Tamweel Sukuk Prospectus

Level: 5 From: 5 Wednesday, July 16, 2008 11:28 eprint3 3989 Intro : 3989 Intro
Tamweel Sukuk Limited (incorporated in the Cayman Islands with limited liability) AED 1,100,000,000 Trust Certificates due 2013
The issue price of the AED 1,100,000,000 Trust Certificates due 2013 (the Certificates or the Sukuk), each of which represents an undivided ownership interest in the Trust Assets (as defined herein) of Tamweel Sukuk Limited (the Issuer) is 100 per cent. of their face amount. The Certificates will be constituted by a declaration of trust (the Declaration of Trust) dated on or about 21 July 2008 (the Closing Date) made by the Issuer, the Issuer in its capacity as trustee (the Trustee), Tamweel PJSC (Tamweel) and BNY Corporate Trustee Services Limited (the Delegate). Pursuant to the Declaration of Trust, the Issuer will declare that it will hold certain assets (the Trust Assets), primarily consisting of its rights, title and interest in and to certain assets purchased from Tamweel pursuant to a purchase agreement (the Purchase Agreement) and (by way of istisna) under the istisna agreement (the Istisna Agreement), both dated on or about the Closing Date and entered into between the Issuer and Tamweel, any investments made by Tamweel as Service Agent under the Service Agency Agreement (each as defined below) and certain rights under the other Transaction Documents (as defined herein), all moneys which may now be or hereafter from time to time are standing to the credit of the Transaction Account (as defined herein) and all proceeds of the foregoing, upon trust absolutely for the holders of the Certificates (the Certificateholders and each, a Certificateholder)) pro rata according to the face amount of Certificates held by each Certificateholder. On 21 July, 21 October, 21 January and 21 April in each year commencing on 21 October 2008 up to and including 21 July 2013 (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 (each, a Periodic Distribution Date), the Issuer will pay the Periodic Distribution Amount (as defined herein) to Certificateholders. The Issuer shall pay the Periodic Distribution Amount solely from the proceeds received in respect of the Trust Assets pursuant to the service agency agreement (the Service Agency Agreement) dated on or about the Closing Date and entered into between Tamweel and the Trustee, pursuant to which Tamweel is appointed as service agent (the Service Agent) in respect of the Portfolio Assets (as defined herein). Unless previously redeemed, the Certificates will be redeemed in full by the Issuer at the Redemption Amount (as defined herein) on the Periodic Distribution Date falling in July 2013 (the Maturity Date). Investing in the Certificates involves certain risks as more fully described in the section Risk Factors beginning on page 11. Application has been made for the Certificates to be listed on the primary exchange of the Dubai International Financial Exchange (the DIFX). There can be no assurance that the listing of the Certificates on the DIFX will take effect on the Closing Date or at all. The DIFX takes no responsibility for the contents of this document, makes no representation as to its accuracy or completeness and expressly disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon any part of the contents of this document. There will be no application for admission to trading of the Certificates on the DIFX. The Certificates will be traded over-the-counter and cleared and settled through Euroclear Bank S.A./N.V. (Euroclear) and Clearstream Banking, socit anonyme (Clearstream, Luxembourg). The Certificates are expected to be assigned a rating of A3 by Moodys Investor Services Inc. (Moodys) and A 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. No offer of the Certificates may be made to any person in the Dubai International Financial Centre unless such offer is (a) deemed to be an Exempt Offer in accordance with the Offered Securities Rules (the Rules) of the Dubai Financial Services Authority (the DFSA) and (b) made to Qualified Investors (as defined in the Rules). Persons into whose possession this Prospectus or any Certificates may come must inform themselves about the nature of the Certificates as Restricted Securities as defined in the Rules, and observe any applicable restrictions in any relevant jurisdiction on the distribution of this Prospectus and the offering, purchase and sale of the Certificates. A copy of this Prospectus has been filed with the DFSA in accordance with the Markets Law 2004 and the Rules. In accordance with the Rules, the DFSA has no responsibility for the contents of the Prospectus and has not approved this Prospectus nor has it reviewed or verified the information in it, nor has it determined whether it is Sharia compliant. If you do not understand the contents of this document you should consult an authorised financial adviser. 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 the account or benefit of U.S. Persons (as defined in Regulation S of the Securities Act (Regulation S)) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act. Accordingly, the Certificates are being offered, sold or delivered solely to non-U.S. Persons (as defined in Regulation S) outside the United States in reliance on Regulation S. 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 may only be offered, sold or transferred in registered form in minimum denominations of AED 500,000 and integral multiples of AED 100,000 in excess thereof and as such will qualify as Restricted Securities within the meaning of the Listing Rules of the DIFX. 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 and 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.
Joint Lead Managers and Bookrunners Badr Al Islami, Mashreqbank psc Dubai Islamic Bank PJSC Joint Lead Managers Emirates Islamic Bank PJSC
Standard Chartered Bank
United Bank Limited
The date of this Prospectus is 16 July 2008
Each of Tamweel and the Issuer, having taken all reasonable care to ensure that such is the case, confirms 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 Tamweel and the Issuer accepts 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 or Tamweel or the Certificates other than as contained in this Prospectus. Any such representation or information should not be relied upon as having been authorised by the Issuer, Tamweel or Badr Al Islami, Islamic Banking Division of Mashreqbank psc, Dubai Islamic Bank PJSC, Standard Chartered Bank, Emirates Islamic Bank PJSC and United Bank Limited (each a Joint Lead Manager and together, the Joint Lead Managers). Neither the delivery of this document nor the offering, sale or delivery of any Certificate shall in any circumstances constitute a representation or create any implication that the information contained herein is correct at any time subsequent to the date hereof or that there has been no adverse change, nor any event reasonably likely to involve any adverse change, in the condition (financial or otherwise) of the Issuer or Tamweel since the date of this Prospectus. To the fullest extent permitted by law, none of the Joint Lead Managers, the Trustee, the Delegate or any Agent (as defined herein) nor any of their respective affiliates accept any responsibility for the contents of this Prospectus or for any other statement made, or purported to be made, by a Joint Lead Manager, the Trustee, the Delegate or any Agent, or any of their respective affiliates, or on its behalf in connection with the Issuer or Tamweel or the issue and offering of the Certificates. Each Joint Lead Manager, the Trustee, the Delegate and each Agent accordingly disclaims all and any liability whether arising in tort or in contract or otherwise which it might otherwise have in respect of this Prospectus or any such statement. This Prospectus does not constitute an offer of, or an invitation to subscribe for or purchase, any Certificates. This Prospectus is 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 Joint Lead 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, Tamweel, the Joint Lead Managers, the Trustee, the Delegate and the Agents 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 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, Tamweel, the Joint Lead Managers, the Trustee, 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 Tamweel. Notice to Cayman Islands Residents No invitation may be made to the public in the Cayman Islands to subscribe for the Certificates. Notice to United Kingdom Residents The Certificates represent interests in a collective investment scheme (as defined in the Financial Services and Markets Act 2000 (the FSMA)) which has not been authorised, recognised or otherwise approved by the United Kingdom 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 the FSMA except in circumstances which could not constitute a contravention of Section 21 of the FSMA.
ii
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 the FSMA, is being addressed to, or directed at, only the following persons: (i) persons who are Investment Professionals as defined in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the Financial Promotion Order), (ii) overseas recipients under Article 12(1)(a) of the Financial Promotion Order and (iii) 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 the 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 Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001 (the Promotion of CISs Order), (ii) overseas recipients under Article 8(1)(a) of the Promotion of CISs Order, (iii) 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 (iv) 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. 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.
iii
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 Tamweel for the three years ended 31 December 2005 to 31 December 2007 (the Audited Accounts) and the unaudited interim condensed financial statements for the 3 months ended 31 March 2008. The Audited Accounts have been prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board, and relevant federal laws of the UAE, consistently applied. Certain Defined Terms and Conventions References to Dubai herein are references to the Emirate of Dubai; and references to the UAE herein are to the United Arab Emirates. Certain figures and percentages 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 Prospectus 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, all references to UAE dirham and AED refer to the United Arab Emirates dirham, being the legal currency for the time being of the United Arab Emirates. The UAE dirham has been pegged to the U.S. dollar since 22 November 1980. The mid point between the official buying and selling rates for the UAE dirham is at a fixed rate of AED 3.6725 = U.S.$1.00. Certain Publicly Available Information Certain statistical data and other information appearing in this Prospectus have been extracted from public sources. Neither the Issuer nor Tamweel accepts responsibility for the factual correctness of any such statistics or information but the Issuer and Tamweel accept responsibility for accurately extracting and transcribing such statistics and information and believe, after due inquiry, that such statistics and information represent the most current publicly available statistics and information from such sources at and for the periods with respect to which they have been presented and do not omit anything which would render the reproduced information inaccurate or misleading.
iv
SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES Tamweel is incorporated in the UAE and all of its operations and assets are located outside the United Kingdom. As a result, it may not be possible for investors to effect service of process within the United Kingdom upon Tamweel or to enforce against it, in courts located in the United Kingdom, judgments obtained in courts located in the United Kingdom. Currently, the majority of Tamweels assets are located in the UAE. The Emirate of Dubais courts are unlikely to enforce an English judgment without re-examining the merits of the claim and may not observe the choice by the parties of English law as the governing law of the transaction. In addition, even if English law is accepted as the governing law, this will only be applied to the extent that it is compatible with the Emirate of Dubai law and public policy. Moreover, judicial precedent in the UAE has no binding effect on subsequent decisions and there is no formal system of reporting court decisions in the UAE. These factors create greater judicial uncertainty than would be expected in certain other jurisdictions.
FORWARD LOOKING STATEMENTS Some statements in this Prospectus may be deemed to be forward looking statements. Forward looking statements include statements concerning Tamweels plans, objectives, goals, strategies, future operations and performance and the assumptions underlying these forward looking statements. When used in this Prospectus, 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, Business Description of Tamweel PJSC and other sections of this Prospectus. In each case these forward looking statements have been based on the current view of Tamweels management with respect to future events and financial performance. Although Tamweel believes that the expectations, estimates and projections reflected in Tamweels 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 Tamweel has identified in this Prospectus, or if any of Tamweels underlying assumptions prove to be incomplete or inaccurate, the actual results of operations 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, Tamweel expressly disclaims any obligation or undertaking to disseminate after the date of this Prospectus any updates or revisions to any forward looking statements contained herein to reflect any change in expectations thereof or any change in events, conditions or circumstances on which any such forward looking statement is based.
vi
TABLE OF CONTENTS STRUCTURE DIAGRAM .......................................................................................................... OVERVIEW OF THE OFFERING ................................................................................................ RISK FACTORS ........................................................................................................................ TERMS AND CONDITIONS OF THE CERTIFICATES.................................................................... GLOBAL CERTIFICATE ............................................................................................................ PRONOUNCEMENT ................................................................................................................ USE OF PROCEEDS ................................................................................................................ BUSINESS DESCRIPTION OF TAMWEEL PJSC .......................................................................... DESCRIPTION OF THE ISSUER.................................................................................................. OVERVIEW OF THE EMIRATE OF DUBAI .................................................................................. OVERVIEW OF THE PROPERTY AND HOME FINANCE MARKET IN DUBAI................................ SUMMARY OF THE PRINCIPAL TRANSACTION DOCUMENTS .................................................. TAXATION .............................................................................................................................. CLEARANCE AND SETTLEMENT .............................................................................................. SUBSCRIPTION AND SALE ...................................................................................................... GENERAL INFORMATION ........................................................................................................ APPENDIX - FINANCIAL INFORMATION .................................................................................. 1 3 11 20 38 40 41 42 61 63 65 67 74 76 78 81 83
vii
Level: 5 From: 5 Wednesday, July 16, 2008 11:29 eprint3 3989 Section 01 : 3989 Section 01
STRUCTURE DIAGRAM The following is an overview of the structure and cashflows relating to the Certificates. This overview and in particular the very simplified structure diagram 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 this entire Prospectus, especially the risks in relation to investing in the Certificates discussed under Risk Factors.
Tamweel as seller/sani of its rights, title and interest in and to the Original Leased Assets and the Original Istisna Assets Return on Portfolio Assets Purchase / Istisna Agreement Tamweel as Service Agent Tamweel as Obligor
Service Agency Agreement Purchase Undertaking/ Sale Undertaking
Exercise Price
Issuer Proceeds Periodic Distribution Amounts and Redemption Amount
Declaration of Trust
Certificateholders
Cashflows Set out below is a simplified description of the principal cashflows underlying the transaction. Potential investors are referred to Terms and Conditions of the Certificates and the detailed descriptions of the relevant Transaction Documents set out elsewhere in this Prospectus for a fuller description of certain cashflows and for an explanation of the meaning of certain capitalised terms used herein. Payments by the Certificateholders and the Issuer On the Closing Date, the initial subscribers of the Certificates will pay the issue price in respect of the Certificates to the Issuer who, in its capacity as Trustee, will: (a) (b) apply at least one third of the proceeds of the Certificates to purchase Tamweels rights, title and interest in and to the Original Leased Assets (as defined herein); and apply the remainder of the proceeds of the Certificates to purchase (by way of istisna) Tamweels rights, title and interest in and to the Original Istisna Assets (as defined herein).
Under the Service Agency Agreement, Tamweel as Service Agent will provide certain services with respect to the Portfolio Assets (as defined herein), as more particularly described in the Service Agency Agreement.
The Service Agent shall distribute Portfolio Profit (as defined herein) generated by the Portfolio Assets to the Trustee. Pursuant to the Declaration of Trust, the Issuer in its capacity as Trustee, will declare a trust for the benefit of the Certificateholders over all of its rights, title, interest, present and future, in, to and under the Portfolio Assets and each 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. Periodic Payments by the Issuer On the second Business Day prior to each Periodic Distribution Date (each a Distribution Date), the Service Agent shall distribute Portfolio Profit generated by the Portfolio Assets to the Trustee. The Trustee shall apply such Portfolio Profit on each Periodic Distribution Date to pay the Periodic Distribution Amount due on such date. If the Portfolio Profit payable to the Trustee on each Distribution Date is greater than the relevant Periodic Distribution Amount, that surplus Portfolio Profit will be recorded as a reserve amount and shall be credited by the Service Agent into the Profit Reserve Account (as defined herein) which may be used to fund future payments of Periodic Distribution Amounts. Any amount standing to the credit of the Profit Reserve Account on the Maturity Date will be due and payable to the Service Agent as an incentive fee for its performance. The Service Agent may, however, prior to the Maturity Date, use the amounts standing to the credit of the Profit Reserve Account (Advance Incentive Fee) so long as any amounts deducted from the Profit Reserve Account prior to the Maturity Date are re-credited to fund any shortfall in the Periodic Distribution Amount, if so required. If the amounts standing to the credit of the Profit Reserve Account are insufficient (after the Service Agent has re-credited any Advance Incentive Fee) to fund any shortfall in any Periodic Distribution Amount, the Service Agent may meet the shortfall through the provision of Sharia compliant financing and if this is not possible, for any reason, it may provide a loan on a qard basis to the Trustee to meet such shortfall which, in each case, shall be repayable in the manner set out in the Service Agency Agreement. Redemption Payments Within a specified period prior to the Maturity Date, the Issuer, in its capacity as Trustee, will have the right to require Tamweel (as Obligor under the Purchase Undertaking (as defined herein)) to purchase all of the Trustees rights, title and interest in and to the Portfolio Assets. The Exercise Price payable by the Obligor in respect of such purchase is intended to fund the Redemption Amount payable by the Issuer under the Certificates on the Maturity Date. The Certificates may be redeemed prior to the Maturity Date following a Dissolution Event, a Rating Downgrade Event or a Tax Event (each, as defined herein). The amounts payable under the Certificates on any Redemption Date will be funded by the Obligor paying for the acquisition of all of the Trustees right, title and interest in and to the Portfolio Assets, (i) following a Dissolution Event or a Rating Downgrade Event, pursuant to the exercise by the Trustee of its right under the Purchase Undertaking to require the Obligor to purchase all of the Trustees rights, title and interest in and to the Portfolio Assets or, (ii) following a Tax Event, pursuant to the exercise by Tamweel of its right under the Sale Undertaking to require the Trustee to sell all of the Trustees rights, title and interest in and to the Portfolio Assets.
Level: 5 From: 5 Wednesday, July 16, 2008 4:01 pm mac5 3989 Section 02 : 3989 Section 02
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. Terms defined under Terms and Conditions of the Certificates or elsewhere in this Prospectus shall have the same respective meanings in this overview. Certificateholders should note that through a combination of the Service Agency Agreement, the Purchase Undertaking and the Sale Undertaking, the ability of the Issuer to pay amounts due under the Certificates will depend on payments made by the Service Agent and payments made by the Obligor and the Certificateholders recourse to the Issuer is limited to the Trust Assets. See Limited Recourse below. Parties Issuer Tamweel Sukuk Limited an exempted company with limited liability incorporated in the Cayman Islands on 12 May 2008 (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 Issuers shares have been issued and are held by Maples Finance Limited under the terms of a trust for charitable purposes. Trustee The Issuer will act as trustee in respect of the Trust Assets (as defined below) (in such capacity, the Trustee) for the benefit of Certificateholders in accordance with a declaration of trust dated on or about the Closing Date (the Declaration of Trust) and the conditions of the Certificates (the Conditions). Under the Declaration of Trust, the Trustee will delegate certain powers, duties and authorities to the Delegate (as defined below), including the power and authority to enforce or realise the Trust Assets. Tamweel PJSC (in such capacity, the Seller) will sell to the Trustee, at a price equal to no less than one third of the proceeds of the issue of the Certificates, its rights, title and interest in and to a portfolio of leased assets (the Original Leased Assets) pursuant to the terms of the Purchase Agreement (as defined below). Tamweel PJSC (in such capacity, the Sani) will sell (by way of istisna) to the Trustee, at a price equal to the remainder of the proceeds of the issue of the Certificates (after having made the purchase of the Original Leased Assets), its rights, title and interest in and to a portfolio of istisna assets (the Original Istisna Assets) pursuant to the terms of the Istisna Agreement (as defined below). Tamweel PJSC (in such capacity, the Service Agent) shall be appointed to act as Service Agent and, in that capacity, to provide certain services to the Trustee pursuant to the terms of the Service Agency Agreement (as defined below). Tamweel PJSC (in such capacity, the Obligor) shall execute the Purchase Undertaking (as defined below) in favour of the Trustee, pursuant to which the Obligor shall undertake to, in certain circumstances, purchase all of the Trustees rights, title and interest in and to the Portfolio Assets. Badr Al Islami, Islamic Banking Division of Mashreqbank psc, Dubai Islamic Bank PJSC and Standard Chartered Bank.
Seller
Sani
Service Agent
Obligor
Joint Lead Managers and Bookrunners
Delegate Principal Paying Agent, Calculation Agent and Replacement Agent Registrar and Transfer Agent Summary of the Trust Purchase Agreement
BNY Corporate Trustee Services Limited. The Bank of New York Mellon, acting through its London Branch.
The Bank of New York (Luxembourg) S.A.
Pursuant to the purchase agreement (the Purchase Agreement) dated on or about the Closing Date and entered into between Tamweel, as Seller, and the Trustee, the Trustee will purchase Tamweels rights, title and interest in and to the Original Leased Assets. Pursuant to the istisna agreement (the Istisna Agreement) dated on or about the Closing Date and entered into between Tamweel, as Sani, and the Trustee, as Mustasni, the Trustee will purchase (by way of istisna) Tamweels rights, title and interest in and to the Original Istisna Assets. The Portfolio Assets shall comprise the Original Leased Assets and the Original Istisna Assets and any assets at any time replacing the Portfolio Assets in accordance with the Service Agency Agreement, including Sharia compliant income generating assets. The Trust Assets comprise the Trustees rights, title, interest and benefit, present and future, in, to and under the Portfolio Assets, each of the Transaction Documents, all moneys from time to time standing to the credit of the Transaction Account and all proceeds of the foregoing. Pursuant to the Service Agency Agreement, Tamweel shall be appointed to act as Service Agent and, in that capacity, to provide certain services to the Trustee with respect to the Portfolio Assets. See section Summary of the Principal Transaction Documents Service Agency Agreement. The Service Agent shall create a UAE dirham denominated account in its books for the purpose of recording the crediting of any reserve amounts in respect of Portfolio Profit and, if applicable, re-crediting of any Advance Incentive Fee in accordance with the terms of the Service Agency Agreement (the Profit Reserve Amount) which will be used to fund payments of Periodic Distribution Amounts to the extent that there is insufficient Portfolio Profit to pay such amount. Any amount standing to the credit of the Profit Reserve Account on the Maturity Date will be due and payable to the Service Agent by way of an incentive fee (the Incentive Fee). Portfolio Profit means the amount by which all rental, sale proceeds or other income or consideration, damages, insurance proceeds, compensation, or other sums received by the Service Agent in connection with the Portfolio Assets (the Portfolio Revenues) exceed the aggregate of (i) Portfolio Revenues required to be reinvested in accordance with the terms of the Service Agency Agreement and (ii) any claims, losses, costs and expenses properly incurred by the Service Agent in providing the services under the Service Agency Agreement (Portfolio Liabilities).
Istisna Agreement
Portfolio Assets
Trust Assets
Service Agency Agreement
Profit Reserve Account
Purchase Undertaking
The Obligor shall execute a purchase undertaking (the Purchase Undertaking) in favour of the Trustee on or about the Closing Date under which the Obligor undertakes to purchase: (i) upon the Trustee exercising its option in accordance with the terms of the Purchase Undertaking by delivering an Exercise Notice to the Obligor specifying the Dissolution Redemption Date (as defined in Condition 10), such Dissolution Redemption Date being a minimum of 3 Business Days following the delivery of such Exercise Notice; or upon the Trustee exercising its option in accordance with the terms of the Purchase Undertaking by delivering an Exercise Notice to the Obligor specifying a Rating Downgrade Redemption Date (as defined in Condition 19.1), such Rating Downgrade Redemption Date, being the next Periodic Distribution Date falling no earlier than 45 days after the date of such Exercise Notice; or upon the Trustee exercising its option in accordance with the terms of the Purchase Undertaking by delivering an Exercise Notice to the Obligor. Any such Exercise Notice must be delivered no later than 3 and no earlier than 30 Business Days prior to the Maturity Date,
(ii)
(iii)
all of the Trustees rights, title and interest in and to the Portfolio Assets 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 terms and subject to the conditions of the Purchase Undertaking. See section Summary of the Principal Transaction Documents Purchase Undertaking. Sale Undertaking Early Redemption following a Tax Event The Trustee shall execute a sale undertaking (the Sale Undertaking) in favour of Tamweel dated on or about the Closing Date. Pursuant to the Sale Undertaking, on exercise of Tamweels option under, and in accordance with, the Sale Undertaking following the occurrence of a Tax Event (as defined in Condition 6.2), the Trustee shall sell all of its rights, title and interest in and to the Portfolio Assets 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 (as defined in Condition 19.1) on the terms and subject to the conditions of the Sale Undertaking. Substitution of Portfolio Assets If Tamweel wants to purchase any of the Portfolio Assets then held by the Trustee which are the subject of an istisna agreement, a forward lease agreement or an ijara contract (the Original Portfolio Assets) by payment in kind with other assets (the Replacement Portfolio Assets), the Trustee undertakes pursuant to the Sale Undertaking to sell the same to Tamweel on an as is basis (without any warranty express or implied as to the 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), subject to satisfaction of certain conditions. See section Summary of the Principal Transaction Documents Sale Undertaking. 5
Summary of the Certificates Certificates AED 1,100,000,000 Trust Certificates due 2013 (the Certificates), each of which represents an undivided ownership interest in the Trust Assets. 21 July 2008. The Periodic Distribution Date falling in July 2013. 100 per cent. of the aggregate face amount of the Certificates. Each Certificate represents an undivided ownership interest in the Trust Assets and will rank pari passu, without any preference, with the other Certificates. The Certificates will be limited recourse obligations of the Issuer. 21 July, 21 October, 21 January and 21 April in each year, commencing on 21 October 2008 up to and including 21 July 2013 (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 shall be the immediately preceding Business Day) (each, a Periodic Distribution Date). On each Periodic Distribution Date, Certificateholders will be entitled to receive a periodic distribution amount equal to the product of 2.25 per cent. per annum plus EIBOR (as defined in Condition 19.1) on the Aggregate Face Amount as at the end of the relevant Periodic Distribution Period (as defined in Condition 19.1) on an actual/360 basis (the Periodic Distribution Amount) from moneys received in respect of the Trust Assets (representing the Portfolio Profit in respect of the Portfolio Assets derived from payments made to the Trustee by the Service Agent under the Service Agency Agreement). Unless previously redeemed, the Certificates shall be redeemed in full by the Issuer on the Maturity Date for an amount equal to the Redemption Amount (as defined below) as of such date and the Trust shall be dissolved following such payment in full. Redemption Amount means, as of any date, the aggregate face amount of the Certificates then outstanding plus all unpaid accrued Periodic Distribution Amounts and all other unpaid accrued amounts (if any) due and payable under the Conditions as of the relevant Redemption Date (including, without limitation, Condition 8). Redemption for Taxation Reasons Following the occurrence of a Tax Event (as defined in Condition 6.4) and the exercise, in accordance with the Sale Undertaking, by Tamweel of its right to require the Trustee to sell all of its rights, title and interest in and to the Portfolio Assets to Tamweel, the Issuer shall, having given not less than 30 nor more than 65 days notice to the Certificateholders (which notice shall be irrevocable), redeem all, but not some only, of the Certificates at the Redemption Amount on the Tax Redemption Date (each, as defined in Condition 19.1) and the Trust shall be dissolved following such payment in full. Following the occurrence of a Rating Downgrade Event (as defined in Condition 19.1), the Certificates may be redeemed in full on the Rating Downgrade Redemption Date (as defined in Condition 6.3) at the Redemption Amount, and the Trust shall be dissolved following such payment in full.
Closing Date Maturity Date Issue Price Status
Periodic Distribution Dates
Periodic Distributions
Scheduled Redemption
Redemption for Rating Downgrade
Redemption and Dissolution following a Dissolution Event
Following the occurrence of a Dissolution Event (as defined below), the Certificates may be redeemed in full on the Dissolution Redemption Date (as defined in Condition 10) at the Redemption Amount, and the Trust shall be dissolved following such payment in full. A Dissolution Event occurs upon the occurrence of any of the following events: (a) a default is made in the payment of any Periodic Distribution Amount or the Redemption Amount on the date fixed for payment thereof and such default continues unremedied for a period of three Business Days; or the Issuer defaults in the performance or observance of any of its other obligations under or in respect of the Declaration of Trust and (except in any case where the failure is incapable of remedy) such default remains unremedied for 30 days after written notice thereof, addressed to the Issuer by the Delegate, has been delivered to the Issuer; or an Event of Default occurs under the Purchase Undertaking; or at any time it is or will become unlawful for the Issuer 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 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 (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 an order or decree is made or an effective resolution is passed for the winding up, liquidation or dissolution of the Issuer; or any event occurs which under the laws of the Cayman Islands has an analogous effect to any of the events referred to in paragraphs (e) and (f) above.
(b)
(c) (d)
(e)
(f) (g)
Role of Delegate
Pursuant to the Declaration of Trust, the Trustee shall delegate all of its rights and powers, authorities, duties and discretions to the Delegate. In particular, the Delegate shall be entitled to: (a) deliver an Exercise Notice to the Obligor in accordance with the Purchase Undertaking after the occurrence of a Dissolution Event or a Rating Downgrade Event; and following a Dissolution Event, take any enforcement action in the name of the Trustee against either the Obligor or the Service Agent.
(b)
The Trustee will act in accordance with the directions and instructions given to it by the Delegate in the exercise of the relevant delegated powers, following the delegation of such powers becoming effective. The Delegate is entitled to various protections and limitations on its liability, as set out in the Declaration of Trust. The Delegate is not obliged to take any action in connection with the Declaration of Trust and the Certificates unless it is reasonably satisfied that Tamweel will be able to indemnify it against all Liabilities (as defined in the Declaration of Trust) which may be incurred in connection with such action. Transaction Account All payments by any of the Service Agent or the Obligor to the Trustee under each Transaction Document to which it is party will be deposited into an account of the Trustee maintained for such purpose (the Transaction Account). Distributions of monies deriving from the Trust Assets will be made to Certificateholders from funds standing to the credit of the Transaction Account in the order of priority set out below. Priority of Distributions On each Periodic Distribution Date, or on a Redemption Date, the Trustee shall apply the moneys standing to the credit of the Transaction Account in the following order of priority: (i) 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 Conditions; 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; and third, only if such payment is due on a Redemption Date, to the Principal Paying Agent for application in or towards payment pari passu and rateably of the Redemption Amount; and fourth, only if such payment is due on a Redemption Date, in payment of the surplus (if any) to the Issuer.
(ii)
(iii)
(iv) Limited Recourse
No payment of any amount whatsoever shall be made in respect of the Certificates by the Issuer or any agents thereof except to the extent that funds are available therefor from the Trust Assets. 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 the Issuer or the Obligor (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 Delegate, the Agents or any of their affiliates as a consequence of such shortfall or otherwise. The Certificates will be represented on issue by interests in a Global Certificate, in registered form, which will be deposited with, and registered in the name of The Bank of New York Depository (Nominees) Limited, as nominee for The Bank of New York Mellon, acting through its London Branch in its capacity as the common depositary for Euroclear and Clearstream, Luxembourg.
Form and Delivery of the Certificates
Definitive Certificates evidencing holdings of Certificates will be issued in exchange for interests in the Global Certificate only in certain limited circumstances. See section Global Certificate. Clearance and Settlement Certificateholders must hold their interest in the Global Certificate in book-entry form through either Euroclear or Clearstream, Luxembourg. Transfers within Clearstream, Luxembourg or Euroclear will be in accordance with the usual rules and operating procedures of the relevant clearing system. The Certificates will be issued in registered form in face amounts of AED 500,000 and integral multiples of AED 100,000 in excess thereof. All payments by each of Tamweel and the Trustee under the Transaction Documents to which it is a party and 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 (as defined in Condition 19.1) (Taxes), unless the withholding or deduction of the Taxes is required by law. In such event, (a) where Tamweel is required to make such a withholding or deduction, Tamweel will be required, pursuant to the relevant Transaction Document, to pay to the Trustee, and/or (b) where the Trustee is required to make such a withholding or deduction, the Trustee will be required to pay in respect of the Certificates, additional amounts so that, subject to certain exceptions, the full amount which otherwise would have been due and payable is received by the parties entitled thereto. See Condition 8 (Taxation). Application has been made for the Certificates to be listed on the primary exchange of the Dubai International Financial Exchange (the DIFX). There can be no assurance that the listing of the Certificates on the DIFX will take effect on the Closing Date or at all. The Certificates are expected to be assigned a rating of A3 by Moodys and A 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. A summary of the provisions for convening meetings of Certificateholders to consider matters relating to their interests as such are set forth under Condition 14. See section Taxation for a description of certain United Arab Emirates, Cayman Islands and European Union taxation considerations applicable to the Certificates. There are certain restrictions on the offer, sale and transfer of the Certificates which are set forth in section Subscription and Sale. The Transaction Documents are the Purchase Agreement, the Istisna Agreement, the Purchase Undertaking, the Sale Undertaking, the Service Agency Agreement, the Declaration of Trust, the Agency Agreement, the Costs Undertaking, the Certificates and any other agreements and documents designated as such by the Issuer and the Obligor.
Denominations Withholding Tax
Listing
Rating
Certificateholder Meetings
Tax Considerations
Selling Restrictions Transaction Documents
Governing Law and Jurisdiction
The Transaction Documents (other than the Purchase Agreement and the Istisna Agreement) will be governed by English law and subject to the jurisdiction of the English courts. The Purchase Agreement and the Istisna Agreement will be governed by the laws of the Emirate of Dubai and applicable federal laws of the United Arab Emirates and subject to the jurisdiction of the courts of Dubai. In respect of any dispute under the Service Agency Agreement, the Declaration of Trust, the Agency Agreement, the Costs Undertaking and the Purchase Undertaking, Tamweel has consented to arbitration in accordance with the Rules of the International Chamber of Commerce if the Trustee so requires.
Waiver of Sovereign Immunity
Tamweel acknowledges in the Transaction Documents to which it is a party that to the extent that it may in any jurisdiction claim for itself or its assets or revenues immunity from suit, 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, Tamweel represents and agrees that it will not claim and irrevocably and unconditionally waives such immunity in relation to any proceedings.
10
RISK FACTORS The purchase of Certificates may involve substantial risks and is suitable only for sophisticated investors who have the knowledge and experience in financial and business matters necessary to enable them to evaluate the risks and merits of an investment in the Certificates. Before making an investment decision, prospective purchasers of Certificates should consider carefully, in the light of their own financial circumstances and investment objectives, all of the information in this Prospectus. Neither the Issuer nor Tamweel represents that the statements below regarding the risks of holding any Certificates are exhaustive and the Issuer may be unable to pay amounts on or in connection with any Certificate for reasons other than those described below. 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. Words and expressions defined in the Terms and Conditions shall have the same meanings in this section. RISKS RELATING TO THE ISSUER No operating history The Issuer is a newly formed entity and has no operating history. The Issuers only material assets, which will be held on trust for Certificateholders, will be the Trust Assets, including the obligation of Tamweel to make payments under the Transaction Documents to which it is a party. Therefore, the Issuer is subject to all the risks to which Tamweel is subject, to the extent that such risks could limit Tamweels ability to satisfy in full and on a timely basis its obligations under the Transaction Documents to which it is a party. See section Risk Factors relating to Tamweel for a further description of certain of these risks. Limited Recourse Recourse to the Issuer is limited to the Trust Assets and proceeds of the Trust Assets are the sole source of payments on the Certificates. Upon the occurrence of a Dissolution Event, the only remedy available to the Trustee or the Delegate, as the case may be, on behalf of the Certificateholders will be to exercise the right under the Purchase Undertaking to require Tamweel to purchase all of the Trustees rights, title and interest in and to the Portfolio Assets at the Exercise Price. Certificateholders will otherwise have no recourse to any assets of Tamweel (to the extent it fulfils all of its obligations under the Transaction Documents to which it is a party), the Joint Lead Managers, the Agents, the Delegate or any affiliate of any of the foregoing entities in respect of any shortfall in the expected amounts from the Trust Assets. Tamweel is obliged to make payments under the Transaction Documents to which it is a party directly to the Trustee, and the Trustee or the Delegate, as the case may be, on behalf of the Certificateholders, will have direct recourse against Tamweel to recover payments due to the Trustee from Tamweel pursuant to the Transaction Documents to which Tamweel is a party. There can be no assurance that the net proceeds of the realisation of, or enforcement with respect to, the Trust Assets will be sufficient to make all payments due in respect of the Certificates. In the event that the proceeds of the Trust Assets are not sufficient to satisfy the payments under the Certificates, the Certificateholders shall have no recourse against any other assets of the Issuer or the Trustee or against any director, shareholder, officer or employee of the Issuer or Trustee. Furthermore, under no circumstances shall any Certificateholder or the Trustee or the Delegate, as the case may be, have any right to cause the sale or other disposition of any of the Trust Assets except pursuant to the Purchase Undertaking and the sole right of the Trustee and the Certificateholders against Tamweel shall be to enforce the obligation of Tamweel to pay the Exercise Price under the Purchase Undertaking. The Delegate is not obliged to take any action following the occurrence of a Dissolution Event unless it has been directed to do so and has been indemnified and/or secured to its satisfaction. RISKS RELATING TO TAMWEEL Tamweels business requires reliable funding sources Tamweel will require additional funds to support home financing outlays and to support the future growth of its business. Tamweels ability to obtain external financing and the cost of such financing are dependent on numerous factors including general economic and capital market conditions, international financing
11
rates, credit rating, credit availability from banks or other lenders, investor confidence in Tamweel, and the success of Tamweels business. There can be no assurance that additional financing, either on a short-term or long-term basis, will be made available or, if available, that such financing will be obtained on terms favourable to Tamweel. Any failure to obtain financing in the amounts required, at rates that are appropriate to Tamweels business operations or at all could have a material adverse effect on the business, results of operations, financial condition or prospects of Tamweel. Tamweels funding sources are generally short term while its financing products are long term Tamweels ability to provide long term home financing is dependent on its ability to adequately source appropriate funds to provide financing to customers. Tamweel has historically relied upon capital contributions from founding members, public markets, bank financing and corporate investment deposits. Some of these sources of funds are short-term in nature. To manage liquidity risk, Tamweel must seek longterm funding sources congruent in duration to the financing provided to its customers. Tamweel may at times be required to obtain funding under unfavourable financial market conditions. Market conditions are dependent upon, amongst other things, the overall condition of the global and regional asset backed securities markets, the credit assessment criteria of credit rating agencies, the quality of Tamweels assets, and Tamweels performance on past securitisations. There is no guarantee that Tamweel will be able to source long term funding on viable terms so as to match its home finance product offering. A limitation on the part of Tamweel to adequately source funds with appropriate maturities could have a material adverse effect on Tamweels business, financial condition, results of operations or prospects. Tamweels business is subject to customer credit risk Tamweel employs formal procedures to assess and monitor credit risk. The management of Tamweel is of the opinion that these procedures are in line with applicable international standards and in accordance with regulations applicable to Tamweel. In addition, management regularly reviews the state of financing receivables and provision is made for any specific balances where recovery is doubtful. As at 31 March 2008, Tamweel did not have any payments in excess of 180 days overdue and less than 2 per cent. of its payments were overdue. Notwithstanding efforts on the part of Tamweel to manage credit exposure, no assurance can be given that Tamweels credit procedures will protect it against future defaults and such defaults could have a material adverse effect on Tamweels business, financial condition, results of operations or prospects. Tamweel generally owns the property against which it provides home financing. In the event of customer default, Tamweels ability to realise its collateral will be subject to conditions in the real estate market at that time. The real estate market is affected by many factors, including general economic conditions, availability of financing, interest rates and other factors, including supply and demand, that are beyond Tamweels control. No assurance can be given that Tamweel will be able to realise any property in amounts that exceed the debt due to it on a timely basis or at all. These factors could have a material adverse effect on Tamweels business, results of operations, financial condition or prospects. Tamweels business is subject to operational risks Operational risks and losses can result from fraud, error by employees, failure to document transactions properly or to obtain proper internal authorisation, failure to comply with regulatory requirements or conduct of business rules, failure of internal systems, equipment and external systems (including those of Tamweels counterparties or vendors) and the occurrence of natural disasters. Management is responsible for establishing an effective and efficient operational control environment in accordance with Tamweels standards so that Tamweels assets are adequately protected and operational risks are sufficiently mitigated. Although Tamweel has implemented risk controls and loss mitigation strategies it is not possible to entirely eliminate operational risks. Tamweel will, when appropriate, insure itself against operational risks. Notwithstanding insurance against operational risks, Tamweel might nonetheless be subject to losses arising from operational risk as a result of inadequate insurance coverage and delay in claim settlement. No assurance can be given that Tamweel will be successful in managing operational risk and any failure to manage such risk could have a material adverse effect on Tamweels business, financial condition, results of operations or prospects.
12
Tamweels business is reliant on qualified personnel Tamweels operations depend, in part, on the continued service of senior executives and other qualified personnel as well as Tamweels ability to recruit and retain skilled employees. The competition for such employees in the UAE is intense. Tamweels failure to manage its personnel needs successfully could have a material adverse effect on Tamweels business, financial condition, results of operations or prospects. Real estate valuation is inherently subjective and uncertain Property assets are inherently difficult to value. Tamweel provides financing based on market best estimates which are subject to substantial uncertainty and are made on the basis of assumptions which may not be correct. There can be no assurance that sales proceeds in the event of customer default would be sufficient to cover the finance provided by Tamweel. Multiple customer defaults could have a material adverse effect on Tamweels business, financial condition, results of operations or prospects. Since the incorporation of Tamweel, the demand for residential and commercial property in Dubai has increased substantially. Part of current demand has been based on the assumption that there will be continued economic growth in the UAE and continued political and financial stability. If this demand were to decrease it could have a material adverse effect on Tamweels business, financial condition, results of operations or prospects. Tamweels business is influenced by a principal beneficial shareholder Tamweels principal beneficial shareholder is the Government of Dubai, with an indirect shareholding of approximately 27.6 per cent. (while a further approximately 10.0 per cent. is held by Dubai Investment Group LLC, the majority of the shares of which are indirectly held by Dubai Holding LLC). By virtue of such shareholding, the Government of Dubai has the ability to influence Tamweels business significantly through its ability to control actions that require shareholder approval. Such influence by the Government of Dubai could have a material adverse effect on Tamweels business, financial condition, results of operations or prospects. Furthermore, if circumstances were to arise where the interests of the Government of Dubai or any future significant shareholder conflict with the interests of the holders of Certificates, the holders of the Certificates could be disadvantaged. Tamweels business is regionally concentrated in the UAE Tamweel currently has all of its operating businesses in the UAE. Tamweels business may be affected by the financial, political and general economic conditions prevailing from time to time in the UAE or the Middle East generally. These markets are subject to greater risks than more developed markets, including in some cases significant legal, economic and political risks that could have a material adverse effect on Tamweels business, financial condition, results of operations or prospects. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in the light of those risks, their investment is appropriate. Generally, investment in such markets is only suitable for sophisticated investors who fully appreciate the significance of the risks involved. Tamweels business expansion strategy may not be successfully implemented and could lead to increased costs and lower profitability Tamweel intends to develop residential property financing businesses in Saudi Arabia and Egypt. Tamweels business and prospects must be considered in light of the inherent risks, uncertainties, expenses and difficulties encountered by companies such as Tamweel which are expanding geographically. There can be no assurance that the Tamweel will be successful in expanding its business in to these regions and any failure to do so could have a material adverse effect on Tamweels business, results or operations and financial condition. Competition represents a continuous pressure on Tamweels business High growth in the UAEs real estate market is attracting interest from local and international real estate companies. Barriers to entry are relatively low and Tamweel anticipates an increase in the number of home financiers entering the real estate market. The introduction of new laws regulating the real estate market and anticipated increased transparency of regulator frameworks and issuance of new title deeds are
13
expected to further remove barriers to entry and result in increased competition. An increase in competition could have a material adverse effect on Tamweels business, financial condition, results of operations or prospects. Tamweels success depends on its ability to manage growth Tamweels ability to maintain and manage its growth effectively requires expansion of management information system capabilities and operational systems and controls. Tamweel will need to attract, train and retain senior executives, managers, technical professionals and other employees. Failure to meet resource expansion requirements could have a material adverse effect on Tamweels business, financial condition, results of operations or prospects. Any acquisition made by Tamweel might expose Tamweel to integration risks associated with streamlining business activity, assets and personnel as well as servicing the debt obligations of the acquired company. The process of integrating an acquired business may involve unforeseen difficulties and may require a disproportionate amount of management attention and financial and other resources. At any point in time, Tamweel may be unable to continue to identify additional suitable acquisition opportunities, negotiate acceptable terms, obtain financing for acquisitions on satisfactory terms or successfully acquire identified targets. Joint ventures may expose Tamweel to additional liabilities Tamweel is currently involved in, and may enter into further, joint venture arrangements with third parties. When entering into partnerships with other entities, Tamweel might be held liable for the actions of its partner. As such, joint venture partnerships could have a material adverse effect on Tamweels business, financial condition, results of operations or prospects. Tamweels business is subject to political, economic and related considerations The UAE has enjoyed significant economic growth and relative political stability. There can be no assurance that such growth or stability will continue. Moreover, while the UAE governments policies have generally resulted in improved economic performance, there can be no assurance that such level of performance can be sustained. Tamweels business may also be materially adversely affected generally by political and economic developments in the UAE, the Middle East or the global market. Specific risks in the Middle East that may have a material impact on Tamweels business, operating results, cash flows, financial condition and prospects include: an increase in inflation and the cost of living; political, social and economic instability; any acts of warfare, civil clashes and terrorist activities; governments actions or interventions, including tariffs, protectionism and subsidies; regulatory, taxation and legal structure changes; difficulties and delays in obtaining new permits and consents for Tamweels operations or renewing existing ones; potential lack of reliability as to title to real property in certain jurisdictions where Tamweel operates; cancellation of contractual rights; lack of infrastructure; expropriation of assets; and inability to repatriate profits and/or dividends.
No assurance can be given that the UAE government will not implement regulations 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 14
material adverse effect on Tamweels business, financial condition, results of operations or prospects or which could adversely affect the market price and liquidity of the Certificates. Tamweels business may be affected if there are geo-political events that prevent Tamweel from delivering its services. It is not possible to predict the occurrence of events or circumstances such as or similar to a war or the impact of such occurrences and no assurance can be given that Tamweel would be able to sustain its current profit levels or continue to operate as a viable business if such events or circumstances were to occur. Therefore a downturn or instability in certain sectors of the UAE, regional or global economy could have an adverse effect on Tamweels business, financial condition, results of operations or prospects. Expectations of Tamweels performance depends on future projections The information contained in this Prospectus relating to Tamweel may contain forward-looking statements based on Tamweels forecasts, expectations, estimates and current public information. This Prospectus takes into account Tamweels strategy, plans and capital expenditure forecasts. Tamweel does not guarantee its future performance, which might be subject to unforeseen risks and other elements outside the control of Tamweel. Certain predictions are based on assumptions vis--vis future events and may not be accurate. Some factors which may lead to a discrepancy between the Tamweels predictions and actual results include, but are not limited to, changes in laws and policies in regions where Tamweel has or intends to have an active presence; increase in competition due to, amongst other things, new market entrants, existing market players and new products; fluctuations in exchange rates, financing rates and inflation rates; and changes in laws. See risk factor Tamweels business is subject to political, economic and related considerations. RISKS RELATING TO THE DEVELOPING MARKETS Investments in emerging markets are subject to greater risk than investments in more developed markets Investors in emerging markets should be aware that these markets are subject to greater risks than more developed markets, including in some cases significant legal, economic and political risks. Accordingly, investors should exercise particular care in evaluating the risks involved and must decide for themselves whether, in the light of those risks, their investment is appropriate. Generally, investment in emerging markets is only suitable for sophisticated investors who fully appreciate the significance of the risk involved. Legal and regulatory systems may create an uncertain environment for investment and business activities Many countries in the MENA region are 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. Some countries (such as those countries comprising the Gulf Cooperation Council (GCC)) are also in the process of transitioning to a market economy and, as a result, may experience changes in their economies and government policies (including, without limitation, policies relating to foreign ownership, repatriation of profits, property and contractual rights and planning and permit-granting regimes) that may affect Tamweels business. The MENA region has enjoyed significant economic growth and some countries (such as those in the GCC) have also enjoyed relative political stability. However, there can be no assurance that such growth or stability will continue. Moreover, while the governments policies in some MENA countries have generally resulted in improved economic performance to date, there can be no assurance that such level of performance can be sustained. No assurance can be given that the governments in the countries in which Tamweel maintains operations or owns assets will not implement regulations or fiscal or monetary policies, including policies, regulations, or new legal interpretations of existing regulations, relating to or affecting taxation, financing rates or exchange controls, or otherwise take actions which could have a material adverse effect on Tamweels business, financial condition, results of operations or prospects.
15
RISKS RELATING TO THE CERTIFICATES The Certificates may not be a suitable investment for all investors and the failure by an investor to understand their investment may result in losses 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: 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; 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; have sufficient financial resources and liquidity to bear all of the risks of an investment in the Certificates; understand thoroughly the terms of the Certificates and be familiar with the behaviour of any relevant financial markets; and 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.
The Certificates are complex financial instruments and such instruments may be purchased as a way to reduce risk or enhance yield with an understood, measured, appropriate addition of risk to their overall portfolios. A potential investor should not invest in the Certificates unless it has the expertise (either alone or with the help of a financial adviser) to evaluate how the Certificates will perform under changing conditions, the resulting effects on the value of such Certificates and the impact this investment will have on the potential investors overall investment portfolio. There can be no assurance that a secondary market for the Certificates will develop There can be no assurance that a secondary market for the Certificates will develop or, if a secondary market does develop, that it will provide the Certificateholders with liquidity of investment or that it will continue for the life of the Certificates. The market value of Certificates may fluctuate. Consequently, any sale of Certificates by Certificateholders in any secondary market which may develop may be at a discount from the original purchase price of such Certificates. Hence an investor in the Certificates must be prepared to hold the Certificates for an indefinite period of time or until their maturity. Application has been made for the Certificates to be listed on the primary exchange of the DIFX but there can be no assurance that such listing will occur on or prior to the Closing Date 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. Certain investors may be affected by provisions under the EC Savings Directive Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State is required to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to an individual resident in that other Member State. However, for a transitional period, Belgium, Luxembourg and Austria are instead required (unless during that period they elect otherwise) to operate a withholding system in relation to such payments (the ending of such transitional period being dependent upon the conclusion of certain other agreements relating to information exchange with certain other counties). A number of non-EU countries and territories including Switzerland have adopted similar measures (a withholding system in the case of Switzerland) with effect from the same date.
