MEX II Sdn Bhd IMTN Sukuk RM1.3 Billion and Junior Bonds RM150 Million - Information Memorandum

Transcription

1. STRICTLY CONFIDENTIAL – DO NOT FORWARD IMPORTANT: YOU MUST READ THE FOLLOWING BEFORE CONTINUING. THIS E-MAIL AND ANY ATTACHMENT HERETO ARE INTENDED ONLY FOR USE BY THE ADDRESSEE NAMED HEREIN AND MAY CONTAIN CONFIDENTIAL INFORMATION. IF YOU ARE NOT THE INTENDED RECIPIENT OF THIS E-MAIL, YOU ARE HEREBY NOTIFIED THAT ANY DISSEMINATION, DISTRIBUTION OR COPYING OF THE INFORMATION CONTAINED IN THIS E-MAIL, AND ANY ATTACHMENTS THERETO, ARE STRICTLY PROHIBITED. IF YOU HAVE RECEIVED THIS E-MAIL IN ERROR, PLEASE IMMEDIATELY NOTIFY US BY REPLY E-MAIL AND PERMANENTLY DELETE ALL COPIES OF THIS E-MAIL INCLUDING ALL ATTACHMENTS AND DESTROY ALL PRINTOUTS OF IT. BY OPENING AND ACCEPTING THIS E-MAIL CONTAINING THE INFORMATION MEMORANDUM, THE RECIPIENT AGREES TO BE BOUND BY ALL THE TERMS AND CONDITIONS BELOW. IF YOU DO NOT AGREE TO ANY OF THE TERMS AND CONDITIONS, PLEASE DELETE THIS E-MAIL IMMEDIATELY. ATTACHED PLEASE FIND AN ELECTRONIC COPY OF THE INFORMATION MEMORANDUM DATED 29 FEBRUARY 2016 (“INFORMATION MEMORANDUM”), RELATING TO THE PROPOSE ISSUE OF, OFFER FOR SUBSCRIPTION OR PURCHASE OF, OR INVITATION TO SUBSCRIBE FOR OR PURCHASE OF (1) THE ISLAMIC MEDIUM TERM NOTES (“SUKUK MURABAHAH”) UNDER THE ISLAMIC MEDIUM TERM NOTES ISSUANCE PROGRAMME OF RM1,300 MILLION IN NOMINAL VALUE UNDER THE SHARIAH PRINCIPLE OF MURABAHAH (VIA A TAWARRUQ ARRANGEMENT) (“SUKUK MURABAHAH PROGRAMME”) AND (2) THE JUNIOR BONDS OF RM150 MILLION IN NOMINAL VALUE (“JUNIOR BONDS”) BY MEX II SDN BHD (COMPANY NO. 1104478-P) (“ISSUER”). THE INFORMATION MEMORANDUM IS STRICTLY CONFIDENTIAL AND DOES NOT CONSTITUTE AN OFFER TO ANY PERSON OR THE PUBLIC GENERALLY TO SUBSCRIBE FOR OR OTHERWISE PURCHASE THE SUKUK MURABAHAH AND/OR THE JUNIOR BONDS OTHER THAN TO THE PERSONS FALLING WITHIN THE SELLING RESTRICTIONS AS SET OUT BELOW. DISTRIBUTION OF THE INFORMATION MEMORANDUM TO ANY PERSON, OTHER THAN THE PERSON RECEIVING THIS E-MAIL FROM THE ISSUER OR CIMB INVESTMENT BANK BERHAD (COMPANY NO. 18417-M) AS THE LEAD ARRANGER AND/OR LEAD MANAGER OF THE SUKUK MURABAHAH PROGRAMME AND THE JUNIOR BONDS (THE “LA/LM”) IS UNAUTHORISED. THE PERSON RECEIVING THIS E-MAIL FROM THE ISSUER OR THE LA/LM IS PROHIBITED FROM DISCLOSING THE INFORMATION MEMORANDUM, ALTERING THE CONTENTS OF THE INFORMATION MEMORANDUM OR FORWARDING A COPY OF THE INFORMATION MEMORANDUM OR ANY PORTION THEREOF BY E-MAIL OR OTHERWISE TO ANY PERSON. THE SUKUK MURABAHAH AND/OR THE JUNIOR BONDS MAY ONLY BE ISSUED, OFFERED, SOLD, TRANSFERRED OR OTHERWISE DISPOSED DIRECTLY OR INDIRECTLY TO PERSONS (1) AT THE POINT OF ISSUANCE OF THE SUKUK MURABAHAH AND/OR THE JUNIOR BONDS FALL WITHIN THE RELEVANT CATEGORY OF THE PERSONS SPECIFIED IN SECTION 4(6) OF THE COMPANIES ACT 1965 AND FALL WITHIN PART I OF SCHEDULE 6 (OR SECTION 229(1)(B)) OF THE CAPITAL MARKETS AND SERVICES ACT, 2007 (“CMSA”) AND PART I OF SCHEDULE 7 (OR SECTION 230(1)(B)) OF THE CMSA, READ TOGETHER WITH SCHEDULE 9 (OR SECTION 257(3)) OF THE CMSA; AND (2) AFTER THE ISSUANCE OF THE SUKUK MURABAHAH AND/OR THE JUNIOR BONDS FALL WITHIN THE RELEVANT CATEGORY OF THE PERSONS SPECIFIED IN SECTION 4(6) OF THE COMPANIES ACT 1965 AND FALL WITHIN PART I OF SCHEDULE 6 (OR SECTION 229(1)(B)) OF THE CMSA, READ TOGETHER WITH SCHEDULE 9 (OR SECTION 257(3)) OF THE CMSA. NO ACTION HAS BEEN TAKEN OR WILL BE TAKEN IN ANY JURISDICTION BY THE ISSUER OR THE LA/LM THAT WOULD, OR IS INTENDED TO, PERMIT AN OFFERING OF THE SUKUK MURABAHAH AND/OR THE JUNIOR BONDS, OR THE INVITATION TO SUBSCRIBE OR PURCHASE, OFFER, ISSUE OR TRANSFER OF THE SUKUK MURABAHAH AND/OR THE JUNIOR BONDS OR THE PUBLICATION OR DISTRIBUTION OF THIS INFORMATION
2. MEMORANDUM OR ANY OTHER MATERIAL IN CONNECTION WITH THE OFFERING OF THE SUKUK MURABAHAH AND /OR THE JUNIOR BONDS, IN ANY COUNTRY OR JURISDICTION WHERE ACTION FOR THAT PURPOSE IS REQUIRED. ACCORDINGLY, NO INVITATION TO SUBSCRIBE OR PURCHASE, OFFER, ISSUE OR TRANSFER OF THE SUKUK MURABAHAH AND/OR THE JUNIOR BONDS THE PUBLICATION OR DISTRIBUTION OF THIS INFORMATION MEMORANDUM OR ANY OTHER MATERIALS IN CONNECTION WITH THE OFFERING OF THE SUKUK MURABAHAH AND/OR THE JUNIOR BONDS IN ANY COUNTRY OR JURISDICTION OUTSIDE MALAYSIA SHALL BE MADE. BY ACCEPTING THE E-MAIL AND ACCESSING THE INFORMATION MEMORANDUM, YOU SHALL BE DEEMED TO HAVE REPRESENTED TO US THAT (1) YOU ARE A PERSON FALLING WITHIN THE SELLING RESTRICTIONS; AND (2) YOU CONSENT TO THE DELIVERY OF THE INFORMATION MEMORANDUM BY E-MAIL. YOU ARE REMINDED THAT THE INFORMATION MEMORANDUM HAS BEEN DELIVERED TO YOU ON THE BASIS THAT YOU ARE A PERSON INTO WHOSE POSSESSION THE INFORMATION MEMORANDUM MAY BE LAWFULLY DELIVERED IN ACCORDANCE WITH THE LAWS OF THE JURISDICTION IN WHICH YOU ARE LOCATED AND YOU MAY NOT, NOR ARE YOU AUTHORISED TO, DELIVER OR DISCLOSE THE CONTENTS OF THE INFORMATION MEMORANDUM TO ANY OTHER PERSON. IF THIS IS NOT THE CASE, YOU MUST RETURN THIS INFORMATION MEMORANDUM TO US IMMEDIATELY. TRANSMISSION OVER THE INTERNET MAY BE SUBJECT TO INTERRUPTIONS, TRANSMISSION BLACKOUT, DELAYED TRANSMISSION DUE TO INTERNET TRAFFIC, INCORRECT DATA TRANSMISSION DUE TO THE PUBLIC NATURE OF THE INTERNET, DATA CORRUPTION, INTERCEPTION, UNAUTHORISED AMENDMENT, TAMPERING, VIRUSES OR OTHER TECHNICAL, MECHANICAL OR SYSTEMIC RISKS ASSOCIATED WITH INTERNET TRANSMISSIONS. THE ISSUER AND THE LA/LM HAVE NOT ACCEPTED AND WILL NOT ACCEPT ANY RESPONSIBILITY AND/OR LIABILITY FOR ANY SUCH INTERRUPTION, TRANSMISSION BLACKOUT, DELAYED TRANSMISSION, INCORRECT DATA TRANSMISSION, CORRUPTION, INTERCEPTION, AMENDMENT, TAMPERING OR VIRUSES OR RISKS ASSOCIATED WITH INTERNET TRANSMISSIONS OR ANY CONSEQUENCES THEREOF. YOU ARE RESPONSIBLE FOR PROTECTING AGAINST VIRUSES AND OTHER DESTRUCTIVE ITEMS. YOUR USE OF THIS E-MAIL IS AT YOUR OWN RISK AND IT IS YOUR RESPONSIBILITY TO TAKE PRECAUTIONS TO ENSURE THAT IT IS FREE FROM VIRUSES AND OTHER ITEMS OF DESTRUCTIVE NATURE. THE FOREGOING IS IN ADDITION TO AND WITHOUT PREJUDICE TO ALL OTHER DISCLAIMERS AND AGREEMENTS WHICH A RECIPIENT OF THE INFORMATION MEMORANDUM SHALL BE DEEMED TO HAVE AGREED TO OR BE BOUND BY AS PROVIDED IN THE INFORMATION MEMORANDUM.
3. STRICTLY PRIVATE AND CONFIDENTIAL Serial Number : MEX II SDN BHD (Company No. 1104478-P) (Incorporated in Malaysia under the Companies Act 1965) INFORMATION MEMORANDUM IN RELATION TO THE PROPOSED ISSUANCE, OFFER FOR SUBSCRIPTION OR PURCHASE OF, OR INVITATION TO SUBSCRIBE FOR OR PURCHASE OF THE (1) ISLAMIC MEDIUM TERM NOTES (“SUKUK MURABAHAH”) UNDER THE ISLAMIC MEDIUM TERM NOTES ISSUANCE PROGRAMME OF RM1,300 MILLION IN NOMINAL VALUE UNDER THE SHARIAH PRINCIPLE OF MURABAHAH (VIA A TAWARRUQ ARRANGEMENT) (“SUKUK MURABAHAH PROGRAMME”) AND (2) JUNIOR BONDS OF RM150 MILLION IN NOMINAL VALUE (“JUNIOR BONDS”) Lead Arranger and Lead Manager CIMB Investment Bank Berhad (Company No. 18417-M) Financial Adviser ZJ advisory ZJ Advisory Sdn Bhd (Company No. 645449-V) This Information Memorandum is dated 29 February 2016.
4. IMPORTANT NOTICE Responsibility Statements This Information Memorandum has been approved by the directors of MEX II Sdn Bhd (Company No. 1104478-P) (“MEX II” or “Issuer”), and the board of directors of the Issuer accepts full responsibility for the accuracy of the information contained in this Information Memorandum. The Issuer, after having made all reasonable enquiries, confirms that this Information Memorandum contains all information with respect to the Issuer, which is material in the context of the proposed issuance, offer for subscription or purchase of, or invitation to subscribe or purchase of the (1) Sukuk Murabahah pursuant to the Sukuk Murabahah Programme and (2) Junior Bonds. Reasonable enquiries made by the Issuer with respect to the information in this Information Memorandum may not extend to the Issuer obtaining verification from independent sources. The opinions and intentions expressed in this Information Memorandum in relation to the Issuer are honestly held and there are no other facts in relation to the Issuer, the Sukuk Murabahah Programme and/or the Junior Bonds, the omission of which would, in the context of the Sukuk Murabahah Programme and/or the Junior Bonds, make any statement in this Information Memorandum misleading in any material respect. No representation or warranty, expressed or implied, is made that the information remains unchanged in any respect as of any date or dates after those stated herein, with respect to any matter concerning the Issuer or any statement made in this Information Memorandum. Any opinion of intention expressed in this Information Memorandum is honestly held as at the date hereof and has been reached after considering all relevant circumstances and is based on reasonable assumptions. Important Notice and General Statement of Disclaimer This Information Memorandum is being furnished on a private and confidential basis solely for the purpose of enabling investors to consider the purchase of the Sukuk Murabahah and/or Junior Bonds. It is a condition for the Sukuk Murabahah Programme to be rated AA-IS and the Junior Bonds to be rated A- by Malaysian Rating Corporation Berhad (“Rating Agency”). A rating is not a recommendation to buy, sell or hold securities and may be subject to revision, suspension or withdrawal at any time by the rating agency. None of the information or data contained in this Information Memorandum has been independently verified by CIMB Investment Bank Berhad (Company No. 18417-M) (“CIMB”) as the lead arranger/lead manager (“LA/LM”) and ZJ Advisory Sdn Bhd (Company No. 645449-V) as the financial adviser (“Financial Adviser”) of the Sukuk Murabahah Programme and the Junior Bonds. Accordingly, no representation, warranty or undertaking, express or implied, is given or assumed by the LA/LM and the Financial Adviser as to the authenticity, origin, validity, accuracy or completeness of such information and data or that the information or data remains unchanged in any respect after the relevant date shown in this Information Memorandum. The LA/LM and the Financial Adviser have not accepted and will not accept any responsibility for the information and data contained in this Information Memorandum or otherwise in relation to the Sukuk Murabahah Programme and/or the Junior Bonds and shall not be liable for any consequences of reliance on any of the information or data in this Information Memorandum. The information in this Information Memorandum supersedes all other information and material previously supplied (if any) to the recipients. By taking possession of this Information Memorandum, the recipients are acknowledging and agreeing and are deemed to have acknowledged and agreed that they will not rely on any previous information supplied. No person is authorised to give any information or data or to make any representation or warranty other than as contained in this Information Memorandum and, if given or made, any such information, data, representation or warranty must not be relied upon as having been authorised by the Issuer, the LA/LM and the Financial Adviser, or any other person. This Information Memorandum has not been and will not be made to comply with the laws of any jurisdiction other than Malaysia (“Foreign Jurisdiction”), and has not been and will not be lodged, registered or approved pursuant to or under any legislation of (or with or by any regulatory authorities or other relevant bodies of) any Foreign Jurisdiction and it does not constitute an issue,
5. offer for subscription or purchase of , or an invitation to subscribe or purchase the Sukuk Murabahah Junior Bonds or any other securities of any kind by any party in any Foreign Jurisdiction. The distribution or possession of this Information Memorandum in or from certain jurisdictions may be restricted or prohibited by law. Each recipient is required by the Issuer, the LA/LM and the Financial Adviser to seek appropriate professional advice regarding, and to observe, any such restriction or prohibition. Neither the Issuer, nor the LA/LM nor the Financial Adviser accepts any responsibility or liability to any person in relation to the distribution or possession of this Information Memorandum in or from any Foreign Jurisdiction. This Information Memorandum is not and is not intended to be a prospectus. Unless otherwise specified in this Information Memorandum, the information contained in this Information Memorandum is current as at the date hereof. By accepting delivery of this Information Memorandum, each recipient agrees to the terms upon which this Information Memorandum is provided to such recipient as set out in this Information Memorandum, and further agrees and confirms that: (a) it will keep confidential all such information and data; (b) it is lawful for the recipient to subscribe for or purchase the Sukuk Murabahah and/or the Junior Bonds under all jurisdictions to which the recipient is subject; (c) the recipient has complied with all applicable Malaysian laws in connection with such subscription or purchase of the Sukuk Murabahah and/or the Junior Bonds; (d) the Issuer, the LA/LM, the Financial Adviser and their respective directors, officers, employees and professional advisers are not and will not be in breach of the laws of Malaysia and of any Foreign Jurisdiction to which the recipient is subject as a result of such subscription or purchase of the Sukuk Murabahah and/or the Junior Bonds, and they shall not have any responsibility or liability in the event that such subscription or purchase of the Sukuk Murabahah and/or the Junior Bonds is or shall become unlawful, unenforceable, voidable or void; (e) it is aware that the Sukuk Murabahah and/or the Junior Bonds can only be offered, sold, transferred or otherwise disposed of directly or indirectly in accordance with the relevant Selling Restrictions (as defined below) and all applicable laws; (f) it has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of subscribing or purchasing the Sukuk Murabahah and/or the Junior Bonds, and is able and prepared to bear the economic and financial risks of investing in or holding the Sukuk Murabahah and/or the Junior Bonds; (g) it is subscribing or accepting the Sukuk Murabahah and/or the Junior Bonds for its own account; and (h) it is a person to whom an offer or invitation to subscribe to the Sukuk Murabahah and/or the Junior Bonds and to whom the Sukuk Murabahah and/or the Junior Bonds are issued who would (1) at the point of issuance of the Sukuk Murabahah and/or the Junior Bonds fall within the relevant category of the persons specified in Section 4(6) of the Companies Act 1965 and fall within Part I of Schedule 6 or Section 229(1)(b) of the Capital Markets and Services Act 2007, as amended from time to time (“CMSA”) and Part I of Schedule 7 or Section 230(1)(b) of the CMSA, read together with Schedule 9 or Section 257(3) of the CMSA; and (2) after the issuance of the Sukuk Murabahah and/or the Junior Bonds fall within the relevant category of the persons specified in Section 4(6) of the Companies Act 1965 and fall within Part I of Schedule 6 or Section 229(1)(b) of the CMSA read together with Schedule 9 or Section 257(3) of the CMSA (“Selling Restrictions”).
6. Each recipient is solely responsible for seeking all appropriate expert advice as to the laws of Malaysia and the laws of the Foreign Jurisdiction to which the recipient is subject . For the avoidance of doubt, this Information Memorandum shall not constitute an offer for subscription, or purchase of, or an invitation to subscribe or purchase the Sukuk Murabahah and/or the Junior Bonds in relation to any recipient other than those to whom copies have been sent by the LA/LM and are persons who fall within the ambit of the Selling Restrictions. Neither this Information Memorandum nor any other information supplied or document delivered under or in connection with the Sukuk Murabahah pursuant to the Sukuk Murabahah Programme respectively is intended to provide the basis of any credit or other evaluation or should be considered as a recommendation by the Issuer, the LA/LM and the Financial Adviser that any recipient of this Information Memorandum should purchase any of the Sukuk Murabahah and/or the Junior Bonds. This Information Memorandum is not a substitute for, and should not be regarded as, an independent evaluation and analysis and does not purport to be all-inclusive. Each investor contemplating purchasing the Sukuk Murabahah and/or the Junior Bonds should perform and is deemed to have made its own independent investigation and analysis of the financial condition, status and affairs, and its own appraisal of the creditworthiness and nature, of the Issuer, the terms of the offering of the Sukuk Murabahah and/or the Junior Bonds, including the merits and risks involved, and all other relevant matters, and each recipient should consult its own professional advisers. All information and statements herein are subject to the detailed provisions of the respective documents referred to herein and are qualified in their entirety by reference to such documents. Neither the distribution or delivery of this Information Memorandum nor the offering, sale or delivery of any Sukuk Murabahah and/or the Junior Bonds shall in any circumstance imply that the information contained herein concerning the Issuer is correct at any time subsequent to the date hereof or the date specified in this Information Memorandum if a date is specified, or that any other information supplied in connection with the Sukuk Murabahah Programme and/or the Junior Bonds is correct as of any time subsequent to the date indicated in the document containing the same. Neither the LA/LM nor the Financial Adviser nor any other advisers for the Sukuk Murabahah Programme and/or the Junior Bonds undertake to review the financial condition or affairs of the Issuer during the tenure of the Sukuk Murabahah and/or the Junior Bonds and the Sukuk Murabahah Programme and/or the Junior Bonds or to advise any investor in any Sukuk Murabahah and/or the Junior Bonds of any information coming to their respective attention. This Information Memorandum includes estimates, or reports thereon derived from sources mentioned in this Information Memorandum and other parties with respect to the economy, the material businesses which the Issuer operates and certain other matters. Such information, estimates, or reports have been included solely for illustrative purposes. No representation or warranty is made as to the accuracy or completeness of any information, estimates and/or reports thereon derived from such sources or from other third party sources. All discrepancies (if any) in the tables included in this Information Memorandum between the listed amounts and totals thereof are due to, and certain numbers appearing in this Information Memorandum are shown, after rounding. Statements of Disclaimer on Shariah Pronouncement CIMB Islamic Bank Berhad as the Shariah adviser ("Shariah Adviser") has approved the structure and mechanism of the Sukuk Murabahah Programme and its compliance with Shariah principles vide the Shariah pronouncement dated 7 January 2016. However, the approval is only an expression of the view of the Shariah Adviser based on its experience in the subject. There can be no assurance as to the Shariah permissibility of the structure of the issue and the trading of the Sukuk and none of the Issuer, or the LA/LM makes any representation as to the same. Investors are reminded that, as with any Shariah views, differences in opinion are possible. Investors are advised to obtain their own independent Shariah advice as to whether the structure meets their individual standards of compliance and make their own determination as to the future tradability of the Sukuk Murabahah on any secondary market.
7. Forward-Looking Statements The Issuer has included statements in this Information Memorandum which contain words or phrases such as “will”, “would”, “aimed”, “is likely”, “are likely”, “believe”, “expect”, “expected to”, “will continue”, “will achieve”, “anticipate”, “estimate”, “intend”, “plan”, “contemplate”, “seek to”, “seeking to”, “target”, “propose to”, “future”, “objective”, “goal”, “project”, “should”, “can”, “could”, “may” and similar expressions or variations of such expressions, that are “forward-looking statements”. All of these forward-looking statements are based on estimates and assumptions made by the Issuer and although the Issuer believes that the expectations reflected in the forwardlooking statements are reasonable at this time, actual results may differ materially from those suggested by the forward-looking statements due to certain risks or uncertainties that may cause events or future results to be materially different than expected or indicated by such statements and there can be no assurance that these expectations will prove to be correct. For a further discussion on the factors that could cause actual results to differ, see the discussion under “Investment Considerations” contained in this Information Memorandum. As such, no assurances can be given that any of such statements or estimates will be realised. In light of these and other uncertainties, the inclusion of a forward looking statement in this Information Memorandum should not be regarded as a representation or warranty by the Issuer or any other person that the plans and objectives of the Issuer will be achieved. The Issuer is not under any obligation to update or revise such forward looking statements to reflect any change in expectations or circumstances. Acknowledgement The Issuer hereby acknowledge that it has authorised the LA/LM and/or its affiliates to circulate or distribute this Information Memorandum on their behalf in respect of or in connection with the proposed offer or invitation to subscribe for and issue of the Sukuk Murabahah and/or the Junior Bonds to prospective investors and that no further evidence of authorisation is required. Statements of Disclaimer by the Securities Commission Malaysia (“SC”) A copy of this Information Memorandum will be deposited with the SC, which takes no responsibility for its contents. The issue, offer for subscription or purchase of, or invitation to subscribe or purchase the Sukuk Murabahah and/or the Junior Bonds is subject to the fulfilment of various conditions precedent including without limitation lodgement of the applicable information and documents pursuant to the Guidelines on Unlisted Capital Market Products Under the Lodge and Launch Framework (“Guidelines”) (effective on 15 June 2015) issued by the SC. The Sukuk Murabahah Programme has been lodged with the SC on 19 February 2016 and the Junior Bonds has been lodged with the SC on 19 February 2016. Please note that the lodgement with the SC shall not be taken to indicate that the SC recommends the subscription or purchase of the Sukuk Murabahah and/or the Junior Bonds. The SC shall not be liable for any non-disclosure on the part of the Issuer and assumes no responsibility for the correctness of any statements made or opinions or reports expressed in this Information Memorandum. EACH ISSUANCE OF THE SUKUK MURABAHAH WILL CARRY DIFFERENT RISKS AND PROSPECTIVE INVESTORS ARE STRONGLY ENCOURAGED TO EVALUATE EACH ISSUANCE OF THE SUKUK MURABAHAH ON ITS OWN MERIT. IT IS RECOMMENDED THAT PROSPECTIVE INVESTORS CONSULT THEIR FINANCIAL, LEGAL AND OTHER ADVISERS BEFORE PURCHASING OR SUBSCRIBING FOR THE SUKUK MURABAHAH UNDER THE SUKUK MURABAHAH PROGRAMME.
