Cagamas BHD Information Memorandum 2019-New - 1
Cagamas BHD Information Memorandum 2019-New - 1
Cagamas BHD Information Memorandum 2019-New - 1
THE INFORMATION MEMORANDUM IS NOT A PROSPECTUS AND HAS NOT BEEN REGISTERED NOR
WILL IT BE REGISTERED AS A PROSPECTUS UNDER THE CAPITAL MARKETS AND SERVICES ACT,
2007 ("CMSA"). AT ISSUANCE, THE NOTES HAVE NOT BEEN AND WILL NOT BE OFFERED FOR
SUBSCRIPTION OR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF, DIRECTLY OR
INDIRECTLY, OTHER THAN TO THE PERSONS, OR OTHER THAN IN RELATION TO AN OFFER OR
INVITATION , FALLING WITHIN SCHEDULE 6 (OR SECTION 229(1)(b)) OF THE CMSA AND SCHEDULE
7 (OR SECTION 230(1)(b)) OF THE CMSA, READ TOGETHER WITH SCHEDULE 9 (OR SECTION 257(3))
OF THE CMSA.
THIS TRANSMISSION SHALL NEITHER CONSTITUTE AN OFFER TO SELL NOR THE SOLICITATION
OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THE NOTES IN ANY JURISDICTION IN
WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL UNDER THE LAWS OF SUCH
JURISDICTIONS.
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.
Strictly Private & Confidential
CAGAMAS BERHAD
(Company No. 157931-A)
INFORMATION MEMORANDUM
IN RELATION TO THE PROPOSED ISSUANCE OF CONVENTIONAL
MEDIUM TERM NOTES AND ISLAMIC MEDIUM TERM NOTES PURSUANT
TO A MEDIUM TERM NOTES PROGRAMME, WITH AN AGGREGATE LIMIT
OF RM60.0 BILLION IN NOMINAL VALUE
Responsibility Statements
This information memorandum (the "Information Memorandum") has been approved by the
directors of Cagamas Berhad (Company No. 157931-A) ("Issuer" or "Cagamas") and the Issuer
accepts full responsibility for the truth and accuracy of the information contained in this
Information Memorandum. The Issuer, after having made enquiries as were reasonable in the
circumstances, has reasonable grounds to believe that: (a) the statements and information in
this Information Memorandum are true and not misleading; (b) any omissions in this Information
Memorandum are not material; (c) there are no material omissions; and (d) no conduct was
engaged in that was misleading or deceptive. The conventional medium term notes ("CMTNs")
and Islamic medium term notes (“Sukuk Cagamas”) (which shall include the Sustainability
CMTNs (as defined herein) and the Sustainability Sukuk Cagamas (as defined herein)) pursuant
to a medium term notes programme ("MTN Programme"), with an aggregate limit of RM60.0
billion in nominal value shall collectively be referred to as the "Notes".
The opinions and intentions expressed in this Information Memorandum are honestly held by the
Issuer. The Issuer accepts full responsibility for all information contained in this Information
Memorandum.
This Information Memorandum is being furnished on a private and confidential basis solely for
the purpose of enabling prospective investors to consider the purchase of the Notes to be issued
pursuant to the MTN Programme. This Information Memorandum is not and is not intended to
be a prospectus.
No application is being made to list the Notes on any stock exchange, nor is any such application
contemplated.
The MTN Programme has been accorded a final rating of AAA by RAM Rating Services Berhad
("RAM") and Malaysian Rating Corporation Berhad ("MARC"), respectively (collectively, RAM
and MARC are referred to as the "Rating Agencies"). 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 Agencies.
None of the information or data contained in this Information Memorandum has been
independently verified by CIMB Investment Bank Berhad, HSBC Bank Malaysia Berhad, HSBC
Amanah Malaysia Berhad and Maybank Investment Bank Berhad as the joint principal
advisers/joint lead arrangers of the MTN Programme (collectively, the "Joint Principal
Advisers" or "Joint Lead Arrangers"). Accordingly, no representation, warranty or undertaking,
express or implied, is given or assumed by the Joint Principal Advisers/Joint Lead Arrangers as
to the authenticity, origin, validity, accuracy or completeness of such information and data or that
the information or data shall remain unchanged in any respect after the relevant date shown in
this Information Memorandum. The Joint Principal Advisers/Joint Lead Arrangers 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 MTN Programme and shall not be liable
for the consequences of any reliance on any of the information or data in this Information
Memorandum except as provided by Malaysian laws.
It is to be noted that although the Issuer has sought the advice of CIMB Islamic Bank Berhad,
HSBC Amanah Malaysia Berhad, Maybank Islamic Berhad and Amanie Advisors Sdn Bhd (only
in respect of the issue of Sukuk Cagamas under the Wakalah Bil Istithmar principle) (the "Joint
Shariah Advisers") with regards to the conformity of the Sukuk Cagamas and the structure and
mechanism of each of the Shariah structures as described in the Principal Terms and Conditions
of the MTN Programme with Shariah principles, no representation, warranty or undertaking,
express or implied, is given by the Issuer or the Joint Principal Advisers/Joint Lead
Arrangers/Joint Shariah Advisers as to Shariah permissibility of the structures or the issue and
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trading of the Sukuk Cagamas and the Issuer, the Joint Principal Advisers/Joint Lead Arrangers
and the Joint Shariah Advisers shall not be liable for the consequences of any such reliance
and/or assumption of any such compliance. Each recipient should perform and is deemed to
have consulted its own professional advisers and obtained independent Shariah advice on the
Shariah permissibility of the structures and the issue and trading of the Sukuk Cagamas. Any
non-compliance with Shariah principles may have legal consequences.
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 Joint Principal Advisers/Joint Lead Arrangers or any other person.
This Information Memorandum does not, 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 offer, or an invitation to subscribe or purchase the Notes or any other securities of
any kind by any party in any Foreign Jurisdiction.
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 Notes under
all jurisdictions to which the recipient is subject, (c) the recipient has complied with all applicable
laws in connection with such subscription or purchase of the Notes, (d) the Issuer, the Joint
Principal Advisers/Joint Lead Arrangers and their respective directors, officers, employees and
professional advisers are not and will not be in breach of the laws of any jurisdiction to which the
recipient is subject as a result of such subscription or purchase of the Notes, and they shall not
have any responsibility or liability in the event that such subscription or purchase of the Notes is
or shall become unlawful, unenforceable, voidable or void, (e) it is aware that the Notes can only
be offered, sold, transferred or otherwise disposed of directly or indirectly in accordance with the
relevant selling restrictions 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
for or purchasing the Notes, and is able and is prepared to bear the economic and financial risks
of investing in or holding the Notes, (g) it is subscribing for or accepting the Notes for its own
account, and (h) it is a person to whom an offer or invitation to subscribe for or purchase the
Notes would constitute an excluded offer or excluded issue as specified in Schedule 6 or Section
229(1)(b) of the Capital Markets and Services Act 2007, as amended from time to time ("CMSA")
and Schedule 7 or Section 230(1)(b) of the CMSA, read together with Schedule 9 or Section
257(3) of the CMSA at the point of issuance and Schedule 6 or Section 229(1)(b) of the CMSA,
read together with Schedule 9 or Section 257(3) of the CMSA after issuance. Each recipient is
solely responsible for seeking all appropriate expert advice as to the laws of all jurisdictions to
which it is subject. For the avoidance of doubt, this Information Memorandum shall not constitute
an offer or invitation to subscribe for or purchase the Notes in relation to any recipient who does
not fall within item (h) above.
This Information Memorandum or any document delivered under or in relation to the issue,
subscription or the offer for sale of the Notes is not, and should not be construed as, a
recommendation by the Issuer and/or the Joint Principal Advisers/Joint Lead Arrangers to
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subscribe for or purchase the Notes. 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 recipient should perform and is deemed to have made its own independent
investigation and analysis of the Issuer, the Notes 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 agreements referred to herein and are
qualified in their entirety by reference to such documents.
Unless otherwise specified in this Information Memorandum, the information contained in this
Information Memorandum is current as at the date hereof. Neither the delivery of this Information
Memorandum nor the issue, subscription, offer for sale or delivery of any Notes shall in any
circumstance imply that the information contained herein concerning the Issuer is correct at any
time subsequent to the date hereof or that any other information supplied in connection with the
MTN Programme is correct as of any time subsequent to the date indicated in the document
containing the same. Neither the Joint Principal Advisers/Joint Lead Arrangers nor any other
advisers to the MTN Programme undertake to review the financial condition or affairs of the
Issuer or to advise any investor of the Notes of any information coming to their attention.
This Information Memorandum may include forward-looking statements and reflect projections
of future events which may or may not prove to be correct. All of these statements are based on
estimates and assumptions made by the Issuer and its advisers and although believed to be
reasonable, are subject to risks and uncertainties that may cause actual events or future results
to be materially different than expected or indicated by such statements and estimates, and no
assurance can be given that any such statements or estimates will be realised. 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, its advisers
or any other persons that the future events as anticipated by the Issuer will occur. Any such
statements are not guarantees of performance and involve risks and uncertainties many of which
are beyond the control of the Issuer.
Acknowledgement
The Issuer hereby acknowledges that it has authorised the Joint Principal Advisers/Joint Lead
Arrangers to circulate or distribute this Information Memorandum on its behalf in respect of or in
connection with the proposed offer or invitation to subscribe for and issue of, the Notes to
prospective investors and that no further evidence of authorisation is required.
A copy of this Information Memorandum will be deposited with the Securities Commission
Malaysia ("SC"), which takes no responsibility for its contents.
The issue, offer or invitation to subscribe or purchase the Notes in this Information Memorandum
are subject to the fulfilment of various conditions precedent including without limitation the
lodgement of information and documents in relation to the MTN Programme with the SC in
accordance with the Guidelines on Unlisted Capital Market Products under the Lodge and
Launch Framework issued by the SC on 9 March 2015 (effective on 15 June 2015) and revised
on 11 October 2018 (as may be amended from time to time) (“LOLA Guidelines”).
The SC has approved the issue of the Notes pursuant to the MTN Programme on 11 May
2007. The Issuer has on 8 March 2019 lodged the documents and information relating to
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the MTN Programme with the SC in accordance with the LOLA Guidelines in relation to
amongst others the upsizing of the MTN Programme.
However, please note that the approval of the SC or the lodgement with the SC shall not
be taken to indicate that the SC recommends the subscription or purchase of the Notes.
Further, the SC takes no responsibility for the contents of this Information Memorandum.
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 ISSUE OF NOTES UNDER THE MTN PROGRAMME WILL CARRY DIFFERENT RISKS
AND ALL INVESTORS SHOULD EVALUATE EACH ISSUE OF NOTES BASED ON ITS
MERITS. INVESTORS SHOULD RELY ON THEIR OWN EVALUATION TO ASSESS THE
MERITS AND RISKS OF THE INVESTMENT.
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 annual financial statements and, if published later, the
most recently published interim financial statements of the Issuer (if any);
(ii) any pricing supplements prepared and issued in relation to an issuance of the Notes under
the MTN Programme (if any); and
(iii) all supplements or amendments to this Information Memorandum circulated 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.
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CONFIDENTIALITY
This Information Memorandum and its contents are strictly confidential and are made strictly on
the basis 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.
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TABLE OF CONTENTS
IMPORTANT NOTICE...................................................................................................................... i
DEFINITIONS ................................................................................................................................ viii
SECTION 1.0 INTRODUCTION ...................................................................................................... 1
1.1 Brief background of Cagamas ......................................................................................... 1
1.2 Brief description of the MTN Programme ........................................................................ 1
1.3 Utilisation of proceeds of MTN Programme .................................................................... 2
1.4 Rating of the MTN Programme ....................................................................................... 2
1.5 Cagamas’ Sustainability Bond/Sukuk Framework .......................................................... 2
1.6 Key Financial Highlights .................................................................................................. 3
SECTION 2.0 PRINCIPAL TERMS AND CONDITIONS OF THE MTN PROGRAMME ................ 5
SECTION 3.0 BACKGROUND INFORMATION OF CAGAMAS .................................................. 86
3.1 Overview........................................................................................................................ 86
3.2 Share capital.................................................................................................................. 87
3.3 Shareholders ................................................................................................................. 87
3.4 Subsidiaries and related companies ............................................................................. 88
3.5 Profile of Directors ......................................................................................................... 90
3.6 Senior management of Cagamas ................................................................................. 97
SECTION 4.0 INVESTMENT CONSIDERATIONS .................................................................... 102
4.1 Risks relating to Cagamas .......................................................................................... 102
4.2 Risks relating to the Notes .......................................................................................... 106
4.3 General Considerations ............................................................................................... 110
4.4 Forward-looking statements ........................................................................................ 110
SECTION 5.0 BUSINESS ........................................................................................................... 111
5.1 Business overview ....................................................................................................... 111
5.2 Strategy and Key Objectives ....................................................................................... 122
5.3 Key strengths .............................................................................................................. 124
5.4 Recent developments .................................................................................................. 126
5.5 General ........................................................................................................................ 127
SECTION 6.0 RISK MANAGEMENT .......................................................................................... 128
6.1 Enterprise Risk Management Framework ................................................................... 128
6.2 Risk Governance Structure ......................................................................................... 128
6.3 Key Areas of Risk Management .................................................................................. 129
SECTION 7.0 INDUSTRY OVERVIEW ...................................................................................... 132
7.1 Overview of the Malaysian economy .......................................................................... 132
7.2 Overview of the construction industry ......................................................................... 135
SECTION 8.0 OTHER INFORMATION ...................................................................................... 137
8.1 Material litigation ......................................................................................................... 137
8.2 Material contingent liabilities ....................................................................................... 137
8.3 Conflict-of-interest situations and appropriate mitigating measures ........................... 137
APPENDIX I ................................................................................................................................ 146
Audited financial statements of Cagamas for the Financial Year Ended 2017 ........................... 146
APPENDIX II ............................................................................................................................... 147
Unaudited interim financial statements of Cagamas as at 30 June 2018 ................................... 147
APPENDIX III .............................................................................................................................. 148
Cagamas Sustainability Bond/Sukuk Framework as at 17 January 2019 .................................. 148
APPENDIX IV .............................................................................................................................. 149
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Second Opinion ........................................................................................................................... 149
vii
DEFINITIONS
In this Information Memorandum, the following words or expressions shall have the following
meanings except where the context otherwise requires:
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and any other financial institutions as Cagamas may appoint
from time to time in relation to an issuance under the MTN
Programme.
Joint Shariah Advisers : Collectively, CIMB Islamic, HSBC Amanah, Maybank
Islamic and Amanie Advisors Sdn Bhd (only in respect of the
issue of Sukuk Cagamas under the Wakalah Bil Istithmar
principle)
LOLA Guidelines : Guidelines on Unlisted Capital Market Products under the
Lodge and Launch Framework
LPD : 1 February 2019 being the latest practicable date
MARC : Malaysian Rating Corporation Berhad (Company No.
364803-V)
Maybank Islamic : Maybank Islamic Berhad (Company No. 787435-M)
MIBB : Maybank Investment Bank Berhad (Company No. 15938-H)
MTN Programme : Medium Term Notes Programme for the issue of CMTNs
and Sukuk Cagamas with an aggregate limit of RM60.0
billion in nominal value
Noteholders : The holders of the CMTNs and the Sukuk Cagamas, as the
case may be
Notes : Collectively, the CMTNs and the Sukuk Cagamas
RAM : RAM Rating Services Berhad (Company No. 763588-T)
RHB : RHB Investment Bank Berhad (Company No. 19663-P)
RHB Islamic : RHB Islamic Bank Berhad (Company No. 680329-V)
Ringgit/RM and sen : Ringgit Malaysia and sen respectively, being the lawful
currency of Malaysia
Second Opinion : A second party opinion issued by RAM Consultancy
Services Sdn Bhd dated 17 January 2019 for Cagamas’
Sustainability Guidelines/ Framework as enclosed as
Appendix IV in this Information Memorandum.
SC : Securities Commission Malaysia
SCB : Standard Chartered Bank Malaysia Berhad (Company No.
115793-P)
Subsidiaries : Cagamas MBS, Cagamas SME, Cagamas, BNM Sukuk,
Cagamas SRP and Cagamas MGP
Sukuk Cagamas : The Islamic medium term notes (including the Sustainability
Sukuk Cagamas) to be issued from time to time pursuant to
the MTN Programme
Sustainability : Any one or more of the following guidelines or frameworks,
Guidelines/Framework as amended from time to time:
(a) the Sustainable and Responsible Investment Sukuk
Framework pursuant to the SC’s LOLA Guidelines;
(b) the ASEAN Green Bond Standards pursuant to the
SC’s LOLA Guidelines;
(c) the ASEAN Social Bond Standards pursuant to the
SC’s LOLA Guidelines;
(d) the ASEAN Sustainability Bond Standards pursuant
to the SC’s LOLA Guidelines;
(e) the ICMA’s Green Bond Principles;
(f) the ICMA’s Social Bond Principles;
(g) the ICMA’s Sustainability Bond Guidelines; and
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(h) such other guidelines or frameworks or standards
which are incorporated by the SC into the LOLA
Guidelines from time to time or such other related
guidelines or frameworks or standards, whether or not
having the force of law, in relation to
sustainability/social/green bonds issued from time to
time.
Sustainability CMTNs : The CMTNs to be issued from time to time in compliance
with the Sustainability Guidelines/Framework and/or
Cagamas’ Sustainability Bond/Sukuk Framework
Sustainability Sukuk : The Sukuk Cagamas to be issued from time to time in
Cagamas compliance with the Sustainability Guidelines/Framework
and/or Cagamas’ Sustainability Bond/Sukuk Framework
Trustee : PB Trustee Services Berhad (Company No. 7968-T)
Transaction Documents : The transaction documents for the MTN Programme
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SECTION 1.0 INTRODUCTION
This summary is qualified by and must be read in conjunction with the more detailed information
and financial statements appearing elsewhere in this Information Memorandum. Each investor
should read this entire Information Memorandum carefully, including the Appendices attached.
Cagamas was incorporated in Malaysia on 2 December 1986 under the Companies Act,
2016 as a public company limited by shares. The registered office of Cagamas is at Level
32, The Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala
Lumpur.
The principal activity of Cagamas consists of the purchase of mortgage loans, personal
loans and hire purchase and leasing debts from primary lenders approved by Cagamas
and the issue of bonds and notes to finance these purchases. Cagamas also purchases
Islamic financing facilities such as home financing, personal financing and hire
purchase/leasing receivables, funded by issuance of Sukuk.
The MTN Programme was established in the year 2007 for the issue of CMTNs and Sukuk
Cagamas with an aggregate combined limit of RM40.0 billion in nominal value. The tenure
of the MTN Programme was 40 years from the date of the first issuance under the MTN
Programme, which took place within 2 years of the date of the approval of the SC.
Pursuant to the lodgment with the SC dated 8 March 2019, the Issuer will upsize the MTN
Programme from RM40.0 billion in nominal value to RM60.0 billion in nominal value and
will extend the tenure of the MTN Programme from 40 years to 60 years from the date of
the first issuance under the MTN Programme. Cagamas may also issue Sustainability
CMTNs and Sustainability Sukuk Cagamas which will be in compliance with the
Sustainability Guidelines/Framework and/or Cagamas’ Sustainability Bond/Sukuk
Framework.
The Issuer may issue Sukuk Cagamas based on but not limited to any one of the following
Shariah principles:
The descriptions of each of these Shariah principles are set out in Section 2.0 of the
Principal Terms and Conditions of the MTN Programme.
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1.3 Utilisation of proceeds of MTN Programme
(a) CMTNs
The proceeds raised from the issuance of CMTNs under the MTN Programme shall be
utilised for working capital and general corporate purposes.
The proceeds raised from the issuance of Sustainability CMTNs under the MTN
Programme shall be utilised by Cagamas to solely purchase eligible loans/assets that
meet the criteria set out in Cagamas’ Sustainability Bond/Sukuk Framework and/or the
Sustainability Guidelines/Framework as further set out in the relevant pricing supplement.
The proceeds raised from the issuance of Sukuk Cagamas under the MTN Programme
shall be utilized for the purchase of Shariah compliant financing/assets, investment in
Shariah compliant instruments and/or to defray the costs and expenses in relation to the
issuance of Sukuk Cagamas pursuant to the MTN Programme.
The proceeds raised from the issuance of Sustainability Sukuk Cagamas under the MTN
Programme shall be utilised by Cagamas to solely purchase eligible Shariah compliant
financing/assets that meet the criteria set out in Cagamas’ Sustainability Bond/Sukuk
Framework and/or the Sustainability Guidelines/Framework and/or the Shariah-compliant
Eligible SRI projects (within the definition set out in the LOLA Guidelines) as further set
out in the relevant pricing supplement.
Pursuant to RAM’s letters dated 9 April 2018 and 10 August 2018, the MTN Programme
has been accorded a final rating of AAA. Pursuant to MARC’s letters dated 19 April 2018
and 10 August 2018, the MTN Programme has been accorded a final rating of AAA.
(a) The 2018 Green Bond Principles, 2018 Social Bond Principles and the 2018
Sustainability Bond Guidelines, as held by ICMA;
(b) The ASEAN Green Bond Standards dated October 2018, ASEAN Social Bond
Standards dated October 2018 and ASEAN Sustainability Bond Standards dated
October 2018, endorsed by the ASEAN Capital Markets Forum; and
(c) The Sustainable and Responsible Investment Sukuk Framework issued by the SC.
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A copy of Cagamas Sustainability Bond/Sukuk Framework is attached in Appendix III and
a copy of the Second Opinion is attached in Appendix IV of this Information Memorandum.
Cagamas may update the Cagamas’ Sustainability Bond/Sukuk Framework from time to
time and such update will be published on its website at www.cagamas.com.my.
Summary of the key financial highlights of Cagamas for the FYE 2012, FYE2013,
FYE2014, FYE2015, FYE2016, FYE2017, 1H2018** are set out below:
Balance Sheet
Amount Due From
Counterparties 3,696.1 3,825.7 6,540.2 10,971.0 14,296.2 19,870.4 19,869.9
Islamic Financing
Debts 8,076.9 6,107.9 6,541.2 5,581.4 5,307.7 5,544.4 8,827.9
Conventional
Mortgage Assets 6,093.8 7,846.6 7,296.7 6,781.8 6,238.3 5,848.1 5,599.0
Islamic Mortgage
Assets 3,828.8 7,582.9 7,326.4 7,006.6 6,662.1 6,300.6 6,126.6
Total Assets 23,284.6 27,595.0 29,451.7 33,081.7 35,488.8 41,074.5 44,388.9
Unsecured bearer
bonds and notes 9,217.4 11,521.7 13,291.6 17,994.7 20,946.6 25,764.9 26,148.1
Sukuk 11,707.6 13,403.0 13,261.7 11,944.0 11,214.9 11,597.9 14,386.7
Total Liabilities 21,060.2 25,067.9 26,697.9 30,066.5 32,272.8 37,652.9 40,894.0
Per share*
Earnings (sen) 146.0 212.4 165.2 170.4 170.0 161.1 85.2
Net Tangible Assets
(RM) 14.8 16.8 18.3 20.1 21.3 22.7 23.2
Dividend (sen) 88.0 20.0 20.0 11.0 20.0 20.0 15.0
Financial Ratios
Pre-tax Return on
Average
Shareholders' Funds
(%) 13.5 17.9 12.7 11.9 10.7 9.7 9.6
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2012 2013 2014 2015 2016 2017 1H2018**
RM million
After-tax Return on
Average
Shareholders' Funds
(%) 10.1 13.4 9.4 8.9 8.2 7.3 7.3
Pre-tax Return on
Average Total Assets
(%) 1.3 1.7 1.2 1.1 1.0 0.8 0.7
After-tax Return on
Average Total Assets
(%) 1.0 1.3 0.9 0.8 0.7 0.6 0.6
Dividend Cover
(times) 2.2 14.2 8.3 15.5 8.5 8.1 11.4
Risk-Weighted Capital
Ratio (%) 24.4 24.3 24.3 23.5 24.1 22.3 29.2
The annual financial information above has been derived from and should be read in conjunction
with the audited financial statement of Cagamas for the respective years.