16
If a payment were to be made or collected through a Member State which has opted for a withholding system and an amount of, or in respect of, tax were to be withheld from that payment, neither the Issuer nor any Paying Agent nor any other person would be obliged to pay additional amounts with respect to any Certificate as a result of the imposition of such withholding tax. If a withholding tax is imposed on payment made by a Paying Agent, the Issuer will be required to maintain a Paying Agent in a Member State that will not be obliged to withhold or deduct tax pursuant to the Directive. The Certificates may be redeemed prior to their Maturity Date In the event that the amount payable on the Certificates is required to include amounts or in certain circumstances the Service Agent is required pursuant to the Service Agency Agreement to pay amounts to the Trustee to ensure that the funds available to the Trustee are sufficient to pay the relevant Distribution Amount, in each case as a result of certain changes affecting taxation in the UAE or the Cayman Islands, or in each case any political subdivision or any authority thereof or therein having power to tax, the Trustee may redeem all but not some only of the Certificates upon giving notice in accordance with Condition 6.4. CERTAIN ADDITIONAL RISKS There is no assurance that the Certificates will be Sharia compliant Tamweels Fatwa & Sharia Supervisory Board, constituted by Dr. Hussain Hamid Hassan, Sheikh Dr. Mohammed Abdul Hakaim Zuair and Sheikh Mohammed Abdul Razak El Sedeiq, has confirmed that, in their view, the proposed issue of the Certificates and the related structure and mechanism described in the Transaction Documents are in compliance with Sharia principles. However, there can be no assurance as to the Sharia permissibility of the structure or the issue and the trading of the Certificates and none of the Issuer, Tamweel nor the Joint Lead Managers make any representation as to the same. Investors are reminded that, as with any Sharia views, differences in opinion are possible. Investors should obtain their own independent Sharia advice as to the Sharia permissibility of the structure and the issue and the trading of the Certificates. Consents to variation of Transaction Documents and other matters The Declaration of Trust contains provisions permitting the Delegate 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 and the Conditions of the Certificates if, in the opinion of the Delegate such modification (a) is of a formal, minor or technical nature, or (b) is made to correct a manifest error, or (c) is not materially prejudicial to the interests of Certificateholders. Unless 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. There can be no assurance as to the impact of a change in the laws governing the Certificates The Conditions and the Transaction Documents (other than the Purchase Agreement and the Istisna Agreement) are based on English law in effect as at the date of this Prospectus. No assurance can be given as to the impact of any possible judicial decision or change to English law 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. Reliance on Euroclear and Clearstream, Luxembourg procedures The Certificates will be represented on issue by a Global Certificate that will be deposited with a common depositary for Euroclear and Clearstream, Luxembourg. Except in the circumstances described in the Global Certificate, investors will not be entitled to receive Certificates in definitive form. Euroclear and Clearstream, Luxembourg will maintain records of the interests in the Global Certificate. While the Certificates are represented by the Global Certificate, investors will be able to trade their interests only through Euroclear and Clearstream, Luxembourg. While the Certificates are represented by the Global Certificate, the Issuer will discharge its payment obligation under the Certificates by making payments to the common depositary for Euroclear and Clearstream, Luxembourg for distribution to their account holders. A holder of an interest in the Global
17
Certificate must rely on the procedures of Euroclear and Clearstream, Luxembourg and, where applicable, such account holders to receive payments under the relevant Certificates. The Issuer has no responsibility or liability for the records relating to, or payments made in respect of, interests in the Global Certificate. Holders of interests in the Global Certificate will not have a direct right to vote in respect of the relevant Certificates. Instead, such holders will be permitted to act only to the extent that they are enabled by Euroclear and Clearstream, Luxembourg to appoint appropriate proxies. RISKS RELATING TO THE TRUST ASSETS AND THE PORTFOLIO ASSETS Liability attaching to owners of assets In order to comply with the requirements of Sharia, rights, title and interest in and to the Portfolio Assets will pass to the Issuer, in its capacity as trustee, under the Purchase Agreement and the Istisna Agreement. The Trustee will declare a trust in respect of its rights, title and interest in and to such Portfolio Assets and the other Trust Assets in favour of the Certificateholders pursuant to the Declaration of Trust. Accordingly, Certificateholders will have rights, title and interest in and to the Portfolio Assets unless transfer of such rights, title and interest is prohibited by, or ineffective under, any applicable law (see risk factor Transfer of the Portfolio Assets below). No investigation or enquiry will be made and no due diligence will be conducted in respect of any Portfolio Asset. Only limited representations will be obtained from Tamweel in respect of the Portfolio Assets. In particular, the precise terms of the Portfolio Assets or the nature of the assets sold will not be known (including whether there are any restrictions on transfer or any further obligations required to be performed by Tamweel to give effect to the transfer of the rights, title and interest in and to the Portfolio Assets). No steps will be taken to perfect any transfer of such rights, title and interest or otherwise give notice to any lessee or obligor in respect thereof. Obligors and lessees may have rights of set-off or counterclaim against Tamweel in respect of such Portfolio Assets. Transfer of the Portfolio Assets No investigation has been or will be made as to whether any interest in any Portfolio Assets may be transferred as a matter of the law governing the contracts, the law of the jurisdiction where such assets are located or any other relevant law. No investigation will be made to determine if the Purchase Agreement or the Istisna Agreement will have the effect of transferring an interest in the Portfolio Assets. Accordingly, no assurance is given that any rights, title and interest in and to the Portfolio Assets has been or will be transferred to the Trustee. Nevertheless, the Certificateholders will not have any rights of enforcement as against the Portfolio Assets and their rights are limited to enforcement against Tamweel of its obligation to purchase the Trustees rights, title and interest in and to the Portfolio Assets pursuant to the terms of the Purchase Undertaking. Accordingly, any such restriction on the ability of Tamweel to make a true sale of the rights, title and interest in and to the Portfolio Assets to the Trustee is likely to be of limited consequence to the rights of the Certificateholders. By way of further assurance, Tamweel shall expressly declare in the Purchase Undertaking that the Exercise Price represents a fair price for the Trustees rights, title and interest in and to the Portfolio Assets and that it irrevocably and unconditionally accepts all or any rights, title and interest the Trustee may have in and to the Portfolio Assets. If it breaches any such declaration or undertaking, or any administrator, liquidator or receiver of Tamweel disputes or challenges the rights, title and interest that the Trustee has in and to the Portfolio Assets, Tamweel shall fully indemnify the Trustee for the purpose of redemption, in UAE dirham, in full of the outstanding Certificates and, accordingly, the amount payable under any such indemnity claim will equal the Exercise Price. Furthermore, Tamweel shall agree in the Purchase Undertaking that, in the event that the transfer of the Trustees rights, title and interest in and to the Portfolio Assets is for any reason found to have been, or alleged to have been, ineffective so that the Trustee is unable to deliver such interest (or part thereof) to Tamweel in accordance with the terms of the Purchase Undertaking, Tamweel shall fully indemnify the Trustee for the purposes of redemption, in UAE dirham, in full of the outstanding Certificates and, accordingly, the amount payable under any such indemnity claim will equal the Exercise Price.
18
RISKS RELATING TO ENFORCEMENT UAE Bankruptcy Law In the event of Tamweels insolvency, UAE bankruptcy law may adversely affect Tamweels ability to perform under the Purchase Undertaking and the Service Agency Agreement and therefore the Trustees 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 any insolvency of Tamweel. Enforcement of Liabilities Ultimately the payments under the Certificates are dependent upon Tamweel making payments to the Trustee under the Service Agency Agreement, the Sale Undertaking and the Purchase Undertaking. If Tamweel fails to do so, it may be necessary to bring an action against Tamweel to enforce its obligations before the UAE courts which may be costly and time consuming. Enforcing foreign judgments in Dubai The Dubai courts are unlikely to enforce an English judgment without re-examining the merits of the claim and may not observe the choice by the parties of English law as the governing law of the relevant Transaction Documents. In addition, even if English law is accepted as the governing law, this will only be applied to the extent that it is compatible with the laws of the Emirate of Dubai and UAE law and public policy. This may mean that the Dubai courts may seek to interpret English law governed documents as if governed by UAE law and there can therefore be no certainty that in those circumstances the Dubai courts would give effect to such documents in the same manner as the parties may intend. Judicial precedent in the United Arab Emirates has no binding effect on subsequent decisions. In addition, there is no formal system of reporting court decisions in the United Arab Emirates. These factors create greater judicial uncertainty.
19
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 AED 1,100,000,000 Trust Certificates due 2013 (the Certificates) represents an undivided ownership interest in the Trust Assets held on trust for the holders of such Certificates pursuant to a declaration of trust (as amended or supplemented from time to time, the Declaration of Trust) dated 21 July 2008 (the Closing Date) made between Tamweel Sukuk Limited (the Issuer and, in its capacity as trustee, the Trustee), Tamweel PJSC (Tamweel) and BNY Corporate Trustee Services Limited (the Delegate). 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 the Issuer, the Delegate, and The Bank of New York Mellon, acting through its London Branch 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 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), and as calculation agent (in such capacity, the Calculation Agent) and The Bank of New York (Luxembourg) S.A. as registrar (in such capacity, the Registrar) and 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). References to the Delegate, 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 Conditions (the Conditions) include summaries of certain provisions of the Declaration of Trust, the Agency Agreement, the Purchase Agreement, the Istisna Agreement, the Service Agency 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 19. In addition (unless the context requires otherwise), words and expressions defined and rules of construction and interpretation set out in the Declaration of Trust shall 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 those applicable to them of the Agency Agreement. Each initial Certificateholder, by its acquisition and holding of its interest in a Certificate, shall be deemed to authorise and direct the Issuer (i) to apply the sums paid by it in respect of its Certificates towards the price payable by the Issuer for the purchase of Tamweels rights, title and interest in and to the Original Leased Assets under the Purchase Agreement and the Original Istisna Assets under the Istisna Agreement and (ii) 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. Under the Declaration of Trust, the Trustee has delegated to the Delegate certain rights and obligations under these Conditions. To the extent of such delegation, any reference in these Conditions to the Trustee shall be interpreted as a reference to the Delegate. 1 1.1 Form, Denomination and Title Form and Denomination The Certificates are issued in registered form in face amounts of AED 500,000 and integral multiples of AED 100,000 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
20
depositary for, Euroclear Bank S.A./N.V. and Clearstream Banking, socit 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 definitive Certificates in respect of their individual holdings of Certificates. The Certificates are not issuable in bearer form. 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. 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 2.1 Transfers of Certificates and Issue of Certificates Transfers Subject to Conditions 2.4 and 2.5 and to the limitations as to transfer set out in 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 face amount of the Certificates in respect of which a certificate is issued are to be transferred, a new certificate in respect of the face 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 face amount of the Certificates not so transferred to the address of such holder appearing on the Register 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 Registrar and 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 stamp duty, 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 (a) during the period of seven days ending on (and including) any Tax Redemption Date or Dissolution Redemption Date
21
or (b) during the period of seven days ending on (and including) any Periodic Distribution Date or, as the case may be, the Maturity Date. 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. 3 3.1 Status and Limited Recourse Status Each Certificate evidences an undivided 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 Transaction Document, no payment of any amount whatsoever shall be made in respect of the Certificates by the Issuer or any agents thereof except to the extent that funds are available therefor from the Trust Assets. The Certificates do not represent an interest in any of the Issuer, the Obligor, 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 against the Obligor (to the extent that it fulfils all of its obligations under the relevant Transaction Documents to which it is a party), or any of the Issuer, the Trustee, the Delegate or the Agents to the extent the Trust Assets have been exhausted following which all obligations of the Issuer and the Trustee shall be extinguished. 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 or the Trustee, 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 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 or fraud. 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 Obligor (to the extent that each fulfils all of its obligations under the relevant Transaction Documents to which it is a party), or against any of the Issuer, the Trustee, 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 the Obligor (to the extent that it fulfils all of its obligations under the relevant Transaction Documents to which it is a party), or any of the Issuer, the Trustee, the Delegate, the Agents or any of their affiliates as a consequence of such shortfall or otherwise. 4 4.1 Trust Summary of the Trust The Issuer will act as trustee for and on behalf of Certificateholders pursuant to the Declaration of Trust.
22
On the Closing Date, the Trustee will enter into a purchase agreement (the Purchase Agreement) with Tamweel, pursuant to which the Trustee will purchase Tamweels rights, title and interest in and to the Original Leased Assets. On the Closing Date, the Trustee will enter into an istisna agreement (the Istisna Agreement) with Tamweel, pursuant to which the Trustee will purchase (by way of istisna) Tamweels rights, title and interest in and to the Original Istisna Assets. Pursuant to the service agency agreement (the Service Agency Agreement) to be entered into on the Closing Date between the Trustee and Tamweel, in its capacity as Service Agent, the Service Agent shall provide certain services with respect to the Portfolio Assets, as more particularly described in the Service Agency Agreement. Pursuant to the purchase undertaking (the Purchase Undertaking) dated the Closing Date provided by Tamweel (in such capacity, the Obligor) in favour of the Trustee, the Obligor shall undertake to purchase all of the Trustees rights, title and interest in and to the Portfolio Assets at the Exercise Price on the Exercise Date following the issue of an Exercise Notice from the Trustee, which the Trustee shall deliver to the Obligor not less than three Business Days prior to any Dissolution Redemption Date (if any), or, provided that a Rating Downgrade Event has occurred, at any time between the Closing Date and the Maturity Date, or no later than 3 Business Days and no earlier than 30 Business Days prior to the Maturity Date, in each case, in the form set out in the Purchase Undertaking. On the Closing Date, the Trustee shall execute a sale undertaking (the Sale Undertaking) in favour of Tamweel. Pursuant to the Sale Undertaking, subject to a Tax Event occurring, Tamweel may, by exercising its option under the Sale Undertaking by delivering a Tax Event Exercise Notice to the Trustee by no earlier than 65, and no later than 45, days prior to the Tax Redemption Date, oblige the Trustee to sell all of its rights, title and interest in and to the Portfolio Assets on the Tax Redemption Date at the Exercise Price. In addition, Tamweel has the right to substitute any Portfolio Asset which is the subject of an istisna agreement, a forward lease agreement or an ijara contract with other assets, as more particularly described in the Sale Undertaking. Pursuant to the Declaration of Trust, the Issuer 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 Portfolio Assets and each 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 (including insurance proceeds) of the foregoing (together, the Trust Assets). All payments by either the Service Agent or the Obligor to the Trustee for the Certificateholders under each Transaction Document to which it is party will be deposited into an account of the Trustee maintained for such purpose (the Transaction Account). 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 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; 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; and third, only if such payment is due on a Redemption Date, to the Principal Paying Agent for application in or towards payment pari passu and rateably of the Redemption Amount. fourth, only if such payment is due on a Redemption Date, in payment of the surplus (if any) to the Issuer.
(b)
(c) (d)
23
The Principal Paying Agent shall apply the moneys so received towards the payments set forth above. 5 5.1 Periodic Distributions Periodic Distribution Amounts and Periodic Distribution Dates A distribution amount, representing a defined share of the profit in respect of the Trust Assets derived from payments made to the Trustee under the Service Agency Agreement, will be payable on the Certificates and be distributed in accordance with these Conditions. Subject to Condition 3.2 and Condition 4.2, the distribution payable in respect of the Certificates for any Periodic Distribution Period shall be the Periodic Distribution Amount and will be made by the Issuer in respect of the Certificates in arrear on each Periodic Distribution Date in accordance with Condition 7. The Periodic Distribution Amount payable on any Periodic Distribution Date shall be distributed to each Certificateholder pro rata (in an amount calculated by multiplying the Periodic Distribution Amount by a fraction of which the numerator is the face amount of the relevant Certificateholders Certificates and the denominator is the Aggregate Face Amount on the relevant Periodic Distribution Date, and rounding the resultant figure to the nearest AED 0.01, AED 0.005 being rounded upwards). 5.2 EIBOR Determination EIBOR for each Periodic Distribution Period shall be determined by or on behalf of the Issuer in accordance with the following provisions: (a) on each EIBOR Determination Date, the Calculation Agent, on behalf of the Issuer, will determine the Screen Rate at approximately 1.00 p.m. (Dubai time) on such EIBOR Determination Date and such Screen Rate shall be the value of EIBOR for the forthcoming Periodic Distribution Period; if the Screen Rate is unavailable, the Calculation Agent shall request the principal Dubai or Abu Dhabi office of each Reference Bank to provide it with the rate at which deposits in UAE dirham are offered by it to prime banks in the UAE inter-bank market for a period of three months at approximately 1.00 p.m. (Dubai time) on such EIBOR 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 being rounded upwards) as calculated by the Calculation Agent shall be the value of EIBOR for the forthcoming Periodic Distribution Period; if fewer than two rates are provided by the Reference Banks, the value of EIBOR for the forthcoming Periodic Distribution Period shall be the arithmetic mean of the rates quoted by major banks in Dubai or Abu Dhabi (as applicable), as selected by the Calculation Agent, at approximately 1.00 p.m. (Dubai time) on the first day of such Periodic Distribution Period for loans in UAE dirham to leading UAE banks for a period of six months commencing on the first day of such Periodic Distribution Period and for a an amount equal to the Aggregate Face Amount at the relevant time; and if EIBOR cannot be determined in accordance with the above provisions, the value of EIBOR for the forthcoming Periodic Distribution Period shall be as determined on the preceding EIBOR Determination Date.
(b)
(c)
(d)
Following determination of each of EIBOR 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 and/or traded 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 EIBOR and Periodic Distribution Amount. In addition, the Calculation Agent shall arrange for such EIBOR and Periodic Distribution Amount to be published in accordance with Condition 16 as soon as practicable after their determination but in no event later than the fourth Business Day thereafter.
24
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 and/or traded at the relevant time of the amended Periodic Distribution Amount and Periodic Distribution Date, and shall arrange for such amended Periodic Distribution Amount and Periodic Distribution Date to be published in accordance with Condition 16 as soon as practicable after determination of such amendment but in no event later than the fourth Business Day thereafter. 5.3 Notifications etc. All notifications, opinions, determinations, certificates, calculations, quotations and decisions given, expressed, made or obtained for the purposes of this Condition 5 by the Calculation Agent on behalf of the Issuer will (in the absence of manifest error) be binding on the Issuer, the Trustee, the Delegate, the Obligor, the Agents and the Certificateholders. No liability to the Issuer, the Trustee, the Delegate, the Obligor, the Agents or the Certificateholders shall attach to the Calculation Agent in connection with the exercise or non-exercise by it of its powers, duties and discretions for such purposes. 5.4 Cessation of Accrual No further amounts will accrue or be payable on any Certificate from and including its due date for redemption. 6 6.1 Redemption Scheduled Redemption Unless previously redeemed, the Certificates shall be redeemed in full by the Issuer on the Maturity Date at 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 Maturity 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 face amount of the relevant Certificate and the denominator is the Aggregate Face Amount on the Maturity Date and rounding the resultant figure to the nearest AED 0.01, AED 0.005 being rounded upwards. 6.2 Redemption following a Dissolution Event Following the occurrence of a Dissolution Event, the Certificates may, subject to Condition 10, be redeemed by the Issuer in full on the Dissolution Redemption Date at the Redemption Amount, and the Trust shall be dissolved following such payment in full. The Redemption Amount shall be distributed on any Dissolution 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 face amount of the relevant Certificate and the denominator is the Aggregate Face Amount on the Dissolution Redemption Date and rounding the resultant figure to the nearest AED 0.01, AED 0.005 being rounded upwards. 6.3 Redemption following a Rating Downgrade Event Following the occurrence of a Rating Downgrade Event, the Certificates may be redeemed by the Issuer in full on the Rating Downgrade Redemption Date (as defined below) at the Redemption Amount, and the Trust shall be dissolved following such payment in full, subject to the following: (a) the Issuer shall give notice of the occurrence of a Rating Downgrade Event to Tamweel, and to the Delegate and the Certificateholders in accordance with Condition 16 with a request to such Certificateholders to indicate if they wish the Trust to be dissolved, and
25
(b)
following the issuance of a notice pursuant to paragraph (a) above, and if so requested in writing by the holders of at least 50 per cent. in the Aggregate Face Amount, or if directed by an Extraordinary Resolution of the holders of the Certificates, the Delegate shall (subject in each case to being indemnified and/or secured to its satisfaction) give notice to the holders of the Certificates in accordance with Condition 16 that the Certificates are immediately due and payable at the Redemption Amount on the Rating Downgrade Redemption Date and that the Trust is to be dissolved on the day after the last outstanding Certificate has been paid in full.
The Redemption Amount shall be distributed on the Periodic Distribution Date specified in the notice served on Tamweel in accordance with the terms of the Purchase Undertaking (the Rating Downgrade 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 face amount of the relevant Certificate and the denominator is the Aggregate Face Amount on the Rating Downgrade Redemption Date and rounding the resultant figure to the nearest AED 0.01, AED 0.005 being rounded upwards. 6.4 Redemption for Taxation Reasons (a) Tax Event Upon exercise by Tamweel of its option under the Sale Undertaking and the Issuer giving Certificateholders not less than 30 days and not more than 65 days notice prior to the Periodic Distribution Date specified in the notice (the Tax Redemption Date) given by the Issuer to the Certificateholders in accordance with Condition 16 (which notice shall be irrevocable), all, but not some only, of the Certificates will be redeemed in whole at the Redemption Amount if: (i) (1) the Issuer has or will become obliged to pay additional amounts pursuant to Condition 8 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 16 July 2008, and (2) such obligation cannot be avoided by the Issuer taking reasonable measures available to it; or the Service Agent has or will become obliged to pay amounts under the Service Agency Agreement to ensure that the funds available to the Trustee are sufficient to pay the relevant Periodic Distribution Amount 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 16 July 2008,
(ii)
(each a Tax Event), provided that no such notice of redemption shall be given earlier than 30 days prior to the earliest date on which, in the case of Condition 6.4(a)(i), the Issuer would be obliged to pay such additional amounts were a payment in respect of the Certificates then due and, in the case of Condition 6.4(a)(ii), the Service Agent would be obliged to pay such amounts were a payment to the Trustee under the Service Agency Agreement then due. Prior to the publication of any notice of redemption pursuant to this paragraph, the Issuer shall deliver to the Delegate (x) a certificate signed by two directors of the Issuer (in the case of Condition 6.4(a)(i)) stating that the obligation referred to in (i) above cannot be avoided by the Issuer (having taken reasonable measures available to it) and (y) an opinion of independent legal or tax advisers 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 Delegate shall (without any investigation required of it) accept such certificate and opinion as sufficient evidence of the conditions set out in (i) and (ii) above without liability to any person in which event it shall be conclusive and binding on the Certificateholders.
26
Upon the Tax Redemption Date, the Issuer shall redeem the Certificates at the Redemption Amount, and the Trust shall be dissolved following such payment in full. (b) Redemption Amount The Redemption Amount payable on the Tax Redemption Date shall be distributed pro rata amongst the Certificates to be redeemed on the Tax Redemption Date. 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 face amount of the relevant Certificate and the denominator is the Aggregate Face Amount, in each case on the Tax Redemption Date, and rounding the resultant figure to the nearest AED 0.01, AED 0.005 being rounded upwards. 6.5 Cancellation All Certificates which are redeemed in full will forthwith be cancelled and accordingly may not be held, reissued or sold. 7 7.1 Payments Payments in Respect of Certificates Subject to Condition 7.2, 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 UAE dirham cheque drawn on a bank that processes payments in UAE dirham 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 7.2, 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 UAE dirham cheque drawn on a bank that processes payments in UAE dirham and mailed to the registered address of the Certificateholder if it does not have a registered account. For the purposes of this Condition, a Certificateholders registered account means the UAE dirham account maintained by or on behalf of it with a bank that processes payments in UAE dirham, 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 Certificateholders registered address means its address appearing on the Register at that time. 7.2 Payments subject to applicable laws Payments in respect of Certificates are subject in all cases to any fiscal or other laws and regulations applicable in the place of payment, but without prejudice to the provisions of Condition 8. 7.3 Payment only on a 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 Business Day, for value the first following day which is a 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 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.
27
7.4
Agents The Issuer 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 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.
7.5
Calculation Agent (a) Appointment The Issuer 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 the Issuer 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 AED 100,000 in face 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, the Issuer shall appoint the London office of another major bank engaged in the London interbank market to act in its place. If the Issuer shall fail, within a reasonable time, to appoint any such replacement, the Delegate 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. (b) Determinations binding Any determination or calculation made by the Calculation Agent shall (in the absence of manifest error) be final and binding on the Issuer, the Trustee, the Delegate, the Obligor, the Service Agent, 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 advisers opinion.
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 (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 the 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 (where presentation is required) 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 presented for payment (where presentation is required) more than 30 days after the due date for payment of the Redemption Amount except to the extent that a holder would have been entitled to additional amounts on presenting the same for payment on the last day of the period of 30 days assuming, whether or not such is in fact the case, that day to have been a Business Day; or
(b)
28
(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 presented for payment (where presentation is required) 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.
(d)
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 the Redemption Amount) and five years (in the case of Periodic Distribution Amounts) from the Relevant Date in respect of the Certificates, subject to the provisions of Condition 7.
10
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 the Redemption Amount on the date fixed for payment thereof and such default continues unremedied for a period of three Business Days; or the Issuer defaults in the performance or observance of any of its other obligations under or in respect of the Declaration of Trust and (except in any case where the failure is incapable of remedy) such default remains unremedied for 30 days after written notice thereof, addressed to the Issuer by the Delegate, has been delivered to the Issuer; or an Event of Default occurs; or at any time it is or will become unlawful for the Issuer 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 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 (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 an order or decree is made or an effective resolution is passed for the winding up, liquidation or dissolution of the Issuer; or any event occurs which under the laws of the Cayman Islands has an analogous effect to any of the events referred to in paragraphs (e) and (f) above.
(b)
(c) (d)
(e)
(f) (g)
Upon the occurrence of a Dissolution Event, the Issuer shall give notice of the occurrence of such Dissolution Event to the Delegate and the Certificateholders in accordance with Condition 16 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 Delegate in its sole discretion may, and if so requested in writing by the holders of at least 25 per cent. in Aggregate Face Amount, 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 that the Certificates are immediately due and payable at the Redemption Amount on the date specified in such notice (the Dissolution Redemption Date) and that the Trust is to be dissolved on the day after the last outstanding Certificate has been paid in full.
29
11
Covenants The Issuer has irrevocably undertaken in the Declaration of Trust that, among other things, for so long as any Certificate is outstanding, it shall not: (a) incur any indebtedness in respect of borrowed money or any other financing whatsoever, or give any guarantee in respect of any obligation of any person other than those in issue as at the Closing Date or as permitted pursuant to any Transaction Document; secure any of its present or future indebtedness for borrowed money or any other financing 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; 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 and in accordance with the principles of Sharia; use the proceeds of the issue of the Certificates for any purpose other than as provided for under the Transaction Documents; subject to Condition 14.2, amend or agree to any amendment of any of the Transaction Documents to which it is a party or to its constitutional documents; 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); have any subsidiaries or employees; redeem any of its shares or pay any dividend or make any other distribution to its shareholders; 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 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 or engage in any business or activity other than: (i) (ii) (iii) as provided for or permitted in the Transaction Documents; the ownership, management and disposal of the Trust Assets as provided in the Transaction Documents; and such other matters which are incidental thereto.
(b)
(c)
(d) (e) (f)
(g) (h) (i)
(j)
12
Enforcement and Exercise of Rights
12.1 Actions by Delegate Subject to Condition 12.2, 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 Delegate shall (acting for the benefit of the Certificateholders) take one or more of the following steps: (a) enforce the provisions of the Purchase Undertaking against the Obligor and/or the provisions of the Service Agency Agreement against the Service Agent; and
30
(b)
take such other steps as the Delegate may consider necessary to recover amounts due and/or deliverable to the Certificateholders.
Notwithstanding the foregoing, the Delegate 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 and/or the Service Agent to enforce their respective obligations under the Transaction Documents, the Conditions and the Certificates. 12.2 Trustee and Delegate not bound to act Neither the Trustee nor the Delegate shall 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 Face Amount, and then only if it shall be indemnified and/or secured to its satisfaction against all Liability to which it may render itself liable or which it may incur by so doing. 12.3 Certificateholders not entitled to proceed directly No Certificateholder shall be entitled to proceed directly against, or to provide instructions to the Trustee to pursue any claim, against the Issuer or the Obligor arising under the Trust Assets or the Certificates or to enforce the performance of any provisions of any of the Transaction Documents or for any other reason unless (i) the Delegate has resigned its appointment in accordance with the terms of the Declaration of Trust and (ii) no successor or replacement has been appointed in its place (in accordance with the terms of the Declaration of Trust). Under no circumstances shall the Trustee, the Delegate or any Certificateholders have any right to cause the sale or other disposition of any of the Trust Assets except pursuant to the Purchase Undertaking, and the only right of the Trustee, the Delegate and Certificateholders against the Issuer and the Obligor and the Service Agent shall be (i) to enforce the obligation of the Obligor to pay the Exercise Price under the Purchase Undertaking and (ii) to enforce the obligations of the Service Agent under the Service Agency Agreement. 12.4 Satisfaction of Obligation of Trustee and Delegate Conditions 12.1, 12.2 and 12.3 are subject to this Condition 12.4. After enforcing and distributing or realising the Trust Assets and distributing the net proceeds of the Trust Assets in accordance with Condition 4.2, the obligations of the Delegate and the Trustee in respect of the Certificates shall be satisfied and no Certificateholder may take any steps against the Delegate or 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. 13 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 Issuer may reasonably require. Mutilated or defaced Certificates must be surrendered or an indemnity given before replacements will be issued. 14 Meetings of Certificateholders, Modification, Waiver, Authorisation and Determination
14.1 Meetings of Certificateholders The Delegate and/or the Trustee may convene 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 or any other Transaction Documents. 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 face amount of the Certificates for the time being outstanding, or at any adjourned such meeting
31
two or more Certificateholders, proxies or representatives present whatever the face 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 than 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. 14.2 Modification The Trustee or, as the case may be, the Delegate may agree, without the consent or sanction of the Certificateholders, to any modification (other than in the case of a Reserved Matter (as defined in the Declaration of Trust)) 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 or, as the case may be, the Delegate, materially prejudicial to the interests of Certificateholders or may agree, without any such consent as aforesaid, to any modification which, in the opinion of the Trustee or, as the case may be, the Delegate, is of a formal, minor or technical nature or to correct a manifest error. 14.3 Entitlement of Trustee In connection with the exercise by it of any of its trusts, powers, authorities and discretions (including, without limitation, any modification, waiver, authorisation or determination), the Trustee or, as the case may be, the Delegate (acting on behalf of the Certificateholders) 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 neither the Trustee nor the Delegate shall be entitled to require, nor shall any Certificateholder be entitled to claim, from the Trustee, the Delegate 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 8. 14.4 Determinations etc. binding Any modification, abrogation, waiver, authorisation or determination shall be binding on Certificateholders and any modification, abrogation, waiver, authorisation or determination shall be notified by the Issuer (unless the Delegate agrees otherwise) to Certificateholders as soon as practicable thereafter in accordance with Condition 16. 15 Indemnification and Liability of the Trustee and the Delegate
15.1 Indemnification of Trustee and Delegate The Declaration of Trust contains provisions for the indemnification of the Trustee and the Delegate, in each case in certain circumstances, and for relief from responsibility, including provisions relieving each of them from taking action (in particular, in connection with the exercise of any of their respective rights in respect of the Trust Assets) unless indemnified and/or secured to its satisfaction. Prior to taking any such action, the Delegate may demand that there be paid in advance such sums as it considers (without prejudice to any further demand) shall be sufficient to indemnify it and, on such demand being made, Tamweel shall be obliged to make payment of all such sums in full. Neither the Trustee nor the Delegate shall in any circumstances take any action unless directed to do so in accordance with Condition 12, and then only if the Trustee and/or the Delegate (as the case may be) shall have been indemnified and/or secured to their satisfaction.
32
15.2 No liability to Certificateholders for payments Each of the Delegate and the Trustee (solely in its capacity as such) makes no representation and assumes no responsibility for the validity, sufficiency or enforceability of the obligations of either of the Service Agent or the Obligor under any Transaction Document 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 payment which should have been made by either of the Service Agent or the Obligor, as the case may be, but is not so made, and shall not in any circumstances have any liability arising from the Trust Assets other than as expressly provided in these Conditions or the Declaration of Trust. The Delegate is not responsible for monitoring compliance by Tamweel with its obligations. Tamweel is obliged to notify the Delegate of the occurrence of an Event of Default or a potential Event of Default, but is not required to provide regular compliance certificates to the Delegate. 15.3 No liability in respect of Trust Assets The Delegate and the Trustee shall not be liable in respect of any loss or theft of the Trust Assets or any cash or for failure in any obligation to insure the Trust Assets or any cash or for 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. 15.4 Delegate and Trustee not required to incur any Liability Nothing contained in any Transaction Document, the Certificates or these Conditions shall require the Delegate or the Trustee to expend or risk its own funds or otherwise incur any Liability in the performance of any of its duties or in the exercise of any of its rights, powers, authorities or discretions if it considers that the repayment of such funds or adequate indemnity against, or security for, such risk or Liability is not assured to it. 15.5 Delegates Rights The Declaration of Trust also contains provisions pursuant to which no director or officer of the Delegate or of any holding, affiliated or associated company of the Delegate shall be precluded from underwriting the Certificates with or without a commission or other remuneration, or from purchasing or otherwise acquiring, holding, dealing in or disposing of any securities whatsoever or from being interested in any contract or transaction or from accepting and holding the office of trustee or administrator for the holders of any other securities, and in any case neither the Delegate nor any director or officer of the Delegate shall be liable to the Certificateholders for any profit made by it or him thereby or in connection therewith. 16 Notices
16.1 Notices to Certificateholders All notices to the Certificateholders will be valid if: (a) (b) published in a daily newspaper (which will be in a leading English language newspaper having general circulation) in the Gulf region approved by the Trustee; or 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 second 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.
33
16.2 Notices from Certificateholders 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 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. 18 Governing Law and Submission to Jurisdiction
18.1 Governing Law The Declaration of Trust, the Agency Agreement and the Certificates are governed by, and will be construed in accordance with, English law. 18.2 Jurisdiction The Issuer has in the Declaration of Trust irrevocably and unconditionally agreed for the benefit of the Trustee and Certificateholders that the courts of England are to have non-exclusive jurisdiction to settle any disputes which may arise out of or in connection with the Declaration of Trust or the Certificates and that accordingly any suit, action or proceedings arising therefrom or in connection therewith (together referred to as Proceedings) may be brought in the courts of England. 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. 18.3 Process Agent 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. 19 Definitions and Interpretation
19.1 Definitions In these Conditions: AED and UAE dirham denotes the United Arab Emirate dirham, being the legal currency for the time being of the United Arab Emirates. Agents means any of the Paying Agents, the Registrar, the Replacement Agent, the Calculation Agent or the Transfer Agents appointed by the Issuer pursuant to the Agency Agreement. Aggregate Face Amount means, at any time, the aggregate face amount of the outstanding Certificates which, for the avoidance of doubt, shall be AED 1,100,000,000 on the Closing Date.
34
Business Day means a day (other than Friday, Saturday or Sunday) on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in London and Dubai. Costs Undertaking means the costs undertaking to be dated the Closing Date and executed by Tamweel. Day Count Fraction means, in relation to a Periodic Distribution Period or any other period in respect of which a payment is due to be made, the actual number of days from, and including, the first day of that period to, but excluding, the last day of that period, divided by 360. Dissolution Event means any of the events specified as such in Condition 10. Dissolution Redemption Date has the meaning set out in Condition 10. Dubai Business Day means a day (other than a Friday, a Saturday or a Sunday) on which commercial banks and foreign exchange markets settle payments and are open for general business (including dealings in foreign exchange and foreign currency deposits) in Dubai. EIBOR means for each Period Distribution Period the UAE inter-bank offered rate for three months UAE dirham deposits determined in accordance with Condition 5.2. EIBOR Determination Date means the second Dubai Business Day preceding the first day of each Periodic Distribution Period. Event of Default shall have the meaning given to such term in the Purchase Undertaking. Exercise Date means the date on which the Exercise Price is due pursuant to the terms of the Purchase Undertaking or the Sale Undertaking. Exercise Notice means a notice substantially in the form set out in the Purchase Undertaking. Exercise Price means, with respect to any Redemption Date, the Redemption Amount on such date. Extraordinary Resolution means a resolution passed at a meeting of Certificateholders duly convened and held in accordance with the provisions of Schedule 3 to the Declaration of Trust by a majority of not less than three quarters of the votes cast. Istisna Agreement shall have the meaning given in Condition 4.1. Liability means any actual 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 other tax charged or chargeable in respect thereof and properly incurred legal fees and expenses on a full indemnity basis. Maturity Date means the Periodic Distribution Date falling in July 2013. Obligor means Tamweel PJSC. Original Istisna Assets means the assets which are the subject of the sale and purchase (by way of istisna) under the Istisna Agreement. Original Leased Assets means the assets which are the subject of the sale and purchase under the Purchase Agreement. Periodic Distribution Amount means, in respect of each Periodic Distribution Period, an amount equal to the product of (i) the Periodic Distribution Rate; (ii) the Aggregate Face Amount (as of the final day of such Periodic Distribution Period) and (iii) the Day Count Fraction; and in each case including such additional amounts as may be payable pursuant to Condition 8. Periodic Distribution Date means 21 July, 21 October, 21 January and 21 April in each year, commencing on 21 October 2008 up to and including 21 July 2013 (or if any such day is not a
35
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). Periodic Distribution Period means the period from and including the Closing Date to but excluding the first Periodic Distribution Date, and thereafter each successive period from and including a Periodic Distribution Date to but excluding the next succeeding Periodic Distribution Date or the Redemption Date (if such date is not a Periodic Distribution Date). Periodic Distribution Rate means EIBOR plus 2.25 per cent. per annum. 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. Portfolio Assets has the meaning given in the Service Agency Agreement. 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. Purchase Agreement shall have the meaning given in Condition 4.1. Purchase Undertaking means the purchase undertaking to be dated the Closing Date and executed by the Obligor in favour of the Trustee. Rating Downgrade Event means a downgrading of the rating of the Obligor by at least two notches at any one time between the Closing Date and the Maturity Date by either or both of Moodys Investors Services Inc. or Fitch Ratings Ltd., in each case, as a direct result of the Government of Dubai reducing its direct or indirect ownership of the issued share capital of the Obligor. For the purposes of this definition only, the relevant rating agencys sole determination of what constitutes the Government of Dubai shall be conclusive. Rating Downgrade Redemption Date has the meaning set out in Condition 6.3. Redemption Amount means, as of any date, the Aggregate Face Amount plus all unpaid accrued Periodic Distribution Amounts and all other unpaid accrued amounts (if any) due and payable under these Conditions as of the relevant Redemption Date including such additional amounts as may be payable pursuant to Condition 8. Redemption Date means any of the Dissolution Redemption Date, the Rating Downgrade Redemption Date, the Tax Redemption Date, the Maturity Date or any other date specified in accordance with these Conditions for the redemption of all of the Certificates. Reference Banks means the principal Dubai or Abu Dhabi office of each of four major banks engaged in the UAE 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. 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, 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 United Arab Emirates (in the case of any payment by Tamweel PJSC) and the Cayman Islands (in the case of any payment by the Issuer) or, in either case, any political subdivision or any authority thereof or therein having power to tax. Sale Undertaking means the sale undertaking to be dated the Closing Date and executed by the Trustee in favour of Tamweel.
36
Screen Rate means the rate for three month deposits in UAE dirhams which appears on the Reuters screen AEIBOR= (or such replacement page on that service or any successor service which displays the same information). Service Agency Agreement shall have the meaning given to such term in Condition 4.1. Service Agent means Tamweel PJSC, in its capacity as Service Agent under the Service Agency Agreement. Tax Event has the meaning given in Condition 6.4. Tax Event Exercise Notice means a notice substantially in the form set out in the Sale Undertaking. Tax Redemption Date means the date fixed for redemption of the Certificates pursuant to Condition 6.4. Taxes shall have the meaning given to such term in Condition 8. Transaction Account means the account of the Trustee maintained for the deposit of payments by Tamweel (in whatever capacity) to the Trustee for the Certificateholders under the Transaction Documents. Transaction Documents means the Purchase Agreement, the Istisna Agreement, the Purchase Undertaking, the Sale Undertaking, the Service Agency Agreement, the Declaration of Trust, the Agency Agreement, the Costs Undertaking, the Certificates and any other agreements and documents designated as such by the Issuer and the Obligor. Trust has the meaning given in Condition 4.1. Trust Assets has the meaning given in Condition 4.1. UAE means the United Arab Emirates. 19.2 Interpretation In these Conditions headings and sub-headings are for ease of reference only and shall not affect the construction of these Conditions.
37
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 the clearing system as the holder of a particular aggregate face amount of such Certificates (each, a Holder) (in which regard any certificate or other document issued by the clearing system as to the aggregate face amount of such Certificates standing to the account of any person shall be conclusive and binding for all purposes, save in the case of manifest error) shall be treated as the holder of such aggregate face 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 registered holder of the Global Certificate in accordance with and subject to the terms of the Global Certificate. Each Holder must look solely to the relevant clearing system for its share of each payment made to the registered holder. Cancellation Cancellation of any Certificate following its redemption by the Issuer will be effected by reduction in the aggregate face amount of the Certificates in the register of Certificateholders. Payments Payment of the Periodic Distribution Amounts and the Redemption Amount in respect of Certificates represented by the Global Certificate will be made upon presentation and, if no further payment is 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 systems rules and procedures. A record of each payment made will be entered into the register by or on behalf of the Registrar and shall be prima facie evidence that payment has been made. 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 day after the day on which such notice is delivered to the relevant clearing systems. Registration of Title Registration of title to the Global Certificate 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 Delegate is not appointed by the Issuer within 90 days after receiving such notice from Euroclear or Clearstream, Luxembourg. In these circumstances title to the Global Certificate may be transferred into the names of holders notified by the
38
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. 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 any 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. Certificates in Definitive Form Interests in the Global Certificate will be exchangeable or transferable, as the case may be, for Certificates in definitive form (Definitive Certificates) upon the occurrence of an Exchange Event. For these purposes, Exchange Event means that (i) a Dissolution Event has occurred and is continuing or (ii) the Issuer has been notified that both Euroclear and Clearstream, Luxembourg have been closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or have announced an intention permanently to cease business or have in fact done so and no successor clearing system is available. In any such event, the Issuer will issue Definitive Certificates (in exchange for the whole of the Global Certificate) within 45 days of the occurrence of the relevant Exchange Event upon presentation of the Global Certificate by the person in whose name the Global Certificate is registered in the register kept by the Registrar in respect of the Certificates on any day (other than a Saturday or Sunday) on which banks are open for business in the city in which the Registrar has its office.
39
PRONOUNCEMENT Copies of the pronouncement given on or before the Closing Date and issued by Tamweels Fatwa & Sharia Supervisory Board, constituted by Dr. Hussain Hamid Hassan, Sheikh Dr. Mohammed Abdul Hakaim Zuair and Sheikh Mohammed Abdul Razak El Sedeiq confirming that, in their view, the proposed issue of the Certificates and the related structure and mechanism described in the Transaction Documents are in compliance with Sharia principles shall be distributed to prospective Certificateholders upon request to the Joint Lead Managers. Prospective Certificateholders should not rely on the pronouncement referred to above in deciding whether to make an investment in the Certificates and should consult their own Sharia advisers as to whether the proposed transaction described in the pronouncement referred to above is in compliance with Sharia principles.
40
USE OF PROCEEDS At least one third of the proceeds of the issue of the Certificates will be used by the Issuer to purchase Tamweels rights, title and interest in and to the Original Leased Assets, and the remainder of the proceeds will be used by the Issuer to purchase (by way of istisna) Tamweels rights, title and interest in and to the Original Istisna Assets.
41
BUSINESS DESCRIPTION OF TAMWEEL PJSC
OVERVIEW Tamweel PJSC (Tamweel) is a leading provider of Sharia compliant residential property financing in the United Arab Emirates (UAE). Since opening for business in March 2004 it has become a leading residential property finance provider within the UAE with a market share estimated at approximately 35 per cent. (by value of financing granted) as at 31 December 2007. Tamweel provides Sharia compliant home financing solutions to real estate buyers in the UAE. Tamweel is organised into two major business segments: (i) Islamic financing and investing assets, which is its core residential property financing business; and (ii) investments in properties and property development. In addition, Tamweel has recently commenced an escrow management business. As at 31 March 2008, Tamweel had a market capitalisation of approximately AED 6.73 billion and its total assets were approximately AED 9.6 billion. As at 31 May 2008, the principal shareholders of Tamweel were Istithmar World PJSC (Istithmar) which held approximately 21.6 per cent. of the shares of Tamweel, Dubai Islamic Bank PJSC (DIB) which held approximately 19.9 per cent. and Dubai Investment Group LLC, the majority of the shares of which are indirectly held by Dubai Holding LLC, which held approximately 10.0 per cent. As the Government of Dubai indirectly holds all of the shares of Istithmar and currently holds approximately 30.0 per cent. of the shares of DIB, the Government of Dubai is Tamweels principal beneficial shareholder, holding an indirect shareholding of approximately 27.6 per cent. As at the date of this Prospectus, the authorised share capital of Tamweel is AED 1 billion divided into 1 billion ordinary shares of AED 1 each, all of which have been issued. Tamweel is currently licensed by the UAE Central Bank to operate as an Islamic finance company and is primarily engaged in Sharia compliant financing and investment activities. Accordingly, Tamweel is subject to UAE Central Bank regulations (including the Central Bank Board of Directors Resolution No.165/6/2004 issued on 6 December 2004 regarding the regulation of finance companies which operate in accordance with Sharia principles) as well as the laws of Dubai and the applicable federal laws of the UAE. Tamweel is in the process of expanding the geographic scope of its home financing services. In addition to diversifying into certain other Emirates in the UAE, Tamweel has a joint venture in the Kingdom of Saudi Arabia and is in the process of establishing operations through a wholly-owned subsidiary in Egypt and intends, over time, to offer its services in other countries in the Middle East and potentially the South East Asian regions. Tamweels registered head office is currently located at Business Avenue Building, Mezzanine Floor, P.O. Box 111555, Dubai, UAE and its telephone number is +971 4 294 4400. In addition to a branch located at its head office, Tamweel also has three other branch offices located in Abu Dhabi, Dubai and Sharjah. HISTORY Tamweel was established in Dubai, UAE, on 11 November 2000 as a limited liability company under the name of Emirates Finance Company LLC (EFC). From November 2002, DIB held 99.50 per cent. of the shares in EFC until mid-2003 when DIB and Istithmar, the investment arm of the Dubai World Group, entered into a joint venture arrangement. EFC was renamed Tamweel LLC. Tamweel LLC opened for business in March 2004. Until June 2006, DIB held 50 per cent. of the shares in Tamweel LLC and Istithmar held the remaining 50 per cent. In February 2006, Tamweel launched its initial public offering. In June 2006, Tamweel was converted into a public joint stock company in accordance with UAE Federal Law No (8) of 1984, as amended. In July 2006 its shares started trading on the Dubai Financial Market. RECENT DEVELOPMENTS The board of directors of Tamweel (the Board) has requested that senior management evaluate whether its existing corporate structure is the most appropriate model for its potential strategic expansion into new products and new markets. Both the Board and the shareholders of Tamweel have approved an amendment to permit Tamweel to be restructured as a holding company. Pursuant to these approvals,
42
