> For the complete documentation index, see [llms.txt](https://t-blocks.gitbook.io/t-blocks-documentation/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://t-blocks.gitbook.io/t-blocks-documentation/instrument-types/sukuk-and-shariah-compliant-instruments.md).

# Sukuk & Shariah-Compliant Instruments

Sukuk are asset-backed certificates of ownership structured in accordance with Islamic finance principles. Unlike conventional debt instruments, sukuk do not represent a claim on interest-bearing debt — they represent a proportional ownership interest in an underlying asset, usufruct, service, or project, with returns generated through that asset's performance rather than through the payment of riba (interest).

**Structure.** The SubFund acquires a direct ownership interest, usufruct right, or contractual participation in an underlying asset — which may include real estate, infrastructure, an operating business, a revenue-generating concession, or another eligible asset class — depending on the sukuk structure selected. The SubFund issues certificates (sukuk) to investors. Certificate holders hold a proportional beneficial interest in the SubFund's underlying asset position. Returns are generated through rental income, profit-sharing, trade-based margins, or agency arrangements — depending on the specific sukuk structure — and distributed to certificate holders in accordance with the SubFund's waterfall provisions.

**Shariah governance.** Each sukuk issuance is reviewed and certified by an independent Shariah Supervisory Board (SSB) composed of qualified Islamic scholars with recognised expertise in Islamic commercial law and financial structuring. The SSB reviews the instrument's structure, the underlying asset's Shariah eligibility, and the transaction documentation, and issues a fatwa confirming compliance with Islamic principles prior to issuance. The SSB monitors ongoing Shariah compliance throughout the instrument's lifecycle and issues an annual Shariah compliance certificate.

The SSB is appointed on a per-issuance basis and operates independently of the Management Company, the issuer, and the investors.

**Compliance framework.** Sukuk issued through T-Blocks Trio Fund are structured in accordance with the standards of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI), the leading international standard-setting body for Islamic finance, whose standards are adopted by Islamic financial institutions and regulators across more than 45 countries.

**Supported sukuk structures.** The following AAOIFI-compliant structures are supported, with the specific structure selected on a per-issuance basis depending on the underlying asset, the obligor's requirements, and the target investor base:

* Sukuk al-Ijara — lease-based certificates. The SubFund acquires an asset and leases it to the obligor. Certificate holders receive rental income. At maturity, the asset is sold or transferred. Returns are generated through the lease arrangement rather than through interest.
* Sukuk al-Murabaha — cost-plus sale certificates. The SubFund purchases an asset and sells it to the obligor at a disclosed markup. Certificate holders receive the profit share. Returns are generated through a trade-based transaction rather than through interest.
* Sukuk al-Musharakah — partnership certificates. The SubFund enters into a partnership with the obligor. Profits and losses are shared according to pre-agreed ratios. Certificate holders participate in partnership returns on an equity-participation basis.
* Sukuk al-Wakala — agency certificates. The SubFund appoints the obligor as agent to manage the underlying asset pool. Returns are generated through the agent's management activities. Certificate holders receive the agreed return less the agent's fee.

**Return mechanism.** Returns to certificate holders are defined in each SubFund's Specific Management Regulations and vary by sukuk structure. They may take the form of periodic rental distributions, profit-share payments, trade-based margins, or a combination. A defined distribution waterfall governs the priority and timing of payments to certificate holders. The specific return profile, expected yield, and distribution schedule are set out in the relevant private placement memorandum.

**Security.** Sukuk certificates are backed by the SubFund's ownership interest or contractual rights in the underlying asset. Depending on the structure and the nature of the underlying asset, additional security interests — including asset pledges, account pledges, or receivables assignments — may be established in favour of certificate holders and documented in the transaction security package.

**Typical use cases.** Real estate assets with rental income streams, infrastructure projects with concession-based revenue, operating businesses with distributable profit, hospitality assets under management agreements, and renewable energy installations with power purchase agreements structured on a Shariah-compliant basis.

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