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SECTION 2.0 PRINCIPAL TERMS AND CONDITIONS OF THE MTN PROGRAMME
Words and expressions used and defined in this Section 2.0 shall, in the event of any inconsistency
with the definition section of this Information Memorandum, only be applicable to this Section 2.0.
(collectively, “Sustainability
Guidelines/Framework” and the CMTNs
issued under such Sustainability
Guidelines/Framework shall be referred to as
“Sustainability CMTNs” in this term sheet).
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The relevant Sustainability
Guidelines/Framework under which such
Sustainability CMTNs are issued and the
naming of such Sustainability CMTNs shall
be specified in the relevant pricing
supplement and the documents in relation to
the issuance of such Sustainability CMTNs.
(5) Expected facility/ programme size (for The aggregate outstanding nominal value of
programme, to state the option to the Notes issued under the MTN Programme
upsize) (comprising the CMTNs and the Sukuk
Cagamas) shall not at any point in time
exceed RM60 billion.
(6) Tenure of facility/ programme The tenure of the MTN Programme is sixty
(60) years from the date of the first issue
under the MTN Programme.
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one year but not exceeding sixty (60) years.
Any CMTNs issued must mature within the
tenure of the MTN Programme.
(7) Availability period of debt or sukuk The MTN Programme is available for
programme issuance upon completion of documentation
and fulfilment of all conditions precedent to
the satisfaction of the JLAs.
(8) Clearing and settlement platform Payments Network Malaysia Sdn Bhd
(“PayNet”)
(9) Mode of Issue The Notes may be issued through any of the
following modes as determined by the
Issuer:
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CMSA, read together with Schedule 9
or Section 257(3) of the CMSA.
(11) Tradability and transferability The Notes are transferable but subject to the
Selling Restrictions described above.
8
and commercial standards and
practices;
9
(ii) the Issuer shall not use the
proceeds of the MTN Programme
except for the purposes set out
herein;
10
auditors’ report thereon as
well as any other accounts,
report, notice, statement or
circular issued to
shareholders within thirty (30)
days of the same being
issued to the shareholders;
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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; and
(20) Details of credit rating, if applicable The rating for the MTN Programme is AAA
by the Rating Agencies.
(21) Conditions precedent To include but not limited to the following (all
have to be in form and substance acceptable
to the JLAs and as may be waived by the
JLAs):
A. Main Documentation
B. Issuer
12
(v) A report of the relevant company
search of the Issuer.
C. General
13
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 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;
14
(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;
15
such event has a material adverse
effect;
(xiii) illegality;
16
Upon the declaration of an Event of Default,
the Trustee may or shall (if directed to do so
by a special resolution of the Noteholders)
declare that the Notes together with all other
sums payable under the Notes shall become
immediately due and payable. Thereafter,
the Trustee may take proceedings against
the Issuer as it may think fit to enforce
immediate payment of the Notes.
(25) Provisions on buy back, if applicable The Issuer may at any time purchase the
Notes at any price in the open market or by
private treaty and these repurchased Notes
shall be cancelled.
(b) Interest/ coupon payment frequency In respect of CMTNs which are issued with
coupons, the coupons will be payable on a
semi-annual basis or such other periodic
basis as determined prior to the issuance of
such CMTNs.
17
(c) Interest/ coupon payment basis Actual/Actual basis or Actual/365 basis.
(e) Details on utilisation of proceeds The proceeds raised from the issuance of
CMTNs under the MTN Programme shall be
utilised for working capital and general
corporate purposes.
(f) Form and denomination The Notes shall be issued in accordance with
(1) the “Participation and Operation Rules for
Payment and Securities Services” issued by
PayNet (“PayNet Rules”) and (2) the
“Operational Procedures for Securities
Services” issued by PayNet (“PayNet
Procedures”), as amended or substituted
from time to time (collectively the “PayNet
Rules and Procedures”). Each tranche of
the Notes shall be represented by a global
certificate to be deposited with BNM, and is
exchanged for definitive bearer form only in
certain limited circumstances. The
denomination of the Notes shall be RM1,000
or in multiples of RM1,000 at the time of
issuance.
18
Notes. The issue price of each Reopened
Note shall take into consideration, where
applicable, accrued interest from and
including the original issue date or the last
coupon payment date whichever is later of a
tranche, to and excluding the date of the
Reopening, except when the date of the
Reopening falls on a coupon payment date.
(h) Minimum level of subscription The minimum level of subscription for each
(RM or %) issue that is issued on a bought deal basis
shall be 100%. The minimum level of
subscription for each issue that is not issued
on a bought deal basis shall be 5% of the
size of a particular issue.
19
amount on account of such withholding or
deduction.
20
b) the ASEAN Green Bond Standards
pursuant to the SC’s LOLA
Guidelines;
c) the ASEAN Social Bond Standards
pursuant to the SC’s LOLA
Guidelines;
d) the ASEAN Sustainability Bond
Standards pursuant to the SC’s LOLA
Guidelines;
e) the ICMA’s Green Bond Principles;
f) the ICMA’s Social Bond Principles;
g) the ICMA’s Sustainability Bond
Guidelines; and
h) such other guidelines or frameworks
or standards which are incorporated
by the SC into the LOLA Guidelines
from time to time or such other related
guidelines or frameworks or
standards, whether or not having the
force of law, in relation to
sustainability/social/green bonds
issued from time to time.
(collectively, “Sustainability
Guidelines/Framework” and the Sukuk
Cagamas issued under such
Sustainability Guidelines/Framework shall
be referred to as “Sustainability Sukuk
Cagamas” in this term sheet).
21
pursuant to which Cagamas (in such
capacity, the "Agent") is appointed as
the wakeel of the Sukukholders for
the purchase of Shariah-compliant
Commodities* ("Commodities").
22
of Sukuk Cagamas issued at
premium.
23
(“Murabahah Periodic Payments”)
(based on a profit rate to be agreed
(in the case of Sukuk Cagamas
issued based on fixed profit rate), or
the Effective Profit Rate (as defined in
item 33(a)) (in the case of Sukuk
Cagamas issued based on floating
profit rate) to the Sukukholders and/or
a one-off payment (“Murabahah
One-off Payment”) which shall be
equivalent to the Discounted Amount
(as defined below) for Sukuk
Cagamas issued at a discount on the
respective maturity date(s)
(“Murabahah Maturity Date”).
Ibra’
24
(iii) in the case of Sukuk Cagamas
issued based on floating profit rate,
the Effective Profit Rate is lower
than Ceiling Profit Rate (as defined
in item 33(a) below).
25
vii) In the case of Sukuk Cagamas with
Murabahah Periodic Payments based
on floating profit rate and issued at
premium
Musharakah
26
undertaking the Musharakah Venture.
The Sukuk Cagamas comprise
certificates representing the
Sukukholders’ undivided beneficial
interest in the Musharakah Venture and
any funds held by the Manager on
account of the Sukukholders in the
Musharakah Profit Reserve Account (as
defined below). Any profit derived from
the Musharakah Venture will be
distributed based on the ratio of capital
contribution among the Sukukholders and
losses will also be shared based on the
Sukukholders’ ratio of capital contribution.
27
profits generated from the Musharakah
Venture are in excess of the Musharakah
Expected Return (such excess above the
Musharakah Expected Return shall be
referred to as “Excess Profit”), profits up
to the Musharakah Expected Return will
be distributed to the Sukukholders and the
Excess Profit shall be credited by the
Manager to a reserve account
(“Musharakah Profit Reserve Account”)
on behalf of the Sukukholders on a
custody basis which may be used to fund
future Musharakah Periodic Payments or
Musharakah One-off Payment, where
applicable.
28
exercise of the Musharakah Purchase
Undertaking (as defined below) payable
on the Musharakah Maturity Date or the
Musharakah Dissolution Date.
29
Musharakah = Musharakah
Exercise Price Capital plus
accrued but
unpaid expected
Musharakah
Periodic
Payments plus the
amount
outstanding under
the Musharakah
Liquidity Facility.
Musharakah = Musharakah
Exercise Price Capital plus
accrued but
unpaid expected
Musharakah
Periodic
Payments plus the
amount
outstanding under
the Musharakah
Liquidity Facility.
Musharakah = Musharakah
Exercise Capital plus the
Price accreted
Musharakah
One-off Payment
plus accrued but
unpaid expected
Musharakah
Periodic
Payments plus
the amount
outstanding
30
under the
Musharakah
Liquidity Facility.
Musharakah = Musharakah
Exercise Capital plus the
Price Musharakah
One-off Payment
plus the amount
outstanding
under the
Musharakah
Liquidity Facility.
Musharakah = Musharakah
Exercise Capital plus the
Price accreted
Musharakah One-
off Payment plus
the amount
outstanding under
the Musharakah
Liquidity Facility.
31
outstanding
under the
Musharakah
Liquidity Facility.
Mudharabah
32
manage the Mudharabah Venture and
administer the collection of income from
the Mudharabah Venture.
33
Venture are in excess of the Mudharabah
Expected Return (such excess above the
Mudharabah Expected Return shall be
referred to as “Excess Profit”), profits up
to the Mudharabah Expected Return will
be distributed to the Sukukholders and the
Excess Profit shall be credited by the
Mudharib to a reserve account
(“Mudharabah Profit Reserve
Account”) which may be used to fund
future Mudharabah Periodic Payments or
Mudharabah One-off Payment, where
applicable.
34
on Mudharabah Maturity Date or the
Mudharabah Dissolution Date.
Mudharabah = Mudharabah
Exercise Price Capital plus
accrued but
35
unpaid expected
Mudharabah
Periodic
Payments plus
the amount
outstanding
under the
Mudharabah
Liquidity Facility.
Mudharabah = Mudharabah
Exercise Price Capital plus
accrued but
unpaid
expected
Mudharabah
Periodic
Payments plus
the amount
outstanding
under the
Mudharabah
Liquidity
Facility.
Mudharabah = Mudharabah
Exercise Price Capital plus
accrued but
unpaid expected
Mudharabah
Periodic
Payments plus
the Mudharabah
One-off Payment
plus the amount
outstanding
under the
Mudharabah
Liquidity Facility.
Mudharabah = Mudharabah
Exercise Price Capital plus the
accreted
Mudharabah
One-off
Payment plus
accrued but
unpaid
expected
Mudharabah
36
Periodic
Payments plus
the amount
outstanding
under the
Mudharabah
Liquidity
Facility.
Mudharabah = Mudharabah
Exercise Price Capital plus the
Mudharabah
One-off Payment
plus the amount
outstanding
under the
Mudharabah
Liquidity Facility.
Mudharabah = Mudharabah
Exercise Price Capital plus the
accreted
Mudharabah
One-off
Payment plus
the amount
outstanding
under the
Mudharabah
Liquidity
Facility.
37
Mudharabah = nominal value
Exercise Price plus accrued
but unpaid
expected
Mudharabah
Periodic
Payments plus
the amount
outstanding
under the
Mudharabah
Liquidity Facility
Ijarah
38
pricing requirements under the SC’s
Guidelines on Unlisted Capital Market
Products under the Lodge and Launch
Framework, as amended from time to time
(“LOLA Guidelines”).
39
Period on the relevant Ijarah Periodic
Payment Date in respect of Sukuk
Cagamas with periodic payments or on a
one-off basis on the Ijarah Maturity Date
or the Ijarah Dissolution Date (as defined
below) in respect of Sukuk Cagamas
without periodic payments. The Lease
Rental payable is equivalent to the
periodic distribution rate, if any, on the
nominal value of the respective Sukuk
Cagamas, or the difference between the
nominal value of the relevant Sukuk
Cagamas and the Sukuk Cagamas
proceeds, up to the respective Ijarah
Maturity Date or the date of an Ijarah
Dissolution Event (“Ijarah Dissolution
Date”), whichever is applicable.
40
Assets with qualified leasable assets as
approved by the Joint Shariah Advisers
within a stipulated timeframe pursuant to
the Ijarah Substitution Undertaking (as
defined below)), the Ijarah Agreement will
be terminated and the proceeds from
takaful/insurance shall be used to redeem
the Sukuk Cagamas.
41
In relation to the Ijarah Purchase
Undertaking, the “Ijarah Exercise Price”
for purchase of the Sukukholders’
undivided proportionate interest in the
Ijarah Assets under the relevant Sukuk
Cagamas shall be determined based on
the following formula and shall be
calculated in accordance with PayNet
Rules and Procedures in respect of
redemption:
42
Ijarah Exercise Price = accreted value of
the Sukuk Cagamas plus Ownership
Expenses.
43
evidence the Sukukholders’ undivided
and proportionate interest in the Istithmar
Portfolio (as defined below).
Istithmar Assets
Equity Assets
44
certificates issued by Islamic banks,
Government Investment Issues
certificates, etc. A MII certificate shall be
issued to evidence the Mudharabah
arrangement between Cagamas as
Wakeel and Cagamas as Mudharib to the
Wakeel. Any losses in investment in
Islamic investment products shall be
borne by the Rabb al-Mal.
Other Assets
Tangible Shariah-compliant assets which
will comprise any or all of the following:
45
Purchasing and Selling Commodities
(“Murabahah Investment”)
46
to Commodity Broker B for a cash
consideration (Selling Price) which is
equal to the Istithmar Purchase Price.
However, Commodities received may be
used by Cagamas to facilitate its Islamic
Operations before onward sale to
Commodity Broker B. Commodity Broker
A and Commodity Broker B could either
be the Bursa Suq Al-Sila’ commodity
market or an independent licensed
commodity broker.
47
beneficial interest in the Istithmar Assets
which may include any outstanding Equity
Assets and/or Other Assets from the
Sukuk Trustee at the relevant Istithmar
Exercise Price (as defined below), upon
the Istithmar Maturity Date or the date of
an Istithmar Event of Default ("Istithmar
Event of Default Date"), or such other
payments dates to be determined
between the Obligor and the Sukuk
Trustee whichever is earlier.
48
For Sukuk Cagamas issued at a discount
with Istithmar Periodic Payments, the
Istithmar Exercise Price shall consist of:
49
On the Istithmar Maturity Date:
Incentive Payment
Ibra’
50
(i) if the Sukuk Cagamas are
redeemed before the Istithmar
Maturity Date;
(ii) upon the declaration of an Istithmar
Event of Default; or
(iii) in the case of Sukuk Cagamas with
floating profit rate, if the Effective
Profit Rate is lower than the Ceiling
Profit Rate.
51
(vi) In the case of Sukuk Cagamas with
Istithmar Periodic Payments based
on fixed profit rate and issued at
premium
52
In relation to the Reopened Sukuk
Cagamas (as defined in item 33 (e)
below), Cagamas and the Sukuk Trustee
shall execute new and separate
contract(s) for the relevant structures to
reflect, amongst others, the i) increased
obligation pursuant to the increase in the
outstanding nominal value of the relevant
Reopened Sukuk Cagamas, ii) additional
asset(s) required for the Reopened Sukuk
Cagamas and iii) additional proceeds
raised pursuant to the issuance of the
Reopened Sukuk Cagamas.
(6) Expected facility/ programme size (for The aggregate outstanding nominal value
Programme, to state the option to upsize) of the Notes issued under the MTN
Programme (comprising the CMTNs and
the Sukuk Cagamas) shall not at any point
in time exceed RM60 billion.
53
(7) Tenure of facility/ programme The tenure of the MTN Programme is sixty
(60) years from the date of the first issue
under the MTN Programme.
(8) Availability period of debt or sukuk The MTN Programme is available for
programme issuance upon completion of
documentation and fulfilment of all
conditions precedent to the satisfaction of
the JLAs.
(9) Clearing and settlement platform Payments Network Malaysia Sdn Bhd
(“PayNet”)
54
read together with Schedule 9 or
Section 257(3) of the CMSA.
(12) Tradability and transferability The Sukuk Cagamas are transferable but
subject to the Selling Restrictions
described above.
55
rights, licences, approvals and
permits which is or may become
necessary;
56
Standard undertakings (subject to
exceptions and compliance periods to be
agreed to between the parties during
documentation) for a facility of this nature
including but not limited to:
57
(a) within nine (9) months of
the expiration of each
financial year, the annual
audited accounts of the
Issuer for that financial year
and any other accounts,
report, notice, statement or
circular issued to the
shareholders;
58
board of directors and/or
substantial shareholders;
(21) Details of credit rating, if applicable The rating for the MTN Programme is AAA
by the Rating Agencies.
A. Main Documentation
B. Issuer
59
(i) Certified true copies of the
Certificate of Incorporation, and the
constitution, of the Issuer.
C. General
(23) Representations and warranties To include but not limited to the following:
60
(i) the Issuer is a company with
limited liability duly incorporated
and validly existing under the
laws of Malaysia, has power to
carry on its business and to own
its property and assets;
61
claims have a material adverse
effect is presently in progress or
pending, in relation to which the
Issuer has not taken any action in
good faith to set aside or defend;
62
effect, and in the case of such
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 fourteen (14) days after the
Issuer having been notified by
the Sukuk Trustee of the failure;
63
Act 2016 has been instituted by
or against the Issuer;
(xiii) illegality;
64
(xvi) such other event as may be
advised by the legal counsel of
JLAs and mutually agreed with
the Issuer.
(26) Provisions on buy back, if applicable The Issuer may at any time purchase the
Notes at any price in the open market or
by private treaty and these repurchased
Notes shall be cancelled.
65
item 33(e)), it shall fall within the series of
the relevant reopened tranche.
(a) Profit or equivalent rate (%) The Sukuk Cagamas will be issued at par
(please specify) or at a discount or at a premium. The profit
rate (if applicable, and which may be fixed
or floating) will be determined prior to
66
issuance of Sukuk Cagamas, as the case
may be.
(b) Profit payment frequency and basis In respect of Sukuk Cagamas which are
issued with a profit rate, the profit is
payable on a semi-annual basis or such
other periodic basis as determined prior to
the issuance of such Sukuk Cagamas.
67
the case of Sukuk Cagamas on
amortising basis, the outstanding nominal
value of the relevant tranche of the Sukuk
Cagamas for the relevant profit period
based on actual/actual basis or on
actual/365 basis.
(d) Details on utilisation of proceeds The proceeds raised from the issuance of
Sukuk Cagamas under the MTN
Programme respectively shall be utilized
for the purchase of Shariah compliant
financing/assets, investment in Shariah
compliant instruments and/or defray the
costs and expenses in relation to the
issuance of Sukuk Cagamas pursuant to
the MTN Programme.
68
The issue price of Sukuk Cagamas will be
determined prior to each issuance of
Sukuk Cagamas and shall be calculated
in accordance with the PayNet
Procedures.
69
issued on a bought deal basis shall be 5%
of the size of a particular issue.
70
(l) 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 the event of any
withholding or deduction required by law,
the Issuer shall not be required to make
payment of any additional amount on
account of such withholding or deduction.
71
APPENDIX 1
Unless otherwise defined, all capitalised terms herein are as defined in item 4 Facility
Description of the Principal Terms and Conditions of the Sukuk Cagamas.
1. From time to time, Cagamas (on behalf of the holders of the Sukuk Cagamas
("Sukukholders")) shall enter into an Agency Agreement, pursuant to which Cagamas (in
such capacity, the "Agent") is appointed as the wakeel of the Sukukholders for the
purchase of Shariah-compliant Commodities ("Commodities").
3. Pursuant to the Purchase Order, the Agent (as wakeel of the Sukukholders) will purchase
on a spot basis the Commodities from Commodity Broker A at a purchase price which
shall be an amount equivalent to the Sukuk Cagamas proceeds ("Murabahah Purchase
Price").
4. Cagamas (acting as the Issuer) shall issue Sukuk Cagamas to the Sukukholders whereby
the Sukuk Cagamas proceeds shall be used to pay the Murabahah Purchase Price of the
Commodities. The Sukuk Cagamas shall evidence, amongst others, the Sukukholders'
ownership of the Commodities and subsequently, once the Commodities are sold to
Cagamas (as Purchaser), the entitlement to receive the Deferred Sale Price.
5. Thereafter, pursuant to the undertaking under the Purchase Order, the Sukuk Trustee
(acting on behalf of the Sukukholders) shall sell the Commodities to Cagamas (as
Purchaser) via Cagamas (as Agent for the Sukukholders) at the Deferred Sale Price under
a sale and purchase agreement.
6. Cagamas as Purchaser shall sell the Commodities on a spot basis to Commodity Broker
B for an amount equal to the Murabahah Purchase Price. However, Commodities
purchased by Cagamas from the Sukuk Trustee may be used by Cagamas for its Islamic
Operations before the onward sale to the Commodity Broker B. Commodity Broker A and
Commodity Broker B could either be the Bursa Suq Al-Sila’ commodity market or an
independent licensed commodity broker.
72
7. The Sukuk Cagamas may be issued with or without periodic payments. During the tenure
of the Sukuk Cagamas, Cagamas (as Purchaser) shall, in the case of Sukuk Cagamas
with periodic payments, as part of its obligation to pay the Deferred Sale Price, make
periodic payments ("Murabahah Periodic Payments") based on a profit rate to be agreed
(in the case of Sukuk Cagamas issued based on fixed profit rate), or the Effective Profit
Rate (in the case of Sukuk Cagamas issued based on floating profit rate) to the
Sukukholders and/or a one-off payment (“Murabahah One-off Payment”) which shall be
equivalent to the Discounted Amount for Sukuk Cagamas issued at a discount on the
respective maturity date(s) (“Murabahah Maturity Date”).
Each such payment shall pro tanto reduce the obligation of the Issuer on the Sukuk
Cagamas issued.
73
APPENDIX 2
Unless otherwise defined, all capitalised terms herein are as defined in item 4 Facility Description
of the Principal Terms and Conditions of the Sukuk Cagamas.
Step 1
a) Under the Musharakah transaction, the Sukukholders shall from time to time, form a
partnership amongst themselves for the purpose of undertaking a venture (the
"Musharakah Venture") consisting of an investment in Shariah-compliant assets, i.e.
asset based financings arising from Shariah principles of Ijarah and/or Musharakah
Mutanaqisah and/or any other Shariah-compliant assets acceptable to the Joint Shariah
Advisers ("Musharakah Assets") to be identified and held on trust by the Issuer on behalf
of the Sukukholders, whereby the Sukukholders contribute capital in the form of cash
through the subscription of Sukuk Cagamas.
b) The Sukukholders (through the Sukuk Trustee) shall appoint the Issuer as the manager
("Manager") of each Musharakah Venture upon the terms and subject to the conditions of
a Musharakah agreement.
c) The Issuer shall issue Sukuk Cagamas to the Sukukholders, in consideration of their
capital contribution ("Musharakah Capital"). The Musharakah Capital shall be invested
with the Issuer (in its capacity as Manager) for the purposes of undertaking the
Musharakah Venture. The Sukuk Cagamas comprise certificates representing the
Sukukholders’ undivided beneficial interest in the Musharakah Venture and any funds held
by the Manager on account of the Sukukholders in the Musharakah Profit Reserve Account.