Tamweel announced, on 1 June 2008, the establishment of Tamweel Properties & Investments LLC, a wholly-owned subsidiary which will focus on real estate investment and brokerage services. Tamweel Properties & Investments LLC has been established with a paid-up capital of AED 400 million. It is likely that some reorganisation of the current corporate structure may occur over the next two years and any such reorganisation will require the approval of the relevant regulatory authorities in the UAE. In terms of geographic expansion, during 2007, Tamweel entered into a joint venture agreement with Al Oula Real Estate Development, a leading Saudi Arabian property development company, with the aim of giving it access to the residential financing market in the Kingdom of Saudi Arabia. Tamweel believes that there is significant demand for housing in Saudi Arabia with an estimated average of 200,000 new units a year being required simply to cater to domestic demand and that this demand is constrained by a lack of available finance. Tamweel expects to commence business in Saudi Arabia before the end of 2008. Tamweel is also at an advanced stage of establishing business operations in Egypt through a wholly-owned subsidiary, Tamweel Egypt for Real Estate Finance SA (Tamweel Egypt). This company gained its commercial registration in January 2008, formally establishing it as a legal entity under Egyptian law. In February 2008, Tamweel Egypt was granted a mortgage finance licence by the Egyptian Mortgage Finance Authority. Tamweel Egypt expects to begin operations in July 2008. Tamweel Egypts authorised capital is EGP 500 million (approximately AED 333.4 million) with paid-up capital of EGP 100 million (approximately AED 66.7 million). The combination of a population in excess of 80 million and a lack of residential property financing makes Egypt an attractive market for Tamweel to provide its products and services. STRATEGY Tamweel is a leading provider of residential property financing in the UAE. Its strategy is to become the most admired leader in the financial industry regionally. Tamweels mission is to maximise shareholder value and become the home finance solutions provider of choice in the markets in which it operates. It aims to achieve its mission by securing a leading market share through product and service differentiation. Tamweel attributes the substantial growth in the residential finance market in the UAE and specifically in Dubai both before and since it commenced business in 2004 to, among other factors, advancements in the legal system (which includes a new property law in Dubai, see Escrow Management below), overall strong performance of the UAE economy, the continued influx of expatriates, in particular in Dubai, and a steady supply of quality infrastructure. Tamweel anticipates that these factors will continue to increase the demand for residential financing in Dubai in the short-to-medium term and also in Abu Dhabi in future years. Currently, approximately 90 per cent. of Tamweels outstanding residential financing relates to properties in Dubai and, in the short-term, Tamweels strategy is to consolidate its leading position in this growing market. The remaining 10 per cent. currently relates to properties in the other Emirates of the UAE, mainly, Abu Dhabi. Tamweel believes that its dedicated focus on residential property financing and its focus on providing Sharia compliant solutions are significant competitive strengths, see Strengths below. In particular, Tamweel aims to service the mid-value end-user market which it believes is more stable and less prone to fluctuation in demand than the high value segment where property speculation is more common. Tamweel aims to consolidate its leading position in Dubai in its chosen market segment through quality of service, leveraging its in-depth knowledge of the UAE real estate market and through product innovation. Tamweel aims to diversify away from its reliance on the residential property market in Dubai by expanding its activities in Abu Dhabi and, to a lesser extent, the other Emirates in coming years and through targeted international expansion. Tamweel believes that its expansion into international markets will be facilitated by the fact that certain of its key developer partners (such as Emaar Properties PJSC, Nakheel Co. LLC, Dubai Properties LLC, Sama Dubai LLC and Limitless LLC) are also expanding into such regions. Tamweel intends to position itself so as to capture the residential financing demand expected to flow from property developments in these regions. Tamweel has established a dedicated full time international expansion team which has been responsible for overseeing the ventures in both Saudi Arabia and Egypt. This team investigates and monitors a range of possible new markets for Tamweel to enter in the GCC and the wider Middle East and North Africa (MENA) and the South East Asian regions and it is possible that Tamweel may expand into other markets in these areas in 2009 or later.
43
Properties held for sale and property development Beyond its core business of residential property finance, Tamweel also seeks to exploit its knowledge and experience of the real estate market in its chosen territories. Although it has no current intention to act as a property developer, Tamweel seeks to take advantage of particular market opportunities as they arise. Recent examples include:
buying and re-selling real estate developments or properties for development, including its investments in International City, Discovery Garden, Al Jadaf, Surough, Jumeirah Village, Business Bay and Al Reef Downtown as described under Businesses Properties held for sale and property development. In these cases, Tamweel uses its balance sheet and aims to resell at a profit over the acquisition price; assisting developers with the sale of their developments both through Tamweels existing customer channels and through the provision of finance to potential buyers. This is a commission based business and Tamweel also earns income on any residential property financing granted by it; and acting an as escrow manager, see Businesses Escrow Management.
COMPETITION Tamweel believes that it is the only dedicated provider of Sharia compliant residential property financing in the UAE. Tamweels competitors in this business include both Islamic and conventional banks and other financial institutions operating in the UAE. There are currently at least 23 banks and financial institutions providing residential property finance in Dubai alone and such finance is provided on both an Islamic and conventional basis. In November 2007, Moodys Investors Service Inc. (Moodys) identified Tamweel as one of the two largest residential property financing institutions in the UAE (other than Amlak Finance PJSC (Amlak)). According to Moodys, the two largest institutions together account for approximately 60 to 65 per cent. of the total mortgage market in the UAE, with Tamweel accounting for approximately 35 per cent. of such market as at 30 June 2007. As of the date of this Prospectus, Tamweel estimates its market share remains around 35 per cent. Tamweel believes its major competitors in the provision of home financing include Amlak, Barclays Bank (UAE), Dubai Bank PJSC, Dubai Islamic Bank PJSC, HSBC Bank Middle East Limited, Mashreqbank psc, National Bank of Dubai PJSC, RakBank PJSC and Abu Dhabi Commercial Bank PJSC. STRENGTHS Tamweel is a dedicated residential property financing company. This is in contrast to Amlak which has a more diversified financing assets portfolio and to its principal bank competitors for whom real estate financing is just one of many types of financing product offered. Tamweels products are Sharia compliant, which allows it to capture both the conventional and Islamic home finance market. Customers who prefer Sharia compliant products are satisfied whilst customers who are not concerned with Sharia compliance are offered products and rates that are competitive with those offered by non-Islamic institutions. Tamweel believes that in the provision of financing to its customers its principal competitive strengths include:
the fact that it is a single product company with a focused strategy. Tamweels focus on the provision of residential property financing has given it an in depth knowledge of the real estate market in Dubai and the UAE which it believes the majority of its competitors, with their generally wider financing focus, are unable to match. This knowledge enables Tamweel to train its finance advisers to a high standard thereby leading to generally better quality advice and service being provided to its customers than that provided by the majority of its competitors. Tamweel believes that this is particularly important in a developing market where customer awareness is generally lower than in more developed markets; the fact that it is a Sharia compliant institution. Unlike its competitors providing only conventional financing, Tamweels products may be utilised by both Sharia conscious customers and those for whom Sharia compliance is not a relevant consideration. Tamweel believes that its product offering compares favourably both on quality of service and in pricing terms with those offered by its principal competitors; and
44
commitment to customer service, illustrated by a 48-hour application response time (the 48-hour Campaign). Tamweels 48-hour Campaign has been running successfully since its launch in January 2008. During the first three months of the 48-hour Campaign, Tamweel was able to process and turn around all applications within 48-hours. Tamweel believes that the 48-hour Campaign introduced a more consistent application processing, without adversely affecting the credit quality of the portfolio. The 48-hour Campaign has resulted in increased customer satisfaction.
In addition to the above significant competitive advantages, Tamweel believes that it also benefits from a strong brand value, the strong financial position and continued support of its founding shareholders, a sound corporate governance and risk management culture, excellent information technology systems and an experienced management team. BUSINESSES Islamic Financing and Investing Assets As at 31 December 2007, Tamweels Islamic financing and investing assets (essentially representing the home financing products provided by it) amounted to approximately AED 5.2 billion. Tamweel offers a number of financing options to meet the needs of a range of home buyers. Tamweels principal Sharia compliant home financing products are:
Home Builder (Istisnaa and forward Ijarah): these are finance products designed to enable customers to finance a property which is under construction. Either the customer or a property developer may manage the construction of the residence. Tamweel finances the construction of the residence on an instalment basis and repayment of such instalments commences once the construction is complete. The term of the financing can be up to 25 years in the case of a floating profit rate and 15 years in the case of a fixed profit rate; Flexible Rent-to-Own (Flexible Ijarah): these are leases whereby Tamweel purchases the property and leases it to the customer on a floating rate instalment basis. The customer makes monthly rental payments to Tamweel. The term of the financing can be up to 25 years. At the end of the lease, Tamweel transfers title in the property to the customer; Fixed Lease-to-Own (Fixed Ijarah): these are leases whereby Tamweel purchases the property and leases it to the customer on a fixed rate instalment basis. The customer makes monthly rental payments to Tamweel. The term of the financing can be up to 15 years. At the end of the lease, Tamweel transfers title in the property to the customer; Home Owner (Murabaha): these are sales contracts whereby Tamweel purchases the property under its name and subsequently resells it to the home buyer at an agreed profit rate on an instalment or deferred payment basis. The term of the financing does not exceed 15 years; Baiti: this is a product offered to UAE and GCC nationals only to finance the purchase of ready properties or the construction of new properties. This product is similar to the Istisnaa, forward Ijarah and Flexible Ijarah contracts and the financing period cannot exceed 25 years. Soyoula: this is a home refinancing product. Tamweel allows existing customers to unlock the equity value in their homes by refinancing up to 75 per cent. of the value of the home.
45
The following table sets out a breakdown of Tamweels on balance sheet Islamic financing and investment portfolio: 31 December 2007 111111111244 AED Number of (millions) Contracts Ijarah Istisnaa Other Total 2,393.2 2,623.1 200.2 1111 5,216.5 1111 aaaa 2,874 3,025 36 1111 5,936 1111 aaaa 31 December 2006 111111111244 AED Number of (millions) Contracts 1,596.9 963.4 23.3 1111 2,583.6 1111 aaaa 2,215 2,089 52 1111 4,356 1111 aaaa 31 December 2005 111111111244 AED Number of (millions) Contracts 836.6 441.7 27.3 1111 1,305.6 1111 aaaa 910 934 3 1111 1,847 1111 aaaa
The majority of Tamweels customer financing is carried out through an Ijarah (or lease-based) finance product (including the Ijarah element of Istisnaa contracts) and Tamweels current emphasis is on the Flexible Ijarah. Tamweel has not entered into a significant number of fixed profit rate Ijarah contracts since early 2007 and, as illustrated in the table above, has not entered into a significant number of Murabaha contracts. Fixed profit rate products make up only a very small proportion of Tamweels financing products. Tamweel focuses on Ijarah financing products because the structure allows Tamweel to retain ownership of the property until the end of the financing term. Therefore, if there is a default, Tamweel would, as owner, be able to repossess the property. In an enforcement scenario, if the sale proceeds of the repossessed property do not satisfy the amounts due to Tamweel, the customer remains liable to Tamweel for any amount outstanding. If the sale proceeds exceed the amount due, Tamweel can, at its option, return the excess funds to the customer. Tamweel believes it has a well diversified profile of customers. As at 31 December 2007:
approximately 96 per cent. of Tamweels customers had monthly incomes between AED 5,000 to AED 500,000; approximately 73 per cent. of Tamweels customers were in the 25 to 45 age bracket; approximately 77 per cent. of Tamweels customers were salaried employees; on a weighted average basis, Tamweels customers, at the time of origination, had a debt/financing service ratio of less than or equal to 47 per cent.; and on a weighted average basis, financing provided by Tamweel had a finance to property value, at the time of origination, of 79 per cent.
As at 31 March 2008, the properties financed by Tamweel had valuations based on and as at the date of their valuation for financing purposes as follows: % of total portfolio 11112 Value of property financed AED 1 million or less AED 1 to 3 million AED 3 to 5 million AED 5 to 7 million More than AED 7 million 22.6 55.3 14.2 2.8 5.1
As at 31 December 2007, Tamweel estimates the regional origin of its customers to be as follows: Asia 29 per cent., Europe and North America 21 per cent., UAE and GCC 19 per cent., and others (principally the non-GCC MENA region) representing the remaining 31 per cent.
46
Tamweels Islamic financing and investing asset business is based on the four pillars of origination, underwriting, servicing and funding as illustrated in the diagram below:
Origination
Underwriting
Servicing
Funding
Multiple sales channels
Risk adjusted pricing model
Sound and stable core banking platform
Adequately capitalised
Product innovation
Rated assets and portfolio management
Workflow management
Securitisation
Wide networks and partnerships
Credit scoring
Servicing capability
Sukuk Programs
Credit risk framework
Operational risk management
CID
Bilateral facilities
Origination Tamweel originates new business through: (i) corporate sales; (ii) real estate agent referrals; (iii) branch walk-ins and customer calls; and (iv) developer campaigns. Corporate sales As at 31 December 2007, approximately 50 per cent. of Tamweels outstanding residential property financing was attributable to corporate sales, which are sales made to employees of approved corporate entities. In general, Tamweel, through its direct sales force, approaches appropriate UAE-based companies which are screened into one of four categories based on parameters such as their financial strength, their stability, the number of their employees and the size of anticipated business that can be generated. These companies agree appropriate arrangement fee and profit rate discounts with Tamweel and in return notify their employees about the availability of these preferred arrangements with Tamweel. The size of the pricing discount depends upon the category of the company concerned, being either Platinum, Gold, Silver or Bronze. Typically, the preferred arrangements are limited to pricing matters with all of Tamweels standard origination criteria remaining as applicable to its corporate sales as to its other sales types. Real estate agent referrals As at 31 December 2007, approximately 22 per cent. of Tamweels outstanding residential property financing was sourced through real estate agent referrals. Tamweel estimates that its non-exclusive real estate agent referral network numbers over 70 agents. Periodically Tamweel conducts surveys of real estate brokers to keep track of market price trends. The agents are rewarded based on the number of successful referrals received.
47
Branch walk-in and customer calls As at 31 December 2007, approximately 19 per cent. of Tamweels outstanding residential property financing was attributable to the call centre and branch walk-ins. Tamweels participation in various marketing campaigns and exhibitions drives branch walk-ins and call centre origination. Tamweel has four branches, two of which are located in Dubai with the other two in Sharjah and Abu Dhabi. The call centre fields enquiries from potential customers through Tamweels toll-free phone number. Call centre agents discuss Tamweels product offering and approval amounts and details of potential customers are forwarded to appropriate advisers for follow-up. Developer campaigns As at 31 December 2007, approximately 9 per cent. of Tamweels outstanding residential property financing originated from developer campaigns. Tamweel partners with approved developers seeking financial solutions for potential home owners. Developers typically apply to Tamweel to become an approved developer. A developers application is first screened by the sales and business development unit and subsequently forwarded to the credit department which reviews the application based on the developers financial statements, project quality, business potential, expected clientele, market reputation and credit risk. Following internal approval, the developer is added to Tamweels approved list. Tamweel assists the approved developer in organising its sales campaign whereby potential customers can examine the project, choose their property and apply for a home financing product from Tamweel. Tamweel has over 50 approved developers and provides home financing to approximately 142 development projects. Underwriting Tamweels underwriting criteria is documented in an internal policy document known as the Product Program Guidelines. These guidelines are updated periodically, reviewed annually, and approved by the Chief Executive Officer and Chief Operating Officer. Underwriting authority requires a minimum of dual sign-off within a specified hierarchy of six levels, which includes the Executive Committee (level 1), the Chief Executive Officer (level 2), the Chief Operating Officer (level 3), the Head of Credit (level 4), Manager and Senior Manager Credit (level 5) and Assistant Manager Credit and Senior Credit Officer (level 6). Tamweel requires detailed documentation and proof of income in order to approve credit facilities. Customer repayment of the financing advanced is made by standing order or post-dated cheques (in the UAE failure to honour a cheque is a criminal offence). The geographical location of properties financed by Tamweel is currently limited to Dubai, Sharjah and Abu Dhabi, with the vast majority of these in Dubai. Tamweel has slightly different financing criteria for salaried and for self-employed customers. In order to qualify for home finance, a customer must be at least 21 years old and must not be older than 60 (in the case of salaried employees) or 65 (in the case of self-employed individuals). Tamweels policy requires that the customer has lived in the UAE for at least one year. Tamweel also requires income levels of at least AED 10,000 per month, although this limit was reduced to AED 5,000 per month on a single project. Salaried employees must have been employed for a minimum of six months and self-employed individuals must have maintained a viable business for a minimum of three consecutive years. The maximum debt service ratio permitted is typically 55 per cent. However, salaried individuals working for approved corporate entities and earning AED 35,000 per month or more may be eligible for a maximum debt service ratio of 65 per cent. This ratio is determined taking into account the individuals fixed financial obligations (excluding revolving credit card facilities and regular living expenses). Tamweels maximum permitted finance to value ratio for underwritten standard products is 85 per cent. From time to time, Tamweel may offer promotions permitting finance to value ratios of up to 95 per cent. This ratio is calculated at the time of origination. Independent property valuations are conducted by independent surveyors as part of the underwriting process. In addition, Tamweel periodically conducts a comprehensive analysis of the UAE property market in terms of per-square-foot pricing and sets maximum limits on property values. The finance to value ratio and applicable profit rate is a function of, among other things:
the customers profile (i.e. salaried versus self-employed); the type of property being financed (i.e. villa versus apartment); the number of outstanding mortgage obligations which the customer has; and
48
the property category (i.e. mid-market versus high-end property).
Tamweel establishes customer profiles through information provided on applications, supporting documents and reference checks. In the case of individuals, Tamweel collects a copy of an applicants passport, visa, a processing fee cheque, a liability letter from the customers bankers (or a credit bureau reference in the case of non-residents) and income documentation, including six months bank statements, and salary certificates/slips (in the case of salaried employees). In the case of self-employed individuals, Tamweel collects trade licenses, tax return documentation, relevant corporate documentation such as articles of association, three years audited financial statements, six months business and six months personal bank statements, a liability letter from the bank and a bankers reference letter for non-residents. Tamweel has established various levels of approval authority for its underwriters. Periodic reports and audits are conducted to monitor finance application acceptance and rejection rates. Tamweel continually reviews the way in which it conducts its origination business in order to ensure that it remains up-to-date and cost effective in the market place. Tamweel also monitors the reasons for declining home finance applications. On average, Tamweel processes approximately 330 home finance applications per month and its average historic acceptance level is approximately 94 per cent. Generally, half of all rejections result from customer inability to meet Tamweels debt servicing thresholds. Amongst other reasons, Tamweel declines applications as result of invalid documentation, inadequate customer profiles, and requests for finance in unapproved properties. Tamweel is in the process of introducing an automated underwriting scorecard system. The automated scorecard is intended to improve Tamweels ability to screen home finance applications. The automated scorecard has been running in parallel (and intended to continue to run in parallel) with Tamweels traditional underwriting approval system since the first quarter of 2007. The automated scorecard is expected to enhance the current system, by adding a further level of control, in the second quarter of 2008. The introduction of the automated scorecard system is also expected to assist in further improving Tamweels application turnaround time. Servicing Following approval of a home finance application, Tamweel establishes the relevant facility and disburses the funds. The customer makes repayments according to an agreed repayment schedule. At the end of the finance term, Tamweel transfers the title for ownership of the property into the name of the customer. Tamweel also offers pre-approved finance facilities for customers for certain finance amounts on approved properties. The pre-approval is subject to, among other things, a satisfactory credit review by Tamweel. Tamweel collects rental payments through either post-dated cheques or standing orders. Post-dated cheques and standing orders are drawn by the customer in favour of Tamweel at the start of each 24month periodic payment cycle during the term of the financing. Towards the end of each periodic payment cycle, customers are contacted to supply further cheques or renew their standing orders. In the case of leases, the amount of rental payments includes fixed rentals, variable rentals and, if applicable, life takaful (insurance). If the variable rental amount of a Flexible Ijarah changes during a 24-month periodic payment cycle, the post-dated cheques and standing orders that have already been collected within the current 24-month cycle are not amended. The difference accrues in a customer current account and is collected or, at the option of Tamweel, reimbursed over the next 24-month period. Tamweel charges a prepayment fee for early settlement of up to a maximum of 4 per cent. of the outstanding adjusted finance amount. Collection Procedures and Delinquent Accounts Tamweel attempts to reduce the possibility of customer default by initially assessing the customers profile, conducting black-list checks and verifying the applicants income. At the portfolio level, Tamweel attempts to minimise portfolio default exposure by limiting multiple property financings and capping single customer exposure to AED 7 million in accordance with the credit policy. Tamweel proactively manages default prevention by being selective in the assets it underwrites and remaining committed to maintaining a robust delinquency management system, as described below. During the first 30 days in which payment is required, Tamweel demands payment by contacting the customer by telephone, SMS text message or e-mail and informing the customer that a post-dated cheque
49
has not cleared or that a standing instruction order has not been honoured. During the next 30 days, Tamweel contacts the customer by telephone at the place of residence or employment and obtains a promise from the customer to pay within a certain time period. If collection remains outstanding, during the next 30 day period Tamweel increases the frequency of calls with a view to obtaining payment. After a payment has been in default for more than 90 days, Tamweel sends a letter to the customer requesting payment and attempts to make personal contact with the customer at the place of residence or employment. Tamweel continues to keep in contact with the customer by telephone. After 120 days, Tamweel sends a second letter to the customer requesting payment and after 150 days a legal notice is sent. Accounts remaining outstanding after 210 days would become subject to legal action and repossession procedures would be commenced. As at 31 March 2008, Tamweel did not have any payments in excess of 180 days overdue and less than 2 per cent. of its payments were overdue. Tamweel has not yet had to resort to repossession proceedings. If it were to do so, it anticipates that it would seek to sell the property in the open market through reputable real estate agents. For properties with an estimated value of over AED 2 million, Tamweels policy is to engage an independent valuation firm before the sale. If the proceeds of such sale were insufficient to cover the amounts outstanding, Tamweel would pursue the customer for the balance. To the extent litigation was required, Tamweel would engage external legal advisers in worthwhile cases. Provisions and write-offs Tamweel suspends profit rate accrual recognition of accounts which are 90 days overdue. Tamweel reviews its outstanding residential property financing periodically to determine whether or not any provision should be made in relation to specific non-performing assets and, although it does not have any, its policy in respect of accounts of 180 days, one year and two years overdue would be to write down net principal owing by 20 per cent., 50 per cent. and 100 per cent., respectively. Net principal owing is the principal owing, less the estimated fair market value of the property. Tamweel has not conducted a write-off since it was established. In addition, Tamweel may also make a collective provision against particular facilities provided which, although not identified as requiring a specific provision, have a greater risk of default than when originally granted. Funding Tamweels funding strategy is to secure diversified and stable sources of funding. To this end, in mid 2007 Tamweel launched its first securitisation of assets which not only provided funding but also removed assets from the balance sheet. Although Tamweels intention is to pursue further securitisation transactions in the future, Tamweel does not anticipate launching any such transactions until market conditions improve. Accordingly, Tamweel has continued to concentrate on increasing its corporate deposit base and on securing alternative longer-term sources of financing in the capital markets. At its Extraordinary General Meeting held on 7 April 2008, Tamweel gained approval to issue an aggregate amount of AED 5.1 billion in Sukuk. In 2007, Tamweel applied to the UAE Central Bank to obtain a banking licence. The application is currently pending and there is no certainty as to when or if it might be approved. Tamweel anticipates that, should it gain a banking licence, this will allow it to further diversify its funding sources as well as grow and diversify its depositor base.
50
The following table provides a breakdown of Tamweels funding (equity, corporate deposits and bank facilities) as at 31 December in each of 2005, 2006 and 2007: As at 31 December 1111111111111113 2007 2006 2005 (AED millions) Equity Corporate deposits Bank facilities Total non-equity funding Total funding Proceeds of securitisation 2,046 1,674 3,949 5,623 1111 7,669 1111 aaaa 667 1,820 670 467 1,137 1111 2,957 1111 aaaa 508 305 700 1,005 1111 1,513 1111 aaaa
Tamweels treasury activities are primarily used to source diversified funding as well as to manage liquidity. Tamweel produces standard asset and liability committee reports that are discussed by the Asset Liability Committee (ALCO) on a monthly basis. The reports cover short- and medium-term funding requirements and overall portfolio profitability and asset-liability tenor mismatches. The reports are regularly reviewed by management and the ALCO also discusses current industry affairs, international interest rates and key funding and liquidity initiatives in the context of the reports. As it does not currently have a banking license, Tamweel is not permitted to accept retail deposits although it is permitted to accept corporate investment deposits. As a result, it experiences concentration in depositors, with approximately 10 to 15 depositors at any given time. Certain of these deposits are from related parties with the majority of the balance being derived from Government of Dubai related entities. Although primarily short-term in contractual nature in line with standard practice in the UAE, the depositors have in fact been long-term depositors in practice and, accordingly, Tamweel believes that its depositor base is stable. Following its incorporation, Tamweel was initially primarily funded by equity, with the balance made up of short-term bank facilities. Since then, Tamweel worked on increasing the proportion of corporate investment deposits and more recently has sought to diversify its funding base both by securitising assets and therefore removing them from the balance sheet and, reflecting recent changes in international securitisation market conditions, by entering into longer-term borrowings of the type described below. As at 31 December 2007, corporate investment deposits constituted approximately 30 per cent. of Tamweels funding base. A maturity breakdown of Tamweels assets and liabilities as at 31 December 2007 is set out in Note 32 to Tamweels financial statements for 2007 included on pages F-12 to F-49 of this Prospectus. In July 2007, Tamweel closed its inaugural USD 210 million residential mortgage backed securitisation. The securitisation was structured according to Islamic principles. The Class A securities were rated Aa2 by Moodys and accounted for USD 177.45 million of the pool. The Class B and Class C securities were rated Baa1 and Ba3 by Moodys, respectively, and accounted for USD 15.33 million and USD 9.87 million of the pool, respectively. The Class D securities were not rated and accounted for USD 7.35 million. The Class A, Class B, Class C and Class D securities are all due in 2037 and have allowed Tamweel to better match funding sources to long-term assets. Tamweel intends, subject to market conditions, to undertake periodic securitisation transactions in order to source additional funding and remove risk from its balance sheet. In late 2007, Tamweel announced, that it had signed an AED 1.7 billion financing agreement with Emirates Islamic Bank PJSC. The facility is Sharia compliant and will be used to fund Tamweels growth. In January 2008, Tamweel closed its USD 300 million exchangeable Sukuk issue. The Sukuk was issued by Tamweel Funding Limited, an offshore special purpose vehicle. Issue proceeds were used for general funding and expansion. The fixed profit rate on the Sukuk is 4.31 per cent., payable quarterly in arrear. The convertible Sukuk has an exchange price of USD 2.2711 which, at the relevant time, represented a premium in excess of 30 per cent. over the then previous three month volume weighted average market price of Tamweel shares. The Sukuk is scheduled to mature in 2013. In April 2008, Tamweel raised USD 235 million through an Islamic syndicated facility.
51
Properties held for sale and property development As part of its strategy of exploiting its knowledge of the UAE real estate market in its chosen territories, Tamweel from time to time invests in completed or partially completed developments or development properties with a view to making a profit by re-selling the purchased properties in the short-term. Whenever an appropriate investment opportunity is identified, a business case is prepared and presented to Tamweels Investment Committee for consideration. An important part of the business case is the availability of purchasers and the expected timeframe within which the property can be fully re-sold. Once approved by the Investment Committee, Tamweel commits funds and makes the relevant investment. A list of the investments made by Tamweel and their book values at 31 March 2008 is set out below: Book Value at 31 March 2008 111112 (AED millions) Description of Property Al Jadaf land Al Reef downtown apartments Business Bay Discovery Garden apartments International City apartments Jumeirah Village villas Surouh Project villas Tamweel Tower Total Tamweel has made the following investments in properties and property development: Al Jadaf land Tamweel signed an agreement in August 2007 to form a strategic partnership with Bonyan International Investment Group LLC, a leading real estate developer based in Dubai, for the purchase of land in the Al Jadaf area of Dubai for consideration of approximately AED 1.93 billion. The acquisition included a total of 135 plots and significantly increased the properties under Tamweels management. The agreement was also signed by Sama Dubai LLC which is the international real estate investment and development arm of Dubai Holding LLC. Sama Dubai LLC will be responsible for the master planning of the area. As at 31 March 2008, Tamweel had sold approximately 67 of these plots. Al Reef downtown apartments In the last quarter of 2007, Tamweel purchased seven buildings in Abu Dhabi containing 259 apartments for an aggregate price of approximately AED 228 million. Tamweel sold some units in the first quarter of 2008 and is aiming to sell the balance of these apartments by the second quarter of 2008. Business Bay In the first quarter of 2007, Tamweel bought a plot of land in Business Bay, Dubai. Tamweel is planning to construct a building comprising of commercial and office space. Discovery Gardens apartments In late 2007, Tamweel purchased a building located in Discovery Gardens, Dubai for an aggregate price of approximately AED 42 million. This building is retained for future capital appreciation and projected to be sold in the second quarter of 2008. 964.60 205.90 114.20 42.20 6.00 14.20 66.80 10.40 111112 1,424.30 111112 aaaaas
52
International City apartments In the second quarter of 2006, Tamweel purchased seven buildings located in International City, Dubai at an aggregate price of approximately AED 135.8 million. By March 2007, Tamweel had sold all of the residential units within the buildings for an aggregate price of approximately AED 121 million. Tamweel retained some retail space in the buildings with a view to selling it in the future. All of Tamweels residential units in International City were financed by Tamweel. Jumeirah Village villas In 2007 Tamweel bought 40 villas in Jumeirah Village for approximately AED 50 million and had sold the majority of these villas by 31 March 2008. Sorouh Project villas In late 2006, Tamweel bought 136 villas in the Sorouh Project located in Abu Dhabi for approximately AED 438 million. Tamweel had sold almost 85 per cent. of these villas as of 31 March 2008. Tamweel Tower In the fourth quarter of 2004, Tamweel sold the residential units of the Tamweel Tower for approximately AED 240 million. The approximate cost of the Tamweel Tower, the development of which is expected to be completed in late 2008, is AED 170 million. Tamweel has retained four floors which make up the commercial units of Tamweel Tower. Escrow Management Under the recently promulgated Law No. 8 of 2008, property developers in Dubai must place project receivables in escrow until predetermined development milestones are achieved. These escrow accounts are regulated by the Real Estate Regulatory Agency, a newly created government entity operating under the ambit of the Dubai Land Department. Tamweel was the first real estate financier to be appointed as an official escrow manager. As a provider of escrow management services, Tamweel offers real estate developers guidance in successfully completing all relevant Dubai Land Department processes, including amongst others: (i) account opening and balance management services; (ii) management of information systems in relation to account receivables and payables; and (iii) making timely payments to all stakeholders. In addition, Tamweel provides developers with the option to outsource management of their receivables through Tamweels own collection management service department, which provides developers with the ability to register their buyer units and audit the cash flow of their projects. As a newly established business area, Tamweel does not expect to generate significant revenues from this business in 2008. RISK MANAGEMENT The principal risks faced by Tamweel in its business operations are credit risk, liquidity risk and profit rate risk. Tamweels risk management structure and a detailed analysis of these and certain other risks faced by Tamweel are described in Note 32 to Tamweels financial statements for 2007 included on pages F-12 to F-49 of this Prospectus. In addition, Tamweels credit policies and procedures are described above under Businesses Islamic Financing and Investment Assets Underwriting and its liquidity management is discussed above under Businesses Islamic Financing and Investment Assets Funding. INTERNAL CONTROLS Tamweels internal audit, risk management and compliance activities are undertaken by an audit and risk management department that functionally reports to the Audit and Risk Management Committee and administratively to the Chief Executive Officer. The Audit and Risk Management Committees activities are governed by the Audit and Risk Management Committee Charter (which is strategic in nature) and an Audit and Risk Management Charter (which is operational in nature). Risk management staff also adhere to the Islamic Financial Services Boards guidelines and publications. Members of the audit and risk
53
management department are permitted unrestricted access to all of Tamweels records (either manual or electronic), its assets, physical properties and personnel to the extent they are relevant to its engagement. The Audit and Risk Management Committee plays an active role in ensuring that senior management establishes and maintains effective internal controls, reviewing the effectiveness of the internal audit function and ensuring that appropriate controls are in place for monitoring compliance with laws, regulations and supervisory requirements. The audit and risk management functions encompass the examination and evaluation of the adequacy and effectiveness of Tamweels corporate governance, risk management processes and all other internal controls. The audit and risk management department deploys a range of risk management methodologies to help management identify, assess and mitigate Tamweels risk exposures. All internal audit, risk management and compliance activities are independent and have no operational responsibility or authority over activities under review. Risk management practices are supported by internal controls, including the proper segregation of duties, application of the maker-checker concept, end-of-day checking, daily reconciliations and timely reporting of delinquencies. Tamweel governs its internal audit by the Institute of Internal Auditors (USA) Code of Ethics, Standards for the Professional Practice of Internal Auditing and Statement of Responsibilities. Tamweel benchmarks its internal audit activities to the Institute of Internal Auditors Global Audit Information Network. Tamweel produces an annual internal audit plan and internal audit procedures covering its day-to-day operations. Internal audits are conducted using a risk based system to calculate the frequency of each audit. A report covering key risks is presented to the Board every two months. Two full internal audit reports are produced every month. Outstanding issues are allocated a resolution timeline and are reviewed by the Board on a monthly basis. In terms of compliance, Tamweel believes that it has a strong corporate governance structure, see Management Corporate Governance. Tamweel has established know your customer and anti-money laundering policies although, as it is not permitted to accept retail deposits and does not accept cash repayment of any facility granted by it, to a large extent it relies on the banks through whom such payments are made to carry out these checks. In addition, Tamweel screens all new customers against UAE central bank blacklists and OFAC and other relevant check lists. INFORMATION TECHNOLOGY Tamweel employs FLEXCUBE as its primary information technology (IT) system. The FLEXCUBE product is provided by I-flex Solutions Limited (I-flex), an IT solutions provider which is now part of the Oracle group of companies. FLEXCUBE has been customised for Islamic mortgage products and entails flexible product architecture to cover a range of fixed or floating profit rates, charges and amortisation structures. Management of the FLEXCUBE product is outsourced to I-flex. Tamweel continually reviews its IT systems, software and processes with a view to ensuring that they are up to date and can efficiently satisfy all its business needs. In this connection, Tamweel has partnered with ECS Limited (ECS) to enhance its business review services for its operations and sale cycles by implementing new software from ULTIMUS. The impetus behind this IT upgrade is to support application turnaround approval time (which is currently targeted to less than 48-hours) and improve overall management information systems across Tamweel. Tamweel has also engaged Gartner Consultancy Services to review and endorse its overall IT strategy, including the network and system architecture, with a view to optimising the IT platform and services offered. Tamweel used HP and CISCO when designing and implementing the system infrastructure and backup platforms. Tamweel intends to continue to review its information technology systems and platforms on an annual basis. Tamweels current information technology system provides daily data back-up to an offsite location in Sharjah. Tamweel intends to implement a backup information technology centre outside of the UAE to support its international expansion plans.
54
LITIGATION During the ordinary course of its business, Tamweel is subject to legal proceedings and adjudications. As of the date of this Prospectus, there are no material legal proceedings involving Tamweel. REGULATION The main regulator of local financial institutions operating within the UAE is the UAE Central Bank, which regularly examines financial institutions. Tamweel underwent a UAE Central Bank examination in September 2006, with no adverse findings and is currently undergoing another UAE Central Bank examination. The UAE Central Bank requires regular submission of data including, but not limited to, deposited funds, Tamweels financing business, liquidity status, risk profile and anti-money laundering controls. As a significant proportion of the shares of Tamweel are indirectly held by the Government of Dubai, Tamweel is also subject to annual government audits by, amongst others, the Finance Audit Department of the Rulers Court, which reports directly to the Ruler of Dubai. As a company listed on the Dubai Financial Market, Tamweel is subject to the rules and regulations as enforced by the Emirates Securities and Commodities Authority. Tamweel also has a Sharia Supervisory Board which is responsible for auditing the Sharia compliance of Tamweels activities. RELATED PARTY TRANSACTIONS Related parties of Tamweel include major shareholders, directors and key management personnel and entities controlled, jointly controlled or significantly influenced by such parties. The pricing policies and terms of all related party transactions are approved by Tamweels management. All such transactions have been entered into on an arms length basis and details of the transactions are set out in Note 35 to Tamweels financial statements for 2007 included on pages F-12 to F-49 of this Prospectus.
55
MANAGEMENT In accordance with applicable UAE law and Tamweels by-laws, Tamweels management is currently comprised of a Board and a senior management team which are described below. Tamweels organisational structure is set out below:
Board of Directors
Audit & Risk Committee
Chief Executive Officer
Head of Audit & Risk Management
Chief Commercial Officer
Chief Operating Officer
Chief Financial & Support Officer
General Manager Escrow Management Services
Board of Directors The management of Tamweel is vested in a Board comprising eight members. The Board is appointed for a two-year renewable term and is required to meet at least six times per annum. The Board is the ultimate decision-making body of Tamweel and is comprised of the Chairman, the Vice Chairman and six other directors. The Board is supported by various standing committees including the Executive Committee, the Audit and Risk Management Committee, ALCO, the Remuneration Committee, the Information Technology Steering Committee and the Investments Committee, each as further described below. The current directors of the Board are: Directors 11112 H.E. Sheikh Khaled Bin Zayed Bin Saqr Al Nehayan Mr. Khaled Al Kamda Mr. Saad Abdul Razak Mr. Ahmed Butti Al Muhairi Mr. Ahmed Sultan Bin Sulayem Mr. Adel Al Shirawi Mr. Fahad Hamad Bin Fahad Al Muhairy Mr. Wasim Saifi Title 112 Chairman Vice Chairman Director Director Director Director Director Director
H.E. Sheikh Khaled Bin Zayed Bin Saqr Al Nehayan is Chairman of Tamweel as well as Salama (Islamic Arab Insurance Company), a provider of Sharia compliant insurance solutions across the globe. Sheikh Khaled established the Bin Zayed Group of Companies in 1988, a conglomerate of companies covering construction, real estate development, information technology, healthcare products, and building materials amongst others. Sheikh Khaled is also a member of the World Economic Forum and Chairman of the 56
Executive Committee of Dubai Council for Economic Affairs. Born in 1958, Sheikh Khaled completed his graduation in business administration from Boston University, and his PhD coursework in Finance from Michigan State University. Mr. Khalid Al Kamda is Vice Chairman at Tamweel. He also chairs Emirates Hotels and Resorts LLC and Dubai Express Freight Works, and is the Managing Director of DIB. Mr. Al Kamda started his career with Emirates Airlines in 1985 as an Information Technology Assistant Manager. In 1992, he was appointed Senior General Manager for all commercial activities of Emirates Airlines throughout the Gulf, Middle East, Africa, and the Commonwealth of Independent States (CIS). Mr. Al Kamda holds a Bachelors degree in electrical engineering from the Melbourne Institute of Technology in Florida, USA, and a Masters degree in business administration from the Cranfield School of Management in England. Mr. Saad Abdul Razak is a member of the Board and previously served as The Chief Executive Officer at DIB. Mr. Razak received the Sheikh Rashid award for academic excellence. He also serves as a board member at a number of leading UAE corporate entities such as Emirates Integrated Telecommunication Company (Du), Dubai World, Dubai Ports World, Al Burj Real Estate, Deyaar Real Estate Development, Millennium Capital, Al Islami Financial Services and DIB Pakistan Ltd. Mr. Ahmed Butti Al Muhairi is a member of the Board and is currently the Chief Executive Officer of Istithmar and director general of Dubai Customs. Upon completion of his Masters degree in science from Denver University in the United States, he was appointed assistant director general of Port Rashid Affairs by His Highness Sheikh Mohammed Bin Rashid Al Maktoum. Upon the creation of the Dubai Ports Authority, Mr. Al Muhairi was appointed assistant managing director for corporate affairs. Mr. Ahmed Sultan Bin Sulayem is the Executive Chairman of the Dubai Multi Commodities Centre (DMCC). He is also closely involved with the various initiatives of DMCC including the Dubai Gold and Commodities Exchange, the Dubai Diamond Exchange, the Dubai Tea Trading Centre and the Dubai Pearl Exchange. Mr. Ahmed was a Director at Asteco Property Management (LLC) and he holds a Bachelors degree in Business Administration from California State University in San Bernardino. Mr. Adel Al Shirawi is currently the Vice Chairman at Istithmar World. He served as Chief Executive Officer of Tamweel from July 2004 to February 2008. Prior to being appointed Chief Executive Officer of Tamweel, he was a member of the Board and served as an executive director and member of the board of directors for the Ports, Customs and Free Zone Corporation. Mr. Al Shirawi has also served as the secretary general for The Corporate Office Group (which includes Ports, Customs and Free Zone Corporation, Dubai Multi and Commodities Center, Tejari and Nakheel Properties). He is a member of the Dubai e-Government executive team. Mr. Al Shirawi holds a Masters degree in engineering from the University of Louisville, Kentucky, United States and has finished executive education programmes with Harvard Business School and London Business School. Mr. Fahad Hamad Bin Fahad Al Muhairy is a member of the Board. He is also a board member of several companies in a variety of sectors including real estate and financial services, including (but not limited to) Dubai Islamic Bank, Emirates Leasing Company and Millennium Capital Holdings. Mr. Al Muhairy has held the position of Chief Risk Officer at Dubai Islamic Bank since 2001. Prior to joining Dubai Islamic Bank, he served as a General Manager at AMLAK Finance and as a Senior Manager of Corporate Banking at Standard Chartered Bank. Mr. Al Muhairy is a Certified Risk Analyst holding a BBA in Finance from the University of Arkansas. Mr. Wasim Saifi is the Chief Executive Officer of Tamweel and was appointed in January 2008. Prior to his appointment, Mr. Saifi was the Executive Vice President and head of retail and business banking of DIB. Mr. Saifi has over 20 years of experience in international banking in different organisations such as Mashreqbank, American Express Bank and Standard Chartered Bank, including assignments in the Middle East and South Asia in areas covering corporate banking. Mr. Saifi holds a Masters in Business Administration from Rutgers University of U.S.A.
57
Senior Management The senior management team of Tamweel comprises five senior division heads reporting to the Chief Executive Officer. Details of the current senior management team are set out below: Senior Management 1111111111 Mr. Wasim Saifi Mr. Sanjay Sharma Mr. Abdulla Nasser Abdulla Mr. Gaurav Agarwal Mr. Kamal Tayara Mr. Reginald King Title 112 Chief Executive Officer Chief Operating Officer Chief Commercial Officer Chief Financial and Support Officer General Manager Escrow Management Services Head of Audit and Risk Management Age 11 50 46 43 34 37 54
Mr. Wasim Saifi is the Chief Executive Officer of Tamweel and was appointed in January 2008. Prior to his appointment, Mr. Saifi was the Executive Vice President and head of retail and business banking of DIB. Mr. Saifi has over 20 years of experience in international banking in different organisations such as Mashreqbank, American Express Bank and Standard Chartered Bank, including assignments in the Middle East and South Asia in areas covering corporate banking. Mr. Saifi holds a Masters in Business Administration from Rutgers University of U.S.A. Mr. Sanjay Sharma is a founding member of Tamweel and has been the Chief Operating Officer of Tamweel since December 2003. Mr. Sharma holds a Masters degree in Management (finance and marketing) from the Indian Institute of Management, Bangalore and a Bachelors degree in Technology (mechanical engineering) from the Indian Institute of Technology, Bombay. Prior to joining Tamweel, he spent five years with HSBC Bank plc and five years with Standard Chartered Bank. He has also worked in key management positions at Industrial Credit and Investment Company of India and Housing Development and Finance Corporation Bank. Mr. Abdulla Nasser Abdulla has been the Chief Commercial Officer of Tamweel since January 2007. Mr. Abdulla has over a decade of experience working for Emirates Airline, where he acted as a country manager for various countries in Asia and the Middle East and eventually acted as Vice-President of Commercial Sales for the UAE. He attended London Business School. Mr. Gaurav Agarwal has been the Chief Financial and Support Officer of Tamweel since April 2007. Prior to his appointment as Chief Financial and Support Officer, he served as Head of Credit and Asset Valuation for Tamweel. Prior to joining Tamweel in 2005, he was a senior manager in the corporate finance and business advisory group of Ernst & Young and was part of the steering committee which launched Tamweel in 2003. Mr. Agarwal holds an MBA in finance and is a Cost and Works Accountant and Chartered Financial Analyst. Mr. Kamal Tayara has been the General Manager Escrow Management Services at Tamweel since January 2008. He has varied experience in the financial services sector having worked with Merrill Lynch, Salomon Smith Barney, Al Arabiya News Channel and EFG Private Bank, Dubai. Mr. Tayara holds an MBA degree from INSEAD and a Bachelor of Engineering from the American University of Beirut. Mr. Reginald King has been the Head of Audit and Risk Management of Tamweel since March 2006. He holds a Masters degree in Business Administration from the University of Kent, England. He is a fellow at both the Institute of Financial Accountants, England and the Chartered Management Institute, England and is also an Associate of the Chartered Institute of Bankers, England. Mr. King has over 30 years of international banking experience and has worked with Standard Chartered Bank, Bankers Trust Company, Saudi Hollandi Bank, the UAE Central Bank and the Union National Bank. There are no conflicts of interest between the duties of the members of the Board and senior management team named above and their private interests or other duties. The business address of each of the members of the Board and senior management team named above is Business Avenue Building, Mezzanine Floor, P.O. Box 111555, Dubai, UAE.
58
Committees Executive Committee The Executive Committee of Tamweel performs the functions delegated by the Board when the board is not in session. The committee assists the Board in its oversight responsibilities. The Executive Committee consists of the Chief Executive Officer, the Chief Operating Officer, the Chief Commercial Officer and the Chief Financial and Support Officer and meets when required. Audit and Risk Management Committee The Audit and Risk Management Committee of Tamweel is independent and is responsible for overseeing corporate governance, internal audit, internal control, financial reporting and risk management of Tamweel. The committee comprises two members of the Board and the Head of Audit and Risk Management who, in turn, report to the full Board. The committee meets six times per year and the Chairman and Chief Executive Officer are generally invited to join committee meetings. Asset Liability Committee ALCO monitors the asset performance and financial position of Tamweel. ALCO is responsible for establishing risk management standards and methodologies, monitoring liquidity and alternative funding sources, reviewing market rate risk and regulatory capital levels and determining pricing parameters and Tamweels base profit rate (determined by reference to EIBOR). The committee also considers new initiatives and reviews funding plans. Members of ALCO include the Chief Executive Officer, Chief Operating Officer, Chief Financial & Support Officer, the Head of Investments and, as occasional observer, the Head of Risk Management. The Chief Executive Officer chairs the committee. The committee meets once per month and reports to the Board on a quarterly basis. Remuneration Committee The Remuneration Committee develops and reviews remuneration packages provided to employees including matters relating to salary, benefits and bonus. The committee conducts periodic reviews to determine appropriate remuneration for both management and employees. Information Technology Steering Committee The Information Technology Steering Committee determines Tamweels information technology infrastructure requirements and defines Tamweels information technology strategy. The committee approves proposals and manages the implementation of information technology systems. Investments Committee The Investments Committee determines Tamweels overall investment strategy and policy. It analyses and approves investment related proposals and reviews performance of investments according to previously set performance indicators. Members of the Investments Committee include the Chief Executive Officer, Chief Operating Officer, Chief Commercial Officer, Chief Financial & Support Officer and the Head of Investments and, as an occasional observer, the Head of Audit and Risk Management. Sharia Supervisory Board In compliance with Tamweels memorandum and articles of association, Tamweel has a Sharia Supervisory Board which oversees all areas of operation in order to ensure that Tamweels activities are in accordance with Sharia principles. Regular Sharia audits are performed on all of Tamweels activities by the Sharia Supervisory Board, which consists of the following members: Name 111 Professor Dr. Hussain Hamid Hassan Sheikh Dr. Mohammed Abdul Hakeim Zuair Sheikh Mohammed Abdul Razak Al Sedeiq Position 1111 Chairman General Secretary Member
59
Professor Dr. Hussain Hamid Hassan is Chairman of Tamweels Sharia Supervisory Board. He holds a PhD in the Faculty of Sharia, a Masters degree in Comparative Jurisprudence, a diploma in Comparative Law, a diploma in Sharia, a diploma in Private Law, an LLB and a Masters degree in Comparative Juries. He is the author of 21 books and over 400 articles on a variety of subjects including Islamic law, Islamic finance and Islamic economics. Sheikh Dr. Mohammed Abdul Hakeim Zuair is General Secretary of Tamweels Sharia Supervisory Board. He holds a PhD in Islamic Sharia, a Masters degree in Islamic Sharia, a diploma in Islamic Studies and a Bachelors degree of Management Science. He is the author of multiple Islamic banking publications. Sheikh Mohammed Abdul Razak Al Sedeiq is a member of Tamweels Sharia Supervisory Board. He holds a Masters degree in Comparative Fiqh, a diploma in Fiqh principles, a Masters degree in Fiqh, a Masters diploma from the Faculty of Sharia and Law and is registered to commence a PhD in comparative Fiqh. Corporate Governance The Board is committed to high standards of corporate governance and has established an internal policy which is aimed at ensuring good corporate governance in its business practices and activities. The policy covers, amongst other things, conflicts of interest, improper payments and gifts, insider trading, confidentiality and each employees responsibilities. Tamweel has appointed a compliance officer to monitor implementation and adherence to the policy. The policy applies to Tamweel, its Board, its officers and its employees. Each employee is required to sign the policy and to attend seminars on its content and application. The Audit and Risk Management Committee is charged by the Board with ensuring that the policy and other applicable policies will govern, without exception, all business activities of Tamweel. Employee ownership On 26 February 2006, Tamweel established an Employee Stock Ownership Plan under which Tamweel shares may be granted to eligible employees. The employee benefit plan is designed to:
foster a sense of ownership and sharing of economic prosperity of the organisation; promote key-employee retention; and help senior management focus on long-term strategic initiatives.
For eligible individuals, Tamweel shares are granted after an agreed period of service, which is typically three years. The restrictions attached to the granted shares lapse over such period in a uniform manner (i.e. 33 per cent. of the shares vest after the first year, 33 per cent. of the shares vest after the second year and the remaining 34 per cent. of the shares vest after the third year). The senior management and functional heads are eligible to receive shares of Tamweel, and there is a provision in the Employee Stock Ownership Plan to award shares of Tamweel to potentially high performers at any level. Employees As at 31 December 2007, Tamweel employed approximately 223 full-time employees. Employees of Tamweel regularly undergo internally organised skill development programmes aimed at ensuring they have all appropriate qualifications and improving their management and other personality-based skills. In addition, employees may attend a range of externally arranged courses to assist in their skills development. Tamweel is committed to the development of UAE citizens. As a result of its Emiratisation programme, the percentage of UAE citizens working at Tamweel is in excess of the regulatory requirement of 10 per cent. for the banking industry and was approximately 15 per cent. as at 31 December 2007. Tamweel is intending to increase this to at least 30 per cent. by the end of 2009. In pursuit of this goal, Tamweel creates awareness about its Emiratisation programme by participating in events such as the March 2008 National Career Exhibition, an initiative geared at recruiting UAE national graduates.
60
DESCRIPTION OF THE ISSUER