8. Documents Incorporated by Reference The following documents published or issued from time to time after the date hereof shall be deemed to be incorporated in , and to form part of, this Information Memorandum: (i) the most recently published audited consolidated and non-consolidated annual financial statements and, if published later, the most recently published interim consolidated and nonconsolidated financial statements (if any) of the Issuer; (ii) the pricing supplement for each issuance of the Sukuk Murabahah (if any); (iii) the pricing supplement for the issuance of the Junior Bonds (if any); and (iv) all supplements or amendments to this Information Memorandum deposited with the SC by the Issuer, if any, save that any statement contained herein or in a document which is deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purpose of this Information Memorandum to the extent that a statement contained in any such subsequent document which is deemed to be incorporated by reference herein modifies or supersedes such earlier statement (whether expressly, by implication or otherwise). Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Information Memorandum. The Issuer will provide, without charge, to each person, falling within the Selling Restrictions, to whom a copy of this Information Memorandum has been delivered, upon the request of such person, a copy of any or all of the documents deemed to be incorporated herein by reference unless such documents have been modified or superseded as specified above. Requests for such documents should be directed to the Issuer through the LA/LM at its offices set out at the end of this Information Memorandum. [The remainder of this page is intentionally left blank]
9. CONFIDENTIALITY This Information Memorandum and its contents are strictly confidential and are made strictly on the basis that the recipient shall ensure that they will remain confidential . Accordingly, this Information Memorandum and its contents, or any information, which is made available in connection with any further enquiries, must be held in complete confidence. This Information Memorandum is sent to selected persons who fall within the ambit of the Selling Restrictions. Any person who receives this Information Memorandum who does not fall within the ambit of the Selling Restrictions must immediately notify the LA/LM and return the Information Memorandum to the LA/LM or the Issuer. In the event that there is any contravention of this confidentiality undertaking or there is reasonable likelihood that this confidentiality undertaking may be contravened, the Issuer may, at its discretion, apply for any remedy available to the Issuer whether at law, equity, including without limitation, injunctions. The Issuer is entitled to fully recover from the contravening party all costs, expenses and losses incurred and/or suffered, in this regard. For the avoidance of doubt, the recipient, the recipient’s professional advisers, directors, employees and any other persons who may receive this Information Memorandum or any part of it from the recipient shall be deemed to have agreed to abide by this confidentiality undertaking. [The remainder of this page is intentionally left blank]
10. TABLE OF CONTENTS TABLE OF CONTENTS .................................................................................................................... i DEFINITIONS AND ABBREVIATIONS ............................................................................................ 1 SECTION 1 EXECUTIVE SUMMARY .................................................................................... 4 1.1 Brief Background of the Issuer and the MEX II Highway .............................. 4 1.2 The Sukuk Murabahah Programme ................................................................. 4 1.3 The Junior Bonds.............................................................................................. 6 SECTION 2 PRINCIPAL TERMS AND CONDITIONS OF THE SUKUK MURABAHAH PROGRAMME .................................................................................................... 8 2.1 Details of the Sukuk Murabahah Programme ................................................ 8 2.2 Transaction Diagram of the Sukuk Murabahah Programme ...................... 39 SECTION 3 PRINCIPAL TERMS AND CONDITIONS OF THE JUNIOR BONDS ............. 41 3.1 Details of the Junior Bonds ........................................................................... 41 SECTION 4 BACKGROUND INFORMATION OF THE ISSUER ........................................ 63 4.1 Corporate Information .................................................................................... 63 4.2 Substantial Shareholders and Share Capital ............................................... 63 4.3 Shareholding Structure .................................................................................. 63 4.4 Board of Directors........................................................................................... 64 4.5 Senior Management ........................................................................................ 66 SECTION 5 SALIENT TERMS OF THE AGREEMENTS .................................................... 69 5.1 The Concession Agreement………………………………………………………69 5.2 The Turnkey Contract……………………………………………………………...75 SECTION 6 MEX II HIGHWAY…………………………………………………………………... 77 6.1 Description of the MEX Highway and MEX II Highway……………………....77 6.2 Toll Systems and Toll Collection………………………………………………...78 6.3 Operations, Maintenance and Management of MEX II……………………….80 6.4 Traffic Projections……………………………………………………………….... 81 SECTION 7 INVESTMENT CONSIDERATIONS……………………………………………… 82 7.1 Risk factors relating to the Issuer ................................................................ 82 7.2 Risk factors relating to the Issuer’s Business ............................................. 83 7.3 Risk relating to the Sukuk Murabahah Programme .................................... 95 7.4 Risk relating to the Junior Bonds ................................................................. 96 7.5 General considerations .................................................................................. 97 SECTION 8 ECONOMY AND INDUSTRY OVERVIEW ....................................................... 99 8.1 Overview and Outlook of the Malaysian Economy...................................... 99 8.2 Industry Overview and Future Prospects ................................................... 100 SECTION 9 OTHER INFORMATION ................................................................................. 101 9.1 Material Litigation ......................................................................................... 101 9.2 Material Contracts ......................................................................................... 101 9.3 Contingent Liabilities.................................................................................... 101 9.4 Conflict of Interest ........................................................................................ 101 APPENDIX I ………………………………………………………………………………………. 103 AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD FROM 12 AUGUST 2014 (DATE OF INCORPORATION) TO 31 DECEMBER 2014 APPENDIX II CASHFLOW PROJECTIONS APPENDIX III THE TRAFFIC REPORT FOR MEX II HIGHWAY i
11. DEFINITIONS AND ABBREVIATIONS In this Information Memorandum , except where the context otherwise requires, the following words and expressions shall have the following meanings: “Additional Works” means any additional works to the construction works of the MEX II Highway as required by the Government. “Availability Date” means the date the Sijil Kesempurnaan Pembinaan Lebuhraya (i.e. Certificate of Practical Completion) is issued by LLM to MEX II. “Banks” means: (i) the banks or financial institutions which may agree to provide loans or other financing to MEX II for t h e M E X I I H i g h w a y pursuant to the Loan Agreement(s), and (ii) any and all investors (other than MEX II) providing financing or refinancing for t h e M E X I I H i g h w a y, and (iii) any trustee or agent acting on their behalf. “BNM” means Bank Negara Malaysia. “Board” means the board of directors of MEX II. “Bondholders” means the holders of the Junior Bonds. “CIMB” or “LA/LM” means CIMB Investment Bank Berhad (Company No. 18417M), as the lead arranger and lead manager for the Sukuk Murabahah Programme and the Junior Bonds issuance. “CMSA” means the Capital Markets and Services Act 2007 of Malaysia, as amended from time to time and any re-enactment thereof. “Companies Act” means the Companies Act 1965 of Malaysia, as amended from time to time and any re-enactment thereof. “Concession” means the concession granted to MEX II by the Government as provided in the Concession Agreement. “Concession Agreement” means the concession agreement dated 20 October 2015 entered into between the Issuer and the Government in relation to the MEX II Highway. “Concession Period” shall have the meaning given to it at Section 5.1(b) of this Information Memorandum. “CP Period” shall have the meaning given to it at Section 5.1(c) of this Information Memorandum. “Effective Date” shall have the meaning given to it at Section 5.1(c) of this Information Memorandum. “Expiry Date” shall have the meaning given to it at Section 5.1(b) of this Information Memorandum. “Financial Adviser” means ZJ Advisory Sdn Bhd (Company No. 645449-V). “Financing Documents” means any loan documentation between the Lenders and MEX II for the provision of Loan for the Concession. “Government” means the government of Malaysia. “Junior Bonds” means proposed issue of, offer for subscription or purchase of, or invitation to subscribe for or purchase of junior bonds of RM150 million in nominal value. “Kampung Pandan means just north of the Jalan Tun Razak / Kampung Pandan 1
12. Roundabout ” Roundabout. “KL” means Kuala Lumpur. “KLIA” means the Kuala Lumpur International Airport . “KLIA2” means the Kuala Lumpur International Airport 2. “Lenders” means any financial institution licensed under the Financial Services Act 2013 or any financial institutions licensed under the Development Financial Institution Act 2002, Islamic Financial Services Act 2013 and/or Bank Kerjasama Rakyat Malaysia Bank Berhad Act 1978 operating in Malaysia and/or such investors holding any private debt securities issued for purposes of financing or refinancing the construction works under the Concession Agreement which for all intents and purposes will mean to include – (i) A trustee and/or agent appointed to represent such financiers’ interest thereto and/or; (ii) Such institutions licensed under the Financial Services Acts 2013 or Islamic Financial Services Act 2013 providing guarantees to such investors, at any time providing, raising, arranging or making available, direct or indirectly, financing to MEX II for the construction works under the Concession Agreement and will include its successor-in-title and permitted assigns. “LLM” means the Malaysian Highway Authority (Lembaga Lebuhraya Malaysia) established under the Highway Authority Malaysia (Incorporation) Act 1980 [Act 231]. “Loan” means any financial arrangement relating to the Concession between MEX II and the Lenders. “Loan Agreement” means an agreement or agreements under which MEX II is entitled to obtain all necessary loans or other financing for the MEX II Highway; “LPD” means the latest practicable date, being 19 February 2016. “Maintenance Bond” means the maintenance bond(s) provided or to be provided to the Government by MEX II under the Concession Agreement. “Maju Group” means Maju Holdings and its subsidiaries and associated companies from time to time. “Maju Holdings” or “Turnkey Contractor” means Maju Holdings Sdn Bhd (Company No. 40444-V). “MESB” means Maju Expressway Sdn Bhd (Company No. 389815-V). “MEX I Revenue” means the Toll Revenue attributable to MESB which is to be collected by MEX II on behalf of MESB. “MEX II Revenue” means the Toll Revenue attributable to MEX II in relation to the MEX II Highway which is to be collected by MEX II. “MEX Highway” means the Maju Expressway which consists of Sections I, II, Seri Kembangan Interchange, Putrajaya Interchange and Putrajaya Link Interchange which starts at Kuala Lumpur from Kampung Pandan Roundabout and terminates at the Putrajaya Interchange, Putrajaya Link Interchange, Seri Kembangan Interchange and all parts thereof. “MEX II Highway” means the extension of the MEX Highway which starts at the Putrajaya Interchange and terminates at KLIA and all parts thereof constructed in the manner specified in the Concession 2
13. Agreement . “MEX II” or “Issuer” means MEX II Sdn Bhd (Company No. 1104478-P). “Performance Bond” means the performance bond(s) to be provided to the Government by MEX II under the Concession Agreement. “Putrajaya Interchange” means a trumpet interchange provided for the MEX Highway at the connection with MEX II Highway. “Putrajaya Link Interchange” means a trumpet interchange provided for the MEX Highway at the connection with Putrajaya Link. “Rating Agency” means Malaysian Rating Corporation Berhad (Company No. 364803-V). “RM” means Ringgit Malaysia. “Section I” means that section of MEX Highway from Kampung Pandan Roundabout to Technology Park Malaysia. “Section II” means that section of MEX Highway begins at Technology Park Malaysia and ends at Putrajaya Link Interchange and Putrajaya Interchange. “Seri Kembangan Interchange” means a trumpet interchange designed, constructed, operated and maintained by MESB including the link, roads, ramps, plazas and supervision building related to the interchange to be constructed at kilometre 16.5 of the MEX Highway which provides for access to and from Seri Kembangan to the MEX Highway. “SC” means the Securities Commission Malaysia. “Sukuk Murabahah Programme” means the proposed Islamic medium term notes issuance programme of RM1,300 million in nominal value under the Shariah principle of Murabahah (via a Tawarruq arrangement). “Sukuk Murabahah” means the Islamic medium term notes issued under the Sukuk Murabahah Programme. “Sukukholders” means the holders of the Sukuk Murabahah. “Toll Collection Account” means an account opened or to be opened by MEX II as may be informed by MEX II to MESB to capture all the MEX I Revenue and MEX II Revenue, if applicable. “Toll Collection Agreement” means the toll collection agreement to be entered into between the Issuer and MESB, if applicable. “Toll Revenue” means toll collection including electronic toll collection less any rebate, discount and commission. “Traffic Consultant” means Jacobs Engineering Group Malaysia Sdn Bhd. “Trustee” means the trustee(s) pursuant to the trust deed(s) to be entered into by MEX II pursuant to the Loan Agreement(s); “Sukuk Trustee” or “Security Trustee” means TMF Trustees Malaysia Berhad (Company No. 610812W). “Turnkey Contract” means the turnkey contract dated 18 February 2016 entered between the Issuer and Maju Holdings for the design, construction, completion and commissioning of the MEX II Highway. “Value of Completed Works” shall have the meaning given to it at Section 7.2(ii)(i)(a) of this Information Memorandum. 3
14. SECTION 1 EXECUTIVE SUMMARY The following executive summary below aims to provide an overview of the information contained in this Information Memorandum and is qualified in its entirety by the more detailed information appearing elsewhere in this Information Memorandum . Investors should read the entire Information Memorandum including the appendices carefully before deciding whether or not to invest in any of the Sukuk Murabahah and/or the Junior Bonds. 1.1 Brief Background of the Issuer and the MEX II Highway The Issuer was incorporated in Malaysia on 12 August 2014 under the Companies Act as a private limited company under the name of MEX II Sdn Bhd with the registration number 1104478-P. The principal activities of MEX II are to design and construct the extension of the MEX Highway from Putrajaya to KLIA (“MEX II Highway”), to provide other highway related facilities and services, and to operate and maintain the MEX II Highway and to collect toll from the general public for the use of the highway during the Concession Period. On 20 October 2015, the Government and MEX II entered into the Concession Agreement whereby the Government granted to MEX II, inter alia, the right and authority to undertake the design, construction, maintenance, operation and management of the MEX II Highway. Further details of the Concession Agreement are set out in Section 5.1 of this Information Memorandum. The MEX II Highway is approximately 16.8km in length which consists of a three lane dual carriageway which connects to the Putrajaya Interchange of the MEX Highway and aims to provide the shortest direct linkage between the commercial centre of KL and the KLIA/KLIA 2 at Sepang. Further description of the MEX II Highway is provided under Section 6 of this Information Memorandum. On 18 February 2016, MEX II entered into the Turnkey Contract to appoint Maju Holdings as the Turnkey Contractor to design, construct, complete and commission the MEX II Highway for a consideration of RM 1,290,000,000 inclusive of goods and services tax. The Turnkey Contract commences upon the confirmation of the fulfilment of the conditions precedent and other terms and conditions of the Concession Agreement. Further details of the Turnkey Contract are set out in Section 5.2 of this Information Memorandum. 1.2 The Sukuk Murabahah Programme (i) Overview of the Sukuk Murabahah Programme The Sukuk Murabahah shall be issued under the Shariah principle of Murabahah (via Tawarruq arrangement), which falls within the Shariah principles and concepts approved by the SC’s Shariah Advisory Council (“SAC”). Murabahah (cost-plus sale) is a contract that refers to the sale and purchase of assets whereby the cost and profit margin (mark-up) are made known. Tawarruq (tripartite sale) is an arrangement of purchasing a commodity on a deferred price and then selling it to a third party for cash. The issuance of each tranche of the Sukuk Murabahah shall be effected as follows: 1. The Sukuk Trustee (on behalf of the holders of the Sukuk Murabahah (“Sukukholders”)) and MEX II shall enter into an agency agreement 4
15. (“Agency Agreement”), pursuant to which MEX II (in such capacity, the “Agent”) is appointed as the agent of the Sukukholders for the purchase and sale of Commodities (as defined in Section 2 of this Information Memorandum). The Agent will then enter into a “Sub-Agency Agreement” to appoint the Facility Agent as the sub-agent (in such capacity, the “SubAgent”) for the purchase and sale of Commodities under the Sukuk Murabahah issuance. 2. Pursuant to a commodities murabahah master agreement (“Commodities Murabahah Master Agreement”), to be entered into between MEX II (in such capacity, the “Purchaser”) and the Agent and the Sukuk Trustee (acting on behalf of the Sukukholders), the Purchaser issues a purchase order (the "Purchase Order") to the Agent and subsequently thereafter, the Agent issues the Purchase Order to the Sub-Agent. In the Purchase Order, MEX II (acting as Purchaser for itself) will request the Agent, and subsequently, the Agent will request the Sub-Agent to purchase the Commodities on the terms specified therein. The Purchaser will irrevocably undertake to purchase the Commodities from the Sukukholders via the Sub-Agent at the Deferred Sale Price (as defined in Section 2 of this Information Memorandum). 3. Pursuant to the Purchase Order, the Sub-Agent via the Commodity Trading Participant (“CTP”) (pursuant to a CTP purchase agreement entered into between the Sub-Agent and the CTP (“CTP Purchase Agreement”)) will purchase on a spot basis the Commodities from commodity vendor(s) in the Bursa Suq Al-Sila' and/or such other independent commodity trading platforms acceptable to the Shariah Adviser (“Commodity Seller”) at a purchase price, which shall be an amount equivalent to the Sukuk Murabahah proceeds ("Purchase Price"). 4. MEX II (acting as the Issuer) shall issue Sukuk Murabahah to the Sukukholders whereby the proceeds received from such issuance shall be used to pay for the Purchase Price of the Commodities. The Sukuk Murabahah shall evidence the Sukukholders' ownership of the Commodities and subsequently, once the Commodities are sold to MEX II (as the Purchaser for itself), the entitlement to receive the Deferred Sale Price. 5. Thereafter, pursuant to the undertaking under the Purchase Order, the Sub-Agent (acting on behalf of the Agent who in turn acts as agent of the Sukukholders) shall sell the Commodities to MEX II (acting as Purchaser for itself) at the Deferred Sale Price under the commodities sale and purchase agreement (the “Sale and Purchase Agreement”). 6. Subsequently thereafter, MEX II (pursuant to a CTP sale agreement entered into between MEX II, as Purchaser for itself, and the CTP (“CTP Sale Agreement”)) shall appoint the CTP to sell the Commodities to Bursa Suq Al-Sila’ and/or such other commodity trading platforms acceptable to the Shariah Adviser (“Commodity Buyer”) on a spot basis for an amount equal to the Purchase Price. The CTP Sale Agreement will provide for the CTP to sell the Commodities directly to the Commodity Buyer upon notice by MEX II that the Sale and Purchase Agreement has been duly executed and upon receipt of the sale instruction by MEX II. 7. During the tenure of the Sukuk Murabahah, MEX II (in its capacity as the Purchaser), as part of its obligation to pay the Deferred Sale Price, shall make periodic profit payments to the Sukukholders. On the Sukuk Murabahah maturity dates or upon the declaration of an Event of Default (as defined in Section 2 of this Information Memorandum), 5
16. MEX II (in its capacity as the Purchaser) shall pay all amounts outstanding in respect of the Deferred Sale Price of the relevant Sukuk Murabahah (subject to Ibra’ as defined below), where applicable, upon which the relevant Sukuk Murabahah will be cancelled. Further details of the Sukuk Murabahah Programme are set out in Section 2 of this Information Memorandum. (ii) Utilisation of Proceeds The utilisation of proceeds is as follows: Utilisation of proceeds Amount up to (RM’ million) (i) To part finance the construction costs, development costs, financing costs, fees and expenses in relation to MEX II Highway 1,230 (ii) To fund the FSRA (as defined in Section 2 of this Information Memorandum) 50 (iii) To pay fees, expenses and all other amounts payable under or related to the Sukuk Murabahah 20 Total 1,300 Note: 1. In the event that the amount allocated for purposes set out in any of the items (i) to (iii) above is not utilised in whole or in part for such purposes, the Issuer may utilise such unutilised amount for any of the other purposes set out in items (i) to (iii) above. 2. Once the Sukuk Murabahah has been issued for any of the purposes set out above, the Issuer may issue new Sukuk Murabahah to refinance the outstanding Sukuk Murabahah. For the avoidance of doubt, all utilisation of funds from the issuance of the Sukuk Murabahah shall be for Shariah compliance purposes only. (iii) Rating The Sukuk Murabahah Programme has been assigned a preliminary rating of AA-IS by the Rating Agency. 1.3 The Junior Bonds (i) Overview of the Junior Bonds Issuance of redeemable secured junior bonds of RM150 million in nominal value (“Junior Bonds”). The Junior Bonds shall rank after the Sukuk Murabahah issued under the Sukuk Murabahah Programme in respect of security and payment to the extent that payments under the Junior Bonds are subject to compliance with the Requisite Conditions (as defined in Section 3 of this Information Memorandum). There is no payment of coupon amounts under the Junior Bonds during the construction period of the MEX II Highway. The payment of coupon amounts is subject to the Requisite Conditions which includes, amongst others, the commencement of MEX II Highway tolling operations. 6
17. Further details of the Junior Bonds are set out in Section 3 of this Information Memorandum . (ii) Utilisation of Proceeds The utilisation of proceeds is as follows: Utilisation of proceeds Amount up to (RM’ million) (i) To part finance the construction costs, development costs and financing costs in relation to MEX II Highway (ii) To fund the Junior FSRA (as defined in Section 3 of this Information Memorandum) 140 Total 150 10 Note: 1. In the event that the amount allocated for purposes set out in any of the items (i) to (ii) above is not utilised in whole or in part for such purposes, the Issuer may utilise such unutilised amount for any of the other purposes set out in items (i) to (ii) above. (iii) Rating The Junior Bonds have been assigned a preliminary rating of A- by the Rating Agency. [The remainder of this page is intentionally left blank] 7
18. SECTION 2 PRINCIPAL TERMS AND CONDITIONS OF THE SUKUK MURABAHAH PROGRAMME Words and expressions used and defined in this Section 2 shall , in the event of any inconsistency with the definitions section of this Information Memorandum, only be applicable for this Section 2. 2.1 Details of the Sukuk Murabahah Programme Name of facility : An Islamic medium term notes issuance programme of RM1,300 million in nominal value under the Shariah principle of Murabahah (via a Tawarruq arrangement) (“Sukuk Murabahah Programme”). The Islamic medium term notes to be issued under the Sukuk Murabahah Programme shall be referred to as “Sukuk Murabahah”. One-time issue or programme : Programme Shariah principles (for sukuk) : Facility description : No. Shariah Principles 1 Murabahah (Cost-plus sale) 2 Tawarruq (Tripartite sale) The Sukuk Murabahah shall be issued under the Shariah principle of Murabahah (via Tawarruq arrangement), which are the Shariah principles and concepts approved by the SAC. Murabahah (cost-plus sale) is a contract that refers to the sale and purchase of assets whereby the cost and profit margin (mark-up) are made known. Tawarruq (tripartite sale) is purchasing a commodity on a deferred price and then selling it to a third party for cash. The issuance of each tranche of the Sukuk Murabahah from time to time under the Sukuk Murabahah Programme shall be effected as follows: 1. The Sukuk Trustee (on behalf of the holders of the Sukuk Murabahah (“Sukukholders”)) and MEX II shall enter into an agency agreement (“Agency Agreement”), pursuant to which MEX II (in such capacity, the “Agent”) is appointed as the agent of the Sukukholders for the purchase and sale of Commodities (as defined in the paragraph entitled “Identified Assets” in "Other terms and conditions"). The Agent will then enter into a “Sub-Agency Agreement” to appoint the Facility Agent as the sub-agent (in such capacity, the “Sub-Agent”) for the purchase and sale of Commodities under the Sukuk Murabahah issuance. 2. Pursuant to a commodities murabahah master agreement (“Commodities Murabahah Master Agreement”), to be entered into between MEX II (in such capacity, the “Purchaser”) and the Agent and the Sukuk Trustee (acting on behalf of the Sukukholders), the Purchaser issues a purchase order (the "Purchase Order") to the Agent and subsequently thereafter, the Agent issues the Purchase Order to the SubAgent. In the Purchase Order, MEX II (acting as Purchaser for 8
19. itself ) will request the Agent, and subsequently, the Agent will request the Sub-Agent to purchase the Commodities on the terms specified therein. The Purchaser will irrevocably undertake to purchase the Commodities from the Sukukholders via the Sub-Agent at the Deferred Sale Price (as defined in the paragraph entitled “Purchase and selling price/rental” in "Other terms and conditions"). 3. Pursuant to the Purchase Order, the Sub-Agent via the Commodity Trading Participant (“CTP”) (pursuant to a CTP purchase agreement entered into between the Sub-Agent and the CTP (“CTP Purchase Agreement”)) will purchase on a spot basis the Commodities from commodity vendor(s) in the Bursa Suq Al-Sila' and/or such other independent commodity trading platforms acceptable to the Shariah Adviser (“Commodity Seller”) at a purchase price, which shall be an amount equivalent to the Sukuk Murabahah proceeds ("Purchase Price"). 4. MEX II (acting as the Issuer) shall issue Sukuk Murabahah to the Sukukholders whereby the proceeds received from such issuance shall be used to pay for the Purchase Price of the Commodities. The Sukuk Murabahah shall evidence the Sukukholders' ownership of the Commodities and subsequently, once the Commodities are sold to MEX II (as the Purchaser for itself), the entitlement to receive the Deferred Sale Price. 5. Thereafter, pursuant to the undertaking under the Purchase Order, the Sub-Agent (acting on behalf of the Agent who in turn acts as agent of the Sukukholders) shall sell the Commodities to MEX II (acting as Purchaser for itself) at the Deferred Sale Price under the commodities sale and purchase agreement (the “Sale and Purchase Agreement”). 6. Subsequently thereafter, MEX II (pursuant to a CTP sale agreement entered into between MEX II, as Purchaser for itself, and the CTP (“CTP Sale Agreement”)) shall appoint the CTP to sell the Commodities to Bursa Suq Al-Sila’ and/or such other commodity trading platforms acceptable to the Shariah Adviser (“Commodity Buyer”) on a spot basis for an amount equal to the Purchase Price. The CTP Sale Agreement will provide for the CTP to directly sell the Commodities to the Commodity Buyer upon notice by MEX II that the Sale and Purchase Agreement has been duly executed and upon receipt of the sale instruction by MEX II. 7. During the tenure of the Sukuk Murabahah, MEX II (in its capacity as the Purchaser), as part of its obligation to pay the Deferred Sale Price, shall make periodic profit payments to the Sukukholders. On the Sukuk Murabahah maturity dates or upon the declaration of an Event of Default (as defined in the paragraph entitled “Events of default or enforcement events, where applicable, including recourse available to investors”), MEX II (in its capacity as the Purchaser) shall pay all amounts outstanding in respect of the Deferred Sale Price of the relevant Sukuk Murabahah (subject to Ibra’ as defined in the paragraph entitled "Ibra"), where applicable, upon which the relevant Sukuk Murabahah will be cancelled. 9
20. Currency : Ringgit. Expected facility/ programme size : MYR1,300,000,000.00 Option to upsize (for programme) : No. Tenure of facility/ programme : 18 year(s). Availability period for debt/ sukuk programme : The period from the date of the compliance with all conditions precedent and other applicable conditions to the satisfaction of the Lead Arranger until the maturity date of the Sukuk Murabahah Programme. Clearing and settlement platform : • MyClear Mode of issue : • • • • • • Book building Private placement Bought deal Book running Direct placement Other-Book building or private placement (on a best effort basis) or on a bought deal basis, each without prospectus. Selling restrictions : • Part 1 of Schedule 6 of the Capital Markets & Services Act, 2007 (CMSA) Part 1 of Schedule 7 of the CMSA Read together with Schedule 9 of CMSA Section 4(6) of the Companies Act, 1965 • • • Other:Selling Restrictions at issuance The Sukuk Murabahah may only be offered, sold, transferred or otherwise disposed of, directly or indirectly, to persons falling within Section 4(6) of the Companies Act (as amended from time to time) (“Companies Act”); and Part I Schedule 6 and Part I Schedule 7 read together with Schedule 9 of CMSA. Selling Restrictions thereafter The Sukuk Murabahah may only be offered, sold, transferred or otherwise disposed of, directly or indirectly, to persons falling within Section 4(6) of the Companies Act (as amended from time to time); and Part I Schedule 6 read together with Schedule 9 of the CMSA. Tradability and transferability : Other regulatory approvals required in relation to the issue, offer or invitation to subscribe or purchase PDS/sukuk, and whether or not obtained : • Tradable & transferable. None. 10
21. Details of security / collateral pledged : The Sukuk Murabahah shall be secured by the following (collectively, the “Security Documents”) including but not limited to: (i) a debenture incorporating a first ranking fixed and floating charge over all the present and future assets, rights, and interests of the Issuer other than: (a) the toll revenue collected by the Issuer on behalf of Maju Expressway Sdn Bhd (“MESB”) and held in the TCA (as defined in the paragraph entitled “Details of the Designated Account(s)”) (“MESB’s Revenue”), if applicable; (b) the Junior FSRA (as defined in the paragraph entitled “Details of the Designated Account(s)”) and the credit balances therein; (c) cash deposits of up to RM30 million to be identified from time to time by the Issuer over which the Issuer is required to grant security to secure such bank guarantee facilities obtained by the Issuer which are permitted under item (i) under Negative Covenants in paragraph (x) below; (ii) a first ranking assignment of all income, proceeds and compensation received by the Issuer under the Concession Agreement (as defined in the paragraph entitled “Project Documents” in Other terms and conditions) and any other rights, interest and title in respect of any amount payable to the Issuer by the Government of Malaysia (“Government”) under the Concession Agreement; (iii) a first ranking fixed charge and assignment over the Designated Accounts (as defined hereafter) and the credit balances therein (other than the MESB’s Revenue, if applicable) (the “Charge over Accounts”); (iv) a first ranking assignment of all benefits, titles, interests and rights of the Issuer under the Turnkey Contract (as defined in the paragraph entitled “Project Documents” in Other terms and conditions) in relation to the MEX II Highway; (v) a first ranking assignment of all the Issuer’s rights, interests, titles and benefits in the Toll Collection Agreement (as defined in the paragraph entitled “Project Documents” in “Other terms and conditions”) between the Issuer and MESB in relation to Section II of the Maju Expressway forthwith upon execution thereof, if applicable; (vi) a shareholders’ undertaking from Maju Holdings Sdn Bhd to cover all cost overruns in connection with the construction of the MEX II Highway; and (vii) any other security as may be required by the Solicitors. Details of guarantee : Not guaranteed. Convertibility of Issuance : Non-convertible. 11
22. Exchangeability of Issuance : Non-exchangeable. Call option : No call option. Put option : No put option. Details of covenants : a. Positive covenants To include but not limited to the following: (i) the Issuer shall maintain in full force and effect all relevant authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) and will promptly obtain any further authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) which is or may become necessary to enable it to own its assets, to carry on its business or for the Issuer to enter into or perform its obligations under the Transaction Documents or to ensure the validity, enforceability, admissibility in evidence of the obligations of the Issuer or the priority or rights of the financiers under the Transaction Documents and the Issuer shall comply with the same; (ii) the Issuer shall at all times on demand execute all such further documents and do all such further acts reasonably necessary at any time or times to give further effect to the terms and conditions of the Transaction Documents; (iii) the Issuer shall exercise reasonable diligence in carrying out its business and affairs in a proper and efficient manner and in accordance with sound financial and commercial standards and practices; (iv) the Issuer shall promptly perform and carry out all its obligations under all the Transaction Documents (including but not limited to redeeming the Sukuk Murabahah on the relevant maturity date(s) or any other date on which the Sukuk Murabahah are due and payable) and ensure that it shall immediately notify the Sukuk Trustee in the event that the Issuer is unable to fulfill or comply with any of the provisions of the Transaction Documents; (v) the Issuer shall prepare its financial statements on a basis consistently applied in accordance with approved accounting standards in Malaysia and those financial statements shall give a true and fair view of the results of the operations of the Issuer for the period to which the financial statements are made up and shall disclose or provide against all liabilities (actual or contingent) of the Issuer; (vi) the Issuer shall promptly comply with all applicable laws including the provisions of the CMSA, LOLA Guidelines and/or the notes, circulars, conditions or guidelines issued by SC from time to time; (vii) the Issuer shall maintain the takaful/insurances required by the Transaction Documents and Project Documents; 12
