4
QP Related
239 million
731 million
60
Type of customer
Project
Description
Type Of Project
Off-taker
Project cost
(QR)
Energy Related
Mesaieed Labour
Camps 1, 2 and 3
and portacabins 1
Residential units
for 12,000
personnel
ALAQARIA
Leased Land
Private sector
158 million
Mesaieed
Commercial
Centre
140 shops and
a mall
ALAQARIA
Leased Land
Private sector
20 million
Residential and
Commercial
Centre at Dukhan
67 units
ALAQARIA
Leased Land
Private sector
6 million
Subtotal
6
Office building
at C-Ring Road
Commercial office
space
Subtotal
1
Commercial
Total
184 million
Build and Sell
Sold
55 million
55 million
17
1,209 million
Dukhan Housing Project
ALAQARIA commenced work on the Dukhan Housing Project in 1998. Dukhan was one of the
main industrial areas in which ALAQARIA first focused its efforts. The project plan, which covered
a period of five to seven years, was formulated to meet Dukhan’s needs with respect to housing units
and public services utilities. The plan not only provided for the construction of new housing units
and villas, but also covered the redevelopment of some of the existing housing units in the area, the
construction of a commercial complex and QP’s administration building. The development of the
project covered three phases:
First Phase: Junior Staff Housing
This was the first phase of the Dukhan Housing Project to be constructed and paved the way for
future co-operation between ALAQARIA and QP.
This phase comprised 200 housing units distributed across 50 buildings for junior staff. The total
building area amounted to approximately 145,000m2 divided into two sections with each section
comprised of 25 buildings in addition to infrastructure works, landscaping and an irrigation network.
All the work was undertaken by local and national companies. The total cost of this phase was an
estimated QR70 million and the work was completed in two years.
Second Phase: Married and Bachelors Senior Staff Housing
This phase involved the construction of 34 villas for married senior staff and 40 villas for bachelors.
Construction was completed in the last quarter of 2002. The phase also included the construction of
related infrastructure and facilities. The total cost of this phase was QR40 million.
Third Phase: Married and Bachelors Senior Staff Housing
This QR38 million phase comprised the construction of 41 villas for married and single senior staff.
Work on this phase commenced in mid 2003 and was completed in 2004.
The lease term is for ten years commencing from the handover date of the units.
QP operations headquarter building at Dukhan
In 2004, an agreement between ALAQARIA and QP was reached pursuant to which ALAQARIA
constructed an office complex consisting of 630 offices with a total built up area of 35,000m2 and a
development area of 160,000m2 which included parking and green areas. The building was handed
over and leased back to QP in the third quarter of 2005. The lease term is for 10 years. The total
project cost was QR70 million.
61
Mesaieed Medical Centre
An agreement was reached between the Mesaieed City Administration and ALAQARIA for the
construction and lease of a medical centre in Mesaieed for QP. Work on the centre commenced in
2002 and was completed in 2003. The lease term is for ten years. The total project cost was
QR14 million.
Mesaieed Post Office
An agreement was reached between Qatar Post and ALAQARIA for the construction and leasing of
a post office building in Mesaieed for Qatar Post. Work on the post office commenced in 2004 and
was completed in 2005. The total project cost was QR7 million and the lease term is for fifteen years.
Qatar Gas Housing Project
Work on this project began in 1995 and took three years to complete at a cost of approximately
QR280 million. The site allocated for this project was 812,000m2. The Qatar Gas Housing Project
was considered a unique project in Qatar with its approach to space, services and the use of a variety
of construction models. The total area of constructed buildings and public utilities was an estimated
600,000m2 and included infrastructure services such as roads and water networks, drainage systems,
telephone lines, roads, lighting, landscapes, gardens and a children’s playground. The lease term which
is for 25 years commenced from the handover date of the units.
The project consisted of 823 housing units categorised into four different types:
*
housing for directors, comprising 17 villas with a total space of 295m2 per villa;
*
senior staff family housing, comprising 246 villas with a total space of 295m2 per villa;
*
junior staff family housing comprising 340 flats with a total space of 162m2 per flat; and
*
bachelor accommodation comprising 220 flats with a total space of 50m2 per flat.
During the design of the general plan, care was taken to ensure that each housing unit was a unique
entity. Gulf architecture, especially Qatari building styles, was incorporated into the design of the
development.
The project essentially aimed to deliver a unique, self-sufficient and self-contained development.
General building services such as electricity substations, elevated water tanks and water pumping
stations were provided to support the residential units. Social and educational infrastructure, such as
social clubs and schools, were also constructed to cater for the staff and their families. It was one of
the first projects that aimed to deliver residential housing that supported the development of a
community and quality of life.
Ras Gas Housing Project
The QR350 million Ras Gas Housing project, for management level staff at Ras Gas, was designed
and developed in very much the same spirit as the Qatar Gas Housing Project. Like the Qatar Gas
project, the development plan for Ras Gas included public service buildings and social and
educational infrastructure. The design of the Ras Gas project was modelled closely on Qatar Gas.
The site allocated for the project was an estimated 1,300,000m2 with the total constructed area taking
up 201,000m2 and comprising:
*
8 villas, model (A+) for directors and general managers with a total area of 412m2 per villa;
*
46 villas, model (A) for managers and senior staff with a total area of 390m2 per villa; and
*
160 villas, model (B) for married senior staff with a total area of 300m2 per villa.
The project also comprised of 316 model C flats and 166 model D flats which were completed during
2000 and 2001. The project was completed in mid 2003. The lease term is for 25 years.
62
Al Khor Housing Project phases 1 and 2
ALAQARIA started a new development of the Al Khor area. This development including 60 new
villas, 72 three bedroom apartments and 40 single bedroom apartments built on 224,000m2. The
project includes a recreation centre, clubhouses and guardrooms. The infrastructure work includes the
installation of sewage systems, road works, water and irrigation systems, fire fighting and detection
installations, electrical supply networks and street lighting, telecommunication works and landscaping.
The total project cost was QR101 million. In July 2005, ALAQARIA signed a lease agreement with
Dolphin for 5 years with an option to renew for a similar term.
Mesaieed Labourers’ Housing Complex
First Phase:
Construction work on this complex started at the end of 2000. This complex was the first stage of the
development programme planned by the Mesaieed City Administration. The labourers’ housing
complex consists of housing facilities for 2,056 people in addition to supporting facilities such as
dining rooms, mosques, laundry areas and social activity areas. The total cost of this project was
QR23 million and construction was completed in the first quarter of 2002.
Second Phase:
Phase two of the labourers’ housing project has a capacity of 2,992 persons and, as with the first
phase, has supporting facilities. The construction started in mid 2004 and was completed by mid 2005.
The total cost of this phase exceeded QR40 million.
Third Phase:
Construction work on this complex started in mid 2005. The complex was the third stage of the
development programme planned by the administration of Mesaieed Industrial City. The labourers’
housing complex consists of housing facilities for 4,176 persons in addition to supporting facilities
such as dining rooms, mosques, laundry areas and social activity areas. In addition, there are parking
spaces for 284 cars and 140 buses. The total cost of this project was QR60 million.
The project also includes temporary labour camps consisting of fabrication, procurement and the
setup of temporary units (porta-cabins) to accommodate 2,776 persons. The project cost was
QR35 million.
Mesaieed Commercial Complex
Along with the construction of the labourers’ housing complex, ALAQARIA also began work on a
commercial complex in 2000. The first and the second parts of the commercial complex consisted of
trading stores in addition to a shopping mall. The total project cost was QR20 million and the
140 shops and the mall were completed in 2002. The plan for the commercial complex included an
open space for the possible development of a third phase of the project.
Residential and Commercial Centre at Dukhan
To cater for the increasing demand for residential and commercial units in the Dukhan area,
ALAQARIA constructed a complex consisting of 40 shops and 27 flats in addition to infrastructure
works such as sewage, water systems and electricity. This project was completed in the third quarter
of 2004, with a total cost of QR6 million.
Office Building at C-Ring Road
This commercial building was completed in the last quarter of 2006 and sold. The cost of the project
was QR55 million.
The project provided for a 2 storey executive office building containing 4,000m2 of office space.
63
Existing Projects under construction
The following is a list of projects under construction as of 30 May 2007:
Started and Expected
Completion
Percentage
completed as of
30 May 2007
Budgeted
Cost (QR)
Type Of Customer
Project
Description
Type of project
Off-taker
QP and Government
Dukhan Housing
Project Phases 4
and 5
920 residential
units and
infrastructure
Build and
Transfer
QP for a 10
year rent
period.
Started in June 2005
and is expected to be
completed in the 1st
Quarter of 2008
82%
308 million
Dukhan Housing
Project Phase 6
24 residential
bungalows and
infrastructure
Build and
Transfer
QP, for a 10
year rent period
Started in December
2006. Expected to be
Quarter of 2008
25%
60 million
Mesaieed
Housing Project
for QP, Phases
1,2,3 and 4
1,244
residential
units, facilities
and
infrastructure.
Build and
Transfer
QP for a 10
year rent
period.
Started January
2006 and is expected
to be completed in
the 1st Quarter of
2008
52%
820 million
Staff
accommodation
at Abusamra
Residential
units and
infrastructure
on 23,000m2 of
land.
Build and
Transfer
Ministry of
Finance
Started January
to be completed in
the 4th Quarter of
2007
77%
95 million
Mowasalat Staff
Accommodation1
Vehicle parking
facility
Build and
Transfer
Mowasalat
Started in February
2007, expected to be
completed in the 3rd
Quarter of 2007
50%
20 million
Subtotal
6
Al Khor Housing
Project Phase 3
(infrastructure)
982 residential
unit, facilities
and
infrastructure
QP Related
1,303 million
ALAQARIA
Controlled
Owned Land
QG, RG, Shell,
dolphin, ORYX
for a 10-25 year
period
Phase 4
Energy Related
Commercial
Total
Phase 3 started June
to be completed
June 2007.
90%
120 million
Phase 4 started
February 2007 and
is expected to be
Quarter of 2009
5%
750 million
Subtotal
2
870 million
Dukhan
Commercial
Center
10 offices, 9
shops, post
office, bank,
supermarket,
restaurants &
cinema
Build,
Operate and
Transfer
Private sector
Started June 2006,
expected to be
Quarter of 2007
60%
25 million
Labour
accommodationportacabins – 2
Labour
accommodation
for 3,000 people
Build,
Operate and
Transfer
Private sector
Started April 2007,
expected to be
Quarter of 2008
55%
47 million
Subtotal
2
Building at old
Salatah area,
Doha
18 storey office
building
Build to Own
Private sector
Started September
2006, expected to be
Quarter of 2008
10%
125 million
10 villas at
Garragah Doha
10 villas at
Doha suburb
(Al Garrafah)
Build & Sell
Private sector
Started April 2006,
expected to be
Quarter of 2007
80%
15 million
Subtotal
2
72 million
140 million
2,385 million
12
64
Dukhan Housing Project Phases 4 and 5
As part of a QP plan to develop the Dukhan area, ALAQARIA completed the first 3 phases of the
Dukhan development. QP and ALAQARIA signed an agreement in June 2005, pursuant to which
ALAQARIA commenced the development of phases 4 and 5 which will be leased back to QP upon
completion for a period of ten years.
The design stage was completed by ALAQARIA in 2004. The project will provide a total of
920 residential units (126 building blocks) for bachelor, married senior and junior QP staff. The
project also provides for the necessary infrastructure works including roads, water and irrigation
systems, electricity supply networks, street lighting, fire fighting installations, landscaping, sewage
systems and networks, parking and telecommunication works.
The project is divided into 4 phases with a total expected cost of QR308 million. Mobilisation started
in mid 2005 for all phases simultaneously and the project is expected to be completed by the 1st
Quarter of 2008. Construction works have been allocated to 4 A-graded contractors and the
supervision and consultation was assigned to an international office. By the end of May 2007,
82 per cent of the project had been completed.
Dukhan Housing Project Phase 6
The project provides for an expansion of the development in the Dukhan area by 24 residential
bungalows and related infrastructure. The estimated project cost is QR60 million. By the end of
May 2007, 25 per cent. of the project had been completed.
Mesaieed Housing Project for QP, phases 1, 2, 3 and 4
In order for QP to meet its own and its contractors’ demand for residential units in the Mesaieed
area, ALAQARIA reached an agreement with QP in January 2006 to construct a housing
development project and lease it back to QP for a period of ten years.
The project provides for 177 senior family villas, 703 family town homes and 364 bachelor residential
units. The project includes the necessary infrastructure works such as sewage networks, drainage and
soak-away systems, road works, water supply installation, irrigation systems, electrical systems, street
lighting, telecommunication works and landscaping.
The project is divided into 4 phases, with an expected total cost of QR820 million. Construction
work has been assigned to 4 A-graded contractors and the supervision and consultation was assigned
to an international office. Contractors started mobilisation in January 2006, and the project is
expected to complete in the 1st Quarter of 2008.
Staff Accommodation at Abusamra
ALAQARIA reached an agreement with the Ministry of Finance to develop a residential complex at
the new Abusamra customs post on the Qatar–Saudi Arabia border.
The project provides a built up area of 23,000m2 of senior staff accommodation, labour
accommodation and associated ancillary buildings, a mosque, retail buildings, service buildings and a
sewage treatment plant. The external works are extensive and comprise roads, parking, paving,
landscaping, irrigation, external sports courts and lighting.
Construction works have been assigned to an A graded contractor and the supervision and
consultation was assigned to an international office. The contractor started mobilisation in
January 2006 and the project is expected to complete in the 4th Quarter of 2007. The total expected
project cost is QR95 million.
Mowasalat Staff Accommodation – 1
Construction on this project started February 2007. The cost of the project is expected to be
QR20 million. The project is the development of a parking facility for cars and buses and is expected
to complete in the 3rd Quarter of 2007. As of the end of May 2007 the project was 50 per cent.
complete.
Al Khor Housing Project phases 3 and 4
This is an expansion of the previous projects in Al Khor (Qatar Gas, Ras Gas and Al Khor housing
projects 1 and 2). This development provides for 982 new housing units, schools, gardens, parking
lots, clubs, in a total area of 600,000m2. in addition the related infrastructure work includes the
65
installation of sewage systems, road works, water and irrigation systems, fire fighting and detection
installations, electrical supply networks and street lighting, telecommunication works and landscaping.
The total project cost is expected to be QR870 million.
Labour accommodation-portacabins – 2
Work on this complex started in April 2007. The labourers’ housing complex consists of housing
facilities for 3,000 workers in addition to supporting facilities such as dining rooms, mosques, laundry
areas and social activity areas. The total cost of this project is expected to be QR47 million and
construction is expected to be completed in January 2008. The expected duration of the project is
10-12 months. As of 30 May 2007 the project was 55 per cent. complete.
Building at old Salatah area, Doha
The project was initiated in September 2006 and is expected to be completed by August 2008. The
designs provide for an 18 story commercial office tower with a rentable area of approximately
13,000m2. The expected cost of the project is QR 125 million. As of 30 May 2007 the project was 10
per cent. complete.
Villas at Garrafah, Doha
The project involves the construction of 10 villas, model (A+) with a total area of 412m2 per villa in
the Al Garrafah suburb of Doha. Construction on the villas began in April of 2006 and is expected
to be completed in July 2007. The villas have already been sold. The expected cost of the project is
QR15 million. As of 30 May 2007 the project was 80 per cent. complete.
Pipeline Projects
The following is a list of projects currently under negotiation by ALAQARIA:
Type of project Off-taker
Expected cost
(QR)
Type Of Customer
Project
Description
QP and Government
Dukhan Housing
Project Phase 7
Expansion of the Build and
Dukhan Housing Transfer
project through
the construction
of further
residential units
QP, 10 yr rental 250 million
period
Design stage –
Estimated start
date first quarter
of 2008
Dukhan Housing
Project Phase 8
Expansion of the Build and
Dukhan Housing Transfer
project through
the construction
of further
residential units
period
Design stage –
Estimated start
date first quarter
of 2008
National Health
Authority Staff
Accommodation
Construction of
staff
accommodation
and amenity
buildings
Build and
Transfer
National Health 400 million
Authority, 10 yr
rental period
Design stage –
Contract to be
awarded by year
end 2007
Mowasalat Staff
Accommodation 2
Construction of
Build and
staff
Transfer
accommodation
(6,000 people) and
amenity buildings
Mowasalat, 10 200 million
yr rental period
Tendering
completed.
Awaiting approval
of contractor
Mesaieed Housing
extension – 1
Construction of
290 residential
units
Build and
Transfer
Tendering
completed.
Awaiting approval
of contractor
Mesaieed Housing – 2 Construction of
2,442 housing
units
Build and
Transfer
QP, 10 yr rental 3,700 million Design stage –
estimated start first
quarter of 2008
Mesaieed Schools
Construction of 2 Build and
schools to service Transfer
the Mesaieed
residential
developments
Subtotal
7
5,200 million
66
Status
Tendering
completed.
Awaiting approval
of contractor
Type Of Customer
Project
QP Related
Al Khor housing – 5 Construction of
Build to
(infrastructure)
830 housing units Own
Energy Related
Total
Description
Subtotal
1
Mesaieed labour
accommodation – 4
Labour
accommodation
for 7,200 people
Subtotal
1
Office Building at
Airport Road
8 storey office
building
Subtotal
1
Type of project Off-taker
Expected cost
(QR)
Status
QG, RG, Shell, 1,500 million Tendering in
dolphin, ORYX
progress
for a 10-25 year
period
1,500 million
Build,
Private sector
Operate and
Transfer
70 million
Design stage –
Awaiting award of
contract
70 million
Build to
Own
Private sector
250 million
Tendering in
progress
250 million
10
7,020 million
Dukhan Housing Project Phase 7 and 8
Phase 7 and 8 is in the design stage. The project provides for 600 housing units with the related
infrastructure. The estimated project cost is QR250 million for Phase 7 and QR200 million for
Phase 8.
