LODGEMENT FORM TO THE SECURITIES COMMISSION MALAYSIA FOR THE AFB STRUCTURED COVERED SUKUK MURABAHAH PURSUANT TO THE FACILITY

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1 LODGEMENT FORM TO THE SECURITIES COMMISSION MALAYSIA FOR THE AFB STRUCTURED COVERED SUKUK MURABAHAH PURSUANT TO THE FACILITY Other terms and conditions (i) (ii) (iii) (iv) Expected facility/programme size Identified asset/trust asset Purchase and selling price/rental, where applicable compliance with asset pricing requirements Profit/coupon/ rental rate (fixed or floating) In addition to the section entitled Expected facility/programme size : The aggregate outstanding nominal value of all the tranches issued under the AFB Structured Covered Sukuk Murabahah at any point in time shall not exceed RM2,295 million. Shariah-compliant commodities which exclude ribawi items in the category of medium of exchange such as currency, gold and silver. For the avoidance of doubt, the commodities are only applicable to the MBSB Structured Covered Sukuk Murabahah as the issuance of the AFB Structured Covered Sukuk Murabahah is to facilitate the Proposed Sukuk Exchange. Purchase Price The purchase price in relation to each purchase of commodities shall be equivalent to the proceeds received under the MBSB Structured Covered Sukuk Murabahah. For avoidance of doubt, there shall be no cash proceeds arising from the issuance as the AFB Structured Covered Sukuk Murabahah will be issued to facilitate the Proposed Sukuk Exchange. Deferred Sale Price The Deferred Sale Price shall be equivalent to the purchase price of the MBSB Structured Covered Sukuk Murabahah and a mark-up (profit) payable on deferred payment basis. Under the Proposed Sukuk Exchange, the Outstanding Deferred Sale Price under the MBSB Structured Covered Sukuk Murabahah will be transferred to the Issuer. The AFB Structured Covered Sukuk Murabahah will be issued at par in exchange with the MBSB Structured Covered Sukuk Murabahah on the basis of one Ringgit (RM1.00) nominal value of MBSB Structured Covered Sukuk Murabahah with one Ringgit (RM1.00) nominal value of AFB Structured Covered Sukuk Murabahah ( Proposed Sukuk Exchange ) with the identical maturity dates, profit rates and profit payment dates. 1

2 (v) Profit/coupon/rental payment frequency The profits are payable at semi-annual intervals in arrears with the first payment due on the profit payment dates corresponding to the respective series of the MBSB Structured Covered Sukuk Murabahah to be exchanged and the last ending on the date falling on the maturity of each series. (vi) Tenure of the Facility The tenure of the Facility is up to eleven (11) years from the date of issuance of the AFB Structured Covered Sukuk Murabahah, provided that the said issuance shall be made within sixty (60) business days from the date of lodgement of information and documents relating to the Facility with the SC as required under the LOLA Guidelines. (vii) (viii) Tenure of the AFB Structured Covered Sukuk Murabahah Utilisation of Proceeds The tenure of each series of the AFB Structured Covered Sukuk Murabahah shall be identical to the remaining tenure of the corresponding series of the MBSB Structured Covered Sukuk Murabahah to be exchanged. There shall be no cash proceeds arising from the issuance as the AFB Structured Covered Sukuk Murabahah will be issued to facilitate the Proposed Sukuk Exchange pursuant to the proposed transfer of Islamic assets and liabilities from MBSB to AFB. (ix) Status The AFB Structured Covered Sukuk Murabahah issued and/or to be issued will constitute direct, unconditional, unsubordinated and unsecured obligations of the Issuer and shall at all times rank pari passu without discrimination, preference or priority among themselves, but subject to payments preferred under law and the Issue Documents. (x) Repurchase and Cancellation The Issuer or its subsidiaries or its agent(s) who is acting for the redemption or purchase may at any time purchase the AFB Structured Covered Sukuk Murabahah at any price in the open market or by private treaty, but these purchased AFB Structured Covered Sukuk Murabahah shall be cancelled and cannot be resold. The AFB Structured Covered Sukuk Murabahah so acquired by the Issuer or any Interested Persons will not entitle them to vote at any meeting of the AFB Sukukholders and will not be deemed to be outstanding for the purpose of determining the total votes exercisable by the AFB Sukukholders whenever such determination is required under the Trust Deed. 2