23. (viii) the Issuer shall promptly exercise its rights under the Project Documents as to procure that the contractors, subcontractors and consultants appointed in connection with any works are properly skilled, qualified and experienced to undertake the awarded contracts and maintenance projects and to ensure that these contractors, subcontractors and their consultants promptly perform their respective obligations under the Project Documents; (ix) the Issuer shall give to the Sukuk Trustee such information as it may require in order to discharge its duties and obligations as trustee under the trust deed relating to the Issuer’s affairs to the extent permitted by law; (x) the Issuer shall keep proper books and accounts at all times and to provide the Sukuk Trustee access to such books and accounts; (xi) the Issuer shall file all relevant tax returns and pay all taxes promptly upon the same becoming due except to the extent that taxes are being contested in good faith or an adequate reserve has been set aside with respect thereto; (xii) the Issuer shall open and maintain the Designated Accounts for the purpose stated and make payments from such accounts only as permitted under the Transaction Documents, and comply with the terms and conditions of the Transaction Documents in all matters concerning the Designated Accounts; (xiii) the Issuer shall maintain a paying agent in Malaysia; (xiv) the Issuer shall procure that the paying agent shall notify the Sukuk Trustee in the event that the paying agent does not receive payment from the Issuer on the due dates as required under the trust deed and the terms and conditions of the Sukuk Murabahah; (xv) the operation of the Sukuk Murabahah shall at all times be governed by guidelines issued and to be issued by the SC and/or other authorities having jurisdiction over matters pertaining to the Sukuk Murabahah; (xvi) the Issuer shall maintain at all times throughout the tenor of the Sukuk Murabahah, the Sukuk Trustees’ Reimbursement Account for Sukukholders' actions (the “Sukuk Trustees' Reimbursement Account”) with a sum of RM30,000 to be set up from the moneys received by the Issuer when the Sukuk Murabahah are issued. The Sukuk Trustees' Reimbursement Account shall be operated by the Sukuk Trustee and the money in the Sukuk Trustees' Reimbursement Account shall only be used strictly by the Sukuk Trustee in carrying out their duties in relation to the occurrence of Event of Default or enforcement events which are provided under the Transaction Documents in respect of the Sukuk Murabahah; and (xvii) such other covenants as may be advised by the Solicitors. 13
24. b . Negative covenants To include but not limited to the following: (i) the Issuer shall not incur any additional indebtedness (including any loans or advances from its shareholders, subsidiaries or associated companies) save and except where:(a) such indebtedness (including but not limited to hire purchase, leasing arrangements bank guarantee facilities and/or facilities for working capital) does not exceed RM50.0 million in aggregate and is unsecured (with a sublimit of up to RM30.0 million in aggregate for bank guarantee facilities raised for the MEX II Highway purposes only on secured basis with the balance thereof being on an unsecured basis); or (b) such loans or advances from its shareholders, subsidiaries or associated companies are fully subordinated to the Sukuk Murabahah. (ii) the Issuer shall not create or permit to exist any encumbrance, mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment by way of security, trust arrangement for the purpose of providing security or other security interest of any kind including, without limitation, title transfer and/or retention arrangements having a similar effect or any agreement to create any of the foregoing, but excluding: (a) liens arising in the ordinary course of business by operation of law and not by way of contract; (b) the security over the Junior FSRA and the credit balances therein, to secure the Junior Bonds; (c) those security as contemplated under this term sheet; (iii) the Issuer shall not provide or permit to exist any guarantee to any party save and except for such guarantees required in the ordinary course of business for the MEX II Highway provided always that the issuance of such guarantee will not result in a downgrade of the prevailing rating of the outstanding Sukuk Murabahah; (iv) the Issuer shall not incur capital expenditure exceeding a threshold to be agreed, other than those related to MEX II Highway and capital expenditure which has already been planned and included in the operating budget for the relevant year, without the written consent of the Sukuk Trustee or the agent as may be approved; (v) the Issuer shall not dispose any assets in excess of RM10.0 million in aggregate in any financial year, except where the asset disposal is solely for the purposes of facilitating Shariah concepts used in Islamic financing facilities granted to the Issuer; (vi) the Issuer shall not add, delete, amend or substitute its Memorandum or Articles of Association in a manner 14
25. inconsistent with the provisions of the Transaction Documents unless otherwise required under the law or to increase its authorized capital or for the purpose of fulfilling any regulatory requirements which may be applicable in connection with the listing of the shares of the Issuer ; (vii) the Issuer shall not reduce its authorised or paid-up share capital whether by varying the amount, structure or value thereof or the rights attached thereto or by converting any of its share capital into stock, or by consolidating, dividing or subdividing all or any of its shares, or by any other manner and for the avoidance of any doubt, listing of shares of the Issuer shall not be restricted by this covenant; (viii) the Issuer shall not declare or pay any dividends or make any distribution (such payments and distributions shall be referred to as “Distributions”) whether income or capital in nature to its shareholders, except in relation to the Junior Bonds (which are subject to the Requisite Conditions (as defined in the paragraph entitled “Details of designated account(s)”)) unless the following conditions are met: (a) the calculation of the Senior FSCR has commenced; (b) the Senior FSCR is above 2.00 times immediately after the Distributions; (c) no Event of Default (or event or condition which, with the giving of notice, the passage of time, or both, would become an Event of Default) has occurred or would have occurred following such payment or distribution of dividends/distributions; and (d) any amount under the FSRA (as defined in the paragraph entitled “Details of designated account(s)”) is due or any instalment on any of the payments under the arrangements pertaining to the Sukuk Murabahah is overdue and unpaid or if any of the payments under the arrangements pertaining to the Sukuk Murabahah which has become payable has not been paid as a consequence of default by the Issuer; (ix) the Issuer shall not make any payments: (a) (whether in relation to principal, interest or otherwise) to its shareholders, subsidiaries or associated companies in connection with any loans or advances from its shareholders, subsidiaries or associated companies unless the conditions described in paragraph (viii) above which relates to ‘Distributions’ are met; and (b) on the Junior Bonds unless the Requisite Conditions are met. (x) except otherwise contemplated in the Transaction Documents, the Issuer shall not enter into any agreement with its subsidiaries (if any) or associated companies except for the Issuer which agreement must be entered into: (a) in the ordinary course of its business; 15
26. (b) in relation to the Junior Bonds; (c) on an arms-length basis; and (d) will not have a Material Adverse Effect on the Issuer; For the purposes of this Principal Terms and Conditions, “Material Adverse Effect” means any material adverse effect on the business or condition (financial or otherwise) or results of the operations of the Issuer or the ability of the Issuer to perform any of its obligations under any of the Transaction Documents. (xi) the Issuer shall not use the proceeds raised from the Sukuk Murabahah except for the purposes set out herein; (xii) the Issuer shall not lend any money to any party other than to the Issuer's directors, officers or employees as part of their terms of employment; (xiii) the Issuer shall not enter into any amalgamation, demerger, reconstruction or transfer or assign any or all of their rights in title to or interest of the license(s) necessary for the operations of the Issuer in such a manner which may result in or potentially would have a Material Adverse Effect; (xiv) the Issuer shall not carry on any business other than its undertaking and enjoyment of the Concession and the maintenance of roads and such ancillary activities permitted under the Concession Agreement and to demand, collect, retain and distribute tolls, on behalf of other persons awarded concessions by the Government; (xv) the Issuer shall not abandon the Concession; (xvi) the Issuer shall not amend, supplement or vary or agree to any amendment, supplement or variation to the Concession Agreement or the Project Documents; (xvii) the Issuer shall not agree to waive any breach or proposed breach of the Concession Agreement which would have a Material Adverse Effect and/or materially prejudice the interest of the Sukukholders or any security created under the Security Documents; (xviii) the Issuer shall not open any other accounts other than the Designated Accounts, the Sukuk Trustees' Reimbursement Account, the Junior Bonds Trustees’ Reimbursement Account and the Junior FSRA; and (xix) such other covenants as may be advised by the Solicitors. [The remainder of this page is intentionally left blank] 16
27. c . Financial covenants Finance to Equity Ratio (“F:E Ratio”) The Issuer shall maintain an annual F:E Ratio of not more than 80:20 throughout the tenure of the Sukuk Murabahah Programme, F:E Ratio is the ratio of senior indebtedness of the Issuer represented by; (a) all nominal value outstanding under the Sukuk Murabahah Programme; and (b) all principal amounts outstanding under all other indebtedness for borrowed monies (be it actual or contingent); and (c) all hire purchase obligations, finance lease obligations, net exposure determined on a marked to market basis under any derivative instrument and obligations/contingent liabilities under guarantees/call or put options of the Issuer save for performance bonds and maintenance bonds that are to be issued by the Issuer to GOM pursuant to the Project Documents but excluding the Junior Bonds and other intercompany loans which are subordinated to the Sukuk Murabahah, to Equity, defined as all the shareholders equity contribution made directly by the shareholder in the form of ordinary share capital, shareholder preferred shares, subordinated loans/advances/financing and the Junior Bonds. For the avoidance of doubt, retained profits or losses shall be excluded from the computation of the F:E Ratio. The F:E Ratio calculation shall be duly confirmed by the Issuer’s external auditors based on its latest annual audited financial statements. The Issuer shall arrange for the external auditor’s confirmation to be forwarded to the Facility Agent for its distribution to the Sukuk Trustee. Senior Finance Service Cover Ratio The Issuer shall maintain a Senior Finance Service Cover Ratio (“Senior FSCR”) of at least 1.75 times, at all times. The Senior FSCR is the ratio of Senior Available Cash Flow (as defined hereunder) to the aggregate of: a. all principal and profit obligations of the Issuer under the Sukuk Murabahah due and payable in the next 12 months; plus all other principal and profit/coupon/interest payment obligations paid by the Issuer under any other financings/ borrowings of the Issuer (excluding the Junior Bonds and any other subordinated loans/advances/financing instruments) in the preceding 12 months. 17
28. The Senior FSCR calculations shall be duly confirmed by the Issuer ’s external auditor and based on the Senior Available Cash Flow (as defined hereafter) as per the latest annual audited financial statements of the Issuer on an annual basis. The first of such Senior FSCR calculations will commence and be based on the annual audited financial statements of the Issuer for the financial year immediately following the financial year when tolling operations of MEX II Highway commences and shall be performed no later than one hundred and eighty (180) days from such financial year end. For the avoidance of doubt, any double counting shall be disregarded. The Issuer shall submit a compliance certificate to the Sukuk Trustee, the Rating Agency and the Facility Agent, which certificate shall be signed by two (2) directors of the Issuer certifying the compliance of the Senior FSCR. Senior Available Cash Flow In any annual period, the sum of: i. all income received by the Issuer under the Concession Agreement and any other receipts of a capital or revenue nature under any contract or agreement; ii. all distribution, returns and realised gains received by the Issuer; iii. all credit balances in the Designated Accounts (save for amounts due to MESB, if applicable) including accrued profit payments retained by or on behalf of the Issuer and the amount utilised from the Designated Accounts for Permitted Investments at the beginning of the relevant twelve (12) month period; and iv. proceeds of takaful/insurance claims received by the Issuer. Less: i. the total amount spent on management, administration, operation, maintenance and heavy repairs; ii. taxes paid or such other contributions paid by the Issuer to Government; iii. capital expenditure incurred, except if such capital expenditure is funded by the Sukuk Murabahah or additional equity injection; and iv. any payments made by the Issuer under the Project Documents (as defined in the paragraph entitled “Project Documents” in "Other terms and conditions") or other contract or agreement. 18
29. d . Information covenants To include but not limited to the following: (i) the Issuer shall provide to the Sukuk Trustee at least on an annual basis, a certificate confirming that it has complied with all its obligations under the Transaction Documents and the terms and conditions of the Sukuk Murabahah and that there does not exist or had not existed, from the date the Sukuk Murabahah were issued, any Event of Default, and if such is not the case, to specify the same; (ii) the Issuer shall deliver to the Sukuk Trustee the following: (a) as soon as they become available (and in any event within one hundred and eighty (180) days after the end of each of its financial years) copies of its financial statements for that year which shall contain the income statements and balance sheets of the Issuer and which are audited and certified without qualification by a firm of independent certified public accountants acceptable to the Sukuk Trustee; (b) as soon as they become available (and in any event within ninety (90) days after the end of the first half of its financial year) copies of its unaudited half yearly financial statements for that period which shall contain the income statements and balance sheets of the Issuer which are duly certified by any one of its directors; (c) promptly, such additional financial or other information relating to the Issuer’s business and its operations as the Sukuk Trustee may from time to time reasonably request in order to discharge its duties and obligations as trustee to the extent permitted by law; (d) promptly, all notices or other documents received by the Issuer from any of its shareholders or its creditors which contents may materially and adversely affect the interests of the Sukukholders, and a copy of all documents dispatched by the Issuer to its shareholders (or any class of them) in their capacity as shareholders or its creditors generally, which contents may affect the interests of the Sukukholders, at the same time as these documents are dispatched to these shareholders or creditors; and (e) promptly, any other accounts, report, notice, statement or circular issued to shareholders which the Sukuk Trustee shall at its discretion circulate the accounts, report, notice, statement or circular to the registered Sukukholders who fall within Schedules 6 and 7 of the CMSA; (iii) the Issuer shall promptly notify the Sukuk Trustee of any change in its board of directors; (iv) the Issuer change in litigation or threatened tribunal or shall promptly notify the Sukuk Trustee of any its condition (financial or otherwise) and of any other proceedings of any nature whatsoever being or initiated against the Issuer before any court or administrative agency which may materially and 19
30. adversely affect the ability of the Issuer to perform any of its obligations under any of the Transaction Documents ; (v) the Issuer shall promptly give notice to the Sukuk Trustee or the Facility Agent in writing in the event that it becomes aware of any of the following: (a) of the occurrence of any Event of Default or any event which (with the expiry of a grace period, the giving of notice, the making of any determination under the Transaction Documents relating to the Sukuk Murabahah or any combination of the foregoing) would constitute an Event of Default (the “Potential Event of Default”) forthwith upon becoming aware thereof, and it shall take all reasonable steps and/or such other steps as may reasonably be requested by the Sukuk Trustee to remedy and/or mitigate the effect of the Event of Default or the Potential Event of Default; (b) the occurrence of any event that has caused or could cause, one or more of the following: (i) any amount secured or payable under the Sukuk Murabahah to become immediately payable; (ii) the Sukuk Murabahah enforceable; or to become immediately (iii) any other right or remedy under the terms, provisions and covenants of the Transaction Documents have become immediately enforceable; (c) any circumstance that has occurred that would materially prejudice the Issuer or any security included in or created by the Transaction Documents; (vi) the Issuer shall promptly notify the Sukuk Trustee or the Facility Agent in writing of any change in withholding tax position or taxing jurisdiction of the Issuer (where applicable); (vii) the Issuer shall promptly notify the Sukuk Trustee or the Facility Agent in writing of any substantial change in the nature of the business of the Issuer; (viii) the Issuer shall promptly notify the Sukuk Trustee of any circumstance that has occurred that would materially prejudice the Issuer; (ix) the Issuer shall promptly notify the Sukuk Trustee of any change in the utilisation of proceeds of the Sukuk Murabahah, where the Information Memorandum or any agreement entered into in connection with the issue, offer or invitation sets out a specific purpose for which proceeds are to be utilized; (x) the Issuer shall promptly notify the Sukuk Trustee of any other matter which may materially prejudice the interests of the Sukukholders; and (xi) any other covenants as advised by the Solicitors. 20
31. Details of designated account (s) : 1. Toll Collection Account (“TCA”) Name of account Parties responsible for opening the account Toll Collection Account (“TCA”) Parties responsible for maintaining/op erating the account Signatories to the account Sources of funds Security Trustee Utilisation funds Monies in the TCA shall be transferred by the Security Trustee into an account to be nominated by MESB after reconciliation of the toll revenue collected in the TCA between the Issuer and MESB. Any balance in the TCA shall then be transferred into the RA. 2. of Issuer Security Trustee The Issuer shall open and maintain the TCA, if applicable, for the purpose of depositing all cash from toll revenue collected by the Issuer including toll amounts collected and held on behalf of MESB under the Toll Collection Agreement entered or to be entered into between the Issuer and MESB. Revenue Account (“RA”) Name of account Parties responsible for opening the account Revenue Account (“RA”) Parties responsible for maintaining/o perating the account Signatories to the account Security Trustee Sources of funds The Issuer shall open and maintain the RA for the purposes of depositing the following: (i) proceeds raised from the issuance of the Sukuk Murabahah and the Junior Bonds for the construction of MEX II Highway net of any ancillary fees, costs, deposits and expenses related to the Sukuk Murabahah Programme and the Junior Bonds (the “Relevant Proceeds”). (ii) all revenues and proceeds attributable and Issuer Security Trustee 21
32. (iii) (iv) (v) (vi) (vii) Utilisation of funds received by the Issuer pursuant to the Concession Agreement and other relevant project agreements including monies transferred from the TCA, if applicable; any compensation sums or monies received by the Issuer from the Government in connection with the Concession Agreement; proceeds from any additional equity injections and/or shareholders loans/advances as may be made by the Issuer’s shareholders at their election apart from the proceeds from the issuance of the Junior Bonds; proceeds of takaful/insurance claims in respect of takaful/insurance taken and maintained throughout the tenure of the Sukuk Murabahah Programme; any claims received in respect of third party performance bonds, maintenance bonds, guarantees or any other compensation received; all other revenues of the Issuer; and amounts from the FSRA in excess of the Minimum Required Balance (as defined below). The balance in the RA shall be applied in accordance with the following order of priority (“RA Priority of Cashflows”): (i) Funds in the RA shall be applied as per the proposed utilisation of proceeds set out in the paragraph entitled “Details of Utilisation of Proceeds” based upon receipt of a report from the Independent Consulting Engineer together with certified true copies of the relevant certificates on stages of completed work and/or supporting invoices/ other documentary evidences all in form and substance acceptable to the Security Trustee. (ii) Transfers to the OA (as defined below) for the payment of operating and maintenance costs and expenses, taxes, duties, management and recurring capital expenditures in respect of the MEX II Highway in accordance with the operating and maintenance budget to be approved by the Security Trustee. For the avoidance of unbudgeted doubt, any critical but maintenance expenses and/or capital expenditures that is required to ensure safety of the MEX II Highway to users shall be allowed to be transferred to the OA at the Security Trustee’s discretion; (iii) payment of profit and principal amounts, fees, commissions and other payments payable under the Sukuk Murabahah; (iv) transfer to the FSRA to meet the Minimum Required Balance; (v) payment of coupons amounts payable under 22
33. the Junior Bonds subject to : (a) the commencement of the MEX II Highway tolling operations; (b) the commencement of the calculation of the Senior FSCR in accordance with the terms of the Transaction Documents; (c) the Senior FSCR being maintained at a minimum of 1.75 times after such payment; and (c) no Event of Default has occurred, is continuing or will occur as a result of such payment, (collectively the “Requisite Conditions”); (vi) transfer to the Junior Bonds finance service reserve account (“Junior FSRA”) to be opened and maintained by the Issuer to meet the relevant requirements subject to the Requisite Conditions; (vii) payments of any dividends or distributions to the shareholder of the Issuer subject to meeting the conditions under item (viii) of the paragraph entitled "Negative Covenants"; and (viii) investments in Permitted Investments (as defined in the paragraph entitled “Permitted Investments”). 3. Operations Account (“OA”) Name of account Parties responsible for opening the account Operations Account (“OA”) Parties responsible for maintaining/o perating the account Signatories to the account Issuer Sources of funds The Issuer shall open and maintain the OA for the purpose of depositing any transfers from the RA. Utilisation of funds The balance in the OA shall be applied by the Issuer for the payment of operating and maintenance costs and expenses, taxes, duties, management and recurring capital expenditures in respect of the MEX II Highway in accordance with the operating and maintenance budget. Issuer Issuer 23
34. 4 . Finance Service Reserve Account (“FSRA”) Name of account Parties responsible for opening the account Finance Service Reserve Account (“FSRA”) Parties responsible for maintaining/o perating the account Signatories to the account Security Trustee Sources funds of The Issuer shall open and maintain the FSRA for purposes of depositing amounts that are transferred from the RA. An initial deposit equivalent to an amount payable in respect of any profit and principal of the Sukuk Murabahah due in the next 6 months shall be deposited and paid into the FSRA upon first issuance of the Sukuk Murabahah. Utilisation funds of The Issuer shall at all times thereafter maintain an amount equivalent to an amount payable in respect of any principal and profit payments of the Sukuk Murabahah for the next 6 months (the “Minimum Required Balance”). The monies in the FSRA may be withdrawn to the extent that funds in the RA are insufficient to fulfil the Issuer’s payment obligations in respect of the principal and profit of the Sukuk Murabahah. In the event that the balance held in the FSRA is less than or exceeds the Minimum Required Balance, the shortfall or excess shall be topped up from or released to the RA, as the case may be. The Issuer shall top up the FSRA so as to comply with the Minimum Required Balance within ninety (90) days from the day that the balance held in FSRA is less than the then prevailing Minimum Required Balance provided that such Minimum Required Balance is complied with at least thirty (30) days prior to the forthcoming scheduled profit payment date or maturity date(s) of the Sukuk Murabahah, as the case may be. For the avoidance of doubt, non-compliance of the Minimum Required Balance does not by itself constitute an Event of Default. Issuer Security Trustee 24
35. Name of credit rating agency and credit rating : No. Credit Rating Agency 1 Conditions precedent : Malaysian Rating Corporation Bhd (MARC) Credit rating Final/ Indicative rating Partial Amount rated AA- IS Indicative rating Yes MYR 1,300.00 To include but not limited to the following (all have to be in form and substance acceptable to the Lead Arranger): A. Main Documentation 1) The Transaction Documents have been executed and, where applicable, stamped and presented for registration. 2) All relevant notices and acknowledgements (where applicable) and consents (where applicable) from the relevant counterparties to the Project Documents shall have been made or received as the case may be. B. Issuer 1) Receipt of certified true copies of the Certificate Incorporation, and the Memorandum and Articles Association. 2) Receipt of certified true copies of the Forms 24, 44 and 49. 3) A certified true copy of board resolutions authorising, among other actions, the execution of the Transaction Documents (as defined below). 4) A list of authorised signatories and their respective specimen signatures. 5) A report of the relevant company search of the Issuer. 6) Receipt of the search results and winding up search results on the Issuer confirming that the Issuer is not and/or has not been wound up. C. General 1) Receipt of acknowledgement by the SC of the lodgement in respect of the Sukuk Murabahah Programme and the Junior Bonds with the SC. 2) The Sukuk Murabahah have received the requisite ratings as stated in this Principal Terms and Conditions. 3) Evidence that all transaction fees, costs and expenses have been or will be paid in full by the date of the issuance of the Sukuk Murabahah. 4) Receipt of a report from the Insurance Consultant confirming, among others, that the insurance/Takaful programme for the MEX II Highway is adequate and that the insurance policies/Takaful contracts for the construction of the MEX II Highway are in place. of of 25
36. 5 ) Receipt of a report from the Independent Consulting Engineer reviewing, amongst others, the technical feasibility of the MEX II Highway and the reasonableness of MEX II Highway costs, construction schedule and payment schedules. 6) Satisfactory evidence that (i) the issued and paid-up capital of the Issuer is at least RM60 million and (ii) shareholders advances of RM140 million has been made by Maju Holdings Sdn Bhd to the Issuer. 7) Satisfactory evidence that the agreement between the Issuer and Maju Holdings Sdn Bhd have been entered into for the subscription of RM150 million nominal value of the Junior Bonds. 8) Receipt of satisfactory legal opinion from the Solicitors confirming amongst others:(i) all approvals/ consents (be it regulatory or contractual) which are required shall have been duly obtained for the Sukuk Murabahah and for the execution of the Transaction Documents; (ii) the Transaction Documents are legal, valid, binding and enforceable and that all the conditions precedent in relation to the Transaction Documents have been fulfilled or waived, as the case may be; (iii) Confirmation from the Solicitors that all security arrangements under the Sukuk Murabahah are in full force and effect. 9) Evidence of the confirmation from the Shariah Adviser that the structure of the Sukuk Murabahah and the Transaction Documents are in compliance with Shariah principles. 10) Evidence that the Designated Accounts have been established in accordance with the provisions of Transaction Documents and an amount equivalent to the initial Minimum Required Balance has been or will be deposited into the FSRA by the issuance of the Sukuk Murabahah. 11) Receipt of a report from the Traffic Consultant confirming, among others, the traffic projections and its assumptions thereto. 12) Receipt of a letter from the Reporting Accountant stating among others, the assumptions adopted in the cashflow projections and the accuracy of the mathematical calculations of the cashflow projections based on the underlying assumptions. 13) Certification issued by the Issuer in the form prescribed by the Lead Arranger confirming the accuracy of the representations and warranties contained in the Transaction Documents in all respect. Certified true copy of the Environmental Impact Assessment report prepared for the MEX II Highway. 14) 26
37. 15 ) Receipt of certified true copies of all relevant duly executed Project Documents, including the Turnkey Contract. 16) Confirmation that the approval of the Government pursuant to clause 31.2 of the Concession Agreement has been obtained, and that the Government’s right to assume operational responsibility in accordance with clause 40 of the Concession Agreement has been acknowledged and reflected in the relevant Transaction Documents. 17) Satisfactory evidence that all insurance policies/Takaful contracts of the Issuer or in respect of the MEX II Highway are also in the name of the Sukuk Trustee and the Sukuk Trustee is a loss payee thereunder. 18) Such other conditions precedent as may be advised by the Solicitors. Conditions precedent for subsequent issuance(s) of the Sukuk Murabahah: Representations and warranties : (i) Receipt of the Issuer’s certification that it is in compliance with all representations and warranties and covenants under the Transaction Documents; (ii) No Event of Default or Potential Event of Default has occurred or shall occur if the relevant issuance is made; (iii) Confirmation from the Shariah Adviser that the issuance is in compliance with Shariah; (iv) Confirmation from the Rating Agency that there is no adverse impact on the rating of the Sukuk Murabahah Programme; and (v) Such other conditions precedent as may be advised by the Solicitors. To include but not limited to the following: (i) the Issuer is a company with limited liability duly incorporated and validly existing under the laws of Malaysia, has full power to carry on its business and to own its property and assets, and has full beneficial ownership of all its property and assets; (ii) the memorandum and articles of association of the Issuer incorporates provisions which authorise, and all necessary corporate and other relevant actions have been taken to authorise, and all relevant consents and approvals of any administrative, governmental or other authority or body in Malaysia have been duly obtained and are in full force and effect which are required to authorise, the Issuer to execute and deliver and perform the transactions contemplated by the Transaction Documents to which it is a party in accordance with their terms; (iii) neither the execution and delivery of any of the Transaction Documents nor the performance of any of the transactions contemplated by the Transaction Documents did or does as at the date this representation and warranty is made or repeated (a) contravene or constitute a default under any provision 27
38. contained in any agreement , instrument, law, ordinance, decree, judgment, order, rule, regulation, licence, permit or consent by which the Issuer or any of its assets is bound or which is applicable to the Issuer or any of its assets, (b) cause any limitation on the Issuer or the powers of its directors, whether imposed by or contained in its memorandum and articles of association or in any agreement, instrument, law, ordinance, decree, order, rule, regulation, judgment or otherwise, to be exceeded, or (c) cause the creation or imposition of any security interest or restriction of any nature on any of the Issuer’s assets; (iv) each of the Transaction Documents is or will when executed and/or issued, as the case may be, be in full force and effect and constitutes, or will when executed or issued, as the case may be, constitute, valid and legally binding obligations of the Issuer enforceable in accordance with its terms; (v) the audited financial statements (including the income statement and balance sheet) of the Issuer shall be prepared on a basis consistently applied and in accordance with approved accounting standards in Malaysia and give a true and fair view of the results of their operations and the state of their affairs and in particular disclose all material liabilities (actual or contingent) of the Issuer; (vi) no litigation, arbitration or administrative proceeding or claim which might by itself or together with any other such proceedings or claims either have a material adverse effect on the financial condition of the Issuer or materially and adversely affect the Issuer’s ability to perform its obligations under the Transaction Documents in accordance with their terms, is presently in progress or pending or, to the best of the knowledge, information and belief of the Issuer (after due and careful enquiry), threatened against the Issuer or any of its or their assets; (vii) the Issuer is not aware of and has no reason to believe that any event has occurred which constitutes, or which with the giving of notice and/or the lapse of time and/or a relevant determination would likely to constitute, a contravention of, or default under, any agreement or instrument by which the Issuer or any of its assets are bound or affected, being a contravention or default which might either have a material adverse effect on the financial condition of the Issuer or materially and adversely affect the Issuer’s ability to perform its obligations under the Transaction Documents in accordance with their terms; (viii) the Issuer is in compliance and will comply with any applicable laws and regulations; (ix) the Issuer has obtained all permits, approvals and licenses required under the Project Documents and all of these are in full force and effect; (x) the Issuer has disclosed prior to the date of the Sukuk Murabahah agreement to the Lead Arranger and/or the Facility Agent all facts relating to the Issuer knows or should reasonably know and which are material for disclosure to the 28
39. Sukuk Trustee , the Lead Arranger and the Facility Agent in the context of the Transaction Documents; and (xi) Events of defaults or enforcement events, where applicable, including recourse available to investors : any other representations and warranties as may be advised by the Solicitors. Events of Default to include but not limited to the following: (i) the Issuer fails to pay any amount due from it under any of the Transaction Documents on the due date or, if so payable, on demand; (ii) any representation or warranty made or given by the Issuer under the Transaction Documents or which is contained in any certificate, document or statement furnished at any time pursuant to the terms of the Sukuk Murabahah or the Concession Agreement and/or any of the Transaction Documents or Concession Agreement proves to have been incorrect or misleading in any material respect on or as of the date made or given or deemed made or given, and in the case of a failure which in the opinion of the Sukuk Trustee is capable of being remedied, the Issuer does not remedy the failure within a period of thirty (30) days after the Issuer became aware or having been notified by the Sukuk Trustee or the Security Trustee of the failure; (iii) the Issuer fails to observe or perform its obligations under any of the Transaction Documents or the Sukuk Murabahah or under any undertaking or arrangement entered into in connection therewith other than an obligation of the type referred to in paragraph (i) above, and in the case of a failure which in the opinion of the Sukuk Trustee is capable of being remedied, the Issuer does not remedy the failure within a period of thirty (30) days after the Issuer became aware or having been notified by the Sukuk Trustee or the Security Trustee of the failure; (iv) there has been a breach by the Issuer of any obligation under any of the Issuer’s existing contractual obligations which may materially and adversely affect the Issuer’s ability to perform its obligations under the Transaction Documents and, if in the opinion of the Sukuk Trustee is capable of being remedied, the Issuer does not remedy the breach within a period of thirty (30) days after the Issuer became aware or having been notified by the Sukuk Trustee or the Security Trustee of the breach; (v) any indebtedness for borrowed moneys of the Issuer becomes due or payable or capable of being declared due or payable prior to its stated maturity or any guarantee or similar obligations of the Issuer is not discharged at maturity or when called and such declaration of indebtedness being due or payable or such call on the guarantee or similar obligations is not discharged or disputed in good faith by the Issuer in a court of competent jurisdiction within thirty (30) days from the date of such declaration or call, or the Issuer goes into default under, or commits a breach of, any agreement or instrument relating to any such indebtedness, guarantee or other obligations, or any security created to secure such indebtedness becomes enforceable; 29