General Tamweel Sukuk Limited, a Cayman Islands exempted company with limited liability, was incorporated on 12 May 2008 under the Companies Law (2007 Revision) of the Cayman Islands with company registration number 210388. The Issuer has been established as a special purpose vehicle for the sole purpose of issuing the Certificates and entering into the transactions contemplated by the Transaction Documents. The registered office of the Issuer is at Maples Finance Limited, PO Box 1093, Queensgate House, Grand Cayman, KY1-1102, Cayman Islands. The authorised share capital of the Issuer is US$50,000 consisting of 50,000 ordinary shares of US$1.00 each, of which 250 shares have been issued. All of the issued shares (the Shares) are fully-paid and are held by Maples Finance Limited as share trustee (the Share Trustee) under the terms of a trust deed (the Trust Deed) dated 11 July 2008 under which the Share Trustee holds the Shares in trust until the Termination Date (as defined in the Trust Deed). Prior to the Termination Date, the trust is an accumulation trust, but the Share Trustee has the power to benefit the Certificateholders or qualified charities (as further described in the Trust Deed). It is not anticipated that any distribution will be made whilst any Certificate is outstanding. Following the Termination Date, the Share Trustee will wind up the trust and make a final distribution to charity. The Share Trustee has no other interest in, and derives no benefit (other than its fee for acting as Share Trustee) from, its holding of the Shares. Business of the Issuer The Issuer has no prior operating history or prior business and will not have any substantial liabilities other than in connection with the issue of the Certificates. The Certificates are the obligations of the Issuer alone and not the Share Trustee. The objects for which the Issuer is established are set out in clause 3 of its Memorandum of Association as registered on 12 May 2008. The objects are expressed to be unrestricted and therefore would include the issue of the Certificates, execution of Transaction Documents to which it is a party and any other agreement 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. Directors of the Issuer The Directors of the Issuer are as follows: Name: Guy Major Carlos Farjallah John Ackerley Principal Occupation: Senior Vice-President, Maples Finance Limited Senior Vice-President, Maples Finance Limited Senior Vice-President, Maples Finance Limited
The business address of each Director is PO Box 1093, Boundary Hall, Cricket Square, Grand Cayman, KY11102, Cayman Islands. Except as otherwise disclosed herein, there are no potential conflicts of interest between the private interests or other duties of the Directors listed above and their duties to the Issuer. Fiscal Year / Financial Statements / Auditors The fiscal years of the Issuer will end on 31 December of each year, beginning in 2008. Since the date of its incorporation, no financial statements of the Issuer have been prepared.
61
Other than as described herein, the Issuer does not have any loan, capital, borrowings or contingent liabilities and has not changed its equity capital. As at the Closing Date, Ernst & Young will be appointed as auditors of the Issuer. The Administrator Maples Finance Limited will act as administrator of the Issuer (in such capacity, the Issuer Administrator). The office of the Issuer Administrator will serve as the general business office of the Issuer. Through the office, and pursuant to the terms of the corporate services agreement executed between the Issuer and the Issuer Administrator (the Corporate Services Agreement), the Issuer Administrator will perform in the Cayman Islands various administrative functions on behalf of the Issuer, including the provision of registered office facilities to the Issuer and the provision of certain clerical, administrative and other services until termination of the Corporate Services Agreement. In consideration of the foregoing, the Issuer Administrator will receive various fees payable by the Issuer at rates agreed upon from time to time, plus expenses. The terms of the Corporate Services Agreement provide that the Issuer may terminate the appointment of the Issuer Administrator by giving 14 days notice to the Issuer Administrator at any time within 12 months of the happening of certain stated events, including any breach by the Issuer Administrator of its obligations under the Corporate Services Agreement. In addition, the Corporate Services Agreement provides that the Issuer Administrator shall be entitled to retire from its appointment by giving at least three months notice in writing. The Issuer Administrator will be subject to the overview of the Issuers Board of Directors. The Corporate Services Agreement may be terminated (other than as stated above) by either the Issuer or the Issuer Administrator giving the other party at least three months written notice. The Issuer Administrators principal office is PO Box 1093, Boundary Hall, Cricket Square, Grand Cayman, KY1-1102, Cayman Islands. The Directors of the Issuer are all employees or officers of the Issuer Administrator. The Issuer has no employees and is not expected to have any employees in the future.
62
OVERVIEW OF THE EMIRATE OF DUBAI The information set forth in this section is based on publicly available information. Tamweel accepts responsibility for accurately reproducing such information and as far as Tamweel is aware no facts have been omitted which would render such information misleading, but Tamweel accepts no further responsibility in respect of such information. Such information may be approximations or use rounded numbers. Introduction The UAE is a federation of seven emirates made up of Abu Dhabi, Dubai, Sharjah, Ajman, Umm Al Quwain, Fujairah and Ras Al Khaimah. The UAE has one of the most liberal business environments in the Middle East focused around economic liberalisation and promoting the role of the private sector. There are currently no corporate taxes in most business sectors, other than oil producing companies and foreign banks, no personal taxes and no exchange controls on the remittance of profits or repatriation of capital. Additionally, the UAE enjoys low tariffs and there are virtually no restrictions on foreign trade. Legal System There are three primary sources or types of law in the UAE: federal laws and decrees, local laws and Sharia (Islamic law). The secondary source of law is trade custom or practice. In the absence of federal legislation on areas specifically reserved to federal authority, the ruler or local government of each emirate will apply his or its own rules, regulations and practices. As is its right under the Constitution, Dubai, like the emirates of Ras Al Khaimah and Abu Dhabi, has elected to maintain its own court system, separate from that of the federation, and the courts of Dubai have sole jurisdiction to hear cases brought in Dubai. Although both federal and Dubai courts have a similar three-tier structure (Court of First Instance, Court of Appeal and Court of Cassation/Supreme Court), Dubai has retained complete autonomy over its courts in all matters, including the appointment of judges. In accordance with the Constitution, however, the Dubai courts will first apply federal law where this exists and, in its absence, the laws of Dubai. The Emirate of Dubai Dubai is the second largest emirate in the UAE, and is situated on the west coast of the UAE in the southwestern part of the Arabian Gulf. It covers an area of 3,885 square kilometres and lies approximately at longitude 55 degrees east and latitude 25 degrees north. Except for a tiny enclave in the Hajar Mountains at Hatta, the emirate of Dubai comprises one contiguous block of territory. The population of Dubai was estimated at 1,422,000 in 2006 in the 2006 census. Approximately 75 per cent. of the population is estimated to be non-UAE nationals, mainly drawn from the Indian subcontinent, Europe and other Arab countries. Approximately 75 per cent. of the population is estimated to be male and 25 per cent. female, reflecting the large male expatriate workforce. History Dubai started as a pearl and fishing village sometime in the first half of the eighteenth century. From the 1850s until the formation of the UAE in 1971, the British were the dominant influence in the region, and each emirate entered into a separate treaty with Great Britain. The emirates were then collectively known as the Trucial States or Sheikhdoms and the area was generally known as the Trucial Coast. The Sheikhdoms were each led by a sheikh, who usually belonged to the most influential tribe in that area. During the nineteenth century, Dubai, split by a 14 kilometre long creek, which led into a natural harbour, established itself as a flourishing centre for the import and re-export of merchandise. Another important economic activity at that time was pearling. Offshore from Dubai, the waters were rich with pearl beds. However, the Great Depression of the 1930s and the emergence of artificial pearls in 1929 dented Dubais prosperity. To counter the loss of economic activity from the decline in pearling, Dubai encouraged traders from India and Iran to establish their business in Dubai. Traders, attracted by Dubais liberal policies, especially its lower
63
taxes on foreigners compared to its neighbours, made it their base and Dubai quickly established itself as a leading centre for trade in gold bullion, textiles and consumer durables. In the 1930s and 1940s, oil was discovered in Kuwait, Qatar and Saudi Arabia - adding to that already found in Bahrain, Iran and Iraq. In 1966, oil was first discovered by the Dubai Petroleum Company at Fateh, which lies 92 kilometres off the coast of Dubai. As the primary regional trading hub, Dubai was well placed to capitalise on the upturn in Middle East business activity that came with oil exports. The Economy of Dubai Dubais strategic position at the crossroads between the East and West has helped establish it as a leading trading and services hub between the Far East and Europe. Dubais economy has growing banking, tourism and real estate sectors. However, with only a fraction of the fossil fuel reserves of other emirates, it has gradually reduced its dependency on oil and gas revenues. The Government of Dubai continues to invest heavily in the infrastructure of the emirate and its economic development. Much of the infrastructure that has been created in recent years, both public and private, is aimed at reinforcing Dubais strategic position at the East-West crossroads. Dubai has focused on developing itself as a centre for tourism, trade and commerce in order to diversify its economy away from oil. The emirate has successfully pioneered the use of free zones to spur economic activity and attract companies to its shores. These free zones offer 100 per cent. ownership to nonnationals, and serve as an attractive location for companies seeking to serve the growing markets of the Middle East, South Asia and Central Asia. Some free zones currently operating in Dubai include the Jebel Ali Free Zone (JAFZ), the Dubai Technology and Media Free Zone (DTMF) (previously called the Technology Electronic Commerce and Media Free Zone) and the Dubai International Financial Centre (DIFC). The DIFC is a financial free zone, aimed at attracting international commercial banks, investment banks, insurance companies and other financial institutions. DTMF consists of Dubai Internet City, Dubai Media City and Knowledge Village and aims to attract global companies that serve the technology, media and training industry. DTMFs tenants include prestigious international and regional IT and media companies such as Microsoft, IBM, Reuters, CNN, CNBC, and MBC, among others. JAFZ was established in 1980 with the specific purpose of facilitating investment in manufacturing and distribution businesses. Other free zones include the Dubai Multi Commodities Centre, the Airport Free Zone and Dubai Healthcare City. Upcoming free zones include Dubai Logistics City, Dubai Aid City, Dubai Biotech FZ, and Dubai Silicon Oasis, in addition to a number of others. The Government of Dubai All powers of government in Dubai are vested in the Ruler. The various departments and other arms of the Government and their respective executives operate under the powers and responsibilities specifically delegated to them from time to time by the Ruler. Laws of Dubai are passed by Decree of the Ruler. The present Ruler is H.H. General Sheikh Mohammed bin Rashid Al Maktoum. In Dubai, there are various local governing bodies charged with regulating and administering local law and policy, including the Dubai Department of Economic Development, Dubai Municipality and the Department of Civil Aviation.
64
OVERVIEW OF THE PROPERTY AND HOME FINANCE MARKET IN DUBAI The information set forth in this section is based on publicly available information. Tamweel accepts responsibility for accurately reproducing such information and as far as Tamweel is aware no facts have been omitted which would render such information misleading, but Tamweel accepts no further responsibility in respect of such information. Such information may be approximations or use rounded numbers. Property Ownership Until recently, legal title in real property in Dubai could be owned only by UAE nationals and, under certain conditions, by other GCC nationals. Law No (7) of 2006 concerning Real Property Registration in Dubai (the Property Law) was passed in March 2006 and published in the official gazette in April 2006 and provides that the right to own real property in Dubai shall be restricted to UAE and GCC nationals and companies owned in full by them, as well as to public joint stock companies, however, non-UAE nationals may be granted the right to freehold ownership or usufruct/leasehold rights over real property for a period not exceeding 99 years, in designated areas of Dubai. These areas have been defined pursuant to Regulation No (3) of 2006 (the Designated Areas). Historically, outright ownership of real property in Dubai has either been classified as freehold ownership or gifted/granted land obtained pursuant to a gift or grant from the Ruler of Dubai. Land Registration Under the Property Law, purchased properties in Dubai are required to be registered in the name of the purchaser and in accordance with the Regulation No. 3 of 2006. In the case of properties purchased from developers, applications for registration may be submitted by the initial purchaser at the office of the developer of the development in which the relevant property is situated, and completed by the developer at the Dubai Land Department. As this registration requirement applies retroactively to prior sales of properties, property developers have been faced with significant backlogs, as has the Dubai Land Department as it processes registrations of prior sales. Housing Market The Dubai property market has registered record growth in recent years. According to Dubai Municipality, the total number of residential units almost doubled to just over 205,500 in the 10 years ended 2005. (Source: Dubai Residential Real Estate Report - MEED July 2007) The value of the land transactions in the local market (i.e. outside the freehold areas) has increased at an average rate of 42 per cent. a year over the past six years. Approximately AED 160,000 million worth of land deals were done in the period of 2001 to 2006 with approximately 40 per cent. of the total being carried out in 2006. Approximately 48 per cent. of transactions were financed by mortgages and a further 35 per cent. were outright purchases (Source: Dubai Residential Real Estate Report - MEED July 2007). During the last two years, the supply of new housing in Dubai has generally fallen short of demand mainly due to delays in completion of the announced projects. However, some major developments such as Jumeirah Lake Towers and Discovery Gardens are nearing completion and will add to the supply. The demand for residential and commercial real estate in Dubai has grown as a result of general economic and population growth in Dubai. Tamweel believes market demand will be sustained in the medium term due to delays in supply, growth in free zone employment, advances in real estate and business legislation and a tax friendly environment. According to the United Arab Emirates Yearbook 2007 (published with the assistance and support of the UAE Ministry for Presidential Affairs and the National Media Council), investment in real estate in Dubai in mid-2006 stood at AED 165 billion, up from AED 11 billion in 2000. Between 2000 and 2005 the number of residential buildings in Dubai increased by more than 42 per cent., to 79,000 buildings from 56,000. This compares with a modest growth in the number of residential buildings of 6.7 per cent in the previous five
65
year period. The number of residential units, meanwhile, surged 63 per cent over the five years to about 238,000 at the end of 2005. Prices on the primary market tripled between 2002 to 2007, with prices of two and three bedroom villas increasing from an average AED 474,000 and AED 705,000, respectively to AED 1.7 million and AED 2.5 million, respectively in 2006. Similarly prices of apartments also increased significantly. The prices of a studio and three bedroom units increased from AED 194,000 and AED 1.475 million, respectively to AED 650,000 and AED 2.7 million, respectively between 2002 and 2007. The average per square ft. prices increased from AED 331 to AED 764 for villas and AED 533 to AED 1050 for apartments from 2002 to 2007 (Source for pricing information: Tamweel). The Home Finance Market The UAE housing finance sector is in its initial stages with Tamweel and Amlak being the leading housing finance providers followed by a number of banks that have, until recently, not been aggressively involved in the sector. Driven by growth in the Dubai property market, the volume of facilities extended has almost quadrupled between the end of 2004, when it was AED 2.9 billion, to reach AED 11.3 billion in September 2006 (Source: EFG-Hermes Report on UAE Housing Finance, January 2007). During 2006, introduction of the Property Law, a change in the customer mix more towards long-term ownership and the launch of several projects targeted at low to middle income consumers led to significant increases in housing finance facilities. Tamweel believes the variable rate of return payable by customers under residential property financings has been relatively stable, falling within the range of 7.5 per cent. to 8.5 per cent. per annum. The main market-wide contributing factors for this have been pricing competition among financiers and the broad range of financing products offered by financiers (although some financiers have also benefited from a low cost of funds). Tamweel and Amlak jointly hold over half the market share in the housing finance market. The rest of the market is held by a number of local and foreign banks that offer home finance in the UAE, including HSBC, Standard Chartered Bank, Abu Dhabi Commercial Bank, Dubai Islamic Bank, Lloyds Bank TSB, Barclays, Mashreqbank and National Bank of Dubai.
66
SUMMARY OF THE PRINCIPAL TRANSACTION DOCUMENTS The following is a summary of certain provisions of the 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 Issuer. The proceeds of the issue of the Certificates will be used by the Issuer to purchase Tamweels rights, title and interest in and to certain assets in accordance with the Purchase Agreement and the Istisna Agreement. Purchase Agreement Pursuant to the Purchase Agreement dated on or about the Closing Date and entered into between Tamweel, as Seller, and the Trustee, as Purchaser, the Trustee will purchase Tamweels rights, title and interest in and to a portfolio of leased assets as further described in the Purchase Agreement (the Original Leased Assets) at a price equal to no less than one third of the proceeds of the issue of the Certificates. Istisna Agreement Pursuant to the Istisna Agreement dated on or about the Closing Date and entered into between Tamweel, as Sani, and the Trustee, as Mustasni, the Trustee will purchase (by way of istisna) Tamweels rights, title and interest in and to a portfolio of istisna assets as further described in the Istisna Agreement (the Original Istisna Assets) at a price equal to the proceeds of the issue of the Certificates less the amount paid to Tamweel under the Purchase Agreement. Declaration of Trust Pursuant to the Declaration of Trust, the Issuer will declare that it will (in its capacities as Issuer and Trustee) hold the Trust Assets upon trust absolutely for the Certificateholders pro rata according to the face amount of Certificates held by each Certificateholder subject to and in accordance with the Declaration of Trust and the Conditions. The Issuer shall cause all income from the Trust Assets to be distributed, and all payments in respect of the Certificates to be made, in accordance with the Conditions. Trust Assets means the Trustees rights, title, interest and benefit, present and future, in, to and under the Portfolio Assets and each 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 (including insurance proceeds) of the foregoing. Portfolio Assets means the Original Leased Assets and the Original Istisna Assets and, from time to time, any assets replacing any of those assets in accordance with the Service Agency Agreement including Sharia compliant income generating assets. The Declaration of Trust provides that no payment of any amount whatsoever shall be made in respect of the Certificates by the Issuer or the Trustee or any of their respective agents except to the extent that funds are available therefor from the Trust Assets. Service Agency Agreement Pursuant to the Service Agency Agreement dated on or about the Closing Date, Tamweel will be appointed to act as Service Agent and, in that capacity, for so long as the Trustee has any right, title or other entitlement in or to the Portfolio Assets, to provide, inter alia, the following services to the Trustee with respect to the Portfolio Assets (the Services): (a) it shall hold, take delivery (including, upon completion, taking delivery of any istisna assets, at any time, comprising the Portfolio Assets) and manage (including delivering completed istisna assets to the lessees in accordance with applicable Istisna Transaction Documents) the Portfolio Assets for the benefit of the Trustee to generate profit and without any capital loss to the value of the Portfolio Assets being AED 1,100,000,000 as at the date of the Service Agency Agreement; it shall be entitled to substitute or exchange any Portfolio Assets in accordance with the Sale Undertaking;
(b)
67
(c)
it shall ensure that not less than 33 per cent. of the Portfolio Assets comprise assets which are the subject of rental generating ijara contracts (the Leased Portfolio Assets) and the realisable amount on any sale of such assets is not less than AED 366,666,667; it shall do all acts and things (including execution of such documents, issue of notices and commencement of any proceedings) that it considers reasonable and prudent to ensure the assumption and compliance by each Portfolio Transaction Party of its covenants, undertakings or other obligations under the Portfolio Transaction Documents to which the Service Agent is a party or for the benefit of the Service Agent in accordance with applicable law and the terms of the Portfolio Transaction Documents; it shall pay and discharge all Portfolio Liabilities; it shall collect all Portfolio Revenues, investigate non-payment of Portfolio Revenues and generally make reasonable efforts to collect or enforce the collection of such Portfolio Revenues on the Portfolio Transaction Documents as and when the same shall become due; to the extent that Portfolio Revenues (including any insurance proceeds) do not, in the opinion of the Service Agent, constitute Portfolio Profit, the Service Agent shall: (i) (ii) (iii) reinvest them in a manner to maintain compliance with paragraph (c) above and in assets to be constructed; reinvest them in acquiring assets, whether to be constructed or otherwise, which, when delivered, shall be leased to any person the Service Agent thinks fit; pending such re-investment, invest them in Sharia compliant income generating assets, in accordance with the guidance from the Service Agents Sharia Coordination Department to ensure timely payment of Portfolio Profit in accordance with the Service Agency Agreement;
(d)
(e) (f)
(g)
(h)
it shall discharge all obligations in respect of any of the Leased Portfolio Assets required by the Sharia to be assumed by a lessor, including insurance against total or partial loss and reinstatement of any assets which are the subject of a partial loss; it shall discharge all obligations under paragraph (h), the Service Agent may procure that those obligations are delegated to a Lease Transaction Party acting as service agent (in a manner and on such terms as are compliant with the Sharia) in accordance with any Lease Transaction Document such service agent is or will become a party to; it shall pay all Taxes (if any) charged, levied or claimed in respect of the Portfolio Assets by any relevant taxing or other authority; it shall obtain all necessary Authorisation in connection with any of the Portfolio Assets and its obligations under or in connection with the Service Agency Agreement; and it shall maintain the Portfolio Account and the Profit Reserve Account in accordance with, and comply with all its other obligations under, the Service Agency Agreement.
(i)
(j) (k) (l)
On the second Business Day prior to each Periodic Distribution Date (each, a Distribution Date), the Service Agent shall pay the Portfolio Profit to the Trustee and the Trustee will apply the same to pay the Periodic Distribution Amount due on the immediately succeeding Periodic Distribution Date. If the Portfolio Profit payable to the Trustee on a Distribution Date is greater than such Periodic Distribution Amount, that surplus Portfolio Profit will be used as a reserve which may be utilised for the payment of future Portfolio Profits and must be credited to the Profit Reserve Account accordingly. The Service Agent may at any time prior to the Maturity Date withdraw any amount standing to the credit of the Profit Reserve Account on account of the incentive fee payable to the Service Agent on the Maturity Date (each such withdrawal, an Advance Incentive Fee), subject to: (i) the Service Agent re-crediting to the Profit Reserve Account any Advance Incentive Fee on a Distribution Date if, and to the extent, the aggregate of (i) the Portfolio Profit and (ii) the amount then standing to the credit of the Profit Reserve Account is less than the relevant Periodic Distribution Amount;
68
(ii)
the amount so re-credited must be paid to the Trustee on the relevant Distribution Date in or towards payment of the relevant Periodic Distribution Amount.
If, notwithstanding such re-crediting of the Profit Reserve Account, there is insufficient funds to enable the Trustee to pay the Periodic Distribution Amount in full, the Service Agent may meet the shortfall through the provision of Sharia compliant financing and if this is not possible, for any reason, it may provide a loan on a qard basis to the Trustee to meet such shortfall which, in each case, shall be repayable solely from any future Portfolio Profit (without recourse to the Portfolio Assets or the Trustee) on a first priority basis. For the purpose of the foregoing: Distribution Period means the period from and including the Closing Date to, but excluding, the Distribution Date falling in October 2008 and thereafter each period from, and including, a Distribution Date to, but excluding, the next Distribution Date. Istisna Transaction Documents means any istisna agreement comprising the Portfolio Assets and any related documentation (including any forward ijara contract) entered into or to be entered into by any Istisna Transaction Party, including the grant of Security to secure the obligations of any Istisna Transaction Party. Istisna Transaction Party means (other than Tamweel) any person which is or will become a party to any Istisna Transaction Document. Lease Transaction Documents means any ijara contract comprising the Portfolio Assets and any related documentation entered into or to be entered into by any Lease Transaction Party, including the grant of Security to secure the obligations of any Lease Transaction Party. Lease Transaction Party means (other than Tamweel) any person which is or will become a party to any Lease Transaction Document. Portfolio Account means a UAE dirham denominated account in the books of the Service Agent for the purpose of recording the receipt and payment of all Portfolio Revenues and Portfolio Liabilities. Portfolio Liabilities means the amount of any claims, losses, costs and expenses properly incurred by the Service Agent in providing the Services. Portfolio Profit means, in respect of a Distribution Period, the amount by which Portfolio Revenues exceed the aggregate of (i) Portfolio Revenues required to be reinvested to maintain compliance with the Service Agency Agreement and (ii) Portfolio Liabilities. Portfolio Revenues means all rental, sale proceeds or other income or consideration, damages, insurance proceeds, compensation, or other sums received by the Service Agent in whatever currency in connection with the Portfolio Assets. Portfolio Transaction Documents means the Lease Transaction Documents and the Istisna Transaction Documents. Portfolio Transaction Parties means the Lease Transaction Parties and the Istisna Transaction Parties. Profit Reserve Account means a UAE dirham denominated account in the books of the Service Agent for the purpose of recording the crediting of any reserved Portfolio Profit and payment and, if applicable, re-crediting of any Advance Incentive Fee in accordance with the Service Agency Agreement. Security means any mortgage, charge, assignment by way of security, pledge, hypothecation, lien, right of set off, retention of title provision, trust or flawed asset arrangement (for the purpose of, or which has the effect of, granting security) or any other security interest of any kind whatsoever, or any agreement, whether conditional or otherwise, to create any of the same. Purchase Undertaking Under the Purchase Undertaking executed by Tamweel in favour of the Trustee on or about the Closing Date, Tamweel undertakes:
69
(i) (ii) (iii)
provided that a Dissolution Event has occurred and is continuing, at any time between the Closing Date and the Maturity Date (each as defined in the Conditions); provided that a Rating Downgrade Event has occurred, at any time between the Closing Date and the Maturity Date (each as defined in the Conditions); or on the Maturity Date;
to purchase, in each case, on the date falling two Business Days prior to the relevant Redemption Date all of the Trustees rights, title and interest in and to the Portfolio Assets at the Exercise Price specified in the Exercise Notice in each case in UAE dirham 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) and otherwise on the terms and subject to the conditions of the Purchase Undertaking. The Trustee (or the Delegate on its behalf, as the case may be) may exercise its option under the Purchase Undertaking as follows: (a) (b) in the case of (i) by delivering an Exercise Notice to the Obligor, such Dissolution Redemption Date being a minimum of 3 Business Days following the delivery of such Exercise Notice; in the case of (ii) by delivering an Exercise Notice to the Obligor specifying the Rating Downgrade Redemption Date, such Rating Downgrade Redemption Date being the next Periodic Distribution Date falling no earlier than 45 days after the date of such Exercise Notice; and in the case of (iii) by delivering an Exercise Notice to the Obligor no later than 3 Business Days and no earlier than 30 Business Days prior to the Maturity Date.
(c)
Promptly following Tamweels payment of the Exercise Price in accordance with the Purchase Undertaking, the sale of all of the Trustees rights, title and interest in and to the Portfolio Assets shall occur by Tamweel and the Trustee executing a Sale Agreement. If Tamweel fails to settle all or a part of the Exercise Price that is due in accordance with the Purchase Undertaking (the Outstanding Exercise Price), Tamweel shall pay 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 the Trustee must be donated (on behalf of Tamweel) to the Red Crescent Society, being the charity of Tamweels choice. Under the Purchase Undertaking, the following events constitute an Event of Default: (a) (b) Non-Payment: The Obligor fails to pay any amount under any Transaction Document when due, and such failure continues unremedied for a period of three Business Days; or Breach of Other Obligations: The Obligor does not perform or comply with any one or more of its other obligations in the Declaration of Trust which default is incapable of remedy or, if in the opinion of the Trustee capable of remedy, is not in the opinion of the Trustee remedied within 30 days after notice of such default shall have been given to the Obligor by the Trustee; or Cross-Default: (i) any other present or future indebtedness of the Obligor or any of its Subsidiaries for or in respect of moneys borrowed or raised becomes (or becomes capable of being declared) due and payable prior to its stated maturity by reason of any actual or potential default, event of default or the like (howsoever described), or any such indebtedness is not paid when due or, as the case may be, within any originally applicable grace period, or the Obligor or any of its Subsidiaries fails to pay when due any amount payable by it under any present or future guarantee for, or indemnity in respect of, any moneys borrowed or raised
(c)
(ii) (iii)
70
provided that the aggregate amount of the relevant indebtedness, guarantees and indemnities in respect of which one or more of the events mentioned above in this paragraph (c) have occurred equals or exceeds U.S.$10,000,000 (or its equivalent in any other currency or currencies); or (d) Enforcement Proceedings: any expropriation, attachment, sequestration, distress or execution made pursuant to a court order or judgment or arising by virtue of any law or regulation affects any asset or assets of the Obligor or any of its Material Subsidiaries having an aggregate value of at least U.S.$10,000,000 (or its equivalent in any other currency or currencies) and is not discharged within 30 days; or Security Enforced: any security over any assets of the Obligor or any of its Material Subsidiaries having an aggregate value of U.S.$10,000,000 (or its equivalent in any other currency or currencies) is enforced; or Insolvency: the Obligor or any of its Material Subsidiaries is (or is, or could be, deemed by law or a court to be) insolvent or bankrupt or unable to pay its debts, stops, suspends or threatens to stop or suspend payment of all or a material part of (or of a particular type of) its debts, proposes or makes any agreement for the deferral, rescheduling or other readjustment of all of (or all of a particular type of) its debts (or of any part which it will or might otherwise be unable to pay when due), proposes or makes a general assignment or an arrangement or composition with or for the benefit of the relevant creditors in respect of any of such debts or a moratorium is agreed or declared in respect of or affecting all or any part of (or of a particular type of) the debts of the Obligor or any of its Material Subsidiaries; or Winding-up: an order is made or an effective resolution passed for the winding-up or dissolution of the Obligor or any of its Material Subsidiaries, or the Obligor or any of its Material Subsidiaries ceases or threatens to cease to carry on all or substantially all of its business or operations, except for the purpose of and followed by a reconstruction, amalgamation, reorganisation, merger or consolidation (i) on terms approved by the Trustee or by an Extraordinary Resolution of the Certificateholders, or (ii) in the case of a Material Subsidiary, whereby the undertaking and assets of the Material Subsidiary are transferred to or otherwise vested in the Obligor or another of its Material Subsidiaries; or Authorisation and Consents: any action, condition or thing (including the obtaining or effecting of any necessary consent, approval, authorisation, exemption, filing, licence, order, recording or registration) at any time required to be taken, fulfilled or done in order (i) to enable the Obligor lawfully to enter into, exercise its rights and perform and comply with its obligations under the Transaction Documents to which it is a party and the Declaration of Trust, (ii) to ensure that those obligations are legally binding and enforceable and (iii) to make the Transaction Documents and the Declaration of Trust admissible in evidence in the courts of any relevant jurisdiction is not taken, fulfilled or done; or Illegality: it is or will become unlawful for the Obligor to perform or comply with any one or more of its obligations under any of the Transaction Documents to which it is a party; or Analogous Events: any event occurs which under the laws of any relevant jurisdiction has an analogous effect to any of the events referred to in paragraphs (f) and (g) above;
(e)
(f)
(g)
(h)
(i) (j)
provided that, except in the case of paragraph (a) and the following paragraphs in respect of the Obligor only: (c), (f) and (g), such events shall only be an Event of Default for the purposes of Condition 10 if the Trustee (or the Delegate on its behalf, as the case may be) has certified that, in its opinion, such event is materially prejudicial to the interests of the Certificateholders. Under the Purchase Undertaking, Tamweel will undertake that so long as any Certificates remains outstanding, it shall not, and shall ensure that none of its Material Subsidiaries will, create, or have outstanding, any Security Interest upon the whole or any part of its present or future undertaking, assets or revenues (including any uncalled capital) to secure any Relevant Indebtedness, or any guarantee or indemnity in respect of any Relevant Indebtedness, without at the same time or prior thereto creating according to the Certificates the same security as is created or subsisting to secure any such Relevant Indebtedness, guarantee or indemnity or such other security as shall be approved by an Extraordinary Resolution of the Certificateholders. For the purpose of the foregoing:
71
Material Subsidiary means at any time any Subsidiary of Tamweel: (a) whose (i) operating income (consolidated in the case of a Subsidiary which itself has Subsidiaries) or (ii) total net assets (consolidated in the case of a Subsidiary which itself has Subsidiaries) attributable to Tamweel represent not less than five per cent. of the consolidated operating income or, as the case may be, the consolidated total net assets of Tamweel and its Subsidiaries taken as a whole, all as calculated by reference to the latest financial statements (consolidated or, as the case may be, unconsolidated) of such Subsidiary and the then latest audited consolidated financial statements of Tamweel and its consolidated Subsidiaries, provided that in the case of a Subsidiary acquired after the end of the financial period to which the then latest audited consolidated financial statements of Tamweel relate for the purpose of applying each of the foregoing tests, the reference to Tamweels latest audited consolidated financial statements shall be deemed to be a reference to such financial statements as if such Subsidiary had been shown therein by reference to its then latest relevant financial statements, adjusted in such manner as may be appropriate to consolidate the latest audited financial statements (consolidated or, as the case may be, unconsolidated) of such Subsidiary in such financial statements; or to which is transferred all or substantially all of the assets and undertaking of a Subsidiary which immediately prior to such transfer is a Material Subsidiary.
(b)
A certificate of two directors of Tamweel that, in their opinion, a Subsidiary is or is not, or was or was not, at any particular time or during any particular period, a Material Subsidiary may be relied upon by the Trustee (and the Delegate) without further enquiry or evidence and, if relied upon by the Trustee (or the Delegate), shall (in the absence of manifest error) be conclusive and binding. Rating Downgrade Event means a downgrading of the rating of the Obligor by at least two notches at any one time between the Closing Date and the Maturity Date by either or both of Moodys Investors Services Inc. or Fitch Ratings Ltd., in each case, as a direct result of the Government of Dubai reducing its direct or indirect ownership of the issued share capital of the Obligor. For the purposes of this definition only, the relevant rating agencys sole determination of what constitutes the Government of Dubai shall be conclusive. Relevant Indebtedness means any indebtedness other than Securitisation Indebtedness which is in the form of, or represented or evidenced by, bonds, notes, debentures, loan stock, sukuk certificates or other securities which for the time being are, or are intended to be or capable of being, quoted, listed or dealt in or traded on any stock exchange or over-the-counter or other securities market. Securitisation means any securitisation of existing or future assets and/or revenues, provided that (i) any Security Interest given by Tamweel or any of its Subsidiaries in connection therewith is limited solely to the assets and/or revenues which are the subject of the securitisation, (ii) each party participating in such securitisation expressly agrees to limit its recourse to the assets and/or revenues so securitised, and (iii) there is no other recourse to Tamweel or any of its Subsidiaries in respect of any default by any person under the securitisation. Securitisation Indebtedness means any indebtedness incurred in connection with a Securitisation. Security Interest means any mortgage, charge, lien or other security securing any obligation of any party. Subsidiary means any entity whose financial statements at any time are required by law or in accordance with generally accepted accounting principles to be fully consolidated with those of Tamweel. Sale Undertaking The Trustee shall execute a Sale Undertaking to be dated on or about the Closing Date in favour of Tamweel. Early Redemption following a Tax Event Pursuant to the Sale Undertaking, the Trustee undertakes to sell to Tamweel all of its rights, title and interest in and to the Portfolio Assets on an as is basis (without any warranty express or implied as to the condition, fitness for purpose, suitability for use or otherwise and if any warranty is implied by law, it shall
72
be excluded to the full extent permitted by law) at the Exercise Price following Tamweel exercising its option under the Sale Undertaking. Subject to no Dissolution Event being continuing, Tamweel may exercise its option following the occurrence of a Tax Event (as defined in Condition 6.2) by delivering a Tax Event Exercise Notice to the Trustee by no earlier than 65, and no later than 45, days prior to the Tax Redemption Date to be specified in the Tax Event Exercise Notice. The Exercise Price shall be paid in full, without deduction, set-off or counterclaim into the Transaction Account two Business Days prior to the Tax Redemption Date. Promptly following such payment, the sale of all of the Trustees rights, title and interest in and to the Portfolio Assets shall occur by Tamweel and the Trustee executing a tax redemption sale agreement substantially in the form set out in the Sale Undertaking. Substitution of Portfolio Assets If Tamweel wants to purchase any of the Portfolio Assets then held by the Trustee which are the subject of an istisna agreement, a forward lease agreement or an ijara contract (the Original Portfolio Assets) by payment in kind with other assets (the Replacement Portfolio Assets), the Trustee undertakes pursuant to the Sale Undertaking to sell the same to Tamweel on an as is basis (without any warranty express or implied as to the 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), subject to the following conditions: (a) (b) no Dissolution Event has occurred and is continuing; Tamweel delivering a substitution exercise notice to the Trustee by no earlier than 60, and no later than 10, days prior to the date on which the substitution sale agreement to be executed by Tamweel and the Trustee substantially in the form set out in the Sale Undertaking is to be executed; the value (taking into account realisable profit from the Original Portfolio Assets) of the Original Portfolio Assets must be certified by Tamweel (in UAE dirhams) in the substitution exercise notice substantially in the form set out in the Sale Undertaking, and that certified value will be the UAE dirham purchase consideration (the Sale Price) for the Replacement Portfolio Assets; the Sale Price must be paid in kind by Tamweel transferring all its rights, title and interest in and to the Replacement Portfolio Assets subject to the value (taking into account realisable profit from the Replacement Portfolio Assets) of the Replacement Portfolio Assets being equal to the Sale Price and certified as such in the substitution exercise notice; and any costs and expenses for such transfer must be paid in full by Tamweel.
(c)
(d)
(e)
Agency Agreement Pursuant to the Agency Agreement to be dated the Closing Date, the Issuer will appoint: (a) (b) The Bank of New York Mellon, acting through its London Branch as principal paying agent, calculation agent and replacement agent in respect of the Certificates; and The Bank of New York (Luxembourg) S.A. as registrar and transfer agent in respect of the Certificates.
Costs Undertaking Pursuant to the Costs Undertaking to be dated the Closing Date and executed by Tamweel, Tamweel will agree to pay certain fees and expenses arising in connection with the issue of the Certificates and under the Transaction Documents.
73
TAXATION The following is a general description of certain tax considerations relating to the Certificates. It does not purport to be a complete analysis of all tax considerations relating to the Certificates. Prospective purchasers of Certificates should consult their tax advisers as to the consequences under the tax laws of the country of which they could be resident for any tax purposes and the tax laws of the UAE of acquiring, holding and disposing of Certificates and receiving payments of Redemption Amounts, Periodic Distribution Amounts and/or other amounts under the Certificates. This summary is based upon laws, decrees, rulings, administrative practice and judicial decisions as in effect on the date of this Prospectus and is subject to any change in law that may take effect after such date and which could have retroactive effect. UAE Taxation The following summary of the anticipated tax treatment in the UAE in relation to the payments on the Certificates is based on the taxation law and practice in force at the date of this Prospectus, and does not constitute legal or tax advice and prospective investors should be aware that the relevant fiscal rules and practice and their interpretation may change. Prospective investors should consult their own professional advisers on the implications of subscribing for, buying, holding, selling, redeeming or disposing of Certificates and the receipt of any payments in respect of any Distribution Amounts and distributions (whether or not on a winding-up) with respect to such Certificates under the laws of the jurisdictions in which they may be liable to taxation. There is currently in force in the Emirate of Dubai legislation establishing a general corporate taxation regime (the Dubai Income Tax Decree 1969 (as amended)). The regime is however not enforced save in respect of companies active in the hydrocarbon industry, some related service industries and branches of foreign banks operating in the United Arab Emirates. It is not known whether the legislation will or will not be enforced more generally or within other industry sectors in the future. Under current legislation, there is no requirement for withholding or deduction for or on account of UAE, or Dubai taxation in respect of payments of coupon or principal on debt securities (including of Periodic Distributions and Redemption Amounts due under the Certificates). The Constitution of the UAE specifically reserves to the Federal Government of the UAE the right to raise taxes on a federal basis for the purpose of funding its budget. It is not known whether this right will be exercised in the future. The UAE has entered into double taxation arrangements with a number of countries, but these are not extensive in number. Cayman Islands Taxation The Government of the Cayman Islands, will not, under existing legislation, impose any income, corporate or capital gains tax, estate duty, inheritance tax, gift tax or withholding tax upon the Issuer or the Certificateholders. The Cayman Islands are not party to any double taxation treaties. The Issuer has applied for and can expect to receive an undertaking from the Governor in Cabinet of the Cayman Islands that, in accordance with section 6 of the Tax Concessions Law (1999 Revision) of the Cayman Islands, for a period of 20 years from the date of the undertaking, no law which is enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or appreciations shall apply to the Issuer or its operations and, in addition, that no tax to be levied 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 the Issuer or (ii) by way of the withholding in whole or in part of a payment of dividend or other distribution of income or capital by the Issuer to its members or a payment of principal or interest or other sums due under a debenture or other obligation of the Issuer. EU Directive on the Taxation of Savings Income Under EC Council Directive 2003/48/EC on the taxation of savings income, each Member State has been required, since 1 July 2005, to provide to the tax authorities of another Member State details of payments of interest (or similar income) paid by a person within its jurisdiction to, or collected by such a person for, an individual resident in that other Member State. However, Austria, Belgium and Luxembourg are required
74
instead to apply a withholding system for a transitional period in relation to such payments by deducting amounts on account of tax at rates rising over time to 35 per cent. This transitional period commenced on 1 July 2005 and terminates 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 nonEU countries and territories, including Switzerland, have agreed to adopt similar measures (a withholding system in the case of Switzerland) with effect from the same date. 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 the Issuer in a Member State that is not required to withhold tax pursuant to the directive.
75
CLEARANCE AND SETTLEMENT The information set out below is subject to any change in or reinterpretation of the rules, regulations and procedures of Euroclear or Clearstream, Luxembourg currently in effect. The information in this section concerning such clearing systems has been obtained from sources that the Issuer believes to be reliable, but none of the Issuer, Tamweel nor the Joint Lead Managers takes any responsibility for the accuracy of this section. The Issuer and Tamweel only take responsibility for the correct extraction and reproduction of the information in this section. Investors wishing to use the facilities of any of the Clearing Systems are advised to confirm the continued applicability of the rules, regulations and procedures of the relevant Clearing System. None of the Issuer or Tamweel 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, ownership interests in the Certificates held through the facilities of any Clearing System or for maintaining, supervising or reviewing any records relating to such 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 worldwide 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. Ownership of bookentry 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 owner of bookentry 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 Global Certificate, holders of Certificates represented by those individual Certificates. The Principal Paying Agent will be responsible for ensuring that payments received by it from the Issuer for holders of book-entry interests in the Global Certificate holding through Euroclear and Clearstream, Luxembourg are credited to Euroclear or Clearstream, Luxembourg, as the case may be. The Issuer will not impose any fees in respect of holding the Global Certificate; however, holders of bookentry 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
76
settlement procedures applicable to conventional Eurobonds. Book-entry interests in the Global Certificate will be credited to Euroclear and Clearstream, Luxembourg participants securities clearance accounts on the Closing Date against payment (for 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 purchasers and sellers accounts are located to ensure that settlement can be made on the desired value date. Trading between Euroclear and/or Clearstream, Luxembourg participants Secondary market trading between Euroclear participants and/or Clearstream, Luxembourg participants will be settled using the procedures applicable to conventional Eurobonds in same-day funds. General Neither of Euroclear and Clearstream, Luxembourg is under any obligation to perform or continue to perform the procedures referred to above, and such procedures may be discontinued at any time. None of the Issuer, the Trustee, Tamweel or any of their agents will have any responsibility for the performance by Euroclear or Clearstream, Luxembourg or their respective participants of their respective obligations under the rules and procedures governing their operations or the arrangements referred to above.
77
SUBSCRIPTION AND SALE Badr Al Islami, Islamic Banking Division of Mashreqbank psc, Dubai Islamic Bank PJSC and Standard Chartered Bank (the Relevant Joint Lead Managers) have, pursuant to a subscription agreement dated 16 July 2008 (the Subscription Agreement) made between the Issuer, Tamweel and the Joint Lead Managers, jointly and severally agreed, subject to the satisfaction of certain conditions set forth therein to procure subscribers for or, failing which, subscribe and pay for the Certificates at the issue price of 100 per cent. of the face amount of the Certificates. Pursuant to the Subscription Agreement, Tamweel has agreed to pay certain commissions and expenses to the Relevant Joint Lead Managers in respect of their subscription of the Certificates and to reimburse the Relevant Joint Lead Managers for certain of their 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, subject to certain exceptions, may not be offered or sold within the United States. The Certificates are being offered and sold outside of the United States in reliance on Regulation S. In addition, until 40 days after commencement of the offering of the Certificates, an offer or sale of the Certificates within the United States by any dealer (whether or not participating in the Offering) may violate the registration requirements of the Securities Act. United Kingdom Each of the Joint Lead Managers has represented and agreed that: (a) it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement in connection with the Certificates to persons to whom such an invitation or inducement can lawfully be communicated or caused to be communicated under applicable United Kingdom law (including section 21 and section 238 of the FSMA ); and 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.
(b)
Cayman Islands Each of the Joint Lead Managers has represented and agreed that no offer or invitation to subscribe for Certificates has been made or will be made to the public of the Cayman Islands. United Arab Emirates (excluding the Dubai International Financial Centre) Each of the Joint Lead Managers has acknowledged and agreed that the Certificates have not been and will not be publicly offered, sold or 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 to the public of securities. Dubai International Financial Centre Each of the Joint Lead Managers has represented and agreed that it has not offered and will not offer the Certificates to any person in the Dubai International Financial Centre unless such offer is (a) deemed to be an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (the Rules); and (b) made only to Qualified Investors (as defined in the Rules). Bahrain Each of the Joint Lead Managers 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.
78
Kuwait Each of the Joint Lead Managers 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 of the Joint Lead Managers has represented and warranted that the Certificates are only intended to be distributed to persons who are not Retail Customers (as such term is defined in the QFC Regulatory Authority Interpretation and Application Rulebook, Glossary of Defined Terms). Singapore Each of the Joint Lead Managers has acknowledged that this Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each of the Joint Lead Managers has represented and agreed that it has not offered or sold any Certificates or caused such Certificates to be made the subject of an invitation for subscription or purchase and will not offer or sell any Certificates or cause such Certificates to be made the subject of an invitation for subscription or purchase, and has not circulated or distributed, 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 such Certificates, whether directly or indirectly, to persons in Singapore other than (a) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (the SFA), (b) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1)(A), and in accordance with the conditions specified in Section 275 of, the SFA, or (c) otherwise pursuant to, and in accordance with the conditions, of any other applicable provision of the SFA. Hong Kong Each of the Joint Lead Managers has represented, warranted and agreed that: (a) it has not offered or sold and will not offer or sell in Hong Kong, by means of any document, any Certificates other than (i) to professional investors as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (ii) in other circumstances which do not result in the document being a prospectus as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance; and 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 read by, the public in Hong Kong (except if permitted to do so under the Securities 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 as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
(b)
Malaysia Each of the Joint Lead Managers has acknowledged and agreed that the offer or issue of the Certificates in Malaysia can only be made to investors in the manner specified in Schedules 6 or 7 and 9 of the Capital Markets and Services Act 2007 (e.g. unit trust schemes, holders of a Capital Markets Services Licence (CMSL) who carry on the business of dealing in securities, closed-end funds approved by the Securities Commission of Malaysia, holders of a CMSL who carry on the business of fund management, licensed financial institutions under the Banking and Financial Institutions Act 1989 or licensed Islamic banks under the Islamic Banking Act 1983, licensed offshore banks under the Offshore Banking Act 1990, insurance companies registered under the Insurance Act 1996, corporations with total net assets exceeding ten millions Malaysian ringgit or its equivalent in foreign currencies based on the last audited accounts, statutory bodies established by an Act of Parliament of Malaysia or an enactment of any state in Malaysia
79
and pension funds approved by the Director General of Inland Revenue under section 150 of the Income Tax Act 1967). General No action has been or will be taken in any jurisdiction by the Joint Lead Managers, the Issuer or Tamweel 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 of the Joint Lead Managers has undertaken that it 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. None of the Issuer or Tamweel will have any responsibility for, and the Joint Lead Managers will obtain any consent, approval or permission required by it 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.
80
Level: 5 From: 5 Wednesday, July 16, 2008 4:03 pm mac5 3989 Section 07 : 3989 Section 07
GENERAL INFORMATION (1) (2) (3) Application has been made for the Certificates to be listed on the Dubai International Financial Exchange. Listing is expected to be granted on or around 30 July 2008. The issue of the Certificates has been duly authorised by a written resolution of the Board of Directors of the Issuer on 14 July 2008. Tamweel has obtained all necessary consents, approvals and authorisations in connection with the entry into of the Transaction Documents to which it is a party. The entry into by Tamweel of the Transaction Documents to which it is a party was duly authorised by a resolution of the board of directors of Tamweel on 5 June 2008. The Certificates have been accepted for clearance through Euroclear and Clearstream, Luxembourg which are entities in charge of keeping records. The ISIN for the Certificates is XS0378312630. The Common Code for the Certificates is 037831263. Each Certificate will bear the following legend: No offer of the Certificates may be made to any person in the Dubai International Financial Centre unless such offer is (a) deemed to be an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (the Rules) and (b) made to Qualified Investors as defined in the Rules. Persons into whose possession this Certificate may come must inform themselves about the nature of this Certificate as a restricted security, and observe any applicable restrictions in any relevant jurisdiction on the offering, purchase and sale of the Certificates. (6) Since: (a) 31 March 2008 (the last day of the financial period in respect of which the most recent unaudited interim financial statements of Tamweel have been prepared), there has been no significant change in the financial or trading position of Tamweel; 31 December 2007 (the last day of the financial period in respect of which the most recent audited financial statements of Tamweel have been prepared), there has been no material adverse change in the financial position or prospects of Tamweel; and the date of its incorporation, there has been no significant change in the financial or trading position of the Issuer and no material adverse change in the financial position or prospects of the Issuer.
(4)
(5)
(b)
(c)
(7)
The Issuer is not and has not been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which the Issuer is aware) during the 12 months preceding the date of this Prospectus which may have or have had in the recent past significant effects on the financial position or profitability of the Issuer. Tamweel is not and has not been involved in any governmental, legal or arbitration proceedings (including any such proceedings which are pending or threatened of which Tamweel 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 Tamweel. The first financial year of the Issuer will end on 31 December 2008. The Issuer has no subsidiaries. For so long as any of the Certificates remains outstanding, copies (and English translations where the documents in question are not in English) of the following documents will be available for inspection during normal business hours on any weekday (excluding Saturdays, Sundays and public holidays) from the registered office of the Issuer: (a) (b) the constitutional documents of the Issuer; the most recently publicly available audited financial statements of the Issuer (if any);
(8)
(9) (10)
81
(c)
the most recently publicly available audited financial statements of Tamweel for the years ended 31 December 2007, 31 December 2006 and 31 December 2005 and the respective auditors report thereon; the most recently publicly available interim financial statements of Tamweel for the 3 months ended 31 March 2008; the Transaction Documents; the pronouncement dated on or before the Closing Date and issued by Tamweels Fatwa & Sharia Supervisory Board; and this Prospectus.
(d) (e) (f) (g)
This Prospectus will be published on the website of the DIFX at www.difx.ae. (11) The auditors of Tamweel are Ernst & Young, Dubai, independent auditors, who have audited the consolidated financial statements of Tamweel for the three years ended 31 December 2007 as stated in the auditors reports set out in this Prospectus. The auditors of Tamweel have no material interest in Tamweel. The auditors of the Issuer are Ernst & Young. The Issuer has not prepared any financial statements to date. The auditors of the Issuer have no material interest in the Issuer.
(12)
82
APPENDIX FINANCIAL INFORMATION Unaudited consolidated financial statements of Tamweel for the 3 months ended 31 March 2008............................................................................................................ Auditors report and consolidated financial statements of Tamweel for the period ended 31 December 2007...................................................................................................... Auditors report and consolidated financial statements of Tamweel for the period ended 31 December 2006 ................................................................................................................ Auditors report and consolidated financial statements of Tamweel for the period ended 31 December 2005 ................................................................................................................
F-1 F-12 F-50 F-76
83
Level: 5 From: 5 Wednesday, July 16, 2008 01:49 mac8 3989 Section 08a : 3989 Section 08a
Tamweel PJSC and its subsidiaries