3 (xi) Issue Documents Facility Agreement; The Issuer shall confirm in writing to the Sukuk Trustee: (i) the aggregate nominal amount of the AFB Structured Covered Sukuk Murabahah which have been purchased and cancelled; and (ii) that such AFB Structured Covered Sukuk Murabahah have been cancelled within fourteen (14) days after the date of acquisition. Securities Lodgement Form; (c) Hiwalah Agreement; (d) Trust deed as supplemented by a Supplemental Trust Deed ( Trust Deed ); (e) Supplemental Security Documents (as defined under Details of guarantee in the Principal Terms and Conditions ); (f) Any other agreements in respect of the underlying Islamic principle; and (g) Such other supplemental documents as and when required and deemed necessary by the Transaction Solicitors, the Shariah Adviser, the Joint Principal Advisers/Joint Lead Arrangers and/or the Facility Agent. (xii) Transaction Documents (i) Master sale and purchase agreement between the Issuer and the SPV ( Master Sale And Purchase Agreement ); (ii) Transaction administrator agreement ( Transaction Administrator Agreement ); (iii) Servicing agreement ( Servicing Agreement ); and (iv) Such other supplemental documents as and when required and deemed necessary by the Transaction Solicitors, the Shariah Adviser, the Joint Principal Advisers/Joint Lead Arrangers and/or the Facility Agent. Both Transaction Documents and Issue Documents are collectively referred as Documents. (xiii) 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 or on behalf of Malaysia or other applicable jurisdictions, or any 3

4 authority thereof or therein having power to tax, unless such withholding or deduction is required by law, in which event the Issuer 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. (xiv) Cost and expenses All legal fees, stamp duties (if any) and reasonable expenses incurred in connection with the AFB Structured Covered Sukuk Murabahah, including professional due diligence fees and fees payable to BNM, SC and the Rating Agency, shall be for the account of the Issuer. (xv) Covered Sukuk Guarantee (aa) Details of the Designated Accounts For each tranche to be exchanged, the SPV is to maintain a separate set of Shariah-compliant accounts with a financial institution with a minimum rating of A3/P1 or its equivalent by a rating agency. For avoidance of doubt, the SPV is not allowed to open the aforesaid Shariah-compliant accounts with the Issuer or MBSB. 1. Tranche Account Name account of : Tranche Account Parties responsible for opening the account Parties responsible for maintaining/ operating the account Signatories to the account : SPV : Sukuk Trustee : The Sukuk Trustee shall be the sole signatory to the Tranche Account Sources funds of : From time to time and at any time, the following shall be credited into the Tranche Account: 4

5 the monthly instalments (comprising profit and principal), prepayment and prepayment penalties (if any) of that Tranche Cover Assets received from the Servicer net of all deductions made by Angkatan Koperasi Kebangsaan Malaysia Bhd ( ANGKASA ) or such other body that maybe agreed and accepted by the Joint Principal Advisers/Joint Lead Arrangers and the Facility Agent (collectively, Collection Body ); (c) the repurchase consideration received from AFB for ineligible Financing Receivables, Clean-up Call (as defined herein under item (xvii)(gg)) and Mandatory Repurchase of Portfolio Pool (as defined herein under item (xvii)(hh)); the recoveries received from defaulted Financing Receivables; and (d) if any, all profit income earned on idle funds placed in fixed deposits and/or repurchase agreement transactions with a financial institution(s) which has a minimum rating of A3/P1 by a rating agency. Utilisation of funds : All monies from time to time and at any time standing to the credit of the Tranche Account will be applied in the following order and priority: to the payment of any taxes and other expenses preferred by law which are due and payable; (i) prior to the occurrence of the Facility Event of Default, 5

6 to the payment of profit under the SPV Sukuk Murabahah and the same which will be used as payment to the profit due and payable on that tranche of AFB Structured Covered Sukuk Murabahah on a pari passu basis; (ii) upon occurrence of the Facility Event of Default or when a Notice to Pay is served, to the payment of profit due and payable on that tranche of AFB Structured Covered Sukuk Murabahah on a pari passu basis; (c) (d) (e) (i) prior to the occurrence of the Facility Event of Default, to the payment of principal under the SPV Sukuk Murabahah and which will be used for the pro-rata redemption of principal on that tranche of AFB Structured Covered Sukuk Murabahah; (ii) upon occurrence of the Facility Event of Default or when a Notice to Pay is served, for the pro-rata redemption of principal on that tranche of AFB Structured Covered Sukuk Murabahah; to the topping up and/or maintaining the Target Level (as defined below) in the Liquidity Reserve Account; to the payment of annual Servicer Fee (as defined herein under item (xviii)(dd)) and fees payable to the Transaction Administrator; (f) to purchase additional Financing Receivables from the Issuer, subject to compliance of the Covered Sukuk Guarantee; 6

7 (g) (h) (i) upon full redemption of that tranche of AFB Structured Covered Sukuk Murabahah, towards the redemption of the relevant SPV Sukuk Murabahah; upon full redemption of that tranche of AFB Structured Covered Sukuk Murabahah and the SPV Sukuk Murabahah, to pay the Servicer the incentive fee; upon full settlement of the above and all other amounts due and payable by the SPV and full redemption of that tranche of AFB Structured Covered Sukuk Murabahah, any surplus to be paid to the Share Trustee to be held on trust for the benefit of charitable organisations to be identified. 2. Liquidity Reserve Account Name account of : Liquidity Reserve Account Parties responsible for opening the account Parties responsible for maintaining/ operating the account Signatories to the account : SPV : Sukuk Trustee : The Sukuk Trustee shall be the sole signatory to the Liquidity Reserve Account 7