National Health Authority Staff Accommodation
The project provides for accommodation for NHA staff and Amenity buildings.
Mesaieed Housing Extension – 1
The project provides for 290 residential units and the related infrastructure.
Mesaieed Housing Extension – 2
The development provides for 2,442 housing units, sport facilities and the related infrastructure.
Mesaieed Schools
The development provides for 2 schools with total capacity for 1,400 students.
Mesaieed labour accommodation – 4
The development to accommodate 7,200 people and to provide the necessary facilities.
Office Building at Airport Road
This project is an eight story office building, providing for 18,000m2 office space.
10. COMPETITION
The Qatar Real Estate market can be divided into three sub-sectors: industrial, commercial and
residential.
Industrial
For commercial/residential developments in the industrial sub-sector ALAQARIA is the largest
developer, has the largest landbank and no direct competitors for the projects that it is currently
focused on.
Commercial
The commercial real estate sector in Qatar is more competitive than the industrial sector. The leading
Qatar based real property developers in the commercial real estate sector are Barwa Real Estate and
Qatari Diar. ALAQARIA is looking to increase its income from commercial properties; however, it is
still currently focusing on continuing its role in developing QP’s commercial projects within Qatar and
does not feel that its competitive position in this area is threatened.
67
Residential
In addition to Barwa Real Estate the leading residential property developers in Qatar are United
Development Company and Nasser Bin Khalid Group. However, the focus of these developers is
larger projects while at present Alaqaria is pursuing small to medium sized projects and at this size
the market is more fragmented.
11. SUPPLIERS
ALAQARIA’s principal suppliers of design and architectural services are: KEO International
Consultants and Qatar Design Consortium and Maunsell Consultancy.
ALAQARIA’s principal supplier of construction services in Qatar are Gettco Contracting, Genco
Contracting, Badr Contracting, Shannon Contracting, Al Saraiya Contracting, Al Jaber Contracting
and Al Attiya Contracting. Due to the large amount of construction currently taking place in Qatar,
construction services are in high demand. Therefore the management of ALAQARIA has negotiated
standard contracts with several Qatar construction companies.
The management of ALAQARIA believes that the loss of any single supplier would not have a
material adverse affect on ALAQARIA’s business because of the availability of alternative suppliers.
ALAQARIA enters into a variety of contractor and supply contracts for the purposes of the design
and construction of its projects. ALAQARIA either tenders out the positions of contractor or
supplier or negotiates with a selected developer with whom it has a working history. In respect of any
particular development project, ALAQARIA segregates the development process by establishing a
design team, a consultant team and onsite contractors.
Progress payments are generally made for ALAQARIA’s contracts. Contractors issue a progress
payment certificate (PPC) along with an invoice on completion of each defined stage of work under
the contract. The PPC and invoice are certified and approved by an external management consultant,
the project director and finally by the Executive Management. 10 per cent. of each progress payment
is deducted as a retention.
Final payment is only made to contractors after: (i) the contractor’s notification of completion is
received and verified; (ii) the completion of final inspection by an ALAQARIA’s consultant; (iii)
inspections are completed by consultants and project directors to establish completion and a ‘‘Taking
over Certificate’’ (TOC) is issued (the TOC allows some issues to be addressed and incomplete works
to be carried out later with a time limit); and (iv) payment is approved by an external management
consultant, the project director and finally by the Executive Management.
The retention amount due is then paid by ALAQARIA within 3 months of the issuance of the TOC
and after issuance of a defects liability certificate. ALAQARIA adopts a transparent contracting
policy whereby terms and conditions are disclosed in the Request For Proposal document (RFP)
issued to all contending bidders. The terms and conditions of the contracts used by ALAQARIA are
based on internationally recognised forms of contract, depending on the nature of the works under
construction. These contracts are amended to take into account local law and conditions and project
specific requirements.
The standard terms and conditions include:
*
a full description of the works to be carried out;
*
contract value and currency of payment;
*
a performance bond to secure satisfactory completion of the works;
*
general risk allocation clauses including unforeseen physical conditions and change of law;
*
indemnification;
*
insurances;
*
a fully priced bill of quantities and other technical documents including drawings, technical
specifications, health and safety and quality control requirements; and
*
an advance to be set off against future certified payments.
12. INSURANCE
ALAQARIA currently has project specific insurance for all of its projects through Oman Insurance
Co. This provides cover against all property risk and loss of income. ALAQARIA insures its
68
property against their replacement value. Furthermore, all ALAQARIA staff have insurance cover
and policies in respect of workmen’s compensation.
There have been no significant claims made under any of these insurance policies since inception.
ALAQARIA has hired external consultants to review its insurance policies and to ensure that the risk
exposures are appropriately covered.
13. INVESTMENTS
ALAQARIA has determined that in the past it was over-exposed to equity investments. In 2006
ALAQARIA had to register a QR 100 million write down of its existing portfolio. As such, the
Board has decided to limit exposure to the stock market to QR 50 million by year end 2007.
14. ENVIRONMENT AND SAFETY
A majority of ALAQARIA’s completed and ongoing projects are located in areas controlled by QP
authorities. Compliance with QP health, safety and environmental (HSE) policy is mandatory for
these projects.
In all contracts for design, construction and supervision, there are clauses making the contractor and
consultants responsible for fulfilling the regulating authority’s HSE policy.
Each contractor has to submit its HSE plan at the start of the project which is reviewed by the
supervision consultant. Each contractor has to appoint the required number of safety officers and
safety engineers to the satisfaction of the governing authority. In most of the projects there will be
safety engineers staffed by the supervision consultant overseeing HSE matters and the compliance of
the contractors with HSE regulations.
Each project is managed with a tailor made HSE plan prepared by the contractor and approved by
the consultant. Compliance with the HSE plan is reviewed by the supervision consultants regularly
and monitored by both ALAQARIA and the end user.
15. SHARE CAPITAL AND RELATED PARTY TRANSACTIONS
Share Capital
The share capital of ALAQARIA is QR720 million made up of 72 million shares of QR10 each. Non
Qatari Nationals can own up to 25 per cent. of the total issued shares. The shares are eligible to be
purchased by both Qatari nationals and non-nationals. No more than 5 per cent. of ALAQARIA
shares may be owned by a single share holder (other than the government of Qatar). No rights or
bonuses have been issued. The following chart shows the investors who own more than 1 per cent. of
the shares issued by the type of entity and percentage held in each category:
Percentage
held:
27%
3%
8%
6%
2%
2%
48%
52%
Type of investor:
Government of Qatar
Other government units
Companies
Individuals
Funds
Banks
Sub-total
Less than 1 per cent.
Total
100%
Related Party Transactions
As at the date of this Prospectus, ALAQARIA has not entered into arrangements and agreements
with any of its shareholders or directors. There are no loans made by ALAQARIA to any member of
the senior management, no stock options held by any of the senior management and no other related
party transactions.
69
70
Facility Management Department
Maintenance
Services Department
Development &
Quality Control
Procurement
Chief Facility Management
Officer
Real Estate Development
Department
Sales
Marketing,
Communications
Real Estate
Development
Chief Development Officer
Projects Department
Projects Administration
Contracts and Planning
Engineering Services
Design and
Construction
Management
Chief Financial Officer
Chief Operations Officer
Finance and Administration
Department
Information
Technology
Human Resources
& Administration
Finance, Treasury
and Control
Executive Secretary
Chief Executive Officer
Managing Director
Board of Directors
Chief
Risk
Officer
Legal and Risk Management
Department
Legal
Advisor
16. ORGANISATIONAL STRUCTURE OF ALAQARIA
ALAQARIA has divided its organisational structure into five departments; Facility Management,
Real Estate Development, Projects, Finance and Administration and Legal and Risk Management.
The organisational structure of ALAQARIA is shown in the following chart:
Facility Management Department
The Facility Management Department is responsible for managing and maintaining ALAQARIA’s
properties post construction. The department is also responsible for the procurement function that
supports all other departments’ requirements. The following are the key roles and responsibilities of
the Financial Control Department:
*
maintain all the facilities under ALAQARIA’s control in a satisfactory condition throughout
their useful life within allocated budgets;
*
provide all required services to the tenants of such properties whether contractually required or
against an additional charge; and
*
follow international quality standards while providing the above.
Real Estate Development Department
The Real Estate Development Department is responsible for development of real estate projects in an
efficient manner and ensuring a quality output which meets or exceeds the expectations of
ALAQARIA’s clients.
Revenues from real estate investments are in the form of mark-up on the projects delivered at the
request of the client, lease rentals on properties developed or acquired by ALAQARIA, and gain on
sale of properties held for trading. These revenues form a significant part of the total revenues for
ALAQARIA.
The main objective of the Real Estate Development is to develop the business of ALAQARIA
through different project initiatives, conduct feasibility of the investment options and assist the
management in the decision making process for investments.
Projects Department
The Projects Department focuses on the process of delivering ALAQARIA’s projects to its clients on
time and as per the requirements set out in the development plan. The Projects Department’s
responsibilities include coordinating each project as to the monitoring, deliverable and follow up
under the consultant advisory, managing contract variations and monitoring the budget and the
schedule of the project.
Finance and Administration Department
The Finance Department has the responsibility of cash flow management and the financial reporting
process inside of ALAQARIA. The Finance Department carries out procedures related to accounting
of transactions, treasury management functions and general financial reporting. Treasury handles two
important areas of finance activity, deployment of surplus funds and project financing. The Treasury
function within the Finance Department is responsible for investing the surplus funds from the
business in profitable avenues, as approved by the Board, and ensuring returns are in line with the
investment strategy. The Finance Department is also responsible for assisting the management in
deciding on the sources of project financing required for its development projects.
Legal and Risk Management Department
The Legal and Risk Management Department oversees any legal matters relating to ALAQARIA and
ensures that ALAQARIA is compliant with all applicable legal requirements. This department is also
responsible for reviewing all legal documents prior to signing by ALAQARIA and monitoring any
significant risks that may affect ALAQARIA.
71
17. EMPLOYEES
As at 31 December 2004, 2005 and 2006, ALAQARIA had 56, 95 and 127 employees, respectively.
The following table sets forth the average number of employees as at 31 December 2004, 2005 and
2006 by their function:
As at December 31,
2004
2005
8
9
8
11
23
55
17
20
Management
Engineers and project department
Operations/facility management
Others
Total
56
95
2006
11
18
72
26
127
The management of ALAQARIA believes that none of ALAQARIA’s employees belongs to trade
unions, labour or workers’ syndicates. There are no collective bargaining agreements between any
members of ALAQARIA and its employees.
18.
RISK MANAGEMENT
Business Code of Conduct
ALAQARIA has put in place an internal policy (the Code of Business Conduct), which is aimed at
ensuring good corporate governance in its business practices and activities. The Code of Business
Conduct sets out best practice by ALAQARIA and covers, amongst other things, conflicts of interest,
improper payments and gifts, insider trading, confidentiality and employees’ responsibilities. The Code
of Business Conduct applies to ALAQARIA, its Board of Directors, and its officers and employees.
The Executive Management is charged by the Board of Directors with ensuring that this Code of
Business Conduct and other applicable policies will govern, without exception, all business activities
of ALAQARIA.
Corporate Governance
There are several committees both at the Board level and at the general management level, each with
a defined authority and responsibility. These committees constitute ALAQARIA’s internal risk
management system which undertakes risk assessments and monitors ALAQARIA’s performance. The
composition and responsibilities of the various committees are set out below:
Board Level Committees
(a) Finance & Investment Committee
The Investment Committee comprises the Chairman and three Directors. The committee meets
frequently and is responsible for:
(b)
*
setting, approving and updating ALAQARIA investment objectives and procedures;
*
monitoring and evaluating ALAQARIA’s investment performance;
*
approving any new investment decision before presenting it before the Board of Directors
for their approval.
*
setting and overseeing ALAQARIA’s liquidity status and plans;
*
monitoring ALAQARIA’s performance and profits;
*
approving budgets and forecasts before presenting them to the Board of Directors for their
approval; and
*
reviewing ALAQARIA’s quarterly financials.
Audit Committee
The Audit Committee comprises the Chairman and three Directors. The committee meets
frequently and is responsible for independently ensuring and maintaining oversight of
ALAQARIA’s internal processes, including:
*
financial reporting systems;
*
internal control and risk management processes;
72
(c)
*
internal and external audit functions;
*
legal and regulatory requirements.
Management Level Committee
The Management Committee comprises the functional heads of the senior management team.
The Management Committee meets on a monthly basis and is responsible for the day to day
management of ALAQARIA. The Management Committee is headed by the Chief Executive
Officer, who reports directly to the Chairman and Managing Director.
Risk management policies
Operational Risks
ALAQARIA is acutely aware of the operational risks arising through fraud, unauthorised activities,
error, omission, inefficiency, system failure or from external events. It manages this risk through a
controls-based environment in which duties are clearly assigned and processes are well-documented.
These measures are supported by independent reviews.
ALAQARIA also evaluates its employees’ performance and standards on an annual basis. This
mitigates against employee misconduct and encourages accountability and transparency within
ALAQARIA. ALAQARIA has, to date, not experienced any material incidences of employee
misconduct.
ALAQARIA has adopted the use of international best practices and continues to maintain and
update internal control procedures through third party international consultants.
ALAQARIA also undertakes a stringent selection of major suppliers and contractors to ensure
compliance with its high standards. ALAQARIA’s selection criteria primarily includes governmental
grading of ALAQARIA, its record of previous experience and its technical skills. Contractors are
always requested to provide adequate performance guarantees and insurance coverage. Contractors
are also occasionally requested to provide advance payment guarantees.
Back to back contracts with off-takers and contractors eliminate exposure to raw material price
increases and cost over-runs.
Market Risk
Since the majority of ALAQARIA projects are priced on a fixed return basis with government or
government related off-takers, the market risk is limited to the commercial developments that
ALAQARIA is willing to undertake. Management has limited the commercial exposure to 20 per
cent. of the rental revenue pool, and adopted a strict policy, where each project is subject to a
detailed feasibility review which takes into consideration a wide range of sensitivity analysis and risk
scenarios.
Liquidity Risk
Liquidity risk is the risk that ALAQARIA may be unable to meet its funding requirements.
To guard against liquidity risk, ALAQARIA’s management aim is to diversify ALAQARIA’s funding
sources. It also works to ensure that its financial arrangements are made with reputable banks and
financial institutions, its assets are managed to ensure continued liquidity and a healthy balance of
cash and cash equivalents are maintained.
Credit Risk
Credit risk is the risk that a customer or counter party will fail to meet its commitment, resulting in
financial loss to ALAQARIA.
ALAQARIA’s credit risk is mitigated by its entering into lease contracts with well-known reputable
off-takers, such as QP, and its subsidiaries Qatar Gas and Ras Gas. Where ALAQARIA is dealing
with other off-takers, ALAQARIA will mandatorily obtain adequate security in the form of bank
guarantees or post dated cheques.
ALAQARIA’s management has also put in place formal procedures to monitor credit risk. The
Management Committee regularly reviews the status of receivables and also ensures that provisions
are made for any specific balances where recovery is doubtful.
73
Currency Risk
ALAQARIA mitigates this risk by ensuring that a large proportion of its assets (and liabilities) are in
Qatari Riyals and U.S. dollars. If assets and liabilities are in currencies other than Qatari Riyals
and/or U.S. dollars, ALAQARIA will hedge such assets and liabilities.
Interest Rate Risk
Interest rate risk arises from the possibility that changes in interest rates will affect future
profitability.
ALAQARIA mitigates this risk by adopting favourable hedging arrangements.
19.
MANAGEMENT
Board of Directors
Khalid Bin Khalifa Bin Jassim Al-Thani (Chairman and Managing Director) has an MBA from Pacific
Lutheran University, USA. He started his career with QP in 1991, where he held many key positions
in several departments including material and procurement, projects, logistics, budgeting and planning.
He participated in the setting up, planning and monitoring of many QP projects, especially within the
Mesaieed industrial area. He is currently the head of the Business and Investors Department in QP,
Mesaieed Industrial City Directorate. Sheikh Khalid represents the government of Qatar on the Board
of Directors.
Saud Bin Nasser Bin Jassim Al-Thani (Vice Chairman) has a Bachelor of Science degree (BSc) in
accounting and business administration from the University of Oklahoma, USA. He is the director of
the budgeting and planning department in the Ministry of Finance in Qatar. He joined the Ministry
of Finance in 1997 and held several positions in the tax department and the inspection and tax
payers affairs department. He previously held several positions in the finance department of QP
between 1989 and 1996. Sheikh Saud represents the government of Qatar on the Board.
Hamad Bin Abdulla Bin Khalifa Al-Thani (Board Member) is currently the Chairman of a number of
high profile companies in Qatar, including QIPCO and Qatar Finance House, and also sits on the
Board of Qatar Airways, Qatar National Bank, and Qatar Shipping. He graduated from the
University of Coventry with a degree in Political Science & International Relations.