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
31 MARCH 2008 (UNAUDITED)
F-1
REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS TO THE BOARD OF DIRECTORS OF TAMWEEL PJSC
Introduction We have reviewed the accompanying interim condensed consolidated financial statements of Tamweel PJSC and its subsidiaries (the Group) as of 31 March 2008, comprising of the interim consolidated balance sheet as at 31 March 2008 and the related interim consolidated statements of income, changes in equity and cash flow for the three-month period then ended, and explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with International Accounting Standard 34 Interim Financial Reporting (IAS 34). Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review. Scope of Review We conducted our review in accordance with International Standard on Review Engagements 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity. A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements are not prepared, in all material respects, in accordance with IAS 34.
ERNST & YOUNG Signed by Naushad Anwar Partner Registration No. 489
16 April 2008
F-2

CONSOLIDATED INCOME STATEMENT
Period ended 31 March 2008 (Unaudited)
Three months ended 31 March 2008 31 March 2007 AED000 AED000 139,513 29,601 155,866 736 325,716 (59,224) 266,492 (90,145) 176,347 61,232 8,200 17,577 4,566 91,575 (19,600) 71,975 (21,506) 50,469
Note
Income from Islamic financing and investing assets Fees, commission and other income Income from sale of properties held for sale Income from sale of development property, net
OPERATING INCOME
General and administrative expenses

PROFIT BEFORE DEPOSITORS SHARE OF PROFIT
Depositors share of profit

PROFIT FOR THE PERIOD
Earnings per share: Basic earnings per share (AED) 3 0.18 0.05
Diluted earnings per share (AED)
0.17
0.05
The attached notes 1 to 6 form part of these interim condensed consolidated financial statements.
F-3

CONSOLIDATED BALANCE SHEET
At 31 March 2008
31 March 2008 AED000 (Unaudited)
ASSETS
31 December 2007 AED000 (Audited) 189,761 647,055 2,308,694 45,301 70,338 5,216,539 36,040 8,513,728
Bank balances and cash Advances, prepayments and other receivables Properties held for sale Investment properties Other investments Islamic financing and investing assets Property and equipment
TOTAL ASSETS
778,291 634,632 1,424,275 45,301 66,753 6,635,280 42,241 9,626,773
LIABILITIES AND EQUITY
Liabilities Zakat payable Accounts payable, accruals and other liabilities Financing obligations Total liabilities Equity Share capital Employees benefit plan Statutory reserve General reserve Special reserve Cumulative changes in fair value Convertible bonds equity component Retained earnings Proposed dividends Total equity
TOTAL LIABILITIES AND EQUITY
32,129 792,059 6,736,202 7,560,390
27,682 808,749 5,631,329 6,467,760
1,000,000 (9,577) 136,452 480,124 52,290 413 69,534 337,147 2,066,383 9,626,773
1,000,000 (9,577) 136,452 480,124 52,290 365 168,314 218,000 2,045,968 8,513,728
____________________ Chief Executive Officer 16 April 2008
WASIM SAIFI
KHALID BIN ZAYED

_____________________ Chairman 16 April 2008
F-4

CONSOLIDATED CASH FLOW STATEMENT
Three months ended 31 March 2008 31 March2007 AED000 AED000
OPERATING ACTIVITIES
Profit for the period Adjustments for: Depreciation Amoritsation of deferred cost Provision for employees benefits Provision against Islamic financing and investing assets Changes in fair value of investment properties Depositors share of profit
176,347 811 2,162 937 6,255 90,145 276,657
50,469 730 158 (2,239) 21,506 70,624 (430,581) 486,475 (149,078) (1,119)(134,788) 125,834 (32,633) (10,332) (153) (43,118)
Working capital changes: Islamic financing and investing assets Financing obligations Properties held for sale Trading investments Advances, prepayments and other receivables Accounts payable, accruals and other liabilities Cash used in operations Depositors share of profit paid Zakat paid Employees benefits paid Net cash used in operating activities
(1,424,996) 84,093 884,419 3,633 10,262 (243,671) (409,603) (81,551) (2,674) (194) (494,022)
INVESTING ACTIVITY
Purchase of property and equipment Cash used in investing activity

FINANCING ACTIVITIES
(7,012) (7,012)
(2,181) (2,181)
Proceeds from issue of convertible bonds Directors fee Cash from financing activities
1,090,314 (750) 1,089,564
Increase / (decrease) in cash and cash equivalents Cash and cash equivalents at 1 January
CASH AND CASH EQUIVALENTS AT 31 MARCH
588,530 189,761 778,291
(45,299) 380,181 334,882
F-5
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Share capital AED 000 1,000,000 38 (11,100) 91,305 435,000 25,837 208 78,329 200,000 AED000 AED000 AED000 AED000 AED000 AED000 AED000 AED000 Employees benefit plan Statutory reserve General reserve Special reserve Cumulative Convertible changes in fair bonds value equity component Retained earnings Proposed dividends Total AED000 1,819,579 38
Balance at 1 January 2007
Gain on available-for-sale investments recognised directly in equity
Total income for the period recognised directly in equity 1,000,000 1,000,000 1,000,000 (9,577) 136,452 480,124 52,290 413 48 (9,577) 136,452 480,124 52,290 365 48 48 (11,100) 91,305 435,000 30,143 246 69,534 69,534 4,306 38 38 -
38 50,469
Profit for the period
50,469 50,469 (4,306) (375) 124,117 168,314 176,347 176,347 (750) (7,121) 357 337,147
Total income for the period
(200,000) 218,000 (218,000) -
50,507 (200,000) (375) 1,669,711 2,045,968 48 48 176,347 176,395 (218,000) (750) (7,121) 69,534 357 2,066,383
Transfer to special reserve
Dividends approved
Directors fees
F-6
Balance at 31 March 2007
Total income for the period recognised directly in equity
Dividends approved
Directors fees
Zakat provision for 2007
Convertible bonds equity component
Cost of vested shares under employees benefit plan
Balance at 31 March 2008
Tamweel PJSC and its subsidiaries NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS At 31 March 2008 (Unaudited)
1 THE COMPANY AND ITS OPERATIONS
Tamweel PJSC (the Company) was registered on 3 June 2006 as a Public Joint Stock Company in accordance with UAE Federal Law No (8) of 1984, as amended. The share capital of the Company comprises 1,000,000,000 shares of AED 1 each. Previously, the Company was operating as Tamweel LLC with a paid up share capital of AED 450 million (450,000 shares of AED 1,000 each). The Company is licensed by the UAE Central Bank as a finance company and is primarily engaged in Islamic Shariaa compliant financing and investment activities such as Ijara, Murabaha, Istisnaa etc. The activities of the Group are conducted in accordance with Islamic Shariaa, which prohibits usury, and within the provisions of its Articles and Memorandum of Association. The Group is also engaged in the business of property development and trading. During the period, the Group has obtained the license from Real Estate Regulatory Authority, Dubai, United Arab Emirates to start the Escrow Management Services operations and consequently, the Group started those operations during the current period. The head office of the Group is located at Business Avenue Building, Emirate of Dubai, UAE. The Group also has one branch each in the Emirates of Dubai, Abu Dhabi and Sharjah. The Group consists of Tamweel PJSC (the Parent Company) and its following subsidiaries registered up to 31 March 2008 Subsidiaries Beneficial ownership 100% Principal activity Country of incorporation Egypt
Tamweel Egypt for Real Estate Finance
Sharia compliant financing and investing activities Holding Company
Tamleek Egypt Limited
100%
Jebel Ali Free Zone Dubai, UAE
Tahfeez Egypt Limited
100%
Holding Company
Jebel Ali Free Zone Dubai, UAE
The above subsidiaries have yet to commence their commercial operations. 2 ACCOUNTING POLICIES
The interim condensed consolidated financial statements of the Group are prepared in accordance with International Accounting Standard 34, Interim Financial Reporting. The accounting policies used in the preparation of the interim condensed consolidated financial statements are consistent with those used in the preparation of the annual financial statements for the year ended 31 December 2007 except for the following new policies which were adopted by the Group on consolidation of the subsidiaries and issuance of convertible Sukuk bonds during the period: Consolidation The consolidated financial statements comprise the financial statements of Tamweel PJSC (the Company) and its Subsidiaries (together the Group). The financial statements of the subsidiaries are prepared for the same reporting period as the Parent Company, using consistent accounting policies. All intra-group balances, transactions, income and expenses and profits and losses resulting from intra-group transactions that are recognised in assets, are eliminated in full. Subsidiaries are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control ceases.
F-7
2 ACCOUNTING POLICIES - continued Convertible Sukuk bonds Convertible Sukuk bonds that can be settled at the option of the issuer are recorded as compound financial instrument. The equity component of the convertible bonds is calculated as the excess of issue proceeds over the present value of the future profit and principal payments, discounted at the market rate of profit applicable to similar liabilities that do not have a conversion option. The interim condensed consolidated financial statements do not contain all information and disclosures required for full financial statements prepared in accordance with International Financial Reporting Standards, and should be read in conjunction with the Groups annual financial statements as at 31 December 2007. In addition, results for the 3 months ended 31 March 2008 are not necessarily indicative of the results that may be expected for the financial year ending 31 December 2008.
EARNINGS PER SHARE BASIC AND DILUTED
The following table shows the profit and shares data used in the basic and diluted earnings per share calculation: Three months ended 31 March 2008 31 March 2007 AED000 AED000 Basic earnings per share Profit for the period net of directors remuneration of AED 750 thousand (2007 AED 375 thousand)
175,597 Number of shares
50,094
Weighted average number of ordinary shares Basic earnings per shares (AED)
1,000,000,000 0.18
1,000,000,000 0.05
Diluted earnings per share Profit for the period net of directors remuneration of AED 750 thousand (2007 AED 375 thousand)
187,280 Number of shares
50,094
Weighted average number of ordinary shares Diluted earnings per shares (AED)
1,103,119,000 0.17
1,000,000,000 0.05
There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the date of authorisation of these financials statements for issuance. 4 CONVERTIBLE SUKUK BONDS
In January 2008, the Group issued convertible bonds in the form of Trust Certificates / Sukuk-al-Mudarabah (the Sukuk) for a total value of USD 300 million. The Sukuk, which is structured to conform to the principles of Islamic Shariah, was approved by the Groups shareholders at an Extraordinary General Meeting held in April 2007. The Sukuk matures in year 2013 and has a fixed profit rate of 4.31% to be paid on a quarterly basis in arrear. The reference share price for conversion, to which an exchange premium of 20.5% will apply, was taken as the closing price of the Parent Companys share as of 13 December 2007. The Sukuk is secured by Parent Companys Islamic and financing assets in accordance with the principles of Islamic Shariah.
CONVERTIBLE SUKUK BONDS - continued
F-8
Each Trust Certificate may be redeemed at the option of the issuer at any time after year 1 to the maturity date, as governed under the Terms of the subscription. On exercise of option, at the option of the Group, either shares will be issued at reference share price or an equivalent sum of cash will be paid based on the arithmetic average of the volume weighted average price of the shares on each trading day during the last 10 consecutive days into number of shares would have been issued under equity settlement. The Group may also voluntarily redeem the Trust Certificates under certain conditions. Convertible Sukuk has been included under financing obligations in the balance sheet as follows: 31 March 2008 AED000 Proceeds from issue of convertible bonds Less: Issuance costs Net proceeds from issuance of convertible bonds Less: Equity component on initial recognition Liability component on initial recognition Add: Profit accrued up to period end 1,101,840 11,526 1,090,314 69,534 1,020,780 11,683 1,032,463 Less: Current portion of profit classified under accounts payable, accruals and other liabilities 8,970 1,023,493
F-9
NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS At 31 March 2008 (Unaudited)
SEGMENTAL INFORMATION
Primary segment information For management purposes the Group is organised into two major business segments:
Islamic financing and investing activities
Property development
These segments are the basis on which the Group reports its segment information.
Segmental information for the three months ended 31 March was as follows:
F-10
61,232
-
2008 _______________________________________________________ Islamic financing and investing Property activities development Other Total AED000 AED000 AED000 AED000
2007 _____________________________________________________ Islamic financing and investing Property activities development Other Total AED000 AED000 AED000 AED000 4,566
-
25,777
-
91,575
-
Gross income Provision for impairment Allocable expenses 156,602 (32,810) 123,792 (64,146) 176,347 29,183 240,493 29,601 (418) 325,716 (6,255) (78,968) 87,518
139,513 (6,255) (45,740)
(16,984) 44,248
(2,238) 2,328
25,778
(19,222) 72,353 (21,884) 50,469
Segment result
Unallocated expenses
No secondary segment information has been provided as the Group operates only in the United Arab Emirates.
6 COMMITMENTS AND CONTINGENT LIABILITIES Commitments 31 March 31 December 2008 2007 AED000 AED000 Irrevocable commitments to extend credit Purchase of properties Contribution to share capital Property development 6.1 6.2 6.3 6.4 4,341,722 81,888 395,372 8,231 4,753,513 6.1 3,423,021 81,888 429,769 10,581 3,945,259
This represents contractual commitments to provide Islamic financing. Commitments generally have fixed expiry dates, or other termination clauses, and normally require the payment of a fee. Since these may expire without being drawn upon, the total contract amounts do not necessarily represent future cash requirements. This represents commitments to property developers in respect of property purchases. This represents a commitment to subscribe to the share capital of the Companies. This represents contracts for capital expenditure outstanding at the balance sheet date.
6.2 6.3 6.4
Contingencies There have been no significant changes in contingent liabilities since 31 December 2007.
F-11
Level: 5 From: 5 Wednesday, July 16, 2008 01:49 mac8 3989 Section 08b : 3989 Section 08b
Tamweel PJSC
FINANCIAL STATEMENTS
31 DECEMBER 2007
F-12
INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS OF TAMWEEL PJSC
Report on the Financial Statements We have audited the accompanying financial statements of Tamweel PJSC, which comprise the balance sheet as at 31 December 2007, and the income statement, cash flow statement and statement of changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory notes. Managements 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 and the applicable provisions of the articles of association of Tamweel PJSC and the UAE Commercial Companies Law of 1984 (as amended). 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. Auditors 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. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors 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 entitys 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 entitys 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.
F-13
Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Tamweel PJSC as of 31 December 2007, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards.
Report on Other Legal and Regulatory Requirements We also confirm that, in our opinion, the financial statements include, in all material respects, the applicable requirements of the UAE Commercial Companies Law of 1984 (as amended) and the articles of association of Tamweel PJSC; proper books of account have been kept by Tamweel PJSC and the contents of the report of the Board of Directors relating to these financial statements are consistent with the books of account. We have obtained all the information and explanations which we required for the purpose of our audit and, to the best of our knowledge and belief, no violations of the UAE Commercial Companies Law of 1984 (as amended) or of the articles of association of Tamweel PJSC have occurred during the year which would have had a material effect on the business of Tamweel PJSC or on its financial position.
ERNST & YOUNG
Signed by Naushad Anwar Partner Registration No. 489 20 January 2008
Dubai, United Arab Emirates
F-14
Tamweel PJSC
INCOME STATEMENT
Year ended 31 December 2007
2007 AED000 311,463 276,159 122,991 8 9 8,479 56,317 775,409 (131,840) 643,569 11 (192,330) 451,239 451,239 2006 AED000 155,819 16,430 21,331 45,616 29,315 268,511 (54,471) 214,040 (61,269) 152,771 699,050 851,821
Notes Income from Islamic financing and investing assets Commission and agency fees Income from sale of properties held for sale Income from sale of development property Other income
OPERATING INCOME
6 7