8 Sources funds of : The following shall be credited into the Liquidity Reserve Account: Part of the proceeds from the SPV Sukuk Murabahah with an amount equivalent to 50% of the Target Level amount. Any monies transferred from the Tranche Account to top up any shortfall to meet the Target Level. The Target Level shall be equal to the profit payments, principal redemption and senior expenses for the next 6 months subject to a minimum of RM15 million or such other amount which has been determined prior to the Proposed Sukuk Exchange ( Target Level ). Should the rating of the AFB Structured Covered Sukuk Murabahah fall to BBB3 and below, the Target Level shall be revised to an amount equivalent to the profit payments, principal redemption and senior expenses for the next 12 months. Utilisation of funds : All monies from time to time and at any time standing to the credit of the Liquidity Reserve Account will be applied in the following order and priority: to meet any shortfall in payments on the corresponding Tranche Account in the priority set out thereunder due on each profit payment date in the event there are insufficient funds in the Tranche Account for the purpose of meeting such payments; 8

9 to meet any shortfall in senior expenses payment; (c) to transfer any amounts exceeding the Target Level to the Tranche Account; and (d) upon full redemption of that tranche of AFB Structured Covered Sukuk Murabahah, to transfer any remaining amount in the Liquidity Reserve to the Tranche Account. For the avoidance of doubt, failure to meet the Target Level shall not constitute a Facility Event of Default. (bb) Asset Coverage Test The SPV shall ensure that an Asset Coverage Ratio (as defined below) for each tranche of at least equal to an agreed ratio with the Rating Agency (that has been determined prior to the Proposed Sukuk Exchange) which shall be maintained at all times throughout the tenure of the tranche. The test on the Asset Coverage Ratio ( Asset Coverage Test ) shall be performed on a quarterly basis. The Asset Coverage Ratio is calculated based on the following formula: Aggregate Receivable Amount / Total nominal value of that relevant tranche of the AFB Structured Covered Sukuk Murabahah outstanding where: Aggregate Receivable Amount = L + D L = outstanding principal balance of that Tranche Cover Assets less any defaulted receivables D = monies standing to the credit of that Designated Accounts If on any calculation date, the Asset Coverage Test is 9

10 breached, then the SPV (or the Calculation Agent (as defined herein under item (xxii) on its behalf) will notify the Sukuk Trustee, rating agency and the Issuer and (subject to the Sukuk Trustee having actual knowledge or express notice of such breach) the Sukuk Trustee will serve an Asset Coverage Test Breach Notice on the SPV. MBSB will use all reasonable endeavours to subscribe for the SPV Sukuk Murabahah to ensure that the Asset Coverage Test is met by the second calculation date (which will fall at the end of sixth month from the date of the breach of the test). For the avoidance of doubt, it will be the Issuer's option, instead of obligation, to remedy the test by selling sufficient further Financing Receivables and/or subscribing for the SPV Sukuk Murabahah and/or making advances to the SPV. For avoidance of doubt, such advances will be subordinated to the AFB Structured Covered Sukuk Murabahah. An Asset Coverage Test Breach Notice will be revoked if, on any calculation date falling on or prior to the second calculation date (which will fall at the end of the sixth month from the date of the initial breach of test) following the service of the Asset Coverage Test Breach Notice, the Asset Coverage Test is satisfied and neither a Notice to Pay nor an Issuer Acceleration Notice has been served. If an Asset Coverage Test Breach Notice has been served and not revoked on or before the second calculation date after service of such Asset Coverage Test Breach Notice, then a Facility Event of Default shall occur and the Sukuk Trustee shall serve a Notice to Pay on the SPV and is entitled to serve an Issuer Acceleration Notice. (cc) Further Financing Receivables Purchase Any purchase of further Financing Receivables will be subject to no occurrence of the Facility Event of Default, Servicer Event of Default and SPV Event of Default, meeting the Liquidity Reserve Target Level as well as a written confirmation of the rating agency of no adverse impact on the credit rating. (dd) SPV Events of Default In respect of each tranche, events of default typical of a transaction of such nature which include but are not limited to: (i) the SPV fails to pay any guarantee amount due under that tranche or any of the Issue Documents to which it is a party in relation to that tranche on the due date, or on 10

