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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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