PROFIT BEFORE DEPOSITORS SHARE OF PROFIT AND INCOME FROM IPO PROCEEDS
10

PROFIT BEFORE INCOME FROM IPO PROCEEDS
Income from IPO proceeds, net

PROFIT FOR THE YEAR
12
Attributable to: Shareholders of PJSC Shareholders of LLC
451,239 13 0.45
824,399 27,422 851,821 1.11
Earnings per share-basic and diluted (AED)
The attached notes 1 to 39 form part of these financial statements.
F-15
Tamweel PJSC
BALANCE SHEET
At 31 December 2007
2007 AED000 2006 AED000
Notes
ASSETS
Bank balances and cash Advances, prepayments and other receivables Properties held for sale Investment properties Other investments Islamic financing and investing assets Property and equipment
TOTAL ASSETS
14 15 16 17 18 19 21
189,761 647,055 2,308,694 45,301 70,338 5,216,539 36,040 8,513,728
380,181 195,341 17,706 43,062 10,834 2,583,745 31,480 3,262,349
Liabilities Zakat payable Accounts payable, accruals and other liabilities Financing obligations Total liabilities Equity Share capital Employees benefit plan Statutory reserve General reserve Special reserve Cumulative changes in fair value Retained earnings Proposed dividend Total equity
22 23
27,682 808,749 5,631,329 6,467,760 1,000,000 (9,577) 136,452 480,124 52,290 365 168,314 218,000 2,045,968 8,513,728
4,845 207,165 1,230,760 1,442,770 1,000,000 (11,100) 91,305 435,000 25,837 208 78,329 200,000 1,819,579 3,262,349
24 25 26 27 28
29
WASIM SAIFI
____________________ Chief Executive Officer
_____________________ Chairman
KHALID BIN ZAYED
F-16
Tamweel PJSC
CASH FLOW STATEMENT
Notes
2007 AED000 451,239
2006 AED000 851,821 2,572 2,278 (10,807) (9,432) 61,269 897,701 (1,278,106) 132,300 (17,706) (6,472) (83,453) 119,689 (236,047) (54,786) (510) 10,807 (280,536) (16,168) (3,124) (33,630) (52,922) 550,000 (725) 2,353 551,628 218,170 162,011 380,181
Profit for the year Adjustments for: Depreciation Amortisation of deferred cost Provision for employees benefits Provision against Islamic financing and investing assets Income on deposits and wakala placements Change in fair value of investment properties Depositors share of profit
21 10
9 17 11
3,118 3,529 3,625 12,500 (20,574) (2,239) 192,330 643,528 (2,645,294) 4,400,569 (2,290,988) (14,427) (454,388) 523,137 162,137 (128,894) (1,884) (186,079) (3,090) 20,574 (137,236)
Working capital changes: Islamic financing and investing assets Financing obligations Properties held for sale Trading investments Advances, prepayments and other receivables Accounts payable, accruals and other liabilities Cash from (used in) operations Depositors share of profit paid Employees benefits paid Dividend paid Zakat paid Income received on deposits and wakala placements Net cash used in operating activities
INVESTING ACTIVITIES
Additions to property and equipment Other investments Purchase of available-for-sale-investments Purchase of investment properties Net cash used in investing activities
21
(7,678) (44,920) (52,598) (1,277) 691 (586) (190,420) 380,181 189,761
Issue of shares Directors fees Money received under the Employees benefit plan Net cash (used in) from financing activities
(DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS
Cash and cash equivalents at 1 January

CASH AND CASH EQUIVALENTS AT 31 DECEMBER
14
F-17
Tamweel PJSC
STATEMENT OF CHANGES IN EQUITY
Share capital AED000 450,000 550,000 6,019 -
Employees benefit plan AED000
Statutory reserve AED000
General reserve AED000
Special reserve AED000
Cumulative changes in fair value AED000 Retained earnings AED000
Proposed dividends Total AED000 AED000 52,434 508,453 550,000
Issue of shares
Shares received under the Employees benefit plan (note 25) (18,000) -
(18,000)
Shares granted under the Employees benefit plan (note 25) 6,900 104 -
27,422 1,089 -
(52,434)
7,004 27,422 1,089 (52,434)
Profit for the period till 2 June 2006
F-18
1,000,000 (11,100) 6,123
Zakat, net of reversals till 2 June 2006
Dividends settled
Dividends relating to profit till 2 June 2006 settled
Balance at 2 June 2006
(23,027) 5,484
(23,027) 1,000,507
Tamweel PJSC
STATEMENT OF CHANGES IN EQUITY - continued
Share capital AED000 208 208 -
Employees benefit plan AED000
Statutory reserve AED000
General reserve AED000
Special reserve AED000
Cumulative changes in fair value AED000 Retained earnings AED000
Proposed dividends AED000 -
Total AED000 208 208
Profit for the period from 3 June to 31 December 2006 -
208
824,399 824,399
824,399 824,607
F-19
85,182 435,000 1,000,000 (11,100) 91,305 435,000
Zakat, net of reversals for the period from 3 June to 31 December 2006
25,837
(4,710) (825) (200,000) (85,182) (435,000) (25,837)
200,000 -
(4,710) (825) -
Directors fees
Proposed dividend
Transfer to statutory reserve (note 26)
Transfer to general reserve (note 27)
Transfer to special reserve (note 28)
Balance at 31 December 2006
25,837
208
78,329
200,000
1,819,579
Tamweel PJSC

Share capital AED000 1,000,000 157 157 (11,100) 91,305 435,000 25,837 208 78,329 Employees benefit plan AED000 Statutory reserve AED000 General reserve AED000 Cumulative Special changes in fair Retained reserve value earnings AED000 AED000 AED000 Proposed dividends AED000 200,000 -

Total AED000 1,819,579 157 157
Balance at 1 January 2007 Gain on available-for-sale investments recognized directly in equity
Total income for the year recognised directly in equity
Net profit for the year
Total income for the year -
157 -
451,239 451,239 (25,927)
(200,000) -
451,239 451,396 (200,000) (25,927)
Dividend settlement for 2006
F-20
1,523 23 45,124 45,124 1,000,000 (9,577) 136,452 480,124
Zakat, net of reversals
Shares granted under Employees benefit Plan, net (Note 25)
1,426
1,546 1,426
Cost of vested shares under Employees benefit plan
Directors fees
(2,052) (218,000) (45,124) (45,124)
218,000 -
(2,052) -
Proposed dividend
Transfer to special reserve (Note 28)
26,453 52,290
365
(26,453) 168,314
218,000
2,045,968
Tamweel PJSC
NOTES TO THE FINANCIAL STATEMENTS
At 31 December 2007
Tamweel PJSC (the Company) was registered on 3 June 2006 as a Public Joint Stock Company in accordance with UAE Federal Law No (8) of 1984, as amended. The share capital of the Company comprises 1,000,000,000 shares of AED 1 each. Previously, the Company was operating as Tamweel LLC with a paid up share capital of AED 450 million (450,000 shares of AED 1,000 each). The Company is licensed by the UAE Central Bank as a finance company and is primarily engaged in Islamic Shariaa compliant financing and investment activities such as Ijara, Forward Ijara, Murabaha, Istisnaa etc. The activities of the Company are conducted in accordance with Islamic Shariaa, which prohibits usury, and within the provisions of its Articles and Memorandum of Association. The Company is also engaged in the business of property development and trading. The head office of the Company is located at Business Avenue Building, P.O. Box 111555, Emirate of Dubai, UAE. The Company has one branch each in the Emirates of Dubai, Abu Dhabi and Sharjah.
STATEMENT OF COMPLIANCE
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), the Shariaa rules and principles as determined by the Shariaa Supervisory Board (the Board) of the Company and applicable requirements of United Arab Emirates laws. Changes in accounting policies Adoption of IFRS in current year As of 1 January 2007, the Company adopted and applied the following new IASB standards and interpretations. Adoption of these standards and interpretations did not have any effect on the financial position of the Company. They did, however, give rise to the additional disclosures being included for the years ended 31 December 2007 and 31 December 2006. The principal effects of these changes are as follows: Amendments to IAS 1 Presentation of Financial Statements These amendments require the Company to make new disclosures enabling the users of financial statements to understand the Companys objectives, policies and processes for managing capital. The new disclosures as shown in Note 33. IFRS 7 Financial Instruments: Disclosures This standard requires disclosures that enable users of the financial statements to evaluate the significance of Companys financial instruments and the nature and extent of risks arising from those financial instruments. The new disclosures are primarily shown in Note 32. While there has been no effect to the financial position or results, comparative information has been revised where needed. IASB Standards and Interpretations issued but not adopted The Company has not adopted the new accounting standards or interpretations that have been issued but are not yet effective. These standards and interpretations except for revised IAS 1, are not likely to have any significant impact on the financial statements of the Company in the period of their initial application. The Company has not adopted the revised IAS 1 Presentation of Financial Statements which will be effective for the year ending 31 December 2009. The application of this standard will result in amendments to the presentation of the financial statements. The Company has not adopted the revised IAS 23 Borrowing costs which will be effective for the year ending 31 December 2009. The standard has been revised to require capitalisation of borrowing costs when such costs relate to a qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use or sale. In accordance with the transitional requirements in the standard, the Company will adopt this as a prospective change. Accordingly, borrowing costs will be capitalised on qualifying assets with a commencement date after 1 January 2009. No changes will be made for borrowing costs incurred to this date that have been expensed.
F-21
Tamweel PJSC
At 31 December 2007
2 STATEMENT OF COMPLIANCE (continued)
IFRS 8 Operating Segments The application of IFRS 8 which will be effective for the year ending 31 December 2009 will result in amended and additional disclosures relating to operating segments. 3 BASIS OF MEASUREMENT
The accompanying financial statements have been prepared under the historical cost convention as modified by the measurement at fair value of investment properties, trading and available for sale investments. The functional currency of the Company is UAE Dirhams (AED) and these financial statements have been presented in thousands of Dirhams. 4 DEFINITIONS OF SIGNIFICANT TERMS
The following terms are used in these financial statements with the meaning specified hereunder: Shariaa Shariaa is the body of Islamic law and is essentially derived from The Quran and The Sunnah. The Company, being an Islamic Financial Institution, incorporates the essence of Shariaa in its activities. Ijara Ijara is an agreement whereby the Company as a lessor buys an asset according to the customers request and then leases it to the customer as lessee for a specified rental over a specific period. The duration of the lease, as well as the basis for rental, are set and agreed in advance. The Company retains legal ownership of the asset throughout the arrangement. The arrangement could end by transferring the ownership of the asset to the lessee. Istisnaa Istisnaa is an agreement whereby the Company undertakes to construct a specific asset or property according to certain agreed upon specifications at a pre-determined price and for a fixed date of delivery. The work undertaken is not restricted to be accomplished by the Company alone and the whole or part of the construction can be undertaken by third parties under the Companys control and responsibility. Murabaha Murabaha is an agreement whereby the Company makes a sale to a customer of a commodity that is acquired principally based on a promise received from the customer to buy the item purchased according to the specific terms and conditions. While making the sale, the Company expressly mentions the costs incurred on the commodities that are sold and the profit thereon to the customer. Forward Ijara Forward Ijara is an arrangement whereby the Company agrees to provide, on a specified future date, certain described property on lease to the customer upon its completion and delivery by the developer, from whom the Company has purchased the property. The lease rent under Forward Ijara commences only upon the customer having received possession of the property from the Company. The arrangement could end by transferring the ownership of the asset to the lessee. Mudaraba Mudaraba is an agreement in which the customer contributes capital and the Company applies its effort. The proportionate share of profit is determined by mutual agreement. The loss, if any, unless caused by negligence or violation of the terms of the agreement, is borne only by the owner of the capital in which case the Company gets nothing for its efforts. The financier is known as rab-al-mal and the Company as mudareb. Wakala An agreement whereby the Company provides a certain sum of money to an agent, who invests it according to specific conditions in return for a certain fee (a lump sum of money or percentage of the amount invested). The agent is obliged to return the invested amount in case of default, negligence or violation of the terms and conditions of the Wakala.
F-22
Tamweel PJSC
At 31 December 2007
5 SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in preparing the financial statements are as follows: Revenue recognition Provided it is probable that the economic benefits will flow to the Company and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in the income statement as follows: Ijara income Ijara income is recognised on a time-apportioned basis over the lease term based on the principal amount outstanding. Murabaha income Murabaha income is recognised on a time-apportioned basis over the period of the contract based on the principal amount outstanding. Istisnaa income Istisnaa associated profit margin (difference between the cash price of al-masnoo to the customer and the Companys total Istisnaa cost) is accounted for on a time- apportioned basis. Sale of properties held for sale Sale of properties held for sale is recognised on full accrual method as and when all of the following conditions are met: A sale is consummated and contracts are signed; The buyers investment, to the date of the financial statements is adequate to demonstrate a commitment to pay for the property; The Companys receivable is not subject to future subordination; The Company has transferred to the buyer the usual risks and rewards of ownership in a transaction that is in substance a sale and does not have a substantial continuing involvement with the property; and Work to be completed, if any, is both easily measurable and accrued or is not significant in relation to the overall value of the contract. Sale of development property Revenue on sale of development property is recognised on the basis of percentage of completion method as and when all of the following conditions are met: A sale is consummated and contracts are signed; The buyers investment, to the date of the financial statements, is adequate to demonstrate a commitment to pay for the property; Construction work has commenced, with engineering, design work and site clearance being completed; The buyer is committed. The buyer is not eligible for a refund except for non-delivery of the unit. Management believes that the likelihood of the Company being unable to fulfil its contractual obligations for these reasons is remote; and The aggregate sales proceeds and costs can be reasonably estimated. Processing fees Processing fees are recognised when applications for facilities are processed. Other income Income earned on deposits and wakala placements is recognised on a time proportion basis. All other income is recognised when the right to receive the income is established. Cost of sale of development property Cost of sale of development property includes the cost of land and development costs. Development costs include the cost of infrastructure and construction. The cost of sale in respect of individual properties is based on the estimated proportion of the development cost incurred to date to the estimated total development cost for the project. Cash and cash equivalents For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash in hand, bank balances, and short-term deposits with an original maturity of three months or less, net of outstanding bank overdrafts.
F-23
Tamweel PJSC
At 31 December 2007
5 SIGNIFICANT ACCOUNTING POLICIES (continued)
Islamic financing and investing assets Islamic financing and investing assets include outstanding ijara principal rentals, murabaha sales receivables net of deferred profits, istisnaa costs incurred to date measured at cash equivalent value and forward Ijara at costs incurred to date. These assets are stated at cost net of provisions for impairment, if any. Investment properties Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the balance sheet date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the year in which they arise. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year of retirement or disposal. Properties held for sale Properties held for sale are valued at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. Cost comprises all costs of purchase and other directly attributable costs incurred in bringing each property to its location and condition. Net realisable value signifies the estimated selling price in the ordinary course of the business less estimated costs necessary to be incurred on disposal. Investments Trading investments These are initially recognised at cost and subsequently measured at fair value. All related realised and unrealised gains or losses are taken to income statement. Profit earned or dividends received are included in other income. Held to maturity Securities which have fixed or determinable payments and are intended to be held to maturity, are carried at amortised cost using the effective interest method, less provision for impairment in value, if any. Available -for-sale Available-for-sale investments are recognised and derecognised, on a trade date basis, when the Company becomes, or ceases to be, a party to the contractual provisions of the instrument. Investments designated as available-for-sale investments are initially recorded at cost and subsequently measured at fair value, unless this cannot be reliably measured. Changes in fair value are reported as a separate component of equity. Upon impairment any loss, or upon derecognition any gain or loss, previously reported as cumulative changes in fair value within equity is included in the income statement for the period. Property and equipment Property and equipment is stated at cost less accumulated depreciation and impairment in value, if any. Capital work-in progress is stated at cost and is not depreciated. Depreciation is calculated on a straight line basis over the estimated useful lives of such assets as follows: Leasehold improvements Office equipment Furniture and fixtures Software licenses and computer equipment Networks and servers 5 to 10 years 5 years 4 to 5 years 3 to 8 years 3 to 4 years
The carrying values of property and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount, being the higher of their fair value less costs to sell and their value in use.
F-24
Tamweel PJSC
At 31 December 2007
Property and equipment (continued) Expenditure incurred to replace a component of an item of property and equipment that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalised only when it increases future economic benefits of the related item of property and equipment. All other expenditure is recognised in the income statement as the expense is incurred. Financial instruments The Company recognises financial assets or financial liabilities only when the Company becomes a party to the contractual provisions of a financial instrument. On initial recognition, the financial assets and financial liabilities are measured at fair value plus, in case of a financial asset or financial liability not at fair value through profit or loss, transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability. Subsequent to initial measurement, the financial assets are measured at fair value except for loans and receivables which are measured at amortised cost. Financial liabilities, after initial recognition, are measured at amortised cost. Derecognition of financial assets and financial liabilities Financial assets A financial asset (or, where applicable a part of a financial asset or part of a group of similar financial assets) is derecognised where: (a) (b) the right to receive cash flows from the asset have expired; or the Company has transferred its rights to receive cash flows from the asset or has assumed an obligation to pay the received cash flows in full without material delay to a third party under a pass-through arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset, or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
(c)
When the Company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, and has neither transferred nor retained substantially all the risks and rewards of the asset nor transferred control of the asset, the asset is recognised to the extent of the Companys continuing involvement in the asset. A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. Securitisation The Company enters into securitisation transactions to finance specific loans and advances to customers. Both the debt securities in issue and the loans and advances to customers remain on the Companys balance sheet within the appropriate balance sheet headings unless: i) ii) iii) a fully proportional share of all or of specifically identified cash flows have been transferred to the holders of the debt securities, in which case that proportion of the assets are derecognised; substantially all the risks and rewards associated with the assets have been transferred, in which case the assets are fully derecognised; or if a significant proportion of the risks and rewards have been transferred, the assets are recognised only to the extent of the Companys continuing involvement.
Zakat Zakat is computed as per the Companys Articles and Memorandum of Association and is approved by the Companys Shariaa Supervisory Board on the following basis: Zakat on shareholders equity is computed as the aggregate of general and legal reserves, provision for doubtful debt, retained earnings and provision for staff gratuity as multiplied by 2.577%. Zakat is disbursed by a committee appointed by the Board of Directors and operating as per the by-law set by the Board. Zakat on the paid up capital is not included in the zakat computations and is payable by the shareholders personally.
F-25
Tamweel PJSC
At 31 December 2007
Accounts payable and accruals Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not. Provisions Provisions are recognised when the Company has a present obligation (legal or constructive) arising from a past event and the costs to settle the obligation are both probable and able to be reliably measured. Employees end-of-service benefits For its national employees, the Company makes contributions to the pension fund established by the General Pension and Social Security Authority calculated as a percentage of the employees salaries. The Companys obligations are limited to these contributions, which are recognised in the income statement when due. The Company provides end-of-service benefits to its expatriate employees. The entitlement to these benefits is based upon the employees salary and length of service, subject to the completion of a minimum service period. The expected costs of these benefits are accrued over the term of employment. Employees benefit plan shares Employees benefit plan shares consist of the Companys own shares that have been designated under Employee Stock Ownership Plan and not yet reissued or cancelled. These shares are accounted for using the cost method. Under the cost method, the average cost of the shares is shown as a deduction from total shareholders equity. Share-based payments The cost of equity-settled transactions with employees is measured by reference to the fair value at the date at which the awards are granted. The cost of equity-settled transactions with employees is recognised, together with a corresponding increase in equity, over the period in which the performance conditions are fulfilled ending on the date on which the employees become fully entitled to the award (vesting date). The cumulative expense recognised for equity-settled transactions at each reporting date until the vesting date reflects the extent to which the vesting period has expired and the Companys best estimate of the number of equity instruments that will ultimately vest. The income statement charge or credit for a period represents the movement in cumulative expense recognised as at the beginning and end of that period. Foreign currencies Transactions in foreign currencies are recorded at rates of exchange prevailing at the dates of the transactions. Trade and settlement date accounting All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Company commits to purchase or sell the asset. Fair values For investments actively traded in organised financial markets, fair value is determined by reference to quoted market prices at the close of business on the balance sheet date. Bid prices are used for assets and offer prices are used for liabilities. For unquoted securities fair value is determined by reference to brokers' quotes, recent transaction(s), the market value of similar securities, or based on the expected cash flows discounted at current rates applicable for items with similar terms and risk characteristics. For investments in properties, fair value is determined periodically on the basis of independent professional valuations. Offsetting Financial assets and financial liabilities are only offset and the net amount reported in the balance sheet when there is a legally enforceable right to offset the recognised amounts and the Company intends to settle on a net basis. Significant management judgements and estimates Judgements In the process of applying the Companys accounting policies, management has made the following judgements, apart from those involving estimations, which may have an effect on amounts recognised in the financial statements.
F-26
Tamweel PJSC
At 31 December 2007
Transfer of equitable interest in properties The Company has entered into a number of contracts with buyers for the sale of property units. Management has determined that equitable interest in such assets, and therefore risks and rewards of ownership, are transferred to the buyer once he is committed to complete the payment for the purchase. The commitment is evidenced by a signed contract for the purchase of the property and payments of sufficient progressive payments. The risk of the buyer being able to rescind the contract for the reasons stated in the contract which are dependent on the enactment of pending legislation is considered by management to be remote. Classification of investments Management decides on acquisition of an investment whether it should be classified as held to maturity, carried at fair value through profit or loss, loans and receivables or available-for-sale. For those investments deemed held to maturity, management ensures that the requirements of IAS 39 are met and, in particular that the Company has the intention and ability to hold these to maturity. The Company classifies investments as trading if they are acquired primarily for the purpose of making a short term profit by the dealers. All other investments are classified as a available-for-sale. Use of estimates The preparation of the financial statements requires management to make estimates and assumptions that may affect the reported amount of financial assets and liabilities, revenues, expenses, disclosure of contingent liabilities and the resultant provisions. Such estimates are necessarily based on assumptions about several factors and actual results may differ from reported amounts as described below: Impairment losses on Islamic financing and investing assets The Company reviews its Islamic financing and investing assets on a regular basis to assess whether a provision for impairment should be recorded in the income statement in relation to any non-performing assets. In particular, judgement by management is required in the estimation of the amount and timing of future cash flows when determining the level of provisions required. Such estimates are necessarily based on assumptions about the probability of default and probable losses in the event of default, the value of the underlying security, and realization costs. Collective impairment provisions on Islamic financing and investing assets In addition to specific provisions against individually significant Islamic financing and investing assets, the Company also makes collective impairment provisions against facilities which, although not specifically identified as requiring a specific provision, have a greater risk of default than when originally granted. The amount of the provision is based on the historical loss pattern for facilities within each grade and is adjusted to reflect current economic changes. Cost to complete properties under development The Company estimates the cost to complete properties under development in order to determine the cost attributable to revenue being recognised. These estimates include the cost of providing infrastructure activities, potential claims by sub contractors and all cost of meeting other contractual obligations to the customers. Valuation of investment properties The Company hires the service of third party values for obtaining estimates of the valuation of investment properties.
F-27
Tamweel PJSC
At 31 December 2007
6 INCOME FROM ISLAMIC FINANCING AND INVESTING ASSETS 2007 AED000 Ijara Murabaha Istisnaa Forward Ijara Processing and other fees 143,053 1,116 37,118 66,822 63,354 311,463 2006 AED000 89,900 5,528 32,627 416 27,348 155,819
COMMISSION AND AGENCY FEES 2007 AED000 2006 AED000 16,430 16,430
Commission income on sale of properties Agency fee (7.1)
83,143 193,016 276,159
7.1 Agency fee represents a non-refundable fee received from a third party in respect of grant of exclusive rights to sell certain properties.
INCOME FROM SALE OF DEVELOPMENT PROPERTY 2007 AED000 2006 AED000 97,038 (51,422) 45,616
Revenue from sale of development property Cost of sale of development property
23,665 (15,186) 8,479
OTHER INCOME 2007 AED000 2006 AED000 9,432 1,312 10,807 7,764 29,315
Income arising on changes in fair value of investment properties (note 17) Income on investments held for trading Income on deposits and wakala placements Others
2,239 18,339 20,574 15,165 56,317
F-28
Tamweel PJSC
At 31 December 2007
10 GENERAL AND ADMINISTRATIVE EXPENSES 2007 AED000 Staff costs Advertisement and sales promotion Provision against Islamic financing and investing assets Takaful premium on under construction properties Rent Legal and professional charges Amortization of deferred cost on securitisation (note 15) Depreciation (note 21) Cost for vested shares under Employees benefit plan (note 25) Other expenses 68,711 14,304 12,500 6,640 5,585 4,010 3,529 3,118 1,426 12,017 131,840 2006 AED000 30,925 10,757 3,445 1,607 2,572 5,165 54,471
11
DEPOSITORS SHARE OF PROFIT 2007 AED000 2006 AED000 61,166 103 61,269
Financing obligations Others
189,705 2,625 192,330
12
INCOME FROM IPO PROCEEDS, NET
This represents the income earned (net of related expenses) on investing the IPO subscriptions proceeds between the first day of public subscription (27 February 2006) and the date of incorporation of the Public Joint Stock Company (3 June 2006). This income is wholly attributable to the shareholders of Tamweel PJSC.
13
EARNINGS PER SHARE BASIC AND DILUTED 2007 AED000 2006 AED000
Profit for the year net of directors remuneration of AED 2,052 thousand (2006: AED 825 thousand)
449,187
850,996
Number of shares Weighted average number of ordinary shares in issue during the year Basic and diluted earnings per share (AED) 1,000,000,000
769,452,055
0.45
1.11
Basic earnings per share is calculated by dividing the profit attributable to equity holders, net of directors remuneration, of the Company by the weighted average number of shares in issue during the year. Diluted earnings per share is the same as basic earnings per share as there are no potential ordinary shares outstanding which may have any dilutive effect.
F-29
Tamweel PJSC
At 31 December 2007
14 BANK BALANCES AND CASH 2007 AED000 Bank balances Cash in hand 189,718 43 189,761 2006 AED000 380,156 25 380,181
All the bank balances are profit bearing and carry an average profit rate of 5%.
15
ADVANCES, PREPAYMENTS AND OTHER RECEIVABLES 2007 AED000 2006 AED000 47,163 85,065 5,538 8,260 30,217 4,650 14,448 195,341
Receivable against securitised assets Receivable on sale of properties Accrued profit on Islamic financing and investing assets Receivables on sale of development property Advance paid against properties financed Advance commission paid Securitization cost deferred (15.1) Commission receivable Prepaid expenses Advance for purchase of properties Receivable under employees benefit plan Others
171,294 132,346 107,008 77,409 38,312 27,352 22,099 17,606 9,635 9,099 5,505 29,390 647,055
15.1 Total cost incurred on securitisation in respect of certain financial assets (note 20) was AED 25,628 thousand out of which AED 3,529 thousand has been amortised during the year (note 10). The total cost is to be amortised over 36 months commencing July 2007.
16
PROPERTIES HELD FOR SALE 2007 AED000 2006 AED000 102,210 (84,504) 17,706
Balance as at 1 January Properties acquired Cost of properties sold Balance as at 31 December
17,706 2,813,729 (522,741) 2,308,694
F-30
Tamweel PJSC
At 31 December 2007
17 INVESTMENT PROPERTIES 2007 AED000 Balance as at 1 January Properties acquired Changes in fair value Balance as at 31 December 43,062 2,239 45,301 2006 AED000 33,630 9,432 43,062
Investment properties are stated at fair value, which has been determined based on valuations performed by accredited independent valuers. The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arms length transaction at the date of valuation, in accordance with International Valuation Standards.
18
OTHER INVESTMENTS 2007 AED000 2006 AED000 8,676 1,238 920 2,158 10,834
Trading: Quoted - equity Available-for-sale: Quoted - mutual fund units (18.1) Others (18.2)
23,103 1,395 920 2,315 38,846 6,074 44,920 70,338
Held to maturity: Investments in Notes (18.3) Profit accrued on Notes
(18.1) The fair value of investments in mutual fund units is based on the last bid price as published by the fund manager. (18.2) Others represents advance against equity shares to be allotted. (18.3) This represents the investment made in the notes issued by Tamweel Residential ABS CI (1) Ltd in Cayman Islands. The applicable profit rate ranges from 3.95% to 10% above LIBOR. The maturity of these Notes is the earlier of the year 2037 or the expiry of the securitised receivables.
F-31
Tamweel PJSC
At 31 December 2007
19 ISLAMIC FINANCING AND INVESTING ASSETS 2007 AED000 Ijara Gross Murabaha receivable Less: Deferred profit Net Murabaha receivable Istisna'a Forward Ijara 2,393,202 228,046 (15,378) 212,668 802,418 1,820,751 5,229,039 (12,500) 5,216,539 2006 AED000 1,596,898 30,396 (7,030) 23,366 893,975 69,506 2,583,745 2,583,745
Less: Allowance for impairment
Allowance for impairment represents provision made during the year at 31 December 2007. All the assets financed by the Company are only to individuals and are within the UAE.
20
SECURITISATION
In July 2007, the Company entered into a securitisation transaction in respect of certain of its financial assets. In this transaction, the assets, or interests in the assets, were transferred to a special purpose entity (SPE) which then issued notes to third party investors. The Companys financial assets qualify for derecognition as substantially all the risks and rewards of the assets have been transferred. The Company continues to recognise any retained interests in the securitisation vehicles. The details of the above securitisation are given below: Securitisation Company Tamweel Residential ABS CI (1) Ltd. Date of securitisation July 25, 2007 Gross assets securitized AED 773,241 thousand
Identified assets amounting to AED 106,700 thousand have not been transferred either due to early settlement of assets or non-registration of related properties with Lands Department.
F-32
Tamweel PJSC
At 31 December 2007
21 PROPERTY AND EQUIPMENT Furniture and fixtures AED000 2,288 802 3,090 1,192 522 1,714 1,376 Software licenses and computer equipment AED000 5,791 1,618 7,409 2,541 1,597 4,138 3,271 Software licenses and computer equipment AED000 5,178 593 20 5,791 1,099 1,442 2,541 3,250 Network and server AED000 1,262 289 1,551 408 362 770 781 Capital work in progress AED000 24,088 4,142 28,230 28,230
Leasehold Office improvements equipment AED000 AED000 Cost: At 1 January 2007 Additions 1,994 641 At 31 December 2007 2,635 Depreciation: At 1 January 2007 364 Charge for the year 444 At 31 December 2007 808 Net book value: At 31 December 2007 1,827 891 186 1,077 329 193 522 555
Total AED000 36,314 7,678 43,992 4,834 3,118 7,952 36,040
Leasehold Office Improvements equipment AED000 AED000 Cost: At 1 January 2006 Additions Transfer At 31 December 2006 Depreciation: At 1 January 2006 Charge for the year At 31 December 2006 Net book value: At 31 December 2006 778 1,091 125 1,994 102 262 364 1,630 636 255 891 177 152 329 562
Furniture and fixtures AED000 2,092 110 86 2,288 761 431 1,192 1,096
Network and servers AED000 858 404 1,262 123 285 408 854
Capital work in progress AED000 10,604 13,715 (231) 24,088 24,088
Total AED000 20,146 16,168 36,314 2,262 2,572 4,834 31,480
F-33
Tamweel PJSC
At 31 December 2007
22 ACCOUNTS PAYABLE, ACCRUALS AND OTHER LIABILITIES 2007 AED000 Property purchase payables Developers' payables Advance receipts against sale of properties Accrued depositors' share of profit Payable against property development Other liabilities Accrued expenditure Dividend payable Accounts payable Advisory and management fee Employees' end of service benefits 340,871 141,515 126,094 90,672 23,969 22,337 22,050 13,921 13,253 11,000 3,067 808,749 2006 AED000 66,721 27,236 20,998 50,784 27,674 11,000 2,752 207,165
23
FINANCING OBLIGATIONS 2007 AED000 2006 AED000 1,037,300 100,000 93,460 1,230,760
Mudaraba Wakala Others (Note 35)
1,856,680 3,765,649 9,000 5,631,329
Mudarabas represent funds for investment in the Company's (Mudareb's) on-going real estate investment activities (the Project) on a mudaraba basis. Rab Al Mals agree to reward the Mudareb for profits earned by it in excess of a minimum return based on EIBOR determined at inception as an incentive/bonus for profitable, efficient and safe deployment of the Rab Al Mal's capital. All these obligations are short term to medium term. Wakalas represent investment amounts received by the Company (Wakeel) from a customer (Muwakkil) for investment purposes to generate profits for the Muwakkil based on EIBOR. Any profit exceeding the expected profit after deduction of wakala fee is allowed to be kept by the Company as an incentive.
24
SHARE CAPITAL 2007 AED000 2006 AED000
Authorised, issued and paid up 1,000,000,000 ordinary shares of AED 1 each (2006: 1,000,000,000 shares of AED 1 each)
1,000,000
1,000,000
F-34
Tamweel PJSC
At 31 December 2007
25 EMPLOYEES' BENEFIT PLAN
On 26 February 2006, the Company established an Employee benefit plan to recognise and retain good performing key employees. The Plan gives the employee the right to purchase the Companys shares at an exercise price. In accordance with an agreement between the shareholders of Tamweel LLC and the Company, the shareholders of Tamweel LLC agreed to transfer 18,000 shares of AED 1,000 each (equivalent to 18,000,000 shares of AED 1 each after the share split on conversion of the LLC into a PJSC) of the Company owned by them for the benefit of the Companys employees under this plan. These shares are held by two trustee companies. The cost of acquisition of these shares was AED 18 million at the rate of AED 1,000 per share of a nominal value of AED 1,000 each. Out of the above shares, the Company granted 6,900 shares of AED 1,000 each (equivalent to 6,900,000 shares of AED 1 each after the share split on conversion of the LLC into a PJSC) during 2006 at AED 1,015 per share (AED 1.015 per share on split). These shares carry full dividend and voting rights. The fair value of these shares at the grant date was estimated at AED 7,003,500 at AED 1,015 per share (AED 1.015 per share on split). During the year, the Company granted 1,934,000 shares at AED 1.015 per share which vest over a period of 36 months. The fair value of these shares at the grant date was estimated at AED 6,285,500 at AED 3.25 per share. Further, the Company forfeited 411,077 shares out of the shares granted in 2006. The remaining 9,577,077 shares of AED 1 each held under this scheme are held as plan shares by the trustees and will be granted in the future as and when the employees meet the pre-determined criteria. When granted to employees, the difference between the fair value of these shares on the grant date and amounts recovered from employees, if any, will be charged to the income statement. The fair value of these shares at 31 December 2007 is estimated at AED 64.74 million at the rate of AED 6.76 per share.
26
STATUTORY RESERVE
As required by the Commercial Companies Law and the Company's Articles of Association, 10% of the profit for the year has been transferred to statutory reserve. The Company may resolve to discontinue such annual transfers when the reserve totals 50% of paid up share capital. As per the Articles of Association, any amount in statutory reserve in excess of 50% of paid up capital can be distributed as dividends to the shareholders of the Company.
27
GENERAL RESERVE
As required by the Company's Articles of Association, 10% of the profit for the year is transferred to general reserve. As per the Articles of Association, deductions for the general reserve shall stop by resolution of an Ordinary General Assembly upon the recommendation of the Board of Directors or when this reserve reaches 50% of the paid up capital of the Company. This reserve shall be utilised for the purpose determined by the General Assembly at an ordinary meeting upon the recommendation of the Board of Directors.
28
SPECIAL RESERVE
The special reserve, which has been created in accordance with the recommendations of the UAE Central Bank, is not available for distribution.
29
PROPOSED DIVIDENDS
The Board of Directors has proposed a cash dividend of AED 0.218 per share totalling AED 218 million (2006: AED 200 million), which is subject to the approval of the shareholders at the Annual General Meeting.
F-35
Tamweel PJSC
At 31 December 2007
30 COMMITMENTS 2007 AED000 Irrevocable commitments to extend credit Purchase of properties Contribution to share capital Property development 30.1 30.2 30.3 30.4 3,423,021 81,888 429,769 10,581 3,945,259 2006 AED000 1,415,780 671,083 920 29,543 2,117,326
30.1
This represents contractual commitments to provide Islamic financing. Commitments generally have fixed expiration dates, or other termination clauses. Since these may expire without being drawn upon, the total contract amounts do not necessarily represent future cash requirements. This represents the commitment to purchase a property under the provisions of a Memorandum of Understanding. This mainly represents commitment to subscribe to the share capital of companies under formation outside the UAE. This represents contracts for capital expenditure outstanding at the balance sheet date.
30.2
30.3
30.4
31
CONTINGENCIES
a) The Companys bankers have provided a guarantee of AED 50 million (2006: AED 50 million) favouring the UAE Central Bank against the share capital. b) The Company bankers have provided a guarantee of AED 5 million (2006: AED Nil) to Economic Affairs Division for establishing a subsidiary company.
32
RISK MANAGEMENT
Risk is inherent in the Companys activities but it is managed through a process of ongoing identification, measurement, mitigation and monitoring subject to risk limits and other controls. This process of risk management is critical to the Companys continuing profitability and sustainability. The Company is exposed to credit risk, liquidity risk and market risk, the latter being subdivided into trading and non-trading risks. It is also subject to operational risks. The independent risk control process does not include business risks such as changes in the environment, technology and industry. They are monitored through the Companys strategic planning process. The major risks to which the Company is exposed in conducting its business and operations, and the means and organisational structure it employs in seeking to manage them strategically in its attempt to build stakeholders value are outlined below. Risk Management Structure Ultimate responsibility and accountability for the Companys risk management rests with the Board of Directors. The level of risk that the Company accepts, together with the basis for managing those risks, is driven from the top down by those charged with overall responsibility for running the business. However, separate independent bodies are entrusted with delegated risk management responsibilities. The Board of Directors is responsible for the overall risk management approach and for designing and deciding the risk strategies, policies, appetite parameters, and principles.
F-36
Tamweel PJSC
At 31 December 2007
32 RISK MANAGEMENT (continued)
Risk Management Structure (continued) The Audit and Risk Management (ARM) Committee is responsible to the full Board for ensuring that the Company establishes and maintains an effective internal control system, reviewing the effectiveness of the internal audit function, and ensuring that appropriate controls are in place for monitoring compliance with laws, regulations, and supervisory requirements. ARM Committee supports the monitoring of the overall risk situation and the managements approaches to comprehensive risk identification and control. The Committee reviews the Companys risk profile to ensure that it is within the Board established risk policies and appetite parameters. The Audit and Risk Management function, reporting to the Board, independently ensures that appropriate processes are in place for the identification, assessment, monitoring and mitigation of risks. Within the guidelines of the Board of Directors, it coordinates the development and implementation of the risk management framework and the execution of risk policies. Management is responsible for executing the risk management strategy including the identification and evaluation on a continuous basis of all risks to the business and the implementation of appropriate mitigation strategies to contain them. The Sharia Board is responsible to review the operational, financing and investing activities of the Company ensuring their alignment and compliance with The Quran and The Sunnah. Being a supervisory board they are also required to audit the business activities undertaken and present an independent report to the shareholders. The Credit Committee is entrusted with evaluating the Companys credit portfolio, approving financial commitments exceeding a defined limit on behalf of the Company, reviewing the delinquency provision policy in light of the credit risk embedded in the overall portfolio, assessing the Companys significant credit-based exposures and the steps management has taken to mitigate them, handling impaired assets, formulating credit policies and procedures, reporting exposures, and analyzing country and counterparty risks. The Company has introduced a Risk Adjusted Pricing Model for lending following accredited Credit and Risk evaluation standards. The Credit Committee actively pursues the quality of the portfolio on a monthly basis using internationally acknowledged credit scoring system. The Asset and Liability Committee (ALCO) is chiefly responsible for defining long-term strategic plans and shortterm tactical initiatives for directing asset and liability allocations prudently for the achievement of the Companys strategic goals. ALCO monitors the Companys liquidity and market risks and the Companys risk profile in the context of economic developments and market fluctuations. The Investment Committee oversees market risk embedded in all investment-related deals through its responsibility in setting an overall investment strategy and policy, reviewing and approving the investment proposals raised by the Investment Department, monitoring defined limits, and reviewing the performance of the companys investments within the risk-return guidelines set by the Board. The Product Committee is responsible to ensure compliance with directives issued by the Sharia Board including changes in lending contracts, product parameters, etc. For all levels throughout the Company, specifically tailored risk reports are prepared and distributed in order to ensure that all business divisions have access to extensive and up-to-date information necessary for their proper management and monitoring of risks inherent in the activities. Types of Risk the Company is Subject to: Concentration Risk Concentration arises when a number of counterparties are engaged in similar business activities, or activities in the same geographic region, or have similar economic features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentration indicates the relative sensitivity of the Companys performance to developments affecting a particular nationality, industry or geographical location. In order to avoid excessive concentration of risk, the Companys policies and procedures include specific guidelines to maintain a diversified portfolio. This is further enforced by the Credit Committees oversight. Identified concentration of credit risks are controlled and managed accordingly.
F-37
Tamweel PJSC
At 31 December 2007
Credit Risk Credit risk is the risk that a customer or counterparty will fail to meet a commitment, resulting in financial loss to the Company. Such risk stems mainly from day to day Islamic financing activities undertaken by the Company. Credit risk is actively monitored in accordance with the credit policies which clearly define delegated lending authorities, credit standards and procedures. The Company attempts to control credit risk by monitoring credit exposures, maintaining credit limits, limiting transactions with specific counterparties and continually assessing the creditworthiness of counterparties. The Company has built and maintains a sound credit portfolio within the guidelines of the Board approved Credit Policy. The Company has an established risk management process encompassing of credit approvals, control of exposures, credit policy direction to business units, well-designed credit appraisals, review of exposures both on an individual and a portfolio basis, and incorporation of robust problem credit management procedures. Special attention is directed towards the management of past-due financing assets through a dedicated Collection Team. The Company enters in collateral arrangements with counterparties in appropriate circumstances to limit credit exposure. With a relatively dominant Ijara financing structure, the ownership of the financed property is maintained with the Company until the full-settlement of the monies due; thus, resulting in collateralization of amounts financed. QUANTITATIVE INFORMATION Maximum exposure to credit risk without taking account of any collateral and other credit enhancements The table below shows the maximum exposure to credit risk for the components of the balance sheet. The maximum exposure is shown gross. Gross Gross maximum maximum exposure exposure 2007 2006 AED000 AED000 Bank balances Other investments Advances, deposit and other receivables Islamic financing and investing assets Total Irrevocable commitments to extend credit 189,718 70,338 615,321 5,229,039 6,104,416 3,423,021 380,156 10,834 187,081 2,583,745 3,161,816 1,415,780
For more details on the maximum exposure to credit risk for each class of financial instrument, references should be made to the specific notes. The effect of collateral and other risk mitigation techniques is shown below. The Company's financial assets, before taking into account any collateral held or other credit enhancements are analysed by business segment in note 34.
F-38
Tamweel PJSC
At 31 December 2007
QUANTITATIVE INFORMATION (continued) The credit quality of financial assets is managed by the Company using internal credit ratings. The table below shows the credit quality by class of financial asset, based on the Company's credit rating system. 2007 Neither past due nor impaired SubHigh Standard standard grade grade grade AED 000 AED 000 AED 000 Bank balances 189,718 Advances, deposits and other receivables 308,862 Other investments 70,338 Islamic financing and investing assets 1,688,411 Total 2,257,329 306,459 3,495,595 3,802,054 Past due or individually impaired AED 000 45,033 45,033
Total AED 000 189,718 615,321 70,338 5,229,039 6,104,416 2006
Neither past due nor impaired SubHigh Standard standard grade grade grade AED 000 AED 000 AED 000 Bank balances Advances, deposits and other receivables Other investments Islamic financing and investing assets Total 380,156 87,799 10,834 865,012 1,343,801 99,282 1,694,813 1,794,095
Past due or individually impaired AED 000 23,920 23,920
Total AED 000 380,156 187,081 10,834 2,583,745 3,161,816
It is the Companys policy to maintain accurate and consistent risk ratings across the credit portfolio. This facilitates focused management of the applicable risks and the comparison of credit exposures across all lines of business, geographic regions and products. The rating system is supported by a variety of financial analytics, combined with processed market information to provide the main inputs for the measurement of counterparty risk. All internal risk ratings are tailored to the various categories and are derived in accordance with the Companys rating policy. The attributable risk ratings are assessed and updated regularly. Aging analysis of past due but not impaired financial assets 2007 Less than 30 days AED 000 Islamic financing and investing assets Total 31,066 31,066 31 to 60 days AED 000 6,133 6,133 60 to 90 days AED 000 4,180 4,180 More than 91 Days AED 000 3,654 3,654 Total AED 000 45,033 45,033
F-39
Tamweel PJSC
At 31 December 2007
Aging analysis of past due but not impaired financial assets (continued) 2006 Less than 30 days AED 000 Islamic financing and investing assets Total 15,545 15,545 31 to 60 days AED 000 2,990 2,990 60 to 90 days AED 000 4,520 4,520 More than 91 Days AED 000 865 865 Total AED 000 23,920 23,920
Collateral and other credit enhancements The finance provided by the Company is completely asset backed in accordance with the principles of Shariah. Properties are funded based on Companys Appraised Value. In the case of new properties, the appraised value is similar to the developers per square footage rate further assessed by independent valuation and internal assessment. However, in some cases the Company might have lower rates than the developers based on the Companys view of the property. In case of older properties the appraised value is released by the Credit Department. These valuations are based on the valuation report from valuers, whenever required and the property prices witnessed in Tamweels past funding transactions. Property insurance is mandatory and the property is insured against all normal risks for the value stated in the sale agreement, or the valuation amount given by the surveyor, as the case maybe. The insured value is maintained at the original property value through the life of the finance. Profit rate risk Profit rate risk arises from the possibility that changes in profit rates will affect future profitability or the fair values of financial instruments. In the Companys financial statements, mainly two line items can lead to such exposure i.e. Islamic financing assets and financing obligations, as shown on the assets and liability sides respectively. The profit rate risk for the Company is minimal in the short term period. The profit rate for financing assets is a composition of EIBOR and internal spread which cannot be expected to fluctuate frequently based on EIBOR movement. The Company reviews the profit rate on a monthly basis during its ALCO meeting and, if required, recommends rate change based on market conditions and competition. The financing obligations, being short term, are contractually variable rate contracts as determined on contract initiation. The following table demonstrates the sensitivity to a reasonable possible change in profit rates, with all other variables held constant, of the Companys income statement. The sensitivity of the income statement is the effect of the assumed changes in profit rates on the net profit earned for one year, based on the floating rate non-trading financial assets and financial liabilities held at 31 December 2007. 2007 Increase/ Sensitivity (decrease) of in basis net returns points AED 000s 50bps (50bps)
Currency
AED AED
4,623 (4,623)
F-40
Tamweel PJSC
At 31 December 2007
Profit rate risk(continued) 2006 Increase/ Sensitivity (decrease) of in basis net returns points AED 000s AED AED 50bps (50bps)
5,716 (5,716)
Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. All assets and liabilities as on 31 December 2007 are denominated in the UAE Dirham and therefore the Company is not exposed to any significant currency risk. Equity price risk Equity price risk is the risk that the fair values of equities decrease as the result of changes in the levels of equity indices and the value of individual stocks. The non-trading equity price risk exposure arises from the Companys investment portfolio. The effect on equity (as a result of a change in the fair value of equity instruments held as available-for-sale at 31 December 2007) due to a reasonably possible change in equity indices, with all other variables held constant, is as follows: Market indices Change in equity price 2007 Effect on equity AED000 4,620 (4,620) 2006 Change in equity price Effect on equity AED000 1,294 (1,294)
DFM DFM
+20% -20%
+20% -20%
Prepayment risk Prepayment risk is the risk that the Company will incur a financial loss because its counterparties repay earlier or later than expected. The Company does not have any significant prepayments risk as the amount recovered in case of early settlement is more than the fair value of the asset on settlement date, by adding a settlement fees, and to recover amount on time and to avoid any delays. The collection team, supervised by Credit committee monitors the customer receivable position on a daily basis. Operational risk Operational risk is the risk of loss arising from systems failure, human error, fraud or external events. When controls fail to perform, operational risks can cause damage to reputation, have legal or regulatory implications, or lead to financial loss. The Company cannot expect to eliminate all operational risks, but through a control framework and by monitoring and responding to potential risks, the Company is able to manage the risks. Controls include effective segregation of duties, access, authorisation and reconciliation procedures, staff education and assessment processes, including the use of internal audit.
F-41
Tamweel PJSC
At 31 December 2007
32
RISK MANAGEMENT (continued)
Maturity analysis of assets and liabilities The maturity analysis of assets, liabilities and off balance sheet items analysed according to when they are expected to be recovered, settled or sold under repurchase agreements.
Within 1 month 2007 AED 000
1 to 3 months 2007 AED 000
3 to 12 months 2007 AED 000
Subtotal less than 12 months 2007 AED 000
1-5 years 2007 AED 000
Over 5 years 2007 AED 000
Total 2007 AED 000
F-42
12,761 138,956 920,000 1,071,717 58,562 578,000 636,562 14,921 386,113 3,674,329 4,075,363
ASSETS Bank balances and cash Advances, prepayments and other receivables Properties held for sale Investment properties Other investments Islamic financing and investing assets Property and equipment 189,761 247,070 70,578 68,461 575,870 145,297 390,526 25,875 987,471 848 1,550,017 221,358 1,076,775 1,427,949 27,382 2,753,464 189,761 613,725 1,537,879 25,875 2,483,881 28,230 4,879,351
Total assets
33,330 770,815 45,301 44,463 957,728 7,810 1,859,447
1,774,930 1,774,930
189,761 647,055 2,308,694 45,301 70,338 5,216,539 36,040 8,513,728
LIABILITIES Zakat payable Accounts payable, accruals and other liabilities Financing obligations
Total liabilities
27,682 583,631 5,172,329 5,783,642
225,118 459,000 675,118
27,682 808,749 5,631,329 6,467,760
Tamweel PJSC
At 31 December 2007
32
Maturity analysis of assets and liabilities
The maturity analysis of assets, liabilities and off balance sheet items analysed according to when they are expected to be recovered, settled or sold under repurchase agreements.
Within 1 month 2006 AED000
1 to 3 months 2006 AED000
Subtotal less than 12 months 2006 AED000
1-5 years 2006 AED000
Over 5 years 2006 AED000
Total 2006 AED000
F-43
77,521 517,300 594,821 4,845 64,718 100,000 169,563 60,319 520,000 580,319
ASSETS Bank balances and cash Advances, prepayments and other receivables Properties held for sale Investment properties Other investments Islamic financing and investing assets Property and equipment 380,181 679 19,215 400,075 69,453 17,706 6,472 76,858 170,489 61,704 512,307 574,011
Total assets
380,181 131,836 17,706 6,472 608,380 1,144,575
63,505 43,062 4,362 692,315 31,480 834,724
1,283,050 1,283,050
380,181 195,341 17,706 43,062 10,834 2,583,745 31,480 3,262,349
LIABILITIES Zakat payable Accounts payable, accruals and other liabilities Financing obligations
Total liabilities
4,845 202,558 1,137,300 1,344,703
4,607 93,460 98,067
4,845 207,165 1,230,760 1,442,770
Tamweel PJSC
At 31 December 2007
32
Contractual undiscounted repayment obligations
The maturity profile of the Company's financial liabilities based on contractual undiscounted repayment obligations is as follows:
Within 1 month 2007 AED000
1-5 years 2007 AED000
Total 2007 AED000
2007 Zakat payable Accounts payable, accruals and other liabilities Financing obligations
F-44
Within 1 month 2007 AED000 1 to 3 months 2007 AED000
12,761 138,956 953,325 1,105,042
58,562 591,455 650,017
14,921 386,113 3,770,022 4,171,056
27,682 583,631 5,314,802 5,926,115
225,118 514,769 739,887
27,682 808,749 5,829,571 6,666,002
1-5 years 2007 AED000
Total 2007 AED000
2006
Zakat payable Accounts payable, accruals and other liabilities Financing obligations
77,521 535,395 612,916
4,845 64,718 101,552 171,115
60,319 554,578 614,897
4,845 202,558 1,191,525 1,398,928
4,607 93,460 98,067
4,845 207,165 1,284,985 1,496,995
Tamweel PJSC
At 31 December 2007
33 CAPITAL MANAGEMENT
The primary objective of the Companys capital management is to ensure that it maintains healthy capital ratios in order to support its business and maximise shareholders value. The Company manages its capital structure and makes adjustments to it in light of changes in economic conditions. To maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years ended 31 December 2007 and 31 December 2006. Capital comprises share capital, statutory reserve, general reserve, special reserve, cumulative changes in fair value and retained earnings and is measured at AED 1,837,545 thousands as at 31 December 2007 (2006: AED 1,630,679 thousands).
34
SEGMENTAL INFORMATION
For management purposes the company is organised into two major business segments: Islamic financing and investing activity Property development and investments Principally handling Islamic financing and investing activities Principally involved in the development, purchase, sale of properties and related activities including commissions.
These segments are the basis on which the Company reports its segments information. Segmental information for the year ended 31 December 2007 as follows: Islamic financing Property and investing development activities and investments AED000 AED000 Gross income General and administrative expenses Depositors share of profit Segment result before provision Provisions Segment result after provision Unallocated expenses Profit for the year OTHER INFORMATION Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities 2,821,309 2,702,087 18,553 5,173,148 3,093,903 54,144 8,321,195 192,533 8,513,728 5,541,949 925,811 6,467,760 311,463 (87,581) (101,782) 122,100 (12,500) 109,600 407,629 (17,082) (58,963) 331,584 331,584
Others AED000 56,317 (613) (713) 54,991 54,991
Total AED000 775,409 (105,276) (161,458) 508,675 (12,500) 496,175 (44,936) 451,239
F-45
Tamweel PJSC
At 31 December 2007
34 SEGMENTAL INFORMATION (continued)
Segmental information for the year ended 31 December 2006 as follows: Islamic financing Property and investing development activities and investments AED000 AED000 Gross income General and administrative expenses Depositors share of profit Segment result before and after provisions Income from IPO proceeds, net Unallocated expenses Profit for the year 155,819 (41,786) (47,001) 67,032 83,377 (5,317) (5,982) 72,078
Others AED000 29,315 29,315
Total AED000 268,511 (47,103) (52,983) 168,425 699,050 (15,654) 851,821
OTHER INFORMATION Segment assets Unallocated assets Total assets 2,620,724 261,129 192 2,882,045 380,304 3,262,349 1,165,753 277,017 1,442,770
Segment liabilities Unallocated liabilities Total liabilities
910,043
255,710
No secondary segment information has been provided as the company operates only in the United Arab Emirates.
35
RELATED PARTY TRANSACTIONS
Related parties represent major shareholders, directors and key management personnel of the Company, and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Companys management. Transactions with related parties included in the income statement are as follows: 2007 Key Management personnel AED000 Income from financing and investing activities Depositors share of profit Major shareholders AED000 2006 Key management Major personnel shareholders AED000 AED000
293 293
21,884 21,884
153 153
37,722 37,722
F-46
Tamweel PJSC
At 31 December 2007
35 RELATED PARTY TRANSACTIONS (continued)
Balances with related parties included in the balance sheet are as follows: 2007 Key Management personnel AED000 Islamic financing and investing assets Investment in property Financing obligations (a) Depositors share of profit payable Payable for property purchase Major shareholders AED000 2006 Key Management Major personnel shareholders AED000 AED000
12,676 -
42,240 986,207 21,884 8,642
10,873 -
490,760 13,451 -
(a) Included in financing obligations is an amount of AED 9,000 thousand (2006: 93,460 thousand) payable to the shareholders of Tamweel LLC and represents the following: 31 December 31 December 2007 2006 AED000 AED000 Dividends for the year ended 31 December 2005 Profit for the period 1 January 2006 to 2 June 2006 (net of statutory and general reserves) Shares transferred to the Company for the employee benefit plan (note 23) 9,000 9,000 52,434 23,026 18,000 93,460
Compensation of key management personnel is as follows: 2007 AED000 Short term employee benefits Termination and other benefits 7,190 2,014 9,204 2006 AED000 3,638 2,855 6,493
36
FAIR VALUES OF FINANCIAL INSTRUMENTS
Financial instruments comprise financial assets and financial liabilities. Financial assets include bank balances and cash, receivables, Islamic financing and investing assets and other investments. Financial liabilities include accounts payable, accruals and other liabilities and financing obligations. The fair values of financial instruments are not materially different from their carrying values.
F-47
Tamweel PJSC
At 31 December 2007
37 FINANCIAL ASSETS AND LIABILITIES
31 December 2007 Designated as trading or fair value through profit and loss AED'000 Financial Assets Other investments 23,103 Islamic financing and investing assets Advances, deposits and other receivables Bank balances Total 23,103 Financial Liabilities Zakat payable Accounts payable, accruals and other liabilities Financing obligations Total 31 December 2006 Designated as trading or fair value through profit and loss AED'000 Financial Assets Other investments Islamic financing and investing assets Advances, deposits and other receivables Bank balances Total Financial Liabilities Zakat payable Accounts payable, accruals and other liabilities Financing obligations Total 4,845 207,165 1,230,760 1,442,770 4,845 207,165 1,230,760 1,442,770 8,676 8,676 2,158 2,158 2,583,745 187,081 2,770,826 380,181 380,181 10,834 2,583,745 187,081 380,181 3,161,841
Available for sale AED'000
Loans and receivables AED'000
Amortised cost AED'000
Total AED'000
2,314 2,314
5,229,039 615,321 5,844,360
44,921 189,761 234,682 27,682 808,749 5,631,329 6,467,760
70,338 5,229,039 615,321 189,761 6,104,459 27,682 808,749 5,631,329 6,467,760
Available for sale AED'000
Loans and receivables AED'000
Amortised cost AED'000
Total AED'000
F-48
Tamweel PJSC
At 31 December 2007
38 CORRESPONDING FIGURES
Following corresponding figures have been rearranged and reclassified to improve the quality of information presented: Item reclassified Processing and other fees Income from sale of properties Commission income From To Description Amount AED000 27,348
Other income
Other income
Income from Islamic financing and investing assets Income from sale of properties
Processing and other fees have been reclassified for better presentation. Income from sale of properties has been disclosed as separate line item on the face of income statement for better presentation. Commission income has been reclassified under commission and agency fee and disclosed as separate line item on the face of income statement for better presentation.
21,331
Other income
Commission agency fee
and
16,430
39
DATE OF AUTHORISATION
These accounts were approved for issue by the Board of Directors on 20 January 2008.
F-49
Level: 5 From: 5 Wednesday, July 16, 2008 01:49 mac8 3989 Section 08c : 3989 Section 08c
Tamweel PJSC (formerly Tamweel LLC.)