Mohammed Abdulattif Al Menah (Board Member) has a BSc in Sharia and Islamic Jurisprudence. He
currently holds numerous positions at Qatar Islamic Bank, being its Deputy Chairman, member of its
board and Head of its Executive Committee. He is also Chief Executive Officer of Aqar Real Estate
Development and Investment Company and a member of the Board of Tadhamon International
Islamic Bank, Al Jazeera Islamic Co. and Ritage Co. Previously, he was also the Minister of
Endowment and Islamic affairs in Qatar and the Chairman of the Qatar Zakat Fund.
Mohammed Ali Al Kubaisi (Board Member) has a BSc in engineering from the University of Qatar.
He is currently the director of QIPCO Holding Company and the Managing Director of the
Investment House, a Qatari Private Shareholding Company specialising in investments, wealth
management and investment advisory services as well as a board member of the National Leasing Co.
(Q.S.C.). He previously held several leading positions in the government sector and other
organisations such as Ras Laffan Liquefied Natural Gas Co.
Abdulbasit Ahmed Al-Shaibei (Board Member) is the present Chief Executive Officer for Qatar
International Islamic Bank. He has over twenty years of banking experience, both as a regulator for
Qatar Central Bank and a senior manager at a leading Islamic bank. He additionally sits on the
Boards of Gulf Cement Company and Medicare Group.
Khalifa Al Suwaidi (Board Member) is a prominent businessman in Qatar. He is the managing
director of Alsuwaidi Investment Co., and an office manager to the Ministry of Economy & Trade.
He is a member of the National World Trade Organisation Affairs Committee, and holds an MBA
and BSC in Marketing & Finance.
Other Senior Management
Mohammed Mandani (Chief Executive Officer) has a BSc in banking from Holley Names College in
California, USA. After graduating, he started his career in 1983 as a banker with Qatar Commercial
Bank and has since held several positions including head of risk management, head of the banking
group, head of the operations department, head of the commercial services department and most
74
recently, Deputy CEO. He was recently appointed as CEO of ALAQARIA, having served as a board
member some years previously. Mr Mandani is a former board member of Qatar Shipping Co. and
Doha Securities Market.
Osama Abu Baker (Chief Financial Officer) holds a BSc in Economics and Accounting. He is a
certified public accountant under the jurisdiction of the state of Illinois, USA. He has eleven years of
experience in financial management, consulting and auditing and held several managerial positions in
international companies such as Deloitte & Touche and Saipem International. He is a Certified
Management Accountant candidate and a member of the American Institute of Certified Public
Accountants.
Richard A. Lukjaniec (Chief Operations Officer) holds a Diploma in Architecture from the University
of Hull in the United Kingdom (formerly Hull School of Architecture), is registered as a Chartered
Architect in both the United Kingdom and in Ontario, Canada and is a member of the Royal
Institute of British Architects. Richard has 25 years of solid practical design and construction
experience, 12 years of which included the running of a successful architectural practice. His
experience includes the full gamut of building projects, including residential, commercial, educational
and recreational developments.
Abdula Ali Al Kuwari (Chief Development Officer) holds a BSc in Architectural Engineering from The
Technical Military College Cairo. He has over ten years’ experience in managerial roles across the
fields of project management, contract administration, architectural design, feasibility studies and
construction monitoring, and initially commenced his career in the Qatar Military Forces.
Murad Al Ghoul (Chief Facility Management Officer) holds a high diploma in Urban Planning (Hons)
from Qatar University and a BSc from the University of North Carolina, USA. He has twenty-one
years’ experience in engineering, construction, project management, logistics and maintenance.
Business Address
The business address of all directors and senior management is Qatar International Islamic Bank
Building, Qahraba Street, Doha, Qatar.
Conflicts
There are no potential conflicts of interest between the duties of the directors and other members of
the senior management listed above and their private interests and other duties.
20. MISCELLANEOUS
Intellectual Property
ALAQARIA is a real estate project designer, planner and developer. It utilises techniques, methods
and processes during the construction of its various projects which are of value to ALAQARIA as it
continues to design, plan and develop new projects. However, ALAQARIA does not consider that
such techniques, methods and processes are material assets, in and of themselves, at this time.
Information Technology
ALAQARIA is supported by an IT infrastructure that includes ORACLE based ERP software and is
managed and supported by an in-house IT team, responsible for IT support and maintenance.
75
THE ISSUER
Qatar Alaqaria Sukuk Company was incorporated in the Cayman Islands under registration no. MC188347 as an exempted company with limited liability on 31 May 2007 in accordance with the
Companies Law of the Cayman Islands with its registered office at PO Box 1093GT, Queensgate
House, South Church Street, Georgetown, Grand Cayman, Cayman Islands.
The authorised share capital of the Issuer is U.S.$50,000 divided into 50,000 shares with a par value
of U.S.$1 each. 250 shares of the Issuer are fully paid up and held by Maples Finance Limited on
trust for charitable purposes.
The directors of the Issuer and their principal occupations are as follows:
Director
Guy Major
Carlos Farjallah
Stephen O’Donnell
Principal Occupation
Senior Vice President, Maples Finance Limited
Vice President, Maples Finance Limited
Senior Vice President, Maples Finance Limited
The business address of each of the directors of the Issuer is c/o Maples & Calder, PO Box 1093GT,
Queensgate House, South Church Street, Georgetown, Grand Cayman, Cayman Islands. 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, include the issue of the Certificates, execution of the
Transaction Documents to which it is a party and any other agreements necessary for the
performance of its obligations under the transactions contemplated thereby and undertaking activities
pursuant to or that are not inconsistent with the terms and conditions of the Certificates.
There are no potential conflicts of interests between the duties of the directors listed above and their
private interests and other duties.
As of the Closing Date, after giving effect to the transactions contemplated by the Transaction
Documents, the authorised share capital of the Issuer will be U.S.$50,000, consisting of 50,000 shares
of U.S.$1.00 par value each. 250 of the shares are fully paid-up and are in the legal ownership of
Maples Finance Limited (the Share Trustee), which will hold them pursuant to the terms of a
declaration of trust (the Cayman Declaration of Trust) in trust until the Termination Date (as defined
in the Cayman Declaration of Trust). The Share Trustee has no beneficial interest in and derives no
benefit other than its fees (if any) for acting as Share Trustee from its holding of the shares. Pursuant
to the terms of its Memorandum of Association and the Transaction Documents, the Issuer may not
issue any securities other than the Certificates or otherwise incur indebtedness, other than in
connection with the Transaction Documents.
Other than as described above, the Issuer does not have any loan, capital, borrowings or contingent
liabilities and has not changed its equity capital.
Maples Finance Limited will act as the administrator (in such capacity, the Administrator) of the
Issuer. Through this office and pursuant to the terms of an administration agreement to be dated on
or about the Closing Date, by and between the Administrator and the Issuer (the Administration
Agreement), the Administrator will perform certain services necessary and appropriate to the
management of the business of the Issuer in and from within the Cayman Islands, including certain
clerical, administrative and other services until termination of the Administration Agreement. In
consideration of the foregoing, the Administrator will receive various fees and other charges payable
by the Issuer at rates provided for in the Administration Agreement and will be reimbursed for
expenses. The terms of the Administration Agreement provide that either party may terminate the
Administration Agreement by giving 14 days’ notice in writing to the other party at any time within
12 months of the happening of any of certain stated events, including any breach by the other party
of its obligations under the Administration Agreement. In addition, either party may terminate the
Administration Agreement at any time by giving at least three months’ notice in writing to the other
party.
The Administrator will be subject to the overview of the Board of Directors of the Issuer. Each of
the directors of the Issuer is an employee of the Administrator.
The Administrator’s principal office is at PO Box 1093 GT, Queensgate House, South Church Street,
George Town, Grand Cayman, Cayman Islands.
The fiscal years of the Issuer will end on 31 December of each year, beginning in 2007. The Issuer
has not prepared any financial statements to date. As at the Closing Date, Deloitte & Touche had
been appointed as auditors of the Issuer.
76
OVERVIEW OF THE STATE OF QATAR1
1.
GENERAL
Location, Area and Historical Background
Qatar is an independent state in the Southern Arabian Gulf surrounded by Saudi Arabia, Bahrain,
the United Arab Emirates and Iran. The country is situated midway along the western coast of the
Arabian Gulf.
The country extends over a peninsula approximately 185 kilometres long and between 55 to 100
kilometres wide and covers a total area of 11,521 square kilometres, including a number of islands.
Doha is Qatar’s capital city, the seat of the Government and the country’s cultural, commercial and
financial centre. It is also the location of Qatar’s main port and the international airport.
Qatar has an arid desert climate with low annual rainfall and little vegetation or surface water. The
highest geographical point in Qatar is Dukhan, in the north west of the country, with a maximum
elevation of about 40 metres above sea level. Qatar relies almost exclusively upon two water
desalination plants and one combined water and power project for domestic water supply.
Qatar has vast hydrocarbons resources within its territory with both onshore and offshore oil fields
and the third largest proven natural gas reserves in the world, including the North Field, the world’s
largest single non-associated gas deposit in the world.
Population
The population of Qatar is estimated to reach 907,229 by July 2007 an average annual increase of
over 2.3 per cent. since 2006.
The official language of Qatar is Arabic and English is widely spoken. Nearly all Qatari citizens are
Muslims. Among the Qatari residents, Hindus and Christians are the principal religious minorities.
Constitution and Legal System
The National Constitution Committee, established by an emiri decree in July 1999 to draft a new
permanent constitution, presented a final draft to His Highness the Emir in July 2002. One of the
main provisions in the new constitution is the establishment of an elected parliament. The draft
constitution received an overwhelming majority vote in the referendum held in April 2003, and
became effective in June 2005.
The judiciary in Qatar was expressly established as an independent body by the provisional
constitution and was formerly divided into two court systems; the Civil, Commercial and Criminal
system and the Sharia Court system which administers Islamic laws.
The Civil and Commercial system was formerly divided into the minor and major courts. The minor
court had jurisdiction to consider only disputes not exceeding QR 30,000 presided by a single judge.
All civil and commercial disputes in excess of that value were heard by the major courts, comprised
of a panel of three judges. Appeals from the minor courts were raised to the major courts, and from
the major courts to the Court of Appeal, which is the highest court of appeal in the country.
In October 2004, the judicial system underwent a radical change with the establishment of the new
Judiciary Law issued in 2003, which became effective in 2004. According to the new Judiciary Law,
the previous two-court system has merged into one. A Higher Court called the Court of Cassation
(Supreme Court) has been established. Appeals from the Court of Appeal can be raised to the Court
of Cassation, which will be considered the highest court of appeal in the country.
Foreign Relations and International Organisations
Qatar is a member of the Gulf Cooperation Council (GCC), whose other members are Bahrain,
Kuwait, Oman, Saudi Arabia and the United Arab Emirates; the Organisation of Petroleum
Exporting Countries (OPEC), and other international multilateral organisations such as the United
Nations, the International Monetary Fund, the International Bank for Reconstruction and
Development and the World Trade Organisation.
1
Unless otherwise stated the information contained in this section is taken from the QNB Research Report dated December 2005
and updated in June 2007 with reference to the CIA – World Factbook. This information has been accurately reproduced, and, as
far as the Issuer and ALAQARIA are able to ascertain from information published by those third parties, no facts have been
omitted which would render the reproduced information inaccurate or misleading.
77
During the GCC summit held in December 2001, the supreme council of the GCC approved the
creation of a GCC customs union which is currently in place. This agreement has accelerated the
proposed customs union by two years, setting unified customs tariffs at 5 per cent. for all imported
goods into the region. The GCC summit also approved proposals for a monetary union and the
introduction of a single GCC currency by 2010.
Government Organisations and Political Background
Qatar is an absolute monarchy and has been ruled by the al-Thani family since the nineteenth
century. In 1916, the al-Thanis entered into a treaty with the British pursuant to which Qatar became
a British protectorate. Qatar declared independence on 3 September 1971. The current Emir, His
Highness Sheikh Hamad bin Khalifa al-Thani, replaced his father as Emir and assumed his position
on 27 June 1995. The Emir is the principal executive officer in Qatar, although the cabinet, appointed
by the Emir, carries out the day-to-day administration of the country’s affairs. The Prime Minister is
Sheikh Hamad bin Jassem bin Jabr Al Thani. The son of the Emir, H.E. Sheikh Tamim bin Hamad
bin Khalifa al-Thani, was designated the crown prince in 2003, replacing his brother, H.E. Sheikh
Jassem bin Hamad bin Khalifa al-Thani, who had been designated crown prince in 1996.
Under the new constitution, the Consultative Council will propose legislation, which is then to be
reviewed by a committee and ratified by the Emir. This will replace the Cormer system whereby the
Council of Ministers was responsible for proposing draft laws and decrees which were then approved
by the Consultative Council and ratified by the Emir. As before, laws only come into effect one
month after their publication in the Official Gazette, unless another date for effectiveness is stipulated
in the law itself. The Emir will retain certain powers including the power to suspend the progress of
proposed legislation in the national interest and to dissolve the Consultative Council.
The Emir appoints the Prime Minister, the Deputy Prime Minister and the members of the Council
of Ministers (together, the cabinet) and one-third of the Consultative Council. The Emir is advised by
the Emiri Diwan, the office of the Emir, an executive staff member that assists both the Emir and the
Council of Ministers in the performance of their respective duties. The Council of Ministers assists
the Emir in the discharge of his duties and the exercise of his powers and is responsible for the
administration of all the internal and external affairs which fall within its competence. The executive
branch of government has been separated from the royal court and state finances have been separated
from the private finances of the al-Thani family.
Credit Rating
The State of Qatar has steadily improved its credit ratings over the last decade. Through a series of
increases, its long-term credit rating by S&P has improved from BBB in February 1996 to its current
rating of AA-, with a stable outlook, in June 2007. Similarly, Moody’s long-term foreign currency
senior unsecured debt rating for the State of Qatar has improved from Baa2 in September 1999 to
AA- in June 2007.
2.
THE ECONOMY OF QATAR
Economy
Qatar’s economy has become one of the fastest growing economies in the world. Nominal Gross
Domestic Product (GDP) growth was estimated at 7.1 per cent. in 2006 and is estimated to show a
further increase in 2007. Moving the economy forward is the rapidly expanding Natural Gas sector,
which continues to lead the economic diversification efforts of the Government and provides the basis
for reshaping the economy.
With the development of projects to produce and export natural gas in the form of Liquefied Natural
Gas (LNG), piped gas, Gas to Liquid (GTL) projects and investments in petrochemical and fertiliser
industries, Qatar has been successful in diversifying its revenue base by reducing its historic
dependence on oil export revenues. Although economic performance is still relatively dependent on oil
revenues, the contribution of LNG has increased significantly over the past few years and Qatar is
expected to become the world’s largest exporters of LNG in 2007. The share of the oil and gas sector
in terms of overall GDP stood at 60 per cent. in 2006.
Gross Domestic Product (GDP)
Qatar’s GDP has more than doubled since 1999, when it was at a level of QR 45.1 billion, to its
2006 level of QR 111.9 billion.
78
For 2007, GDP figures are expected to show continued growth underpinned by a continuing demand
for Qatar’s crude oil and LNG exports.
3.
KEY ECONOMIC SECTORS
The Oil Sector
The State of Qatar conducts its oil and gas operations predominantly through Qatar Petroleum (QP),
which manages the State’s interests in all oil, gas, petrochemical and refining enterprises in Qatar and
abroad. Qatar Petroleum, previously known as Qatar General Petroleum Corporation, was created in
1974 by an Emiri Decree and is 100 per cent. owned by the Qatari government. QP is engaged in all
phases of the hydrocarbon business, including exploration and drilling, production, refining,
transportation, storage, regional sales and exports. Since 1988, the State of Qatar has granted QP the
responsibility of supervising hydrocarbon exploration and production activities conducted in Qatar in
conjunction with foreign companies. QP owns a majority of the shares in companies engaged in
LNG, steel and fertiliser production and most of the companies engaged in petrochemical production
in Qatar. QP also currently produces all the natural gas liquids in Qatar. Additionally, QP is
involved, either through joint ventures or as the agent of the State of Qatar, in all the gas-to-liquids
(GTL) and pipeline gas supply projects in Qatar.
QP is the majority shareholder in a number of industrial companies located primarily at Mesaieed
Industrial City and Ras Laffan City in Qatar which use natural gas as feedstock and/or fuel to
produce various value-added products for both domestic consumption and export. These companies
are engaged in the production of petrochemicals, gas liquids, metal coating, steel, iron and fertiliser.
Several of these downstream companies are owned through QP’s subsidiary, Industries Qatar, which
was partially privatised in 2003 through a public equity offering in Qatar.
QP Oil Production
QP produces oil for its own account from both onshore and offshore fields and from other fields
through Exploration/Development and Production Sharing Agreements (EPSAs/DPSAs) with major
international partners.
QP operates the Dukhan Field on an exclusive basis. The Dukhan field is Qatar’s oldest and largest
field. The field comprises of three reservoirs for crude oil and one reservoir for non-associated gas.
QP also produces offshore crude oil for its own account from two fields within Qatar’s territorial
waters: Maydan Mahzam and Bul Hanine, which currently have production capacities of 35,000 bpd
and 70,000 bpd respectively.
QP embarked upon an investment programme with the intention of expanding oil production capacity
from its onshore and offshore fields from 800,000 bpd to around 875,000 bpd by year-end 2006. QP
has in its new five-year plan, starting 2005, budgeted an overall QR 185 billion for projects in crude
oil, natural gas, and petrochemicals, with QR 6 billion allocated specifically for crude oil production,
expansion and other oil related projects.