11 demand, if so payable; (ii) the SPV breaches any of its representations and warranties, obligations and undertakings under that tranche or any of the Documents to which it is a party in relation to that tranche (other than that stated in paragraph (i) above) which in the opinion of the Sukuk Trustee, is capable of being remedied, is not remedied to the satisfaction of the Sukuk Trustee within thirty (30) days from the date the SPV becomes aware of such breach or the SPV is notified of such breach; (iii) it becomes unlawful for the SPV to perform its obligations under that tranche and/or any of the Documents to which it is a party in relation to that tranche; (iv) the SPV changes the nature or scope of its business; (v) any proceeding or step is taken for the winding-up, dissolution or liquidation of the SPV, or a resolution is passed for the winding-up of the SPV or a petition is presented against the SPV and the SPV has not taken any action in good faith to set aside such petition within thirty (30) days from the date of service of such windingup order has been made against the SPV; (vi) the SPV becomes insolvent; (vii) an encumbrancer takes possession of, or a trustee, receiver and manager or similar officer is appointed over the whole or a substantial part of the business or assets of the SPV, or distress, legal process, sequestration or any form of execution is levied or enforced or sued out against the SPV or any security interest which may for the time being affect any of its assets becomes enforceable; and (viii) any other SPV Events of Default as may be advised by the Transaction Solicitors. In the circumstances where any of the events (each a SPV Event of Default ) occurs, and subject to any remedy period, where applicable, the Sukuk Trustee may at its discretion and shall, if instructed by the AFB Sukukholders of the relevant tranche by an extraordinary resolution, issue a notice in writing to the SPV ( SPV Acceleration Notice ), declare a SPV Event of Default has occurred for that tranche whereupon: all amount payable by the SPV under the Covered 11

12 Sukuk Guarantee for that tranche shall thereupon immediately become due and payable and all accrued profits thereon and any other amounts payable under the Covered Sukuk Guarantee in relation to these shall become due and payable; and the Sukuk Trustee shall be entitled to immediately enforce the security as mentioned above, without further notice to the SPV. For the avoidance of doubt, the enforcement of any of the Master Security will be subject to the request of the holders of all tranches of the AFB Structured Covered Sukuk Murabahah by their respective extraordinary resolution. (ee) SPV Representations and Warranties Note: There is no cross default provision among the SPV Events of Default among the various tranches. A default on or in respect of any tranche will not, by reason solely of such default entitle the sukukholders of another tranche to declare a SPV Event of Default on or in respect of their tranche unless the event or events giving rise to such default constitute events falling within any of the SPV Events of Default of that other tranche, in which case, a SPV Event of Default can be declared on that other tranche. For the enforcement of the Master Security for all tranches as mentioned above, it will be effected upon instruction of the AFB Sukukholders of all the tranches which respectively subject to the approval of 75% of the AFB Sukukholders of that tranche. Representations and warranties usual and customary to the SPV for a transaction of such nature including but not limited to: It has not engaged in any activities since its incorporation other than those contemplated by its constituent documents; and Such other standard representations and warranties as may be advised by the Transaction Solicitors. (ff) SPV Covenants Covenants usual and customary to the SPV for a transaction of such nature including but not limited to: the SPV shall not, without the prior written consent of the Sukuk Trustee, for so long as the AFB Structured Covered Sukuk Murabahah remains outstanding: (i) create or permit to exist over all or any part of its 12

13 business or assets any security interest save and except as provided for in the Security Documents; (ii) add to, delete, vary or amend its Memorandum and/or Articles of Association or Constitution in any manner which may be prejudicial to the interest of the AFB Sukukholders or may affect its ability to perform its obligations under the Documents to which it is a party; (iii) change the nature of its business or carry on any business or engage in any activities not specifically authorised under its Memorandum of Association or Constitution have any subsidiary; (iv) amalgamate, consolidate or merge with any other person or convey or transfer its properties or assets substantially as an entirety to any person; (v) agree to any change to the terms and conditions of the documentation relating to any Financing Receivables or agree to the exercise by the Issuer of any rights thereunder which may be prejudicial to the interest of the AFB Sukukholders or may affect its ability to perform its obligations under the Documents to which it is a party; (vi) terminate, revoke, replace or suspend any of the Documents to which it is a party; (vii) vary or waive any terms or conditions of any of the Documents to which it is a party or grant any time or indulgence to or release or vary the liability of any person from time to time liable thereunder in any manner which may be prejudicial to the interest of the AFB Sukukholders or may affect its ability to perform its obligations under the Documents to which it is a party; (viii) transfer, assign, relinquish or otherwise dispose of (other than as provided under the Security Documents), any of its rights and interests under the Documents to which it is a party; The SPV, shall: (i) take all action necessary or desirable to ensure that its performance of the Documents to which it is a party is in compliance with the law and its obligations thereunder continue to be valid, binding and enforceable; (ii) exercise its rights under the Documents to which it 13