40. (vi) an encumbrancer takes possession of, or a trustee, receiver, receiver and manager or similar officer is appointed in respect of the whole or substantial part of the business or assets of the Issuer, or distress, legal process, sequestration or any form of execution is levied or enforced or taken against the Issuer which may have a Material Adverse Effect on the Issuer, or any security interest which may for the time being affect any of its assets becomes enforceable; For the purpose of this paragraph (vi), references to “substantial” shall mean such value equivalent to or more than 5% of the Issuer’s net tangible assets as reflected in its latest audited financial statements. (vii) the Issuer fails to satisfy any judgement passed against it by any court of competent jurisdiction and no appeal against such judgement or no application for a stay of execution has been made to any appropriate appellate court within the time prescribed by law or such appeal or application for a stay of execution has been dismissed; (viii) any step is taken for the winding up, dissolution or liquidation of the Issuer or a resolution is passed for the winding up of the Issuer or a petition for winding up is presented against the Issuer and the Issuer has not taken any action in good faith to set aside such petition within thirty (30) days from the date of service of such winding up petition or a winding up order has been made against the Issuer; (ix) the Issuer convenes a meeting of its creditors or proposes or makes any arrangement including any scheme of arrangement or composition or begins negotiations with its creditors, or takes any proceedings or other steps, with a view to a rescheduling or deferral of all or any part of its indebtedness or a moratorium is agreed or declared by a court of competent jurisdiction in respect of or affecting all or any part of its indebtedness or any assignment for the benefit of its creditors (other than for the purposes of and followed by a reconstruction previously approved in writing by the Sukuk Trustee, unless during or following such reconstruction the Issuer becomes or is declared to be insolvent) or where a scheme of arrangement under Section 176 of the Companies Act has been instituted against the Issuer; (x) where there is a revocation, withholding or modification of any license, authorisation, approval or consent which in the opinion of the Sukuk Trustee may materially and adversely impairs or prejudices the ability of the Issuer to comply with the terms and conditions of the Sukuk Murabahah or the Transaction Documents; (xi) the Issuer is deemed unable to pay any of its debts or becomes unable to pay any of its debts as they fall due or suspend or threaten to suspend making payments with respect to all or any class of its debts; (xii) any creditor of the Issuer exercises a contractual right to take over the financial management of the Issuer and such event in the opinion of the Sukuk Trustee may have a Material Adverse Effect; 30
41. (xiii) the Issuer changes or threatens to change the nature or scope of a substantial part of its business, or suspends or threatens to suspend or cease or threatens to cease the operation of a substantial part of its business which it now conducts directly or indirectly and such change or suspension or cessation in the opinion of the Sukuk Trustee may have a Material Adverse Effect; (xiv) at any time any of the provisions of the Transaction Documents in respect of the Sukuk Murabahah is or becomes invalid, illegal, void, voidable or unenforceable or ceases to be binding which in the opinion of the Sukuk Trustee may have a Material Adverse Effect; (xv) at any time any of the provisions of the Concession Agreement or the Project Documents is or becomes invalid, illegal, void, voidable or unenforceable or ceases to be binding; (xvi) the Issuer repudiates any of the Transaction Documents or the Issuer does or causes to be done any act or thing evidencing an intention to repudiate any of the Transaction Documents; (xvii) any of the project counterparties to the Concession Agreement or the Project Documents repudiates the Concession Agreement or the Project Documents or any of the project counterparties to the Concession Agreement or the Project Documents does or causes to be done any act or thing evidencing an intention to repudiate the Concession Agreement or the Project Documents; (xviii) any of the assets, undertakings, rights or revenue of the Issuer are seized, nationalised, expropriated or compulsorily acquired by or under the authority of any governmental body which in the opinion of the Sukuk Trustee may have a Material Adverse Effect on the Issuer; (xix) any event or events has or have occurred or a situation exists which in the opinion of the Sukuk Trustee may have a Material Adverse Effect on the Issuer, and in the case of the occurrence of such event or situation which in the opinion of the Sukuk Trustee is capable of being remedied, the Issuer does not remedy it within a period of thirty (30) days after the Issuer became aware or having been notified by the Sukuk Trustee or the Security Trustee of the event or situation; (xx) if at any time the Issuer commits a breach of any term or any obligation of or under the Concession Agreement (whether or not resulting in a termination of such Concession Agreement) except: (a) where such a breach is not materially prejudicial to the interest of the Sukukholders; and (b) is remedied by the Issuer within thirty (30) days from the notice of such breach from the Government (xxi) if the Concession Agreement is terminated (whether by way of expropriation, breach of condition or otherwise) or a termination event or an event of default occurs under the Concession Agreement; or 31
42. (xxii) such other event as may be advised by the Solicitors. Upon the occurrence of an Event of Default referred to above, the Sukuk Trustee may or shall (if directed to do so by a special resolution of the Sukukholders and subject to it being indemnified to its satisfaction) declare that: (i) an Event of Default has occurred; (ii) declare that all amounts (including Deferred Sale Price) under the Sukuk Murabahah then outstanding and other sums payable under the Transaction Documents are immediately due and payable in full in accordance with the terms of the relevant Transaction Documents; and (iii) the Sukuk Trustee and the Security Trustee shall have the right to institute such proceedings and to take such steps as it/they think fit including enforcing remedies under each of the Transaction Documents including the security documents. If there is still outstanding Sukuk Murabahah, the holders of the Junior Bonds shall not declare an Event of Default if the Sukukholders have not declared an Event of Default. Governing laws : Laws of Malaysia. Provisions on buyback : No provision on buy-back Provisions on early redemption : Redemption Unless previously redeemed or purchased and cancelled, the Sukuk Murabahah will be redeemed by the Issuer at 100% of their nominal value on their respective maturity dates and all Sukuk Murabahah redeemed shall be cancelled and cannot be resold. Repurchase and Cancellation The Issuer or any of its subsidiaries or any of its agent and/or interested persons may at any time purchase the Sukuk Murabahah at any price in the open market or by private treaty, but these repurchased Sukuk Murabahah, if purchased by the Issuer or by its subsidiaries or by its agents, shall be cancelled and cannot be resold, or, if purchased by the Issuer’s interested persons, the Sukuk Murabahah need not be cancelled but they will not entitle such interested persons to vote at any meeting of the Sukukholders. Voting : Voting by the Sukukholders under the Sukuk Murabahah shall be carried out as follows: Subject to the terms of the Trust Deed and save as provided below, all Sukukholders regardless of which series of Sukuk Murabahah they hold shall collectively constitute a single class for the purposes of attending and voting at meetings of Sukukholders. The Issuer, agents and/or any interested person of the Issuer may at any time purchase the Sukuk Murabahah at any price in the open market or by private treaty and such Sukuk Murabahah so purchased shall not be counted for the purpose of voting in meetings of Sukukholders and shall be cancelled. 32
43. Permitted investments : Right to Make Permitted Investments Monies standing to the credit of the Designated Accounts shall be permitted to be invested in Permitted Investments (as defined below), provided that: (i) such funds utilised for Permitted Investments shall, where necessary, be remitted back to the relevant Designated Accounts to meet any payment obligations of the Issuer at least three (3) days before such payment obligations are due and payable; and (ii) shall be denominated in Ringgit Malaysia. Permitted Investments Permitted Investments shall comprise investment products approved by the SC's SAC, BNM’s SAC and/or other recognised Shariah authorities. For the purposes of the Sukuk Murabahah, Permitted Investments are the Shariah Compliant investments/products listed below or those which invests in these products: (i) deposits with licensed Islamic financial institutions in Malaysia; or (ii) Islamic bankers acceptances, Islamic bills and other Islamic money market instruments by licensed financial institutions with a short term rating of P1 and a minimum long term rating of AA3/AA- or their equivalent; or (iii) Islamic treasury bills, Islamic money market instruments, and sukuk issued by BNM or the Government; or (iv) sukuk issued by quasi government or government related corporations with a short term rating of P1 and a minimum long term rating of AA3/AA- or their equivalent or sukuk guaranteed by the Government; or (v) sukuk issued by corporations with a short term rating of P1 and a minimum long term rating of AA3/AA- or their equivalent, or by financial institutions or guaranteed by licensed financial institutions with a short term rating of P1 or a minimum long term rating of AA3/AA- or their equivalent. Ta’widh (for sukuk) : In the event of any delay in payments of any amount, including the Deferred Sale Price due and payable under any tranche of the Sukuk Murabahah or the Transaction Documents, the Issuer shall pay Ta’widh (compensation) on such delay in payment at the rate and manner prescribed by the SAC from time to time. Ibra’ (for sukuk) : The Sukukholder(s) in subscribing or purchasing the Sukuk Murabahah, hereby consent to grant an Ibra’, if the Sukuk Murabahah are redeemed before the maturity date or upon the declaration of an Event of Default. The “Ibra’” shall be calculated as follows: (i) in the case of Sukuk Murabahah with periodic profit payment and issued at a discount the aggregate of unearned periodic profit payment and the unearned discounted amount; 33
44. (ii) in the case of Sukuk Murabahah without periodic profit payment and issued at a discount the unearned discounted amount; (iii) in the case of Sukuk Murabahah with periodic profit payment and issued at par or at a premium the aggregate of unearned periodic profit payment; The Ibra’ in relation to (i), (ii) and (iii) above shall be calculated from the date of the declaration of an Event of Default up to the Sukuk Murabahah’s respective maturity date(s). “Ibra'” means an act of releasing absolutely or conditionally ones’ rights and claims on any obligation against another party which would result in the latter being discharged of his/its obligation or liabilities towards the former. The release may be either partially or in full. Kafalah (for sukuk) : Not applicable. Other terms and conditions: Details of Utilisation of Proceeds by Issuer : The utilisation of proceeds are as follows: Utilisation of proceeds Amount up to (RM’ million) (i) To part finance the construction costs, development costs, financing costs, fees and expenses in relation to MEX II Highway 1,230 (ii) To fund the FSRA (as defined in the paragraph entitled “Details of designated account(s)”) 50 (iii) To pay fees, expenses and all other amounts payable under or related to the Sukuk Murabahah 20 Total 1,300 Note: 1. In the event that the amount allocated for purposes set out in any of the items (i) to (iii) above is not utilised in whole or in part for such purposes, the Issuer may utilise such unutilised amount for any of the other purposes set out in items (i) to (iii) above. 2. Once the Sukuk Murabahah have been issued for any of the purposes set out above, the Issuer may issue new Sukuk Murabahah to refinance the outstanding Sukuk Murabahah. For the avoidance of doubt, all utilisation of funds from the issuance of the Sukuk Murabahah shall be for Shariah compliant purposes only. 34
45. Identified Assets : Shariah-compliant commodities which shall include, but are not limited to, crude palm oil and such other acceptable commodities (excluding ribawi items in the category of mediums of exchange such as currency, gold and silver) which are provided through Bursa Suq Al-Sila’ and/or such other independent commodity platform acceptable by the Shariah Adviser (“Commodities”). Purchase and selling price/rental : Purchase Price The Purchase Price shall be determined prior to the issuance of the Sukuk Murabahah. The Purchase Price shall comply with the SAC’s asset pricing requirements (“Asset Pricing Requirements”) as provided in the LOLA Guidelines. Deferred Sale Price The Deferred Sale Price shall be an amount equal to the Purchase Price plus the aggregate profit margin which is based on profit rate determined upfront (applicable for a Sukuk Murabahah with periodic payments) and, in respect of a Sukuk Murabahah issued at a discount, plus the Discounted Amount (as defined below) payable on a deferred payment basis and will be determined prior to the sale of the Commodities to the Issuer. "Discounted Amount" means the difference between the nominal value of the Sukuk Murabahah and the Purchase Price in the case of Sukuk Murabahah issued at a discount. Profit/coupon/rent al rate (fixed or floating) : The profit rate for each tranche of the Sukuk Murabahah will be fixed rate only and shall be determined prior to the issuance of the relevant Sukuk Murabahah. Profit/coupon/rent al payment frequency : Semi-annual or such other period as the Issuer and the Lead Arranger may agree (“Profit Payment Period”). Profit/coupon/rent al payment basis : Actual/365 days Listing status and types of listing, where applicable : The Sukuk Murabahah may be listed on Bursa Malaysia Securities Berhad (“Bursa Securities”) under an Exempt Regime pursuant to Chapter 4B of the Bursa Securities Main Market Listing Requirements. The SC will be notified accordingly in event of such listing. Transaction Documents : (i) Programme Agreement; (ii) Subscription Agreement; (iii) Trust Deed; (iv) Securities Lodgement Form for Central Depository and Paying Agency Services; (v) Commodity Murabahah Master Agreement; (vi) relevant Islamic documents; (vii) Security Documents; and Securities 35
46. (viii) any other documents or any such other agreements that may be advised by the Solicitors. Project Documents : (i) Concession agreement dated 20 October 2015 entered into between the Issuer and the Government in relation to the MEX II Highway (“Concession Agreement”); (ii) Turnkey contract dated 18 February 2016 between the Issuer and Maju Holdings Sdn Bhd as the turnkey contractor in respect of the construction of the MEX II Highway (“Turnkey Contract”); (iii) the toll collection agreement to be entered between the Issuer and MESB in relation to Section II of the Maju Expressway (“Toll Collection Agreement”) if applicable; and (iv) any other amendment(s) or variation(s) of the items under (i), (ii) and (iii) above and addition(s) to the items under (i), (ii) and (iii) above and any other instrument(s) executed supplemental thereto or in substitution thereof. Status : The Sukuk Murabahah will constitute direct, unconditional and secured obligations of the Issuer and shall at all times rank pari passu, without discrimination, preference or priority amongst themselves and shall rank in priority against all other present and future unsecured and unsubordinated obligations of the Issuer, subject to those preferred by law and/or the Transaction Documents. Option to Upsize : No. Taxation : All payments by the Issuer shall be made without withholding or deductions for or on account of any present or future tax, duty or charge of whatsoever nature imposed or levied by or on behalf of Malaysia or any other applicable jurisdictions, or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law, in which event the payer shall be required to make such additional amount so that the payee would receive the full amount which the payee would have received if no such withholding or deductions are made. Form and Denomination : The Sukuk Murabahah shall be issued in accordance with (1) the “Participation and Operation Rules for Payment and Securities Services issued by MyClear (“MyClear Rules”) and (2) MyClear Procedures, or their replacement thereof (collectively the “MyClear Rules and Procedures”) applicable from time to time. Each tranche of the Sukuk Murabahah shall be represented by a global certificate to be deposited with BNM, and shall be exchanged for definitive bearer form only in certain limited circumstances. The denomination of the Sukuk Murabahah shall be RM1,000 or in multiples of RM1,000 at the time of issuance or such other denomination as may be mutually agreed between the Issuer and the Facility Agent. 36
47. Transaction Expenses : All legal and professional fees, the cost of due diligence exercises, stamp duties, taxes and any other out-of-pocket expenses incurred in connection with the Sukuk Murabahah and the Junior Bonds, including professional due diligence fees, Shariah advisory fee and fees payable to the Rating Agency, the Lead Arranger, the Lead Manager, the Facility Agent, the Sukuk Trustee and the Security Trustee, shall be borne by the Issuer. Other Conditions : The Sukuk Murabahah shall at all times be governed by the guidelines issued and to be issued from time to time by the SC, or BNM. Jurisdiction : The Issuer shall unconditionally and irrevocably submit to the nonexclusive jurisdiction of the courts of Malaysia. Tenure : The Sukuk Murabahah shall have a tenure of more than one (1) year and up to eighteen (18) years as the Issuer may select, provided that the Sukuk Murabahah shall mature on or prior to the expiry date of the Sukuk Murabahah Programme. For the avoidance of doubt, the tenure of any Sukuk Murabahah issued under the Sukuk Murabahah Programme shall not exceed the tenure of the junior bonds of RM150 million in nominal value (“Junior Bonds”) issued. Expected facility/ programme size (for programme to state the option to upsize) : The initial limit of the Sukuk Murabahah Programme shall be up to RM1,300 million which shall be reduced in accordance with the following amortisation schedule:Anniversary from the First Issue Date Reduction in Programme Limit 5 - 1,300 6 - 1,300 7 50 1,250 8 50 1,200 9 50 1,150 10 50 1,100 11 50 1,050 12 50 1,000 13 150 850 14 150 700 15 150 550 16 150 400 17 200 200 18 200 - Sukuk Murabahah Programme Available Limit RM’million The Sukuk Murabahah may be issued at par or at a discount as may be agreed between the Issuer and the Lead Arranger prior to the issuance. 37
48. Disclosure : • If the Issuer or its Board Members have been convicted or charged with any offence under the securities laws, corporation laws or other laws involving fraud or dishonesty in a court of law, or if any action has been initiated against the issuer of its Board Members for breaches of the same, for the past ten years prior to the lodgement/ since incorporation (for issuer incorporated less than ten years); and No. • If the Issuer has been subjected to any action by the stock exchange for any breach of the listing requirements or rules issued by the stock exchange, for the past five years prior to the date of application. No. [The remainder of this page is intentionally left blank] 38
49. 2 .2 Transaction Diagram of the Sukuk Murabahah Programme Steps Description of the Sukuk Murabahah Structure 1 The Sukuk Trustee (on behalf of the holders of the Sukuk Murabahah (“Sukukholders”)) and MEX II shall enter into an agency agreement (“Agency Agreement”), pursuant to which MEX II (in such capacity, the “Agent”) is appointed as the agent of the Sukukholders for the purchase and sale of Commodities (as defined above). The Agent will then enter into a “Sub-Agency Agreement” to appoint the Facility Agent as the sub-agent (in such capacity, the “Sub-Agent”) for the purchase and sale of Commodities under the Sukuk Murabahah issuance. 2 Pursuant to a commodities murabahah master agreement (“Commodities Murabahah Master Agreement”), to be entered into between MEX II (in such capacity, the “Purchaser”) and the Agent and the Sukuk Trustee (acting on behalf of the Sukukholders), the Purchaser issues a purchase order (the "Purchase Order") to the Agent and subsequently thereafter, the Agent issues the Purchase Order to the Sub-Agent. In the Purchase Order, MEX II (acting as Purchaser for itself) will request the Agent, and subsequently, the Agent will request the Sub-Agent to purchase the Commodities on the terms specified therein. The Purchaser will irrevocably undertake to purchase the Commodities from the Sukukholders via the Sub-Agent at the Deferred Sale Price. 39
50. Steps Description of the Sukuk Murabahah Structure 3 Pursuant to the Purchase Order , the Sub-Agent via the Commodity Trading Participant (“CTP”) (pursuant to a CTP purchase agreement entered into between the Sub-Agent and the CTP (“CTP Purchase Agreement”)) will purchase on a spot basis the Commodities from commodity vendor(s) in the Bursa Suq Al-Sila' and/or such other independent commodity trading platforms acceptable to the Shariah Adviser (“Commodity Seller”) at a purchase price, which shall be an amount equivalent to the Sukuk Murabahah proceeds ("Purchase Price"). 4 MEX II (acting as the Issuer) shall issue Sukuk Murabahah to the Sukukholders whereby the proceeds received from such issuance shall be used to pay for the Purchase Price of the Commodities. The Sukuk Murabahah shall evidence the Sukukholders' ownership of the Commodities and subsequently, once the Commodities are sold to MEX II (as the Purchaser for itself), the entitlement to receive the Deferred Sale Price. 5 Thereafter, pursuant to the undertaking under the Purchase Order, the Sub-Agent (acting on behalf of the Agent who in turn acts as agent of the Sukukholders) shall sell the Commodities to MEX II (acting as Purchaser for itself) at the Deferred Sale Price under the commodities sale and purchase agreement (the “Sale and Purchase Agreement”). 6 Subsequently thereafter, MEX II (pursuant to a CTP sale agreement entered into between MEX II, as Purchaser for itself, and the CTP (“CTP Sale Agreement”)) shall appoint the CTP to sell the Commodities to Bursa Suq Al-Sila’ and/or such other commodity trading platforms acceptable to the Shariah Adviser (“Commodity Buyer”) on a spot basis for an amount equal to the Purchase Price. The CTP Sale Agreement will provide for the CTP to directly sell the Commodities to the Commodity Buyer upon notice by MEX II that the Sale and Purchase Agreement has been duly executed and upon receipt of the sale instruction by MEX II. 7 During the tenure of the Sukuk Murabahah, MEX II (in its capacity as the Purchaser), as part of its obligation to pay the Deferred Sale Price, shall make periodic profit payments to the Sukukholders. On the Sukuk Murabahah maturity dates or upon the declaration of an Event of Default, MEX II (in its capacity as the Purchaser) shall pay all amounts outstanding in respect of the Deferred Sale Price of the relevant Sukuk Murabahah (subject to Ibra’), where applicable, upon which the relevant Sukuk Murabahah will be cancelled. [The remainder of this page is intentionally left blank] 40
51. SECTION 3 PRINCIPAL TERMS AND CONDITIONS OF THE JUNIOR BONDS Words and expressions used and defined in this Section 3 shall , in the event of any inconsistency with the definitions section of this Information Memorandum, only be applicable for this Section 3. 3.1 Details of the Junior Bonds Name of facility : Proposed issue of, offer for subscription or purchase of, or invitation to subscribe for or purchase of junior bonds of RM150 million in nominal value. One-time issue or programme : One-time issue Shariah principles (for sukuk) : Not applicable Facility description : Issuance of redeemable secured junior bonds of RM150 million in nominal value (“Junior Bonds”). Currency : Ringgit. Expected facility/ programme size : MYR150,000,000.00 Option to upsize (for programme) : No. Tenure of facility/ programme : 19 year(s). Availability period for debt/ sukuk programme : Not applicable Clearing and settlement platform : • MyClear Mode of issue : • • • • • • Book building Private placement Bought deal Book running Direct placement Other-Book building or private placement (on a best effort basis) or on a bought deal basis, each without prospectus. Selling restrictions : • Part 1 of Schedule 6 of the Capital Markets & Services Act, 2007 (CMSA) • Part 1 of Schedule 7 of the CMSA • Read together with Schedule 9 of CMSA • Section 4(6) of the Companies Act, 1965 Other:Selling Restrictions at issuance The Sukuk Murabahah may only be offered, sold, transferred or otherwise disposed of, directly or indirectly, to persons falling within Section 4(6) of the Companies Act (as amended from time 41
52. to time ) (“Companies Act”); and Part I Schedule 6 and Part I Schedule 7 read together with Schedule 9 of CMSA. Selling Restrictions thereafter The Sukuk Murabahah may only be offered, sold, transferred or otherwise disposed of, directly or indirectly, to persons falling within Section 4(6) of the Companies Act (as amended from time to time); and Part I Schedule 6 read together with Schedule 9 of the CMSA. • Tradability and transferability : Other regulatory approvals required in relation to the issue, offer or invitation to subscribe or purchase PDS/sukuk, and whether or not obtained : None. Details of security/ collateral pledged : Details of guarantee : The Junior Bonds shall be secured by a first ranking charge and assignment of the Junior FSRA (as defined in the paragraph entitled “Details of designated account(s)”) and the credit balances therein. Not guaranteed. Convertibility of Issuance : Non-convertible. Exchangeability of Issuance : Non-exchangeable. Call option : No call option. Put option : No put option. Details of covenants : a. Tradable & transferable. Positive covenants To include but not limited to the following: (i) the Issuer shall maintain in full force and effect all relevant authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) and will promptly obtain any further authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) which is or may become necessary to enable it to own its assets, to carry on its business or for the Issuer to enter into or perform its obligations under the Transaction Documents or to ensure the validity, enforceability, admissibility in evidence of the obligations of the Issuer or the priority or rights of the financiers under the Transaction Documents and the Issuer shall comply with the same; (ii) the Issuer shall at all times on demand execute all such further documents and do all such further acts reasonably necessary at any time or times to give further effect to the terms and 42
53. conditions of the Transaction Documents ; (iii) the Issuer shall exercise reasonable diligence in carrying out its business and affairs in a proper and efficient manner and in accordance with sound financial and commercial standards and practices; (iv) the Issuer shall promptly perform and carry out all its obligations under all the Transaction Documents and ensure that it shall immediately notify the Trustee in the event that the Issuer is unable to fulfill or comply with any of the provisions of the Transaction Documents; (v) the Issuer shall prepare its financial statements on a basis consistently applied in accordance with approved accounting standards in Malaysia and those financial statements shall give a true and fair view of the results of the operations of the Issuer for the period to which the financial statements are made up and shall disclose or provide against all liabilities (actual or contingent) of the Issuer; (vi) the Issuer shall promptly comply with all applicable laws including the provisions of the CMSA, LOLA Guidelines and/or the notes, circulars, conditions or guidelines issued by SC from time to time; (vii) the Issuer shall maintain the takaful/insurances required by the Transaction Documents and Project Documents; (viii) the Issuer shall give to the Trustee such information as it may require in order to discharge its duties and obligations as trustee under the trust deed relating to the Issuer’s affairs to the extent permitted by law; (ix) the Issuer shall keep proper books and accounts at all times and to provide the Trustee access to such books and accounts; (x) the Issuer shall file all relevant tax returns and pay all taxes promptly upon the same becoming due except to the extent that taxes are being contested in good faith or an adequate reserve has been set aside with respect thereto; (xi) the Issuer shall open and maintain the Junior FSRA for the purpose stated and make payments from such accounts only as permitted under the Transaction Documents, and comply with the terms and conditions of the Transaction Documents in all matters concerning the Junior FSRA; (xii) the Issuer shall maintain a paying agent in Malaysia; (xiii) the Issuer shall procure that the paying agent shall notify the Trustee in the event that the paying agent does not receive payment from the Issuer on the due dates as required under the trust deed and the terms and conditions of the Junior Bonds; (xiv) the operation of the Junior Bonds shall at all times be governed by guidelines issued and to be issued by the SC and/or other authorities having jurisdiction over matters 43
54. pertaining to the Junior Bonds ; (xv) the Issuer shall maintain at all times throughout the tenor of the Junior Bonds, the Trustees’ Reimbursement Account for Bondholders' actions (the “Junior Bonds Trustees' Reimbursement Account”) with a sum of RM30,000 to be set up from the moneys received by the Issuer when the Junior Bonds are issued. The Junior Bonds Trustees' Reimbursement Account shall be operated by the Trustee and the money in the Junior Bonds Trustees' Reimbursement Account shall only be used strictly by the Trustee in carrying out their duties in relation to the occurrence of Event of Default or enforcement events which are provided under the Transaction Documents in respect of the Junior Bonds; and (xvi) such other covenants as may be advised by the Solicitors. b. Negative covenants To include but not limited to the following: (i) the Issuer shall not incur any additional indebtedness (including any loans or advances from its shareholders, subsidiaries or associated companies) save and except where:(a) such indebtedness (including but not limited to hire purchase, leasing arrangements bank guarantee facilities and/or facilities for working capital) does not exceed RM50.0 million in aggregate and is unsecured (with a sublimit of up to RM30.0 million in aggregate for bank guarantee facilities raised for the MEX II Highway purposes only on secured basis with the balance thereof being on an unsecured basis); or (b) such loans or advances from its shareholders, subsidiaries or associated companies are fully subordinated to the Junior Bonds. (ii) the Issuer shall not create or permit to exist any encumbrance, mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment by way of security, trust arrangement for the purpose of providing security or other security interest of any kind including, without limitation, title transfer and/or retention arrangements having a similar effect or any agreement to create any of the foregoing, but excluding: (a) liens arising in the ordinary course of business by operation of law and not by way of contract; (b) the security contemplated to secure the Sukuk Murabahah Programme; and (c) those security as contemplated under this term sheet; (iii) the Issuer shall not provide or permit to exist any guarantee to any party save and except for such guarantees required in the ordinary course of business for the MEX II Highway provided always that the issuance of such guarantee will not result in a downgrade of the prevailing rating of the outstanding Junior 44
55. Bonds ; (iv) the Issuer shall not incur capital expenditure exceeding a threshold to be agreed, other than those related to MEX II Highway and capital expenditure which has already been planned and included in the operating budget for the relevant year, without the written consent of the Trustee or the agent as may be approved; (v) the Issuer shall not dispose any assets in excess of RM10.0 million in aggregate in any financial year, except where the asset disposal is solely for the purposes of facilitating Shariah concepts used in Islamic financing facilities granted to the Issuer; (vi) the Issuer shall not add, delete, amend or substitute its Memorandum or Articles of Association in a manner inconsistent with the provisions of the Transaction Documents unless otherwise required under the law or to increase its authorized capital or for the purpose of fulfilling any regulatory requirements which may be applicable in connection with the listing of the shares of the Issuer; (vii) the Issuer shall not reduce its authorised or paid-up share capital whether by varying the amount, structure or value thereof or the rights attached thereto or by converting any of its share capital into stock, or by consolidating, dividing or subdividing all or any of its shares, or by any other manner and for the avoidance of any doubt, listing of shares of the Issuer shall not be restricted by this covenant; (viii) the Issuer shall not declare or pay any dividends or make any distribution (such payments and distributions shall be referred to as “Distributions”) whether income or capital in nature to its shareholders, except in relation to the Junior Bonds (which are subject to the Requisite Conditions) unless the following conditions are met: (a) the calculation of the Senior FSCR has commenced; (b) the Senior FSCR is above 2.00 times immediately after the Distributions; (c) no Event of Default (or event or condition which, with the giving of notice, the passage of time, or both, would become an Event of Default ) has occurred or would have occurred following such payment or distribution of dividends/distributions; (d) any amount under the finance service reserve account in accordance with the terms of the Sukuk Murabahah (as defined under item (A) of the paragraph entitled “Details of covenants”) is due or any instalment on any of the payments under the arrangements pertaining to the Sukuk Murabahah is overdue and unpaid or if any of the payments under the arrangements pertaining to the Sukuk Murabahah which has become payable has not been paid as a consequence of default by the Issuer; and (ix) the Issuer shall not make any payments: 45