The Natural Gas Sector
Qatar’s North Gas Field, discovered in 1971, is the largest non-associated gas field in the world, with
proven reserves estimated at over 910 trillion cubic feet (tcf), which is equivalent to about 164 billion
barrels of oil. These reserves would translate into 14.4 per cent. of the world total and will be
sufficient to support planned production of natural gas for over 200 years. The North Field extends
over an area of approximately 6,000 square kilometres, predominantly underlying the territorial
waters of the State of Qatar. Associated gas reserves are currently estimated at 15 tcf. Within the
Middle East, Qatar has the second highest proven gas reserves after Iran.
QP has initiated and developed two major LNG projects with foreign shareholders for the purpose of
utilising the North Field gas for exports in the form of LNG. These projects are Qatargas and
Rasgas. Expansion of LNG facilities through Rasgas II, Qatargas II, RasGas III, Qatargas III, and
Qatargas IV is being pursued to meet additional export opportunities. Sales and Purchase Agreements
(SPA) have been reached with a number of countries, which at their peak in 2011 will reach exports
of 34.5 million tons per annum (mtpa). Several Heads of Agreement (HoA) have also been signed,
and should these turn into confirmed SPAs, total LNG exports would reach about 78.1 mtpa by
2011. The Qatar Gas Transport Company (Nakilat) was established as a Doha Securities Market
79
listed company in early 2005, to meet the transportation needs of the various LNG export deals. QP
has allocated QR 122 billion in its five-year plan, starting 2005, to meet the rapidly expanding needs
of the Natural Gas sector.
4.
INFLATION
Inflation in Qatar has witnessed an increase in recent years, reaching an estimated 3.2 per cent. in
2006 as compared to an average of 3.9 per cent. over the period from 2001 to 2005. This increase in
inflation over the past few years can be primarily attributed to the sustained increase in housing costs
and the weakness of the U.S. dollar, to which the Qatari Riyal is pegged.
5.
FOREIGN TRADE
Qatar’s exports have grown significantly, averaging a growth rate of 18.8 per cent. over the five year
period from 2001 to 2005 and reaching QR 121 billion (U.S.$33.25 billion) in 2006. Qatar is
attempting to diversify its economy by increasing export revenues coming in from natural gas,
chemicals and related products, and iron and steel.
Exports
There has been a significant increase in Qatar’s exports of crude oil, LNG, chemicals and related
products, and iron and steel. The increase in crude oil export revenues was a result of better than
average crude oil prices and production.
Qatar’s leading export trade partner is Japan. Exports to Japan have been on a steady increase over
the years, mainly due to increased LNG exports. South Korea, Singapore, India and the United Arab
Emirates are other main export trade partners.
Imports
Qatar’s imports free on board (fob) increased to QR 44.9 billion in 2006 up from QR 33.0 billion in
2005. Qatar’s main imports consist of machinery, transportation equipment, food and chemicals.
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SUMMARY OF THE PRINCIPAL TRANSACTION DOCUMENTS
The following is a summary of certain provisions of the principal Transaction Documents and is qualified
in its entirety by reference to the detailed provisions of the principal Transaction Documents. Copies of
the Transaction Documents will be available for inspection at the offices of the Principal Paying Agent
(as defined in the Conditions).
Investment Management Agreement
Pursuant to the investment management agreement (the Investment Management Agreement) dated on
or about the Closing Date and entered into between the Investment Manager and Qatar Alaqaria
Sukuk Company, Qatar Alaqaria Sukuk Company shall transfer the proceeds of the sale of the
Certificates (the Capital) to the Investment Manager. The Capital shall be invested on the Closing
Date in accordance with an investment plan (in the form attached to the Investment Management
Agreement and prepared by the Investment Manager, the Investment Plan) to purchase tangible and
non-tangible assets (such assets, the Assets) that the Investment Manager determines to be Sharia
compliant. The Investment Plan provides that, among other things, part of the Capital shall always
be invested in Property.
The Investment Plan provides that from and including the Closing Date not less than a third of
Capital shall be invested in QP Property, Non QP-Property, Eligible Shares and Other Tangible
Assets but, for the avoidance of doubt, not including any Non-Tangible Assets or Cash (such assets,
Tangible Assets). The Investment Manager shall be entitled to replace and substitute the Assets with
other assets, provided always that not less than a third of Capital shall be invested in Tangible
Assets.
Cash means, at any time, cash in hand or cash at bank.
Eligible Shares means any and all shares, interests, partnership interests (whether general or
limited), participations, rights in or other equivalents (however designated) in any equity and
any other interest or participation that confers a right to receive a share of the profits and
losses, or distributions of assets of any person which, in each case, the Investment Manager
determines are Sharia compliant (in accordance with the terms of the Investment Management
Agreement).
Non-QP Property means any property development or project undertaken on property other
than QP Property.
Non-Tangible Assets means any Assets other than Tangible Assets and Cash.
Other Tangible Assets means any tangible assets other than QP Property, Non-QP Property and
Eligible Shares.
QP Property means any property development or project on property owned or controlled by
Qatar Petroleum.
Ninety per cent. of the profit derived from the Assets will be distributed by the Investment Manager
in U.S. dollars 2 Business Days prior to each Periodic Distribution Date to Qatar Alaqaria Sukuk
Company and the remaining ten per cent. of such profit shall be distributed to the Investment
Manager. If such profit payable to Qatar Alaqaria Sukuk Company is greater than the relevant
Periodic Distribution Amount, the Investment Manager shall be entitled to retain such excess profit
(the Excess Profit) on behalf of Qatar Alaqaria Sukuk Company. Qatar Alaqaria Sukuk Company
shall at any time be entitled to demand payment of such Excess Profit. To the extent that there is
insufficient cash to pay any further profit distributions to Qatar Alaqaria Sukuk Company, the
Investment Manager shall be entitled to first use any retained Excess Profit to pay the shortfall prior
to providing the Liquidity Facility (as defined below). Any remaining Excess Profit (following
redemption of the Certificates in full) shall be retained by the Investment Manager for its own
account by way of an incentive payment.
In circumstances where there is insufficient cash available to pay all distributable profit then due, the
Investment Manager shall provide liquidity funding which it determines to be Sharia compliant
(the Liquidity Facility) to ensure Qatar Alaqaria Sukuk Company receives the payment expected
under the Investment Plan. All amounts advanced under the Liquidity Facility shall only be repayable
on the Redemption Date.
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Under the terms of the Investment Management Agreement, ALAQARIA may purchase any asset
which comprises part of the Assets at any time prior to the Redemption Date at its Initial Value
provided that:
(a)
no Event of Default or Dissolution Event has occurred and is continuing and no Exercise
Notice has been served under either the Purchase Undertaking or the Sale Undertaking;
(b)
the Investment Manager certifies in writing to the Delegate that (i) no Event of Default or
Dissolution Event has occurred and is continuing, (ii) no Exercise Notice has been served under
the Purchase Undertaking or Sale Undertaking, and (iii) immediately following the proposed
purchase, the aggregate of the Initial Value of the remaining Tangible Assets shall constitute not
less than U.S.$100,000,000 (being one third of the Capital). In the event that the aggregate of
the Initial Value of the remaining Tangible Assets is less than U.S.$100,000,000, the Investment
Manager will be required to confirm that the Value of all remaining Tangible Assets is
U.S.$100,000,000 (being one third of the Capital) or more, and any valuation of the remaining
Tangible Assets shall be undertaken on a basis that is consistent with the valuation methodology
used in determining Initial Values (provided always that the Investment Manager shall be
required to request a valuation from an Independent Appraiser to confirm the relevant Value of
any Non-QP Property and/or Other Tangible Assets). In addition, the certification of the
Investment Manager shall, except in the case of manifest or proven error, be deemed conclusive
and binding.
The Delegate shall review the certification provided by the Investment Manager (the Certification) and
shall confirm to the Trustee if the Certification has been provided by the Investment Manager in the
appropriate form.
Upon receipt of such confirmation from the Delegate, the Trustee shall consent to the sale of the
Asset, and no later than 10 days thereafter, ALAQARIA and the Trustee shall enter into a sale
agreement, evidencing the sale of such Asset to ALAQARIA, and the purchase price payable shall be
deferred until the Certificates have been redeemed in full. The purchase price due shall be set off
against the incentive fees due to the Investment Manager on such date, and accordingly no cash
payment will be made on the date of acquisition of such Asset by ALAQARIA.
Under the terms of the Investment Management Agreement, the Investment Manager shall be entitled
to commingle its own assets with the Assets.
The Investment Manager shall agree to make investments in accordance with the Investment
Management Agreement, in a manner that would not subject Qatar Alaqaria Sukuk Company to any
tax liability imposed by the State of Qatar. In the event that Qatar Alaqaria Sukuk Company is
subject to any such tax liability (arising in respect of or by reference to any income, profits or gains
arising in respect of any of the investments made by the Investment Manager on behalf of Quatar
Alaqaria Sukuk Company), the Investment Manager shall agree to pay Qatar Alaqaria Sukuk
Company an amount equal to such tax liability imposed by the State of Qatar and the incurrence of
such tax liability shall not constitute an Event of Default.
Purchase Undertaking
Under the Purchase Undertaking, the Obligor undertakes that upon Qatar Alaqaria Sukuk Company
exercising its option to oblige the Obligor to purchase all of Qatar Alaqaria Sukuk Company’s rights,
benefits and entitlements to the Assets (including, without limitation, any claim under the Investment
Management Agreement in respect of the Assets), the Obligor shall purchase the same on an ‘‘as is’’
basis (without any warranty express or implied as to condition, fitness for purpose, suitability for use
or otherwise) and if any warranty is implied by law, it shall be excluded to the full extent permitted
by law at the Exercise Price on the relevant Exercise Date following the issue of a notice under the
Purchase Undertaking from Qatar Alaqaria Sukuk Company (the Exercise Notice).
If the Obligor fails to settle all or part of the Exercise Price that is due in accordance with the
Purchase Undertaking (the Outstanding Exercise Price), the Obligor irrevocably undertakes to pay
Qatar Alaqaria Sukuk Company a late payment amount in respect of the period from, and including,
the due date for settlement to, but excluding, the date of full settlement, calculated on a daily basis,
as the product of (a) 1 per cent. per annum, (b) the Outstanding Exercise Price and (c) on the basis
of 12 months of 30 days each. Any late payment amount received by Qatar Alaqaria Sukuk
Company must be donated (on behalf of the Obligor) to The Red Crescent Society, being the charity
of the Obligor’s choice.
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Under the Purchase Undertaking, the Obligor has agreed, for so long as the Certificates are
outstanding, to be bound by the following covenants:
Minimum Consolidated Tangible Net Worth
The Consolidated Tangible Net Worth of ALAQARIA shall not be less than QR 1,100,000,000
during any Relevant Period.
Negative Pledge
ALAQARIA 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:
(a)
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
(b)
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).
Insurance
ALAQARIA shall, and shall procure that each member of the Group shall, obtain and maintain
insurance with an insurer or insurers of sufficient standing against such losses and risks and in such
amounts as are customary in the businesses (or substantially similar businesses) in which they are
engaged in the jurisdiction where they operate; provided that if such member of the Group can
remedy any failure to comply with the above within 30 days, this covenant shall be deemed not to
have been breached.
Information undertakings
ALAQARIA shall:
(a)
promptly notify the Trustee and the Delegate once it has received notice of or become aware of
the occurrence of any Event of Default;
(b)
deliver to the Trustee and the Delegate its most recent (consolidated, if so prepared) audited
annual and reviewed semi-annual financial statements, as soon as they become available, but in
any event within 180 days after the end of each of its financial and semi-annual financial years,
prepared by a firm of auditors of international repute and in accordance with International
Financial Reporting Standards from time to time published by the International Accounting
Standard Board or any successor body; and
provide the Trustee and the Delegate within fourteen (14) days following written request by either the
Trustee or the Delegate with a certificate (a compliance certificate) signed by either the chief executive
officer or the chief financial officer, or any two other members of ALAQARIA’s executive
management, stating that, to the best of the signing person’s knowledge, ALAQARIA has kept,
observed, performed and fulfilled its obligations under, and complied with, the Transaction
Documents to which it is a party and is not in default in the performance or observance of any of
the terms, provisions and conditions hereof or in the other Transaction Documents to which it is a
party (or, if an Event of Default or Potential Event of Default shall have occurred, describing all
such Events of Default or Potential Events of Default of which he may have knowledge), provided
always that ALAQARIA shall not be required to give more than one compliance certificate in any
twelve-month period.
For these purposes:
ASAS means ASAS Real Estate, a Qatari company with limited liability incorporated and
registered on 11 December 2006.
Consolidated Tangible Net Worth means the nominal paid-up capital of ALAQARIA and its
Subsidiaries plus the aggregate of amounts standing to the credit of reserves (including share
premium account, capital redemption reserve, profit & loss account, subordinated shareholders’
loans and shareholders’ current account) less goodwill and other intangible assets, less dividends
declared but not paid, and debit balances in the profit & loss account and the shareholders’
current account as shown in the latest Relevant Accounts.
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Capital Stock means, with respect to any Person, any and all shares, participations or other
equivalents (howsoever designated, whether voting or non-voting) or such Person’s equity,
including any preferred stock of such Person, whether now outstanding or issued after the date
hereof including, without limitation, all series or classes of such Capital Stock.
Financial Indebtedness means any indebtedness for or in respect of:
(a)
moneys borrowed;
(b)
any amount raised by acceptance under any acceptance credit facility or dematerialised
equivalent;
(c)
any amount raised pursuant to any note purchase facility or the issue of bonds, notes,
debentures, loan stock or any similar instrument;
(d)
the amount of any liability in respect of any lease or hire purchase contract which would,
in accordance with International Financial Reporting Standards (IFRS), be treated as a
finance or capital lease;
(e)
receivables sold or discounted (other than any receivables to the extent they are sold on a
non-recourse basis);
(f)
any amount raised under any other transaction (including any forward sale or purchase
agreement) having the commercial effect of a borrowing;
(g)
any derivative transaction entered into in connection with protection against or benefit
from fluctuation in any rate or price (and, when calculating the value of any derivative
transaction, only the marked to market value shall be taken into account);
(h)
any counter-indemnity obligation in respect of a guarantee, indemnity, bond, standby or
documentary letter of credit or any other instrument issued by a bank or financial
institution excluding any performance bonds;
(i)
any amount of any liability under an advance or deferred purchase agreement if one of the
primary reasons behind the entry into this agreement is to raise finance;
(j)
any obligations incurred in respect of any Islamic financing arrangements; and
(k)
(without double counting) the amount of any liability in respect of any guarantee or
indemnity for any of the items referred to in paragraphs (a) to (j) above.
Group means, at any time, ALAQARIA and its Subsidiaries.
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 indebtedness in respect of any person on any date (and without
duplication) for or in respect of:
(a)
any Financial Indebtedness of such person;
(b)
the amount of any liability of such person to pay the deferred and unpaid purchase price
of property, assets or services, which purchase price is due more than 30 days after the
earlier of the date of placing such property in service or taking delivery and title thereof or
the completion of such services;
(c)
the principal component or liquidation preference of all obligations of such person with
respect to the redemption, repayment or other repurchase of any preferred stock; and
(d)
all indebtedness of any other person secured by Security granted by such person on any of
its asset (the value of which, for these purposes, shall be determined by reference to the
balance sheet in respect of the latest half year period of the person providing the Security)
of such person, whether or not such indebtedness is assumed by such person.
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Permitted Security means:
(a)
any Security existing on the Closing Date;
(b)
any Security created or outstanding with the approval of an Extraordinary Resolution;
(c)
any Security arising by operation of law, provided that such Security is discharged within
30 days of arising;
(d)
any Security granted by a Subsidiary in favour of ALAQARIA;
(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 ALAQARIA or a Subsidiary in the ordinary course of its business;
(f)
any Security on assets or property existing at the time ALAQARIA 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 ALAQARIA 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 ALAQARIA or any
Subsidiary;
(h)
any Security created or permitted to be outstanding by ALAQARIA or any Subsidiary in
respect of any Project Finance Indebtedness;
(i)
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
(Negative Pledge) of the Purchase Undertaking does not, at any time, exceed 10 per cent.
of the Consolidated Tangible Net Worth; and
(j)
any renewal of or substitution for any Security permitted by any of the preceding subclauses (a) through (i), provided that with respect to any such Security incurred pursuant
to this sub-clause (j), 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).
Person means any individual, corporation, partnership, joint venture, association, joint stock
company, trust, unincorporated organisation, limited liability company or government or agency,
or political subdivision thereof, or other entity.
Project Finance Indebtedness means any Financial Indebtedness issued, borrowed or raised by
ALAQARIA or any of its Subsidiaries to finance the ownership, acquisition, development and/
or operation of an asset or project where there is no recourse whatsoever for repayment thereof
other than:
(a)
recourse solely to the property, income, assets or revenues from such asset or project
(including insurance proceeds); and/or
(b)
recourse, for the purpose only of enabling amounts to be claimed in respect of such
Financial Indebtedness, over such asset or project or the income, cash flow or other
proceeds deriving therefrom, provided that the extent of such recourse is limited solely to
the amount of any recoveries made on any such enforcement.
QR means Qatari Riyal, being the legal currency for the time being of the State of Qatar.
Relevant Accounts means, at any time, the most recently publicly available annual audited or
interim reviewed financial statements of ALAQARIA prepared in accordance with International
Financial Reporting Standards.
Relevant Period means each period of twelve months ending on the last day of ALAQARIA’s
financial year and each period of six months ending on the last day of the first half of
ALAQARIA’s financial year.