31 DECEMBER 2006
F-50
INDEPENDENT AUDITORS REPORT TO THE SHAREHOLDERS OF TAMWEEL PJSC (FORMERLY TAMWEEL LLC)
Report on the Financial Statements We have audited the accompanying financial statements of Tamweel PJSC, which comprise the balance sheet as at 31 December 2006, and the income statement, cash flow statement and statement of changes in equity for the year then ended, and a summary of significant accounting policies and other explanatory notes. Managements 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 and the applicable provisions of the articles of association of Tamweel PJSC and the UAE Commercial Companies Law of 1984 (as amended). 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. Auditors 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. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors 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 entitys 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 entitys 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.
F-51
Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Tamweel PJSC as of 31 December 2006, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Report on Other Legal and Regulatory Requirements We also confirm that, in our opinion, the financial statements include, in all material respects, the applicable requirements of the UAE Commercial Companies Law of 1984 (as amended) and the articles of association of Tamweel PJSC; proper books of account have been kept by Tamweel PJSC and the contents of the report of the Board of Directors relating to these financial statements are consistent with the books of account. We have obtained all the information and explanations which we required for the purpose of our audit and, to the best of our knowledge and belief, no violations of the UAE Commercial Companies Law of 1984 (as amended) or of the articles of association of Tamweel PJSC have occurred during the year which would have had a material effect on the business of Tamweel PJSC or on its financial position.
ERNST & YOUNG

Signed by Naushad Anwar Partner Registration No. 489 30 January 2007 Dubai, United Arab Emirates
F-52
Tamweel PJSC.(formerly Tamweel LLC)

INCOME STATEMENT
Notes Income from Islamic financing and investing assets Income from sale of development property, net Fees and other income
OPERATING INCOME
2006 AED000 128,471 45,616 94,424 268,511
2005 AED000 46,241 22,548 31,175 99,964 (35,642) 64,322 (22,120) 42,202 42,202
6 7 8

PROFIT BEFORE DEPOSITORS SHARE OF PROFIT AND INCOME FROM IPO PROCEEDS
(54,471) 214,040

PROFIT BEFORE INCOME FROM IPO PROCEEDS
10
(61,269) 152,771
Income from IPO proceeds, net

PROFIT FOR THE YEAR
11
699,050 851,821
Attributable to: Shareholders of PJSC Shareholders of LLC
824,399 27,422 851,821 12
42,202 42,202 0.12
Earnings per share-basic and diluted (AED)
1.11
F-53

BALANCE SHEET
At 31 December 2006
2006 AED000 2005 AED000 162,011 107,271 1,030 1,302,839 17,884 1,591,035
Notes
ASSETS
Bank balances and cash Advances, prepayments and other receivables Investment in properties Other investments Islamic financing and investing assets Property and equipment
TOTAL ASSETS
13 14 15 16 17 18
380,181 195,341 60,768 10,834 2,583,745 31,480 3,262,349
Liabilities Zakat payable Accounts payable, accruals and other liabilities Financing obligations Total liabilities Equity Share capital Employees benefit plan Statutory reserve General reserve Special reserve Cumulative changes in fair value Retained earnings Proposed dividend Total equity
19 20
4,845 207,165 1,230,760 1,442,770
1,734 75,848 1,005,000 1,082,582 450,000 6,019 52,434 508,453 1,591,035
21 22 23 24 25 26
1,000,000 (11,100) 91,305 435,000 25,837 208 78,329 200,000 1,819,579 3,262,349
ADEL SHIRAWI
____________________ Chief Executive Officer
_____________________ Chairman
KHALID BIN ZAYED
F-54

CASH FLOW STATEMENT
2006 AED000 2005 AED000 42,202 1,198 327 2,800 (30) 22,120 68,617 (1,039,132) (51,478) 53,460 (968,533) (22,120) (990,653)
Notes
Profit for the year Adjustments for: Depreciation 18 Provision for employees end of service benefits, net Provision for impairment of Islamic financing and investing assets Changes in fair value of available-for-sale investments Change in fair value of investment properties 8 Depositors share of profit 10 Working capital changes: Islamic financing and investing assets Properties held for sale, net Investments held for trading, net Advances, prepayments and other receivables Accounts payable, accruals and other liabilities Cash used in operations Depositors share of profit paid Zakat paid Net cash used in operating activities
851,821 2,572 2,278 (9,432) 61,269 908,508 (1,278,106) (17,706) (6,472) (83,453) 118,964 (358,265) (54,786) (510) (413,561)
Purchase of property and equipment Purchase of available-for-sale-investments, net Purchase of investment properties Net cash used in investing activities
18
(16,168) (3,124) (33,630) (52,922)
(13,989) (1,000) (14,989)
Issue of shares Financing obligations, net Money received under the Employees benefit plan Net cash from financing activities Increase in cash and cash equivalents Cash and cash equivalents at 1 January
CASH AND CASH EQUIVALENTS AT 31 DECEMBER
550,000 132,300 2,353 684,653
150,000 930,000 1,080,000 74,358 87,653 162,011
218,170 162,011 380,181
F-55

Share capital AED000 Total AED000 317,985 150,000 (52,434) 6,123 27,422 1,089 (23,027) 5,484 52,434 52,434 (52,434) 42,202 (1,734) 508,453 550,000 (18,000) 7,004 27,422 1,089 (52,434) (23,027) 1,000,507 300,000 150,000 450,000 550,000 1,000,000 (11,100) 6,900 104 (18,000) 6,019 4,220 (4,220) (1,734) 42,202 1,799 16,186 Employees benefit plan AED000 Statutory reserve AED000 General reserve AED000 Cumulative Special changes in fair Retained reserve value earnings AED000 AED000 AED000 Proposed dividends AED000
Issue of shares
Profit for the year
Transfer to statutory reserve
Zakat
Proposed dividend
F-56
Issue of shares
Shares received under the Employees benefit plan (note 22)
Shares granted under the Employees benefit plan (note 22)
Profit for the period till 2 June 2006
Zakat, net of reversals till 2 June 2006
Dividends settled
Dividends relating to profit till 2 June 2006 settled
Balance at 2 June 2006 carried down

Share capital AED000 Total AED000 1,000,507 1,000,000 (11,100) 6,123 5,484 Employees benefit plan AED000 Statutory reserve AED000 General reserve AED000 Cumulative Special changes in fair Retained reserve value earnings AED000 AED000 AED000 Proposed dividends AED000
Balance at 2 June 2006 brought down
Gain on available-for-sale investment recognized directly in equity 1,000,000 (11,100) 91,305 435,000 435,000 25,837 25,837 85,182 208 208 208 824,399 824,399 (4,710) (85,182) (435,000) (25,837) (825) (200,000) 78,329 208 -
200,000 200,000
208 208 824,399 824,607 (4,710) (825) 1,819,579
Profit for the period from 3 June to 31 December 2006
F-57
Zakat for the period from 3 June to 31 December 2006
Transfer to special reserve
Directors fees
Proposed dividend

At 31 December 2006
Tamweel PJSC (the Company) was registered on 3 June 2006 as a Public Joint Stock Company in accordance with UAE Federal Law No (8) of 1984, as amended. The share capital of the Company comprises 1,000,000,000 shares of AED 1 each. Previously, the Company was operating as Tamweel LLC with a paid up share capital of AED 450 million (450,000 shares of AED 1,000 each). The Company is licensed by the UAE Central Bank as a finance company and is primarily engaged in Islamic Shariaa compliant financing and investment activities such as Ijara, Murabaha, Istisnaa etc. The activities of the Company are conducted in accordance with Islamic Shariaa, which prohibits usury, and within the provisions of its Articles and Memorandum of Association. The Company is also engaged in the business of property development. The head office of the Company is located at Business Avenue Building, Emirate of Dubai, UAE. The Company has one branch each in Emirates of Dubai, Abu Dhabi and Sharjah.
STATEMENT OF COMPLIANCE
These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), the Shariaa rules and principles as determined by the Shariaa Supervisory Board (the Board) of the Company and applicable requirements of United Arab Emirates laws. The accounting policies are consistent with those used in the previous years except the Company has reconsidered the classification of its investments in the light of the new requirements in IAS 39 which became mandatory for financial years beginning on or after 1 January 2006 relating to classification of financial assets at fair value through profit or loss. Accordingly, investments are now carried at fair value through profit or loss only when permitted by paragraph 11A of IAS 39, or when doing so results in more relevant information. Consequently, investments at fair value through profit or loss have been re-designated as available-for-sale investments at 1 January 2006 and included under Investments at their fair value of AED 1,030,000. Available-for-sale investments are carried at fair values, unless this cannot be reliably measured. Changes in fair value are reported as a separate component of equity. On de-recognition or impairment, the cumulative gain or loss previously reported in equity is included in the income statement for the period. Had the policy not been changed, the current year profit would have been higher by AED 207,619.
BASIS OF MEASUREMENT
The accompanying financial statements have been prepared under the historical cost convention as modified by the measurement at fair value of investment properties and other investments. The functional currency of the Company is UAE Dirhams (AED) and these financial statements have been presented in thousands of Dirhams.
DEFINITIONS OF SIGNIFICANT TERMS
The following terms are used in these financial statements with the meaning specified hereunder: Shariaa Shariaa is the body of Islamic law and is essentially derived from The Quran and The Sunnah. The Company, being an Islamic Financial Institution, incorporates the essence of Shariaa in its activities.
F-58

At 31 December 2006
4 DEFINITIONS OF SIGNIFICANT TERMS - continued
Ijara Ijara is an agreement whereby the Company as a lessor buys an asset according to the customers request and then leases it to the customer as lessee for a specified rental over a specific period. The duration of the lease, as well as the basis for rental, are set and agreed in advance. The Company retains ownership of the asset throughout the arrangement. The arrangement could end by transferring the ownership of the asset to the lessee. Istisnaa Istisnaa is an agreement whereby the Company undertakes to construct a specific asset or property according to certain agreed upon specifications at a pre-determined price and for a fixed date of delivery. The work undertaken is not restricted to be accomplished by the Company alone and the whole or part of the construction can be undertaken by third parties under the Companys control and responsibility. Murabaha Murabaha is an agreement whereby the Company makes a sale to a customer of a commodity that is acquired principally based on a promise received from the customer to buy the item purchased according to the specific terms and conditions. While making the sale, the Company expressly mentions the costs incurred on the commodities that are sold and the profit thereon to the customer. Mudaraba Mudaraba is an agreement in which the customer contributes capital and the Company applies its effort. The proportionate share of profit is determined by mutual agreement. The loss, if any, unless caused by negligence or violation of the terms of the agreement, is borne only by the owner of the capital in which case the Company gets nothing for its efforts. The financier is known as rab-al-mal and the Company as mudareb. Wakala An agreement whereby the Company provides a certain sum of money to an agent, who invests it according to specific conditions in return for a certain fee (a lump sum of money or percentage of the amount invested). The agent is obliged to return the invested amount in case of default, negligence or violation of the terms and conditions of the Wakala.
SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies adopted in preparing the financial statements are as follows: IASB Standards and Interpretations issued but not adopted The following IASB Standards and Interpretations have been issued but are not yet mandatory, and have not yet been adopted by the Company: IFRS 7 Financial Instruments: Disclosures IFRIC Interpretation 8 Scope of IFRS 2 The application of IFRS 7, which will be effective for the year ending 31 December 2007 will result in amended and additional disclosures relating to financial instruments and associated risks. The application of IFRIC 8, which is also effective from 2007 is not expected to have a material impact on the financial statements of the Company. Revenue recognition Provided it is probable that the economic benefits will flow to the Company and the revenue and costs, if applicable, can be measured reliably, revenue is recognised in the income statement as follows:
F-59

At 31 December 2006
5 SIGNIFICANT ACCOUNTING POLICIES - continued
Revenue recognition - continued Sale of development property Revenue on sale of development property is recognised on the basis of percentage completion as and when all of the following conditions are met: A sale is consummated and contracts are signed; The buyers investment, to the date of the financial statements, is adequate to demonstrate a commitment to pay for the property; Construction work has commenced, with engineering, design work and site clearance being completed; The buyer is committed. The buyer is not eligible for a refund except for non-delivery of the unit. Management believes that the likelihood of the Company being unable to fulfill its contractual obligations for these reasons is remote; and The aggregate sales proceeds and costs can be reasonably estimated. Ijara income Ijara income is recognised on a time-apportioned basis over the lease term based on the principal amounts outstanding. Murabaha income Murabaha income is recognised on a time-apportioned basis over the period of the contract based on the principal amounts outstanding. Istisnaa income Istisnaa associated profit margin (difference between the cash price of al-masnoo to the customer and the Companys total Istisnaa cost) is accounted for on a time- apportioned basis. Processing fees Processing fees are recognised when applications for facilities are received. Cost of sale of development property Cost of sale of development property includes the cost of land and development costs. Development costs include the cost of infrastructure and construction. The cost of sale in respect of individual properties is based on the estimated proportion of the development cost incurred to date to the estimated total development cost for the project. Cash and cash equivalents Cash and cash equivalents comprise cash in hand, cash with banks and short-term deposits with an original maturity of three months or less. Islamic financing and investing assets Islamic financing and investing assets include outstanding ijara rentals, murabaha sales receivables net of deferred profits and istisnaa costs incurred to date measured at cash equivalent value. Ijara and murabaha assets are stated at cost net of provisions for impairment, if any. Investment properties Investment properties are measured initially at cost, including transaction costs. The carrying amount includes the cost of replacing part of an existing investment property at the time that cost is incurred if the recognition criteria are met; and excludes the costs of day-to-day servicing of an investment property. Subsequent to initial recognition, investment properties are stated at fair value, which reflects market conditions at the balance sheet date. Gains or losses arising from changes in the fair values of investment properties are included in the income statement in the year in which they arise. Investment properties are derecognised when either they have been disposed of or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. Any gains or losses on the retirement or disposal of an investment property are recognised in the income statement in the year of retirement or disposal.
F-60

At 31 December 2006
Properties held for sale Properties held for sale are valued at the lower of cost and net realisable value. Cost is determined using the weighted average cost method. Cost comprises all costs of purchase and other directly attributable costs incurred in bringing each property to its location and condition. Net realisable value signifies the estimated selling price in the ordinary course of the business less estimated costs necessary to be incurred on disposal. Investments Held for trading These are initially recognised at cost and subsequently remeasured at fair value. All related realised and unrealised gains or losses are taken to the income statement. Profit earned or dividends received are included in other income. Available -for-sale These are initially recognised at cost, being the fair value of the consideration given including directly attributable transaction costs. After initial recognition, investments which are classified as available-for-sale are normally remeasured at fair value, unless fair value cannot be reliably determined in which case they are measured at cost less impairment. Fair value changes which are not part of an effective hedging relationship, are reported as a separate component of equity until the investment is derecognised or the investment is determined to be impaired. On derecognition or impairment the cumulative gain or loss previously reported as cumulative changes in fair value within equity, is included in the income statement for the period. Fair values For investments actively traded in organised financial markets, fair value is determined by reference to quoted market prices at the close of business on the balance sheet date. Bid prices are used for assets and offer prices are used for liabilities. For unquoted investments, a reasonable estimate of the fair value is determined by reference to the market value of a similar investment or is based on acceptable valuation techniques. For investments in properties, fair value is determined periodically on the basis of independent professional valuations. Property and equipment Property and equipment is stated at cost less accumulated depreciation and any impairment in value, if any. Capital work-in progress is not depreciated. The carrying values of property and equipments are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. Depreciation is calculated on a straight line basis over the estimated useful lives of the assets as follows: Leasehold improvements Office equipment Furniture and fixtures Software licenses and computer equipments Networks and servers 5 to 10 years 5 years 5 years 3 to 8 years 4 years
Expenditure incurred to replace a component of an item of property and equipment that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalised only when it increases future economic benefits of the related item of property and equipment. All other expenditure is recognised in the income statement as the expense is incurred.
F-61

At 31 December 2006
Impairment of financial instruments An assessment is made at each balance sheet date to determine whether there is objective evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss, is recognised in the income statement. Impairment is determined as follows: (a) for assets carried at fair value, impairment is the difference between cost and fair value. (b) for assets carried at cost, impairment is present value of future cash flows discounted at the current market rate of return for a similar financial asset. For available-for-sale equity investments, reversal of impairment losses are recorded as increases in cumulative changes in fair value through equity. In addition, a provision is made to cover impairment for specific groups of assets where there is a measurable decrease in estimated future cash flows. Zakat Zakat is computed as per the Companys Articles and Memorandum of Association and is approved by the Companys Shariaa Supervisory Board on the following basis: Zakat on shareholders equity is computed as the aggregate of general and legal reserves, provision for doubtful debt, retained earnings and provision for staff gratuity as multiplied by 2.577%. Zakat is disbursed by a committee appointed by the Board of Directors and operating as per the bye-law set by the Board. Zakat on the paid up capital is not included in the zakat computations and is payable by the shareholders personally. Accounts payable and accruals Liabilities are recognised for amounts to be paid in the future for goods or services received, whether billed by the supplier or not. Provisions Provisions are recognised when the Company has a present obligation (legal or constructive) arising from a past event and the costs to settle the obligation are both probable and able to be reliably measured. Employees end-of-service benefits For its national employees, the Company makes contributions to the pension fund established by the General Pension and Social Security Authority calculated as a percentage of the employees salaries The Companys obligations are limited to these contributions, which are recognised in the income statement when due. The Company provides end-of-service benefits to its expatriate employees. The entitlement to these benefits is based upon the employees salary and length of service, subject to the completion of a minimum service period. The expected costs of these benefits are accrued over the year of employment. Foreign currencies Transactions in foreign currencies are recorded at rates of exchange prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are reported at the exchange rates prevailing at that date. Any gain or loss arising from changes in exchange rates subsequent to the date of a transaction is recognized in the income statement in the period in which they arise.
F-62

At 31 December 2006
Significant management judgements and estimates Judgements In the process of applying the Companys accounting policies, management has made the following judgements, apart from those involving estimations, which may have an effect on amounts recognised in the financial statements. Transfer of equitable interest in properties The Company has entered into a number of contracts with buyers for the sale of apartment units. The Management has determined that equitable interest in such assets and therefore risks and rewards of the ownership are transferred to the buyer once he is committed to complete the payment for the purchase. The commitment is evidenced by a signed contract for the purchase of the property and payments of sufficient progressive payments. The risk of the buyer being able to rescind the contract for the reasons stated in the contract which are dependent on the enactment of pending legislation is considered by management to be remote. Classification of investments Management decides upon acquisition of an investment whether it should be classified as held to maturity, held for trading, carried at fair value through income statement or available for sale. For those investments deemed held to maturity, management ensures that the requirements of IAS 39 are met and, in particular, that the Company has intention and ability to hold these to maturity. The Company classifies investments as trading if they are acquired primarily for the purpose of making a short term profit. All other investments are classified as a available for sale. Use of estimates The preparation of the financial statements requires management to make estimates and assumptions that may affect the reported amount of financial assets and liabilities, revenues, expenses, disclosure of contingent liabilities and the resultant provisions and fair value for the year. Such estimates are necessarily based on assumptions about several factors and actual results may differ from reported amounts as described below: Impairment losses on Islamic financing and investing assets The company reviews its Islamic financing and investing assets on a regular basis to assess whether a provision for impairment should be recorded in the income statement in relation to any non-performing assets. In particular, judgement by management is required in the estimation of the amount and timing of future cash flows when determining the level of provisions required. Such estimates are necessarily based on assumptions about the probability of default and probable losses in the event of default, the value of the underlying security, and realisation costs. Cost to complete properties under development The Company estimates the cost to complete properties under development in order to determine the cost attributable to revenue being recognised. These estimates include the cost of providing infrastructure activities, potential claims by sub contractors and all costs of meeting other contractual obligations to the customers. Valuation of investment properties The Company hires the service of third party valuers for obtaining estimates of the valuation of investment properties.
F-63

At 31 December 2006
6 INCOME FROM ISLAMIC FINANCING AND INVESTING ASSETS 2006 AED000 Ijara Murabaha Istisnaa 89,900 5,528 33,043 128,471 2005 AED000 28,163 2,832 15,246 46,241
INCOME FROM SALE OF DEVELOPMENT PROPERTY, NET 2006 AED000 2005 AED000 60,204 (37,656) 22,548
Revenue from sale of development property Cost of sale of development property
97,038 (51,422) 45,616
FEES AND OTHER INCOME 2006 AED000 2005 AED000 13,634 9,678 4,734 3,129 31,175
Processing and other fees Income from sale of properties held for sale Commission income Income on deposits Income arising on changes in fair value of investment properties (note 15) Income on investments held for trading (net of loss of AED 1.3 million on changes in fair value) Securitisation servicing income Other income
27,348 21,331 16,430 10,807 9,432 1,312 3,473 4,291 94,424
GENERAL AND ADMINISTRATIVE EXPENSES 2006 AED000 2005 AED000 20,830 5,955 740 1,198 1,483 5,436 35,642
Staff costs Advertisement and sales promotion Legal and professional charges Depreciation Operating lease rentals Other expenses
30,925 10,757 1,607 2,572 3,445 5,165 54,471
F-64

At 31 December 2006
10 DEPOSITORS SHARE OF PROFIT 2006 AED000 Financing obligations Others 61,166 103 61,269 2005 AED000 21,276 844 22,120
11
INCOME FROM IPO PROCEEDS, NET
This represents the income earned (net of related expenses) on investing the IPO subscriptions proceeds between the first day of public subscription (27 February 2006) and the date of incorporation of the Public Joint Stock Company (3 June 2006). This income is wholly attributable to the shareholders of Tamweel PJSC.
12
EARNINGS PER SHARE BASIC AND DILUTED 2006 AED000 2005 AED000 42,202
Profit for the year, net of directors fees
850,996
Number of shares Weighted average number of ordinary shares in issue during the year Basic and diluted earnings per share (AED) 769,452,055 1.11 339,863,014 0.12
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average number of shares in issue during the year. Diluted earnings per share is the same as basic earnings per share as there are no potential ordinary shares outstanding which may have any dilutive effect. 13 BANK BALANCES AND CASH
Included in bank balances and cash are short term deposits of AED 304.73 million (2005: AED nil) 14 ADVANCES, PREPAYMENTS AND OTHER RECEIVABLES 2006 AED000 Accrued profit on Islamic financing and investing assets Receivables on sale of development property Advances for purchase of properties Prepaid expenses Commission receivable Others 47,163 85,065 30,217 8,260 5,538 19,098 195,341 2005 AED000 13,946 44,333 27,889 5,302 14,036 1,765 107,271
F-65

At 31 December 2006
15 INVESTMENT IN PROPERTIES 2006 AED000 Investment properties Properties acquired Changes in fair value (note 8) 33,630 9,432 43,062 Properties held for sale Properties acquired Cost of properties sold 2005 AED000 -
102,210 (84,504) 17,706 60,768
Investment properties are stated at fair value, which has been determined based on valuations performed by accredited independent valuers. The fair value represents the amount at which the assets could be exchanged between a knowledgeable, willing buyer and a knowledgeable, willing seller in an arms length transaction at the date of valuation, in accordance with International Valuation Standards.
16
OTHER INVESTMENTS 2006 AED000 2005 AED000 1,030 1,030 1,030
Trading: Quoted - equity Available for sale: Quoted - mutual fund units (note - a) Unquoted - equity (note - b) Others (note - c)
6,472
1,238 2,204 920 4,362 10,834
(a) The fair value of investments in mutual fund units is based on the last bid as published by the fund manager. (b) Unquoted equity investments are carried at cost due to the unpredictable nature of future cash flows and the lack of observable market values. (c) Others represents advance against equity shares to be allotted.
F-66

At 31 December 2006
17 ISLAMIC FINANCING AND INVESTING ASSETS 2006 AED000 Ijara Murabaha Istisna'a Provision for impairment 1,596,898 23,366 963,481 2,583,745 2,583,745 All the assets financed by the Company are within the UAE. 2005 AED000 836,574 27,337 441,728 1,305,639 (2,800) 1,302,839
18
PROPERTY AND EQUIPMENT Software Furniture licenses and and computer fixtures equipment AED000 AED000 2,092 110 86 2,288 761 431 1,192 5,178 593 20 5,791 1,099 1,442 2,541 Network and servers AED000 858 404 1,262 123 285 408 Capital work in progress AED000 10,604 13,715 (231) 24,088 -
Leasehold Office Improvements equipment AED000 AED000 Cost: At 1 January 2006 Additions Transfer At 31 December 2006 Depreciation: At 1 January 2006 Charge for the year At 31 December 2006 Net book value: At 31 December 2006 At 31 December 2005 778 1,091 125 1,994 102 262 364 636 255 891 177 152 329
Total AED000 20,146 16,168 36,314 2,262 2,572 4,834
1,630 676
562 459
1,096 1,331
3,250 4,079
854 735
24,088 10,604
31,480 17,884
19
ACCOUNTS PAYABLE, ACCRUALS AND OTHER LIABILITIES 2006 AED000 2005 AED000 11,866 20,753 16,987 8,509 4,758 474 12,501 75,848
Accounts payable Depositors' share of profit Developers' payables Accrued expenditure IPO advisory and management fee Deferred commission income Employees' end of service benefits Other liabilities
27,674 27,236 66,721 50,784 11,000 2,027 2,752 18,971 207,165
F-67