56. (a) (whether in relation to principal, interest or otherwise) to its shareholders, subsidiaries or associated companies in connection with any loans or advances from its shareholders, subsidiaries or associated companies unless the conditions described in paragraph (viii) above which relates to ‘Distributions’ are met; and (b) on the Junior Bonds unless the Requisite Conditions are met. (x) except otherwise contemplated in the Transaction Documents, the Issuer shall not enter into any agreement with its subsidiaries (if any) or associated companies except for the Issuer which agreement must be entered into: (a) in the ordinary course of its business; (b) in relation to the Sukuk Murabahah Programme; (c) on an arms-length basis; and (d) will not have a Material Adverse Effect on the Issuer. For the purposes of this Principal Terms and Conditions, “Material Adverse Effect” means any material adverse effect on the business or condition (financial or otherwise) or results of the operations of the Issuer or the ability of the Issuer to perform any of its obligations under any of the Transaction Documents. (xi) the Issuer shall not use the proceeds raised from the Junior Bonds except for the purposes set out herein; (xii) the Issuer shall not lend any money to any party other than to the Issuer's directors, officers or employees as part of their terms of employment; (xiii) the Issuer shall not enter into any amalgamation, demerger, reconstruction or transfer or assign any or all of their rights in title to or interest of the license(s) necessary for the operations of the Issuer in such a manner which may result in or potentially would have a Material Adverse Effect; (xiv) the Issuer shall not carry on any business other than its undertaking and enjoyment of the Concession and the maintenance of roads and such ancillary activities permitted under the Concession Agreement and to demand, collect, retain and distribute tolls, on behalf of other persons awarded concessions by the Government; (xv) the Issuer shall not abandon the Concession; (xvi) the Issuer shall not amend, supplement or vary or agree to any amendment, supplement or variation to the Concession Agreement or the Project Documents; (xvii) the Issuer shall not agree to waive any breach or proposed breach of the Concession Agreement which would have a Material Adverse Effect and/or materially prejudice the interest 46
57. of the Bondholders or any security created under the security documents ; (xviii) the Issuer shall not open any other accounts other than the Junior Bonds Trustees' Reimbursement Account, the Junior FSRA and the designated accounts under the Sukuk Murabahah Programme; and (xix) such other covenants as may be advised by the Solicitors. c. Financial covenants The Issuer shall maintain a Junior Finance Service Cover Ratio (“Junior FSCR”) of at least 1.25 times, at all times. In the event the Junior Available Cash Flow (defined below) is inadequate to fully service the Junior Bonds obligations, noncompliance of the Junior FSCR shall not constitute an event of default. The Junior FSCR is the ratio of Junior Available Cash Flow to the aggregate of: a. all coupon obligations due under the Junior Bonds for the next twelve (12) months; plus b. all Coupon Payment Amount and/or Expected Cumulative Coupon Payments due under the Junior Bonds for the next twelve (12) months. The Junior FSCR calculations shall be duly confirmed by the Issuer’s directors and based on the Junior Available Cash Flow (as defined hereafter) as per the latest audited financial statements of the Issuer on an annual basis. The first of such Junior FSCR calculations will commence and be based on the annual audited financial statements of the Issuer for the financial year immediately following the financial year when tolling operations of MEX II Highway commences and shall be performed no later than one hundred and eighty (180) days from such financial year end. For the avoidance of doubt, any double counting shall be disregarded. The Issuer shall submit a compliance certificate to the Trustee, the Rating Agency and the Facility Agent, which certificate shall be signed by two (2) directors of the Issuer certifying the compliance of the Junior FSCR. Junior Available Cash Flow In any annual period, the sum of: i. all income received by the Issuer under the Concession Agreement (as defined in the paragraph entitled “Project Documents” in Other terms and conditions) and any other receipts of a capital or revenue nature under any contract or agreement; ii. all distribution, returns and realised gains received by the Issuer; iii. all credit balances in the Junior FSRA including accrued 47
58. coupon payments retained by or on behalf of the Issuer and the amount utilised from the Junior FSRA for Permitted Investments (as defined in the paragraph entitled “Permitted investments, if applicable”) at the beginning of the relevant twelve (12) month period; and iv. proceeds of takaful/insurance claims received by the Issuer. Less: Less: i. ii. the total amount spent on management, administration, operation, maintenance and heavy repairs; taxes paid or such other contributions paid by the Issuer to the Government of Malaysia (“Government”); iii. capital expenditure incurred (unless funded by contributions from shareholders in the form of equity advances or shareholders’ loans); iv. all amounts paid in accordance with the terms of the Islamic medium term notes to be issued (“Sukuk Murabahah”) under the Islamic medium term notes issuance programme of RM1,300 million in nominal value under the Shariah principle of Murabahah (via a Tawarruq arrangement) (“Sukuk Murabahah Programme”); v. all other senior debt service of the Issuer; and vi. any payments made by the Issuer under the Project Documents (as defined in the paragraph entitled “Project Documents” in Other terms and conditions) or other contract or agreement. d. Information covenants To include but not limited to the following: (i) the Issuer shall provide to the Trustee at least on an annual basis, a certificate confirming that it has complied with all its obligations under the Transaction Documents and the terms and conditions of the Junior Bonds and that there does not exist or had not existed, from the date the Junior Bonds were issued, any Event of Default, and if such is not the case, to specify the same; (ii) the Issuer shall deliver to the Trustee the following: (a) as soon as they become available (and in any event within one hundred and eighty (180) days after the end of each of its financial years) copies of its financial statements for that year which shall contain the income statements and balance sheets of the Issuer and which are audited and certified without qualification by a firm of independent certified public accountants acceptable to the Trustee; (b) as soon as they become available (and in any event within ninety (90) days after the end of the first half of its financial year) copies of its unaudited half yearly financial statements for that period which shall contain the income 48
59. statements and balance sheets of the Issuer which are duly certified by any one of its directors ; (c) promptly, such additional financial or other information relating to the Issuer’s business and its operations as the Trustee may from time to time reasonably request in order to discharge its duties and obligations as trustee to the extent permitted by law; and (d) promptly, all notices or other documents received by the Issuer from any of its shareholders or its creditors which contents may materially and adversely affect the interests of the Bondholders, and a copy of all documents dispatched by the Issuer to its shareholders (or any class of them) in their capacity as shareholders or its creditors generally, which contents may affect the interests of the Bondholders, at the same time as these documents are dispatched to these shareholders or creditors; and (e) promptly, any other accounts, report, notice, statement or circular issued to shareholders which the Trustee shall at its discretion circulate the accounts, report, notice, statement or circular to the registered Bondholders who fall within Schedules 6 and 7 of the CMSA; (iii) the Issuer shall promptly notify the Trustee of any change in its board of directors; (iv) the Issuer shall promptly notify the Trustee of any change in its condition (financial or otherwise) and of any litigation or other proceedings of any nature whatsoever being threatened or initiated against the Issuer before any court or tribunal or administrative agency which may materially and adversely affect the ability of the Issuer to perform any of its obligations under any of the Transaction Documents; (v) the Issuer shall promptly give notice to the Trustee or the Facility Agent in writing in the event that it becomes aware of any of the following: (a) of the occurrence of any Event of Default or any event which (with the expiry of a grace period, the giving of notice, the making of any determination under the Transaction Documents relating to the Junior Bonds or any combination of the foregoing) would constitute an Event of Default(the “Potential Event of Default”) forthwith upon becoming aware thereof, and it shall take all reasonable steps and/or such other steps as may reasonably be requested by the Trustee to remedy and/or mitigate the effect of the Event of Default or the Potential Event of Default; (b) the occurrence of any event that has caused or could cause, one or more of the following: (i) any amount secured or payable under the Junior Bonds to become immediately payable; (ii) the Junior Bonds to become immediately enforceable; or 49
60. (iii) any other right or remedy under the terms, provisions and covenants of the Transaction Documents have become immediately enforceable; (c) any circumstance that has occurred that would materially prejudice the Issuer or any security included in or created by the Transaction Documents; (vi) the Issuer shall promptly notify the Trustee or the Facility Agent in writing of any change in withholding tax position or taxing jurisdiction of the Issuer (where applicable); (vii) the Issuer shall promptly notify the Trustee or the Facility Agent in writing of any substantial change in the nature of the business of the Issuer; (viii) the Issuer shall promptly notify the Trustee of any circumstance that has occurred that would materially prejudice the Issuer; Details of designated account(s) : (ix) the Issuer shall promptly notify the Trustee of any change in the utilisation of proceeds of the Junior Bonds, where the Information Memorandum or any agreement entered into in connection with the issue, offer or invitation sets out a specific purpose for which proceeds are to be utilized; (x) the Issuer shall promptly notify the Trustee of any other matter which may materially prejudice the interests of the Bondholders; and (xi) any other covenants as advised by the Solicitors. Junior Finance Service Reserve Account (“Junior FSRA”) Name account of Junior Finance (“Junior FSRA”) Service Reserve Account Parties responsible for opening the account Issuer Parties responsible for maintaining/o perating the account Signatories to the account Security Trustee Sources funds The Issuer shall open and maintain a Junior FSRA to deposit proceeds from the revenue account in respect of the Sukuk Murabahah Programme (“RA”) equivalent to the next six (6) months of Junior Bonds debt service, the first of which is to be deposited upon issuance of the Junior Bonds (“Initial Deposit”). Thereafter, a minimum balance equivalent to the Initial Deposit of Security Trustee 50
61. must be maintained throughout the tenure of the Junior Bonds (“Junior Bonds Minimum Required Balance”). If the balance held in the Junior FSRA is less than the Junior Bonds Minimum Required Balance, the shortfall shall be topped up from the RA by no later than thirty (30) days prior to the next scheduled Coupon Payment Date. Utilisation of funds Name of credit rating agency and credit rating Conditions precedent : : The balance in the Junior FSRA may be withdrawn to make payments under the Junior Bonds if the amount available for such payment from the RA is insufficient to meet Junior Bonds debt service. The operation of this Junior FSRA, including the deposit of Initial Deposit and maintenance of the Junior Bonds Minimum Required Balance from the RA, shall always be subject to the prior payment of all obligations due under the Sukuk Murabahah Programme and the Requisite Conditions. For the avoidance of doubt, non-compliance with the Junior Bonds Minimum Required Balance in the Junior FSRA shall not by itself constitute an Event of Default. No. Credit Rating Agency Credit rating Final/ Indicative rating Partial Amount rated 1 A- Indicative rating No MYR 150.00 Malaysian Rating Corporation Bhd (MARC) To include but not limited to the following (all have to be in form and substance acceptable to the Lead Arranger): A. Main Documentation 1) The Transaction Documents have been executed and, where applicable, stamped and presented for registration. 2) All relevant notices and acknowledgements (where applicable) and consents (where applicable) from the relevant counterparties to the Project Documents shall have been made or received as the case may be. B. Issuer 1) Receipt of certified true copies of the Certificate Incorporation, and the Memorandum and Articles Association. 2) Receipt of certified true copies of the Forms 24, 44 and 49. 3) A certified true copy of board resolutions authorising, among other actions, the execution of the Transaction Documents (as defined below). 4) A list of authorised signatories and their respective specimen of of 51
62. signatures . 5) A report of the relevant company search of the Issuer. 6) Receipt of the search results and winding up search results on the Issuer confirming that the Issuer is not and/or has not been wound up. C. General 1) Receipt of acknowledgement by the SC of the lodgement in respect of the Junior Bonds with the SC. 2) The Junior Bonds have received the requisite ratings as stated in this Principal Terms and Conditions. 3) Evidence that all transaction fees, costs and expenses have been or will be paid in full by the date of the issuance of the Junior Bonds. 4) Receipt of a report from the Insurance Consultant confirming, among others, that the insurance/Takaful programme for the MEX II Highway is adequate and that the insurance policies/Takaful contracts for the construction of the MEX II Highway are in place. 5) Receipt of a report from the Independent Consulting Engineer reviewing, amongst others, the technical feasibility of the MEX II Highway and the reasonableness of MEX II Highway costs, construction schedule and payment schedules. 6) Satisfactory evidence that (i) the issued and paid-up capital of the Issuer is at least RM60 million and (ii) shareholders advances of RM140 million has been made by Maju Holdings Sdn Bhd to the Issuer. 7) Satisfactory evidence that the agreement between the Issuer and Maju Holdings Sdn Bhd have been entered into for the subscription of RM150 million nominal value of the Junior Bonds. 8) Receipt of satisfactory legal opinion from the Solicitors confirming amongst others:i) all approvals/ consents (be it regulatory or contractual) which are required shall have been duly obtained for the Junior Bonds and for the execution of the Transaction Documents; ii) the Transaction Documents are legal, valid, binding and enforceable and that all the conditions precedent in relation to the Transaction Documents have been fulfilled or waived, as the case may be; iii) Confirmation from the Solicitors that all security arrangements under the Junior Bonds are in full force and effect. 9) Evidence that the Junior FSRA has been established in accordance with the provisions of Transaction Documents and 52
63. an amount equivalent to the Junior Bonds Minimum Required Balance has been or will be deposited into the Junior FSRA by the issuance of the Junior Bonds . Representations and warranties : 10) Receipt of a report from the traffic consultant confirming, among others, the traffic projections and its assumptions thereto. 11) Receipt of a letter from the Reporting Accountant stating among others, the assumptions adopted in the cashflow projections and the accuracy of the mathematical calculations of the cashflow projections based on the underlying assumptions. 12) Certification issued by the Issuer in the form prescribed by the Lead Arranger confirming the accuracy of the representations and warranties contained in the Transaction Documents in all respect. 13) Certified true copy of the Environmental Impact Assessment report prepared for the MEX II Highway. 14) Receipt of certified true copies of all relevant duly executed Project Documents, including the Turnkey Contract (as defined in the paragraph entitled “Project Documents” in Other terms and conditions). 15) Confirmation that the approval of the Government pursuant to clause 31.2 of the Concession Agreement has been obtained, and that the Government’s right to assume operational responsibility in accordance with clause 40 of the Concession Agreement has been acknowledged and reflected in the relevant Transaction Documents. 16) Satisfactory evidence that all insurance policies/Takaful contracts of the Issuer or in respect of the MEX II Highway are also in the name of the Trustee and the Trustee is a loss payee thereunder. 17) Such other conditions precedent as may be advised by the Solicitors. To include but not limited to the following: (i) the Issuer is a company with limited liability duly incorporated and validly existing under the laws of Malaysia, has full power to carry on its business and to own its property and assets, and has full beneficial ownership of all its property and assets; (ii) the memorandum and articles of association of the Issuer incorporates provisions which authorise, and all necessary corporate and other relevant actions have been taken to authorise, and all relevant consents and approvals of any administrative, governmental or other authority or body in Malaysia have been duly obtained and are in full force and effect which are required to authorise, the Issuer to execute and deliver and perform the transactions contemplated by the Transaction Documents to which it is a party in accordance with their terms; 53
64. (iii) neither the execution and delivery of any of the Transaction Documents nor the performance of any of the transactions contemplated by the Transaction Documents did or does as at the date this representation and warranty is made or repeated (a) contravene or constitute a default under any provision contained in any agreement, instrument, law, ordinance, decree, judgment, order, rule, regulation, licence, permit or consent by which the Issuer or any of its assets is bound or which is applicable to the Issuer or any of its assets, (b) cause any limitation on the Issuer or the powers of its directors, whether imposed by or contained in its memorandum and articles of association or in any agreement, instrument, law, ordinance, decree, order, rule, regulation, judgment or otherwise, to be exceeded, or (c) cause the creation or imposition of any security interest or restriction of any nature on any of the Issuer’s assets; (iv) each of the Transaction Documents is or will when executed and/or issued, as the case may be, be in full force and effect and constitutes, or will when executed or issued, as the case may be, constitute, valid and legally binding obligations of the Issuer enforceable in accordance with its terms; (v) the audited financial statements (including the income statement and balance sheet) of the Issuer shall be prepared on a basis consistently applied and in accordance with approved accounting standards in Malaysia and give a true and fair view of the results of their operations and the state of their affairs and in particular disclose all material liabilities (actual or contingent) of the Issuer; (vi) no litigation, arbitration or administrative proceeding or claim which might by itself or together with any other such proceedings or claims either have a material adverse effect on the financial condition of the Issuer or materially and adversely affect the Issuer’s ability to perform its obligations under the Transaction Documents in accordance with their terms, is presently in progress or pending or, to the best of the knowledge, information and belief of the Issuer (after due and careful enquiry), threatened against the Issuer or any of its or their assets; (vii) the Issuer is not aware of and has no reason to believe that any event has occurred which constitutes, or which with the giving of notice and/or the lapse of time and/or a relevant determination would likely to constitute, a contravention of, or default under, any agreement or instrument by which the Issuer or any of its assets are bound or affected, being a contravention or default which might either have a material adverse effect on the financial condition of the Issuer or materially and adversely affect the Issuer’s ability to perform its obligations under the Transaction Documents in accordance with their terms; (viii) the Issuer is in compliance and will comply with any applicable laws and regulations; (ix) the Issuer has obtained all permits, approvals and licenses required under the Project Documents and all of these are in full force and effect; 54
65. Events of defaults or enforcement events , where applicable, including recourse available to investors : (x) the Issuer has disclosed prior to the date of the Junior Bonds agreement to the Lead Arranger and/or the Facility Agent all facts relating to the Issuer knows or should reasonably know and which are material for disclosure to the Trustee, the Lead Arranger and the Facility Agent in the context of the Transaction Documents; and (xi) any other representations and warranties as may be advised by the Solicitors. Events of Default to include but not limited to the following: (i) the Issuer fails to pay any amount due from it under any of the Transaction Documents on the due date or, if so payable, on demand; (ii) any representation or warranty made or given by the Issuer under the Transaction Documents or which is contained in any certificate, document or statement furnished at any time pursuant to the terms of the Junior Bonds or the Concession Agreement and/or any of the Transaction Documents or Concession Agreement proves to have been incorrect or misleading in any material respect on or as of the date made or given or deemed made or given, and in the case of a failure which in the opinion of the Trustee is capable of being remedied, the Issuer does not remedy the failure within a period of thirty (30) days after the Issuer became aware or having been notified by the Trustee or the Security Trustee of the failure; (iii) the Issuer fails to observe or perform its obligations under any of the Transaction Documents or the Junior Bonds or under any undertaking or arrangement entered into in connection therewith other than an obligation of the type referred to in paragraph (i) above, and in the case of a failure which in the opinion of the Trustee is capable of being remedied, the Issuer does not remedy the failure within a period of thirty (30) days after the Issuer became aware or having been notified by the Trustee or the Security Trustee of the failure; (iv) there has been a breach by the Issuer of any obligation under any of the Issuer’s existing contractual obligations which may materially and adversely affect the Issuer’s ability to perform its obligations under the Transaction Documents and, if in the opinion of the Trustee is capable of being remedied, the Issuer does not remedy the breach within a period of thirty (30) days after the Issuer became aware or having been notified by the Trustee or the Security Trustee of the breach; (v) any indebtedness for borrowed moneys of the Issuer becomes due or payable or capable of being declared due or payable prior to its stated maturity or any guarantee or similar obligations of the Issuer is not discharged at maturity or when called and such declaration of indebtedness being due or payable or such call on the guarantee or similar obligations is not discharged or disputed in good faith by the Issuer in a court of competent jurisdiction within thirty (30) days from the date of such declaration or call, or the Issuer goes into default under, or commits a breach of, any agreement or instrument relating to any such indebtedness, guarantee or other obligations, or any security created to secure 55
66. such indebtedness becomes enforceable ; (vi) an encumbrancer takes possession of, or a trustee, receiver, receiver and manager or similar officer is appointed in respect of the whole or substantial part of the business or assets of the Issuer, or distress, legal process, sequestration or any form of execution is levied or enforced or taken against the Issuer which may have a Material Adverse Effect on the Issuer, or any security interest which may for the time being affect any of its assets becomes enforceable; For the purpose of this paragraph (vi), references to “substantial” shall mean such value equivalent to or more than 5% of the Issuer’s net tangible assets as reflected in its latest audited financial statements. (vii) the Issuer fails to satisfy any judgement passed against it by any court of competent jurisdiction and no appeal against such judgement or no application for a stay of execution has been made to any appropriate appellate court within the time prescribed by law or such appeal or application for a stay of execution has been dismissed; (viii) any step is taken for the winding up, dissolution or liquidation of the Issuer or a resolution is passed for the winding up of the Issuer or a petition for winding up is presented against the Issuer and the Issuer has not taken any action in good faith to set aside such petition within thirty (30) days from the date of service of such winding up petition or a winding up order has been made against the Issuer; (ix) the Issuer convenes a meeting of its creditors or proposes or makes any arrangement including any scheme of arrangement or composition or begins negotiations with its creditors, or takes any proceedings or other steps, with a view to a rescheduling or deferral of all or any part of its indebtedness or a moratorium is agreed or declared by a court of competent jurisdiction in respect of or affecting all or any part of its indebtedness or any assignment for the benefit of its creditors (other than for the purposes of and followed by a reconstruction previously approved in writing by the Trustee, unless during or following such reconstruction the Issuer becomes or is declared to be insolvent) or where a scheme of arrangement under Section 176 of the Companies Act has been instituted against the Issuer; (x) where there is a revocation, withholding or modification of any license, authorisation, approval or consent which in the opinion of the Trustee may materially and adversely impairs or prejudices the ability of the Issuer to comply with the terms and conditions of the Junior Bonds or the Transaction Documents; (xi) the Issuer is deemed unable to pay any of its debts or becomes unable to pay any of its debts as they fall due or suspend or threaten to suspend making payments with respect to all or any class of its debts; (xii) any creditor of the Issuer exercises a contractual right to take over the financial management of the Issuer and such event in the opinion of the Trustee may have a Material Adverse Effect; 56
67. (xiii) the Issuer changes or threatens to change the nature or scope of a substantial part of its business, or suspends or threatens to suspend or cease or threatens to cease the operation of a substantial part of its business which it now conducts directly or indirectly and such change or suspension or cessation in the opinion of the Trustee may have a Material Adverse Effect; (xiv) at any time any of the provisions of the Transaction Documents in respect of the Junior Bonds is or becomes invalid, illegal, void, voidable or unenforceable or ceases to be binding which in the opinion of the Trustee may have a Material Adverse Effect; (xv) at any time any of the provisions of the Concession Agreement or the Project Documents is or becomes invalid, illegal, void, voidable or unenforceable or ceases to be binding; (xvi) the Issuer repudiates any of the Transaction Documents or the Issuer does or causes to be done any act or thing evidencing an intention to repudiate any of the Transaction Documents; (xvii) any of the project counterparties to the Concession Agreement or the Project Documents repudiates the Concession Agreement or the Project Documents or any of the project counterparties to the Concession Agreement or the Project Documents does or causes to be done any act or thing evidencing an intention to repudiate the Concession Agreement or the Project Documents; (xviii) any of the assets, undertakings, rights or revenue of the Issuer are seized, nationalised, expropriated or compulsorily acquired by or under the authority of any governmental body which in the opinion of the Trustee may have a Material Adverse Effect on the Issuer; (xix) any event or events has or have occurred or a situation exists which in the opinion of the Trustee may have a Material Adverse Effect on the Issuer, and in the case of the occurrence of such event or situation which in the opinion of the Trustee is capable of being remedied, the Issuer does not remedy it within a period of thirty (30) days after the Issuer became aware or having been notified by the Trustee or the Security Trustee of the event or situation; (xx) if at any time the Issuer commits a breach of any term or any obligation of or under the Concession Agreement (whether or not resulting in a termination of such Concession Agreement) except: (a) where such a breach is not materially prejudicial to the interest of the Bondholders; and (b) is remedied by the Issuer within thirty (30) days from the notice of such breach from the Government. (xxi) if the Concession Agreement is terminated (whether by way of expropriation, breach of condition or otherwise) or a termination event or an event of default occurs under the Concession Agreement; or (xxii) such other event as may be advised by the Solicitors. 57
68. Upon the occurrence of an Event of Default referred to above , the Trustee may or shall (if directed to do so by a special resolution of the Bondholders and subject to it being indemnified to its satisfaction) declare that: (i) an Event of Default has occurred; (ii) declare that all amounts under the Junior Bonds then outstanding and other sums payable under the Transaction Documents are immediately due and payable in full in accordance with the terms of the relevant Transaction Documents; and (iii) the Trustee and the Security Trustee shall have the right to institute such proceedings and to take such steps as it/they think fit including enforcing remedies under each of the Transaction Documents. If there is still outstanding Sukuk Murabahah, the Bondholders shall not declare an Event of Default if the holders of the Sukuk Murabahah have not declared an Event of Default under the Sukuk Murabahah Programme. Governing laws : Laws of Malaysia. Provisions on buyback : No provision on buy-back Provisions on early redemption : Not applicable. Voting : Voting by the Sukukholders under the Sukuk Murabahah shall be carried out as follows: Subject to the terms of the Trust Deed and save as provided below, all Bondholders shall collectively constitute a single class for the purposes of attending and voting at meetings of Bondholders. Permitted investments : The Issuer shall be permitted from time to time to utilise funds held in the Junior FSRA to make Permitted Investments, provided that: (i) such funds utilised for Permitted Investments shall, where necessary, be remitted back to the relevant Junior FSRA to meet any payment obligations of the Issuer at least three (3) days before such payment obligations are due and payable; and (ii) shall be denominated in Ringgit Malaysia. Permitted Investments Permitted Investments shall comprise investment products approved by the SC and/or BNM. For the purposes of the Junior Bonds, Permitted Investments are as follows: (i) deposits with licensed financial institutions in Malaysia; or (ii) bankers acceptances, bills and other money market instruments by licensed financial institutions with a short term rating of P1 and a minimum long term rating of AA3/AA- or their equivalent; or (iii) treasury bills, money market instruments, and other securities issued by BNM or the Government; or (iv) securities issued by quasi government or government related corporations with a short term rating of P1 and a minimum 58
69. long term rating of AA3 /AA- or their equivalent or securities guaranteed by the Government; or (v) securities issued by corporations with a short term rating of P1 and a minimum long term rating of AA3/AA- or their equivalent, or by financial institutions or guaranteed by licensed financial institutions with a short term rating of P1 or a minimum long term rating of AA3/AA- or their equivalent. Ta’widh (for sukuk) : Not applicable. Ibra’ (for sukuk) : Not applicable. Kafalah (for sukuk) : Not applicable. Other terms and conditions: Details of Utilisation of Proceeds by Issuer : The utilisation of proceeds are as follows: Utilisation of proceeds Amount up to (RM’ million) (i) To part finance the construction costs, development costs and financing costs in relation to MEX II Highway 140 (ii) To fund the Junior FSRA (as defined above) described in section (20) above 10 Total 150 Note: 1. In the event that the amount allocated for purposes set out in any of the items (i) to (ii) above is not utilised in whole or in part for such purposes, the Issuer may utilise such unutilised amount for any of the other purposes set out in items (i) to (ii) above. Availability period for debt/ sukuk programme : The period from the date of the compliance with all conditions precedent and other applicable conditions to the satisfaction of the Lead Arranger. Profit/coupon/rent al rate (fixed or floating) : The coupon for Junior Bonds will be determined prior to the issuance (“Coupon Payment Rate”). On any relevant scheduled Coupon Payment Date (as defined below), the coupon payment amount (“Coupon Payment Amount”) is calculated at the Coupon Payment Rate on the nominal value of the Junior Bonds based on the Coupon Payment basis. On any relevant scheduled Coupon Payment Date, “Cumulative Coupon Payment” means the aggregate of (i) the Coupon Payment Amount due on that Coupon Payment Date; and (ii) cumulative aggregate of any Coupon Payments Amounts (wholly or partly) not paid during the previous Coupon Payment Dates. 59
70. Coupon Payment Amounts or Cumulative Coupon Payment shall be paid on the scheduled Coupon Payment Dates , subject to the commencement of tolling operations of MEX II Highway and the Requisite Conditions (as defined herein). For the avoidance of doubt, any outstanding Cumulative Coupon Payment is to be made on the earlier of: (i) maturity date of the Junior Bonds; or (ii) the date of declaration of an Event of Default under the Junior Bonds. Payment of coupon amounts under the Junior Bonds is subject to: a) the commencement of MEX II Highway tolling operations; b) the commencement of the calculation of the Senior Finance Service Cover Ratio (“Senior FSCR”) in accordance with the terms of the Sukuk Murabahah under the Sukuk Murabahah Programme; c) the Senior FSCR being maintained at a minimum of 1.75 times after such payment; and d) no Event of Default (as defined in the paragraph entitled “Events of default or enforcement events, where applicable, including recourse available to investors”) has occurred, is continuing or will occur as a result of such payment (collectively the “Requisite Conditions”). Any coupons not paid on the scheduled coupon dates due to the non-fulfilment of the Requisite Conditions shall be cumulative and paid on the earlier of maturity date of the Junior Bonds or the date of declaration of an Event of Default under the Junior Bonds. For the avoidance of doubt, any non-payment of coupon for the Junior Bonds on the scheduled coupon payment date due to non-fulfilment of the Requisite Conditions shall not constitute an Event of Default under the Junior Bonds. Profit/coupon/rent al payment frequency : Semi-annual or such other period as the Issuer and the Lead Arranger may agree (“Coupon Payment Period”). Profit/coupon/rent al payment basis : Actual/365 days Listing status and types of listing, where applicable : The Junior Bonds will not be listed on Bursa Securities or any other stock exchange. Transaction Documents : (i) Subscription Agreement; (ii) Trust Deed; (iii) Securities Lodgement Form for Central Securities Depository and Paying Agency Services; (iv) Security Documents; and 60
71. Project Documents Status : : (v) Any other documents or any such other agreements that may be advised by the Solicitors. (i) Concession agreement dated 20 October 2015 entered into between the Issuer and the Government in relation to the MEX II Highway (“Concession Agreement”); (ii) Turnkey contract dated 18 February 2016 between the Issuer and Maju Holdings Sdn Bhd as the turnkey contractor in respect of the construction of the MEX II Highway (“Turnkey Contract”); (iii) the toll collection agreement to be entered between the Issuer and MESB in relation to Section II of the Maju Expressway (“Toll Collection Agreement”) if applicable; and (iv) any other amendment(s) or variation(s) of the items under (i), (ii) and (iii) above and addition(s) to the items under (i), (ii) and (iii) above and any other instrument(s) executed supplemental thereto or in substitution thereof. The Junior Bonds will constitute direct, unconditional and secured obligations of the Issuer and shall at all times rank pari passu, without discrimination, preference or priority amongst themselves and are subordinated to the Sukuk Murabahah in terms of security and priority of payments. For the avoidance of doubt, the Bondholders shall agree upfront to waive their rights in respect of priority of payment to proceeds from the security and shall be ranked after the holders of the Sukuk Murabahah under the Sukuk Murabahah Programme in terms of security and priority of payments. Subordination : The Junior Bonds shall be subordinated to the Sukuk Murabahah in terms of security and priority of payments. For so long as the Sukuk Murabahah remain outstanding, the Bondholders shall not be able to declare an Event of Default ahead of the holders of the Sukuk Murabahah. Taxation : All payments by the Issuer shall be made without withholding or deductions for or on account of any present or future tax, duty or charge of whatsoever nature imposed or levied by or on behalf of Malaysia or any other applicable jurisdictions, or any authority thereof or therein having power to tax, unless such withholding or deduction is required by law, in which event the payer shall be required to make such additional amount so that the payee would receive the full amount which the payee would have received if no such withholding or deductions are made. Transaction Expenses : All legal and professional fees, the cost of due diligence exercises, stamp duties, taxes and any other out-of-pocket expenses incurred in connection with the Sukuk Murabahah and the Junior Bonds, including professional due diligence fees and fees payable to the Rating Agency, the Lead Arranger, the Lead Manager, the Facility Agent, the Trustee and the Security Trustee, shall be borne by the Issuer. Other Conditions : The Junior Bonds shall at all times be governed by the guidelines issued and to be issued from time to time by the SC, or BNM. 61