14 is a party to require repurchase or compensation by Issuer of any Financing Receivables in accordance with the instructions of the Sukuk Trustee; and such other covenants standard for this nature of transaction and as may be advised by the Transaction Solicitors. (gg) Limited Recourse, No Petition Any Sukukholders of a particular tranche of the AFB Structured Covered Sukuk Murabahah will have only the benefit of the specifically identified Tranche Cover Assets for that tranche and the collections from or proceeds of realisation thereof including amounts standing to the credit of the corresponding Designated Accounts, and the proceeds from enforcement of any security created pursuant to the Security Documents, and all rights of the Documents to which it is a party, to satisfy their right to receive profit payments and redemption. Once the security has been exhausted and there is any shortfall, all outstanding obligations of the SPV shall be extinguished and Issuer, the Servicer, the SPV Administrator, the Share Trustee and the directors of the Issuer shall agree and the Sukukholders of that tranche of the AFB Structured Covered Sukuk Murabahah shall be deemed to agree (by their subscription or purchase of that tranche of AFB Structured Covered Sukuk Murabahah or the holding of a beneficial interest therein) that they shall not have any legal rights as against the SPV and accordingly, they shall not be entitled to file a petition for or institute or join any other person in instituting proceedings for the reorganisation, liquidation, winding-up or receivership of the SPV or other similar proceedings under any applicable laws. For the avoidance of doubt, this Limited Recourse, No Petition clause will not be applicable to the Issuer. (xvi) SPV Sukuk Murabahah Programme (aa) SPV Sukuk Murabahah Issuer The SPV. (bb) SPV Sukuk The SPV Sukuk Murabahah, which was initially wholly 14

15 (cc) Murabahah Subscriber Details of the SPV Sukuk Murabahah subscribed by MBSB, is to be transferred to AFB. The details of the SPV Sukuk Murabahah are as follows: Purpose The proceeds was utilised to (1) purchase the Financing Receivables from MBSB; (2) prefund the Liquidity Reserve Account; and (3) fund the trustees reimbursement account in relation to the SPV Sukuk Murabahah Programme. Payment The principal payment of the SPV Sukuk Murabahah shall mirror the amount due under each series under the corresponding tranche of the AFB Structured Covered Sukuk Murabahah. The said principal payment was made two (2) days before the maturity date of that relevant series. However, the Issuer will not be relying on payments by the SPV in respect of the SPV Sukuk Murabahah in order to pay profit or repay principal under the AFB Structured Covered Sukuk Murabahah. Status Profit payment frequency and basis Guaranteed payment The obligations shall constitute direct and unsecured obligations of the SPV and shall at all times be subordinated to the AFB Structured Covered Sukuk Murabahah and any obligations arising from the Facility. Profit payments on the SPV Sukuk Murabahah shall be payable on two (2) days prior to the profit payment dates of the corresponding tranche of the AFB Structured Covered Sukuk Murabahah. Any guaranteed payment by the SPV shall be deemed as a satisfaction of payment obligations by the SPV to the sukukholder(s) under the SPV Sukuk 15

16 Murabahah Programme. (xvii) Sale and Purchase of the Financing Receivables (aa) Transaction The SPV has utilised the proceeds arising from the issuance of the SPV Sukuk Murabahah to purchase a pool of Financing Receivables, which comply with the eligibility criteria ( EC ), as set out herein under item (xviii)(ff), from MBSB. In connection with the existing Financing Receivables, MBSB has executed in favour of the SPV a legal assignment (the Sale Assignment ) in respect of the rights, title, interests and benefits in and to the Financing Receivables. The SPV will enter into a Master Sale and Purchase Agreement with AFB, for the purchase, on a piecemeal basis, of the Financing Receivables. (bb) (cc) Purchase Consideration Issuer Representations and Warranties The purchase consideration of the Financing Receivables under the sale will be equal to the Financing Receivables aggregate outstanding principal balance as at the relevant purchase date. Such purchase consideration to be paid by the SPV to AFB shall be in the form of cash and/or such other consideration to be agreed upon between AFB and the SPV. Such other purchase consideration shall be subordinated to the obligations of the SPV under the Covered Sukuk Guarantee. The Issuer will make certain representations and warranties in the Master Sale and Purchase Agreement with respect to itself and the Financing Receivables including but not limited to: that Issuer has the power and it has taken all necessary action to ensure due authorisation by it of the Documents to which it is a party, each of which constitute valid, binding and enforceable obligations of Issuer; the Financing Receivables sold and the documentation relating thereto are in the sole and absolute beneficial 16