Any profit derived from the Musharakah Venture will be distributed based on the ratio of
capital contribution among the Sukukholders and losses will also be shared based on the
Sukukholders’ ratio of capital contribution.
Step 2:
The Sukuk Cagamas shall entitle the Sukukholders the rights to share any income generated from
the relevant Musharakah Venture in proportion to each Sukukholders’ respective capital
contribution of the Musharakah Capital payable either in periodic payments ("Musharakah
Periodic Payments") in respect of Sukuk Cagamas with periodic payments or on a one-off basis
("Musharakah One-off Payment") for Sukuk Cagamas without periodic payments and at a
discount or in both Musharakah Periodic Payments and Musharakah One-Off Payment for Sukuk
Cagamas issued with periodic payments and at a discount. For the avoidance of doubt,
Musharakah Periodic Payments will be distributed semi-annually or such other periodic basis as
74
determined prior to the issuance of such Sukuk Cagamas ("Musharakah Periodic Payment Date")
and Musharakah One-off Payment will be distributed on the Musharakah Maturity Date or the date
of declaration of an event which dissolves the corresponding Musharakah Venture ("Musharakah
Dissolution Event"), whichever is earlier.
The return expected ("Musharakah Expected Return") by the Sukukholders from the
corresponding Musharakah Venture shall be the yield of the respective Sukuk Cagamas up to the
respective maturity dates of the Sukuk Cagamas ("Musharakah Maturity Date") or the date of a
Musharakah Dissolution Event ("Musharakah Dissolution Date"), whichever is applicable.
Step 3
a) The Sukukholders shall also agree upfront that they shall receive profits, if any, up to the
Musharakah Expected Return. If the Sukukholders’ share of profits generated from the
Musharakah Venture are in excess of the Musharakah Expected Return (such excess
above the Musharakah Expected Return shall be referred to as “Excess Profit”), profit up
to the Musharakah Expected Return will be distributed to the Sukukholders and the Excess
Profit shall be credited by the Manager to a reserve account ("Musharakah Profit
Reserve Account") on behalf of the Sukukholders on a custody basis which may be used
to fund future Musharakah Periodic Payments or Musharakah One-off Payment, where
applicable.
b) The Manager may at any time prior to the Musharakah Dissolution Date utilise the amounts
standing to the credit of the Musharakah Profit Reserve Account so long as any amounts
deducted from the Musharakah Profit Reserve Account prior to the Musharakah
Dissolution Date are re-credited to fund any shortfall in the amount of the Musharakah
Periodic Payments or Musharakah One-off Payment, where applicable, and on the
Musharakah Dissolution Date.
c) Any amounts standing to the credit of the Musharakah Profit Reserve Account on the
Musharakah Dissolution Date will be waived by the Sukukholders and retained by the
Manager as an incentive payment ("Musharakah Advance Incentive Payment") for
managing the Musharakah Venture.
d) If the amounts standing to the credit of the Musharakah Profit Reserve Account are
insufficient to meet the expected Musharakah Periodic Payments or Musharakah One-off
Payment, where applicable, in full ("Musharakah Shortfall"), the Manager may provide a
Shariah-compliant liquidity facility ("Musharakah Liquidity Facility") whereby it shall
advance to the Sukuk Trustee (on behalf of the Sukukholders) on a qardh basis an amount
sufficient to make up the Musharakah Shortfall (adjusted accordingly pursuant to any
utilisation of the Musharakah Profit Reserve Account as referred to above, if applicable),
in order to enable the Issuer to make payment in full. For the avoidance of doubt, any
Musharakah Liquidity Facility made by the Manager shall be off-set against the
Musharakah Exercise Price pursuant to the exercise of the Musharakah Purchase
Undertaking payable on the Musharakah Maturity Date or the Musharakah Dissolution
Date.
Step 4
Cagamas (in its capacity as the Obligor) shall also grant to the Sukuk Trustee (acting on behalf of
the Sukukholders) a purchase undertaking ("Musharakah Purchase Undertaking"), whereby the
Obligor shall undertake to purchase such portion of the Sukukholders’ undivided beneficial interest
in the Musharakah Venture from the Sukuk Trustee at the relevant Musharakah Exercise Price,
upon the Musharakah Maturity Date or such other payment dates to be determined between the
Obligor and the Sukuk Trustee or Musharakah Dissolution Date, whichever is earlier.
In the case of Sukuk Cagamas on an amortising basis, the Obligor shall purchase the Sukuk
Trustee’s relevant interest in the Musharakah Assets on each payment date and the Sukuk
Trustee’s interest in the Musharakah Assets will gradually decrease pursuant to such purchase.
75
Step 5
Step 6
Upon exercise of the Musharakah Purchase Undertaking and the full payment of the Musharakah
Exercise Price, the relevant Musharakah Venture and the trust in respect of the Musharakah
Assets will be dissolved and the relevant Sukuk Cagamas held by the Sukukholders will be
cancelled.
76
APPENDIX 3
Unless otherwise defined, all capitalised terms herein are as defined in item 4 Facility
Description of the Principal Terms and Conditions of the Sukuk Cagamas.
Step 1
a) Under the Mudharabah transaction, the Sukukholders as the Rabb al-mal shall from time
to time contribute capital in the form of cash ("Mudharabah Capital") by subscribing the
Sukuk Cagamas for the purpose of investment in a venture (the "Mudharabah Venture").
The Mudharabah Venture shall consist of an investment in Shariah-compliant assets, i.e.
asset based financings arising from Shariah principles of Ijarah and/or Musharakah
Mutanaqisah and/or any other Shariah-compliant assets acceptable to the Joint Shariah
Advisers ("Mudharabah Assets") to be identified and held on trust by the Issuer on behalf
of the Sukukholders, whereby the Sukukholders contribute capital in the form of cash
through the subscription of Sukuk Cagamas.
b) Pursuant to the Mudharabah Agreement, the Sukuk Trustee (on behalf of the
Sukukholders) shall appoint the Issuer as the entrepreneur (“Mudharib”) of each
Mudharabah Venture upon the terms and subject to the conditions of a Mudharabah
agreement. The Mudharib shall have the absolute entrepreneurial authority to manage the
Mudharabah Venture and administer the collection of income from the Mudharabah
Venture.
c) The Sukuk Cagamas shall represent the Sukukholders’ undivided beneficial interest in the
Mudharabah Venture and any funds held by the Mudharib in the Mudharabah Profit
Reserve Account on account of the Sukukholders. Profits generated from the Mudharabah
Venture shall be shared between the Rabb al-mal and the Mudharib according to a pre-
agreed profit sharing ratio while losses, if any, shall be borne solely by the Rabb al-mal.
Step 2
The profit portion, if any, generated from the relevant Mudharabah Venture shall be payable either
in periodic payments ("Mudharabah Periodic Payments") in respect of Sukuk Cagamas with
periodic payments or on a one-off basis ("Mudharabah One-off Payment") for Sukuk Cagamas
without periodic payments and at a discount or in both Mudharabah Periodic Payments and
Mudharabah One-Off Payment for Sukuk Cagamas issued with periodic payments and at a
discount. For the avoidance of doubt, the Mudharabah Periodic Payments will be distributed semi-
annually or such other periodic basis as determined prior to the issuance of such Sukuk Cagamas
with periodic payments ("Mudharabah Periodic Payment Date") and the Mudharabah One-off
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Payment will be distributed on the Mudharabah Maturity Date or the date of declaration of an event
which dissolves the corresponding Mudharabah Venture ("Mudharabah Dissolution Event"),
whichever is earlier.
The return expected ("Mudharabah Expected Return") by the Sukukholders from the
corresponding Mudharabah Venture shall be the yield of the respective Sukuk Cagamas up to the
respective maturity dates of the Sukuk Cagamas ("Mudharabah Maturity Date") or the date of a
Mudharabah Dissolution Event ("Mudharabah Dissolution Date"), whichever is applicable.
Step 3
a) The Sukukholders shall also agree upfront that they shall receive profits, if any, up to the
Mudharabah Expected Return. If the Sukukholders’ share of the profits generated from
the Mudharabah Venture are in excess of the Mudharabah Expected Return (such excess
above the Mudharabah Expected Return shall be referred to as “Excess Profit”), profits
up to the Mudharabah Expected Return will be distributed to the Sukukholders and the
Excess Profit shall be credited by the Mudharib to a reserve account ("Mudharabah Profit
Reserve Account") which may be used to fund future Mudharabah Periodic Payments or
Mudharabah One-off Payment, where applicable.
b) The Mudharib may at any time prior to the Mudharabah Dissolution Date utilise the
amounts standing to the credit of the Mudharabah Profit Reserve Account so long as any
amounts deducted from the Mudharabah Profit Reserve Account prior to the Mudharabah
Dissolution Date are re-credited to fund any shortfall in the amount of the Mudharabah
Periodic Payment or Mudharabah One-off Payment, where applicable, and on the
Mudharabah Dissolution Date.
c) Any amounts standing to the credit of the Mudharabah Profit Reserve Account on the
Mudharabah Maturity Date or the Mudharabah Dissolution Date will be waived by the
Sukukholders and retained by the Mudharib as an incentive payment ("Mudharabah
Advance Incentive Payment") for managing the Mudharabah Venture.
d) If the amounts standing to the credit of the Mudharabah Profit Reserve Account are
insufficient to meet the expected Mudharabah Periodic Payment or Mudharabah One-off
Payment, where applicable, in full (“Mudharabah Shortfall”), the Mudharib may provide
a Shariah-compliant liquidity facility (“Mudharabah Liquidity Facility”) whereby it shall
advance to the Sukuk Trustee (on behalf of the Sukukholders) on a qardh basis an amount
sufficient to make up the Mudharabah Shortfall (adjusted accordingly pursuant to any
utilisation of the Mudharabah Profit Reserve Account as referred to above, if applicable),
in order to enable the Issuer to make payment in full. For the avoidance of doubt, any
Mudharabah Liquidity Facility made by the Mudharib shall be off-set against the
Mudharabah Exercise Price pursuant to the exercise of the Mudharabah Purchase
Undertaking payable on Mudharabah Maturity Date or the Mudharabah Dissolution Date.
Step 4
Cagamas (in its capacity as the Obligor) shall also grant to the Sukuk Trustee (acting on behalf of
the Sukukholders) a purchase undertaking ("Mudharabah Purchase Undertaking"), whereby the
Obligor shall undertake to purchase such portion of the Sukukholders’ undivided beneficial interest
in the Mudharabah Venture from the Sukuk Trustee at the relevant Mudharabah Exercise Price,
upon the Mudharabah Maturity Date or the Mudharabah Dissolution Date or such other payment
dates to be determined between the Obligor and the Sukuk Trustee, whichever is earlier.
In the case of Sukuk Cagamas on an amortising basis, Cagamas (in its capacity as the
Obligor) shall purchase the Sukuk Trustee’s relevant interest in the Mudharabah Assets on
each payment date and the Sukuk Trustee’s interest in the Mudharabah Assets will
gradually decrease pursuant to such purchase.
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Step 5
Step 6
Upon exercise of the Mudharabah Purchase Undertaking and the full payment of the
Mudharabah Exercise Price, the relevant Mudharabah Venture and the trust in respect of
the Mudharabah Assets will be dissolved and the relevant Sukuk Cagamas held by the
Sukukholders will be cancelled.
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APPENDIX 4
Unless otherwise defined, all capitalised terms herein are as defined in item 4 Facility Description
of the Principal Terms and Conditions of the Sukuk Cagamas.
Step 1
Under the Ijarah transaction, the Sukuk Trustee, on behalf of the Sukukholders shall from time to
time, purchase Shariah-compliant leasable assets, i.e. the identified untenanted units and/or
building parcels pursuant to buildings or properties acquired by Cagamas in the ordinary course of
its business and/or properties, vehicles, machineries, equipment, provided there are no existing
tenancy or lease agreements ("Ijarah Assets"), by way of transfer of beneficial ownership
and interest from Cagamas (as the seller ("Seller")), at the asset purchase price ("Ijarah Asset
Purchase Price") pursuant to an asset purchase agreement ("Asset Purchase Agreement").
The Ijarah Asset Purchase Price will be equivalent to the Sukuk Cagamas proceeds. The value of
the Ijarah Assets shall be in compliance with the asset pricing requirements under the SC’s
Guidelines on Unlisted Capital Market Products under the Lodge and Launch Framework, as
amended from time to time (“LOLA Guidelines”).
Step 2
The Sukuk Trustee (acting on behalf of the Sukukholders), in its capacity as the lessor ("Lessor")
under an ljarah Agreement ("ljarah Agreement") to be entered into for each series of Sukuk
Cagamas under the principle of Ijarah, shall then lease the Ijarah Assets to Cagamas in its capacity
as the lessee ("Lessee"), for a pre-determined rental amount (“Lease Rental") payable throughout
a lease period equivalent to the period commencing from the date of issuance of the relevant
Sukuk Cagamas up to the maturity date of the relevant Sukuk Cagamas ("Lease Period") (“Ijarah
Maturity Date”), to be paid on a periodic basis (“Ijarah Periodic Payments”) in respect of Sukuk
Cagamas with periodic payments or on a one-off basis (“Ijarah One-off Rental”) for Sukuk
Cagamas without periodic payments and at a discount, or in both Ijarah Periodic Payments and
Ijarah One-Off Rental for Sukuk Cagamas issued with periodic payments and at a discount. For
the avoidance of doubt, the Ijarah Periodic Payments will be distributed semi-annually or such
other periodic basis as determined prior to the issuance of such Sukuk Cagamas with periodic
payments (“Ijarah Periodic Payment Date”) and the Ijarah One-off Rental will be distributed on
the Ijarah Maturity Date or the Ijarah Dissolution Date (which dissolves the corresponding Trust
Assets and the termination of the ljarah Agreement (“Ijarah Dissolution Event”), whichever is
earliest.
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Step 3
Cagamas shall declare a trust over the Ijarah Assets and the rights and interest under the relevant
transaction documents and the Sukuk Cagamas proceeds of the foregoing ("Trust Assets"), for
the benefit of the Sukukholders. Cagamas, in its capacity as the Issuer, shall issue the Sukuk
Cagamas to represent the Sukukholders' undivided and proportionate beneficial ownership and
interest over the Trust Assets.
Step 4
Pursuant to the Ijarah Agreement, the Lessee shall pay Lease Rental in respect of the Ijarah Assets
during the Lease Period on the relevant Ijarah Periodic Payment Date in respect of Sukuk
Cagamas with periodic payments or on a one-off basis on the Ijarah Maturity Date or the Ijarah
Dissolution Date in respect of Sukuk Cagamas without periodic payments. The Lease Rental
payable is equivalent to the periodic distribution rate, if any, on the nominal value of the respective
Sukuk Cagamas, or the difference between the nominal value of the relevant Sukuk Cagamas and
the Sukuk Cagamas proceeds, up to the respective Ijarah Maturity Date or the date of an Ijarah
Dissolution Event (“Ijarah Dissolution Date”), whichever is applicable.
Step 5
Under the terms of a servicing agency agreement, Cagamas (as Lessee) shall be appointed as
the servicing agent ("Servicing Agent") by the Lessor. As Servicing Agent, the Lessee will be
undertaking the responsibilities, on behalf of the Lessor, for the performance and/or maintenance
and/or structural repair of the Ijarah Assets and/or the related payment and/or ownership expenses
in respect of the Ijarah Assets ("Ownership Expenses"). The Ownership Expenses, which are to
be reimbursed by the Sukuk Trustee to Cagamas as Servicing Agent, will be set-off against the
Ijarah Exercise Price payable by the Obligor to the Sukuk Trustee pursuant to the exercise of the
Ijarah Purchase Undertaking on the Ijarah Maturity Date or Ijarah Dissolution Date, whichever is
applicable.
During the Lease Period, the Servicing Agent is also responsible for making payments of the
relevant takaful contribution or insurance premium for the Ijarah Assets and to ensure that the
takaful/insurance for the Ijarah Assets is sufficient for a covered/insured amount at all times.
Upon the occurrence of a total loss or destruction of, or damage to the whole (and not part only)
of the Ijarah Assets or any event or occurrence that renders the whole (and not part only) of the
Ijarah Assets permanently unfit for any economic use and the repair or remedial work in respect
thereof is wholly uneconomical (“Total Loss Event”) in a particular Ijarah Agreement (unless the
Servicing Agent is substituting the Ijarah Assets with qualified leasable assets as approved by the
Joint Shariah Advisers within a stipulated timeframe pursuant to the Ijarah Substitution
Undertaking), the Ijarah Agreement will be terminated and the proceeds from takaful/insurance
shall be used to redeem the Sukuk Cagamas.
If the takaful/insurance proceeds are insufficient to cover the redemption amount due under the
Sukuk Cagamas and Ownership Expenses (if any) under a Total Loss Event, the Servicing Agent
shall be liable to make good the difference. Any excess from the takaful/insurance proceeds over
the amount required to redeem the relevant Sukuk Cagamas and Ownership Expenses shall be
paid to the Servicing Agent as an incentive payment.
Step 6
The Sukuk Trustee shall provide a substitution undertaking ("Ijarah Substitution Undertaking")
to the Issuer under which the Issuer shall have the right to substitute, via execution of an exchange
agreement, certain Ijarah Assets from time to time throughout the tenure of the Sukuk Cagamas
(at the option of the Issuer) including if the Ijarah Assets are partially damaged or upon a Total
Loss Event, with qualified leasable asset(s) of equal or greater value that is/are Shariah-compliant
and approved by the Joint Shariah Advisers ("Replacement Assets"). The Replacement Assets
shall then form part of the Trust Assets.
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Step 7
Cagamas, as the Obligor, shall grant a purchase undertaking ("Ijarah Purchase Undertaking") to
the Sukuk Trustee (acting for and on behalf of the Sukukholders), under which the Obligor
undertakes to purchase the Ijarah Assets from the Sukuk Trustee by way of entering into a
purchase agreement ("Purchase Agreement") by way of transfer of the beneficial ownership and
interest of the Ijarah Assets from the Sukuk Trustee to the Obligor/Issuer; and will take place on
the earlier of (i) the Ijarah Maturity Date or (ii) the Ijarah Dissolution Date or (iii) such other payment
dates to be determined between the Obligor and the Sukuk Trustee, at a pre-determined Ijarah
Exercise Price.
The Ijarah Exercise Price due from the Obligor to the Sukuk Trustee (on behalf of the Sukukholders)
shall be set-off against reimbursement of the Ownership Expenses to the Servicing Agent. Upon
full settlement of the Ijarah Exercise Price pursuant to the exercise of the Ijarah Purchase
Undertaking, the Ijarah Agreement will be terminated and the trust created under the declaration
of trust will also be dissolved subsequently, and neither the Sukuk Trustee nor the Sukukholders
shall thereafter have further rights and/or obligations in respect of the Ijarah Assets.
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APPENDIX 5
Unless otherwise defined, all capitalised terms herein are as defined in item 4 Facility Description
of the Principal Terms and Conditions of the Sukuk Cagamas.
Step 1
In respect of the Wakalah Bil Istithmar transaction, the Sukuk Trustee (on behalf of the
Sukukholders) will appoint Cagamas as Wakeel under a Wakalah agreement entered into between
Cagamas and the Sukuk Trustee (as agent on behalf of the Sukukholders) ("Wakalah Agreement")
to collect proceeds of the Sukuk Cagamas and invest the proceeds in the Istithmar Portfolio. The
Wakeel shall declare a trust on the proceeds of the Sukuk Cagamas, for the benefit of the
Sukukholders.
Step 2
Cagamas (as Issuer) will issue Sukuk Cagamas to the Sukukholders to evidence the
Sukukholders' undivided and proportionate interest in the Istithmar Portfolio.
Cagamas, in the capacity of Wakeel of the Sukukholders who are represented by the Sukuk
Trustee, will receive cash from the Sukukholders. The cash will be placed by Cagamas (as Wakeel)
in a Sukuk investment trust ("Sukuk Trust") held in trust by the Sukuk Trustee on behalf of the
Sukukholders. The Sukuk Trust will be utilised for purposes of (i) investment in Shariah-compliant
tangible assets which include Equity Assets (as described below) and/or Shariah-compliant assets,
i.e. asset based financings arising from Shariah principles of Ijarah and/or Musharakah
Mutanaqisah and/or any other Shariah-compliant assets acceptable to the Joint Shariah Advisers
("Istithmar Assets") and (ii) commodity murabahah investment via a Tawarruq arrangement
("Murabahah Investment") (collectively known as the "Istithmar Portfolio"). The amount
invested in Istithmar Assets shall at all times be at least 30% of the value of the Istithmar Portfolio.
In determining the value of the Istithmar Portfolio at any given time, the amount attributed to the
Istithmar Assets shall be equal to the nominal value of such Istithmar Assets and the outstanding
Murabahah Deferred Sale Price pursuant to the Murabahah Investment.
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Step 3
Istithmar Assets
Equity Assets
a) Cagamas (as Wakeel to the Sukukholders who are the Rabb al-Mal) will place an amount of
the cash in the Sukuk Trust as placement with Cagamas (acting for itself as Mudharib to the
Wakeel) at an agreed profit sharing ratio ("PSR") and tenure to create a Mudharabah Interbank
Investment ("MII") as part of the Istithmar Assets under the Istithmar Portfolio. Cagamas (as
Mudharib), in turn, will use the proceeds from the MII to invest in Islamic investment products,
i.e. MII certificates issued by Islamic banks, Government Investment Issues certificates, etc. A
MII certificate shall be issued to evidence the Mudharabah arrangement between Cagamas
as Wakeel and Cagamas as Mudharib to the Wakeel. Any losses in investment in Islamic
investment products shall be borne by the Rabb al-Mal.
Other Assets
Tangible Shariah-compliant assets which will comprise any or all of the following:
(i) asset based financing contracts based on Ijarah or Musharakah Mutanaqisah which have
been acquired by Cagamas from Islamic financial institutions and/or its approved sellers
(“Approved Sellers”);
(ii) sukuk that are based on either an Ijarah or Wakalah Bil Istithmar structure or such other
structure approved by the Joint Shariah Advisers, in each case having at least 30%
underlying tangible assets, and which are owned by Cagamas prior to the sale to the
Sukuk Trustee; and
(iii) any other Shariah-compliant tangible assets, as approved by the Joint Shariah Advisers
prior to the issuance of each Sukuk Cagamas.