At 31 December 2006
20 FINANCING OBLIGATIONS 2006 AED000 Mudaraba obligations Wakala obligations Others (note 31) 1,037,300 100,000 93,460 1,230,760 2005 AED000 1,005,000 1,005,000
Mudaraba obligations represent funds for investment in the Company's (Mudareb's) on-going real estate investment activities (the Projects) under which the Rab Al Mal agrees to reward the Mudareb for profits earned by it in excess of a minimum return based on EIBOR determined at inception as an incentive/bonus for profitable, efficient and safe deployment of the Rab Al Mal's capital. All of these obligations are short term. Wakala obligations represent investment amount received by the Company acting as a Wakeel (agent) from a customer (Muwakkil) to invest in an investment transaction expected to generate profit for the Muwakkil based on EIBOR. Any profit exceeding the expected profit after deduction of wakeel fee is allowed to be kept by the Company as incentive.
21
SHARE CAPITAL 2006 AED000 2005 AED000 450,000
Authorised, issued and paid up 1,000,000,000 ordinary shares of AED 1 each (2005: 450,000 shares of AED 1,000 each)
1,000,000
22
EMPLOYEES' BENEFIT PLAN
On 26 February 2006, the Company established an employees benefit plan (Plan) to recognise and retain good performing key employees. The Plan gives the employee the right to purchase the Companys shares at an exercise price. In accordance with an agreement between the shareholders of Tamweel LLC and the Company, the shareholders of Tamweel LLC agreed to transfer 18,000 shares of AED 1,000 each (equivalent to 18,000,000 shares of AED 1 each after the share split on conversion of LLC into PJSC) of the Company owned by them for the benefit of the Companys employees under this plan. These shares are held by two trustee companies on behalf of Tamweel PJSC. The cost of acquisition of these shares was AED 18 million at the rate of AED 1,000 per share of a nominal value of AED 1,000 each. Out of the above shares, the Company granted certain employees the right to purchase 6,900 shares of AED 1,000 each (equivalent to 6,900,000 shares of AED 1 each after the share split on conversion of LLC into PJSC) during 2006 at AED 1,015 per share (AED 1.015 per share on split). This entitlement to ownership became effective on or before 26 February 2006. These shares carry full dividend and voting rights. The fair value of these shares at the grant date was estimated at AED 7,003,500 at AED 1,015 per share (AED 1.015 per share on split). The remaining 11,100 shares of AED 1,000 each (equivalent to 11,100,000 shares of AED 1 each after the share split on conversion of LLC into PJSC) acquired under this scheme are held as plan shares by the trustees and will be granted in the future as and when the employees meet the pre-determined criteria. When granted to employees, the difference between the fair value of these shares on the grant date and amounts recovered from employees, if any, will be charged to the income statement. The fair value of these shares at 31 December 2006 is estimated at AED 45.399 million at the rate of AED 4.09 per share.
23
STATUTORY RESERVE
F-68

At 31 December 2006
As required by the Commercial Companies Law and the Company's Articles of Association, 10% of the profit for the year has been transferred to statutory reserve. The Company may resolve to discontinue such annual transfers when the reserve totals 50% of paid up share capital. As per the Articles of Association, any amount in statutory reserve in excess of 50% of paid up capital can be distributed as dividends to the shareholders of the Company.
24
GENERAL RESERVE
In accordance with a resolution of the Board of Directors, an amount of AED 435 million has been transferred to the General Reserve. This reserve shall be utilised for the purpose determined by the General Assembly at an ordinary meeting upon the recommendation of the Board of Directors.
25
SPECIAL RESERVE
The special reserve, which has been created in accordance with the recommendation of the Central Bank of the UAE, is not available for distribution.
26
PROPOSED DIVIDENDS
The Board of Directors has proposed a cash dividend of AED 0.20 per share totaling AED 200 million, which is subject to the approval of the shareholders at the Annual General Meeting.
27
COMMITMENTS 2006 AED000 2005 AED000 954,233 235,462 1,189,695
Irrevocable commitments to extend credit Purchase of properties Contribution to share capital Property development
27.1 27.2 27.3 27.4
1,415,780 671,083 920 29,543 2,117,326
27.1
This represents contractual commitments to provide Islamic financing. Commitments generally have fixed expiration dates, or other termination clauses, and normally require the payment of a fee. Since these may expire without being drawn upon, the total contract amounts do not necessarily represent future cash requirements. This represents commitments to property developers in respect of property purchases. Included in this is an amount of AED 180.14 million in respect of an underwriting agreement to purchase the properties of a real estate company. The amount is to be paid in scheduled installments against the purchase of certain properties on their successful completion. This represents a commitment to subscribe to the share capital of a company. This represents contracts for capital expenditure outstanding at the balance sheet date.
27.2
27.3 27.4
28
CONTINGENCIES
F-69

At 31 December 2006
(a) The Company has entered into certain lease agreements amounting to AED 1,288 million (US$ 350 million) with customers of Nakheel L.L.C. (Nakheel) which are recorded as off-balance sheet items in the books of the Company. The Company has also entered into securitisation and service agreements with Nakheel L.L.C. and Emirates National Securities Corporation (ENSeC) in connection with these lease agreements. The combined legal effect of these agreements is that the Company is acting on behalf of Nakheel in terms of its arrangements with Nakheels customers. In return it receives a service fee. Any amounts received from lessees are passed by the Company to the Trustees on behalf of Nakheel. Furthermore, as per the agreements, the Company is liable to ENSeC for any defaults by the credit customers. However, Nakheel has provided an irrevocable indemnity to the Company to make good any defaults by the customers and has also provided security in this regard. Accordingly, in the opinion of management the Company has minimal credit risk. The Company has obtained approval from the UAE Central Bank to account for the lease agreements as an off-balance item. (b) The Companys bankers have provided a guarantee of AED 50 million (2005: AED 50 million) favouring the UAE Central Bank against the share capital.
29
RISK MANAGEMENT
Pricing risk Pricing risk, comprising market and valuation risks, is managed on the basis of pre-determined asset allocations across various asset categories, a continuous appraisal of market conditions and trends and managements estimate of long and short term changes in fair value. Credit risk 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. There are formal procedures to assess and monitor credit risk as part of the process of advancing finance. In addition, management regularly reviews the state of receivables and provision is made for any specific balances considered doubtful of recovery. The credit risk is reduced since all assets and finance receivables are considered to be fully secured by direct ownership or mortgage over the assets financed. The Companys customers are mainly based in the United Arab Emirates. At 31 December 2006, there was no significant concentration of credit risk. Liquidity risk Liquidity risk is the risk that an institution will be unable to meet its net funding requirements. Liquidity risk can be caused by market disruptions or credit downgrades which may cause certain sources of funding to dry up immediately. To guard against this risk, management have diversified funding sources and assets are managed with liquidity in mind, maintaining a healthy balance of cash and cash equivalents. The table below summarises the maturity profile of the Companys assets and liabilities. The contractual maturities of assets and liabilities have been determined on the basis of the remaining period at the balance sheet date to the contractual maturity date. The maturity profile is monitored by management to ensure adequate liquidity is maintained.
F-70

At 31 December 2006
29 RISK MANAGEMENT - continued
The maturity profile of the assets and liabilities at 31 December 2006 was as follows: Less than 3 months AED000 Assets Bank balances and cash Advances, prepayments and other receivables Properties held for sale Investment properties Other investments Islamic financing and investing assets 380,181 70,132 17,706 6,472 96,072 570,563 Property and equipment 3 months to 1 year AED000 61,704 512,307 574,011 Over 1 year AED000 63,505 43,062 4,362 1,975,366 2,086,295
Total AED000 380,181 195,341 17,706 43,062 10,834 2,583,745 3,230,869 31,480 3,262,349
Liabilities and equity Zakat payable Accounts payable, accruals and other liabilities Financing obligations
4,845 142,239 617,300 763,559
60,319 520,000 580,319
4,607 93,460 98,067
4,845 207,165 1,230,760 1,442,770 1,819,579 3,262,349
Equity
The maturity profile of the assets and liabilities at 31 December 2005 was as follows: Less than 3 months AED000 Assets Bank balances and cash Advances, prepayments and other receivables Other investments Islamic financing and investing assets 162,011 4,078 229,525 395,614 Property and equipment 3 months to 1 year AED000 49,731 1,030 155,253 206,014 Over 1 year AED000 53,462 918,061 971,523
Total AED000 162,011 107,271 1,030 1,302,839 1,573,151 17,884 1,591,035
Liabilities and equity Zakat payable Accounts payable, accruals and other liabilities Financing obligations
40,764 700,000 740,764
1,734 30,224 305,000 336,958
4,860 4,860
1,734 75,848 1,005,000 1,082,582 508,453 1,591,035
Equity
F-71

At 31 December 2006
30 SEGMENTAL INFORMATION
For management purposes the company is organised into two major business segments: Islamic financing and investing activity Property development These segments are the basis on which the Company reports its segments information. Segmental information for the year ended 31 December 2006 is as follows: Islamic financing and investing Property activities development AED000 AED000 Gross income Allocable expenses Segment result Income from IPO proceeds, net Unallocated expenses Profit for the year Islamic financing and investing Property activities development AED000 AED000 OTHER INFORMATION Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities Segmental information for the year ended 31 December 2005 as follows: Islamic financing and investing activities AED000 Gross income Allocable expenses Segment result Unallocated expenses Profit for the year 59,563 24,920 34,643 1,010,317 54,827 138,821 2,583,745 85,065 468,669 3,137,479 124,870 3,262,349 1,203,965 238,805 1,442,770 159,291 (50,078) 109,213 45,616 45,616
Others AED000 63,604 (6,432) 57,172
Total AED000 268,511 (56,510) 212,001 699,050 (59,230) 851,821
Others AED000
Total AED000
Property development AED000 22,548 22,548
Others AED000 17,853 17,853
Total AED000 99,964 (24,920) 75,044 (32,842) 42,202
F-72

At 31 December 2006
30 SEGMENTAL INFORMATION - continued Islamic financing and investing activities AED000 Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities 1,047,797 16,128 4,758 1,302,839
Property development AED000 44,333
Others AED000 14,036
Total AED000 1,361,208 229,827 1,591,035 1,068,683 13,899 1,082,582
No secondary segmental information has been provided as the company operates only in the United Arab Emirates.
31
Related parties represent major shareholders, directors and key management personnel of the Company and entities controlled, jointly controlled or significantly influenced by such parties. Pricing policies and terms of these transactions are approved by the Companys management. Transactions with related parties included in the income statement are as follows: 2006 Key management personnel AED000 Income from financing and investing activities Depositors share of profit Major shareholders AED000 2005 Key management Major personnel shareholders AED000 AED000 20,037 20,037
153 153
37,722 37,722
Balances with related parties included in the balance sheet are as follows: 2006 Key management personnel AED000 Islamic financing and investing assets Financing obligations ( note a) Depositors share of profit payable 10,873 Major shareholders AED000 490,761 13,451 2005 Key Management Major personnel shareholders AED000 AED000 700,000 11,866
F-73

At 31 December 2006
31 RELATED PARTY TRANSACTIONS - continued (a) Included in financing obligations is an amount of AED 93,461 thousand due (2005: Nil) to the shareholders of Tamweel LLC and represents as follows: 31 December 31 December 2006 2005 AED000 AED000 Dividends for the year ended 31 December 2005 Profit for the period 1 January 2006 to 2 June 2006 (net of statutory and general reserves) Shares transferred to the Company for the employee benefit plan (note 22) 52,434 23,027 18,000 93,461 -
Compensation of the key management personnel is as follows: 2006 AED000 Short term benefits Termination and other benefits 3,638 2,855 6,493 2005 AED000 2,389 110 2,499
32
Financial instruments comprise financial assets and financial liabilities. Financial assets include bank balances and cash, receivables, Islamic financing and investing assets, properties held for sale and other investments. Financial liabilities include accounts payable, accruals and other liabilities and financing obligations. The fair values of financial instruments are not materially different from their carrying values.
33
KEY SOURCES OF ESTIMATION UNCERTAINTY
Impairment of Islamic financing and investing assets An estimate of the collectible amount of Islamic financing and investing assets 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 Islamic financing and investing assets were AED 2,583.75 million (2005: AED 1,305.64 million) with nil (2005: 2.8 million) provision there against. Any difference between the amounts actually collected in future years and the amounts expected will be recognised in the income statement.
F-74

At 31 December 2006
34 CORRESPONDING FIGURES
Corresponding figures have been rearranged and reclassified wherever necessary to improve the quality of information presented. Payable to developers amounting to AED 16.99 million has been regrouped under accounts payable, accruals and other liabilities. Previously this amount was netted off against Islamic financing and investing assets.
35
DATE OF AUTHORISATION
These accounts were authorised for issue by the Board of Directors on 30 January 2007.
F-75
Level: 4 From: 4 Wednesday, July 16, 2008 01:50 mac8 3989 Section 08d : 3989 Section 08d
Tamweel L.L.C.
31 DECEMBER 2005
F-76
AUDITORS' REPORT TO THE SHAREHOLDERS OF TAMWEEL L.L.C.
We have audited the accompanying balance sheet of Tamweel L.L.C (the Company) as of 31 December 2005, and the related statements of income, cash flows and changes in equity for the year then ended. These financial statements and the Companys undertaking to operate in accordance with Islamic Shariaa rules and principles are the responsibility of the Companys management. 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 plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of 31 December 2005 and the results of its operations and its cash flows for the year then ended in accordance with International Financial Reporting Standards and the Shariaa rules and principles as determined by the Shariaa Supervisory Board of the Company. We also confirm that in our opinion proper books of account have been kept by the Company, and the contents of the report of the Board of Directors relating to these financial statements are in agreement with the books of account. We have obtained all the information and explanations which we required for the purpose of our audit and, to the best of our knowledge and belief, no violations of the UAE Commercial Companies Law of 1984 (as amended) or of the articles of association of the company have occurred during the year which would have had a material effect on the business of the Company or on its financial position.
ERNST & YOUNG 22 January 2006

Dubai, United Arab Emirates
F-77
Tamweel L.L.C.
INCOME STATEMENT
Notes Income from Islamic financing and investing assets Income from sale of development property, net Fees and other income
OPERATING INCOME
2005 AED000 46,241 22,548 31,175 99,964 (35,642) (22,120) 42,202
2004 AED000 5,693 20,592 8,014 34,299 (18,235) 1,921 17,985
3 4 5
General and administrative expenses Finance (cost) income, net

PROFIT FOR THE YEAR
6 7
F-78
Tamweel L.L.C.
BALANCE SHEET
At 31 December 2005
2005 AED000 162,011 107,271 1,285,852 1,030 17,884 1,574,048 2004 AED000
Notes
ASSETS
Bank balances and cash Accounts receivable and prepayments Islamic financing and investing assets Investments carried at fair value through income statement Fixed assets
TOTAL ASSETS
8 9 10 12
87,653 55,793 266,507 5,093 415,046
SHAREHOLDERS EQUITY AND LIABILITIES
Capital and reserves Share capital Statutory reserve Retained earnings Proposed dividend Total shareholders equity Liabilities Zakat payable Accounts payable Accruals and other payables Deferred commission income Financing arrangements Employees end of service benefits Total liabilities
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES
13 14 15
450,000 6,019 52,434 508,453 1,734 11,866 41,763 4,758 1,005,000 474 1,065,595 1,574,048
300,000 1,799 16,186 317,985 19,688 2,226 75,000 147 97,061 415,046
16 17
KHALID AL KAMDA
____________________ Chairman 22 January 2006
SAAD ABDUL RAZZAK

_____________________ Director 22 January 2006
F-79
Tamweel L.L.C.
STATEMENT OF CASH FLOWS
2005 AED000 42,202 1,198 327 2,800 (30) 22,120 68,617 (51,478) (1,022,145) (7,822) 39,537 4,758 (968,533) 2004 AED000
Notes
Profit for the year Adjustments for: Depreciation 12 Loss on disposal of fixed assets Provision for employees end of service benefits Provision for impairment of Islamic financing and investing assets 9 Movement in fair value of investments Finance cost (income), net 7
17,985 1,066 6 147 (1,921) 17,283 (55,793) (266,507) 19,688 2,226 (283,103)
Working capital changes: Accounts receivable and prepayments Islamic financing and investing assets Accounts payable Accruals and other payables Deferred commission income Net cash used in operating activities
8 9 16
Purchase of fixed assets Purchase of investments carried at fair value through income statement Proceeds from disposal of fixed assets Finance (cost) income, net Net cash used in investing activities
12
(13,989) (1,000) (22,120) (37,109)
(6,197) 32 1,921 (4,244)
FINANCING ACTIVITY
Issue of shares Financing arrangements contracted Financing arrangements repaid Cash from financing activity
13 17
150,000 1,080,000 (150,000) 1,080,000 74,358 87,653 162,011
75,000 75,000 (212,347) 300,000 87,653
INCREASE (DECREASE) IN BANK BALANCES AND CASH
Bank balances and cash at 1 January

BANK BALANCES AND CASH AT 31 DECEMBER
F-80
Tamweel L.L.C.
Share capital AED000 ` Balance at 1 January 2004 Net profit for the year Transfer to statutory reserve Balance at 31 December 2004 Issue of shares Net profit for the year Transfer to statutory reserve Zakat Proposed dividend (note 15) Balance at 31 December 2005 300,000 300,000 150,000 450,000 Statutory reserve AED000 1,799 1,799 4,220 6,019 Retained earnings AED000 17,985 (1,799) 16,186 42,202 (4,220) (1,734) (52,434) Proposed Dividend AED000 52,434 52,434
Total AED000 300,000 17,985 317,985 150,000 42,202 (1,734) 508,453
F-81
Tamweel L.L.C.
At 31 December 2005
1 ACTIVITIES
Tamweel L.L.C. (the Company) is registered as a limited liability company in accordance with UAE Federal Law No (8) of 1984, as amended. The Company is licensed by the UAE Central Bank as a finance company and is primarily engaged in Islamic financing and investment activities such as Ijara, Murabaha, Istinaa etc. The Company is also engaged in the business of property development. The activities of the Company are conducted in accordance with Islamic Shariaa, which prohibits usury, and within the provisions of its Articles and Memorandum of Association. The registered address of the Company is P.O. Box 111555, Dubai, United Arab Emirates.
SIGNIFICANT ACCOUNTING POLICIES
Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards, Shariaa rules and principles as determined by the Companys Shariaa Supervisory Board and applicable requirements of United Arab Emirates laws. The financial statements have been presented in thousands of UAE Dirhams being the functional currency of the company. The financial statements are prepared under the historical cost convention modified to include the measurement at fair value of investments carried at fair value through the income statement. The accounting policies are consistent with those used in the previous year. Revisions to International Financial Reporting Standards becoming mandatory for financial years beginning on or after 1 January 2005 have had no effect on the accounting policies adopted by the company. Definitions The following terms are used in the financial statements with the meaning specified: Ijarah An agreement whereby the Company (lessor) purchases or leases an asset according to the customers request (lessee), based on his promise to lease the asset for a specific period and against certain rent installments. Ijara could end by transferring the ownership of the asset to the lessee. Murabaha An agreement whereby the Company sells to a customer a commodity which the Company has purchased and acquired based on a promise received from the customer to buy the item purchased according to specific terms and conditions. The selling price comprises the cost of the commodity and an agreed profit margin. Istisnaa An agreement between the Company and a third party whereby the Company commits itself to construct specific assets or properties. The price and specifications of the assets or properties are agreed at the outset between the client and the Company. In addition, a construction supervision fee is paid by the client to the Company in phases, equivalent to the progress in the construction of the asset or property.
F-82
Tamweel L.L.C.
At 31 December 2005
Revenue recognition Sale of property Revenue on sale of apartments is recognized on the basis of percentage completion as and when all of the following conditions are met: A sale is consummated and contracts are signed; The buyers investment, to the date of the financial statements, is adequate to demonstrate a commitment to pay for the property; Construction work has commenced, with engineering, design work and site clearance being completed; The buyer is committed. The buyer is unable to require a refund except for non-delivery of the unit. Management believes that the likelihood of the Company being unable to fulfil its contractual obligations for these reasons is remote; and The aggregate sales proceeds and costs can be reasonably estimated.
Ijarah Ijarah income is recognised on a time-apportioned basis over the lease term. Murabaha Murabaha income is recognised on a time-apportioned basis over the period of the contract based on the principal amounts outstanding. Istisnaa Istisnaa revenue and the associated profit margin (difference between the cash price of al-masnoo to the customer and the Companys total Istisnaa cost) is accounted for on a time- apportioned basis. Processing fees Processing fees are recognized when facilities are approved. Cost of sale of property Cost of sale of property includes the cost of land and development costs. Development costs include the cost of infrastructure and construction. The cost of sale in respect of apartments is based on the estimated proportion of the development cost incurred to date to the estimated total development cost for each project. Islamic financing and investing assets Islamic financing and investing assets consist of Ijarah contracts, Istisnaa contracts and Murabaha receivables. Istisnaa cost is measured and reported in the financial statements at a value not exceeding the cash equivalent value. Other Islamic financing and investing assets are stated at cost less deferred profits and any provisions for impairment. Cash and cash equivalents Cash and cash equivalents comprise cash on hand, bank balances and short-term deposits with an original maturity of three months or less. Investments carried at fair value through income statement Investments are classified as fair value through income statement if the fair value of the investment can be reliably measured and the classification as fair value through income statement is as per the strategy of the Company. Investments classified as Investments at fair value through income statement upon initial recognition are remeasured at fair value with all changes in fair value being recorded in the income statement. Fair values For investments quoted in an active market, fair value is determined by reference to quoted market prices. Bid prices are used for assets and offer prices are used for liabilities. The fair value of investments in mutual funds, unit trusts, or similar investment vehicles are based on the last published bid price. For financial instruments where there is no active market fair value is normally based on one of the following: recent transactions brokers quotes The estimated fair value of corporate deposits is the amount payable on demand.
F-83
Tamweel L.L.C.
At 31 December 2005
Fixed assets Fixed assets are stated at cost less accumulated depreciation and any impairment in value. Land and capital workin progress are not depreciated. Depreciation is calculated on a straight line basis over the estimated useful lives of the assets as follows: Leasehold improvements Office equipment Networks and servers Furniture and fixtures Computer equipment 5 years 5 years 4 years 4 years 3 years
The carrying values of fixed assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying values exceed the estimated recoverable amount, the assets are written down to their recoverable amount. Expenditure incurred to replace a component of an item of fixed assets that is accounted for separately is capitalised and the carrying amount of the component that is replaced is written off. Other subsequent expenditure is capitalised only when it increases future economic benefits of the related item of fixed assets. All other expenditure is recognised in the income statement as the expense is incurred. Impairment and uncollectibility of financial assets An assessment is made at each balance sheet date to determine whether there is objective evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognised in the income statement. Impairment is determined as follows: (a) (b) For assets carried at fair value, impairment is the difference between cost and fair value; For assets carried at cost, impairment is the difference between cost and the present value of future cash flows discounted at the current market rate of return for a similar financial asset.
Deposits Deposits are carried at cost, less amounts repaid. Accounts payable and accruals Liabilities are recognized for amounts to be paid in the future for goods or services received, whether billed by the supplier or not. Provisions Provisions are recognized when the Company has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and able to be reliably measured. Zakat Zakat is computed as per the Companys Articles and Memorandum of Association and is approved by the Companys Shariaa Supervisory Board on the following basis: Zakat on shareholders equity is computed as the aggregate of general and legal reserves, provision for doubtful debt, retained earnings and provision for staff gratuity as multiplied by 2.577%. Zakat is disbursed by a committee appointed by the Board of Directors and operating as per the by-law set by the Board. Zakat on the paid up capital is not included in the zakat computations and is payable by the shareholders personally.
F-84
Tamweel L.L.C.
At 31 December 2005
Employees end of service benefits With respect to its national employees, the Company makes contributions to a pension fund established by the General Pension and Social Security Authority calculated as a percentage of the employees salaries. The Companys obligations are limited to these contributions, which are recognised in the income statement when due. The Company provides end of service benefits to its other employees. The entitlement to these benefits is based upon the employees salary and length of service, subject to the completion of a minimum service year. The expected costs of these benefits are accrued over the year of employment. Foreign currencies Transactions in foreign currencies are recorded at rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the balance sheet date. All differences are taken to the income statement. IFRSs and interpretation issued but not yet effective The following IFRSs and Interpretations have been issued but are not yet mandatory, and have not been adopted by the Company: IFRS 6 IFRIC 3 IFRIC 5 Exploration for and Evaluation of Mineral Resources Emission Rights Rights to Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
These Standards and Interpretations do not apply to the activities of the Company. IFRIC 4 Determining Whether an Arrangement Contains a Lease
This Interpretation is required to be applied for annual years beginning on or after 1 January 2006, but is not expected to have a material impact on the financial statements of the Company.
INCOME FROM ISLAMIC FINANCING AND INVESTING ASSETS 2005 AED000 2004 AED000 3,436 1,281 976 5,693
Ijarah Murabaha Istisnaa
28,163 2,832 15,246 46,241
INCOME FROM SALE OF DEVELOPMENT PROPERTY, NET 2005 AED000 2004 AED000 40,280 (19,688) 20,592
Revenue from sale of property Cost of sale of property (note 11)
60,204 (37,656) 22,548
F-85
Tamweel L.L.C.
At 31 December 2005
5 FEES AND OTHER INCOME 2005 AED000 Processing and arrangement fees Commission income Gain on investment earned at fair value through income statement Others 13,322 9,678 30 8,145 31,175 2004 AED000 5,111 2,903 8,014
GENERAL AND ADMINISTRATIVE EXPENSES 2005 AED000 2004 AED000 7,701 4,379 809 1,066 1,514 1,296 1,470 18,235
Staff costs Advertisement and public relations services Rent Depreciation Legal and professional expenses Commissions Others
20,830 5,955 1,483 1,198 740 52 5,384 35,642
FINANCE (COST) INCOME, NET 2005 AED000 2004 AED000 2,528 (305) (302) 1,921
Income on deposits Bank charges Mudaraba charges Corporate deposit charges
(844) (18,965) (2,311) (22,120)
ACCOUNTS RECEIVABLE AND PREPAYMENTS 2005 AED000 2004 AED000 20,875 25,299 5,685 1,025 2,909 55,793
Commission income receivable Receivables on sale of property Advance for purchase of properties Accrued profit on Islamic financing and investing assets Prepaid expenses Others
14,036 44,333 27,889 13,946 5,302 1,765 107,271
F-86
Tamweel L.L.C.
At 31 December 2005
9 ISLAMIC FINANCING AND INVESTING ASSETS 2005 AED000 Ijarah Murabaha Istisnaa 819,587 27,337 441,728 1,288,652 (2,800) 1,285,852 2004 AED000 197,767 45,814 22,926 266,507 266,507
Provision for impairment
10
INVESTMENTS CARRIED AT FAIR VALUE THROUGH INCOME STATEMENT
The Company holds investments in managed funds which are classified as investments carried at fair value through income statement. These investments are carried at fair value based on the last published bid price received from the fund manager.
11
DEVELOPMENT PROPERTY 2005 AED000 2004 AED000 19,688 (19,688)
Costs incurred during the year Less: Transferred to cost of sale of property (note 4)
37,656 (37,656)
12
FIXED ASSETS Software Furniture licenses and Network and computer and fixtures equipments server AED000 AED000 AED000 1,672 420 2,092 407 354 761 1,331 1,265 1,525 3,653 5,178 577 522 1,099 4,079 948 858 858 123 123 735 Capital work in progress AED000 2,623 7,981 10,604 10,604 2,623
Leasehold Office improvement equipments AED000 AED000 Cost: At 1 January 2005 Additions At 31 December 2005 Depreciation: At 1 January 2005 Charge for the Year At 31 December 2005 Net book value: At 31 December 2005 At 31 December 2004 778 778 102 102 676 337 299 636 80 97 177 459 257
Total AED000 6,157 13,989 20,146 1,064 1,198 2,262 17,884 5,093
F-87
Tamweel L.L.C.
At 31 December 2005
13 SHARE CAPITAL 2005 AED000 Issued and fully paid: 450,000 (2004: 300,000) shares of AED 1,000 each 2004 AED000
450,000
300,000
14
STATUTORY RESERVE
As required by the Commercial Companies Law and the Company's Articles of Association, 10% of the profit for the year has to be transferred to statutory reserve. The Company may resolve to discontinue such annual transfers when the reserve totals 50% of paid up share capital.
15
PROPOSED DIVIDEND
The Board of Directors has proposed cash dividend of AED 0.12 per share totaling AED 52,434 thousand, which is subject to the approval of the shareholders at the annual general meeting.
16
ACCRUALS AND OTHER PAYABLES 2005 AED000 2004 AED000 190 2,036 2,226
Accrued Mudaraba charges Accruals for capital expenditures Accrued corporate deposits charges Other payables
18,443 9,745 2,310 11,265 41,763
17
FINANCING ARRANGEMENTS 2005 AED000 2004 AED000 75,000 75,000
Mudaraba obligations Corporate deposits
700,000 305,000 1,005,000
Mudaraba obligations The Company has Mudaraba obligations of AED 675 million with Dubai Islamic Bank P.J.S.C. (2004: AED 75 million) and AED 25 million with Istithmar Private Joint Stock Company (2004: NIL). Mudaraba facilities obtained from Dubai Islamic Bank contain varying profit and loss distribution ratios subject to a minimum return, based on EIBOR, determined at the inception of the arrangement. Minimum return varied between 3.62% to 5.5%. These arrangements can be rolled forward at the end of the initial term subject to the mutual consent of both parties. These facilities are repayable within one year. Mudaraba facilities with Istithmar Private Joint Stock Company contain a profit and loss distribution ratio of (30:70) subject to a minimum return of 3.80%, based on EIBOR, determined at the inception of the arrangement. These arrangements can be renewed at the end of the initial term subject to the mutual consent of both parties. The repayment is due within a year.
F-88
Tamweel L.L.C.
At 31 December 2005
17 FINANCING ARRANGEMENTS - continued
Corporate deposits These are deposits from companies in the United Arab Emirates. These deposits are denominated in UAE Dirhams and carry profit returns varying between 4.2% and 5.75%.
18
Related parties represent major shareholders, directors and key management personnel of the Company, and companies of which they are principal owners (affiliated companies). Pricing policies and terms of these transactions are approved by the Companys management. Transactions with related parties included in the income statement are as follows: 2005 Income AED000 Major shareholders Directors and key management personnel Other related parties Expenses AED000 19,287 750 20,037 Income AED000 2004 Expenses AED000 607 875 94 1,576
Balances with related parties included in the balance sheet are as follows: 2005 Capital commitments AED000 Affiliated companies Major shareholders 235,462 235,462 Receivables AED000 42,881 42,881 Payables AED000 11,866 700,000 711,866 Capital commitments AED000 227,692 227,652 2004 Receivables AED000 27,589 27,589 Payables AED000 19,687 75,000 94,687
Compensation of Key Management Personnel 2005 AED000 Short term benefits Terminal benefits 4,778 110 4,888 2004 AED000 1,578 50 1,628
F-89
Tamweel L.L.C.
At 31 December 2005
19 COMMITMENTS
Credit-related commitments Financing-related commitments include commitments to extend finance designed to meet the requirements of the Companys customers. Commitments to extend financing represent contractual commitments to provide Islamic financing. Commitments generally have fixed expiration dates, or other termination clauses, and normally require the payment of a fee. Since commitments may expire without being drawn upon, the total contract amounts do not necessarily represent future cash requirements. The Company has the following credit related commitments: 2005 AED000 Irrevocable commitments to extend credit 954,233 2004 AED000 963,848
Capital commitment As at 31 December 2005, the Company was committed to capital expenditure of AED 235,462 thousands (31 December 2004: AED 227,692 thousands).
20
CONTINGENCIES
(a) The Company has entered into certain lease agreements amounting to AED 1,288 million (US$ 350 million) with customers of Nakheel L.L.C. (Nakheel) which are recorded as off-balance sheet items in the books of the Company. The Company has also entered into securitization and service agreements with Nakheel L.L.C. and Emirates National Securities Corporation (ENSeC) in connection with these lease agreements. The combined legal effect of these agreements is that the Company is acting on behalf of Nakheel in term of its arrangements with Nakheels customers. In return it receives a service fee. Any amount received from credit customers is passed by the Company to Trustees on behalf of Nakheel. Furthermore, as per the agreements, the Company is liable to ENSeC for any defaults by the credit customers. However, Nakheel has provided an irrevocable indemnity to the Company to make good any defaults by the customers and has also provided security in this regard. Accordingly, in the opinion of management the Company has minimal credit risk. The Company has obtained approval from the UAE Central Bank to account for the lease agreements as an off-balance item. (b) The Companys bankers have provided a guarantee of AED 50 million favoring the UAE Central Bank against the share capital. 21 RISK MANAGEMENT
Pricing risk Pricing risk, comprising market and valuation risks, is managed on the basis of pre-determined asset allocations across various asset categories, a continuous appraisal of market conditions and trends and managements estimate of long and short term changes in fair value. Credit risk 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. There are formal procedures to assess and monitor credit risk as part of the process of advancing finance. In addition, management regularly reviews the state of receivables and provision is made for any specific balances considered doubtful of recovery. The credit risk is reduced since all assets and finance receivables are considered to be fully secured by direct ownership or mortgage over the assets financed. The Companys customers are mainly based in the United Arab Emirates. At 31 December 2005, there was no significant concentration of credit risk.
F-90
Tamweel L.L.C.
At 31 December 2005
21 RISK MANAGEMENT continued
Liquidity risk Liquidity risk is the risk that an institution will be unable to meet its net funding requirements. Liquidity risk can be caused by market disruptions or credit downgrades which may cause certain sources of funding to dry up immediately. To guard against this risk, management have diversified funding sources and assets are managed with liquidity in mind, maintaining a healthy balance of cash and cash equivalents. The table below summarises the maturity profile of the Companys assets and liabilities. The contractual maturities of assets and liabilities have been determined on the basis of the remaining period at the balance sheet date to the contractual maturity date. The maturity profile is monitored by management to ensure adequate liquidity is maintained. The maturity profile of the assets and liabilities at 31 December 2005 was as follows: Less than 3 months AED000 Assets Cash and deposits with banks Accounts receivable and prepayments Islamic financing and investing assets Investments carried at fair value through income statement 162,011 4,078 212,538 378,627 3 months to 1 year AED000 49,731 155,253 1,030 206,014 Over 1 year AED000 53,462 918,061 971,523
Total AED000 162,011 107,271 1,285,852 1,030 1,556,164 17,884 1,574,048
Fixed assets
Shareholders equity and liabilities Zakat payable Accounts payable Accruals and other payables Deferred commission income Financing arrangements Employees end of service benefits
23,684 93 700,000 723,777
1,734 11,866 18,079 179 305,000 336,858
4,486 474 4,960
1,734 11,866 41,763 4,758 1,005,000 474 1,065,595 508,453 1,574,048
Equity
F-91
Tamweel L.L.C.
At 31 December 2005
21 RISK MANAGEMENT continued
31 December 2004 Less than 3 months AED000 Assets Cash and deposits with banks Accounts receivable and prepayments Islamic financing and investing assets 87,653 34,918 16,241 138,812 3 months to 1 year AED000 20,875 29,726 50,601 Over 1 year AED000 220,540 220,540 Total AED000 87,653 55,793 266,507 409,953 5,093 415,046 19,688 2,226 21,914 75,000 75,000 147 147 19,688 2,226 75,000 147 97,061 317,985 415,046
Fixed assets
Shareholders equity and liabilities Accounts payable Accruals and other payables Financing arrangements Employees end of service benefits
Equity
Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company has no material assets or liabilities in currencies other than UAE Dirhams. Accordingly, the Company is not subject to significant currency risk.
F-92
Tamweel L.L.C.
At 31 December 2005
22 SEGMENTAL INFORMATION
Primary segment information For management purposes the company is organised into two major business segments: Islamic Financing and Investing activity Property development
Principally handling Islamic financing and investing activities. Principally involved in the development and sale of property.
These segments are the basis on which the company reports its primary segment information. Other operations of the company comprise the operations and financial control groups. Segmental information for the year ended 31 December 2005 was as follows: Islamic financing and investing activities AED000 59,563 (2,800) 34,643
Property development AED000 Gross income Provision for impairment 22,548 22,548
Other AED000 17,853 17,853
Total AED000 99,964 (2,800) 75,044 (32,842) 42,202
Segment result Unallocated costs Net profit for the year OTHER INFORMATION Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities
44,333
1,299,798
14,036
16,128
1,030,810
4,758
1,358,167 215,881 1,574,048 1,051,696 13,899 1,065,595
F-93
Tamweel L.L.C.
At 31 December 2005
22
SEGMENTAL INFORMATION continued
Segmental information for the year ended 31 December 2004 was as follows: Islamic financing and investing activities AED000
Property development AED000
Other AED000
Total AED000
Gross income
20,592 20,592
13,332 12,725
2,903 2,903
36,827 36,220 (18,235) 17,985
Segment result Unallocated costs
Net profit for the year OTHER INFORMATION Segment assets Unallocated assets Total assets Segment liabilities Unallocated liabilities Total liabilities 19,688 53,412 22,312 266,507 -
288,819 126,227 415,046 73,100 23,961 97,061
No secondary segment information has been provided as the company operates only in the United Arab Emirates.
23
Financial instruments comprise financial assets and financial liabilities. Financial assets include cash and deposits with banks, trade accounts receivable and Islamic financing and investing assets and investment carried at fair value through income statement. Financial liabilities include payables, accruals, Mudaraba obligations and corporate deposits. The fair values of financial instruments are not materially different from their carrying values.
24
KEY SOURCES OF ESTIMATION UNCERTAINTY
Impairment of Islamic financing and investing assets An estimate of the collectible amount of Islamic financing and investing assets 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 trade accounts receivable were AED 1,288,652 thousand, and the provision for doubtful debts was AED 2,800 thousand. Any difference between the amounts actually collected in future years and the amounts expected will be recognised in the income statement.
F-94
Tamweel L.L.C.
At 31 December 2005
25 COMPARATIVES
The corresponding figures for 2004 have been reclassified in order to conform with the presentation for the current year. Such reclassifications do not affect previously reported net profit and shareholders equity and have been made in light of changes in International Financial Reporting Standards and to improve the quality of information presented.
F-95
ISSUER AND TRUSTEE Tamweel Sukuk Limited c/o Maples Finance Limited PO Box 1093 Queensgate House Grand Cayman, KY1-1102 Cayman Islands OBLIGOR Tamweel PJSC Business Avenue Building Mezzanine Floor PO Box 111555 Dubai United Arab Emirates PRINCIPAL PAYING AGENT, CALCULATION AGENT AND REPLACEMENT AGENT The Bank of New York Mellon, acting through its London Branch One Canada Square Canary Wharf London E14 5AL United Kingdom DELEGATE BNY Corporate Trustee Services Limited One Canada Square Canary Wharf London E14 5AL United Kingdom REGISTRAR AND TRANSFER AGENT The Bank of New York (Luxembourg) S.A Aerogolf Center 1A Hoehenhof, L-1736 Luxembourg LEGAL ADVISERS To the Joint Lead Managers as to English law and to UAE law Lovells (Middle East) LLP Level 6, Al Attar Business Tower Sheikh Zayed Road PO Box 506602 Dubai, United Arab Emirates To the Delegate as to English law Lovells LLP Atlantic House Holborn Viaduct London ECIA 2FG United Kingdom To Tamweel as to English law and to UAE law Allen & Overy LLP Suite101/202, Level 1&2 The Gate Village Building GV08 Dubai International Financial Centre PO Box 506678 Dubai, United Arab Emirates To the Issuer as to Cayman Islands law Maples and Calder 5th Floor, The Exchange Building, Dubai International Financial Centre, PO Box 119980 Dubai, United Arab Emirates
printed by eprintfinancial.com tel: + 44 (0) 20 7613 1800 document number 3989

Tamweel Sukuk Prospectus

Uploaded by

Document Information

Original Description:

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Tamweel Sukuk Prospectus

Uploaded by

Copyright:

Available Formats

Level: 5 From: 5 Wednesday, July 16, 2008 11:28 eprint3 3989 Intro : 3989 Intro

Standard Chartered Bank

United Bank Limited

The date of this Prospectus is 16 July 2008

PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Service Agency Agreement Purchase Undertaking/ Sale Undertaking

Issuer Proceeds Periodic Distribution Amounts and Redemption Amount

Joint Lead Managers and Bookrunners

The Bank of New York (Luxembourg) S.A.

Service Agency Agreement

Profit Reserve Account

Closing Date Maturity Date Issue Price Status

Periodic Distribution Dates

Redemption for Rating Downgrade

Redemption and Dissolution following a Dissolution Event

(iv) Limited Recourse

Form and Delivery of the Certificates

Denominations Withholding Tax

Selling Restrictions Transaction Documents

Governing Law and Jurisdiction

Waiver of Sovereign Immunity

(d) (e) (f)

(g) (h) (i)

Enforcement and Exercise of Rights

BUSINESS DESCRIPTION OF TAMWEEL PJSC

Multiple sales channels

Risk adjusted pricing model

Sound and stable core banking platform

Rated assets and portfolio management

Wide networks and partnerships

Credit risk framework

Operational risk management

the property category (i.e. mid-market versus high-end property).

Audit & Risk Committee

Chief Executive Officer

Head of Audit & Risk Management

Chief Commercial Officer

Chief Operating Officer

Chief Financial & Support Officer

General Manager Escrow Management Services

DESCRIPTION OF THE ISSUER

(j) (k) (l)

(i) (ii) (iii)

(d) (e) (f) (g)

F-1 F-12 F-50 F-76

Tamweel PJSC and its subsidiaries

Tamweel PJSC and its subsidiaries

General and administrative expenses

Depositors share of profit

Diluted earnings per share (AED)

Tamweel PJSC and its subsidiaries

778,291 634,632 1,424,275 45,301 66,753 6,635,280 42,241 9,626,773

LIABILITIES AND EQUITY

32,129 792,059 6,736,202 7,560,390

27,682 808,749 5,631,329 6,467,760

____________________ Chief Executive Officer 16 April 2008

KHALID BIN ZAYED

Tamweel PJSC and its subsidiaries

176,347 811 2,162 937 6,255 90,145 276,657

Purchase of property and equipment Cash used in investing activity

1,090,314 (750) 1,089,564

588,530 189,761 778,291

(45,299) 380,181 334,882