72. Jurisdiction : Disclosure : The Issuer shall unconditionally and irrevocably submit to the nonexclusive jurisdiction of the courts of Malaysia. • If the Issuer or its Board Members have been convicted or charged with any offence under the securities laws, corporation laws or other laws involving fraud or dishonesty in a court of law, or if any action has been initiated against the issuer of its Board Members for breaches of the same, for the past ten years prior to the lodgement/ since incorporation (for issuer incorporated less than ten years); and No. • If the Issuer has been subjected to any action by the stock exchange for any breach of the listing requirements or rules issued by the stock exchange, for the past five years prior to the date of application. No. [The remainder of this page is intentionally left blank] 62
73. SECTION 4 4 .1 BACKGROUND INFORMATION OF THE ISSUER Corporate Information 4.1.1 Background Information The Issuer was incorporated in Malaysia on 12 August 2014 under the Companies Act as a private limited company under the name of MEX II Sdn Bhd with the registration number 1104478-P. The registered office of the Issuer is No. 1, Maju Expressway (MEX), 63000 Cyberjaya, Selangor Darul Ehsan. 4.1.2 Principal Activities The principal activities of the Issuer are to design and construct the MEX II Highway, to provide other highway related facilities and services, and to operate and maintain the MEX II Highway and to collect toll from the general public for the use of the highway during the concession period. 4.2 Substantial Shareholders and Share Capital The shareholders of the Issuer as at the LPD are as follows: Shareholders Maju Lingkaran Development Sdn Bhd (Company No. 662260-H) No. of ordinary shares held 300,000 Percentage (%) of shareholding 100% The authorised, issued and paid-up share capital of the Issuer as at the LPD are as follows: Authorised share capital Issued capital and paid-up share No. of ordinary shares 400,000 Par value (RM) RM1.00 No. of ordinary shares 300,000 Par value (RM) RM1.00 [The remainder of this page is intentionally left blank] 63
74. 4 .3 Shareholding Structure As at the LPD, the corporate structure of the Issuer is illustrated as follows: Tan Sri Abu Sahid Bin Mohamed Puan Sri Noor Azrina Binti Mohd Azmi 91 % 9% Maju Holdings Sdn Bhd (Company No. 40444-V) 100 % Maju Lingkaran Development Sdn Bhd (Company No. 662260-H) 100 % MEX II Sdn Bhd (Company No. 1104478-P) (“the Issuer”) 4.4 Board of Directors As at the LPD, the board of directors of the Issuer and their profiles are as follows: (a) TAN SRI ABU SAHID BIN MOHAMED Chairman (Age: 64, Malaysian) Tan Sri Abu Sahid Bin Mohamed was appointed to the Board of the Issuer on 12 August 2014 and was subsequently appointed as Chairman on 8 April 2015. He is presently the Group Executive Chairman of the Maju Group. He has been the driving force behind the growth of the Maju Group in all its activities over the past 35 years. He has made the Maju Group well diversified with activities in construction, property development, infrastructure, services and manufacturing. Currently, he also serves as the Group Executive Chairman of Bright Focus Berhad, Executive Chairman of Ipmuda Berhad, MESB. He is a major shareholder of Ipmuda Berhad, Kinsteel Bhd and Perwaja Holdings Berhad. He is also a director of various other private limited companies in Malaysia. (b) DATO’ SRI MOHD FAUZI BIN YON Director (Age: 64, Malaysian) Dato’ Sri Mohd Fauzi Bin Yon was appointed to the Board of the Issuer on 12 August 2014. He is currently the Deputy Group Executive Chairman of Maju Holdings, the ultimate holding company for the Issuer. 64
75. He joined the Ministry of Foreign Affairs of Malaysia immediately after graduating from the University of Malaya with Bachelor of Economics (Honours) in 1975. He served in various Malaysian Diplomatic Missions abroad between 1978 and 1993 before opting for retirement from Government service in 1995. The last position he held before his optional retirement from the Ministry of Foreign Affairs of Malaysia was as Principal Assistant Secretary in charge of political and economic affairs of the South East Asian region. He joined Maju Holdings as the Special Assistant to the Group Executive Chairman in August 1995 and subsequently held the position of Chief Executive Officer of Maju Holdings from 16 December 2009 until 27 December 2012. He was appointed to the board of directors of Maju Holdings on 20 July 2001. (c) DATO’ ONG TEE THONG Director (Age: 62, Malaysian) Dato’ Ong Tee Thong was appointed to the Board of the Issuer on 8 April 2015. He is currently a director of Maju Holdings, the ultimate holding company for the Issuer. He holds a Bachelor of Science (Estate Management) degree from the University of Singapore. He is a member of the Institution of Surveyors, Malaysia. He started his career as a Valuation Officer in 1976 with the Valuation Division of the Treasury Department, Ministry of Finance, Malaysia and held the position of Acting Regional Director, Southern Region in 1980. He then joined the private sector and was involved in project management in the real estate industry. He subsequently became actively involved as a property developer undertaking and completing several commercial and residential projects in Johor Bahru. He served as the Chairman of the Housing Developers Association, Johor Branch for two terms from 1994 to 1998. He presently sits on the board of directors of several companies involved in property development and infrastructure projects. He is also the NonIndependent Non-Executive Chairman of Kinsteel Bhd and Perwaja Holdings Berhad. (d) DATO’ YAP WEE LEONG Director (Age: 58, Malaysian) Dato’ Yap Wee Leong was appointed to the Board of the Issuer on 8 April 2015. He holds an Advance Diploma in Civil Engineering from Singapore Institute of Engineering Technologist (Affiliation). He has more than 25 years’ experience in the construction and property development industry. He is currently the Executive Director of ASM Development Sdn Bhd, director of Maju Assets Sdn Bhd, ASM Development (Terengganu) Sdn Bhd and ASM Green Sdn Bhd which are wholly-owned subsidiaries of Maju Holdings. He is also a Project Director of Maju Holdings and a director of Ipmuda Berhad. (e) MOHD FAIQ BIN ABU SAHID Director (Age: 29, Malaysian) Mohd Faiq Bin Abu Sahid was appointed to the Board of the Issuer on 10 August 2015 and subsequently appointed as the Managing Director on 18 August 2015. He is currently a director of Maju Holdings, the ultimate holding company for the Issuer. He graduated with a Bachelors of International Business (Perth, Curtin University). 65
76. He is also currently the Managing Director of MESB which is a subsidiary of Maju Holdings . He is also a director of Ipmuda Berhad and Bright Focus Berhad. He also sits on the board of directors of various subsidiaries within the Maju Group. (f) DATIN PADUKA ALINAH BINTI AHMAD Director (Age: 66, Malaysian) Datin Paduka Alinah Binti Ahmad was appointed as the director of the Issuer on the 2 November 2015. She has vast experience in land matters and started serving the Government at the Implementation Coordination Unit of Prime Minister’s Department in 1981. After 8 years of experience with the Prime Minister’s Department, she served as a Chief Assistant Secretary (Finance) at the Secretariat Office. From October 1992 to March 2004, she was actively involved in land matters which she held positions as the Kuala Langat Chief Assistant District Officer (Land) and the Deputy Director of Selangor Land andMines Department. In April 2004, she then served as a Chief Assistant Secretary at the Selangor Economic Planning Unit. Before her last position as the Mayor of Petaling Jaya in January 2013, she served as an Executive Director and was later appointed as the Chief Executive Officer in Selangor Real Estate and Housing Board for 7 years. 4.5 Senior Management As at the LPD, the senior management of the Issuer and their profiles are as follows: (a) RIZA SELAHETTIN KHUDDUS General Manager Riza Selahettin Bin Khuddus joined MESB in July 2007. Currently, he is the General Manager of MESB. He was seconded to the Issuer on 1 November 2015. He holds an Honours Degree in Political Science and was a Diplomat serving in the Ministry of Foreign Affairs of Malaysia. He served at the International Organisations Division of Wisma Putra before being assigned as the second Secretary (Political) at the High Commission of Malaysia in London. His next posting was with the High Commission of Malaysia in Harare, Zimbabwe, where he served at the First Secretary and Head of Chancery. He joined Maju Group in 1997 as the Head of Corporate and Public Affairs and served in the Office of The Group Executive Chairman. Riza Selahettin also holds a Further Education Teaching Qualification from the City & Guilds of London and has served as an External Examiner for the College of Radiographers, United Kingdom. From year 1976 till year 1978 he lectured at the Royal Postgraduate Medical School at Hammersmith Hospital, London, where he wrote a thesis on the Use of Fast Neutrons in Radiotherapy. He was a member of the Safety Subcommittee of the Atomic Energy Licensing Board of the Prime Minister’s Department, responsible for the formulation of basic radiation safety standards in the use of ionizing radiation for Malaysia. 66
77. (b) KAMARUDDIN SHUIB Senior Manager – Engineering Kamaruddin Bin Shuib was appointed as Senior Manager – Engineering of MESB in January 2007. He was seconded to the Issuer on 1 November 2015. He obtained his Certificate in Civil Engineering from Ungku Omar Polytechnic in 1981, Diploma in Civil Engineering from University Technology Mara (UITM) in 1988 and a Bachelor Degree in Civil Engineering with Honours from Glasgow University, Scotland in 1991. He started his carrier in 1981 with the Public Works Department, Malaysia as a Technician in the Education unit, supervising the construction works of a school project in Subang Airport and later handling the construction of civil works for a TNB Gas Turbine project in Serdang, Selangor. He then joined KUB Development Berhad in 1994, a subsidiary company of KUB Holding Bhd as a Technical Manager. He was involved with the development of housing projects throughout Malaysia, the construction of a hotel in Langkawi, Kedah and planning a marina development in Umbai, Melaka. In 1996 he joined Duta Nilai Holding Sdn Bhd as Group Manager. He was the key person for all projects undertaken by Duta Nilai Group of companies. Among others, he was involved with the development of a large scale housing project in Semenyih, Selangor and a high rise residential project in Damansara. In 2003 he decided to become a freelance Consultant / Constructor. He was involved in designing and building projects for Pembangunan Luar Bandar (PLB), District of Gombak, Selangor, and renovation works for Government agency offices in Kuala Lumpur and Selangor before joining MESB. (c) MOHD SALLEH ADNAN Senior Manager – Toll Operations Mohd Salleh Bin Adnan was appointed as Senior Manager - Toll Operations of MESB in October 2005. He was seconded to the Issuer on 1 November 2015. He graduated in Advance Diploma in Business Administration from University Technology Mara (UiTM) in 1984. He started his career in 1984 with Harper Wira Sdn Bhd, as a Shipping Executive, International Shipping Division, handling the international vessels into Port Klang. In 1985, he joined Syarikat Pengangkutan Maju Berhad, under Johor Corporation (JCorp) group of companies. He was involved in the initial privatization of Johor Port Container Terminal and was later seconded as an Administration and Finance Manager. He was then appointed in 1988 as Operations Manager, to manage the group’s public stage and express bus services. He then joined Konsortium Perkapalan Berhad a container haulage company in 1992 as Operations and Depot Manager in Pasir Gudang, Johor. In 1995 he joined Park May Berhad as Regional Manager, responsible for its public bus services in the Eastern Region. He was promoted to Senior Manager in 1997 with responsibilities over the operations of bus services in the Klang Valley. He was also involved in the introduction of electronic ticketing system using Touch ‘n Go card for the buses. In 2004, he joined Nadicorp Holdings Sdn Bhd bus division as General Manager, Southern Region. 67
78. (d) GOH BIN LY Senior Manager – Corporate, Treasury & Finance Goh Bin Ly was appointed as a Senior Manager, Corporate, Treasury and Finance of MESB in August 2002. She was seconded to the Issuer on 1 November 2015. She is a member of the Malaysian Institute of Accountants and CPA Australia. She also holds a Bachelor of Business degree, majoring in Accounting from Royal Melbourne Institute of Technology, Australia. She was transferred to MESB after serving for a year as Corporate Advisory Manager of Maju Holdings. Prior to joining Maju Holdings, she worked for 4½ years in the Corporate Advisory Department of Malaysian International Merchant Bankers Berhad (“MIMB”) where she was involved in various corporate and debt restructuring exercises. Prior to MIMB, she was attached to the Corporate Care Department of Coopers and Lybrand where she was involved in managing companies under receivership and liquidation. [The remainder of this page is intentionally left blank] 68
79. SECTION 5 5 .1 SALIENT TERMS OF THE AGREEMENTS The Concession Agreement (a) Grant of the Concession On 20 October 2015, the Government and MEX II entered into the Concession Agreement whereby the Government granted to MEX II, inter alia, the right and authority to undertake the design, construction, maintenance, operation and management of the MEX II Highway. (b) Concession Period Subject to the provisions of the Concession Agreement, the Concession was granted for a period of thirty-three (33) years including three (3) years of construction period commencing from the Effective Date (“Concession Period”), and subject to the provisions of the Concession Agreement, ending rd on the thirty-third (33 ) anniversary of such date (“Expiry Date”). (c) Terms and conditions of the Concession The Concession Agreement is conditional upon MEX II having obtained the final approval from the Government confirming that MEX II has fulfilled the following conditions precedent and such date is to be confirmed by the Government as the date of fulfilment of the conditions precedent (“Effective Date”):(i) MEX II has the capacity to finance the construction works of the MEX II Highway; (ii) MEX II has the issued and paid-up capital of RM60,000,000; (iii) neither MEX II nor any of its directors has committed any corrupt practices, unlawful or illegal activities for the purpose of securing the Government’s approval for the Concession; (iv) approval for the construction of the MEX II Highway has been obtained from the State Authority of Selangor; (v) all information and documents as specified in the Concession Agreement and as requested by the Government have been given by MEX II to the Government and such information and documents are true and correct; and (vi) none of the directors of MEX II has been an undischarged bankrupt or has committed any offences under the Companies Act. MEX II is given twelve (12) months from 20 October 2015 to fulfil the abovementioned conditions precedent (“CP Period”) unless otherwise extended by the Government. If the Government extends the CP Period, such extension must not exceed three (3) months after the expiry of the CP Period. Subject to the terms and conditions of the Concession Agreement, MEX II is granted the right and authority to undertake the Concession which is to:(a) undertake the design and construction of the MEX II Highway including the upgrading works; (b) supply and install tolling and other equipment (including telecommunication equipment) at the toll plaza(s) and manage, operate and maintain the same on the MEX II Highway during the Concession Period; 69
80. (d) (c) demand, collect and retain toll for its own benefit from all vehicles liable to pay toll using MEX II Highway during the Concession Period; (d) subject to all prevailing relevant laws, exclusively design, construct, operate, manage and maintain the ancillary facilities during the Concession Period and to retain the income received or receivable and derived therefrom; (e) operate, manage and maintain (including, without limitation, utility charges incurred thereby) the MEX II Highway during the Concession Period; (f) design, construct, operate, manage and maintain the supervision building; and (g) undertake all other activities incidental to the performance of the works referred to in the Concession Agreement. Maintenance Bond MEX II is required to provide to the Government a Maintenance Bond as security for the due performance by MEX II of its maintenance and structural overlay obligations for the Concession Period and a further twelve (12) months thereafter. The terms and conditions in relation to the Maintenance Bond are set out in the Concession Agreement. (e) Performance Bond MEX II is further required to provide a Performance Bond to guarantee the due performance of the construction works to the Government on or before the construction commencement date, and must ensure that the value of the Performance Bond must at all times to be not less than the stipulated amount. If MEX II appoints a turnkey contractor to carry out any part of the construction works, it must ensure that such contractor provides a similar Performance Bond to MEX II, and MEX II is required to assign the Performance Bond to the Government. If there is any Additional Works, MEX II is required to, before the commencement of the Additional Works, provide to the Government a Performance Bond or if MEX II appoints any contractor to carry out any part of the Additional Works, it must ensure that such contractor provides, (before commencing works on the Additional Works), a similar Performance Bond to MEX II and MEX II is required to assign the same to the Government to guarantee the due performance of the Additional Works. The terms and conditions in relation to the Performance Bond for the construction works and any Additional Works are set out in the Concession Agreement. (f) MEX II’s Right to Assign The Concession Agreement allows MEX II to assign its rights under the Concession Agreement to the Lenders only in respect of the following:(i) the proceeds of the toll collection under the Concession Agreement; (ii) the rights to MEX II’s portion of income received or to be received from the ancillary facilities; (iii) the rights to the compensation for the reduction in toll; and (iv) all its rights, interest and title under the Concession Agreement in respect of the amount payable to MEX II by the Government. 70
81. (g) Financing for the Concession MEX II shall be responsible for obtaining all finance, both debt and equity, necessary under the Concession. However, any Financing Documents is subject to the prior approval from the Government. Further, any refinancing of loan by MEX II is subject to the prior approval from the Government. Any refinancing gain from such refinancing is to be shared by the Government and MEX II in accordance with the terms and conditions set out in the Concession Agreement. (h) Paid Up Capital MEX II is required to have a minimum paid up capital of RM60,000,000 within the CP Period and throughout the Concession Period. (i) Shareholding Structure The shareholding structure of MEX II is as follows:Shareholder Maju Lingkaran Development Sdn Bhd Percentage in shareholding 100% Pursuant to the Concession Agreement, MEX II is not permitted to make any changes to the said shareholding structure for a period of two (2) years from the Availability Date, save and except where MEX II applies for its shares to be listed and quoted on the official list of the Bursa Malaysia, or in the case of the shareholders, where the relevant shareholder is itself listed and quoted on the Bursa Malaysia. Any intention to change the shareholding structure after the said period of two (2) years requires the prior written approval of the Government and is subject to the terms and conditions as may be determined by the Government. (j) Toll MEX II may commence the demand, collection and retention of the agreed toll (essentially being the toll that has been stipulated and agreed to between the Government and MEX II) for MEX II Highway on the date specified in the order published in the gazette pursuant to the Federal Roads (Private Management) Act, 1984. The Government is required to publish as soon as practicable but not more than forty-five (45) days from the Availability Date, in the gazette the MEX II Highway as federal road pursuant to the Federal Roads Act 1959 and must within reasonable time publish in the gazette pursuant to Federal Roads (Private Management) Act 1984, the gazetted toll for MEX II Highway. If there is unreasonable delay by the Government, the Concession Period will be extended for such period as necessary to compensate MEX II for the consequence of such delay. In the event that the Government imposes a toll rate for any class of vehicle for/during any operating year of the Concession which is lower than the agreed toll for that class of vehicle, the Government will compensate MEX II for any reduction in toll collections for the relevant year of operation by paying to MEX II an amount which is required to be determined and certified by the operation auditors and calculated in accordance with the manner set out in the Concession Agreement. Any compensation paid by the Government pursuant to the Concession Agreement shall constitute part of MEX II’s toll revenue. 71
82. Please refer to Appendix III (The Traffic Report for MEX II Highway) for details of the toll rates and Section 7.2(ii)(c) for the toll review mechanism under the Concession Agreement. (k) Sharing of Revenue between the Government and MEX II (i) Sharing of Toll Revenue In the event that the actual cumulative toll revenue during each operating year exceeds the cumulative projected toll revenue as provided in the Concession Agreement, the excess revenue is required to be shared by th the Government and MEX II after 20 anniversary of Concession Period or the Loan has been fully paid, whichever is earlier. (ii) Sharing of Ancillary Income Subject to the provisions of the Concession Agreement, MEX II is required to share the ancillary income (i.e. all incomes received or receivable by MEX II as derived from the operation, management and maintenance of the ancillary facilities including any income from the posting of billboards, telecommunication antenna, rentable stalls and other amenities (where applicable) which are constructed, managed and operated or to be constructed, managed and operated as approved by the Government in the concession area) with the Government. (l) Termination of the Concession The Concession Agreement gives MEX II the right to terminate the Concession if the Government, without reasonable cause, fails to perform or fulfil any of its obligations, which adversely affects MEX II’s right to carry out the construction of the MEX II Highway or MEX II’s right to collect and retain toll. MEX II may give a six (6) months’ notice to the Government for the purpose of termination but the period will be mutually extended if requested by the Government. During the Concession Period, the Government similarly has a right to terminate the Concession if MEX II is in breach of the terms of the Concession Agreement or as a result of the liquidation of MEX II. Other causes for termination by the Government due to MEX II’s default are: (i) MEX II assigns the whole or any part of the Concession Agreement (save and except as permitted under the Concession Agreement); (ii) an order is made or a resolution is passed for the winding up of MEX II (except for the purposes of reconstruction or amalgamation not involving the realization of assets in which the interests of creditors are protected); (iii) a receiver is appointed of the assets of MEX II or MEX II makes an assignment for the benefit of or enters into arrangement or composition with its creditors or stops payment or is unable to pay its debts; (iv) execution is levied against a substantial portion of MEX II's assets, unless it has instituted proceedings in good faith to set aside such execution; (v) MEX II fails to commence the construction works on the construction commencement date; or (vi) during the construction period, MEX II:- 72
83. (a) suspends or abandons the whole of the construction works or any part thereof for a continuous period of sixty (60) days; or (b) fails to complete the construction works within the construction period, or any extension allowed by the Government, if any; or (c) fails to complete the construction works within the construction works programme specified in the Concession Agreement; or (d) fails to carry out the construction works in accordance with the approved design and plan. The Government is also entitled to terminate the Concession Agreement due to expropriation, or corruption, unlawful or illegal activities committed by MEX II, its personnel, servants or employees. In addition, both the Government and MEX II may mutually terminate the Concession Agreement if an event of force majeure has occurred and if the force majeure event is severe or continues for more than six (6) months. Please refer to Section 7.2(ii)(i) of this Information Memorandum for the termination events and the consequences of termination of the Concession (including the payment by the Government). (m) Step in rights of the Government Upon the occurrence and during the continuance of an event of default by MEX II, the Government has the right but under no obligation, to assume the operational responsibility of MEX II in order to continue the activities under the Concession. MEX II is required to cause the Lenders specifically to acknowledge the rights of the Government herein and the rights of the Government to utilize the moneys collected in operating the Concession in the Financing Documents. In no event will the Government’s election to assume the operational responsibility of MEX II be deemed to be a transfer of title of MEX II's obligations under the Concession Agreement. During such period the Government is operating the Concession, the Government will not be liable: (1) for any claims and demands of any kind resulting from any accident, damage, injury or death arising from the occupation and/or use of the Concession Area by the Government; or (2) for any actions, suits, claims, demands, proceedings, losses, damages, compensation, costs (including legal costs), charges and expenses whatsoever in respect of or arising from the Concession. During such period the Government is operating the Concession, the Government must ensure that the moneys collected during the period are utilised in the following manner: (1) firstly, towards the operational cost of operating and maintaining the Concession, including the Government’s cost; (2) secondly, towards the discharge of the payment obligation of MEX II to the Lenders; and (3) thirdly, any surplus to be paid to MEX II or, if retained by the Government, to be held on account of and for the benefit of MEX II. The Government will only be obliged to make the payments above to the extent of all moneys actually received by the Government and no payment to 73
84. the Lenders will , in any way, be construed as any assumption by the Government of MEX II's liabilities or obligations to the Lenders. (n) Force Majeure An event of force majeure means an event not within the control of the party affected and which that party is unable to prevent, avoid or remove, which causes or can be reasonably expected to cause either party to fail to comply with its obligations. Events of force majeure include, amongst others, war, hostilities, natural catastrophe, labor unrest and other industrial disturbances which are not the fault of MEX II or its contractors. If and to the extent that the completion of the works is or will be delayed by an event of force majeure occurs at any time during the Concession Period, MEX II is entitled to an extension of time in respect of the Concession Period. In addition, MEX II is required to ensure whenever reasonably practicable, insurance is effected (whether by itself or by its contractor) to cover the occurrence of events of force majeure. (o) Insurance All insurance policies are required under the Concession Agreement to be taken out in the joint names of the Government, MEX II and the Lenders. There must be no exclusions, endorsements or alterations made to the insurance policies unless first approved in writing by the Government. MEX II must ensure that any policy of insurance to be effected must contain a provision that if the insurance company cancels such insurance for any reason whatsoever, such cancellation will only be effective thirty (30) days from the date of receipt by the Government and the Lenders, whichever is later, of written notice from the insurance company advising of such cancellation. MEX II is responsible to pay or cause to be paid all premiums and other sums payable in respect of any insurance policies to be effected and must produce duplicate or certified copies of the insurance policies, renewal certificates, endorsements slips and receipts for payments to the Government and the Lenders. (p) Contribution to the Highway Research, Training and Development The Concession Agreement requires MEX II to contribute to the LLM commencing from the first quarter of the second operating year of the MEX II Highway a sum equal to 0.3% of the actual yearly net profit or a minimum yearly sum of RM50,000, whichever is higher until the Expiry Date for the purpose of highway research, training and development. Such payment is payable by MEX II within six (6) months from the date of financial year end. If MEX II fails to make such contribution within the stipulated timeframe, MEX II is liable to pay an interest at the rate of ten percent (10%) per annum on any outstanding amount provided always that if MEX II is in a net loss position in a relevant financial year, the RM50,000 contribution will be accumulated and paid to LLM when MEX II is again in a net profit position. (q) Additional works The Government may from time to time during the construction period request MEX II to carry out any Additional Works and such request will be subjected to terms and conditions to be mutually agreed between the Government and MEX II. In the event there is any delay caused to the construction of the MEX II Highway due to a request by the Government for any Additional Works and/or changes to the approved design, the Concession Agreement provides that the Government must compensate MEX II for the additional cost of construction 74
85. incurred by MEX II either by extending the Concession Period or other forms of compensation or relief to MEX II . Where the Government has requested for the omissions of certain parts of the approved design to the construction of the MEX II Highway, and such omissions results in a reduction of the overall cost of construction, MEX II must undertake any Additional Works equivalent in value to the reduction in overall cost of construction to the intent that the overall cost of construction of the Additional Works will be offset against the reduction in the overall cost of construction. Notwithstanding the above, MEX II will not be entitled to any compensation whatsoever where the amendments to the approved design or Additional Works requested by the Government:- 5.2 (i) do not increase the scope of works to be undertaken by MEX II as described in the Concession Agreement; or (ii) do not result in the overall cost of construction to exceed the original cost of construction if carried out in accordance with the original approved design; or (iii) are required due to soil conditions. The Turnkey Contract (a) Appointment of Maju Holdings as the Turnkey Contractor MEX II has appointed Maju Holdings as the Turnkey Contractor to design, construct, complete and commission the MEX II Highway for a consideration of RM 1,290,000,000 inclusive of goods and services tax. The Turnkey Contract commences upon the confirmation of the fulfilment of the conditions precedent and other terms and conditions of the Concession Agreement. Under the Concession Agreement, the actual costs of the construction works are to be verified and recommended to the Government by the independent consultant appointed by MEX II under the Concession Agreement, and are to be jointly certified by the operation auditors appointed under the Concession Agreement within eighteen (18) months from the Availability Date in respect of the completion of the MEX II Highway. (b) Assignment by MEX II MEX II is entitled to assign (whether in whole or in part), the Turnkey Contract and any benefits thereunder at any time to the Banks by way of security for the performance of obligations to the Banks and the Turnkey Contractor agrees and will signify its consent, to any assignment or charge of the Turnkey Contract, if required by MEX II. (c) Assignability of Sub-contracts The Turnkey Contractor must include in all sub-contracts, supply agreements and purchase orders, a provision that the Turnkey Contractor may assign the sub-contract, supply agreement or purchase orders to MEX II and that MEX II may assign the same as security to the Banks, the Trustee and/or the Government. 75
86. (d) Assignability of performance bond The Turnkey Contractor is required to provide to MEX II a performance bond from a bank operating in Malaysia before commencement of the construction works for the MEX II Highway and the cost of obtaining the performance bond will be at the expense of the Turnkey Contractor. Subject to the consent of the Turnkey Contractor which shall not be unreasonably withheld, MEX II may assign the performance bond to be given by the Turnkey Contractor to the Government and/or the Banks or its Trustee. Notwithstanding such assignment, MEX II is entitled to make a demand in accordance with the provisions of the Turnkey Contract, upon receiving the same demand from the Government and/or the Banks or its Trustee, as the case may be. (e) Assignability of maintenance bond The Turnkey Contractor is required to provide to MEX II a maintenance bond which is assignable to the Government to guarantee the due performance of the Turnkey Contractor’s obligations in respect of the maintenance of the existing road (as defined in the Turnkey Contract) of the MEX II Highway. The cost of providing such maintenance bond will be borne by the Turnkey Contractor. (f) Assignment of Insurance in favour of Banks Each insurance policy is subject to the terms of any assignment (or provision for assignment) of the proceeds thereof in favour of the Lenders and to such other terms and conditions as the Banks may specify as a condition of providing finance for the construction works of the MEX II Highway, provided however that if the Turnkey Contractor is required to commence restoration, the insurance proceeds must be made available to the Turnkey Contractor for such purpose. (g) Insurance to be taken out in Joint Names The Turnkey Contract provides that insurance is to be taken out with an insurer acceptable to MEX II and all policies are to be taken out in the joint names of the Turnkey Contractor, MEX II, the Banks, its Trustee(s) and the Government and other interested parties and such policies must indemnify them, any delegate or assistant of MEX II and other acting on his or their behalf fully, without any right of subrogation against him or them, in respect of claims that may be made against him or them arising out of or in the course of undertaking the works or their duties in connection therewith or incidental thereto. Such insurances must be effected with insurers and on terms approved by MEX II, which approval must not be unreasonably withheld. (h) Insurance Claims Proceeds The Turnkey Contract also provides that all monies received from insurers pursuant to any claim must be paid to MEX II’s account and must be applied to make good the loss or damage suffered or reimburse the person who has made good the loss or damage, but, must in each case be subject to the terms of any assignment (or provision for assignment) of the proceeds thereof in favour of the Banks and to such other terms and condition as the Banks may specify as a condition of providing finance for the construction works of the MEX II Highway. [The remainder of this page is intentionally left blank] 76
