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CANDIDATE ASSESSMENT FORM by Dofz1YtU

VIEWS: 8 PAGES: 2

									                SUKUK AND BONDS - ENGLISH




I.    INTRODUCTION


As part of its role in facilitating the introduction of new services and products, Tadawul has
developed a new electronic market for trading Sukuk and Bonds. The Sukuk and Bonds Market is a
market where participants (investors & issuers) are able to trade investment securities that have a
periodic returns and lower risk than equity investment.

Sukuk and Bonds are considered important channel for governments, companies, and institutions to
provide the necessary liquidity to finance its projects at relatively low cost. In addition, the Sukuk
and Bonds market will enable investors to diversify their investments and provide financial
protection for their portfolios with lower risk tools which ensure a safe and periodic return for the
investor.

The trading of the Sukuk and Bonds in the new market will be through licensed brokerage firms and
by using the same investment portfolio for trading stocks. The market provides many services such
as, listing, order submission, trade execution, clearing & settlement, and prices information
dissemination. The launch of this market is important step towards Tadawul’s strategy to diversify
financial products for investors in accordance with their investment needs.

II.   CHARACTERISTICS OF SUKUK AND BONDS


Sukuk and Bond have number of characteristics which should be aware of.

•     Issuer: The issuing organization can be either a government-related entity or a private entity.
      Issuer is the one who needs the additional funds.

•     Type of sakk/bond: The specification of each bond is clearly identified in its prospectus when
      the bond is issued. There are many varieties of bond that can be customized to the specific
      needs of the issuer for example Murabaha, Musharakah, Ijarah Sukuk, straight bond,
      amortizing bond, and convertible bond, etc.

•     Term to maturity: The total amount of time between when a sakk/bond is issued and when
      the same sakk/bond matures.

•     Maturity Date: The date on which the sakk or bond investor will be repaid the face value of
      the sakk/bond.

•     The Par Value (Face Value): The value of the issued sakk/bond a holder would receive at
      maturity.

•     The Coupon (annual return): The percentage of the face value which represents the annual
      return of the sakk or bond. The return may be divided into quarterly, semiannual, or
      annual payments.
                     SUKUK AND BONDS - ENGLISH




The difference between Sukuk/Bonds and Equities:



        Comparison                          Sukuk                              Bond                                Stock

     Type of Security               Share of revenue stream                    Debt                      Ownership in a corporation

      Type of Return                     Profit sharing                       Coupon                             Dividends

       Maturity Date                       Specified                         Specified                          Unspecified

Priority in Paying Principle             First priority                   First in priority                   Less in priority

            Risk                            Lower                              Lower                              Higher

       Voting Rights                      Not entitled                      Not entitled                          Entitled




Tradable Sukuk and Bond in Tadawul



                                       Par value
 Sakk/Bond         Issue Size (m)                         Maturity Date                       Coupon (Annual return)
                                         (SR)

                                                                             The basic rate of commission (SIBOR) in addition to
SABIC Sukuk I           3,000            50,000              2026-7-26
                                                                                                  0.40%

SCECO Sukuk             5,000            500,000             2027-7-15     %0.45 The basic rate of commission (SIBOR) in addition to

                                                                             The basic rate of commission (SIBOR) in addition to
SABIC Sukuk II          8,000            10,000              2027-7-15
                                                                                                  0.38%

 SABIC Sukuk
                        5,000            10,000              2028-5-15     %0.48 The basic rate of commission (SIBOR) in addition to
     III




 Trading of Sukuk/Bonds will start initially with above listed Sukuk, other available Sukuk/Bonds
 will be added at later stage.

								
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