Step 4
a) Cagamas (as Wakeel) shall use the remaining amount of the cash in the Sukuk Trust (after
deducting the investment amount for the Istithmar Assets) to purchase the Commodities from
Commodity Broker A on spot basis at a purchase price equal to the amount of such cash
("Istithmar Purchase Price"). By the terms of the Sukuk Cagamas, the Sukuk Trustee is
appointed as agent for the Sukukholders to sell the Commodities. By the terms of the Sukuk
Cagamas, the Wakeel will also agree and acknowledge that the Sukukholders have authorised
the Sukuk Trustee (acting for the Sukukholders) to sell the Commodities.
b) The Sukuk Trustee (as agent for the Sukukholders) shall sell the Commodities to Cagamas
(as Purchaser) at a deferred sale price which shall be the Istithmar Purchase Price plus the
Istithmar Profit Margin ("Murabahah Deferred Sale Price").
c) Subsequently, Cagamas (acting as itself) shall sell the Commodities on a spot basis to
Commodity Broker B for a cash consideration (Selling Price) which is equal to the Istithmar
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Purchase Price. However, Commodities received may be used by Cagamas to facilitate its
Islamic Operations before onward sale to Commodity Broker B. Commodity Broker A and
Commodity Broker B could either be the Bursa Suq Al-Sila’ commodity market or an
independent licensed commodity broker.
Step 5
Cagamas, in its capacity as the Issuer, makes periodic principal and profit distributions (in the case
of Sukuk Cagamas on amortising basis) or profit distributions on a semi-annual or other periodic
basis ("Istithmar Periodic Payments") (based on a profit rate to be agreed (in the case of Sukuk
Cagamas issued based on fixed profit rate), or the Effective Profit Rate in the case of Sukuk
Cagamas issued based on floating profit rate))as determined prior to the issuance of such Sukuk
Cagamas with periodic payments or for such Sukuk Cagamas without periodic payments and at a
discount on one-off basis (“Istithmar One-off Payment”), or both Istithmar Periodic Payments and
Istithmar One-Off Payment for such Sukuk Cagamas with periodic payments issued at a discount,
to the Sukuk Trustee on account of its obligation to pay the Murabahah Deferred Sale Price and
income generated from the Istithmar Assets (if any). Each of such payment shall pro tanto reduce
the obligation of the Issuer on the Sukuk Cagamas issued. On the date of maturity of the Sukuk
Cagamas ("Istithmar Maturity Date") or upon the occurrence of an event of default ("Istithmar
Event of Default"), whichever is earlier, all amounts then outstanding on the Murabahah Deferred
Sale Price (subject to Ibra’, where applicable) shall be paid by Cagamas to the Sukuk Trustee. For
the avoidance of doubt, Ibra’ will be applicable only to the commodity trading portion of the Istithmar
Portfolio i.e. the Murabahah Deferred Sale Price.
Step 6
Cagamas, in its capacity as the Obligor, shall also grant to the Sukuk Trustee (acting on behalf of
the Sukukholders) a purchase undertaking ("Istithmar Purchase Undertaking"), whereby the
Obligor shall undertake to purchase such portion of the Sukukholders’ undivided beneficial interest
in the Istithmar Assets which may include any outstanding Equity Assets and/or Other Assets from
the Sukuk Trustee at the relevant Istithmar Exercise Price (as defined herein), upon the Istithmar
Maturity Date or the date of an Istithmar Event of Default (“Istithmar Event of Default Date”) or
such other payment dates to be determined between the Obligor and the Sukuk Trustee, whichever
is earlier.
The Istithmar Exercise Price for the purchase of the Sukukholders’ undivided proportionate interest
in the Istithmar Assets under the relevant Sukuk Cagamas shall be calculated based on the
relevant formula of the Istithmar Exercise Price.
Upon exercise of the Istithmar Purchase Undertaking and the full payment of the Istithmar Exercise
Price and the outstanding Murabahah Deferred Sale Price, the relevant trust in respect of the
Istithmar Assets will be dissolved and the relevant Sukuk Cagamas held by the Sukukholders will
be cancelled.
Step 7
Incentive Payment
Provided that the income generated from the Istithmar Portfolio is sufficient to satisfy all payments
under the Sukuk Cagamas, any excess income generated from the Istithmar Portfolio shall be
credited by the Wakeel, on behalf of the Issuer, to a reserve account (“Istithmar Reserve
Account”). Following redemption of the Sukuk Cagamas in full, any balance in the Istithmar
Reserve Account shall be retained by the Wakeel as an incentive payment for the performance of
its obligations under the Wakalah Agreement.
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SECTION 3.0 BACKGROUND INFORMATION OF CAGAMAS
3.1 Overview
Cagamas was established by BNM with the objectives of supporting the national agenda
of increasing home ownership and promoting the development of Malaysia’s capital
markets. As part of its development, Cagamas has expanded the scope of its initial
objectives to encompass the development and promotion of Islamic finance within
Malaysia. Through the issuance of conventional and Islamic securities ("Sukuk"),
Cagamas is able to fund the purchase of housing loans and house financings from
financial institutions and non-financial institutions (collectively, referred to as the "Selling
Institutions") through its purchase with recourse ("PWR") and purchase without recourse
("PWOR") schemes. In purchasing housing loans and house financings, Cagamas is able
to provide liquidity to the Selling Institutions at a competitive cost, encouraging them to
provide additional housing loans and house financings to new applicants at an affordable
price and thus assist with the continued expansion of home ownership within Malaysia.
The PWR scheme has now been expanded to include other loans and financings such as
hire purchase/leasing receivables, personal loans and financings, small and medium
enterprise (“SME”) loans and financings and infrastructure development loans and
financings, while the PWOR scheme includes hire purchase and leasing receivables (see
Section 5.1.1 Business Overview — Cagamas for additional information).
(a) Cagamas MBS purchases staff housing loans and house financings (both
conventional and Islamic) from the GOM, funded through the issuance of
residential mortgage-backed securities and Islamic residential mortgage-backed
securities.
Cagamas is the second largest issuer of debt instruments after the Government of
Malaysia and the largest issuer of AAA corporate bonds and sukuk in the market. Since
incorporation in 1986, Cagamas has cumulatively issued circa RM318.6 billion worth of
corporate bonds and sukuk1.
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Below is a diagram setting out the structure of the Cagamas Group:
#
Notes: Dormant company
The issued and paid-up share capital of Cagamas as at the LPD is as follows:
3.3 Shareholders
The following table sets out the number of shareholders constituting each of the three
classes of institutional shareholders, and their total shareholding as a class in Cagamas
Holdings as at the LPD.
Range of
Institution of Shareholding Number of Shareholding
Shareholders Percentage (%) Shareholders (%)
Central Bank of
Malaysia 20.0 1 20.0
Commercial Banks 76.7 18 0.2 - 16.5
Investment Banks 3.3 4 0.4 - 1.6
Total 100.0 23 -
The following table sets out the individual shareholders in Cagamas Holdings as at the
LPD:
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Total Number of Shareholding
Name of Shareholder Shares Held Percentage (%)
The Subsidiaries and related companies of Cagamas as at the LPD are as follows:
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Name Country of Effective equity
Incorporation interest held by
Cagamas (%)
Subsidiaries
Related Companies
Cagamas Global P.L.C. was incorporated on 4 April 2014 in the Federal Territory of
Labuan under the Labuan Companies Act, 1990 of Malaysia. It is a special purpose vehicle
and was formed for the purpose of establishing a multi-currency medium term note
programme of USD2.5 billion in nominal value (or its equivalent in other currencies) which
was established on 29 August 2014.
Cagamas Global Sukuk was incorporated on 5 May 2014 under the Companies Act, 2016.
It is a special purpose vehicle and was formed for the purpose of establishing a multi-
currency sukuk issuance programme of USD2.5 billion in nominal value (or its equivalent
in other currencies) under the Shariah principle of Wakala, which was established in year
2014.
BNM Sukuk
BNM Sukuk was incorporated on 18 January 2006 for the purpose of undertaking the
issuance of Islamic investment securities, namely BNM Sukuk Ijarah (“BSI”) and BNM
Sukuk Murabahah (“BSM”) based on Shariah principles of Ijarah (leasing) and Murabahah
(cost-plus sale). Issuances of BSI are used to facilitate the financing of BNM activities,
namely the purchase of the beneficial interest in land and buildings from BNM and,
thereafter to lease back the same land and buildings to BNM for a contractual period
similar in tenure to the BSI. Issuances of BSM are based on a Murabahah contract which
refers to a mark-up sale transaction. BSM is essentially a certificate of indebtedness
arising from a deferred mark-up sale transaction to BNM of an asset, such as a commodity
(mainly crude palm oil), which complies with Shariah principles.
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Cagamas MBS
Cagamas MBS was incorporated on 8 June 2004 for the purpose of purchasing staff
housing loans and house financings from the GOM and the issuance of residential
mortgage-backed securities and Islamic residential mortgage-backed securities to finance
the purchases.
Cagamas MGP
Cagamas MGP was incorporated on 14 April 2008 to develop the mortgage guarantee
business. With effect from 20 December 2012, Cagamas MGP became a wholly-owned
subsidiary of Cagamas Holdings thus complementing the Cagamas Group’s other
activities and developmental initiatives. Cagamas MGP’s Mortgage Guarantee
Programme (“MGP”) provided financial institutions, particularly mortgage originators, a
mortgage guarantee facility for their conventional and Islamic mortgage portfolio. The MGP
offered a portfolio and risk management solution to these institutions to manage the credit
risk exposure of their mortgage portfolios, whilst continuing to maintain asset growth and
provide affordable mortgage loans to homebuyers. In addition, the MGP assisted in
strengthening the banking sector by removing systemic risk from the sector.
Cagamas MGP has remained dormant since 1 January 2014 and the business of
Cagamas MGP has been transferred to Cagamas SRP.
Cagamas SME
Cagamas SRP
The provision of guarantees under both schemes is similar to that previously offered by
Cagamas MGP to financial institutions.
As at the LPD, the Board consists of eight Non-Executive Directors and one Executive
Director.
The nine members constituting the Board as at the LPD, are set out in the table below:
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Name Nationality Designation
Datuk Shaik Abdul Rasheed bin Malaysian Non-Independent Non-
Abdul Ghaffour Executive Chairman
The directors of Cagamas and their respective profiles as at the LPD are as follows:
Date Appointed to the Board : 1 January 2017 (Elected as Chairman on 1 July 2017)
Membership of Board Committees : Board Staff Compensation and Organisation Committee
Board Meeting Attended : 6/6*
QUALIFICATION
• Bachelor’s degree in Economics (Honours), University of Malaya
WORKING EXPERIENCE /OTHER DIRECTORSHIPS
Present:
• Deputy Governor, Bank Negara Malaysia
- Member, Monetary Policy Committee
- Member, Management Committee
- Member, Reserve Management Committee
- Member, Risk Management Committee
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Past:
• Director, Cagamas Holdings Berhad • Alternate Executive Director for Malaysia
• Chairman, Cagamas SRP Berhad Executive Board, International Monetary Fund,
Washington DC
• Assistant Governor, Bank Negara Malaysia
Past:
• Chairman, Pengurusan Aset Air Berhad • Director General, Economic Planning Unit (EPU)
• Chairman, Cagamas SME Berhad • Deputy Secretary General, Ministry of Finance
• Consultant to the World Bank and United Nations
• Director, Petroliam Nasional Berhad
Development Programme
• Director, Employees Provident Fund
• Director, Inland Revenue Board
• Director, FELDA
• Director, UDA Holdings Berhad
• Director, NCB Holdings Berhad
• Director, MISC Berhad
• Director, Malaysia Deposit Insurance
Corporation
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Dato’ Md Agil bin Mohd Natt — Independent Non-Executive Director
Past:
• Sumitomo Mitsui Banking Corporation • President/Chief Executive Officer, The International
Malaysia Berhad Centre for Education in Islamic Finance (INCEIF)
• Export-Import Bank of Malaysia Berhad • Deputy President/Executive Director, Maybank Group
• Chief Executive Officer, Aseambankers Berhad (now
known as Maybank Investment Bank Berhad)
• Chief Representative, Kleinwort Benson Limited
• Senior General Manager, Island & Peninsular Berhad
• Corporate Finance Manager, Bumiputra Merchant
Bankers Berhad
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• Director, Payments Network Malaysia Sdn. Bhd. (PayNet)
• Director, S P Setia Berhad
• Director, Citibank Berhad
• Director, Qinzhou Development (Malaysia) Consortium Sdn. Bhd.
• Director, China-Malaysia Qinzhou Industrial Park (Guangxi) Development
Co. Ltd.
• Director, Malaysian Electronic Payment Sdn. Bhd. (MEPS)
• Director, MEPS Currency Management Sdn. Bhd. (MCM)
• Member, Corporate Debt Restructuring Committee, Bank Negara
Malaysia
Past:
• Director, Danajamin Nasional Berhad • Country Treasurer and Financial Markets Head,
• Director, MIDF Amanah Investment Bank Citibank Berhad
Berhad • Managing Director/Chief Financial Officer, Emerging
Market Sales and Trading, Asia-Pacific, Citigroup
(Singapore)
• Senior management positions, MUI Group of
Companies
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- Member, Investment Committee
• Director, ERF Sdn Bhd
- Member, Investment Committee
• Advisor to the Malaysian Accounting Standards Board
• Director General, Labuan Financial Services Authority (Labuan FSA)
• Director, Banking Supervision, Bank Negara Malaysia
● Director, Barakah Offshore Petroleum Berhad
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• Chief of Staff, Bank Negara Malaysia
- Director, International Department
- Deputy Director, Monetary Policy Implementation
- Deputy Director, Investment Operations
- Deputy Director, Financial Market Department
• Member, Taskforce on ASEAN Banking Integration Framework
(ABIF)
• Director, CIMB Agro Ventures
- Member, Investment Committee
Datuk Chung Chee Leong — President/ Chief Executive Officer Non-Independent Executive
Director
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• President/CEO, Cagamas Berhad
• Chairman, Cagamas Global PLC
• Chairman, Cagamas Global Sukuk Berhad
• Director, Cagamas MBS Berhad
• Director, Cagamas SRP Berhad
• Director, BNM Sukuk Berhad
• Director, Cagamas SME Berhad
• Director, Cagamas MGP Berhad
• Chairman, International Secondary Mortgage Market Association
• Member, Bond Market Sub-Committee & Financial Market Committee,
Bank Negara Malaysia
Past:
• Chairman, Asian Secondary Mortgage Market Association
• Director, Risk Management, Bank Negara Malaysia
• Director, Credit Guarantee Corporation Berhad
- Member, Board Audit Committee
• Member, Small Debt Resolution Committee
The senior management of Cagamas and their respective profiles as at the LPD are as
follows:
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Name Nationality Designation
Datuk Chung Chee Leong Malaysian President/Chief Executive
Officer and Executive Director
Please refer to the biography of Datuk Chung Chee Leong set out above.
Puan Norazilla Md Tahir is the Senior Vice President, Finance & Business Process,
overseeing the Finance and Business Process Management Departments.
Prior to joining Cagamas, Puan Norazilla was the Head of Finance at RHB Islamic
Bank Berhad and was the Finance Director of several multinational corporations.
Puan Norazilla has had extensive experience throughout her 30 years career in
audit and finance.
Encik Ricky Dang is the Senior Vice President, Risk Management, overseeing the
Risk Management, Credit and Business Continuity Management Departments.
Encik Ricky Dang has more than 21 years of experience in risk management,
credit risk and audit. He was attached to various organisations including banking,
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regulatory body and audit firm. Prior to joining Cagamas, he was the Senior Vice
President, Head of Credit Risk Management at Alliance Bank Malaysia Berhad.
Encik Azizi Ali, Senior Vice President, Business & Product Development oversees
the Core & Structured Business and Islamic Business Departments. He also sits
on the board of Cagamas SME, Cagamas Global P.L.C. and Cagamas Global
Sukuk.
Encik Azizi has over 32 years of experience in finance, treasury, structured finance
and debt capital markets, and was part of the team that established Cagamas’
Islamic business in 1994 with the issuance of Malaysia’s first Sukuk Mudharabah.
He was the Head of Accounts and the Head of Treasury before being appointed
as the Senior Vice President, Islamic Business in 2005.
Encik Delvin Chong is the Senior Vice President, Treasury and Capital Markets
overseeing the funding, liquidity management and investment operations for
Cagamas.
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2006. He was one of the lead members involved in the securitisation of GOM staff
housing loans which required an in-depth understanding of housing loan data,
modelling and due diligence, and one of the people involved in the conception and
delivery of the SRP by the GOM in 2011.
Puan Mazlina Saidi, the Senior Vice President, Human Capital and Administration,
oversees the Human Capital and Administration Department.
Puan Malathi Menon, Senior Vice President, Legal & General Counsel, oversees
the Legal, Corporate Secretariat and Compliance Departments.
Puan Malathi Menon has over 30 years of experience in legal and compliance
matters in the areas of corporate and commercial law and securities law, with
particular emphasis on capital market transactions. She started her career as an
Advocate and Solicitor in Zain & Co, in the areas of general litigation and
arbitration, involving banking, building and construction and contractual disputes.
She was the Head of Legal before being appointed as the Senior Vice President,
Legal & General Counsel in 2018.
Encik Leong See Meng is the Senior Vice President, Corporate Strategy and
Communications, overseeing the Corporate Planning and Strategic
Communications Departments.
Encik Leong See Meng has over 26 years of experience in banking and finance.
His career in banking started in 1993 with Hongkong & Shanghai Banking
Corporation and has since worked for leading financial institutions such as
Citibank and Deutsche Bank amongst others. He was the former CEO at National
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Bank of Abu Dhabi. Before joining Cagamas, he was the Managing Partner for
Futurewerkes PLT, a consultancy firm specializing in project management and
consulting for financial services and digital transformation.
Puan Sarah holds a degree in Library and Information Science from Universiti
Teknologi MARA (UiTM) and is a licensed Company Secretary.
Encik Mohd Ridhwan Abdul Mujib is the Vice President/Head of the Internal Audit
Department and also the Secretary to the Group Board Audit Committee of
Cagamas Holdings.
Encik Mohd Ridhwan Abdul Mujib has more than 26 years of experience in the
financial services industry particularly in audit. Prior to joining Cagamas in October
2006, he was attached to Credit Guarantee Corporation, Bank Muamalat Malaysia
Berhad, Bank Bumiputra Malaysia Berhad, Bank Kerjasama Rakyat Malaysia
Berhad and Development & Commercial Bank Berhad.
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SECTION 4.0 INVESTMENT CONSIDERATIONS
The following is a summary of risk factors relating to the Notes and their possible mitigating factors,
where available. This section does not purport to be comprehensive or exhaustive and is not
intended to substitute or replace an independent assessment of the risk factors that may affect the
Notes. Each investor should carefully conduct his or her independent evaluation of the risks
associated with investing in the Notes. Investors should also note that each issue of the Notes will
carry different risks and all potential investors are strongly encouraged to evaluate each Notes
issue on its own merit.
Cagamas depends on its access to the debt capital markets to fund the purchase
of financial assets in the secondary market. If the capital markets experience
continuous volatility and the availability of funds is limited, it is possible that
Cagamas’ ability to raise sufficient funding may be affected by this or other factors.
Accordingly, its business, financial condition, results of operations and prospects
may be adversely affected.
(c) Cagamas depends on key management for the growth and successful
implementation of its strategy
Cagamas believes that the growth it has achieved to date, as well as its position
as key liquidity provider in the Malaysian mortgage market, is to a large extent
attributable to a strong and experienced senior management team and a skilled
workforce. Cagamas believes that the continued growth of its business and the
successful implementation of its strategy depend on senior management and key
personnel. There can be no assurance that members of the senior management
team will remain in Cagamas for the foreseeable future. Competition for key
personnel in the financial industry is intense and there is limited availability of
individuals with the requisite knowledge of the financial industry and relevant
experience in the markets in which Cagamas operates. There is no guarantee that
Cagamas will be able to successfully recruit, train or retain the necessary qualified
and skilled personnel in the future.
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risk and reputational risk. Investors should note that any failure to adequately
control these risks may have an adverse effect on Cagamas’ financial condition,
operations, prospects and reputation.
Please refer to the sections on credit risk, market risk, liquidity risk, operational
risk and reputational risk set out in Section 6.0 (Risk Management).
Cagamas purchases assets from various counterparties through the PWR and
PWOR schemes. Under the PWR scheme, beneficial ownership of the assets
passes to Cagamas and the assets are held on trust by the Selling Institutions for
Cagamas with legal title to the assets remaining with the Selling Institutions.
Further, Cagamas relies on the Selling Institutions to administer, manage and
collect the payments of the instalments due on the assets. A failure by one or more
Selling Institutions with material exposure to honour the terms of its contract with
Cagamas, including a Selling Institution’s undertaking to repurchase or replace a
significant number of ineligible loans or financings, could have an adverse effect
on the business, operations and financial condition of Cagamas.
Under the PWOR scheme, the assets are equitably assigned to Cagamas, such
that the legal title to the assets remains with the counterparties while Cagamas
carries the assets on its books and bears the full credit risk of the portfolio of loans
or financings purchased without recourse for default risk. Following the sale of the
assets, the counterparties acting as the appointed servicer will continue to
administer the assets, and will collect and remit payments of the instalments due
on the assets by the underlying borrowers/obligors of such assets to Cagamas in
return for a servicer fee as agreed with Cagamas. As such, the performance of
Cagamas’ business under the PWOR scheme is directly dependent on the timely
debt service by the underlying borrowers/obligors (which will depend on the terms
of the obligation as well as on the financial condition of the underlying
borrowers/obligors in respect thereof) and the collection and remittance by the
relevant counterparties. A failure by the underlying borrowers/obligors to make
payments to the relevant servicer when due, or poor collection discipline by the
relevant servicer, will consequently impact the timely remittance of
payment/repayments to Cagamas, and could have an adverse effect on the
business, operations and financial condition of Cagamas.
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(f) There is no assurance that the GOM will continue to promote the broader spread
of home ownership and the growth of the secondary mortgage market in Malaysia
As at the LPD, BNM was the registered holder of 20% of the issued share capital
of Cagamas Holdings. There is no assurance that BNM will remain a substantial
shareholder in Cagamas Holdings or that there will not be a change of control of
Cagamas Holdings or the entry of another major shareholder with the ability to
exert significant influence on the direction or operations of the Cagamas Group,
or that the Cagamas Group's business, financial condition, results of operations
and prospects, including that of Cagamas, would not be adversely affected by
such a change in control or influence.
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(i) Cagamas is dependent upon its status as an “Approved Interbank Institution” as
determined by BNM
Cagamas is a market participant under section 140 of the Finance Services Act
2013 (“FSA”) and Section 152 of the Islamic Financial Services Act 2013 (“IFSA”).
Cagamas uses its status as an Approved Interbank Institution (“AII”) granted by
BNM to assist with its liquidity requirements. This status allows Cagamas direct
access to the interbank money market. Market participants are regulated by BNM
and BNM may impose on any market participant, any condition, restriction or
prohibition including, suspension from trading and restrictions on dealings for
failure to comply with the requirements imposed.
(j) Cagamas business model is focused in only one country which may result in a
higher level of risk
As at the LPD, 100% of the operating revenues of Cagamas were derived from
within Malaysia and 100% of the assets of Cagamas were employed within
Malaysia. As a result, Cagamas depends on the continued strength of Malaysia’s
economy to generate sufficient revenue to meet its payment obligations in relation
to the Notes issued under the MTN Programme. The Malaysian economy is
particularly affected by general economic and business conditions in the Asian
region.