85
Security means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind
(including, without limitation, any conditional sale or other title retention agreement or lease in
the nature thereof, any sale with recourse against the seller or any affiliate of the seller, or any
agreement to give any security interest) securing any obligation of any Person.
Subsidiary means in relation to any company or corporation, a company or corporation:
(a)
which is controlled, directly or indirectly, by the first mentioned company or corporation;
(b)
more than half of the Capital Stock of which is beneficially owned, directly or indirectly
by the first mentioned company or corporation; or
(c)
which is a Subsidiary of another Subsidiary of the first mentioned company or
corporation,
and for this purpose:
(x)
a company or corporation shall be treated as being controlled by another if that other
company or corporation is able to direct its affairs and/or to control the composition of its
board of directors or equivalent body; and
(y)
for so long as ALAQARIA, together with any of its Subsidiaries, (1) beneficially own,
directly or indirectly fifty per cent. (50 per cent.), or less than fifty per cent. (50 per cent.),
of the Capital Stock of ASAS, and (2) do not have the power to elect (or direct the
election) of a majority of the board of directors of ASAS, ASAS shall not be a Subsidiary
of ALAQARIA.
Sale Undertaking
Qatar Alaqaria Sukuk Company shall execute a sale undertaking (the Sale Undertaking) in favour of
ALAQARIA. Pursuant to the Sale Undertaking, subject to Qatar Alaqaria Sukuk Company being
entitled to redeem the Certificates early pursuant to Condition 6.3 (Redemption for Taxation Reasons),
ALAQARIA may, by exercising its option under the Sale Undertaking and serving notice on Qatar
Alaqaria Sukuk Company no later than 45 days and no earlier than 60 days prior to the Tax
Redemption Date, oblige Qatar Alaqaria Sukuk Company to sell and assign all of Qatar Alaqaria
Sukuk Company’s rights, benefits and entitlements in and to the Assets (including, without limitation,
any claim under the Investment Management Agreement in respect of the Assets) to ALAQARIA on
the Exercise Date at the Exercise Price.
Declaration of Trust
The Declaration of Trust will be entered into or about the Closing Date between Qatar Alaqaria
Sukuk Company, ALAQARIA and the Delegate. 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 State of
Qatar do not recognise the concept of trust or beneficial interests and, accordingly, there is no
certainty that the terms of the Declaration of Trust would be enforced by the courts of Qatar.
Pursuant to the Declaration of Trust, Qatar Alaqaria Sukuk Company will declare the Trust for the
benefit of the Certificateholders over the Trust Assets and will, in relation to the Certificates, inter
alia:
(a)
hold the Trust Assets upon trust absolutely for the Certificateholders (pro rata according to the
principal amount of Certificates held by each Certificateholder);
(b)
distribute the proceeds of any enforcement of the Trust Assets;
(c)
collect and invest the proceeds of the Trust Assets in accordance with the terms of the
Declaration of Trust; and
(d)
take such other steps as are reasonably necessary to ensure that the Certificateholders receive the
distributions to be made to them in accordance with the Transaction Documents.
The Declaration of Trust provides that no payment and/or delivery of any amount whatsoever shall
be made in respect of the Certificates by the Trustee or the Trust or any agents thereof except to the
extent that funds are available therefor from the Trust Assets.
Trust Assets means all of Qatar Alaqaria Sukuk Company’s rights, title, interest and benefit,
present and future, in, to and under the Assets and each of the Transaction Documents (other
than the Declaration of Trust, and in relation to any representations given to Qatar Alaqaria
86
Sukuk Company by the Obligor or the Investment Manager pursuant to any of the Transaction
Documents), all moneys, which may now be, or hereafter from time to time are, standing to the
credit of the Transaction Account and all proceeds of the foregoing (together, the Trust Assets).
87
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 own tax advisers as to the consequences under the tax
laws of the country of which they are resident for tax purposes and in particular, the tax laws of Qatar
of acquiring, holding and disposing of Certificates and receiving payments of interest, principal and/or
other amounts under the Certificates. This summary is based upon the law as in effect on the date of
this Prospectus and is subject to any change in law that may take effect after such date.
Qatari Taxation
The following is a general description of certain Qatari tax laws relating to the Certificates and Qatar
Alaqaria Sukuk Company and does not purport to be a comprehensive discussion of the tax
treatment of the Certificates or Qatar Alaqaria Sukuk Company. Prospective Certificateholders should
consult their tax advisers as to applicable tax laws and specific tax consequences of acquiring, owning
and disposing of the Certificates.
All payments in respect of the Investment Management Agreement and Purchase Undertaking shall
be made without withholding or deduction for, Taxes, unless the withholding or deduction of such
Taxes is required by law.
Decree Law No. (11) of 1993 (the Income Tax Law) and its accompanying regulations set out the
primary tax laws in Qatar. Article 2 of the Income Tax Law states that Qatar income tax is payable
on profits derived from activities in Qatar. It is possible therefore that due to Qatar Alaqaria Sukuk
Company sharing in the profits under the Investment Management Agreement, such profits it so
receives may be subject to taxation under the Qatar Income Tax Law.
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 Qatar
Alaqaria Sukuk Company or the Certificateholders. The Cayman Islands are not party to any double
taxation treaties.
Qatar Alaqaria Sukuk Company 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 Qatar Alaqaria Sukuk Company or its
operations and, in addition, that no tax to be levied on 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 Qatar Alaqaria Sukuk Company 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 Qatar Alaqaria Sukuk
Company to its members or a payment of principal or interest or other sums due under a debenture
or other obligation of Qatar Alaqaria Sukuk Company.
EU Directive on the Taxation of Savings Income
Under EC Council Directive 2003/48/EC on the taxation of savings income, Member States are
required to provide to the tax authorities of another Member State details of payments of interest (or
similar income, which may include Periodic Distribution Amounts) paid by a person within its
jurisdiction to, or collected by such a person for, an individual resident in that other Member State.
However, for a transitional period, Austria, Belgium and Luxembourg are required instead (unless
during that period they elect otherwise) to apply a withholding system in relation to such payments
by deducting amounts on account of tax at rates rising over time to 35 per cent. This transitional
period ends at the end of the first full fiscal year following agreement by certain non-EU countries
and territories to the exchange of information relating to payments of interest. A number of non-EU
countries and territories, including Switzerland, have agreed to adopt similar measures (a withholding
system in the case of Switzerland). Therefore, payments of Periodic Distribution Amounts on the
Certificates which are made or collected through Belgium, Luxembourg, Austria or any other relevant
country may be subject to withholding tax which would prevent Certificateholders from receiving
Periodic Distribution Amounts on their Certificate in full. The terms and conditions of the
Certificates provide that, to the extent that it is possible to do so, a paying agent will be maintained
by Qatar Alaqaria Sukuk Company in a Member State that is not required to withhold tax pursuant
to the directive.
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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 Qatar Alaqaria Sukuk
Company believes to be reliable, but neither Qatar Alaqaria Sukuk Company, ALAQARIA nor the
Managers takes any responsibility for the accuracy of this section. Qatar Alaqaria Sukuk Company
and ALAQARIA 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 Qatar Alaqaria Sukuk Company and ALAQARIA 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 or its nominee 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 common
depositary or its 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 Qatar Alaqaria Sukuk Company 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.
Qatar Alaqaria Sukuk Company 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 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
89
the Global Certificate will be credited to Euroclear and Clearstream, Luxembourg participants’
securities clearance accounts on 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 Qatar Alaqaria Sukuk Company, ALAQARIA and 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.
90
SUBSCRIPTION AND SALE
HSBC Bank plc, Masraf Al Rayan, Qatar International Islamic Bank, Qatar Islamic Bank, Emirates
Bank International PJSC, Gulf International Bank B.S.C., Mashreqbank psc, National Bank of Abu
Dhabi P.J.S.C. and Landsbanki Íslands hf. (the Managers) have, pursuant to a certificate purchase
agreement dated 31 July 2007 (the Certificate Purchase Agreement) made between Qatar Alaqaria
Sukuk Company, ALAQARIA and the Managers, agreed, subject to the satisfaction of certain
conditions set forth therein and on a joint and several basis, to subscribe and pay for the Certificates
at the issue price of 100.00 per cent. of the principal amount of the Certificates.
Pursuant to the Certificate Purchase Agreement, ALAQARIA has agreed to pay certain commissions
and expenses to the Managers in respect of the subscription for the Certificates and reimburse the
Managers for certain of its expenses incurred in connection with the issue of the Certificates.
United States
The Certificates have not been and will not be registered under the Securities Act and may not be
offered or sold within the United States except pursuant to an exemption from, or in a transaction
not subject to, the registration requirements of the Securities Act. Each Manager represents that it
has not offered or sold, and agrees that it will not offer or sell, any Certificates constituting part of
its allotment within the United States except in accordance with Rule 903 of Regulation S.
Accordingly, neither it, its affiliates, nor any persons acting on its or their behalf have engaged or
will engage in any directed selling efforts with respect to the Certificates. Terms used in this
paragraph have the meanings given to them by Regulation S.
United Kingdom:
Each Manager has represented and agreed that:
(a)
it has only communicated or caused to be communicated and will only communicate or cause to
be communicated to any invitation or inducement to engage in investment activity or to
participate in a collective investment scheme (within the meaning respectively of Section 21 and
Section 238 of the FSMA) received by it in connection with the issue or sale of any Certificates
in circumstances in which Section 21(1) and Section 238(1) of the FSMA do not apply to the
Issuer; and
(b)
it has complied and will comply with all applicable provisions of the FSMA with respect to
anything done by it in relation to the Certificates in, from or otherwise involving the United
Kingdom.
United Arab Emirates
Each Manager has represented and agreed that the Certificates have not been and will not be offered,
sold or publicly promoted or advertised by it in the United Arab Emirates other than in compliance
with laws applicable in the United Arab Emirates governing the issue, offering and sale of securities.
Bahrain
Each Manager has represented, warranted and undertaken that it has not offered and will not offer
Certificates to the Public (as defined in Articles 142-146 of the Commercial Companies Law (decree
Law No. 21/2001) of Bahrain) in Bahrain.
The Kingdom of 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 by each Saudi Investor must not be
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:
91
(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 SR 1 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 SR 1 million; and
(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.
The provisions of paragraphs (a), (b) and (c) shall apply to all subsequent transferees of the
Certificates.
Kuwait
Each Manager has represented and agreed that no marketing or sale of the Certificates may take
place in Kuwait unless the same has been duly authorised by the Kuwait Ministry of Commerce and
Industry pursuant to the provisions of Law No. 31/1990 and the various ministerial regulations issued
thereunder.
Qatar
Each Manager has represented and agreed that the Certificates have not been and will not be offered,
sold or publicly promoted or advertised by it in Qatar other than in compliance with laws applicable
in Qatar governing the issue, offering and sale of securities.
Singapore
The Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore
under the Securities and Futures Act (SFA) and the Certificates are offered by the Issuer pursuant to
exemptions invoked under Sections 304 and 305 of the SFA. Accordingly each Manager has
represented and agreed that it has not offered or sold and that it will not offer or sell and
Certificates or cause such Certificates to be made the subject of an invitation for subscription or
purchase, nor will it circulate or distribute this Prospectus or any other document or material in
connection with the offer or sale, or invitation for subscription or purchase, of the Certificates,
whether directly or indirectly, to the public or any member of the public in Singapore other than
(a) to an institutional investor or other person specified in Section 304 of the SFA, or (b) pursuant
to, and in accordance with the conditions, of any other applicable provision of the SFA.
Hong Kong
Each Manager has represented and agreed that:
(a)
it has 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)
it has not issued or had in its possession for the purposes of issue, and will not issue or have in
its 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 ready 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.
Malaysia
Each Manager has 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
92
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).
Cayman Islands
Each Manager has represented and agreed that no offer or invitation to subscribe for Certificates has
been made or will be made to any member of the public of the Cayman Islands.
General
No action has been or will be taken in any jurisdiction by the Managers, the Issuer or ALAQARIA
that would permit a public offering of the Certificates, or possession or distribution of this Prospectus
or any other offering or publicity material relating to the Certificates, in any country or jurisdiction
where action for that purpose is required. Each Manager will comply, to the best of its knowledge
and belief, with all applicable laws and regulations in each jurisdiction in which it acquires, offers,
sells or delivers Certificates or has in its possession or distributes this Prospectus or any such other
material, in all cases at its own expense. Neither the Issuer nor ALAQARIA will have any
responsibility for, and the Managers will obtain any consent, approval or permission required by
them for, the acquisition, offer, sale or delivery by it of Certificates under the laws and regulations in
force in any jurisdiction to which it is subject or in or from which it makes any acquisition, offer,
sale or delivery.
93
GENERAL INFORMATION
1
Application has been made to the UK Listing Authority for the Certificates to be listed to be
admitted to the Official List. Application has been made to the London Stock Exchange for the
Certificates to be admitted to trading on the Market. It is expected that admission of the
Certificates to the Official List and admission to trading of the Certificates on the Market will
be granted on or before 3 August 2007, subject only to the issue of the Global Certificate.
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.
2
The issue of the Certificates has been duly authorised by a resolution of the board of directors
of Qatar Alaqaria Sukuk Company dated 4 July 2007. The entry into by ALAQARIA of the
Transaction Documents to which it is a party was duly authorised by a resolution of the board
of directors of ALAQARIA on 27 June 2007. Both Qatar Alaqaria Sukuk Company and
ALAQARIA have obtained all necessary consents, approvals and authorisations in connection
with the issuance of the Certificates and entry into of the Transaction Documents to which each
is a party.
3
The Certificates have been accepted for clearance through Euroclear and Clearstream,
Luxembourg. The ISIN for the Certificates is XS0313358508. The Common Code for the
Certificates is 031335850.
4
Since:
(a)
30 June 2007 (the last day of the financial period in respect of which the most recent
reviewed interim financial statements of ALAQARIA have been prepared), there has been
no significant change in the financial or trading position of ALAQARIA;
(b)
31 December 2006 (the last day of the financial period in respect of which the most recent
audited financial statements of ALAQARIA have been prepared), there has been no
material adverse change in the financial position or prospects of ALAQARIA; and
(c)
the date of its incorporation, there has been no significant change in the financial or
trading position of Qatar Alaqaria Sukuk Company and no material adverse change in the
financial position or prospects of Qatar Alaqaria Sukuk Company.
5
Qatar Alaqaria Sukuk Company 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 Qatar Alaqaria Sukuk Company 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 Qatar Alaqaria Sukuk Company.
6
ALAQARIA 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
ALAQARIA 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
ALAQARIA.
7
The first financial year of Qatar Alaqaria Sukuk Company will end on 31 December 2007.
Qatar Alaqaria Sukuk Company has no subsidiaries.
8
So long as any of the Certificates remains outstanding, copies of the following documents will
be available in English for inspection and obtainable free of charge, during normal business
hours on any weekday (excluding public holidays) from the registered office of the Issuer and
from the specified office of the Trustee:
(a)
the constitutional documents of Qatar Alaqaria Sukuk Company and ALAQARIA;
(b)
the most recently publicly available audited financial statements of both Qatar Alaqaria
Sukuk Company and ALAQARIA beginning with, in respect of ALAQARIA, the financial
statements for the year ended 31 December 2005, and the respective auditor’s report
thereon;
(c)
the most recently publicly available interim financial statements (if any) of ALAQARIA;
(d)
Investment Management Agreement;
(e)
Purchase Undertaking (and any sale agreement entered into thereunder);
94
(f)
Sale Undertaking (and any sale agreement entered into thereunder);
(g)
Declaration of Trust;
(h)
Agency Agreement;
(i)
Costs Undertaking; and
(j)
the pronouncement dated 29 July 2007 issued by HSBC’s Central Sharia Committee.
This Prospectus has been published on the website of the Regulatory News Service operated by
the London Stock Exchange at www.londonstockexchange.com/en-b/pricesnews/marketnews.
9
Deloitte & Touche have rendered unqualified audit reports on the accounts of ALAQARIA for
the years ended 31 December 2005 and 31 December 2006.
10
The expenses relating to the issue of the Certificates are expected to amount to U.S.$1,100,000.
95
Appendix – Financial Statements
Contents
Financial statements for Qatar Real Estate Investment Company Q.S.C. for the year ended
31 December 2005 together with Auditor’s Report
Financial statements for Qatar Real Estate Investment Company Q.S.C. for the year ended
31 December 2006 together with Auditor’s Report
Interim Condensed Financial statements for Qatar Real Estate Investment Company Q.S.C.
for the six month period ended 30 June 2007 together with Auditor’s Report
F-1
F-2
F-19
F-41
QATAR REAL ESTATE INVESTMENT
COMPANY (Q.S.C.)
DOHA – QATAR
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 2005
TOGETHER WITH AUDITORS’ REPORT
F-2
QATAR REAL ESTATE INVESTMENT COMPANY (Q.S.C)
DOHA – QATAR
DECEMBER 31, 2005
TABLE OF CONTENTS
Page
Auditors’ Report
--
Balance Sheet
1
Statement of Income
2
Statement of Changes in Shareholders’ Equity
3
Statement of Cash Flows
4
Notes to the Financial Statements
5 - 14
F-3
F-4
QATAR REAL ESTATE INVESTMENT COMPANY (Q.S.C.)