17 ownership of Issuer and, will, when a transfer/assignment thereof is effected confer a good title on SPV, and there is no impediment to the registration/completion of such transfer/assignment; (c) (d) (e) (f) (g) (h) there is, in respect of each Financing Receivable, no amount owing to the obligor by Issuer nor is the obligor entitled to exercise any right of set-off in respect of any of the monthly instalments; neither Issuer nor any of its agents has received any information in writing or written notice of any litigation, dispute, complaint or insolvency (subsisting, threatened or pending) in relation to any obligor which may have an adverse effect on the ability of the obligor to perform her/his obligations in respect of the relevant Financing Receivable; all information given in the Master Sale and Purchase Agreement and in the purchase request (including any schedule, annexure or attachment thereto and the particulars of each receivable) is true and accurate in all material respects and is not misleading because of any omission or ambiguity or for any other reason; that each obligor has complied with all his/her obligations under the documentation for his/her respective Financing Receivable up to the relevant issue date; that accounts, records and documentation relating to the Financing Receivables have been properly kept and maintained and are up to date at least with transactions up to the relevant issue date and in the possession of Issuer or held to its order; and the execution, delivery and performance by Issuer of the Documents to which it is a party are in compliance with all applicable laws. (dd) (ee) Legal Assignment Compensation or replacement If Issuer breaches any of its representations and warranties, it shall indemnify and keep Issuer indemnified against any loss, damage or claims suffered or incurred by Issuer as a result of such breach. Each sale of Financing Receivables will be by way of legal assignment for legal purposes. Issuer will represent: 17

18 of Financing Receivables that each Financing Receivable satisfies the Eligible Criteria down to the relevant issue date; and that the information given in each purchase request in relation to the Financing Receivables is true and accurate and is not misleading because of any omission or ambiguity or for any other reason. (ff) Eligibility Criteria of Financing Receivables In the event of a breach of any of the foregoing representations, in relation to any Financing Receivables, Issuer will repurchase the relevant Financing Receivables at the Repurchase Price of Financing Receivables (as defined herein under item (xvii)(ii)). There are EC for the Financing Receivables. The EC in relation to each Financing Receivable that must be satisfied as of the relevant issue date are: it is absolutely beneficially owned by MBSB and/or the Issuer free from all encumbrances prior to the sale; (c) (d) (e) (f) (g) (h) it has been originated in the ordinary course of business of MBSB and/or the Issuer ; it shall be of Shariah-compliant product; it was created in accordance with credit standards no less stringent than those generally applied by MBSB or the Issuer (as the case may be) in its ordinary course of business; evidence that the repayment by the obligor has been approved and accepted for deduction at source by Collection Body; at least the first monthly instalment payment of the Financing Receivable has been received from Collection Body under the salary deduction scheme approved by Collection Body; its obligor must be a citizen and resident of Malaysia and to the best knowledge of Issuer, is not a person identified in the records of Issuer as being or having been the subject of bankruptcy proceedings or is an undischarged bankrupt; having been convicted of any offence capable of resulting in imprisonment; (c) being deceased; or (d) being a retiree; its repayment and all other amounts to be accrued and/or to be realised thereof shall be payable in Ringgit Malaysia; 18

19 (i) (j) (k) (l) its original tenure shall not be more than 240 months; its relevant financing agreement provides for settlement of amounts due from the obligor by monthly instalments and Issuer has not waived any material terms of the relevant financing agreement from the date of the initial creation thereof; it is not a defaulted Financing Receivables, in respect of which instalments is six (6) months or more in arrears, and the scheduled monthly instalment payment prior to the relevant issue date has been received; it is a receivable that, to the best knowledge of Issuer, the obligor has not exercised or indicated an intention to exercise any option of early settlement/prepayment, any right of rescission, set-off, counterclaim or defence (including the defence of usury); (m) it is not included in any other pool of receivables for the purpose of any other financing facility nor has it previously been sold/transferred by MBSB and/or the Issuer for purposes of the Facility and/or to any other third parties; (n) (o) (p) (q) (r) it is and will at all relevant times be capable of being segregated and identified for ownership purposes; it is not the subject of any adverse claim or set-off or security claim by any party and no circumstances exist, to the best of knowledge of MBSB and/or the Issuer, which would give the obligor the right to refuse to make any payment under the relevant financing agreement; it is a receivable where the relevant financing agreement and all other documents relating to it, have been duly authorised and executed, are in full force and effect, and constitute legal, valid and binding obligations of the relevant obligor enforceable against the relevant obligor in accordance with their terms; it is a receivable where there is no prohibition or restriction on, or requirement for consent to be obtained or notice to be given (other than pursuant to Section 4(3) of the Civil Law Act 1956) for, any assignment, transfer or sale of the receivable; and others as may be determined and agreed upon after the legal and financial due diligence has been carried out. 19