Furthermore, the monetary and fiscal policies of the GOM will be influenced by
global and domestic developments. The GOM policies may change in tandem with
the economic climate, which may, in turn, adversely affect Cagamas.
Cagamas has significant exposure to the Malaysian property market due to its
portfolio of property mortgage loans and financings. The Malaysian property
market is cyclical and property prices in general have been volatile. Property
prices are affected by a number of factors, including the supply of, and demand
for, comparable properties, the rate of economic growth in Malaysia and political
and economic developments in Malaysia. Accordingly, any significant drop in
property prices and/or liquidity in the Malaysian property market could adversely
affect Cagamas’ business, its financial condition and its operations.
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(l) Impact of re-imposition of capital controls
As part of the package of policy responses to the 1997 economic crisis in South
East Asia, the GOM introduced, on 1 September 1998, selective capital control
measures. The GOM subsequently liberalised such selective capital control
measures in 1999 to allow foreign investors to repatriate principal capital and
profits, subject to an exit levy based on a percentage of profits repatriated.
On 1 February 2001, the GOM revised the levy to apply only to profits made from
portfolio investments retained in Malaysia for less than one year. On 2 May 2001,
the GOM lifted all such controls in respect of the repatriation of foreign portfolio
funds (largely consisting of proceeds from the sale of stocks listed on Bursa
Malaysia Securities Berhad).
There can be no assurance that the GOM will not re-impose these or other forms
of capital controls in the future. If the GOM re-imposes or introduces foreign
exchange controls, investors may not be able to repatriate the proceeds of the
sale of the Notes and interest/profit and principal paid on the Notes from Malaysia
for a specified period of time or may only be able to do so after paying a tax or
levy.
(m) Inflationary pressures in Malaysia and potential impact upon the Malaysian
economy
The MTN Programme has been accorded final rating of AAA by RAM and MARC,
respectively.
A credit rating is not a recommendation to purchase, hold or sell the Notes and
may be revised, suspended or withdrawn by the rating agency at any time.
Although Cagamas will endeavour to maintain the credit ratings, there is no
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assurance that the credit ratings will remain in effect for any given period of time
or that the credit ratings will not be lowered or withdrawn entirely if the
circumstances in the future so warrant. In the event that the credit ratings initially
assigned to the MTN Programme are subsequently lowered or withdrawn for any
reason, no person or entity will be obligated to provide any additional credit
enhancement with respect to the Notes. Any reduction or withdrawal of a credit
rating may have an adverse effect on the liquidity and market price of the Notes.
Any reduction or withdrawal of a credit rating will not constitute an event of default
under the MTN Programme. There is no obligation on the part of Cagamas, the
Joint Principal Advisers, the Joint Lead Arrangers, the Joint Lead Managers, the
Trustee or any other person or entity to maintain or procure maintenance of the
credit ratings for the MTN Programme.
(b) Shariah compliance
The Notes may have no established trading market when issued, and one may
never develop. If a market does develop, it may not be very liquid. Therefore,
investors may not be able to sell their Notes easily or at prices that will provide
them with a yield comparable to similar investments that have a developed
secondary market. This is particularly the case for Notes that are especially
sensitive to interest/profit rate, currency or market risks, are designed for specific
investment objectives or strategies or have been structured to meet the
investment requirements of limited categories of investors.
Trading prices of the Notes are subject to fluctuations and may be influenced by
numerous factors, including the prevailing interest/profit rates, the market for
similar securities, the operating results and/or the financial condition of Cagamas,
political, economic, financial and any other factors that can affect the capital
markets or the industry in which Cagamas is operating in. Consequently, any sale
of the Notes by the Noteholders in any secondary market which may develop may
be at prices that may be higher or lower than the initial offering price. Adverse
economic developments could also have a material adverse effect on the market
value of the Notes.
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interest/profit rates may cause a fall in bond/sukuk prices. The Notes may be
similarly affected resulting in a capital loss for Noteholders. Conversely, when
interest/profit rates fall, bond/sukuk prices and the prices at which the Notes trade
may rise. Noteholders may enjoy a capital gain but the profit received may be
reinvested for lower returns.
Noteholders may suffer erosion on the return of their investments due to inflation.
Noteholders would have an anticipated rate of return based on expected inflation
rates on the purchase of the Notes. An unexpected increase in inflation could
reduce the real return to the Noteholders.
(g) Cagamas’ ability to meet its obligations under the MTN Programme
The Notes will not be the obligation or responsibility of any person other than
Cagamas and shall not be the obligation or responsibility of any of Cagamas’
Subsidiaries or affiliates or any other person involved or interested in the MTN
Programme. None of such persons is obliged to accept any liability whatsoever to
the Noteholders in respect of any failure by Cagamas to pay any amount due
under the Notes.
(h) The Notes may not be a suitable investment for all investors
Each potential investor in the Notes must determine the suitability of that
investment in light of its own circumstances. In particular, each potential investor
should:
(ii) have access to, and knowledge of, appropriate analytical tools to evaluate,
in the context of its particular financial situation, an investment in the
relevant Notes the impact such investment will have on its overall
investment portfolio;
(iii) have sufficient financial resources and liquidity to bear all of the risks of an
investment in the relevant Notes, including where principal or interest/profit
is payable in one or more currencies, or where the currency for principal or
interest/profit payments is different from the potential investor's currency;
(iv) understand thoroughly the terms of the relevant Notes and be familiar with
the behaviour of any relevant indices and financial markets; and
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(v) be able to evaluate (either alone or with the help of a financial adviser)
possible scenarios for change in economic conditions, interest/profit rates
and other factors that may affect its investment and its ability to bear the
applicable risks.
The conditions of the Notes contain provisions for calling meetings of Noteholders
to consider matters affecting their interests generally. These provisions permit
defined majorities to bind all Noteholders including Noteholders who did not attend
and vote at the relevant meeting and Noteholders who voted in a manner contrary
to the majority.
The investment activities of certain investors are subject to legal investment laws
and regulations, or review or regulation by certain authorities. Each potential
investor should consult its legal advisers to determine whether and to what extent:
(i) Notes are legal investments for it; (ii) Notes can be used as collateral for various
types of borrowing; and (iii) other restrictions apply to its purchase or pledge of
any Notes. Financial institutions should consult their legal advisers or the
appropriate regulators to determine the appropriate treatment of Notes under any
applicable risk-based capital or similar rules.
In connection with the potential issuance of the Sustainability CMTNs and/or the
Sustainability Sukuk Cagamas, Cagamas has adopted the Cagamas’
Sustainability Bonds/Sukuk Framework and RAM Consultancy Services Sdn Bhd
has provided second opinion on such framework. Prospective investors should be
aware that Cagamas may update the Cagamas’ Sustainability Bonds/Sukuk
Framework from time to time and the updated framework may be published by
Cagamas on its website. Further, no assurance is given that the loans/assets
purchased using the proceeds of the Sustainability CMTNs and/or the
Sustainability Sukuk Cagamas will fulfil the environmental, social and
sustainability criteria anticipated or required by prospective investors.
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4.3 General Considerations
The issuance of the Notes is based on Malaysian law, tax rulings and regulations,
and administrative practices in effect as at the LPD. No assurance can be given
that Malaysian law, tax rulings and regulations or administrative practices will not
change after the closing or that such changes, if they occur, will not impact the
MTN Programme and the treatment of the Notes.
Changes in law and regulations are unpredictable and beyond Cagamas’ control
and may affect the way Cagamas conducts its business. Such changes may be
more restrictive or result in higher costs than current requirements or otherwise
impact Cagamas’ financial condition, results of operations or its ability to meet its
payment obligations under the Notes.
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SECTION 5.0 BUSINESS
Cagamas is the main operating company of the Cagamas Group and is primarily engaged
in the purchasing of loans and financings from Selling Institutions under the PWR and
PWOR schemes. Both the PWR and PWOR schemes can be used to finance conventional
housing loans, Islamic house financings, hire purchase and Islamic hire purchase/ leasing
receivables, whilst only the PWR scheme can be used to finance industrial property loans
and financings, leasing, personal loans, Islamic personal financing and Rahn (collateral)
receivables. In addition to the two product lines offered by Cagamas, the Cagamas Group
has expanded its range of products through the introduction of the Mortgage Guarantee
Programme ("MGP"), Skim Rumah Pertamaku or "My First Home Scheme" ("SRP") and
Skim Perumahan Belia or “Youth Housing Scheme” (“SPB”) which are offered by
Cagamas SRP and the purchase of GOM staff housing loans and house financing funded
through the issue of residential mortgage-backed securities by Cagamas MBS.
The diagram below illustrates how the various schemes offered by the Cagamas Group
operate.
Cagamas operates two schemes to purchase loans and financings from Selling Institutions:
the PWR scheme and the PWOR scheme. The purchase of loans and financings is funded
by the issue of conventional bonds and Sukuk by Cagamas in the debt capital markets.
To manage liquidity risk, Cagamas issues debt securities that match as closely as possible
the corresponding cashflows and maturity profiles of the loans and financings. All debt
issued by Cagamas is unsecured and ranks pari passu amongst itself.
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/
Cagamas recorded RM14.0 billion of purchases of loans and financing in 2017 under the
PWR scheme (2016: RM5.7 billion) and RM100.0 million purchase of loans under the
PWOR scheme (2016: Nil). Cagamas’ net outstanding loans and financing rose by 16%
to RM37.6 billion in 2017 (2016: RM32.5 billion). As at the end of 2017, residential
mortgages dominated Cagamas’ portfolio at 98.8%, followed by hire purchase loans and
financing at 0.8% and personal loans and financing at 0.4%. Cagamas’ Islamic assets
portfolio against conventional assets contracted to a ratio of 32:68, while PWR and PWOR
loans and financing portfolios were at 65% and 35% respectively. The gross impaired
loans and financing under the PWOR scheme remained low at 0.72%, while net impaired
loans and financing was at 0.23%.
PWR Scheme
Cagamas’ PWR scheme was developed to assist Selling Institutions with liquidity and/or
hedging requirements. PWR schemes can be used to finance various products, including
housing loans and financings (both conventional and Islamic), hire purchase and leasing
receivables (both conventional and Islamic), industrial property loans and financings (both
conventional and Islamic), personal loans and financings (both conventional and Islamic)
and Rahn (collateral) receivables. The PWR scheme comprises two sub-groups, one
dealing with conventional loans ("PWR") and the other dealing with Islamic financings
("Islamic PWR").
Under the PWR scheme, stringent eligibility criteria must be satisfied before Cagamas
purchases loans and financings from Selling Institutions. As such, Cagamas assumes the
counterparty credit risk of the relevant Selling Institution. The key criteria used by
Cagamas in relation to each individual PWR products purchased under the PWR scheme
are set out below.
In utilising the PWR scheme, a Selling Institution is able to hedge its interest rate risks,
while gaining access to alternative funding to grow its asset base. With the availability of
floating rate, fixed rate and convertible rate facilities, Selling Institutions are given
additional flexibility to manage their interest rates risks. For example, by selling their loans
and financings to Cagamas under the fixed rate facility, the Selling Institutions would have
a hedge against a rising interest rates environment. Similarly, in a falling interest rates
environment, the Selling Institutions can sell their loans and financings under the floating
rate facility. A convertible rate facility (except for Islamic products) allows the Selling
Institutions to convert fixed rate loans to floating rate loans or vice versa in view of changes
in the interest rates environment during that period.
Under the PWR scheme, the loans and financings are purchased by Cagamas at their
book value (i.e. the principal balance outstanding on a date which is closest to the
purchase date but not earlier than the end of the month preceding the purchase date).
Following such sale, the Selling Institution undertakes to conduct the Retained Functions
(as defined below) at its own cost as a term of the sale. The scope of Retained Functions
are set out in the relevant agreement selling the loans and financings to Cagamas and
include tasks such as monitoring the performance of loans and financings sold to
Cagamas, the collection of monthly instalments relating to the loans and financings (the
“Monthly Instalments”), the remittance of the Cagamas instalments and any
administrative duties and obligations arising in relation to the loans and financings (the
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“Retained Functions”). By undertaking the Retained Functions, each Selling Institution
reduces the risk of Cagamas seeking recourse and/or indemnity from the Selling
Institution. Cagamas will not purchase the loans and financings under the PWR scheme
without the Selling Institutions undertaking the Retained Functions.
As a result of this arrangement, the duties undertaken by the Selling Institution are not
deemed a service.
Following the sale of loans and financings to Cagamas under the PWR scheme, the Selling
Institutions remain responsible for any losses arising from defaults by the borrower, so that
in the event the loans and financings sold to Cagamas fail any pre-determined Cagamas
criteria and become ineligible, the Selling Institutions must offer new loans and financings
to Cagamas of an equivalent value to replace the loans and financings sold which are then
repurchased by the Selling Institutions during the contracted review period. At the end of
the contracted review period (which coincides with the maturity date of the bond/Sukuk
issued to fund the purchase of the relevant loans and financings), Cagamas will provide
the Selling Institution with a new Cagamas rate for a new term. The Selling Institutions can
then either sign up for a further contracted review period or elect to repurchase the loans
and financings from Cagamas if they decide the Cagamas rate is not acceptable.
Where an institution wishing to sell loans and financings to Cagamas under the PWR
scheme is unable to satisfy Cagamas’ eligibility criteria, it can utilise an intermediary
financial institution for the onward sale of the loans and financings to Cagamas. A
purchase transaction will be entered into between the Selling Institution and the
intermediary financial institution and a separate purchase transaction, on identical terms,
will be entered into between the intermediary financial institution and Cagamas.
As part of Cagamas’ ongoing efforts to offer competitive pricing to the Selling Institutions,
it offers to purchase the loans and financings sold on a cost-plus basis in addition to the
published rates. The cost-plus pricing is computed by Cagamas based on the effective
cost of funds (i.e. Cagamas debts and/or other similar securities issued to fund the
purchases) plus Cagamas’ margin. This pricing approach may enable the Selling
Institutions to enjoy lower rates as compared with the published Cagamas rates.
To assist Selling Institutions in meeting their credit requirements, Cagamas offers the
Selling Institutions alternatives to cash settlement for the sale of loans and financings. On
the purchase date, the relevant Selling Institution can choose to settle the purchase
consideration by receiving debt and/or other similar securities issued by Cagamas, or by
nominating such debts and/or other similar securities issued by Cagamas to be delivered
to such other party chosen by the Selling Institution and approved by Cagamas, or partly
in cash and partly by way of an issuance of Cagamas debt and/or other similar securities.
As a result, the Selling Institutions have the option to sell their loans and financings to
Cagamas without having to endure negative carry in an excess liquidity environment by
receiving debt and/or other similar securities issued by Cagamas to fund such purchases
instead of cash. In addition to the periodic repayment/payment of principal and
interest/profit of the Cagamas instalment by the Selling Institutions on the loans and
financings sold to Cagamas with recourse, the Selling Institution can now choose to pay
interest/profit only throughout the contracted review period with bullet repayment/payment
of the principal on the review date.
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Individual PWR products and their individual criteria for purchase by Cagamas
Under the PWR scheme, Cagamas purchases conventional housing loans ("PWR
Housing Loans") granted to borrowers for the purchase of residential houses by Selling
Institutions. In order for PWR Housing Loans to be eligible for sale by the Selling Institution
to Cagamas, they must each satisfy the following criteria:
(a) the PWR Housing Loan must be secured by a first charge or assignment of rights
over the secured property;
(b) the purpose of the PWR Housing Loan must be for the financing or refinancing of
the purchase, construction or renovation of residential properties;
(c) the PWR Housing Loan must be fully disbursed;
(d) the borrower of the PWR Housing Loan must not be more than one month in
arrears at the time of the proposed sale of the PWR Housing Loan to Cagamas;
(e) the PWR Housing Loan must not expire before the end of the agreed contracted
review period; and
(f) all other eligibility criteria contained in Cagamas’ product guide, as updated from
time to time (the "Cagamas Guide") (Mortgage/Housing) must be satisfied.
Under the PWR scheme, Selling Institutions who are supervised by BNM are eligible to
sell their hire purchase and leasing debts ("PWR HPL Debts") to Cagamas. The following
criteria must be satisfied in order for a PWR HPL Debt to be eligible for sale to Cagamas:
(a) the PWR HPL Debt must be in relation to the hire purchase, sale on credit terms
or the leasing of equipment;
(b) the PWR HPL Debt must be fully disbursed;
(c) the PWR HPL Debt must be an amortising debt;
(d) the PWR HPL Debt must not expire before the end of the agreed contracted review
period;
(e) each PWR HPL Debt must, disregarding any unearned finance charges, have a
book balance of less than RM2 million; and
(f) all other eligibility criteria contained in the Cagamas Guide (PWR HPL Debts) must
be satisfied.
Under the PWR scheme, Cagamas purchases loans and financings which have been
granted for the purpose of financing or refinancing the purchase, construction or
renovation of factories, warehouses or industrial complexes ("Industrial Property Loans")
in the same manner it purchases PWR Housing Loans. The following criteria must be
satisfied in order for an Industrial Property Loan to be eligible for sale to Cagamas:
(a) the purpose of the Industrial Property Loan must be for the financing or refinancing
the purchase, construction or renovation of industrial properties;
(b) the Industrial Property Loan must be fully disbursed;
(c) the borrower of the Industrial Property Loan must not be more than one month in
arrears at the time of the proposed sale;
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(d) each Industrial Property Loan, disregarding any unearned interest, must have a
book balance of less than RM20 million;
(e) the Industrial Property Loan must be secured by a first ranking charge over the
secured property or an assignment of rights over the secured property; and
(f) all other eligibility criteria contained in the Cagamas Guide (Commercial and
Industrial Property Loans) must be satisfied.
Under the PWR scheme, Cagamas purchases conventional personal loans ("PWR
Personal Loans") granted for the purpose of personal consumption. The following criteria
must be satisfied in order for a PWR Personal Loan to be eligible for sale to Cagamas:
(a) the PWR Personal Loan must have arisen pursuant to an agreement entered into
between the borrower and the Selling Institution or the vendor from whom the
Selling Institution has purchased the personal loan;
(b) the PWR Personal Loan must be fully disbursed;
(c) the borrower of the PWR Personal Loan must not be more than one month in
arrears at the time of the proposed sale of the personal loan to Cagamas;
(d) the PWR Personal Loan must not expire before the end of the agreed contracted
review period; and
(e) all other eligibility criteria contained in the Cagamas Guide (Personal Loans) must
be satisfied.
Islamic PWR
Under the Islamic PWR scheme, Cagamas purchases Islamic facilities from Islamic
financial institutions ("IFIs"), the Government or selected corporations based on the same
principles as the conventional PWR scheme with the exception of certain amendments
which need to be made in order to make the scheme suitable for Islamic financings.
Pursuant to carrying out the Retained Functions, any money collected by the Selling
Institution from such financings on behalf of or belonging and/or payable to Cagamas is
held on trust for Cagamas. Cagamas undertakes Wa’d to give Hibah by way of deduction
and retention by the Selling Institution of an amount equal to the net difference in value (if
any) between the monthly instalment received from customers and the Cagamas
instalment provided that the Selling Institution continues to carry out the Retained
Functions.
Cagamas purchases Islamic house financings ("IHF") from IFIs under Bai’ al-Dayn al-Sila’ii
(exchange of debts with commodities) or Bai’ al-Dayn (debts trading) and also purchases
Islamic house financing assets from IFIs under Bai’ al-A’yaan (asset trading) depending
on the underlying Shariah contracts of the originated financings. The following criteria must
be satisfied in order for an IHF to be eligible for sale to Cagamas:
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(a) the IHF must be conducted under approved Shariah principles;
(b) the purpose of the IHF must be for the financing or refinancing of the purchase,
construction or renovation of residential properties;
(c) the IHF must be fully disbursed;
(d) the obligor of the IHF must not be more than one month in arrears at the time of
the proposed sale of the Islamic PWR House Financings to Cagamas;
(e) the IHF must not expire before the end of the agreed contracted review period;
(f) the IHF must have a profit rate greater than Cagamas’ required rate of return (not
applicable for floating rate);
(g) the IHF must be secured by a first charge or assignment of rights over the secured
property; and
(h) the IHF must comply with any other criteria contained in the Cagamas Guide
(Islamic House Financing).
Under the PWR scheme, Cagamas purchases Islamic hire purchase/Islamic leasing ("IHP/
Islamic Leasing") from IFIs under Bai’ al-Dayn al-Sila’ii (exchange of debts with
commodities) or Bai’ al-Dayn (debts trading) and purchases Islamic hire purchase assets
from IFIs under Bai’ al-A’yaan (asset trading). The following criteria must be satisfied in
order for an IHP to be eligible for sale to Cagamas:
(a) the IHP/ Islamic Leasing must be conducted under approved Shariah principles;
(b) the IHP/ Islamic Leasing must be fully disbursed;
(c) the IHP/ Islamic Leasing must be no more than one month in arrears at the time
of sale;
(d) the IHP/ Islamic Leasing must not expire before the end of the agreed contracted
review period;
(e) the IHP/Islamic Leasing must have a book balance (less unearned profit, if any)
not exceeding RM2 million per facility;
(f) the IHP/ Islamic Leasing must have an effective rate greater than Cagamas’
required rate of return (not applicable for floating rate); and
(g) the IHP /Islamic Leasing must comply with any other criteria contained in the
Cagamas Guide (Islamic Hire Purchase/Islamic Leasing).
Under the PWR scheme, Cagamas purchases Islamic Personal Financing ("IPFs") from
IFIs under Bai’ al-Dayn al-Sila’ii (exchange of debts with commodities) or Bai’ al-Dayn
(debts trading). The following criteria must be satisfied in order for an IPF to be eligible for
sale to Cagamas:
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B. PWOR Scheme
Selling Institutions that seek capital, risk and/or portfolio management solutions may seek
to participate in Cagamas’ PWOR scheme. The PWOR scheme encompasses housing
loans and house financings (both conventional and Islamic) and hire purchase and leasing
receivables (both conventional and Islamic). The PWOR scheme comprises of two sub-
groups, one dealing with conventional financing ("PWOR") and one dealing with Islamic
financing ("Islamic PWOR").
Under the PWOR scheme, stringent eligibility criteria must be satisfied before Cagamas
purchases loans and financings from Selling Institutions on a without recourse basis. The
Selling Institution receives proceeds from the sale of loans and financings up-front and,
post-sale, Cagamas does not have any recourse to the Selling Institution but takes on the
credit risk of the underlying borrower/obligor. These loans and financings are purchased
at their book value (i.e. the principal outstanding on a date which is closest to the purchase
date but not earlier than the end of the month preceding the purchase date). The valuation
of each loan and financing can be at a premium or par and this allows the Selling Institution
to secure its profit upfront from the sale to Cagamas. Due to the increased risk profile of
PWOR purchases, the eligibility criteria are far more stringent than those used for the
purchase of similar asset classes under the PWR scheme. The eligibility criteria used by
Cagamas in relation to housing loans and financings and hire purchase products under
the PWOR scheme are set out below.
Following the sale, the relevant Selling Institution is appointed as the servicer/trustee for
a fee, to administer the loans and financings on behalf of Cagamas. The Selling Institutions
are required to remit the instalments paid by the borrower/obligor on the remittance date.