DOHA - QATAR
BALANCE SHEET
AS OF DECEMBER 31, 2005
Note
Assets:
Cash at banks
Investments
Spare parts and appliances
Finance lease receivable – current
3
4
7
2005
(QR’000)
2004
(QR’000)
203,986
21,241
161,980
220
36,626
89,275
23,774
11,994
363
18,546
424,053
143,952
591,723
252,402
2,673
27,078
229,319
368,674
1,471,869
1,895,922
575,641
16,528
2,673
38,286
129,447
172,633
935,208
1,079,160
81,094
78,633
19,373
39,261
264,265
11,277
179,100
314,803
236,043
85,873
321,916
330,579
50,573
381,152
501,016
695,955
500,000
743,430
1,025
7,736
40,965
100,000
1,750
250,000
30,930
1,025
7,295
30,195
12,500
50,000
1,260
Total Shareholders’ Equity
1,394,906
383,205
Total Liabilities and Shareholders’ Equity
1,895,922
1,079,160
5
Total Current Assets
6
7
Investments
Investment in land
Finance lease receivable – non-current
Property and equipments
Total non current Assets
Total Assets
5
8
Liabilities and Shareholders’ Equity:
Current Liabilities:
Loans – current
Unearned finance income – current
10
9
11
Total Current Liabilities
9
11
Loans – non-current
Unearned finance income – non-current
Total Non Current Liabilities
Total Liabilities
Shareholders’ Equity:
Share capital
Legal reserve
General reserve
Investments fair value reserve
Retained earnings
Proposed cash dividend
Proposed Directors remuneration
19
20
21
19
These financial statements were approved by the Board of Directors and signed by the following on their behalf on –
February 6, 2006.
_________________________________
__________________________
Khalid Bin Khalifa Bin Jassim Al Thani
Mohammed Misnad Al Misnad
Chairman of The Board and Managing
General Manager
Director
The accompanying notes are an integral part of these financial statements
-1-
F-5
DOHA - QATAR
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2005
2005
(QR’000)
2004
(QR’000)
12
13
14
110,852
17,932
33,449
8,021
170,254
102,371
11,736
2,202
2,274
118,583
15
(19,961)
(10,755)
16
(23,736)
(13,851)
(9,507)
9,321
-
(22,648)
(9,210)
(5,168)
(8,837)
(1,000)
112,520
60,965
-
(4,724)
112,520
56,241
2.44
1.65
Note
Rental income
Investment income
Other income
Total Income
Operations Cost
Depreciation for investment properties and
property and equipments
Finance charges
Foreign exchange gain (loss)
Investment provision
Net Income for the Year Before Prior Year
Adjustments
Prior year adjustments
17
Net Income for the Year
18
Adjusted basic and diluted earnings per share
-2F-6
F-7
---1,025
---743,430
---
-500,000
Balance at December 31, 2005
-7,736
--
441
----
--
-7,295
--
--
--
389
--
(1,750)
40,965
(100,000)
--
----
--
(1,260)
30,195
112,520
(12,500)
(50,000)
--
--
Retained
Earnings
(QR’000)
43,338
56,241
(5,624)
--
3
----
--712,500
-237,500
--
--
Directors remuneration paid for 2004
Increase in capital
19
Premium on shares issued
Movement in fair value reserve for
available for sale investments
Proposed issue of bonus shares for the
year 2005
Proposed directors remuneration for 2005
Issue of bonus share for the year 2004
Dividends paid for 2004
--
-1,025
--
-30,930
--
-250,000
--
12,500
--
--
--
19
Net income for the year 2005
--
Proposed cash dividend for 2004
--
--
--
---
--
--
General
Reserve
(QR’000)
1,025
----
--
Legal
Reserve
(QR’000)
25,306
-5,624
--
Net income for the year
Transfer to legal reserve
Share
Capital
Note (QR’000)
250,000
----
Investments
Fair Value
Reserve
(QR’000)
6,906
----
-100,000
100,000
--
----
(12,500)
-12,500
--
12,500
--
--
--
Proposed
Issue of
Bonus
Shares
(QR’000)
-----
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
---
--
--
----
-(50,000)
-50,000
--
--
50,000
--
--
Proposed
Dividend
(QR’000)
37,500
--(37,500)
1,750
1,750
--
--
(1,260)
---
--
1,260
1,260
--
--
--
--
(1,400)
Directors
Remuneration
(QR’000)
1,400
----
-1,394,906
--
441
(1,260)
237,500
712,500
-(50,000)
-383,205
112,520
--
--
389
(1,400)
Total
(QR’000)
365,475
56,241
-(37,500)
STATEMENT OF CASH FLOW
______________________________________________________________________________
Note
Net income for the year
Adjustments for:
Depreciation for investment properties and
Amortization of unearned finance income
Amortization of deferred finance charges
Foreign Exchange (gain) loss
Unrealized gain on trading investments
Provision for Investment
Decrease in spare parts and appliances
Decrease(Increase) in accounts receivable and other debit
balances
Increase in accounts payable and other credit balances
Net Cash from Operating Activities
2005
(QR’000)
2004
(QR’000)
112,520
56,241
23,736
22,648
(14,522)
7,934
(9,321)
(859)
-
(8,304)
7,959
15,277
(2,035)
1,000
119,488
92,786
143
2,533
139
(19,749)
39,563
161,727
15,811
88,987
Investing Activities:
Purchase of investment properties and
Proceeds from sale of investments
Purchase of investments
Net Cash Used in Investing Activities
(311,670)
(198,019)
76,624
(461,184)
(696,230)
1,027
(17,270)
(214,262)
Financing Activities:
Capital increase
Share premium
Loans
Dividends paid
Directors remuneration paid
Proceeds from finance lease
Increase in deferred finance charges
Net cash from financing activities
237,500
712,500
(266,785)
(50,000)
(1,260)
17,259
-649,214
--218,970
(37,500)
(1,400)
9,979
(1,482)
188,567
114,711
89,275
203,986
63,292
25,983
89,275
Net increase in cash at banks
Cash at banks at beginning of the year
Cash at Banks at End of the Year
3
-4F-8
NOTES TO THE FINANCIAL STATEMENT
FOR THE YEAR ENDED DECEMBER31, 2005
1.1. Legal Status and Principal Activities:
Qatar Real Estate Investment Company was founded as per the Amiri Decree no 49, of 1995
issued on July 3, 1995 and subject to the rules of Qatar Commercial Companies Law. The
company is registered under the commercial registration number 18714.
The company’s principal activity is the establishment of residential compounds and projects for
rental purposes, purchase of land and developing it for resale. The company also deals in
management of residential compounds.
1.2 Adoption of New and Revised International Financial Reporting Standards:
The Company has adopted all new and revised Standards issued by the International Accounting
Financial Reporting Standards Board (the IASB) that are relevant to its operations. The adoption
of these new and revised standards has only affected the presentation and disclosures of the
company’s financial statements.
2.
Significant Accounting Policies:
The financial statements of the company have been prepared in accordance with the International
Financial Reporting Standards (IFRS) promulgated by the International Accounting Standards
Board.
a.
Basis of Preparation
The financial statements are presented in Qatari Riyals, rounded to the nearest thousand.
They are prepared on the historical cost basis except for the measurement at fair value of
certain available-for-sale and trading investments.
b.
Cash at Banks
Cash at banks comprises of current accounts, call accounts and deposits having a maturity of
less than ninety days.
c.
Accounts Receivable
Receivables are stated net of provision. Provision for doubtful accounts is based on a
detailed review by management of the individual balances at the year-end.
d.
Spare Parts and Appliances
These are stated at the lower of cost and net realizable value less provision for obsolescence
estimated by management. Cost is determined under weighted average method. Cost
includes expenditures incurred in acquiring the inventories and bringing them to their existing
location and condition.
-5-
F-9
e.
Leases for which substantially all the risks and rewards of ownership are transferred to the
lessee at the end of the lease are classified as finance lease receivable. Finance lease
receivable is stated at an amount equal to the present value of the minimum lease payments at
the inception of the lease.
Lease payments are apportioned between the finance lease receivable and the unearned
finance income so as to achieve a constant rate of interest on the remaining balance of the
receivable.
f.
Investment properties comprise of investment in land and buildings in Qatar acquired or
constructed to earn rental income from such properties.
Investment properties are stated at cost less accumulated depreciation and any impairment
losses. Depreciation is calculated on straight-line method. No depreciation is calculated on
investments in land. The rates of depreciation used are based on the following estimated
useful lives of the assets:
Buildings (Investment property)
20 - 33.3 years
Infrastructure
50 years
Gains or losses arising from the retirement or disposal of investment property are recognised
as income or expense in the statement of income.
g.
Investments
Investments held for trading are carried at fair value (market to market) with any gain or loss
arising from the change in fair value included in the statement of income in the period in
which it arises.
Available-for-sale assets are financial assets that are not held for trading purposes, originated
by the company, or held to maturity. Available-for-sale instruments include private equity
investments.
Quoted investments: Financial instruments are measured initially at cost, including
transaction costs. Subsequent to initial recognition all available-for-sale assets are remeasured at fair value.
Unquoted investments: These represent investments where there is no quoted market price.
Unquoted investments are measured initially at cost, including transaction costs. Subsequent
to initial recognition, the unquoted investments are re-measured at cost less any impairment
losses.
Gains and losses arising from a change in the fair value of available-for-sale quoted
investments are recognised directly in equity. When the investments are sold, impaired,
collected or otherwise disposed of the cumulative gain or loss recognised in equity is
transferred to the income statement.
h.
Represents the cost of finance portion related to loans to be settled in future periods. Finance
costs are expensed in the income statement unless incurred during the construction period in
which case it is capitalised as part of the cost of properties.
-6F-10
i.
Property and Equipments
Property and equipments are stated at cost less accumulated depreciation. Depreciation is
calculated annually on the basis of the straight-line method. The estimated useful lives of the
assets are:
j.
•
Equipment and tools
5 years
•
Vehicles
5 years
•
Furniture and fixtures
5 years
Accounts Payable and Other Credit Balances
Liabilities are recognised for amounts to be paid in future for goods or services received
whether or not billed to the company.
k.
Unearned Finance Income
Unearned finance income is calculated as the difference between the present value of the
minimum lease payments under a finance lease and the fair value of the leased property.
l.
Revenue Recognition
Rental income is accounted for on an accrual basis and represents rents received and
receivable.
m. Impairment
The carrying amounts of the Company’s assets are reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such indication exists, the
asset’s recoverable amount is estimated. An impairment loss is recognized whenever the
carrying amount of an asset exceeds its recoverable amount. Impairment losses are
recognized in the income statement in the year when such losses are first determined.
n.
Foreign Currencies
Transactions in foreign currencies are recorded in Qatari Riyals at the rates of exchange
prevailing at the transaction date. Monetary assets and liabilities denominated in foreign
currencies are translated into Qatari Riyals at the rates of exchange prevailing at the balance
sheet date. All differences arising from exchange are included in the income statement.
3.
Cash at Banks:
2005
(QR’000)
28,815
25,171
150,000
203,986
Current accounts
Call accounts
Fixed Deposits – short term
Total
4.
Accounts Receivable and Other Debit Balances:
Rent receivable
Prepayments and other debit balances
Total
-7F-11
2004
(QR’000)
6,946
82,329
-89,275
2005
(QR’000)
2004
(QR’000)
4,062
17,179
21,241
17,120
6,654
23,774
5.
Finance Lease Receivable:
Finance lease receivable – Current
Finance lease receivable – Non-current
Between one and five years
More than five years
Total
6.
Investment Properties:
Cost
At January 1,
Additions
Transfers from work-in-progress
At December 31,
Accumulated Depreciation
At January 1,
Charge for the year
At December 31,
Net Book Value
2005
(QR’000)
36,626
2004
(QR’000)
18,546
149,772
79,547
83,672
45,775
229,319
129,447
265,945
147,993
2005
(QR’000)
2004
(QR’000)
670,326
1,212
35,769
707,307
664,203
100
6,023
670,326
94,685
20,899
115,584
591,723
75,014
19,671
94,685
575,641
The fair value of investment properties is determined on the basis of management’s estimate of the
market value, which in the opinion of management is in excess of their carrying amounts.
Investment properties include buildings and infrastructure. Investment properties are built on land
owned by third parties with the exception of the Qatar Gas Housing Project and Ras Gas Housing
Project where the land was gifted by the Government and the title deed transfer is in progress.
7.
Investments:
Current Investments:
Investments under Islamic Wakalah arrangements
Investments held for trading in quoted shares at
fair value
Total Current investments
Non Current Investments:
Available-for-sale investments in quoted shares at
fair value
Investments in unquoted local companies at cost
Provision for impairment of unquoted local company
investment
Total Non Current Investments
Net
-8F-12
2005
(QR’000)
2004
(QR’000)
80,000
--
81,980
11,994
161,980
11,994
125,938
109,764
17,700
10,528
-7,000
(1,000)
(1,000)
252,402
414,382
16,528
28,522
F-13
----
277,071
115,340
Depreciation
At January 1, 2005
Charge for the year
At December 31, 2005
Net Book Value
-(1,682)
277,071
Transfers to investment
properties and finance lease
Disposals
Land
(QR’000)
115,340
163,413
Property and Equipments:
Cost
At January 1, 2005
Additions during the year
8.
78
51
1,016
18
1,034
--1,112
1,067
45
Porta
Cabins and
Fences
(QR’000)
-9-
434
211
510
100
610
--1,044
721
323
Furniture
and Office
Equipment
(QR’000)
496
740
520
244
764
--1,260
1,260
--
Vehicles
(QR’000)
85,207
50,506
----
(114,180)
-85,207
50,506
148,881
Projects under
Construction
(QR’000)
5,388
5,785
25,384
2,475
27,859
1,118
-33,247
31,169
960
Furniture,
Fixtures &
Electrical
Equipment(Investments
Projects)
(QR’000)
368,674
172,633
27,430
2,837
30,267
(113,062)
(1,682)
398,941
200,063
313,622
Total
(QR’000)
9.
Loans:
Estisna financing no. (1)
Murabaha financing
Ijjarah financing facilities
Overdraft account
2005
(QR’000)
2004
(QR’000)
40,440
107,220
99,581
67,435
--
87,200
135,382
195,247
73,452
103,563
314,676
594,844
- The Estisna financing no. (1) of (Islamic Dinar) ID 16.3 million was drawn during the year
1999/2000 and is repayable in equal semi annual instalments of ID 1.5 million. The last
instalment is payable in March 2008.
- The Estisna financing no. (2) of (Islamic Dinar) ID 20.9 million was drawn during the year
2002/2003 and is repayable in equal semi annual instalments of ID 1.7 million. The last
instalment is payable in July 2011.
- The Murabaha Financing facilities amounting to USD 54 million was drawn during 2004. The
outstanding balance as of December 31, 2005 is repayable in unequal semi-annual instalment
up to April 2011.
- The Ijjarah financing facilities amounting to QR 160 million represents financing facilities with
local Islamic banks and is repayable over 4 to 6 years.
Those loans are classified as:
Current
Non-current
Total
10. Accounts Payable and Other Credit Balances:
Accounts payable
Retentions
Rent received in advance
Dividends payable
Other payables and accruals
Total
- 10 F-14
2005
(QR’000)
2004
(QR’000)
78,633
236,043
314,676
264,265
330,579
594,844
2005
(QR’000)
2004
(QR’000)
16,836
15,472
-8,229
40,557
81,094
15,055
9,104
3,330
4,681
7,091
39,261
11. Unearned Finance Income:
Unearned finance income – Current
Unearned finance income – Non-current
Between one to five years
Total
2005
(QR’000)
2004
(QR’000)
19,373
11,277
70,643
41,951
15,230
85,873
105,246
8,622
50,573
61,850
12. Finance Lease Income:
This represents lease income net of expenses for lease and sublease deals entered into by the
Company with other local companies.
13. Investment Income:
Income on sale of investments
Tatheer provision
Other investment income
Real estate funds income
Unrealized investment income
Total
2005
(QR’000)
2004
(QR’000)
31,552
168
---2,034
2,202
(1,934)
1,967
1,005
859
33,449
14. Other Income:
Profit on bank deposits
Miscellaneous income
Total
2005
(QR’000)
2004
(QR’000)
7,590
431
8,021
1,860
414
2,274
2005
(QR’000)
2004
(QR’000)
1,270
5,635
10,632
2,424
19,961
789
3,281
5,323
1,362
10,755
15. Operation cost:
Staff cost
Water and electricity
Others
Total
- 11 F-15
16. General and Administrative Expenses:
Staff cost
Others
Total
2005
(QR’000)
2004
(QR’000)
6,515
2,992
9,507
3,409
1,759
5,168
2005
(QR’000)
2004
(QR’000)
------
6,440
(809)
(643)
(264)
4,724
17. Prior Year Adjustments:
Foreign exchange loss on Estisna financing
Unrecorded rent income for 2003
Unrecorded profit on bank deposits for 2003
Others
Total
18. Earning Per Share:
Earning per share is calculated by dividing the net profit for the year by the weighted average
number of ordinary shares during the year.
19. Share Capital:
The shareholders in their extraordinary General Assembly meeting held on March 31, 2005
approved to increase the company’s authorized share capital to QR. 500,000,000 with
nominal value of QR. 10 per share through distribution of bonus shares amounting to QR.
12,500,000 and by issuing 23,750,000 shares for the subscription of the shareholders of the
company at QR. 40 per share of which QR. 30 relates to share premium. The amount of
share premiums was credited to legal reserve.
The Board of Directors decided in their meeting held on January 17, 2006 to propose to the
forthcoming Extraordinary General Assembly to approve to increase the Company’s authorized
share capital to QR.600,000,000 of QR. 10 per share through distribution of bonus shares of one
share for every five shares held amounting to QR.100,000,000.