20 (gg) Clean-up Call If the Financing Receivables of any Tranche Cover Assets shall fall to or below 10% of the outstanding principal value initially purchased from the Issuer or if all the series of the AFB Structured Covered Sukuk Murabahah of that relevant tranche shall have been fully redeemed, the SPV will grant the Issuer a first right of refusal to repurchase all the outstanding Financing Receivables in relation to that tranche, provided that the SPV would be able to discharge all its payment obligations to the AFB Sukukholders of the relevant tranche of AFB Structured Covered Sukuk Murabahah, payments preferred by law and all advisers/third party service providers. The repurchase price for the repurchase all the outstanding Financing Receivables in relation to that tranche shall be the Repurchase Price of Financing Receivables. The proceeds received by the SPV from the Clean-up Call shall be applied in accordance with the agreed cash flow waterfall on the profit payment date falling immediately after the Clean-up Call has been exercised. (hh) Mandatory Repurchase of Portfolio Pool Under the terms of the Master Sale and Purchase Agreement, the occurrence of any of the following events which in the opinion of the SPV affects all the Tranche Cover Assets of all outstanding tranches will, by written notice from the SPV to the Issuer, oblige such repurchase by the Issuer: (c) (d) the failure by the Issuer to comply with any applicable law with respect to the Financing Receivables; the failure to vest and maintain vested in the SPV a perfected ownership interest in the Financing Receivables free and clear of any encumbrances; any successful dispute, claim or defence of any of obligor as to the legality and enforceability of any Financing Receivables and such dispute, claim or defence would be applicable to all Financing Receivables; and any successful attempt by any person to avoid, rescind or set aside any transfer by the Issuer to the SPV of the Financing Receivables under any law, including any bankruptcy law or other insolvency law and such avoidance, rescission or setting aside would be applicable to all Financing Receivables. (ii) Repurchase Price of Financing The price payable by the Issuer (or in the case of the Cleanup Call, any eligible third party if the Issuer forgoes its first right of refusal) to repurchase or purchase the Financing 20

21 Receivables Receivables under the following circumstances: (c) Mandatory Repurchase of Portfolio Pool; Clean-up Call; and Breach of EC; shall be equal to the aggregate of: (c) the principal component of such Financing Receivables outstanding as at the date of repurchase; the amount of all accrued and unpaid profit on such Financing Receivables as at the date of repurchase; and all other ancillary costs which shall include, but are not limited to, late payment charges (if any) on any delinquent Financing Receivables. The Issuer shall remit the repurchase consideration, as quantified using the above formula to SPV within a period of ten (10) business days from the date of repurchase or such longer period as may be mutually agreed between the SPV and the Issuer. (xviii) Servicing the Financing Receivables (aa) Servicing Pursuant to a servicing agreement (the Servicing Agreement ) entered or to be entered into between AFB and the SPV and the Sukuk Trustee, AFB (acting as the Servicer) will provide certain services to the SPV in relation to the Financing Receivables purchased by the SPV and these include but are not limited to: (c) (d) receiving collections from Collection Body of all payments in relation to the Financing Receivables; accordingly segregating the collections received before the payment into the respective Tranche Account; the provision of monthly servicer reports summarising, inter alia, the amount of collections, prepayments and any other payments received, and delinquency information; the keeping of records, books, accounts and data in 21

22 relation to each Financing Receivable sold to Issuer; (e) (f) where relevant, maintaining the relevant takaful; and working to ensure necessary steps are taken promptly to collect and/or recover the delinquent Financing Receivables or defaulted Financing Receivables. (bb) (cc) (dd) Periodic Payment Monthly Report Servicer Remuneration The Servicer undertakes also to designate each of the Financing Receivables transferred pursuant to a purchase request in its books of account, records and computer systems by reference to the agreed reference number and otherwise in such a manner as will identify those transferred Financing Receivables as being owned by the SPV and will distinguish each of such Financing Receivables from other financing owned or serviced by the Servicer. Collection Body will make payment of collections in relation to the Financing Receivables (the Collections ) to AFB. AFB, in its capacity as the Servicer, will deposit the Collections from the Financing Receivables into the respective Tranche Account within a period to be agreed between the SPV, Lead Arranger and the Servicer after receipt by the Servicer. On a monthly basis, the Servicer will deliver to the SPV, the Facility Agent, the Rating Agency and the Sukuk Trustee a report setting forth, among other things, the total Collections including prepayments, delinquencies and defaults; and certain portfolio performance statistics of the Financing Receivables, if any and where applicable, have been satisfied. As compensation for its service, the Servicer will receive a fee of up to RM80,000 per annum or such other amount that has been agreed prior to the Proposed Sukuk Exchange ( Servicer Fee ), payable semi-annually in arrears. The Servicer Fee is non-cumulative in nature with non-payment of any amount due shall not be carried forward into the next payment date. The Servicer may be paid an incentive fee at the discretion of the SPV. The incentive fee is payable after the last series of the relevant AFB Structured Covered Sukuk Murabahah shall have been repaid and all obligations and senior payments under the relevant tranche of the AFB Structured Covered 22