Similar to the PWR scheme, Cagamas offers the Selling Institutions a variety of options in
relation to the settlement of the purchase consideration, which include cash settlement,
settlement by way of an issuance of debt and/or other similar securities by Cagamas to
the Selling Institutions, or to such other party as may be nominated by the Selling
Institutions and approved by Cagamas, or partly in cash and partly by way of an issuance
of debt and/or other similar securities by Cagamas.
Regulatory treatment of a PWOR sale transaction allows for complete off-balance sheet
treatment for the Selling Institution such that the Selling Institution will show a reduction in
assets on its balance sheet. In addition, the Selling Institution will benefit from full capital
relief on the sales proceeds received from Cagamas. Such treatment allows the Selling
Institution to better manage its portfolio of concentration risk, as the Selling Institution is
released of all outstanding credit risk for the loans and financings sold to Cagamas under
the PWOR scheme and the Selling Institution will also benefit from a steady income stream
in the form of regular payments of the servicer fee. Standardised product structure and
legal documentation are some of the key features which allow the expedient completion
of transactions under the PWOR scheme.
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PWOR Housing Loans
In order for a PWOR housing loan ("PWOR Housing Loan") to be purchased by Cagamas
under the PWOR scheme, the following criteria must be satisfied:
(a) the PWOR Housing Loan must be secured by a first charge or assignment of rights
over the secured property;
(b) the PWOR Housing Loan must be for the purchase of a completed residential unit
or for the construction or renovation of a residential unit;
(c) the PWOR Housing Loan must be repayable/payable in Ringgit;
(d) the maturity date of the PWOR Housing Loan must not be (1) less than five years;
or (2) more than 30 years, from the proposed date of purchase by Cagamas;
(e) in the twelve months prior to the proposed date of purchase by Cagamas, the
repayment of interest/ payment of profit or principal under the PWOR Housing
Loan must not have been suspended, rescheduled or restructured;
(f) the monthly instalment payable under the PWOR Housing Loan must be greater
than 110% of the interest portion of the monthly instalment;
(g) the loan/financings-to-value ratio should be no more than 80%. (i.e. the
outstanding principal payable under the relevant loan and financings as at the date
of purchase divided by the property value (defined as the lower of the price under
the agreement for the purchase of the mortgaged property or the current market
valuation of the mortgaged property (which valuation has not been made more
than a year ago));
(h) where the PWOR Housing Loan has been provided in relation to leasehold land,
the remaining tenure of the lease must not be less than 20 years on the proposed
date of sale to Cagamas; and
(i) all other eligibility criteria in relation to PWOR Housing Loans provided in the
Cagamas Guide (PWOR Housing Loan) must be satisfied.
In order for hire purchase and leasing debts to be purchased by Cagamas under the
PWOR scheme ("PWOR HPL Debts"), the following criteria must be satisfied:
(a) the PWOR HPL Debt must be taken in relation to hire purchase of private and
non-commercial passenger car(s) only;
(b) the car must have been manufactured no more than seven years prior to the
proposed date of sale to Cagamas;
(c) the initial amount financed under the PWOR HPL Debt must not exceed
RM400,000;
a. the original margin of finance must not be more that 80%. of the purchase
price or market value;
(d) the maturity date of the PWOR HPL Debt must not be less than six months from
the proposed date of sale of the PWOR HPL Debt to Cagamas;
(e) the monthly instalment payable under the PWOR HPL Debt must be greater than
110%. of the interest portion of the monthly instalment;
(f) all other eligibility criteria in relation to PWOR HPL Debts provided in the Cagamas
Guide (PWOR HPL Debts) must be satisfied.
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Islamic PWOR
Under the Islamic PWOR scheme, Cagamas purchases Islamic facilities from IFIs, the
Government or selected corporations based on the same principles as the conventional
PWOR scheme with the exception of certain amendments which need to be made in order
to make the scheme suitable for Islamic financing. Under the Islamic PWOR scheme
Cagamas appoints a Selling Institution as its agent and pays the Selling Institution a
Wakalah (agent) fee for continuing to carry out services on its behalf. Under this scheme,
Cagamas purchases debt-based financings using cash or commodities, i.e. the Shariah
principles of Bai’ al-Dayn (debt trading) and Bai’ al-Dayn al-Sila’ii (exchange of debts with
commodities) and it purchases asset based financings (such as Al-Ijarah Thumma Al-Bai
(lease to purchase) or Musharakah Mutanaqisah (diminishing partnership)) in the form of
cash alone (i.e. the Shariah principles of Bai’ al-A’yaan (asset trading)). The minimum
eligibility criteria for products under the Islamic PWOR scheme is the same as the eligibility
criteria adopted for the PWOR scheme. Products purchased under the Islamic PWOR
scheme are also subject to any Shariah principles that need to be complied with.
BNM has accorded the following regulatory treatments for the debt securities issued by
Cagamas (which includes the conventional debt securities and sukuk issued by Cagamas
and guaranteed by Cagamas as further described under Section 5.1.3 below):
(i) Holdings of debt securities by licensed institutions will qualify for a twenty percent
(20%) risk weight under the Risk Weighted Capital Ratio framework;
(ii) Holdings of debt securities that qualify for high quality liquid assets (“HQLA”) under
Class Level 2A with 15% haircut under the Liquidity Coverage Ratio guidelines
issued by BNM;
(iii) Holdings of the debt securities will be aggregated with other credit facilities
granted to Cagamas in the computation of “Single Customer Credit Limit”; and
(iv) Holdings of debt securities by insurance companies incur a risk charge of 1.6%
under rating category “One” under the Risk-Based Capital Framework for Insurers
issued by BNM.
Cagamas issues conventional debt securities and Sukuk to finance the purchase of
housing loans and house financings as well as other consumer receivables for both
conventional loans and Islamic financing.
Conventional debt securities are typically issued under Cagamas’ RM20 billion Islamic and
Conventional Commercial Papers Programme and under the MTN Programme. The
instruments issued under the programmes are as follows:
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CMTNs with Fixed Rate
CMTNs with fixed rate under MTN Programme have tenures of more than one year and
carry a fixed coupon rate which is determined at the point of issuance. Interest on these
CMTNs is normally paid at half-yearly intervals. The redemption of the relevant CMTNs is
at nominal value together with the interest due upon maturity.
CMTNs with floating rate under MTN Programme have an adjustable interest rate pegged
to the Kuala Lumpur Interbank Offered Rate (KLIBOR). Interest on these CMTNs is paid
at three or six monthly intervals. The redemption of the relevant CMTNs is at face value
together with the interest due upon maturity.
CPs under RM20 billion Islamic and Conventional Commercial Papers Programme are
short-term instruments with maturities of between one to twelve months, issued at either
a discount from the face value where the relevant CPs are redeemable at their nominal
value upon maturity or issued with interest where interest is paid on a semi-annual basis
or such other periodic basis as determined by Cagamas.
Where permitted by the respective trust deeds, Cagamas may at any time purchase its
debt securities and the repurchased debt securities shall be cancelled according to the
requirements of the trust deeds.
Under the USD2.5 billion Multicurrency Medium Term Note Programme ("EMTN
Programme"), Cagamas Global P.L.C. may from time to time issue notes ("EMTN Notes")
denominated in any currency (other than RM) which are unconditionally and irrevocably
guaranteed by Cagamas.
The tenure of each EMTN Note under the EMTN Programme shall be determined prior to
each issuance, subject to such minimum and maximum maturities as may be allowed or
required from time to time by the relevant central bank (or equivalent body) or any laws
and regulations applicable to Cagamas Global P.L.C., Cagamas or the relevant specific
currencies. The EMTN Notes may be interest-bearing or non-interest bearing. Interest (if
any) may accrue at a fixed rate or a floating rate or other variable rate and the method of
calculating interest may vary between the issue date and the maturity date of the relevant
series of EMTN Notes issued.
Cagamas Global P.L.C., Cagamas or any of their respective Subsidiaries may at any time
purchase the EMTN Notes in the open market or otherwise and at any price and such
EMTN Notes may be held, resold or, at the option of Cagamas Global P.L.C., surrendered
to any paying agent for cancellation.
The following table sets out the outstanding conventional debt securities issued and
guaranteed by Cagamas as at the 30 June 2018*.
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Outstanding Conventional Debt Securities issued and
guaranteed by Cagamas As at the 30 June 2018
(RM ’000)
Instrument issued by Cagamas 21,387,312
Sukuk Cagamas
Cagamas issues Sukuk Cagamas via RM20 billion Islamic and Conventional Commercial
Papers Programme and under the MTN Programme. The instruments issued under the
programmes are as follows:
Sukuk Cagamas with fixed profit rate under MTN Programme have tenures of more than
one year and carry a fixed profit rate which is determined at the point of issuance. Profit is
normally paid at half-yearly intervals. The redemption of the relevant Sukuk Cagamas is
at nominal value together with profit due on maturity.
Sukuk Cagamas with variable profit rate under the MTN Programme have tenures of more
than one year and variable profit rates pegged to the KLIBOR or such other reference
benchmark rate which is determined at the point of issuance or any other dates as agreed
by the parties. Profit is paid at three or six monthly intervals. At maturity, the face value of
the relevant Sukuk Cagamas is redeemed with any outstanding profit amounts due on
maturity.
Sukuk Cagamas under RM20 billion Islamic and Conventional Commercial Papers
Programme
Sukuk Cagamas under RM20 billion Islamic and Conventional Commercial Papers
Programme are short term Islamic instruments issued by Cagamas with maturities ranging
from one to twelve months issued at either a discount from the face value where the
relevant Sukuk Cagamas are redeemable at their nominal value upon maturity or issued
with profit paid on a semi-annual basis or on such other periodic basis as determined by
Cagamas.
Cagamas may issue Sukuk Cagamas under RM20 billion Islamic and Conventional
Commercial Papers Programme and MTN Programme based on but not limited to the
following Shariah principles:
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• Ijarah
• Wakalah Bil Istithmar
Where permitted by the respective trust deeds, Cagamas may at any time purchase its
Sukuk from the open market and the repurchased Sukuk shall be cancelled according to
the requirements of the trust deeds.
The tenure of each series of Multicurrency Sukuk under the Sukuk Programme shall be
determined prior to each issuance, subject to such minimum and maximum maturities as
may be allowed or required from time to time by the relevant central bank (or equivalent
body) or any laws and regulations applicable to Cagamas Global Sukuk, Cagamas or the
relevant specified currencies. The Multicurrency Sukuk will be issued on a fully-paid basis
and at a par issue price and the method of calculating the profit rate may vary between
the issue date and the maturity date of the relevant series of Multicurrency Sukuk issued.
Cagamas Global Sukuk, Cagamas or any of their respective Subsidiaries may at any time
purchase the Multicurrency Sukuk in the open market or otherwise and at any price and
such Multicurrency Sukuk may be held, resold or, at the option of Cagamas Global Sukuk
surrendered to the registrar for cancellation.
The following table sets out the outstanding Sukuk issued by Cagamas as at the 30 June
2018.
Cagamas commenced operations in 1987 with two distinct objectives: supporting the
broader spread of home ownership within Malaysia by increasing liquidity and accessibility
to long-term funds for mortgage originators at competitive prices; and spearheading the
development of the local debt securities market by being a credible issuer of high quality
securities. As part of its development, Cagamas has expanded the scope of its initial
objectives to encompass the development and promotion of Islamic finance within
Malaysia.
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Cagamas seeks to achieve these objectives by:
(a) developing the secondary mortgage market in Malaysia through the provision of
innovative facilities and efficient service at a competitive cost to primary home
lenders;
(b) enhancing the capital market, particularly the corporate bonds and sukuk market,
through widening and deepening the scope of securitisation;
(c) nurturing and maintaining a competent workforce of the highest integrity and
professionalism;
(e) valuing its staff for their commitment and loyalty; and
(c) playing a role in assisting financial institutions in coming up with risk and capital
management solutions, especially in light of the implementation of Basel III from
2018;
(e) continuing to undertake its primary role in the financial system to accelerate
liquidity to the secondary mortgage market by providing competitively priced
funding, which is achieved through its diversification of funding sources and
widening of its investor base;
(h) facilitating the GOM in providing affordable homes via provision of project
financing to selected affordable housing developers related to the GOM.
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5.3 Key strengths
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(c) Systemically Important to the Domestic Financial System
Due to its systemically important role, it is anticipated that Cagamas will continue
to receive the support of its shareholders during periods of stress in the financial
markets.
In addition, Cagamas has put in place Product Development Guidelines for all new
business products and variations to existing products; the business units are
responsible for the development of new product ideas, which are approved by
various internal committees such as the Management Executive Committee and
Board Risk Committee, with final approval resting with the Board.
Cagamas has maintained positive growth and margins over the years, supported
by steady business growth, discipline in cost management and strong capital
management.
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(g) Management team
(a) Cagamas’ profitability remains fairly stable as it operates on a low cost base. In
2017, the Cagamas’ cost to income ratio stood at 14.9%, which is below the level
of 40% - 50% maintained by most commercial banks in Malaysia. Cagamas
incurred minimal credit costs between 2011 and 2017 as a result of good asset-
quality performance and conservative level of risk appetite.
(b) Cagamas maintains strong capitalisation with reported Common Equity Tier 1
capital ratio of 20.7% as of the end of 2017. Cagamas’ Board and management
have voluntarily adopted the central bank’s regulatory bank capital framework as
part of Cagamas’ internal governance framework. Cagamas’ total adequacy ratio
was 22.2% as of year-end 2017, well above its internal minimum requirement of
15%.
(c) In line with the Government’s initiative to promote affordable housing to the nation,
Cagamas is currently exploring a new business model with BNM in developing a
Rent to Own Scheme (RTO) to assist middle income households (M40) to own
their own homes. In addition, BNM is expected to roll out a Special Financing
Scheme for first-time house buyers of affordable housing for the low to middle
income group. The RTO Scheme will be a collaboration between several banks
and the Ministry of Housing and Local Government. The guarantee under this
scheme will be provided by Cagamas SRP and is expected to be launched soon.
(d) Cagamas is also looking into the feasibility of purchasing loans and financing
related to environmental and/or social impact projects via the issuance of
Sustainability CMTNs and Sustainability Sukuk Cagamas, in line with the country’s
aspirations of transitioning to a more environmentally friendly economy. The
issuance of Sustainability CMTNs and Sustainability Sukuk Cagamas will provide
an alternative investment option to investors to meet their sustainable and
responsible investment objectives and consequently widen Cagamas’ investor
base to include the ESG (environmental, social and governance) liquidity pool.
Cagamas is also exploring the possibility of issuing bonds in other new foreign
currencies and in new markets including the Panda bonds, ProBond and Formosa
bonds.
(e) As part of its longer term plans to expand regionally, Cagamas is working towards
enhancing mutual development of the secondary mortgage finance market in the
region, as seen by its collaboration through the signing of Memorandum of
Understandings (MOU) with Indonesia’s PT Sarana Multigriya Finansial,
Thailand’s Secondary Mortgage Corporation and the Mongolia Mortgage
Corporation (MIK). This cooperation is a synergistic effort between the members
of the Asian Secondary Mortgage Market Association (ASMMA) as well as the
newly established International Secondary Mortgage Market Association (ISMMA)
in the development of mortgage financing market.
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(f) As a testament to the expertise within Cagamas in the development of the housing
finance market, Cagamas has been appointed as the first chair of ISMMA by the
World Bank in June 2018. ISMMA will focus on advocacy of regulatory issues,
share information, and provide support to newly-established institutions in the field
of housing finance market. This is the first association to bring together secondary
mortgage markets institutions around the world.
5.5 General
In line with the industry’s best practice, Cagamas has implemented Basel II Pillar
1 Risk-Weighted Capital Adequacy Framework (RWCAF), Basel II Pillar 2 Internal
Capital Adequacy Assessment Process (ICAAP) and Basel II Pillar 3 Disclosure
Policy. Additionally, Cagamas monitors its liquidity coverage ratio and net stable
funding ratio as per Basel III requirements.
Cagamas’ CSR activities are in line with the GOM’s policy of nurturing a caring
society. Beneficiaries of Cagamas’ CSR activities include charitable, non-profit
organisations registered with the Social Welfare Department or the Inland
Revenue Board, associations with which Cagamas has a working relationship or
other charitable, non-profit organisations as may be decided upon by Cagamas,
i.e. hospitals, welfare homes, old folks homes, orphanages, etc. established in
Malaysia with the aim of providing as much assistance to the needy as possible.
Cagamas also gives emphasis to the promotion of sustainability via education and
vocation-based programmes when considering donations towards improving
society as a whole.
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SECTION 6.0 RISK MANAGEMENT
Cagamas takes a holistic and enterprise-wide view in managing risk. The Board approved
the Enterprise Risk Management Framework ("ERM") which details the responsibility and
accountability of the Board, Board Risk Committees ("BRC"), President/Chief Executive
Officer ("CEO"), Senior Vice President, Risk Management (“SVP Risk Management”),
Management Executive Committee ("MEC"), Asset Liability Committee ("ALCO"), Risk
Management Department ("RMD"), Compliance Department (“CD”), Internal Audit
Department ("IAD") and Cagamas’ employees.
In line with the ERM Framework, Cagamas employs three lines of defence when managing
risk as illustrated in the diagram below.
Board Level
Board Risk Group Board Audit
Committee Committee
(BRC) (GBAC)
The business units within Cagamas are the first line of defence, and have the primary
responsibility of identifying, mitigating and managing risks within their line of business.
They also ensure that their day-to-day activities are conducted in line with established risk
policies and procedures, and that no limits are exceeded.
The IAD is Cagamas’ third line of defence and is responsible for independently reviewing
the adequacy and effectiveness of risk management processes, the system of internal
controls and compliance with risk policies.
The Board sets the overall strategic direction for Cagamas. It provides ultimate oversight
to ensure that management has set up appropriate risk management systems to manage
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risks associated with Cagamas’ operations and activities. The Board sets the risk appetite
and tolerance level to be consistent with Cagamas’ overall business objectives and desired
risk profile. The Board also reviews and approves all significant risk management policies
and risk exposures.
The BRC assists the Board by ensuring that there is effective oversight and development
of strategies, policies and infrastructure to manage Cagamas’ risks. The BRC is supported
by a management committee addressing one or more of the key risks identified.
The MEC and ALCO, which comprise senior management of Cagamas, are chaired by
the CEO and undertake the oversight function for capital allocation and overall risk limits,
aligning them to the risk appetite set by the Board. Management is responsible for the
implementation of the policies laid down by the Board by ensuring that there are adequate
and effective operational procedures, internal controls and systems.
The RMD is independent of other departments involved in risk-taking activities and reports
directly to the BRC. It is responsible for identifying, measuring, analysing, controlling,
monitoring and reporting of risk exposures independently and coordinating the
management of risk on an enterprise-wide basis.
Strategic risk within the Cagamas Group is the risk of not achieving its corporate
strategy goals which reflect the Cagamas Group’s vision. This may be caused by
internal factors such as performance planning, execution and monitoring, and
external factors such as market environment.
Credit risk is defined as the potential for financial loss resulting from the failure of
a borrower or counterparty to fulfil its financial or contractual obligations. Credit
risk within the Cagamas Group arises from its PWR and PWOR business,
mortgage guarantee programme, investments and treasury hedging activities.
The primary objective of credit risk management is to proactively manage risk and
credit limits to ensure that all exposures to credit risk are kept within parameters
approved by the Board to withstand potential losses. Investment activities are
guided by internal credit policies and guidelines that are approved by the Board.
Specific procedures for managing credit risks are determined at business levels
based on risk environment and business goals.
Market risk is defined as the potential loss arising from movements of market
prices and rates. Within Cagamas, market risk exposure is limited to interest rate
and foreign exchange as Cagamas does not engage in any equity or commodity
trading activities. Involvement in the purchase and sale of commodities is solely
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to facilitate the issuance of Islamic debt securities. Liquidity risk arises when
Cagamas does not have sufficient funds to meet its financial obligations when they
fall due.
Cagamas manages market and liquidity risks by imposing threshold limits which
are approved by management within the parameters approved by the Board
based on a risk-return relationship. Further, Cagamas also adheres to a strict
match-funding policy where all asset purchases are funded by bonds of closely
matched size as well as duration and are self-sufficient in terms of cashflow. A
forward-looking liquidity mechanism is in place to promote efficient and effective
cashflow management while avoiding excessive concentrations of funding.
Cagamas plans its cash flow and monitors closely every business transaction to
ensure that available funds are sufficient to meet business requirements at all
times. Reserve liquidity which comprises marketable debt securities is also set
aside to meet any unexpected shortfall in cash flow or adverse economic
conditions in the financial market.
Operational risk is the potential loss resulting from inadequate or failed internal
processes, people and systems, or from external events. Each business/support
unit undertakes self-assessment of the risk and control environment to identify,
assess and manage its operational risks. Cagamas has established adequate
internal controls, systems and procedures that are subject to regular review by
both internal and external auditors. Business continuity plans are in place to
minimise unexpected disruption and reduce time to restore operations. All
documentation for new products/programmes shall be reviewed by an internal
legal adviser and/or external advisers where necessary to ensure that Cagamas’
interest is protected at all times.
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(f) Shariah Non-Compliance Risk
Periodic Shariah reviews/audits are performed to verify that Islamic products and
operations of Cagamas are in compliance with the decisions endorsed by the
independent Shariah adviser and the Shariah advisers for any sukuk programmes,
where applicable.
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SECTION 7.0 INDUSTRY OVERVIEW
Overview
The Malaysian economy grew by 4.7% in the fourth quarter of 2018 (3Q 2018: 4.4%),
supported by continued expansion in domestic demand and a positive growth in net
exports. Private sector expenditure remained the main driver of domestic demand, while
a rebound in real exports of goods and services (+1.3%; 3Q 2018: -0.8%) contributed
towards the positive growth of net exports. On a quarter-on-quarter seasonally-adjusted
basis, the economy grew by 1.4% (3Q 2018: 1.6%). For 2018 as a whole, the economy
expanded by 4.7% (2017: 5.9%).
Domestic demand expanded at a more moderate pace of 5.6% (3Q 2018: 6.9%) during
the quarter. Growth was weighed down by a moderation in gross fixed capital formation.
Private consumption growth remained robust at 8.5% (3Q 2018: 9.0%), despite the
frontloading of purchases during the tax holiday period in the previous quarter. Income
and employment growth continued to drive household spending. Government measures
to alleviate cost of living, such as special payments to civil servants and pensioners, also
provided some support to consumer spending. Private investment growth moderated to
4.4% (3Q 2018: 6.9%), attributed to slower capital spending across major economic
sectors. However, ongoing multi-year projects particularly in the manufacturing sector
continued to provide support to overall growth. Public consumption expanded at a slower
pace of 4.0% (3Q 2018: 5.2%), attributable to a more moderate growth in supplies and
services. Public investment remained in contraction during the quarter (-4.9%; 3Q 2018: -
5.5%), due mainly to a decline in capital spending by public corporations.