20. Legal Reserve:
As per the Company’s Articles of Association and the provision of Commercial Companies’ Law
No. 5 of 2002, an amount equivalent to 10% of the net income for the year is transferred annually
to the legal reserve until it equals 50% of the capital. This reserve is not available for distribution
except in circumstances stipulated in the Companies’ Law.
21. General Reserve:
In accordance with Articles of Association of the Company the general assembly may allocate a
portion of the net profit to a general reserve. No transfer was made to general reserve during 2005
and 2004. This reserve is freely distributable.
- 12 F-16
22.
Key Sources of estimation uncertainty:
Impairment of receivables
An estimate of the uncollectible amount of receivables is made when collection of
the full amount is no longer probable. For individually significant amounts, this
estimation is performed on an individual basis. Amounts which are not
individually significant but which are past due are assessed collectively and a
provision applied according to the length of time past due based on historical
recovery rates.
At the balance sheet date, gross finance lease receivable were QR. 266 million
(2004: 148 million) and the provision for doubtful debts was NIL (2004: NIL). At
the same date, gross rent receivable was QR. 4 million (2004: 17 million) and the
provision for doubtful debts was QR. 0.2 million (2004: NIL) Any difference
between the amounts actually collected in future periods and the amounts expected
will be recognised in the income statement.
23. Compensation of Key Management Personnel:
The remuneration of key management personnel during the year was as follows:
2005
(QR’000)
-----------------QR.
Short terms benefits
Post-employment benefits
2004
QR’000)
---------------QR.
2,299
169
--------------2,468
=========
1,472
115
--------------1,587
========
In addition to the above amounts the board of directors’ are also given remuneration subject to
shareholders’ approval as disclosed in the statement of changes in shareholders’ equity.
24. Capital Commitments:
Investment properties under construction
2005
(QR’000)
2004
(QR’000)
2,200,000
143,000
2005
(QR’000)
2004
(QR’000)
8,800
723
51,750
723
25. Contingent Liabilities:
Banks Guarantees
Guarantee cheque issued by the company for a third party
- 13 F-17
26. Financial Instruments
The financial assets of the company include balances with banks, accounts receivable and
investments. The financial liabilities of the company include accounts payable and other payables
and due to banks.
a)
Credit Risk Exposure
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation
and cause the other party to incur a financial loss. The Company’s exposure to credit risk is as
indicated by the carrying amount of its financial assets which consist primarily of bank balance
and accounts receivable. Credit risk on bank balance is limited as it is placed with banks having
good credit rating. Credit risk on accounts receivable is limited as these are shown after review of
their recoverability and are stated net of provision for doubtful receivables.
b) Fair Values of Financial Assets and Liabilities
Fair value is the amount for which an asset can be exchanged or a liability settled, between
knowledgeable and willing parties transacting at an “arm’s length”. The accounting convention
under which the financial statements have been prepared is disclosed in Note 2(a). The carrying
value of the Company’s financial instruments as recorded could therefore be different from their
fair value. However, in the management’s opinion, the fair values of the Company’s financial
assets and liabilities approximate to their carrying amounts.
27.
Comparative Figures:
Certain corresponding amounts have been reclassified to conform to the presentation adopted in
the current year’s financial statements.
- 14 F-18
QATAR REAL ESTATE INVESTMENT
COMPANY (Q.S.C.)
DOHA – QATAR
FINANCIAL STATEMENTS
FOR THE YEAR ENDED
DECEMBER 31, 2006
TOGETHER WITH AUDITOR’S REPORT
F-19
DOHA – QATAR
DECEMBER 31, 2006
TABLE OF CONTENTS
Page
Auditor’s Report
--
Balance Sheet
1
Income Statement
2
Statement of Changes in Equity
3
Cash Flows Statement
4
Notes to the Financial Statements
5 - 18
F-20
QR. 31809
AUDITOR’S REPORT
To The Shareholders
Qatar Real Estate Investment Company (Q.S.C.)
Doha – Qatar
Report on the Financial Statements
We have audited the accompanying financial statements of Qatar Real Estate Investment
Company (Q.S.C.), which comprise the balance sheet as at December 31, 2006, and the
income statement, statement of changes in equity and cash flow statement for the year then
ended, and a summary of significant accounting policies and other explanatory notes.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these financial
statements in accordance with International Financial Reporting Standards. This responsibility
includes: designing, implementing and maintaining internal control relevant to the preparation
and fair presentation of financial statements that are free from material misstatement, whether
due to fraud or error; selecting and applying appropriate accounting policies; and making
accounting estimates that are reasonable in the circumstances.
Auditor’s Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with International Standards on Auditing. Those standards
require that we comply with ethical requirements and plan and perform the audit to obtain
reasonable assurance whether the financial statements are free from material misstatement.
F-21
An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. The procedures selected depend on the auditor’s
judgment, including the assessment of the risks of material misstatement of the financial
statements, whether due to fraud or error. In making those risk assessments, the auditor
considers internal control relevant to the entity’s preparation and fair presentation of the
financial statements in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as
evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.
Opinion
In our opinion, the financial statements present fairly, in all material respects, the financial
position of Qatar Real Estate Investment Company (Q.S.C.) as of December 31, 2006, and of its
financial performance and its cash flows for the year then ended in accordance with
International Financial Reporting Standards.
Other Legal and Regulatory Requirements
Furthermore, in our opinion the financial statements provide the information required by the
Qatar Commercial Companies’ Law No. 5 of 2002 and the Company’s Articles of Association.
We are also of the opinion that proper books of account were maintained by the Company and
the contents of the directors’ report are in agreement with the Company’s financial statements.
To the best of our knowledge and belief and according to the information given to us, no
contraventions of the Law or the Company’s Articles of Association were committed during
the year which would materially affect the Company’s activities or its financial position.
For Deloitte & Touche
Doha – Qatar
February 1, 2007
Samer Jaghoub
License No. 88
F-22
DOHA - QATAR
BALANCE SHEET
AS OF DECEMBER 31, 2006
Note
Assets:
Cash at banks
Finance lease receivable
Investments
Property and equipment
Total Assets
2006
(QR’000)
2005
(QR’000)
3
4
5
6
7
8
9
10
11
410,808
193,137
231,348
910,854
816,407
640,756
93,223
498,451
1,890
3,796,874
203,996
21,451
265,945
414,382
820,752
27,078
141,337
981
1,895,922
12
13
14
714,093
85,874
1,314,456
2,114,423
81,094
105,246
314,676
501,016
23
24
25
6
600,000
743,430
1,025
159,458
56,088
120,000
2,450
500,000
743,430
1,025
7,736
40,965
100,000
1,750
Total Equity
1,682,451
1,394,906
Total Liabilities and Equity
3,796,874
1,895,922
Liabilities and Equity:
Liabilities:
Unearned finance income
Loans
Total Liabilities
Equity:
Share capital
Legal reserve
General reserve
Investments revaluation reserve
Retained earnings
Proposed Directors remuneration
23
These financial statements were approved by the Board of Directors on 1 February 2007 and signed on its behalf by:
Khalid Bin Khalifa Bin Jassim Al Thani
Chairman of The Board and Managing
Director
Mohammed Misnad Al Misnad
Chief Executive Officer
-1-
F-23
DOHA - QATAR
STATEMENT OF INCOME
Note
Rental income
Real estate investment income
Investments income
Other income
Total Income
15
16
8
17
18
19
7
11
20
Operations Cost
Finance charges
Foreign exchange gain
21
Profit for the Year
22
Adjusted basic and diluted earnings per share
2006
(QR’000)
2005
(QR’000)
123,343
144,347
22,805
19,485
12,186
5,928
328,094
110,852
273
17,932
33,449
7,748
170,254
(20,744)
(25,500)
(734)
(17,100)
(27,698)
469
(99,214)
(19,961)
(23,374)
(362)
(9,507)
(13,851)
9,321
-
137,573
112,520
2.29
2.00
-2-
F-24
F-25
Issue of bonus shares for the year 2005 23
year 2006
Note
Balance at January 1, 2005
Issue of bonus shares for the year 2004
Increase in capital
Premium on shares issued
year 2005
---
---________
743,430
=======
--
--
-________
600,000
=======
-________
159,458
=======
--
151,722
7,736
----
--
--
441
7,295
-------
(2,450)
________
56,088
=======
(120,000)
--
40,965
137,573
---
(1,750)
(100,000)
--
30,195
112,520
------
Retained
Earnings
(QR’000)
-_______
120,000
=======
120,000
--
100,000
-(100,000)
--
--
100,000
--
12,500
-(12,500)
-----
Proposed
Issue of
Bonus
Shares
(QR’000)
-_______
-======
--
--
-----
--
--
--
50,000
--(50,000)
----
Proposed
Dividend
(QR’000)
2,450
______
2,450
=====
--
--
1,750
--(1,750)
1,750
--
--
Proposed
Directors
Remuneration
(QR’000)
1,260
---(1,260)
---
-3-
-_________
1,025
=======
1,025
----
--
743,430
----
--
--
--
500,000
-100,000
--
--
--
--
--
--
1,025
-------
30,930
-----712,500
250,000
-12,500
--237,500
--
General
Reserve
(QR’000)
Legal
Reserve
(QR’000)
Share
Capital
(QR’000)
Investments
Revaluation
Reserve
(QR’000)
STATEMENT OF CHANGES IN EQUITY
-_________
1,682,451
========
--
151,722
1,394,906
137,573
-(1,750)
--
--
441
383,205
112,520
-(50,000)
(1,260)
237,500
712,500
Total
(QR’000)
STATEMENT OF CASH FLOW
Note
Profit for the year
2006
(QR’000)
2005
(QR’000)
137,573
112,520
25,500
23,374
734
362
Amortization of unearned finance income
(19,372)
(14,522)
Amortization of deferred finance charges
17,868
7,934
Adjustments for:
Finance charges expense
9,830
5,917
Foreign Exchange gain
(469)
(9,321)
(1,479)
(31,552)
(104,008)
(273)
Gain on sale of real estate projects
(40,339)
-
Share of profits of associate
(19,485)
-
99,214
-
105,567
94,439
(Increase) decrease in accounts receivable and other debit balances
Increase in accounts payable and other credit balances
Cash Generated from Operations
(4,228)
38,778
140,117
3,496
40,090
138,025
Directors remuneration paid
Net Cash from Operating Activities
(1,750)
138,367
(1,260)
136,765
(379,283)
(463,174)
(93,155)
(106,291)
Advance to contractors
(167,458)
(820)
Acquisition of associate
(304,098)
-
Payments for projects in progress
Gain on sale of investments
Gain on sale of investment properties
Investing Activities:
Payments for investments
Payments for investment properties
(437,233)
(206,693)
Acquisition for property and equipment
(1,643)
(368)
Proceeds from finance lease
34,597
17,259
Proceeds on sale of investments
242,775
110,166
Proceeds on sale of investment properties and projects in progress
214,378
1,955
(891,120)
(647,966)
Financing Activities:
Capital increase
-
237,500
Share premium
-
712,500
Proceeds from borrowings
1,074,592
-
Repayments of borrowings
(74,812)
(266,785)
Net Cash Used in Investing Activities
Dividends paid
-
(50,000)
(40,215)
(7,293)
959,565
625,922
Net increase in cash at banks
Cash at banks at beginning of the year
206,812
203,996
114,721
89,275
Cash at Banks at Year End
3
The accompanying notes are an integral part of these financial statements.
410,808
203,996
Finance charges paid
Net Cash from Financing Activities
-4-
F-26
NOTES TO THE FINANCIAL STATEMENT
1
Legal Status and Principal Activities:
Qatar Real Estate Investment Company is a Qatari public shareholding Company founded as per
the Amiri Decree no 49, issued on July 3, 1995 and subject to the rules of Qatar Commercial
Companies Law. The company is registered under the commercial registration number 18714.
The company’s principal activity is the establishment of residential compounds and projects for
rental purposes, purchase of land and developing it for resale. The company also deals in
management of residential compounds.
2
Adoption of New and Revised International Financial Reporting Standards:
During the current year, the Company has adopted all of the new and revised Standards and
Interpretations issued by the International Accounting Standards Board (“the IASB”) and the
International Financial Reporting Interpretations Committee (“IFRIC”) of the IASB that are
relevant to its operations and effective for accounting periods beginning on January 1, 2006. The
adoption of these new and revised Standards and Interpretations has resulted in changes to the
company’s accounting policies in the following areas that have affected the amounts reported for
the current year only:
•
Investments classified as at fair value through profit or loss;
The impact of this change is discussed in detail later in this note.
At the date of authorization of these financial statements, the following Standards and
Interpretations were in issue but not yet effective:
New Standards:
•
IFRS 7 Financial Instruments : Disclosure
•
IFRS 8 Operating Segments
Amendments to Standards:
•
Amendment to IAS 1- Capital Disclosure
New Interpretations:
•
IFRIC 11 – IFRS 2 – Group and Treasury Share Transactions
•
IFRIC 12 – Service Concession Arrangements
•
IFRIC 9 Reassessment of Embedded Derivatives
•
IFRIC 10 Interim Financial Reporting and Impairment
The Directors anticipate that the adoption of these Standards and Interpretations in future
periods will have no material impact on the financial statements of the Company.
-5F-27
Limitation of ability to designate financial assets through profit or loss.
Following amendments to IAS 39 Financial Instruments: Recognition and measurement in
June 2005, the ability of entities to designate any financial asset or financial liability as ‘at fair
value through profit or loss’ (FVTPL) has been limited.
Financial assets that can no longer be designated as at FVTPL are now classified as availablefor-sale financial assets and measured at fair value with changes in fair value recognised in
equity unless the financial asset is permanently impaired, in which case the decline is taken to
the income statement as mentioned in Note 6.
These changes have been applied by the Company in accordance with the transitional
provision of IAS 39 with effect from the beginning of the comparative reporting period
presented in these financial statements. The amendments result in listed shares held by the
company with a carrying amount at December 31, 2005 of QR.81.980 million that were
previously designated as FVTPL being reclassified as available-for-sale investments.
Although ordinarily the designation of a financial asset as available-for-sale is made on initial
recognition, the transitional provision of IAS 39 allow such designation to be made on the
date of the de-designation ( January 1, 2005). The profit for the financial year 2006 remained
unchanged following the change in accounting policy mentioned above, as the decrease in fair
market value of those investments is considered permanent and accordingly, the impairment
loss was taken to the income statement. The impairment loss amounted to QR.17.143 million.
Significant Accounting Policies:
Statement of Compliance
The financial statements of the company have been prepared in accordance with the International
Financial Reporting Standards
Basis of Preparation
The financial statements are presented in Qatari Riyals, rounded to the nearest thousand. They are
prepared on the historical cost basis except for the measurement of investments at fair value.
Cash at Banks
Cash at banks comprises of current accounts, call accounts and deposits having a maturity of less
than ninety days.
Accounts Receivable
Receivables are stated net of provision. Provision for doubtful accounts is based on a detailed
review by management of the individual balances at the year-end.
-6F-28
Leases for which substantially all the risks and rewards of ownership are transferred to the lessee
at the end of the lease are classified as finance lease receivable. Finance lease receivable is stated
at an amount equal to the present value of the minimum lease payments at the inception of the
lease.
Lease payments are apportioned between the finance lease receivable and the unearned finance
income so as to achieve a constant rate of return on the remaining balance of the receivable.
Investment properties comprise of investment in land and buildings in Qatar acquired or constructed
to earn rental income from such properties.
Investment properties are stated at cost less accumulated depreciation and any impairment losses.
Depreciation is calculated on a straight-line method. No depreciation is calculated on investments in
land. The rates of depreciation used are based on the following estimated useful lives of the assets;
Buildings (Investment property)
20 – 33.3 years
Infrastructure
50 years
Gains or losses arising from the retirement or disposal of investment property are recognised as
income or loss in the statement of income.
Investments
Available-for-sale investments are financial assets that are not held for trading or held to maturity.
Available-for-sale instruments include local shares and private equity investments.
Gains and losses arising from a change in the fair value of available-for-sale investments are
recognised directly in equity. When the investments are sold, impaired, collected or otherwise
disposed of, the cumulative gain or loss recognised in equity is transferred to the income statement.
When a permanent decline in available-for-sale investments has taken place and there is objective
evidence that the asset is permanently impaired, the amount in excess of the cumulative profit that
had been recognized directly in equity is recognized in profit and loss even if the financial asset is
not derecognized.
Investments where the fair market price is not available are measured at cost, including transaction
costs less any impairment losses.
Investments in associates
Associates are those entities in which the Company holds, directly or indirectly, between 20% and
50% of the voting power and exercises significant influence, but not control, over the financial and
operating policies. Investments in associates companies are accounted for under the equity method
of accounting. The financial statements include the Company’s share of the total recognised gains
and losses of associates on an equity accounted basis, from the date that significant influence
commences until the date that significant influence ceases. When the Company’s share of losses
exceeds its interest in an associate, the Company’s carrying amount is reduced to nil and
recognition of further losses is discounted except to the extent that the Company has incurred legal
or constructive obligations or made payments on behalf of an associate.
-7F-29
Represent the borrowing cost for acquiring investments financed by loans that will be settled in
future periods. Finance costs are deferred at the date of acquisition of investments and
systematically expensed over the duration of the loans. Finance costs on projects under
construction are capitalized as part of the cost of properties during the construction period.
Property and Equipments
Property and equipments are stated at cost less accumulated depreciation less accumulated
impairment. Depreciation is calculated annually on the basis of the straight-line method.