87. SECTION 6 6 .1 MEX II HIGHWAY Description of the MEX Highway and MEX II Highway MEX Highway is an expressway with a total length of 26km connecting the commercial centre of KL to the administrative centre of Putrajaya and the Multimedia Super Corridor of Cyberjaya with interchanges and access at the following locations: (i) (ii) (iii) (iv) (v) (vi) Jalan Tun Perak / Kampung Pandan Roundabout Salak South Kuchai Lama Bukit Jalil Seri Kembangan Putrajaya Link On 20 October 2015, the Government and MEX II entered into the Concession Agreement for the award of the Concession to build the extension of the existing MEX Highway to KLIA/KLIA 2. Upon its completion, the MEX II Highway will provide the shortest direct linkage between the commercial centre of KL and the KLIA/KLIA 2 with a journey time of approximately 30 minutes thus becoming the gateway to the nation. The map below shows the alignments of the MEX Highway and MEX II Highway as well as the network of existing major roads and highways. This map is not drawn to scale 77
88. Taken together , both the MEX Highway and MEX II Highway form the backbone for the infrastructure of the region with connectivity to the following expressways and road: (i) (ii) (iii) (iv) (v) the Middle Ring Road 1 at Jalan Tun Razak the Shah Alam Highway (Kesas) the East-West Link the KL-Seremban Highway the New Pantai Expressway The regional connectivity is expected to relieve traffic congestion and facilitate traffic dispersal in the KL commercial centre as well as for the corridors along the MEX Highway and MEX II Highway. 6.2 Toll Systems and Toll Collection (i) Toll systems The MEX II Highway operates as an ‘open toll’ collection system. Under this system, the vehicle is charged a fixed toll tariff according to the class of vehicle upon reaching an open toll plaza, regardless of the distance travelled. The toll collection system shall be designed to cater for Multi-Lane Free Flow (“MLFF”) in the future which would be implemented within a timeframe to be specified by the Government. (ii) Toll rate Under the Concession Agreement, MEX II has the right and responsibility to demand, collect and retain toll for its own benefit from all vehicles liable to pay toll using the MEX II Highway during the Concession Period. Please refer to Appendix III (The Traffic Report for MEX II Highway) for details of the toll rates and Section 7.2(ii)(c) for the toll review mechanism under the Concession Agreement. (iii) Toll collection A mainline toll plaza and two ramp toll plazas will be constructed at approximately Chainage 25100 m of the MEX II Highway. The toll plaza configuration for the MEX II Highway is as follows: [The remainder of this page is intentionally left blank] 78
89. MESB may appoint MEX II to collect toll of the MEX Highway for and on its behalf whereupon the parties would enter into the Toll Collection Agreement to regulate the implementation of the said toll collection , if applicable. The proposed salient terms of the Toll Collection Agreement are as follows: (a) Right of assignment Both MEX II and MESB are not allowed to assign, transfer or novate the Toll Collection Agreement or any part of it without prior written consent from the other party. However, MESB may assign and create security over its rights to the MEX I Revenue in the Toll Collection Account and all or any of its rights to the income from the MEX Highway to its lenders for the purpose of any financing. (b) Collection of MEX I Revenue and MEX II Revenue MEX II will collect MEX I Revenue on behalf of MESB from all vehicles using the MEX Highway: (i) upon completion of the MEX II Highway; and (ii) such collection of the MEX I Revenue by MEX II on behalf of MESB will only commence from the gazetted date until the end of the concession period for the MEX Highway. For the avoidance of doubt, pending the gazetted date, MESB will continue to collect the MEX I Revenue. The MEX I Revenue will be credited into the Toll Collection Account specifically to capture the Toll Revenue which shall comprise the MEX I Revenue and MEX II Revenue that will be collected at the mainline toll plaza by MEX II. The MEX I Revenue shall be remitted into the bank account nominated by MESB no later than 7 working days or such other period agreed, after reconciliation of the Toll Revenue between the parties. 79
90. The MEX II Revenue will be retained for its own benefit and will be deposited directly into the RA no later than 7 working days or such other period to be agreed between the parties . 6.3 Operations, Maintenance and Management of MEX II MEX II is responsible for the operations, maintenance and management (“OMM”) of the MEX II Highway. Maintenance and operation works will commence upon the completion of MEX II Highway. Broadly, the OMM tasks include the following:- (i) Operations Operations principally comprise:(a) (b) (c) the operation of the toll collection system; management of traffic on MEX II Highway; and emergency and recovery works. Effective traffic management is required for safe, smooth and faster traffic flow. In this respect, traffic surveillance and telecommunication facilities including CCTV, emergency phones and electronic message boards will be put in place to manage the following: (a) (b) (c) Accidents; Heavy traffic flow; and Obstruction due to repair and maintenance works. There is close liaison with the relevant authorities to ensure that emergency cases are attended to without delay. In addition, 24-hour traffic patrolling, vehicle breakdown and accident services will also be provided. With respect to toll booths and lanes, the traffic flow and trends will be monitored by a traffic control and surveillance system in order to manage the number of toll booths and lanes opened during the operations to minimise traffic disruptions and delay. Regular maintenance will also be scheduled and carried out so as to minimise the disruption to traffic, including scheduling the works during non-peak hours. (ii) Maintenance Maintenance works comprise routine maintenance and heavy repairs. Routine maintenance involves work that is repetitive, cyclical or periodic in nature. It is performed to maintain MEX II Highway in good condition and help traffic flow. Routine maintenance includes maintenance of grass, landscaping and servicing of ancillary facilities. Heavy repairs to maintain the structure and form of MEX II Highway are essential for the safety and availability of MEX II Highway. They include repairs to pavement, bridges, slopes and drainage, and equipment replacement. (iii) Management The management of MEX II entails the day-to-day operations and management of administrative, human resource and other functions to ensure the smooth daily operations of MEX II Highway. 80
91. 6 .4 Traffic Projections Please refer to Appendix III (The Traffic Report for MEX II Highway) for the traffic report for the MEX II Highway which sets out the forecast of the traffic volumes and revenue for the MEX II Highway until the end of the Concession Period which has been prepared by the Traffic Consultant. [The remainder of this page is intentionally left blank] 81
92. SECTION 7 INVESTMENT CONSIDERATIONS The following is a summary of certain risk factors in relation to the Issuer ’s business and the Sukuk Murabahah Programme and the Junior Bonds, which prospective investors of the Sukuk Murabahah and the Junior Bonds should consider. This summary is not intended to be exhaustive in terms of all the investment considerations and risks relating to the Issuer’s business or the Sukuk Murabahah Programme or the Junior Bonds or any decision to purchase, own or dispose of the Sukuk Murabahah or the Junior Bonds. Each issue of the Sukuk Murabahah under the Sukuk Murabahah Programme and the issue of the Junior Bonds will carry different risks and all potential investors are strongly encouraged to evaluate each issue of the Sukuk Murabahah under the Sukuk Murabahah Programme and the issue of the Junior Bonds on its own merit. Recipients of this Information Memorandum are advised to independently evaluate the risks described in this section before making an investment decision. The risk factors and its possible mitigating factors summarised below do not purport to be comprehensive or exhaustive and are not intended to be a substitute or replacement for an independent assessment of the risk factors that may affect the Sukuk Murabahah Programme and the Junior Bonds. Further, the inability of the Issuer to make payment under or in connection with the Sukuk Murabahah Programme and the Junior Bonds may occur for reasons not related to the investment considerations identified below and the Issuer does not represent that the considerations relating to an investment in the Sukuk Murabahah and the Junior Bonds described below are exhaustive. Each prospective investor should carefully conduct his or her independent evaluation of the risks associated with investing in the Sukuk Murabahah and the Junior Bonds. The information contained in this Information Memorandum includes forward-looking statements, which imply risks and uncertainties. The Issuer’s actual results could differ materially from those anticipated in these forward-looking statements and/or otherwise projected as a result of certain factors, including but not limited to those set forth in this section. If you are in any doubt about the contents of this Information Memorandum, you should consult an appropriate professional adviser. 7.1 Risk factors relating to the Issuer (i) Issuer’s ability to meet its obligations under the Sukuk Murabahah The Sukuk Murabahah represents the direct and secured and unconditional obligations of MEX II and shall be payable out of MEX II’s operating cashflows. In this regard, the principal and profit payment obligations under the Sukuk Murabahah shall depend on the cash flow availability of MEX II. The Sukuk Murabahah will not be the obligations or responsibilities of any other person other than MEX II and shall not be the obligations or responsibilities of, or guaranteed by any of the LA/LM, the Facility Agent, the Financial Adviser, the Sukuk Trustee or any subsidiary or affiliate thereof, and any other person involved or interested in the Sukuk Murabahah. None of such persons will accept any liability whatsoever to the Sukukholders in respect of any failure by MEX II to pay any amount due under the Sukuk Murabahah. (ii) Issuer’s ability to meet its obligations under the Junior Bonds The Junior Bonds represent the direct and secured and unconditional obligations of MEX II and shall be payable out of MEX II’s operating cashflows. In this regard, the redemption and coupon payments obligations under the Junior Bonds shall depend on the cash flow availability of MEX II. The Junior Bonds will not be the obligations or responsibilities of any other person other than MEX II and shall not be the obligations or responsibilities of, or guaranteed by the LA/LM, the Facility Agent, the Financial Adviser, the Sukuk Trustee or any subsidiary or affiliate thereof, and any other person involved or interested in the Junior Bonds. None of such persons will accept any liability whatsoever to the 82
93. Bondholders in respect of any failure by MEX II to pay any amount due under the Junior Bonds . 7.2 Risk factors relating to the Issuer’s Business MEX II’s principal business is to carry out the concession granted by the Government to design, construct, maintain, operate and manage the MEX II Highway and the provision of other highway related facilities and services as well as to operate and maintain the MEX II Highway and to collect toll from the general public for the use of the MEX II Highway during the Concession Period. The risks to which this business is exposed to are: (i) During Construction Period of MEX II Highway (a) Cost Overrun Risk Pursuant to the execution of the Turnkey Contract, the cost of construction of the MEX II Highway is RM1,290,000,000 and the construction works are expected to be completed within 3 years from the Effective Date. The construction cost may be subject to potential cost overruns. The Concession Agreement provides that the Government must compensate the Issuer for the additional cost of construction incurred by the Issuer arising out of or as a result of any changes to the approved design and/or additional works requested by the Government. If as a result of undertaking such changes to the approved design and/or additional works requested by the Government, there is a delay caused to the construction of the MEX II Highway: (i) the Concession Period will be extended for a period mutually agreed upon by the Government and the Issuer, or (ii) the Government will provide other forms of compensation or relief to the Issuer; to enable the Issuer to meet any loss, cost or expense incurred or suffered for the consequences of such delay. However, there are instances where the Government’s request(s) for amendments or omissions of some parts to the approved design of the MEX II Highway which will not entitle MEX II to any compensation whatsoever, and such instances as provided in the Concession Agreement are where the amendments to the approved design or additional works requested by the Government:(i) do not increase the scope of works to be undertaken by MEX II as described in the Concession Agreement; or (ii) do not result in the overall cost of construction to exceed the original cost of construction if carried out in accordance with the original approved design; or (iii) are required due to soil conditions. The risk of any cost overruns is mitigated by the fact that MEX II’s detailed design has been completed and scope of work for the MEX II Highway has been agreed with the Government and that the Turnkey Contract has been structured on the basis of fixed sum and fixed date. This is further mitigated by the shareholders’ undertaking from Maju Holdings to cover all cost overruns in connection with the construction of the MEX II Highway. 83
94. (b) Delay in land acquisition and increased Land Costs The Government is obliged to make available the land required for the MEX II Highway to the Issuer. The period within which the land has to be made available ranges between six (6) to twelve (12) months after submission of the accepted land acquisition plans, depending on whether the land has to be compulsorily acquired and whether there are any encumbrances on the land. There could however be delays attributed to, for example, any amendment to the accepted land acquisition plans, which would then allow the Government a further period of up to six (6) months to make the land available. The delay risk is however mitigated in the following manner by the following factors: (i) the land for the MEX II Highway has been fully acquired by the Government and gazetted on 27 April 2000 under Section 8 of the Land Acquisition Act 1960; (ii) for any addition works that require land acquisition, if the delay is more than eighteen months (18) after the submission of the accepted land acquisition plans, the Government may either extend the Concession Period or provide MEX II with other remedy or relief to be mutually agreed. However, there is no compensation if the delay by the Government does not affect the completion of the MEX II Highway. In the event that there is an increase in land costs in respect of the MEX II Highway, the Government shall bear the increased costs. However, MEX II shall bear the cost of removal and resettling squatters, other occupiers of Malaysian nationality or structures on such land which is expected to be minimal. According to the approval from the State Authority of Selangor dated 29 January 2016, MEX II is required to fulfill the conditions stipulated therein to ensure that the sites are cleared before MEX II is permitted to commence construction work. (c) Construction Risk/ Completion Delay There are certain risks inherent in design and construction of projects such as the MEX II Highway. These include factors such as shortages of construction materials, unavailability and inefficiency of equipment and labour, price increases, labour disputes, the non-performance or unsatisfactory performance of contractors and subcontractors, inclement weather, natural disasters, accidents, changes in Government policies or adverse economic, business and credit conditions, failure or postponement in the issuance of grant of licenses, permits and approvals and unforeseen engineering and environmental problems. Any delay in completion of MEX II Highway may increase the risk of cost overruns and may affect the commencement of MEX II Highway. No assurance can be given that MEX II will not encounter significant construction difficulties and delays. Further, the terms of the Turnkey Contract would allow MEX II to have recourse against Maju Holdings, pursuant to the performance bond required to be given by Maju Holdings in favour of MEX II, and claim for liquidated and ascertained damages for any delay that may be caused by Maju Holdings other than certain circumstances, such as force majeure and antiquities found at the construction site. In addition, construction risk is expected to be manageable given Maju Holdings’ track record in infrastructure construction and road works. Further, pursuant to the Concession Agreement, MEX II is required to effect and maintain or cause to be effected and maintained the following insurance: 84
95. (i) contractor’s all risk policy for the value of the construction work; (ii) a policy against any liability including third party liability; and (iii) workmen’s compensation. This requirement is the responsibility of the Turnkey Contractor (for detailed description of the Turnkey Contract, please refer to Section 5.2) pursuant to the Turnkey Contract. Further, the appointment of the Independent Consulting Engineer is expected to strengthen the construction surveillance process by ensuring that the construction works will be executed in accordance with the budgeted timeline. (ii) During Operation Period (a) Traffic volume risk The Issuer will derive almost all of its revenue from the operation of MEX II Highway which is derived from the number of vehicles using MEX II Highway and the toll rates chargeable. The traffic volume on MEX II Highway may be affected by, among other factors, future land development, future road network, population and economic growth and existing competing routes/highways, and the availability of alternative means of transport (such as Mass Rapid Transit System, KLIA Transit and KLIA Ekspres). The number of vehicles using the MEX II Highway is to a large extent dependent on factors outside MEX II’s control. These factors would include, but not limited to, the following: • the level of economic activity in Kuala Lumpur, Salak South, Seri Kembangan and Putrajaya, and in the particular, along the corridors of the MEX Highway and the MEX II Highway and the associated demand for transportation by road, which is the principal factor impacting on traffic volume; • the level of commercial, industrial and residential developments in such corridors; • the price of petrol and other transportation fuel; • the development of alternative, competing roads and other highways. • affordability of automobiles; • per capital ownership of automobiles; • alternative domestic and international transport modes such as by rail, sea or air; • unhindered access to the expressways via feeder roads and adjoining highways not operated by MEX II; • the operator’s ability to maintain the MEX II Highway; and 85
96. • the prevailing toll rates and the sensitivity of users of the MEX II Highway to the prevailing level of toll rates. Most of these factors are outside of MEX II’s control. Adverse trends affecting any of these factors could have a material effect on traffic volume, and in turn on MEX II, including but not limited to its business, operations, financial condition and prospects. However, this risk may be mitigated with the further development of Seri Kembangan, Putrajaya and Cyberjaya in the southern corridor of Selangor and the expansion of KLIA which could further contribute towards the increase of the traffic volume along MEX II Highway by the following factors: (b) • MEX II Highway has a strategic alignment providing direct link for north-south travel especially from the heart of Kuala Lumpur city to KLIA/KLIA 2 and vice versa; • MEX II Highway also provides motorists travelling from Kuala Lumpur to KLIA/KLIA 2 with a faster and shorter route which reduces travelling time to approximately 30 minutes as compared to alternative routes to KLIA/KLIA2; • The further development of the surrounding areas along the corridors at the MEX Highway and MEX II Highway and the expansion of KLIA/KLIA 2 which could further contribute towards the increase of the traffic volume along MEX II Highway; and • Under the Concession Agreement, should the creation of any access road adversely affect the traffic flow on MEX II Highway, the Government shall ensure that MEX II is adequately compensated or indemnified for or against any loss, damage, cost or expense (including loss of revenue) by the party creating the access road. Competition The Concession Agreement with MEX II does not prevent the relevant governments from awarding concessions for new roads which may compete with the MEX II Highway. There is also competition from other forms of transportation. Such other forms of transportation include the national rail network, the Light Rail Transit System as well as the KLIA Transit and KLIA Ekspres which provide access from Kuala Lumpur to KLIA/KLIA 2. Under the terms of the Concession Agreement, the Government may issue a written order to MEX II to allow access road or other form of connection, which shall include underpass or overpass to the concession area to any parties for the purpose of connecting their developments to the MEX II Highway. If such access road or other form of connection adversely affects the safety or traffic flow or the level of service on the MEX II Highway and consequently affect the toll revenue of MEX II, the Government shall ensure that MEX II is adequately compensated or indemnified in accordance with the terms and conditions of the Concession Agreement. (c) Toll rate risk Toll rate by MEX II are formularised with the establishment of agreed toll and toll review mechanism. However, the Government may impose and 86
97. has imposed in the past , toll rates lower than the toll rates set out in their respective concession agreements for a variety of reasons including economic difficulties and negative public perception of increases in toll rates in Malaysia. Hence, there is no assurance that the agreed toll will be implemented by the Government. The toll rates and timing of the toll rate revision have been assumed in the cashflow projections in accordance with the Concession Agreement. Accordingly, there are risks that the toll rate may not be revised and MEX II’s revenue and cash flows may be materially and adversely affected thereby. Pursuant to the Concession Agreement, in such event, the Government is obliged to pay compensation in relation to the reduction in toll collection to MEX II. Submission to the Government to determine the agreed toll rates for the subsequent period must be done not later than four (4) months before each review date which falls on the first day of each of the operating period. The submission must be accompanied with a report detailing the actual cumulative Toll Revenue for each operating period up to six (6) months prior to the relevant date of review vis-a-vis the projected cumulative Toll Revenue relevant to the operating period, an audited Toll Revenue report for four (4) operating years and an audit report from the operation auditors (comprising the Government auditor and MEX II's auditor) and any other relevant information. If MEX II is able to prove to the Government’s satisfaction that the actual cumulative Toll Revenue is less than or equal to the projected cumulative Toll Revenue, then the agreed toll will follow the scheduled toll in the Concession Agreement. On the other hand, should the actual cumulative Toll Revenue is proven to be more than the projected cumulative Toll Revenue for the corresponding period up to six (6) months before the review date, the agreed toll for each class of vehicle for the succeeding operating period shall be calculated according to the following formula: ATR = T – [E/A X D] Where: ATR : agreed toll derived for a particular class of vehicle at the relevant operating period; T : the average of the prevailing gazetted toll and the next applicable scheduled toll as stipulated in the Concession Agreement; D : the difference between the then prevailing gazetted toll and the next applicable scheduled toll as stipulated in the Concession Agreement; E : A – P; A : the actual cumulative Toll Revenue; P : the projected cumulative Toll Revenue. Notwithstanding the above formula, if the agreed toll derived from the formula is lower than the prevailing gazetted toll, the prevailing gazetted toll shall continue to be the toll rate. After eighteen (18) months of implementation, if the actual toll revenue is less than the projected toll revenue, MEX II is allowed to submit an application to the Government 87
98. requesting for the applicable scheduled toll to be the agreed toll . If upon reviewing the accompanying documents submitted by MEX II, the Government is satisfied with the application, the applicable scheduled toll as the agreed toll within three (3) months from the date of its application. (d) Toll Receipt Risk The level of revenue derived by MEX II from toll receipts may be reduced by the following factors: (a) “leakage” through fraud or non-payment. If the process of toll collection is not properly monitored and controlled, leakage will reduce MEX II Highway’s toll revenue; and (b) technical problems in toll collection systems, although such technical problems may not necessarily interrupt the toll collection process. Nonetheless, the introduction of various electronic toll collection (“ETC”) products, namely, the “SmartTAG” and “Touch ‘n Go”, has increased the efficiency in collecting tolls and controlling leakages. The toll collection operations via ETC are dependent on the continued application of technology. If MEX II: (a) experiences system failure or shut down with respect to the ETC systems or any of its monitoring or database systems; or (b) is forced by the withdrawal of technology by existing suppliers to procure alternative technology, this may hinder MEX II’s ability to collect tolls efficiently and control leakage. Any such problems could result in loss of revenue and an increase in operating cost due to operational inefficiencies. This is mitigated by the fact that there are alternative electronic systems available in the market, though replacement of the existing electronic systems may be costly. With regards to the ETC system, the Government has enforced the standardisation of single class Touch ‘N Go and Smart Tag system for all toll concessions. However, the MLFF toll system may be implemented in the future subject to the approval of the Government. With regards to system failure, there are back-ups in terms of data storage and the system itself so that minimal interruption is allowed and efficiency level is maintained. (e) Operations, maintenance and related expenditures During the Concession Period, operating costs relating to the operation and maintenance of the MEX II Highway and capital expenditure may increase due to factors beyond MEX II’s control. Such cost increases may arise from: (a) the standards of maintenance or road safety applicable to the MEX II Highway prescribed by LLM and other regulatory authorities from time to time becoming more onerous; (b) MEX II having to restore the MEX II Highway should any damage from landslides or other natural disasters occur; 88
99. (c) higher axle loading, traffic volume or environmental stress leading to more extensive or more frequent heavy repairs or maintenance costs; (d) increases in cost materials and supplies; (e) routine maintenance work will have to be carried out periodically in accordance to the Concession Agreement. Some of the main routine maintenance works that are carried out include civil works, mechanical and electrical maintenance as well as other general maintenance work such as grass cutting and roadway clearing; or (f) the need for repair or maintenance of the MEX II Highway may also adversely affect traffic flow. Environmental factors in a particular region or district may require repairs to be carried out more frequently or cause costs to be higher than expected. The cost involved in any such major repairs may be substantial. In view of the risks above, MEX II will take insurance policies to cover the risk on material damage to its assets, loss of anticipated toll revenue as a direct result of physical loss or damage due to insured perils, public liability, fidelity guarantee, employer’s liability, Director’s and officer’s liability. (f) Dependence on key management MEX II relies on a significant extent on the abilities of some of its directors, senior management and key technical personnel for its continuing success, business directions, effective implementation of business strategy and the operation of the MEX II Highway. The loss of any of these members could adversely affect MEX II’s ability to operate the MEX II Highway and its business or to compete in the industry, and in turn, affect its financial performance and prospects. Further, MEX II’s future success will all depend upon its ability to attract new skilled personnel. However, MEX II expects to be able to source experienced personnel in the similar industry in which it operates. (g) Unforeseen events The use of the MEX II Highway may be interrupted or adversely affected by events such as traffic accidents, defective design and construction, bridge collapse, landslide, road subsidence and labour disputes. These may result in a reduction in toll revenue and increase in the cost of operating the MEX II Highway and may also adversely affect public confidence in MEX II. Insurance has been/will be taken to cover the risk of material damage to assets and loss of anticipated toll revenue as a result of loss or damage from specific perils, as well as public liability, fidelity guarantee, employer’s liability, director’s and officer’s liability insurance policies. However, there is no assurance that insurance will cover all liabilities resulting from claims. There are specific insurance limits per incident, which may be insufficient to meet actual costs and losses and this could adversely affect the operations and financial conditions of the operating subsidiary maintaining the MEX II Highway. 89
100. (h) MEX II is subject to force majeure risks Although MEX II would not be in breach of its obligations under the Concession Agreement if it is unable to perform its obligations as a result of the occurrence of a force majeure event such as war, strike, riot, act of terrorism or natural catastrophe, MEX II is required to repair, at its own expense, any destruction or substantial damage to the MEX II Highway resulting from any such force majeure event, if the Concession Agreement is not terminated. The occurrence of a force majeure event does not entitle MEX II to terminate the Concession Agreement, unless the force majeure event is considered by the party affected by it to be of such severity or continuing for a period of more than six (6) months, in which case the Concession Agreement may be mutually terminated. In addition, the occurrence of a force majeure event may not be covered by insurance and may result in MEX II incurring substantial costs to repair or replace sections of the MEX II Highway. However, if as a result of such restoration MEX II is able to demonstrate that it has incurred substantial costs affecting the Concession, MEX II may apply to the Government for such remedies to enable MEXII to recover such costs of such restoration, and such remedy may include an extension of the Concession Period. (i) Termination of the Concession Agreement The Concession Agreement may be terminated by either MEX II or the Government under the events of default as more particularly described below. The termination of the concession may materially affect MEX II’s ability to meet its liabilities. (a) Termination by MEX II due to Government’s default MEX II may give a six (6) months’ notice to the Government (or such other period as may be mutually agreed by both parties) of its intention to terminate the Concession if the Government without reasonable cause fails to perform or fulfil any of its obligations which adversely affects the right and authority of MEX II to demand, collect and retain toll for its own benefit provided always that notwithstanding MEX II’s right to give such notice, the Government may request for an extension of time to rectify its default or remedy such breach thereof, in which case MEX II must grant such reasonable extension for a period to be mutually agreed by the parties. If the Government fails to remedy the relevant event of default within the period of six (6) months or within such other period as may be agreed by the parties, MEX II may terminate the Concession Agreement which shall take effect thirty (30) days after giving notice to the Government. In the event that the Concession Agreement is terminated by MEX II due to a default by the Government, then Government shall pay to MEX II not later than six (6) months after the termination date: (A) the amount by which the Value of Completed Works exceeds all amounts which may be owing by MEX II to the Government at the termination date; and 90
101. (B) an amount to be calculated based on the Concession Agreement. Under the Concession Agreement, “Value of Completed Works” means the amount jointly certified by the operation auditors to be the aggregate as at the termination date of – (a) the value of the works including the value of pre-operating costs incurred in relation to the works (excluding operation and maintenance costs) completed up to and at the termination date as certified by the consulting engineers; (b) all amounts incurred by MEX II in maintaining the MEX II Highway from the Availability Date up to the date of publication of the Gazette notification in respect of the whole of the MEX II Highway authorizing MEX II to collect toll; (c) all design, management and consulting costs and fees for professional services reasonably and properly incurred by MEX II in relation to the Concession; (d) all interest, capitalized interest and other financing costs and expense reasonably and properly incurred by MEX II in connection with the financing of the construction works during the construction period up to the date of publication of the gazette notification authorizing MEX II to collect toll; (e) the certified value of any additional capital investment made by MEX II; LESS (b) (f) any depreciation or amortization charges and taken to the profit and loss account of MEX II up to the termination date calculated in accordance with internationally recognized accounting standards; (g) (i) if the termination of the Concession Agreement occurs prior to the full repayment of the Loan, any costs and expenses incurred by the Government for the works or any part thereof (excluding any land cost paid by the Government); or (ii) if the termination of the Concession Agreement occurs after the full repayment of the Loan, any costs and expenses incurred by the Government for the works or any part thereof (excluding any land cost paid by the Government, if any). Termination by the Government due to MEX II’s default Pursuant to the terms of the Concession Agreement, the default by MEX II is divided into three (3) categories, namely: • • • default prior to construction commencement date; default during the construction period; and default during the operating period, with different events of default and different consequences. In any of the following circumstances, and without prejudice to any other rights and remedies of the Government, the Government may give notice to MEX II of its intention to terminate the Concession Agreement if MEX II fails to remedy the relevant default within the specified remedy period: 91