23 Sukuk Murabahah satisfied. For the avoidance of doubt, non-payment of the Servicer Fee or any part thereof shall not constitute a Facility Event of Default. (ee) Servicer Events of Default If any of the following events (each, a Servicer Event of Default ) occurs: the Servicer fails to effect transfer or deposit any payment as required under the Servicing Agreement; and the Servicer fails to perform any of its obligations under the Servicing Agreement or breaches any of the terms of the Servicing Agreement (including the representations and warranties) and (except where in the opinion of the SPV such failure is not capable of being remedied) does not cure such default within fourteen (14) days after the earlier of (i) receipt of written notice thereof from the SPV; and (ii) having actual knowledge thereof, (xix) (xx) Trustees Reimbursement Account Form and Denomination then the SPV or the Sukuk Trustee is to appoint a person acceptable to the Rating Agency to replace the Servicer. The Issuer shall open and maintain a Trustees Reimbursement Account for Sukukholders Actions ( Trustees Reimbursement Account ) with a sum of RM30,000 (which shall be maintained at all times throughout the tenure of the Facility). This amount will be deposited into the Trustees Reimbursement Account and shall be operated by the Sukuk Trustee and the money shall only be used strictly by the Sukuk Trustee in carrying out its duties in relation to the occurrence of the Facility Event of Default which are to be provided in the relevant Issue Documents. Form Each series of the AFB Structured Covered Sukuk Murabahah shall be represented by a global certificate to be deposited with BNM and shall be in bearer form. No physical delivery of the AFB Structured Covered Sukuk Murabahah is permitted. The AFB Structured Covered Sukuk Murabahah shall be prescribed and be reported under the rules of Payments 23

24 Network Malaysia Sdn Bhd ( PayNet ) and shall comply with all rules and requirements set out by PayNet. Denomination Each AFB Structured Covered Sukuk Murabahah shall be issued in denomination and multiples of RM1,000 if issued through the rules of PayNet or such other denominations as shall be agreed upon between the Joint Lead Arrangers and the Issuer. (xxi) Other Conditions The AFB Structured Covered Sukuk Murabahah shall at all times be governed by the guidelines issued and to be issued from time to time by the SC, BNM and/or PayNet having jurisdiction over matters pertaining to the AFB Structured Covered Sukuk Murabahah. (xxii) Definitions The following terms shall have the following meaning: Calculation Agent means RHB Investment Bank Berhad. The Calculation Agent is to perform tests in respect of the Asset Coverage Test. Corporate Administrator means TMF Global Services (Malaysia) Sdn Bhd, appointed to provide company secretarial services to and administer the statutory duties of the SPV, including filing of the relevant returns with the regulatory authorities and to act on any other administrative work as may be instructed by the Sukuk Trustee from time to time; (c) Financing Receivables means the financing receivables that comply with the EC; (d) (e) (f) (g) Merger means the merger of MBSB and AFB; Servicer means AFB; SPV Sukuk Murabahah means the sukuk issued in accordance with the Shariah by the SPV pursuant to the SPV Sukuk Murabahah Programme; SPV Sukuk Murabahah Programme means the programme for the issuance of the SPV Sukuk Murabahah pursuant to the SPV Sukuk Murabahah 24

25 programme agreement; (h) Transaction Administrator means AFB. The Transaction Administrator shall provide, inter alia, the following services to the SPV: (i) (ii) prepare and maintain such accounting records in accordance with applicable approved accounting standards in Malaysia as may be required in the normal course of the SPV's business and to ensure the due and proper preparation and filing of all tax returns by the tax agent, computations and forms of the SPV; appoint the third party service providers/advisers such as auditors, tax agent and such other third party service providers/advisers as may be agreed between the Transaction Administrator and SPV; (iii) pay the recurring fees, costs and expenses of all third party service providers/advisers; and (iv) such other services as may be agreed between the parties. The Transaction Administrator will receive as consideration for its services a fixed fee to be mutually agreed upon by the SPV and the Transaction Administrator. Such fee shall be paid semi-annually in arrears on a profit payment date and shall comprise: (1) a fixed annual fee; and (2) the estimated fees, costs and expenses to be paid to the third party service providers/advisers. 25

26 Other Disclosure 1. Disclosure of the following: If the Issuer or its board members have been convicted or charged with any offence under any 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 or its board members for breaches of the same, for the past 10 years prior to the lodgement/ since incorporation (for issuer incorporated less than 10 years); and 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 lodgement. 2. Any other material information None. None. None. Where the corporate bond or sukuk involves originator(s), obligor(s) and guarantor(s), the information set out in sub-paragraph 1.01 must also be provided on the said entities. 26

27 3. Disclosure of the following: If the Guarantor or its board members have been convicted or charged with any offence under any 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 or its board members for breaches of the same, for the past 10 years prior to the lodgement/ since incorporation (for issuer incorporated less than 10 years); and If the Guarantor 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 lodgement. 4. Any other material information None. None. None. Where the corporate bond or sukuk involves originator(s), obligor(s) and guarantor(s), the information set out in sub-paragraph 1.01 must also be provided on the said entities. 27