Headline inflation, as measured by the annual percentage change in the Consumer Price
Index (CPI), declined to 0.3% in the fourth quarter of 2018 (3Q 2018: 0.5%). For 2018 as
a whole, headline inflation averaged at 1.0% (2017: 3.7%), its lowest level since 2009. The
decline in headline inflation was due mainly to transport inflation turning negative (4Q 2018:
-1.2%; 3Q 2018: 3.0%), reflecting the fixed domestic RON95 petrol and diesel prices
during the quarter compared to the higher fuel prices in the base period of 4Q 2017. The
combined outcome of the zerorisation of the Goods and Services Tax (GST) and the
implementation of the Sales and Services Tax (SST) continued to exert an overall
downward impact to headline inflation during the quarter. The percentage of items in the
CPI basket that had inflation of more than 2% remained low at around 9% in 4Q 2018 (3Q
2018: 9%).
During the fourth quarter, labour market conditions remained supportive of economic
activity. Employment continued to expand albeit at a more moderate pace (2.4%, 3Q 2018:
2.6%), amid stable unemployment rate (3.3%; 3Q 2018: 3.4%). Stronger net employment
gains were recorded in the services sector. Manufacturing sector wage growth remained
firm at 9.8% (3Q 2018: 9.6%). Wage growth in export oriented industries (10.8%; 3Q 2018:
10.9%) continued to outpace that of domestic-oriented industries (6.6%; 3Q 2018: 6.1%).
The current account surplus widened to RM10.8 billion (3Q 2018: RM3.8 billion) in the
fourth quarter. This was due to a larger goods surplus and a smaller income deficit, which
more than offset the higher services deficit. The goods surplus increased to RM33.0 billion
(3Q 2018: RM26.6 billion) due to stronger manufactured exports in both the E&E and non-
132
E&E segments, amid a smaller contraction in commodity exports. The services account,
however, registered a larger deficit of RM4.3 billion (3Q 2018: -3.3 billion), owing mainly
to a smaller surplus in the travel account (RM7.4 billion; 3Q 2018: RM8.0 billion) and higher
net payments to foreign providers for architectural and engineering services, as well as
use of intellectual property.
In the income accounts, a smaller deficit in the primary income account (-RM12.9 billion;
3Q 2018: -RM15.0 billion) was attributable to the higher income generated by Malaysian
firms investing abroad and lower profits accrued to foreign investors in Malaysia. The
secondary income deficit remained sizeable at RM4.9 billion (3Q 2018: -RM4.5 billion), on
account of continued outward remittances by foreign workers.
The ringgit appreciated marginally against the US dollar during the fourth quarter of 2018,
despite cautious investor sentiments in global financial markets and non-resident portfolio
outflows from the domestic bond and equity markets. These outflows were driven mainly
by expectations for a faster pace of US monetary policy normalisation, prior to the US
Federal Reserve’s (Fed) downward revision of its policy rate projection for 2019in
December 2018. In addition, uncertainties surrounding the moderating momentum of
global growth and global trade also led to the unwinding of non-resident investments from
regional financial markets, including Malaysia. However, these outflows were offset by
resident inflows, mainly from goods and services, leading to the marginal appreciation of
the ringgit. Going forward, lingering uncertainties on global trade and the trajectory of
monetary policy normalisation in the US will continue to influence the performance of
regional currencies, including the ringgit.
Domestic bond yields increased only marginally during the quarter despite non-resident
outflows due to continued support from domestic institutional investors. Non-resident
outflows from the MGS market were driven mainly by expectations for a faster pace of US
monetary policy normalisation. This led to international investors rebalancing their portfolio
investments in EMEs towards US financial assets. During the period, the 3-year, 5-year
and 10-year MGS yields increased by 2.8, 1.9 and 0.9 basis points, respectively.
Source: Economic and Financial Developments in Malaysia in the Fourth Quarter of 2018,
BNM
133
Outlook
The outlook for the Malaysian economy remains resilient in the near term despite
considerable external and domestic headwinds. Real GDP is projected to expand 4.8%
and 4.9% in 2018 and 2019, respectively, supported mainly by domestic demand. Private
sector expenditure, in particular, household spending will remain as the anchor of growth
following a continuous increase in employment and wage amid benign inflation. Meanwhile,
private investment will be supported by new and ongoing projects in the services and
manufacturing sectors. On the contrary, public expenditure is expected to grow marginally
in 2018 and contract in 2019 following the lower capital outlays by public corporations.
From the supply side, the services sector is expected to remain as the largest contributor,
namely wholesale and retail trade, finance and insurance as well as information and
communication subsectors, benefitting from steady consumer spending. The
manufacturing sector is projected to register a firm growth primarily driven by continuous
demand for E&E. Agriculture and mining sectors are expected to rebound in 2019 after
recording a marginal contraction in 2018 following an increase in the production of crude
palm oil (CPO) and liquefied natural gas (LNG). Meanwhile, the construction sector is
expected to moderate following the near completion of infrastructure projects as well as
property overhang, particularly in the non-residential segment.
Malaysia’s external position is projected to remain resilient in line with steady global
economic and trade performances. However, exports are expected to moderate mainly
due to slower global trade and investment activities. At the same time, the current account
surplus is expected to narrow following widening deficits in the services and income
accounts.
Domestic demand growth is expected to remain resilient at 5% and 4.8% in 2018 and 2019,
respectively. Growth will be steered by sustained private sector expenditure at 6.5% in
2018 and 6.4% in 2019, constituting about 72% of GDP. Meanwhile, public sector
expenditure is anticipated to further decline to 0.9% in 2019 after recording a marginal
growth of 0.1% in 2018 mainly due to lower investment by public corporations. In 2018,
private consumption will remain as the major growth determinant, expanding by 7.2%.
Growth in private consumption will be supported by stable labour market, benign inflation
and conducive financing condition. Other factors such as zerorisation of GST; subsidised
pump prices; general election; FIFA World Cup season; and termination of toll collection
in two highways provide further impetus to household spending. In 2019, private
consumption is forecast to expand 6.8% on account of higher household earnings arising
from better employment outlook; implementation of higher minimum wage rate; steady
commodity prices; and accommodative financing condition. Furthermore, major events
such as the Langkawi International Maritime and Aerospace Exhibition 2019 (LIMA’19)
coupled with promotional activities for Visit Malaysia 2020 are expected to spur consumer
spending.
Gross exports are projected to expand 4.4% in 2018 led by continued demand for
manufactured goods. Exports of manufactured goods, which account for about 84% of
total exports, are estimated to expand 6.6% mainly attributed to continuous expansion in
electronics cycle and favourable global industrial activities. Receipts from E&E products
are estimated to grow 7.3% in line with global semiconductor sales, which is expected to
expand 15.7% in 2018. Growth will be supported by favourable performance of
134
semiconductors, automatic data processing equipment and electronic machines
apparatus. Demand for E&E products from major trading partners are expected to remain
favourable. Meanwhile, exports of non E&E are anticipated to increase 6.1% in 2018,
mainly driven by chemicals and chemical products; manufactures of metal; petroleum
products; as well as optical and scientific equipment.
In 2018 and 2019, the labour market is expected to remain favourable. The unemployment
rate is expected to be sustained at 3.3% with more new jobs in the economy. Total
employed persons are projected to increase to 14.8 million and 15.1 million in 2018 and
2019, respectively. In 2019, about 9.3 million persons will be recruited
During the first half of 2018, the unemployment rate remained 3.4%. Total labour force
increased 1.6% to 15.1 million. Meanwhile, total employed persons increased 1.7% to 14.6
million with the largest number in the services sector at 9.1 million or 62.2% of total
employment, followed by manufacturing (17.3%) and agriculture (11%) sectors. Job
vacancies decreased to 550,449, while the number of active job seekers declined 22.3%
to 241,046, of which 1.7% was new registrants. Amid favourable labour market conditions,
the number of retrenched workers remained low at 9,249 persons. In 2018 and 2019, the
labour market is expected to remain favourable. The unemployment rate is expected to be
sustained at 3.3% with more new jobs in the economy. Total employed persons are
projected to increase to 14.8 million and 15.1 million in 2018 and 2019, respectively. In
2019, about 9.3 million persons will be recruited in the services sector as compared to 9
million in 2018. Meanwhile, total employed persons in the manufacturing and agriculture
sectors are projected to be sustained at 2.5 million and 1.9 million in 2018 and 2019,
respectively.
Value added of the construction sector grew 4.8% (y-o-y) during the first half of 2018
supported by civil engineering subsector. For the year, the sector is expected to expand,
albeit moderately at 4.5% following near completion of several mega projects and
overhang, particularly in the non-residential subsector. The growth momentum is expected
to improve slightly in 2019, with the sector expanding 4.7%, following an increase in new
planned supply in the affordable homes and industrial segments. However, review of
several infrastructure projects as well as subdued activities in non-residential subsector is
expected to weigh down the sector’s performance.
The civil engineering subsector is expected to remain as the driver of the construction
sector in 2018 and 2019 largely supported by ongoing projects. Among the infrastructure
projects include the Pan Borneo Highway in Sabah and Sarawak; Central Spine Road in
East Coast; as well as Mass Rapid Transit (MRT) Sungai Buloh – Serdang – Putrajaya
(SSP) Line and Light Rail Transit Line 3 (LRT3) in Klang Valley. Meanwhile, in the
petrochemical and power plant segment, ongoing projects are the Deepwater Petroleum
Terminal 2 at the Refinery and Petrochemical Integrated Development (RAPID) Complex
in Pengerang, Johor; Floating LNG 2 in Sabah; and the Central Processing Platform in
Bokor, Sarawak. In addition, mixed-development projects such as the Tun Razak
Exchange and Bukit Bintang City Centre in Kuala Lumpur are expected to support the
growth of the subsector.
135
The residential subsector is expected to grow at a marginal pace following the mismatch
between supply and demand. Towards this end, the Government suspended the
development of residential properties, serviced apartments and luxury condominiums
priced over RM1 million in prime areas, effective November 2017. In addition, the
developers are focusing on sales of existing projects to address the overhang issues.
Meanwhile, the Government will continue to provide affordable housing for the low- and
middle-income groups through various programmes.
136
SECTION 8.0 OTHER INFORMATION
As at the LPD, Cagamas is not engaged in any litigation, claims or arbitration, either as
plaintiff or defendant, which has a material adverse effect on the financial position or
business of Cagamas and, to the best of the Board's knowledge and belief, the Board,
having made all reasonable enquiries is not aware of any proceedings pending or
threatened or of any facts likely to give rise to any proceedings which may materially and
adversely affect the financial position or business of Cagamas.
Save as disclosed in the Information Memorandum, Cagamas is not aware of any material
contingent liabilities or material capital commitments, which upon becoming enforceable
may have a substantial impact on its financial position and/or the business as at the LPD.
(a) CIMB
CIMB and CIMB Bank are subsidiaries of CIMB Group Holdings Berhad.
In addition, CIMB has considered the factors involved and it believes that
objectivity and independence in carrying out its roles as a Joint Principal
Adviser/Joint Lead Arranger and a Joint Lead Manager in relation to the MTN
Programme, have been and will be maintained at all times for the following
reasons:
(b) the roles of CIMB will be governed by the relevant agreements and
documentations which shall clearly set out the rights, duties and
responsibilities of CIMB in its capacity as a Joint Principal Adviser/Joint
Lead Arranger and a Joint Lead Manager in relation to the MTN
Programme and shall be carried out on an arms-length basis;
(c) the conduct of CIMB is regulated strictly by the FSA and the CMSA and
by its own internal controls and checks.
137
The Board has been informed and is aware of the situations as described above.
Notwithstanding the above, the Board has approved the above said arrangement
and is agreeable to proceed with the implementation of the MTN Programme
based on the present arrangement and terms.
In addition, HSBC Amanah has considered the factors involved and it believes
that objectivity and independence in carrying out its roles as a Joint Principal
Adviser/Joint Lead Arranger, Joint Shariah Adviser and a Joint Lead Manager in
relation to the MTN Programme, have been and will be maintained at all times for
the following reasons:
(a) HSBC Amanah is a licensed Islamic bank and its appointment as a Joint
Principal Adviser/Joint Lead Arranger, Joint Shariah Adviser and a Joint
Lead Manager in relation to the MTN Programme is in the ordinary course
of its business;
(b) the roles of HSBC Amanah will be governed by the relevant agreements
and documentations which shall clearly set out the rights, duties and
responsibilities of HSBC Amanah in its capacities as a Joint Principal
Adviser/Joint Lead Arranger, Joint Shariah Adviser and a Joint Lead
Manager in relation to the MTN Programme and shall be carried out on
an arms-length basis; and
(c) the conduct of HSBC Amanah is regulated strictly by the IFSA, the CMSA
and by its own internal controls and checks.
The Board has been informed and is aware of the situations as described above.
Notwithstanding the above, the Board has approved the above said arrangement
and is agreeable to proceed with the implementation of the MTN Programme
based on the present arrangement and terms.
138
In addition, HSBC Bank has considered the factors involved and it believes that
objectivity and independence in carrying out its roles as a Joint Principal
Adviser/Joint Lead Arranger and a Joint Lead Manager in relation to the MTN
Programme, have been and will be maintained at all times for the following
reasons:
(a) HSBC Bank is a licensed bank and its appointment as a Joint Principal
Adviser/Joint Lead Arranger and a Joint Lead Manager in relation to the
MTN Programme is in the ordinary course of its business;
(b) the roles of HSBC Bank will be governed by the relevant agreements and
documentations which shall clearly set out the rights, duties and
responsibilities of HSBC Bank in its capacities as a Joint Principal
Adviser/Joint Lead Arranger and a Joint Lead Manager in relation to the
MTN Programme and shall be carried out on an arms-length basis; and
(c) the conduct of HSBC Bank is regulated strictly by the FSA, the CMSA and
by its own internal controls and checks.
The Board has been informed and is aware of the situations as described above.
Notwithstanding the above, the Board has approved the above said arrangement
and is agreeable to proceed with the implementation of the MTN Programme
based on the present arrangement and terms.
(d) MIBB
MIBB has considered the factors involved and it believes that objectivity and
independence in carrying out its roles as a Joint Principal Adviser/Joint Lead
Arranger and a Joint Lead Manager in relation to the MTN Programme, have been
and will be maintained at all times for the following reasons:
(b) the roles of MIBB will be governed by the relevant agreements and
documentations which shall clearly set out the rights, duties and
responsibilities of MIBB in its capacity as a Joint Principal Adviser/Joint
Lead Arranger and a Joint Lead Manager in relation to the MTN
Programme and shall be carried out on an arms-length basis; and
(c) the conduct of MIBB is regulated strictly by the FSA, the CMSA and by its
own internal controls and checks.
139
The Board has been informed and is aware of the situations as described above.
Notwithstanding the above, the Board has approved the above said arrangement
and is agreeable to proceed with the implementation of the MTN Programme
based on the present arrangement and terms.
(e) AIBB
AIBB AmBank and AmIslamic Bank Berhad ("AmIslamic") are entities within the
same group of companies that are wholly owned by AMMB Holdings.
In addition, AIBB has considered the factors involved and it believes its objectivity
and independence in carrying out its role as a Joint Lead Manager in relation to
the MTN Programme, have been and will be maintained at all times for the
following reasons:
(b) AIBB is also governed by its own internal controls and checks and
balances with AIBB’s employees being competent and skilled to carry out
in a professional manner and in the best interest of its clients, the
functions required of the role of a Joint Lead Manager;
(c) AIBB’s Joint Lead Manager role will be governed by relevant agreements
and documentations which shall clearly set out the rights, duties and
responsibilities of AIBB in its capacity as a Joint Lead Manager in relation
to the MTN Programme and such agreements and documentations shall
be entered into on an arms’ length basis; and
(d) the conduct of AmBank and AmIslamic is regulated strictly by the FSA
and the IFSA, respectively and by their own internal controls and checks
and balances and they had entered into the abovementioned transactions
with Cagamas in the ordinary course of their business.
The Board has been informed and is aware of the situations as described above.
Notwithstanding the above, the Board has approved the above said arrangement
and is agreeable to proceed with the implementation of the MTN Programme
based on the present arrangement and terms.
140
(f) HLBB
In addition, HLBB has considered the factors involved and it believes that
objectivity and independence in carrying out its roles as a Joint Lead Manager in
relation to the MTN Programme, have been and will be maintained at all times for
the following reasons:
(a) HLBB is a licensed bank and its appointment as, amongst others, a Joint
Lead Manager in relation to the MTN Programme is in the ordinary course
of its business;
(b) the roles of HLBB will be governed by the relevant agreements and
documentations which shall clearly set out the rights, duties and
responsibilities of HLBB in its capacity as, amongst others, a Joint Lead
Manager in relation to the MTN Programme and shall be carried out on
an arms-length basis; and
(c) the conduct of HLBB is regulated strictly by the FSA and by its own
internal controls and checks.
The Board has been informed and is aware of the situations as described above.
Notwithstanding the above, the Board has approved the above said arrangement
and is agreeable to proceed with the implementation of the MTN Programme
based on the present arrangement and terms.
(g) RHB
Save as disclosed below, as at the date hereof and after making enquiries as were
reasonable in the circumstances, RHB is not aware of any circumstances that
would give rise to a conflict of interest in its capacity as a Joint Lead Manager in
relation to the MTN Programme:
(a) the Board has been informed and is aware of the potential conflict of
interest situations described above. Notwithstanding the above, the Board
has approved the above said arrangement and is agreeable to proceed
with the implementation of the MTN Programme based on the present
arrangement and terms.
141
(b) RHB is a licensed investment bank regulated by BNM and the SC and
governed under, inter alia, the FSA and the CMSA and its appointment as
a Joint Lead Manager for the MTN Programme is in its ordinary course of
business; and
(c) RHB’s role in relation to the MTN Programme will be governed by the
relevant agreements and documentation which shall clearly set out the
rights, duties and responsibilities of RHB in its capacity as a Joint Lead
Manager in relation to the MTN Programme and shall be carried out on an
arms-length basis.
Save as disclosed below, as at the date hereof and after making enquiries as were
reasonable in the circumstances, RHB Islamic is not aware of any circumstances
that would give rise to a conflict of interest in its capacity as a Joint Lead Manager
in relation to the MTN Programme:
(a) the Board has been informed and is aware of the potential conflict of
interest situations described above. Notwithstanding the above, the Board
has approved the above said arrangement and is agreeable to proceed
with the implementation of the MTN Programme based on the present
arrangement and terms.
(c) RHB Islamic’s role in relation to the MTN Programme will be governed by
the relevant agreements and documentation which shall clearly set out
the rights, duties and responsibilities of RHB Islamic in its capacity as a
Joint Lead Manager in relation to the MTN Programme and shall be
carried out on an arms-length basis.
(i) SCB
142
SCB has considered the factors involved and it believes that objectivity and
independence in carrying out its roles as a Joint Lead Manager in relation to the
MTN Programme, have been and will be maintained at all times for the following
reasons:
(a) SCB is a licensed bank and its appointment as, amongst others, a Joint
Lead Manager in relation to the MTN Programme is in the ordinary course
of its business;
(b) the roles of SCB will be governed by the relevant agreements and
documentations which shall clearly set out the rights, duties and
responsibilities of SCB in its capacity as, amongst others, a Joint Lead
Manager in relation to the MTN Programme and shall be carried out on
an arms-length basis; and
(c) the conduct of SCB is regulated strictly by the FSA and by its own internal
controls and checks.
The Board has been informed and is aware of the situations as described above.
Notwithstanding the above, the Board has approved the above said arrangement
and is agreeable to proceed with the implementation of the MTN Programme
based on the present arrangement and terms.
CIMB Islamic is wholly-owned by CIMB Bank. CIMB Islamic and CIMB Bank are
subsidiaries of CIMB Group Holdings Berhad.
CIMB Islamic has considered the factors involved and it believes that objectivity
and independence in carrying out its role as a Joint Shariah Adviser in relation to
the Sukuk Cagamas under the MTN Programme, have been and will be
maintained at all times for the following reasons:
(a) CIMB Islamic is a licensed Islamic bank and its appointment as a Joint
Shariah Adviser in relation to the MTN Programme is in the ordinary
course of its business;
(b) the role of CIMB Islamic will be governed by the relevant agreements and
documentations which shall clearly set out the rights, duties and
responsibilities of CIMB Islamic in its capacity as a Joint Shariah Adviser
143
in relation to the MTN Programme and shall be carried out on an arms-
length basis; and
(c) the conduct of CIMB Islamic is regulated strictly by the IFSA and by its
own internal controls and checks.
The Board has been informed and is aware of the situations as described above.
Notwithstanding the above, the Board has approved the above said arrangement
and is agreeable to proceed with the implementation of the MTN Programme
based on the present arrangement and terms.
Maybank Islamic has considered the factors involved and it believes that
objectivity and independence in carrying out its roles as a Joint Shariah Adviser in
relation to the MTN Programme, have been and will be maintained at all times for
the following reasons:
(a) Maybank Islamic is a licensed Islamic bank and its appointment as a Joint
Shariah Adviser in relation to the MTN Programme is in the ordinary
course of its business;
(b) the roles of Maybank Islamic will be governed by the relevant agreements
and documentations which shall clearly set out the rights, duties and
responsibilities of Maybank Islamic in its capacity as a Joint Shariah
Adviser in relation to the MTN Programme and shall be carried out on an
arms-length basis; and
(c) the conduct of Maybank Islamic is regulated strictly by the IFSA and by
its own internal controls and checks.
The Board has been informed and is aware of the situations as described above.
Notwithstanding the above, the Board has approved the above said arrangement
and is agreeable to proceed with the implementation of the MTN Programme
based on the present arrangement and terms.
As at the LPD and after making enquiries as were reasonable in the circumstances,
Amanie Advisors Sdn Bhd confirms that, to the best of its knowledge and belief,
there is no existing or potential conflict-of-interest in its capacity as a Joint Shariah
144
Adviser (only in respect of the issue of Sukuk Cagamas under the Wakalah Bil
Istithmar principle) in relation to Sukuk Cagamas under the MTN Programme.
As at the LPD and after making enquiries as were reasonable in the circumstances,
Christopher & Lee Ong confirms that, to the best of its knowledge and belief, there
is no existing or potential conflict-of-interest in its capacity as the legal counsel to
the Joint Principal Advisers/Joint Lead Arrangers in relation to the MTN
Programme.
As at the LPD and after making enquiries as were reasonable in the circumstances,
PB Trustee Services Berhad confirms that, to the best of its knowledge and belief,
there is no existing or potential conflict-of-interest in its capacity as the trustee in
relation to the MTN Programme.
(o) MARC
Datuk Azizan bin Haji Abd Rahman is a non-executive director on the Board of
Directors of Cagamas. He is also the independent non-executive chairman of
MARC.
The Board has been informed and is aware of the situations as described above.
Notwithstanding the above, the Board has approved the above said arrangement
and is agreeable to proceed with the implementation of the MTN Programme
based on the present arrangement and terms.
145
APPENDIX I
Audited financial statements of Cagamas for the Financial Year Ended 2017
APPENDIX II
Second Opinion
THE ISSUER
Cagamas Berhad
(Company No. 157931-A)
Level 32
The Gardens North Tower
Mid Valley City
Lingkaran Syed Putra
59200 Kuala Lumpur
CAGAMAS BERHAD
(Incorporated in Malaysia)
Lodged by:
CAGAMAS BERHAD (157931-A)
Level 32, The Gardens North Tower,
Mid Valley City, Lingkaran Syed Putra,
59200 Kuala Lumpur.
Tel. +603 2262 1800 Fax. +603 2282 9125
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
CONTENT PAGES
INCOME STATEMENTS 8
CAGAMAS BERHAD
(Incorporated in Malaysia)
DIRECTORS' REPORT
The Directors have pleasure in submitting their report and the audited financial statements of
the Group and the Company for the financial year ended 31 December 2017.