102. (i) prior to construction commencement date, MEX II: (a) is in breach of any of its obligations; or (b) fails to comply with the provisions of the Concession Agreement As a consequence of such termination, the Government will be entitled to complete the construction works or appoint a third party to take over and complete the same and call on the Performance Bond, if any. MEX II is also required to vacate the MEX II Highway area and will not be entitled to any compensation. (ii) during the construction period, MEX II:(a) fails to commence the construction works on the construction commencement date; or (b) suspends or abandons the whole of the construction works or any part thereof for a continuous period of sixty (60) days; or (c) fails to complete the construction works within the construction period, or any extension allowed by the Government, if any; or (d) fails to complete the construction works within the construction works programme specified in the Concession Agreement; or (e) fails to carry out the construction works in accordance with the approved design and plan; or (f) is in breach of any of its obligations or fails to comply with or perform any of the terms and conditions of the Concession Agreement. The consequences of such termination are similar to Section 7.2 (ii)(i)(b)(i) above in that Government will be entitled to complete the construction works or appoint a third party to take over or complete the same, call on the Performance Bond and call on the Maintenance Bond, if any. In addition, MEX II is also required to vacate the MEX II Highway area, cease the construction works immediately and pay all amounts owing to the Government (“Amount Owing”) and the additional costs incurred by the Government in completing the construction works, in excess of what would have been incurred by MEX II (“Excess”). The Value of Completed Works will be deducted from the aggregate sum of Amount Owing and Excess, but if the Value of Completed Works is higher than the aggregate sum of Amount Owing and Excess, the Government will pay the difference to MEX II. However, in calculating the Value of Completed Works, a sum of equivalent to five per centum (5%) of the total costs of the construction works or RM50,000,000 whichever is lower, (“Penalty”), will be deducted. There can be no assurance that the value of works that have been completed will always be more to cover the Amount Owing, the Excess or the Penalty or all of them, in which case, MEX II may be 92
103. indebted to the Government . The risk of this occurring depends on what stage the construction is. The risk is less when the project is nearing completion. (iii) during the operating period, MEX II: (a) fails to carry out maintenance; or (b) refuses, fails, neglects or ceases to carry out or suspends its obligation under the Concession Agreement; or (c) fails to carry out the upgrading works after one (1) year from the date of the approval by the Government in accordance with the provisions of the Concession Agreement; or (d) is in breach of any of its obligations; As a consequence of such termination, the Government will be entitled to operate, maintain and manage the MEX II Highway for its own benefit, call on the Maintenance Bond, and call on the Performance Bond, if any and pay to the Company the amount by which the Value of Completed Works less RM50,000,000 exceeds the Amount Owing. In addition, MEX II is also required to cease to operate, manage and maintain the MEX II Highway. There can be no assurance that the Value of Completed Works will always be more to cover the Amount Owing, the Excess or the Penalty or all of them, in which case, MEX II may be indebted to the Government. The risk of this occurring depends on what stage the construction is. The risk is less when the project is nearing completion. (iv) In any of the following circumstances, the Government may give notice to MEX II of its intention to terminate the Concession Agreement with immediate effect: (a) MEX II assigns the whole or any part of the Concession Agreement (save and except as permitted under the Concession Agreement); or (b) an order is made or a resolution is passed for the winding up of MEX II (except for the purposes of reconstruction or amalgamation not involving the realization of assets in which the interests of creditors are protected); or (c) a receiver is appointed of the assets of MEX II or MEX II makes an assignment for the benefit of or enters into arrangement or composition with its creditors or stops payment or is unable to pay its debts; or (d) an execution is levied against a substantial portion of MEX II's assets, unless it has instituted proceedings in good faith to set aside such execution. If any of the abovementioned events of default occurs:- 93
104. (aa) prior to the commencement of the construction works; the consequences of the termination as provided in Section 7.2(ii)(i)(b)(i) follow; (bb) during the construction period; the consequences of the termination as provided in Section 7.2(ii)(i)(b)(ii) follow; (cc) (c) during the operating period, the consequences of the termination as provided in Section 7.2(ii)(i)(b)(iii) follow. Termination by the Government due to expropriation The Government may, at any time during the Concession Period, terminate the Concession Agreement by expropriating the Concession by giving not less than three (3) months’ written notice to that effect to MEX II if the Government considers that such expropriation is in the national interest, national security, public policy or Government policy. The determination of what amounts to “national interests”, “national security”, “public policy” or “Government policy” will be made by the Government and such determination is conclusive and binding. In the event the Government expropriates the Concession, the Government will make payment to MEX II using the method of calculation as described in Section 7.2(ii)(i)(a) of this Information Memorandum, and such payment made by the Government constitutes a full and final settlement between the parties and MEX II will not be entitled to any other form of losses, damages or claims. (d) Termination by Government due to corruption, unlawful or illegal activities The Government is also entitled to terminate the Concession at any time by giving immediate written notice to that effect to MEX II, if MEX II, its personnel, servants or employees is convicted by a court of law for corruption or unlawful or illegal activities in relation to the Concession or any other agreement that MEX II may have with the Government. (e) Termination by Government/MEX II due to event of Force Majeure If an event of force majeure has occurred and either party reasonably considers such event of force majeure applicable to it to be of such severity or to be continuing for a period of more than six (6) months, then the Government and MEX II may mutually terminate the Concession Agreement. Thereafter, all rights and obligations in the Concession Agreement will forthwith terminate and neither party will have any claims against each other save and except in respect of any antecedent breach. (f) Insufficient Payment to Lenders In the event that any of the termination events mentioned in this Section occurs, there can be no assurance that any amount received pursuant to the said termination will be sufficient to meet the payment obligations of the Issuer to the Lenders. 94
105. (j) Step in rights of the Government Upon the occurrence of a default by MEX II referred to in Section 7.2 (ii)(i)(b) during the Concession Period, the Government shall have the right but not the obligation to assume the operational responsibility of MEX II. During such period the Government is operating the Concession, the Government must ensure that the moneys collected during the period are utilised in the manner as stated in Section 5.1(m) of this Information Memorandum. The Government’s obligation to make the above payment to the extent of all moneys actually received by the Government and that any such payment cannot be construed as an assumption of liability of MEX II by the Government. There can be no assurance that the amount received will be sufficient for the purpose of the above utilization. MEX II’s Lenders will also be required to acknowledge this step in rights of the Government in its financing documents. On the other hand, in the event of such default, the Government shall terminate the Concession Agreement forthwith. Therefore, the exercise of the step in rights appears unlikely to materialise and in the event of such termination, the consequences of such termination will be as described in Section 7.2(ii)(i)(b) above. 7.3 Risk relating to the Sukuk Murabahah Programme (i) The credit rating of the Sukuk Murabahah Rating Agency assigned long term ratings of AA-IS for the Sukuk Murabahah Programme. A rating is not a recommendation to purchase, hold or sell the Sukuk Murabahah. and there can be no assurance that such a rating will not be revised on a periodic review basis by Rating Agency during the tenor of the Sukuk Murabahah Programme or that such a rating will not be withdrawn entirely if circumstances in the future so warrant. There can be no assurance that the current rating of the Sukuk Murabahah Programme will remain. Further, such rating is not a guarantee of repayment or that there will be no default by the Issuer under the Sukuk Murabahah Programme. In the event that the rating initially assigned to the Sukuk Murabahah Programme is subsequently lowered or withdrawn for any reason, no person or entity will be obligated to provide any additional credit enhancement with respect to the Sukuk Murabahah Programme. Any downgrade or withdrawal of a rating will not constitute an event of default or an event obliging the Issuer to prepay the Sukuk Murabahah but may have an adverse effect on the liquidity and the market price of the Sukuk Murabahah. There is no obligation on the part of the Issuer, the LA/LM, the Financial Adviser, the Sukuk Trustee or any other person or entity to maintain or procure maintenance of the rating for the Sukuk Murabahah Programme. (ii) Interest rate risk The Sukukholders may be exposed to unforeseen losses due to fluctuations in interes rates. Although the Sukuk Murabahah are Islamic securities which do not pay interest, they are similar to fixed income securities and may therefore see their price fluctuate due to fluctuations in interest rates. Generally, a rise in interest rates may cause a fall in the Sukuk Murabahah prices, resulting in a capital loss for the Sukukholders. Conversely, when interest rates fall, the prices at which the Sukuk Murabahah is traded may rise and the Sukukholders may enjoy a capital gain. 95
106. (iii) No prior markets for the Sukuk Murabahah The Sukuk Murabahah comprises a new issue of securities for which there is currently no established secondary markets. In other words, there can be no assurance regarding the future development of a market for the Sukuk Murabahah. the liquidity or sustainability of any market that may develop, the ability of the Sukukholders to sell their Sukuk Murabahah, or the prices at which such Sukukholders may be able to sell their Sukuk Murabahah. There is also no assurance that the price of the Sukuk Murabahah will not be adversely affected by similar issues of Islamic securities. (iv) Shariah Compliance The Shariah Adviser has issued the Shariah pronouncement confirming amongst others that, the transaction and structure of the Sukuk Murabahah are Shariahcompliant as of the date of such Shariah pronouncement. However, the approval is only an expression of the view of the Shariah Adviser based on its experience in the subject. There can be no assurance as to the Shariah permissibility of the structure of the issue and the trading of the Sukuk Murabahah and neither MEX II, the LA/LM nor the Financial Adviser makes any representation as to the same. Potential investors should obtain their own independent Shariah advice as to the Shariah compliance of the transaction and structure of Sukuk Murabahah. (v) Issuer's ability to meet its obligations under the Sukuk Murabahah The Sukuk Murabahah are direct and secured obligations of the Issuer payable out of the Issuer’s own funds. The Sukuk Murabahah will not be the obligations or responsibilities of any other person other than the Issuer. In particular, the Sukuk Murabahah will not be the obligations or responsibilities of the LA/LM or any other person involved or interested in the Sukuk Murabahah. 7.4 Risk relating to the Junior Bonds (i) Subordination The Junior Bonds rank after the Sukuk Murabahah in respect of payment to the extent that payments of coupon are subject to compliance with the Requisite Conditions. Further, so long as any of the Sukuk Murabahah is outstanding under the Sukuk Murabahah Programme, the Junior Bondholders are not entitled to declare an event of default if the Sukukholders have not declared an event of default. (ii) Rating of the Junior Bonds Rating Agency assigned long term ratings of A- for the Junior Bonds. A rating is not a recommendation to purchase, hold or sell the Junior Bonds. and there can be no assurance that such a rating will not be revised on a periodic review basis by Rating Agency during the tenor of the Junior Bonds or that such a rating will not be withdrawn entirely if circumstances in the future so warrant. There can be no assurance that the current rating of the Junior Bonds will remain. Further, such rating is not a guarantee of repayment or that there will be no default by the Issuer under the Junior Bonds. In the event that the rating initially assigned to the Junior Bonds is subsequently lowered or withdrawn for any reason, no person or entity will be obligated to provide any additional credit enhancement with respect to the Junior Bonds. Any downgrade or withdrawal of a rating will not constitute an event of default or an event obliging the Issuer to prepay the Junior Bonds but may have an adverse effect on the liquidity and the 96
107. market price of the Junior Bonds . There is no obligation on the part of the Issuer, the LA/LM, the Financial Adviser, the Sukuk Trustee or any other person or entity to maintain or procure maintenance of the rating for the Junior Bonds. (iii) No prior market for the Junior Bonds The Junior Bonds comprises a new issue of securities for which there is currently no established secondary markets. In other words, there can be no assurance regarding the future development of a market for the Junior Bonds. The liquidity or sustainability of any market that may develop, the ability of the Bondholders to sell their Junior Bonds, or the prices at which such Bondholders may be able to sell their Junior Bonds. There is also no assurance that the price of the Junior Bonds will not be adversely affected by similar issues of private debt securities. (iv) Issuer’s ability to meet its obligations under the Junior Bonds The Junior Bonds are direct and secured obligations of the Issuer payable out of the Issuer’s own funds. The Junior Bonds will not be the obligations or responsibilities of any other person other than the Issuer. In particular, the Junior Bonds will not be the obligations or responsibilities of the LA/LM or any other person involved or interested in the Junior Bonds. (i) Interest rate risk The Bondholders may be exposed to unforeseen losses due to fluctuations in interest rates. Generally, a rise in interest rates may cause a fall in the Junior Bonds prices, resulting in a capital loss for the Bondholders. Conversely, when interest rates fall, the prices at which the Junior Bonds are traded may rise and the Bondholders may enjoy a capital gain. 7.5 General considerations (i) Industry risks Like other businesses, industry risks are an important factor that could materially and adversely affect the financial and business prospects of MEX II. There is no assurance that any change within the industry will not materially affect the business of MEX II. (ii) Change of law The issue of the Sukuk Murabahah is based on, inter alia, the SC’s and BNM’s guidelines and requirements, Malaysian law, tax and administrative practice in effect as at the date of this Information Memorandum and having due regard to the expected tax treatment of all relevant statutes under such law and practice. No assurance can be given as to any possible judicial decision or change to the SC’s and BNM’s guidelines and requirements or Malaysian law after the date of this Information Memorandum will not adversely impact the structure of the transaction and the treatment of the Sukuk Murabahah. (iii) Political, economical and social factors Adverse developments in the political, economic and regulatory conditions in Malaysia and other countries in the region could materially affect the financial prospects of the Issuer. Political and economic uncertainties include risks of war, expropriation, nationalisation, re-negotiation or nullification of existing contracts, changes in interest rates and methods of taxation and currency exchange controls. 97
108. Although measures may be taken by the MEX II to address and /or mitigate such developments there can be no assurance that adverse political and economic factors will not materially affect the Issuer. (iv) Environmental and social factors MEX II is subject to environmental legislation and regulations (including those which require compliance with conditions attached to their respective environmental impact assessment reports) imposed by the Department of Environment. Notwithstanding the financing covenants which require MEX II to procure and comply with all regulations and licensing requirements, there can be no assurance that such licences, consents and approvals will be obtained and, if obtained, that such legislation and regulation will not change to the extent that such changes will have a material adverse effect on the operations and financial position of MEX II. (v) Force majeure An event of force majeure is an event which is not within the control of the party affected, which that party is unable to prevent, avoid or remove and includes war and acts of terrorism, riot and disorders and natural catastrophes. The occurrence of a force majeure event may have a material impact on the MEX II’s business or operations. (vi) Forward looking statements Certain statements, information, estimates and reports in this Information Memorandum are based on historical data, which may not be reflective of future results and others are forward-looking in nature, which are subject to uncertainties and contingencies. All forward-looking statements are based on estimates and assumptions made by the board of directors of the Issuer and the Issuer and although the board of directors of the Issuer and the Issuer believe these forward-looking statements are reasonable, the statements are nevertheless subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied in such forward-looking statements. In light of these and other uncertainties, the inclusion of forward-looking statements in this Information Memorandum should not be regarded as a representation or warranty by the Issuer, the LA/LM, or the Financial Adviser, and there can be no assurance that the plans and objectives of the Issuer will be achieved. A deterioration in the financial condition of the Issuer could adversely affect the market value of the Sukuk Murabahah and the Junior Bonds and the ability of the Issuer to make payments under the Sukuk Murabahah and the Junior Bonds when due, if at all. [The remainder of this page is intentionally left blank] 98
109. SECTION 8 ECONOMY AND INDUSTRY OVERVIEW The information below is included for information purposes only and is relevant to the Issuer ’s prospects. All data and information stated below have been obtained from publicly available official sources of Malaysia and have not been independently verified by the LA/LM, the Issuer or the Financial Adviser. 8.1 Overview and Outlook of the Malaysian Economy Overview Global economic activity continued to expand at a moderate pace in the fourth quarter of 2015. The advanced economies registered modest improvements, but with the pace of growth remaining constrained by crisis-related legacies, including high indebtedness and labour market weaknesses. In Asia, economic activity continued to be supported by domestic demand amid weak export performance. Monetary policy stances experienced a more pronounced divergence given the differing country-specific domestic challenges. The Malaysian economy registered a growth of 4.5% in the fourth quarter of 2015 (3Q 2015: 4.7%), supported mainly by the private sector demand. On the supply side, growth was underpinned by the major economic sectors. On a quarter-on-quarter seasonally adjusted basis, the economy grew by 1.5% (3Q 2015: 0.7%). For the year 2015, the Malaysian economy expanded by 5.0%. Despite the challenging economic environment during the quarter, the private sector continued to be the key driver of growth. Private consumption grew by 4.9% (3Q 2015: 4.1%), supported by stable wage growth and labour market conditions. Private investment expanded by 5.0% (3Q 2015: 5.5%), driven by capital spending in the manufacturing and services sectors. Public investment growth moderated in the fourth quarter (0.4%; 3Q 2015: 1.8%), following lower growth in fixed assets spending by the Federal Government. Meanwhile, public consumption growth registered sustained growth of 3.3% (3Q 2015: 3.5%) as the stronger growth in emoluments was offset by slower growth in supplies and services expenditure. On the supply side, growth in the fourth quarter was supported by the major economic sectors. Growth in the services sector was underpinned by the consumption and traderelated activities. The manufacturing sector recorded a marginally higher growth, supported mainly by domestic-oriented industries. In the construction sector, growth was supported by the civil engineering and residential subsectors. Meanwhile, growth in the agriculture sector moderated, reflecting lower production of palm oil. The mining sector, however, registered a contraction arising from the lower production of both crude oil and natural gas. (Source: Bank Negara Malaysia Quarterly Bulletin, Fourth Quarter 2015) Prospects for 2016 The Malaysian economy is expected to remain steady in 2016, with real gross domestic product (“GDP”) growth between 4% and 5% led by domestic demand. Private sector expenditure will remain the main driver of growth with private consumption and investment expected to grow by 6.4% and 6.7%, respectively. Meanwhile, Government expenditure is forecast to expand, albeit at a moderate pace, in line with efforts to strengthen the fiscal position. On the supply side, growth is expected to be broad-based, with all the sectors registering positive growth. Malaysia’s external position is forecast to remain positive supported by better prospects for global growth and trade. (Source: Ministry of Finance Economic Report 2015/2016) 99
110. 8 .2 Industry Overview and Future Prospects Overview The transport and storage subsector expanded by 5.6% (Q2 2015: 5.4%) led by warehousing and highway operation activities. During the quarter, the land transport segment grew 6.4% (Q2 2015: 5.4%) following higher activities on road transport and highway operations. Traffic volume on tolled highways increased 5.3% to 459.8 million vehicles (Q2 2015: 5.2%; 455.6 million) attributed to higher usage during festivities and school holidays. (Source: Ministry of Finance: Quarterly update on the Malaysian Economy – Third Quarter 2015) Outlook The Eleventh Malaysia Plan will strengthen the foundation of economic expansion and provide an enabling environment to support growth. Initiatives will be undertaken to provide a seamless transportation system and enhance mobility of people, targeting a 40% public transport modal share in the GKL/KV region and 20% in other state capitals. Rural, rural-urban and inter-city connectivity will also be strengthened through enhanced bus, rail and air services. Movement of goods will also become increasingly important as trade plays a significant role in Malaysia’s economic growth. The logistics industry will therefore be strengthened. By 2020, Malaysia is targeting an 8.5% annual growth rate of the transport and storage subsector, along with a place in the top 10 of the World Bank Logistics Performance Index. Beyond physical connectivity, digital infrastructure will not only be vital in bringing people together through communication channels, but lay the foundation of economic development through knowledgeintensive industries. To achieve this, the reach of broadband infrastructure to 95% of populated areas is targeted, along with its affordability - targeting 1% of gross national income (GNI) per capita for fixed broadband cost. Key infrastructure roll-out initiatives such as High-Speed Broadband 2 (HSBB 2), Sub-Urban Broadband (SUBB), and Digital Terrestrial Television (DTT) will be undertaken during this period, along with policies to improve access pricing and consumer protection frameworks. Essential amenities like water services and energy continue to remain critical in directly impacting the quality of life of citizens. In these sectors, expanding network reach especially in rural areas, improving the reliability and efficiency of services, and enhancing the financial sustainability of the sector, are main areas of focus. By 2020, the Government aims to provide 99% of the population with clean and treated water, 80% with connected sewerage services and reduce non-revenue water to 25%. In energy sector, 7,626 MW new generation capacity will be installed in Peninsular Malaysia, along with 300,000 bpd refining capacity at PIPC, providing security to Malaysia’s energy needs. (Source: Eleventh Malaysia Plan, 2016-2020) [The remainder of this page is intentionally left blank] 100
111. SECTION 9 9 .1 OTHER INFORMATION Material Litigation As at the LPD, the Issuer is not engaged in any litigation, either as plaintiff or defendant which has a material effect on its financial position and to the best of the Board's knowledge and belief, the directors of the Issuer are not aware of any proceedings pending or threatened against the Issuer or of any facts likely to give rise to any proceedings which might materially and adversely affect its financial position or business. 9.2 Material Contracts Since the incorporation of the Issuer and as at the LPD, the Issuer has not entered into any contracts which are or which may be material (not being contracts entered into in the ordinary course of business). 9.3 Contingent Liabilities As at the LPD, to the best of the Board's knowledge and belief, the Board is not aware of any significant contingent liabilities or guarantees which upon becoming enforceable, may have substantial impact on its financial position and/ or business. 9.4 Conflict of Interest CIMB Investment Bank Berhad After making enquiries as were reasonable in the circumstances, CIMB is not aware of any circumstances that would give rise to a conflict of interest in its capacity as the LA/LM in relation to the Sukuk Murabahah Programme and the Junior Bonds. ZJ Advisory Sdn Bhd After making enquiries as were reasonable in the circumstances, ZJ Advisory Sdn Bhd is not aware of any circumstances that would give rise to a conflict of interest in its capacity as the Financial Adviser in relation to the Sukuk Murabahah Programme and the Junior Bonds. Shearn Delamore & Co After making enquiries as were reasonable in the circumstances, Shearn Delamore & Co is not aware of any circumstances that would give rise to a conflict of interest in its capacity as the legal counsel to the LA/LM as to Malaysian laws in relation to the Sukuk Murabahah Programme and the Junior Bonds. CIMB Islamic Bank Berhad After making enquiries as were reasonable in the circumstances, CIMB Islamic Bank Berhad is not aware of any circumstances that would give rise to a conflict of interest in its capacity as the Shariah Adviser in relation to the Sukuk Murabahah Programme and the Junior Bonds. Crowe Horwath After making enquiries as were reasonable in the circumstances, Crowe Horwath is not aware of any circumstances that would give rise to a conflict of interest in its capacity as the reporting accountant in relation to the Sukuk Murabahah Programme and the Junior Bonds. 101
112. TMF Trustees Malaysia Berhad After making enquiries as were reasonable in the circumstances , TMF Trustees Malaysia Berhad has confirmed that it is not aware of any circumstances that would give rise to a conflict of interest in its capacity as the Sukuk Trustee and Security Trustee in relation to the Sukuk Murabahah Programme and the Junior Bonds. [The remainder of this page is intentionally left blank] 102
113. APPENDIX I AUDITED FINANCIAL STATEMENTS FOR THE FINANCIAL PERIOD FROM 12 AUGUST 2014 (DATE OF INCORPORATION) TO 31 DECEMBER 2014 [To be separately attached]
141. APPENDIX II CASHFLOW PROJECTIONS [To be separately attached]
142. MEX II SDN BHD (“MEX II” OR “THE COMPANY”) A. Cash Flow Projections for the Financial Years Ending (“FYE”) from 31 December 2016 to 31 December 2035 A1. Cash Flow Projections of the Company FYE 2016 FYE 2017 FYE 2018 FYE 2019 FYE 2020 FYE 2021 FYE 2022 FYE 2023 FYE 2024 FYE 2025 (Amounts shown in RM'million) Cash Flows From Operating Activities Toll collections Interes t incom e Paym ents for operating activities - 30.4 - 17.0 13.5 (1.1) 113.2 6.1 (16.2) 127.0 6.3 (16.8) 136.0 6.9 (17.3) 145.8 7.0 (17.9) 156.5 7.3 (18.5) 166.9 7.3 (19.1) 178.5 7.6 (19.8) Cas h from operations Incom e tax paid - 30.4 - 29.3 - 103.2 - 116.6 - 125.6 - 134.9 - 145.3 - 155.1 - 166.3 - Net Cash From Operating Activities - 30.4 29.3 103.2 116.6 125.6 134.9 145.3 155.1 166.3 Cash Flows For Investing Activities Capital expenditure Cons truction of MEX II Highway (258.0) (645.0) (387.0) - - - - - (29.0) - - Net Cash For Investing Activities (258.0) (645.0) (387.0) - - - - - (29.0) - Cash Flows From/(For) Financing Activities Proceeds from : - Sukuk Murabahah - Junior Bonds Sukuk Murabahah and Junior Bonds is s uance expens es Advances from a s hareholder Proceeds from is s uance of s hares Profit paym ent on Sukuk Murabahah Principal repaym ent on Sukuk Murabahah Coupon paym ent on Junior Bonds Principal repaym ent on Junior Bonds 1,300.0 150.0 (15.0) 140.0 60.0 (40.2) - (80.3) - (80.3) - (80.3) (15.8) - (80.3) (15.8) - (79.5) (30.0) (15.8) - (77.9) (30.0) (15.8) - (76.0) (40.0) (15.8) - (73.8) (40.0) (15.8) - (71.2) (50.0) (15.8) - Net Cash From/(For) Financing Activities 1,594.8 (80.3) (80.3) (96.1) (96.1) (125.3) (123.7) (131.8) (129.5) (137.0) Net Increase/(Decrease) in Cash and Cash Equivalents 1,336.8 (694.9) (438.0) Cash And Cash Equivalent Brought Forward Cash And Cash Equivalent Carried Forward 7.1 20.5 0.4 11.2 13.5 (3.5) 29.3 * 1,336.8 642.0 204.0 211.1 231.6 232.0 243.2 256.7 253.3 1,336.8 642.0 204.0 211.1 231.6 232.0 243.2 256.7 253.3 282.6 * - Am ount les s than RM1,000. Page 1 of 10
143. MEX II SDN BHD (“MEX II” OR “THE COMPANY”) A. Cash Flow Projections for the FYE from 31 December 2016 to 31 December 2035 (Cont’d) A1. Cash Flow Projections of the Company (Cont’d) FYE 2026 FYE 2027 FYE 2028 FYE 2029 FYE 2030 FYE 2031 FYE 2032 FYE 2033 FYE 2034 FYE 2035 (Amounts shown in RM'million) Cash Flows From Operating Activities Toll collections Interes t incom e Paym ents for operating activities 188.7 8.5 (20.4) 199.0 9.8 (21.1) 234.9 10.9 (22.0) 245.2 13.2 (22.7) 260.9 14.0 (23.5) 268.6 14.9 (24.2) 281.6 16.2 (25.0) 327.6 18.7 (26.2) 346.3 21.7 (27.0) 363.0 23.8 (27.9) Cas h from operations Incom e tax paid 176.8 - 187.7 - 223.7 - 235.7 - 251.3 - 259.3 - 272.8 - 320.1 (4.9) 341.0 (70.3) 358.9 (68.0) Net Cash From Operating Activities 176.8 187.7 223.7 235.7 251.3 259.3 272.8 315.2 270.7 290.9 Cash Flows For Investing Activities Capital expenditure Cons truction of MEX II Highway - - - - - (35.7) - (12.6) - - - - Net Cash For Investing Activities - - - - - (35.7) (12.6) - - - Cash Flows From/(For) Financing Activities Proceeds from : - Sukuk Murabahah - Junior Bonds Sukuk Murabahah and Junior Bonds is s uance expens es Advances from a s hareholder Proceeds from is s uance of s hares Profit paym ent on Sukuk Murabahah Principal repaym ent on Sukuk Murabahah Coupon paym ent on Junior Bonds Principal repaym ent on Junior Bonds Net Cash From/(For) Financing Activities Net Increase/(Decrease) in Cash and Cash Equivalents (68.4) (50.0) (15.8) - (64.8) (70.0) (15.8) - (60.7) (70.0) (15.8) - (54.3) (140.0) (15.8) - (45.7) (140.0) (15.8) - (37.0) (140.0) (15.8) - (28.1) (140.0) (15.8) - (17.7) (180.0) (15.8) - (5.9) (180.0) (15.8) - (47.3) (150.0) (134.1) (150.6) (146.4) (210.1) (201.5) (192.7) (183.8) (213.5) (201.7) (197.3) 42.7 37.1 77.3 25.6 49.9 30.9 76.3 101.7 69.0 93.6 Cash And Cash Equivalent Brought Forward 282.6 325.3 362.4 439.7 465.3 515.2 546.1 622.4 724.2 793.2 Cash And Cash Equivalent Carried Forward 325.3 362.4 439.7 465.3 515.2 546.1 622.4 724.2 793.2 886.8 Page 2 of 10
144. MEX II SDN BHD (“MEX II” OR “THE COMPANY”) B. Principal Bases And Assumptions Relating To Cash Flow Projections The principal bases and assumptions upon which the cash flow projections of MEX II have been prepared are as follows: B1. Specific Assumptions Relating To The Company 1. It is assumed that the Concession Agreement awarded to MEX II to design and construct the MEX II Highway will remain in force for the FYE 31 December 2016 to 2035 (“Projection Years”), and that there will be no significant changes to the terms and conditions of the Agreements which would have a material impact to the cash flow projections. 2. Surplus funds of the Company will be able to generate interest income at the rate of 3.0% per annum over the Projection Years. 3. Sukuk Murabahah 3.1 The proceeds of up to RM1,300 million Sukuk Murabahah issued from the Sukuk Murabahah Programme will be utilised for the following purposes:(a) to part finance the construction costs, development costs, financing costs, fees and expenses in relation to MEX II Highway; (b) to fund the FSRA; and (c) to pay fees, expenses and all other amounts payable under or related to the Sukuk Murabahah. 3.2 Profit on Sukuk Murabahah will be paid on a semi-annual basis commencing 6 months from the date of issuance of the Sukuk Murabahah. The projected profit rates range from 5.30% to 6.60% per annum and is assumed to be paid in the month of incurrence. 3.3 There will be no change in the rating of Sukuk Murabahah Programme of the Company throughout the Projection Years. Page 3 of 10
145. MEX II SDN BHD (“MEX II” OR “THE COMPANY”) B. Principal Bases And Assumptions Relating To Cash Flow Projections (Cont’d) B1. Specific Assumptions Relating To The Company (Cont’d) 4. Junior Bonds 5. 6. 4.1 The Junior Bonds will be utilised to part finance the construction costs, development costs and financing costs in relation to MEX II Highway and to fund the junior finance service reserve account. 4.2 Coupon on the Junior Bonds will be paid upon commencement of toll collection. The coupon rate is 10.50% per annum and is assumed to be paid in the month of incurrence. 4.3 There will be no change in the rating of Junior Bonds of the Company throughout the Projection Years. There will be a shareholder’s contribution of RM200 million in FYE 2016 by way of:5.1 subscription by Maju Lingkaran Development Sdn Bhd (“Maju Lingkaran”) of the ordinary share capital in the Company for a total of RM60 million; and 5.2 non-interest bearing advances from Maju Lingkaran and/or Maju Holdings Sdn Bhd of RM140 million. Toll Revenue 6.1 The Company’s projected toll revenue as illustrated in the financial projections is based on the projected toll revenue during the concession period as set out in the Traffic Consultant’s report dated 3 February 2016 prepared by the Traffic Consultant for the 2 toll plazas at Putrajaya which are the mainline toll plaza, from Kuala Lumpur (“KL”) to KLIA (“PJ03”) and the ramp toll plaza from Putrajaya to KLIA (“PJ02”) and vice versa. 6.2 The Scheduled Toll Rates as per CA are as follows:(a) PJ03 Toll Plaza rates Vehicle Type Class 1 Class 2 Class 3 Class 4 Class 5 FYE 2018 to FYE 2022 RM 7.10 14.20 21.30 3.60 7.10 FYE 2023 to FYE 2027 RM 9.10 18.20 27.30 4.60 9.10 FYE 2028 to FYE 2032 RM 11.60 23.20 34.80 5.80 11.60 FYE 2033 to FYE 2047 RM 14.80 29.60 44.40 7.40 14.80 Page 4 of 10
146. MEX II SDN BHD (“MEX II” OR “THE COMPANY”) B. Principal Bases And Assumptions Relating To Cash Flow Projections (Cont’d) B1. Specific Assumptions Relating To The Company (Cont’d) 6. Toll Revenue (Cont’d) 6.2 The Scheduled Toll Rates as per CA are as follows (Cont’d):(b) PJ02 Toll Plaza rates Vehicle Type Class 1 Class 2 Class 3 Class 4 Class 5 FYE 2018 to FYE 2022 RM 7.10 14.20 21.30 3.60 7.10 FYE 2023 to FYE 2027 RM 9.10 18.20 27.30 4.60 9.10 FYE 2028 to FYE 2032 RM 11.60 23.20 34.80 5.80 11.60 FYE 2033 to FYE 2047 RM 14.80 29.60 44.40 7.40 14.80 Note:Class 1 Class 2 Class 3 Class 4 Class 5 A vehicle has two axles and three or four wheels but excluding a taxi and a bus A vehicle has two axles and five or six wheels, but excluding a bus A vehicle has three or more axles, but excluding a bus A taxi A bus 6.3 MEX II is expected to apply the TRM stipulated in the CA from FYE 2023 onwards as the forecasted toll revenue is expected to be higher than the projected toll revenue threshold as stipulated in the CA. 6.4 MEX II is not expected to apply revenue sharing over the Projection Years as stipulated in the CA as the revenue sharing is applicable only after the twentieth (20th) anniversary of the concession period or when the loan to finance the construction of MEX II Highway has been repaid whichever is earlier. 6.5 The toll revenue is calculated using the projected traffic volume during the concession period and applying the toll rates adjusted by the TRM. Page 5 of 10
147. MEX II SDN BHD (“MEX II” OR “THE COMPANY”) B. Principal Bases And Assumptions Relating To Cash Flow Projections (Cont’d) B1. Specific Assumptions Relating To The Company (Cont’d) 6. Toll Revenue (Cont’d) 6.6 The revenue calculations are subject to the TRM as specified in the CA as follows:-