Projects in Progress
Represents projects in the course of construction for the purposes of investment properties or
financing lease. Projects in progress are carried at cost, less any recognised impairment loss. Cost
includes professional fees and borrowing costs capitalised in accordance with the Company’s
accounting policy. Upon the completion of these projects it will be either sold or transferred to the
Investment properties or financing lease accordingly.
Accounts Payable and Other Credit Balances
Liabilities are recognised for amounts to be paid in future for goods or services received whether
or not billed to the company.
Unearned Finance Income
Unearned finance income is calculated as the difference between the present value of the minimum
lease payments under a finance lease and the fair value of the leased property. The unearned
finance lease is systematically recognized in income over the duration of the lease.
Revenue Recognition
•
•
Rental income is accounted for on an accrual basis and represents rents received and
receivable.
Real estate investment income is recognized when risks and rewards of the property have
been transferred to the buyer.
Impairment
The carrying amounts of the Company’s assets are reviewed at each balance sheet date to
determine whether there is any indication of impairment. If any such indication exists, the asset’s
recoverable amount is estimated. An impairment loss is recognized whenever the carrying amount
of an asset exceeds its recoverable amount. Impairment losses are recognized in the income
statement in the year when such losses are first determined.
Foreign Currencies
Transactions in foreign currencies are recorded in Qatari Riyals at the rates of exchange prevailing
at the transaction date. Monetary assets and liabilities denominated in foreign currencies are
translated into Qatari Riyals at the rates of exchange prevailing at the balance sheet date. All
differences arising from exchange are included in the income statement.
-8F-30
End of service indemnities
End-of-service indemnities are provided in accordance with the Qatari labour law and based on the
employees’ length of service.
3.
Cash at Banks:
2006
(QR’000)
Available cash:
Current accounts
Call accounts
Restricted cash maintained to meet contractual payables:
Current accounts
Total
2005
(QR’000)
12,832
48,966
136,099
197,897
28,825
25,171
150,000
203,996
916
211,995
212,911
410,808
203,996
Cash maintained to meet contractual payables is restricted to paying contractors for certain
projects that are financed by Sukuk Al Musharakah.
4.
Accounts Receivable and Other Debit Balances:
Rent receivable
Advance payments to contractors
Prepayments and other debit balances
Total
5.
Finance Lease Receivable:
Finance lease receivable – Current
Finance lease receivable – Non-current
Between two and five years
Total
-9F-31
2006
(QR’000)
5,441
168,278
19,418
193,137
2005
(QR’000)
4,062
820
16,569
21,451
2006
(QR’000)
31,983
2005
(QR’000)
36,626
148,603
50,762
199,365
231,348
149,772
79,547
229,319
265,945
6.
Investments:
Available-For-Sale Investments
The carrying amounts of the available-for-sale investments at December 31 were as follows:
Quoted investments:
Local shares
Managed funds at fair value
Total quoted
Unquoted investments:
Investments in unquoted local companies
Investments in unquoted foreign companies
Investments under Islamic Wakalah arrangements
Investment in Barwa Al Khor Ltd. *
Provision for impairment of unquoted local company
investment
Total unquoted
Total available-for-sale investments
2006
(QR’000)
2005
(QR’000)
201,056
25,100
226,156
207,918
207,918
17,100
5,499
109,764
553,335
17,700
80,000
109,764
-
(1,000)
(1,000)
684,698
206,464
910,854
414,382
* The company acquired a 15% investment in Barwa Alkhor Ltd. The investment has been initially
accounted for at cost and subsequently re-valued based on the fair market value of the investee.
Revaluation differences were included under Investments revaluation reserve in the equity. All other
unquoted investments are stated at cost less any impairment.
Upon assessment of available-for-sale investments to their net recoverable amounts, some were found to be
permanently impaired. As a result, an impairment charge of QR. 99 million was charged to the income
statement.
7.
Investment Properties:
Buildings
(QR’000)
Furniture,
Fixture&
Equipment
(QR’000)
223,614
89,700
707,307
-
34,188
3,455
965,109
93,155
(152,845)
160,469
80,845
788,152
37,643
80,845
(152,845)
986,264
-
115,584
22,855
138,439
28,773
2,645
31,418
144,357
25,500
169,857
Land
(QR’000)
Cost
At January 1, 2006
Transfers from Projects in Progress
Disposals
Depreciation
At January 1, 2006
Charge for the year
Total
(QR’000)
Net Book Value
160,469
816,407
649,713
6,225
223,614
820,752
591,723
5,415
Based on management’s estimate, the market value of investment properties exceed their carrying amounts.
- 10 F-32
8. Investment in associate company
During the year the Company invested 50% in ASAS Real estate (ASAS); a Qatari company with
limited liability (W.L.L) incorporated and registered on 11 December 2006. The paid up capital of
ASAS amounted to QR. 5 million, of which QR. 2.5 million was paid by the Company.
Investment in ASAS has been treated as investment in an associate company, as the management
believe; they can only exercise significant influence over the investee.
The partners have made assets contribution to ASAS. The fair value of the contributed assets
amounted to QR. 1,415,000 million of which the Company’s contribution is QR. 308 million
(book value of QR. 131 million)
As a result of this contribution, the company has recognised 50% of the gain from the sale of its
assets to the investee company into the income statement.
Asas Real Estate
2006
(QR’000)
2005
(QR’000)
640,756
-
Details of the Company’s associate at 31 December 2006 are as follows:
Name of Associate
Place of Incorporation
and Operation
Asas Real Estate
Doha
Proportion of
Ownership and voting
power held
50%
Principal Activity
Real Estate
Summarised financial information in respect of the Company’s associate is set below:
2006
2005
(QR’000)
(QR’000)
Total assets
1,477,345
Total liabilities
(18,375)
Net assets
1,458,970
Company’s share of associate net assets
729,485
Less: Unrealized gains on acquiring investment
(88,729)
640,756
Net Company’s share of associate
Total revenue
Net profit for the period
52,899
38,970
Company’s share of associate’s profit for the period
19,485
- 11 F-33
-
9. Deferred finance charges:
As disclosed in note 2 deferred finance charges represent borrowing costs, initial up front fee,
charges relating to the Sukuk offering and the discounted portion of borrowings due over one year
to be amortised over the term of the loans.
10. Projects in Progress:
Cost
At January 1,
Additions
Transfers to investment properties
Disposals
Net at December 31,
2006
(QR’000)
2005
(QR’000)
141,337
453,156
(80,845)
(15,197)
498,451
50,506
206,693
(114,180)
(1,682)
141,337
The allocation of the projects in progress will be as follows:
Finance Lease
Total
11.
2006
(QR’000)
127,049
371,402
2005
(QR’000)
106,283
35,054
498,451
141,337
Property and equipment:
Porta Cabins
and Fences
(QR’000)
Furniture and
office
equipment
(QR’000)
Vehicles
(QR’000)
Total
(QR’000)
Cost
At January 1, 2006
157
35
192
1,058
939
1,997
1,260
669
1,929
2,475
1,643
4,118
Depreciation
At January 1, 2006
Charge for the year
114
15
129
615
397
1,012
765
322
1,087
1,494
734
2,228
Net Book Value
63
43
985
443
842
495
1,890
981
Depreciation rates
20%
- 12 F-34
20%
20%
12. Accounts Payable and Other Credit Balances:
Current
Contractors
Retentions
Instalments payable *
Dividends payable
Other payables and accruals
Non- current
Instalments payable *
Total
2006
(QR’000)
2005
(QR’000)
33,417
47,509
235,000
7,911
90,256
414,093
16,836
15,472
8,229
40,557
81,094
300,000
-
714,093
81,094
* Instalments payable represent payments due for the acquisition of the associate and available for
sale investments.
The company discounted its instalments payable relating to non-current borrowing using an
effective interest rate of 6%.
13. Unearned Finance Income:
Unearned finance income – Current
Unearned finance income – Non current
Total
14.
Loans:
Murabaha financing
Ijjarah financing facilities
Sukuk Al Musharakah
2006
(QR’000)
2005
(QR’000)
17,921
67,953
85,874
19,373
85,873
105,246
2006
(QR’000)
2005
(QR’000)
25,505
93,918
624,726
23,557
546,750
1,314,456
40,440
107,220
99,581
67,435
-314,676
- The Estisna financing no. (1) Of (Islamic Dinar) ID 16.3 million was drawn during the year
1999/2000 and is repayable in equal semi-annual instalments of ID 1.5 million each. The last
instalment is due in March 2008.
- The Estisna financing no. (2) Of (Islamic Dinar) ID 20.9 million was drawn during the year
2002/2003 and is repayable in equal semi-annual instalments of ID 1.7 million each. The last
instalment is due in July 2011.
- The Murabaha Financing facilities amounting to USD 199 million of which USD 54 million
was drawn during 2004 and USD 145 million in 2006. The outstanding balance of the USD 54
million as of December 31, 2006 is repayable in programmed semi-annual instalments up to
April 2011 and the outstanding balance of the USD 145 million is repayable in 2007.
- The Ijjarah financing facilities amounting to QR 160 million represents financing facilities with
local Islamic banks and is repayable over a period of 4 to 6 years.
- 13 F-35
- Sukuk Al Musharakah financing facilities amounting to USD 150 million was drawn during
2006. The remaining balance will be drawn in two parts: USD 50 million and USD 70 million
during February of 2007 and May of 2007 respectively. The total amount of USD 270 million is
payable in equal quarterly-instalments as of November 2008 until August 2016.
The terms of the loans are as the following:
Loans - Current
Loans - Non current
Total
2006
(QR’000)
2005
(QR’000)
604,065
710,391
1,314,456
78,633
236,043
314,676
15. Real Estate Investment Income:
Real estate investment income represents income from the sale of properties.
16. Finance Lease Income:
This represents lease income net of expenses for lease and sublease deals entered into by the
Company with other local companies. Almost 98% of the total finance lease income is generated
from one client, Qatar Petroleum.
17. Investments Income:
Income on sale of investments
Tatheer provision
Other investment income
Real estate funds income
Total
2006
(QR’000)
2005
(QR’000)
2,095
31,552
(1,934)
2,826
1,005
33,449
7,188
2,903
12,186
18. Other Income:
Profit on bank deposits
Miscellaneous income
Total
- 14 F-36
2006
(QR’000)
2005
(QR’000)
5,663
265
5,928
7,590
158
7,748
19. Operations cost:
Staff cost
Utilities
Others
Total
20. General and Administrative Expenses:
Staff cost
Others
Total
2006
(QR’000)
2005
(QR’000)
2,667
5,790
7,975
4,312
20,744
1,270
5,635
10,632
2,424
19,961
2006
(QR’000)
2005
(QR’000)
11,528
5,572
17,100
6,515
2,992
9,507
21. Impairment on investments
Due to the permanent decline in the Doha Securities Market over an extended period of time
during and before 2006, the Board of Directors of the Company decided to recognize the
impairment losses that were previously recognized under equity into the income statement.
22. Earning Per Share:
Earning per share is calculated by dividing the net profit for the year by the weighted average
number of ordinary shares during the year.
23. Share Capital:
The shareholders in their extraordinary General Assembly meeting held on March 29, 2006
approved to increase the company’s authorized share capital to QR. 600,000,000 with nominal value
of QR. 10 per share through distribution of bonus shares amounting to QR. 100,000,000.
The Board of Directors decided in their meeting held on January 17, 2007 to propose to the
forthcoming Extraordinary General Assembly to approve to increase the Company’s authorized
share capital to QR.720,000,000 of QR. 10 per share through distribution of bonus shares of one
share for every five shares held amounting to QR.120,000,000.
24. Legal Reserve:
Legal reserve is to be computed in accordance with the provisions of the Qatar Commercial
Companies’ Law and the company’s Articles of Association at 10% of the net profit for the year.
This reserve is to be maintained until it equals 50% of the paid up capital and is not available for
distribution except in circumstances specified in the Qatar Commercial Companies’ law. Since the
company exceeded the 50% limit, no deduction has been made for this year or previous year.
Amounts in excess of nominal values of newly issued shares approved by shareholders are also
allocated to legal reserve as per article 192 of the Companies law.
- 15 F-37
25. General Reserve:
In accordance with Articles of Association of the Company the general assembly may allocate a
portion of the net profit to a general reserve. No transfer has been made to general reserve during
2006 and 2005. This reserve is freely distributable.
26. Key Sources of estimation uncertainty:
The key assumptions concerning the future and other key sources of estimation uncertainty at the
balance sheet date that have significant risk of causing material adjustment to the carrying amounts
of assets and liabilities within the next financial year are disclosed below.
Impairment of receivables
An estimate of the uncollectible amount of receivables is made when collection of the full amount
is no longer probable. For individually significant amounts, this estimation is performed on an
individual basis. Amounts which are not individually significant but which are past due are
assessed collectively and a provision applied according to the length of time past due based on
historical recovery rates.
At the balance sheet date, gross finance lease receivable was QR. 231 million (2005: 266 million)
and the provision for doubtful debts was Nil (2005: Nil). At the same date, gross rent receivable
was QR. 5 million (2005: 4 million) and the provision for doubtful debts was QR. 0.2 million
(2005: 0.2).Any difference between the amounts actually collected in future periods and the
amounts expected will be recognised in the income statement.
27. Compensation of Key Management Personnel:
The remuneration of key management personnel during the year was as follows:
2006
(QR’000)
-----------------QR.
Short terms benefits
Post-employment benefits
2,685
112
--------------2,797
=========
2005
QR’000)
---------------QR.
2,299
169
--------------2,468
========
In addition to the above amounts the board of directors’ are also given remuneration subject to
shareholders’ approval as disclosed in the statement of changes in equity proposed for 2006 QR.
2,450 million (2005:1,750 million).
28.
Capital Commitments:
Projects under construction
- 16 F-38
2006
(QR’000)
2005
(QR’000)
2,441,225
2,200,000
29. Segment Information:
The company is organised into two business segments, Lease income (Rental operational and
Finance lease) and Real Estate Investment income.
Segmental information is shown under the Statement of Income.
The company operates geographically only in the State of Qatar.
30. Contingent Liabilities:
Banks Guarantees
Guarantee cheque issued by the company for a third party
2006
(QR’000)
2005
(QR’000)
600
-
8,800
723
31. Financial Instruments
The financial assets of the company include balances with banks, accounts receivable and
investments. The financial liabilities of the company include accounts payable and other payables
and due to banks.
32. Risk Management:
a)
Credit Risk Exposure
Credit risk is the risk that one party to a financial instrument will fail to discharge an obligation
and cause the other party to incur a financial loss. The Company’s exposure to credit risk is as
indicated by the carrying amount of its financial assets which consist primarily of bank balance
and accounts receivable. Credit risk on bank balance is limited as it is placed with banks having
good credit rating. Credit risk on accounts receivable is limited as these are shown after review of
their recoverability and are stated net of provision for doubtful receivables.
b) Financing Risk
The company’s financing contractual arrangements are based on the Islamic Shari’a such as,
Murabaha, Sukuk, Ijjarah and Estisna principles as outlined in note 14. These financing
arrangements between the company and the issuer may be affected by the financial, political and
general economic conditions prevailing from time to time in Qatar and/or the Middle East
generally. The company limits financing risk by monitoring changes in the issuer’s financial
position and financing costs.
c)
Fair Values of Financial Assets and Liabilities
Fair value is the amount for which an asset can be exchanged or a liability settled, between
knowledgeable and willing parties transacting at an “arm’s length”. The accounting convention
under which the financial statements have been prepared is disclosed in Note 2. The carrying
value of the Company’s financial instruments as recorded could therefore be different from their
fair value. However, in the management’s opinion, the fair values of the Company’s financial
assets and liabilities approximate to their carrying amounts.
- 17 F-39
d) Market Risk
Market risk is the risk that the value of a financial instrument will fluctuate as a result of changes
in market prices whether those changes are caused by factors specific to the individual security or
its issuer or factors affecting all securities traded in the market. The company limits market risk by
maintaining a diversified portfolio and by continuous monitoring of developments in international
and local market. In addition the company monitors key factors including analysis of operational
and financial performance of investees.
33.
Comparative Figures:
Certain corresponding amounts have been reclassified to conform to the presentation adopted in
the current year’s financial statements.
- 18 F-40
F-41
F-42
F-43
F-44
F-45
F-46
F-47
F-48
F-49
F-50
F-51
THE ISSUER
PO Box 1093GT
Queensgate House
South Church Street
Georgetown
Cayman Islands
INVESTMENT MANAGER AND OBLIGOR
Qatar Real Estate Investment Company Q.S.C.
P.O. Box 22311
Doha
Qatar
PRINCIPAL PAYING AGENT, CALCULATION AGENT,
REGISTRAR AND TRANSFER AGENT
HSBC Bank plc
8 Canada Square
London E14 5HQ
United Kingdom
DELEGATE
HSBC Trustee (C.I.) Limited
P.O. Box 88
1 Granville Street
St. Helier
Jersey JE4 9PF
LEGAL ADVISERS
To the Managers and the Delegate as to the laws of
England
To the Managers and the Delegate as to the laws
of the State of Qatar
Denton Wilde Sapte LLP
One Fleet Place
London EC4M 7WS
England
Patton Boggs LLP
Suite 1, Blue Salon Building
PO Box 22632
Doha
Qatar
To the Issuer and Qatar Real Estate Investment
Company Q.S.C. as to the laws of England
To the Issuer as to the laws of the Cayman Islands
Lovells
Dubai International Financial Centre
PO Box 506602
Dubai
imprima — C96808
Maples and Calder
The Exchange Building, 5th Floor
Dubai International Finance Centre
PO Box 119980
Dubai

Qatar Alaqaria Sukuk Company

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