PRINCIPAL ACTIVITIES
The principal activities of the Company consist of the purchases of mortgage loans, personal
loans and hire purchase and leasing debts from primary lenders approved by the Company
and the issuance of bonds and notes to finance these purchases. The Company also
purchases Islamic financing facilities such as home financing, personal financing and hire
purchase financing and funded by issuance of Sukuk. Subsidiary companies of the Company
are Cagamas Global PLC (“CGP”) and Cagamas Global Sukuk Berhad (“CGS”):
CGP is a conventional fund raising vehicle incorporated in Labuan. Its main principal
activities is to undertake the issuance of bonds and notes in foreign currency.
CGS is an Islamic fund raising vehicle. Its main principal activities is to undertake the
issuance of Sukuk in foreign currency.
There were no other significant changes in the nature of these activities during the financial year,
other than declared above.
FINANCIAL RESULTS
Group Company
RM’000 RM’000
DIVIDEND
The dividends paid by the Company since 31 December 2016 were as follows:
RM’000
1
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
DIVIDEND (CONTINUED)
The Directors now recommend the payment of a final dividend of 15 sen per share on
150,000,000 ordinary shares amounting to RM22,500,000 for the financial year ended 31
December 2017 which is subject to approval of the member at the forthcoming Annual General
Meeting of the Company.
SHARE CAPITAL
There was no change in the issued ordinary share capital of the Company during the financial
year.
All material transfers to or from reserves and provisions during the financial year are reflected
in the financial statements.
RAM Rating Services Berhad (RAM Ratings) has assigned Cagamas Berhad’s Global, ASEAN
and national-scale Corporate Credit Ratings at gA2/Stable/gP1, seaAAA/Stable/seaP1 and
AAA/Stable/P1, respectively. In addition, Malaysian Rating Corporation Berhad (MARC) has also
assigned Cagamas Berhad’s bonds and sukuk issues ratings at AAA/MARC-1 and AAAIS/MARC-
1IS respectively. Moody’s Investors Service (Moody’s) has assigned local and foreign currency
issuer ratings of A3 that is in line with Malaysian sovereign ratings.
In addition, RAM and Moody’s have maintained the ratings of gA2(s) and A3 respectively to the
USD2.5 billion Multicurrency Medium Term Note (“EMTN”) Programme and USD2.5 billion
Multicurrency Sukuk Programme issued by its subsidiaries.
Most of the transactions of the Group and the Company involving mortgage loans, hire purchase
and leasing debts, available-for-sale (“AFS”) investment securities, Islamic financing facilities as
well as issuance of unsecured bonds and Sukuk are done with various financial institutions
including those who are substantial shareholders of Cagamas Holdings Berhad ("CHB") and
subsidiaries of the Company.
During the financial year ended 31 December 2017, the Company entered into a shared service
arrangement with Cagamas SRP Berhad (“CSRP”). Under this arrangement, the Company sets
out the scope of services performed for CSRP in the normal course of business. The details and
nature of the transactions are disclosed in Note 34 to the financial statements.
2
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
DIRECTORS
The Directors in office during the financial year and during the period from the end of the financial
year to date of the report are:
Datuk Shaik Abdul Rasheed bin Abdul Ghaffour (appointed as Chairman on 1.7.2017)
Dato' Halipah binti Esa
Dr. Roslan bin A. Ghaffar
Dato' Md Agil bin Mohd Natt
Encik Philip Tan Puay Koon
Dato' Wee Yiaw Hin
Datuk Chung Chee Leong
Encik Nazrul Hisyam bin Mohd Noh
Dato' Ooi Sang Kuang (redesignated as Director on 1.7.2017 and resigned on 1.1.2018)
Encik Tang Wing Chew (resigned on 1.3.2017)
The names of the directors of subsidiaries are set out in the respective subsidiary’s statutory
financial statements and the said information is deemed incorporated herein by such reference
and made a part hereof.
In accordance with Articles 19.13 and 19.14 of the Company's Articles of Association, Dr. Roslan
bin A. Ghaffar and Encik Phillip Tan Puay Koon retire by rotation at the forthcoming Annual
General Meeting and being eligible, offer themselves for re-election.
Since the end of the previous financial year, no Director has received or become entitled to
receive a benefit and remuneration (other than Directors' remuneration as disclosed in Note 31 to
the financial statements) by reason of a contract made by the Group or the Company or by a
related corporation with the Director or with a firm of which the Director is a member, or with a
company in which the Director has a substantial financial interest.
Neither during nor at the end of the financial year were the Group and the Company are a party to
any arrangements whose object or objects were to enable the Directors to acquire benefits by
means of the acquisition of shares in, or debentures of the Group and the Company or any other
body corporate.
According to the register of Directors' shareholdings required to be kept under Section 59 of the
Companies Act, 2016, the Directors in office at the end of the financial year did not hold any
interest in shares or options over shares in the Company or its subsidiaries or its holding
company or subsidiaries of the holding company during the financial year.
3
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Before the financial statements of the Group and the Company were prepared, the Directors took
reasonable steps:
(a) to ascertain that proper action had been taken in relation to the writing off of bad debts
and the making of allowance for doubtful debts and satisfied themselves that all known
bad debts had been written off and that adequate allowance had been made for doubtful
debts; and
(b) to ensure that any current assets, other than debts, which were unlikely to realised in
the ordinary course of business including the values of current assets as shown in the
accounting records of the Group and the Company had been written down to an amount
which the current assets might be expected so to realise.
At the date of this report, the Directors are not aware of any circumstances:
(a) which would render the amounts to be written off for bad debts or the amount of the
allowance for doubtful debts in the financial statements of the Group and the Company
inadequate to any substantial extent; or
(b) which would render the values attributed to current assets in the financial statements of
the Group and the Company misleading; or
(c) which have arisen which render adherence to the existing method of valuation of assets
or liabilities of the Group and the Company misleading or inappropriate.
(a) any charge on the assets of the Group and the Company which has arisen since the end
of the financial year which secures the liability of any other person; or
(b) any contingent liability of the Group and the Company which has arisen since the end of
the financial year.
No contingent or other liability has become enforceable or is likely to become enforceable within
the period of twelve months after the end of the financial year which, in the opinion of the
Directors, will or may affect the ability of the Group and the Company to meet its obligations when
they fall due.
At the date of this report, the Directors are not aware of any circumstances not otherwise dealt
with in this report or the financial statements which would render any amount stated in the
financial statements misleading or inappropriate.
4
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
(a) the results of the operations of the Group and the Company during the financial year were
not substantially affected by any item, transaction or event of a material and unusual
nature; and
(b) there has not arisen in the interval between the end of the financial year and the date of
this report any item, transaction or event of a material and unusual nature likely to affect
substantially the results of the operations of the Group and the Company for the financial
year in which this report is made.
SUBSIDIARIES
The Directors regard Cagamas Holdings Berhad, a company incorporated in Malaysia, as the
ultimate holding company.
Cagamas recorded RM14.0 billion of purchases of loans and financing under PWR scheme
(2016: RM5.7 billion) and RM100.0 million purchase of loans under PWOR scheme (2016: Nil).
Cagamas’ net outstanding loans and financing rose by 16% to RM37.6 billion (2016: RM32.5
billion). As at the end of 2017, residential mortgage dominated Cagamas’ portfolio at 98.8%,
followed by hire purchase loans and financing at 0.8% and personal loans and financing at 0.4%.
Cagamas’s Islamic asset portfolio against conventional assets contracted to a ratio of 32:68, while
PWR and PWOR loans and financing portfolios were at 65% and 35% respectively. The gross
impaired loans and financing under the PWOR scheme remained low at 0.72%, while net
impaired loans and financing was at 0.23%.
The significant event during the financial year is disclosed in Note 45 to the financial statements.
5
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
Note 2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
ASSETS
7
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
INCOME STATEMENTS
FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2017
Group Company
Note 2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
(Allowance)/write-back of
impairment losses (719) 8,062 (719) 8,062
──────── ──────── ──────── ────────
PROFIT BEFORE TAXATION
AND ZAKAT 30 320,775 332,035 316,655 330,455
8
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
Note 2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
9
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Issued
ordinary
shares of
RM1 each Non-distributable
Cash flow
Share AFS hedge Regulatory Retained Total
Note capital reserves reserves reserves profits equity
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Total comprehensive income/(loss) for the financial year - 9,805 (15,993) - 241,715 235,527
Transfer to retained profits during the financial year - - - (12,532) 12,532 -
Final dividend in respect of financial year ended
31 December 2016 33 - - - - (22,500) (22,500)
Interim dividend in respect of financial year ended
31 December 2017 33 - - - - (7,500) (7,500)
──────── ──────── ──────── ──────── ──────── ────────
Balance as at 31 December 2017 150,000 (724) (28,357) 161,032 3,139,614 3,421,565
════════ ════════ ════════ ════════ ════════ ════════
10
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Issued
ordinary
shares of
RM1 each Non-distributable
Cash flow
Share AFS hedge Regulatory Retained Total
Note capital reserves reserves reserves profits equity
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Total comprehensive income/(loss) for the financial year - 4,108 (28,302) - 255,036 230,842
Transfer to retained profits during the financial year - - - (16,083) 16,083 -
Final dividend in respect of financial year ended
31 December 2015 33 - - - - (22,500) (22,500)
Interim dividend in respect of financial year ended
31 December 2016 33 - - - - (7,500) (7,500)
──────── ──────── ──────── ──────── ──────── ────────
Balance as at 31 December 2016 150,000 (10,529) (12,364) 173,564 2,915,367 3,216,038
════════ ════════ ════════ ════════ ════════ ════════
11
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Issued
ordinary
shares of
RM1 each Non-distributable
Cash flow
Company Share AFS hedge Regulatory Retained Total
Note capital reserves reserves reserves profits equity
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Total comprehensive income/(loss) for the financial year - 9,805 (15,993) - 237,615 231,427
Transfer to retained profits during the financial year - - - (12,532) 12,532 -
Final dividend in respect of financial year ended
31 December 2016 33 - - - - (22,500) (22,500)
Interim dividend in respect of financial year ended
31 December 2017 33 - - - - (7,500) (7,500)
──────── ──────── ──────── ──────── ──────── ────────
Balance as at 31 December 2017 150,000 (724) (28,357) 161,032 3,131,876 3,413,827
════════ ════════ ════════ ════════ ════════ ════════
12
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Issued
ordinary
shares of
RM1 each Non-distributable
Cash flow
Company Share AFS hedge Regulatory Retained Total
Note capital reserves reserves reserves profits equity
RM'000 RM'000 RM'000 RM'000 RM'000 RM'000
Total comprehensive income/(loss) for the financial year - 4,108 (28,302) - 253,476 229,282
Transfer to retained profits during the financial year - - - (16,083) 16,083 -
Final dividend in respect of financial year ended
31 December 2015 33 - - - - (22,500) (22,500)
Interim dividend in respect of financial year ended
31 December 2016 33 - - - - (7,500) (7,500)
──────── ──────── ──────── ──────── ──────── ────────
Balance as at 31 December 2016 150,000 (10,529) (12,364) 173,564 2,911,729 3,212,400
════════ ════════ ════════ ════════ ════════ ════════
13
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
Note 2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
OPERATING ACTIVITIES
14
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
Note 2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
15
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
Note 2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
INVESTING ACTIVITIES
FINANCING ACTIVITY
16
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
1 GENERAL INFORMATION
The principal activities of the Company consist of the purchases of mortgage loans,
personal loans and hire purchase and leasing debts from primary lenders approved by
the Company and the issuance of bonds and notes to finance these purchases. The
Company also purchases Islamic financing facilities such as home financing, personal
financing and hire purchase financing and funded by issuance of Sukuk. Subsidiary
companies of the Company are Cagamas Global PLC (“CGP”) and Cagamas Global
Sukuk Berhad (“CGS”):
CGP is a conventional fund raising vehicle incorporated in Labuan. Its main principal
activities is to undertake the issuance of bonds and notes in foreign currency.
CGS is an Islamic fund raising vehicle. Its main principal activities is to undertake the
issuance of Sukuk in foreign currency.
The address of the registered office and principal place of business is Level 32, The
Gardens North Tower, Mid Valley City, Lingkaran Syed Putra, 59200 Kuala Lumpur.
The following accounting policies have been applied consistently in dealing with items
which are considered material in relation to the financial statements. These policies have
been consistently applied to all the years presented, unless otherwise stated.
The financial statements of the Group and the Company have been prepared
in accordance with the Malaysian Financial Reporting Standards ("MFRS"),
International Financial Reporting Standards and the requirements of the
Companies Act, 2016 in Malaysia.
The financial statements of the Group and the Company have been prepared
under the historical cost convention unless otherwise indicated in this summary of
significant accounting policies.
The Islamic operations of the Group and the Company refer to the purchases
of Islamic house financing assets, Islamic hire purchase assets, Islamic
personal financing, Islamic mortgage assets and Islamic hire purchases assets
from approved originators, issuance of Sukuk under Shariah principles and
acquisition, investment in and trading of Islamic financial instruments.
17
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
18
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
19
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
20
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
21
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
22
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Subsidiaries
The Group applies the acquisition method to account for business combinations.
The consideration transferred for the acquisition of a subsidiary is the fair values
of the assets transferred, the liabilities incurred to the former owners of the
acquiree and the equity interest issued by the Group. The consideration
transferred includes the fair value of any asset or liability resulting from a
contingent consideration arrangement. Identifiable assets acquired and liabilities
and contingent liabilities assumed in the business combination are measured
initially at their fair values at the acquisition date.
23
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Subsidiaries (Continued)
Note 1 to the financial statements describes the principal activities of the Group
and the Company, which are inter alia, the purchases of mortgage loans,
personal loans and hire purchase and leasing debts. These activities are also set
out in the object clauses of the Memorandum of Association of the Company.
2.4 Mortgage assets and hire purchase assets/Islamic mortgage assets and Islamic
hire purchase assets
Mortgage assets and hire purchase assets/Islamic mortgage assets and Islamic
hire purchase assets are acquired by the Group and the Company from the
originators at fair values. The originator acts as a servicer and remits the principal
and interest/profit income from the assets to the Group and the Company at
specified intervals as agreed by both parties.
24
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
2.4 Mortgage assets and hire purchase assets/Islamic mortgage assets and Islamic
hire purchase assets (continued)
AFS investment securities are securities that are acquired and held for yield or
capital growth and are usually held for an indefinite period of time, which may be
sold in response to market conditions.
Purchases of investments are recognised on the date the Group and the
Company contract to purchase the investment. Investments are derecognised
when the Group and the Company have contracted to sell the investment and
transferred substantially all risks and rewards of ownership.
See accounting policy on impairment of financial assets in Note 2.8 (a) to the
financial statements.
25
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Property and equipment are stated at cost less accumulated depreciation and
accumulated impairment losses, if any. Cost includes expenditure that is directly
attributable to the acquisition of the items.
Depreciation is calculated on a straight line basis to write off the cost of the
assets over their estimated useful lives, with the exception of work-in-progress
which is not depreciated. Depreciation rates for each category of property and
equipment are summarised as follows:
At each statement of financial position date, the Group and the Company assess
whether there is any indication of impairment. If such indications exist, an
analysis is performed to assess whether the carrying amount of the asset is
fully recoverable. A write down is made if the carrying amount exceeds the
recoverable amount. See accounting policy on impairment of non-financial assets
in Note 2.8 (b) to the financial statements.
26
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The Group and the Company assess at the end of the reporting
period whether there is objective evidence that a financial asset
or group of financial assets is impaired. A financial asset or group
of financial assets is impaired and impairment losses are
incurred, if and only if, there is objective evidence of impairment
as a result of one or more events that occurred after the
initial recognition of the asset (a "loss event") and that loss event
(or events) has an impact on the estimated future cash flows of
the financial asset or group of financial assets that can be
reliably estimated.
27
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The Group and the Company assess at the end of the reporting
period whether there is objective evidence that a financial asset
or group of financial assets is impaired. If any such evidence
exists, the cumulative loss, measured as the difference between
the acquisition cost and the current fair value, less any
impairment loss on that financial asset previously recognised, is
removed from equity and recognised in the income statement. If,
in the subsequent period, the fair value of a debt instrument
classified as AFS investment securities increases and the
increase can be objectively related to an event occurring after
the impairment loss was recognised in the income statement,
the impairment loss is reversed through the income statement.
Assets that have an indefinite useful life are not subject to amortisation
and are tested annually for impairment. Assets that are subject to
depreciation or amortisation are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount
by which the carrying amount of the asset exceeds its recoverable
amount. The recoverable amount is the higher of an asset's fair value
less costs to sell and value in use. The impairment loss is charged to the
income statement, unless it reverses a previous revaluation in which it is
charged to the revaluation surplus. Any subsequent increase in
recoverable amount is recognised in the income statement.
Interest income for conventional assets and profit income on Islamic assets are
recognised using the effective interest/profit rate method. Accretion of discount is
recognised using the effective yield method.
2.10 Premium and discount on unsecured bearer bonds, notes and Sukuk
28
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Current tax expense represents taxation at the current rate based on taxable
profit earned during the financial year.
Deferred tax liabilities are recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that future
taxable profits will be available against which the deductible temporary
differences or unused tax losses can be utilised.
Deferred tax is determined using tax rates (and tax laws) that have been enacted
or substantially enacted by the statement of financial position date and are
expected to apply when the related deferred tax asset is realised or deferred tax
liability is settled.
For the purpose of statement of cash flows, cash and cash equivalents
comprise cash and bank balances and deposits that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in
value.
Financial assets and liabilities are offset and the net amount reported in the
statement of financial position when there is a legally enforceable right to set off
the recognised amounts and there is an intention to settle on a net basis, or
realise the asset and settle the liability simultaneously. The legally enforceable
right must not be contingent on future events and must be enforceable in the
normal course of business and in the event of default, insolvency or bankruptcy.
29
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
For derivatives that are not designated as hedging instruments, losses and gains
from the changes in fair value are taken to the income statement.
To apply hedge accounting, the Group and the Company document at the
inception the relationship between the hedging instrument and hedged item,
including the risk management objective for undertaking various hedge
transactions and methods used to assess the effectiveness of the hedge.
The Group and the Company also document its assessment, both at hedge
inception and on an ongoing basis, on whether the derivative is highly effective in
offsetting changes in the fair value or cash flows of the hedged items.
The effective portion of changes in the fair value of a derivative designated and
qualifying as a hedge of future cash flows is recognised directly in the cash
flow hedge reserve, and taken to the income statement in the periods when
the hedged item affects gain or loss. The ineffective portion of the gain or loss
is recognised immediately in the income statement under "Non-interest
income".
30
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
2.16 Provisions
Provisions are recognised when the Group and the Company have a present
legal or constructive obligation as a result of past events, when it is probable that
an outflow of resources embodying economic benefits will be required to settle
the obligation, and when a reliable estimate of the amount can be made. Where
the Group and the Company expect a provision to be reimbursed (for example,
under an insurance contract) the reimbursement is recognised as separate asset
but only when the reimbursement is virtually certain. Provisions are not
recognised for future operating losses.
Where there are a number of similar obligations, the likelihood that an outflow will
be required in settlement is determined by considering the class of obligations as
a whole. A provision is recognised even if the likelihood of an outflow with respect
to any one item included in the same class of obligations may be small.
2.17 Zakat
Zakat or "alms giving" is mandatory for all Muslims who possesses minimum nisab.
The Group and the Company recognise its obligations towards the payment of
zakat on business. Zakat for the current period is recognised when the Group and
the Company have a current zakat obligation as a result of a zakat assessment.
The amount of zakat expenses shall be assessed when the Group and the
Company have been in operation for at least 12 months, i.e. for the period known
as haul.
31
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
32
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Computer software and service rights are tested annually for any
indication of impairment. If such indications exist, an analysis is
performed to assess whether the carrying amount of the asset is fully
recoverable. A write-down is made if the carrying amount exceeds the
recoverable amount. Computer software and service rights are carried at
cost less accumulated amortisation and accumulated impairment losses.
See accounting policy on impairment of non-financial assets in Note 2.8
(b) to the financial statements.
(a) Classification
33
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
(a) Description
In assessing fair value of other financial instruments, the Group and the
Company use a variety of methods and make assumptions that are
based on market conditions existing at each statement of financial
position date. Quoted market prices or dealer quotes for the specific or
similar instruments are used for long term debt. Other techniques, such
as option pricing models and estimated discounted value of future cash
flows, are used to determine the fair value for the remaining financial
instruments. In particular, the fair value of financial liabilities is estimated
by discounting the future contractual cash flows at the current market
interest rate available to the Group and the Company for similar financial
instruments.
34
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The Group and the Company do not recognise a contingent liability but discloses
its existence in the financial statements. A contingent liability is a possible
obligation that arises from past events whose existence will be confirmed by the
occurrence or non-occurrence of one or more uncertain future events beyond the
control of the Group and the Company or a present obligation that is not
recognised because it is not probable that an outflow of resources will be required
to settle the obligation. A contingent liability also arises in the extremely rare case
where there is a liability that cannot be recognised because it cannot be
measured reliably.
The Group and the Company do not recognise contingent assets but discloses
its existence where inflows of economic benefits are probable, but not virtually
certain. A contingent asset is a possible asset that arises from past events
whose existence will be confirmed by the occurrence or non-occurrence of one
or more uncertain future events beyond the control of the Group and the Company.
35
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The preparation of financial statements in conformity with MFRS requires the use of
certain critical accounting estimates and exercise of judgement by management in the
process of applying the Group and the Company's accounting policies.
Estimates and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to
be reasonable under the circumstances. The resulting accounting estimates will, by
definition, seldom equal the related actual results. The estimates and assumptions that
have a significant risk of causing a material adjustment to the carrying amounts of the
asset and liability within the next financial year are outlined below.
The estimates and assumptions considered most likely to have an impact on the
Group’s and the Company's results and financial positions are those relating to
the fair valuation of derivatives and unquoted AFS investment securities for
which valuation models are used. The Group and the Company have exercised its
judgement to select t h e appropriate valuation techniques for these instruments.
However, changes in the assumptions made and market factors used could affect
the reported fair values.
The Group and the Company make allowances for losses on mortgage assets
and hire purchase assets/Islamic mortgage assets and Islamic hire purchase
assets based on assessment of recoverability. Whilst management is guided by
the requirement of MFRS 139, management makes judgement on the future and
other key factors in respect of the recovery of the assets. Among the factors
considered are the net realisable value of the underlying collateral value and the
capacity to generate sufficient cash flows to service the assets.
Assumptions are used to estimate cash flow projections of the principal balance
outstanding of the mortgage assets and hire purchase assets acquired by the
Group and the Company for the purposes of determining accretion of discount.
The estimate is determined based on the historical repayment and redemption
trend of the borrowers of the mortgage assets and hire purchase assets.
Changes in these assumptions could impact the amount recognised as accretion
of discount.
36
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Risk management is an integral part of the Group’s and the Company's business and
operations. It encompasses identification, measurement, analysing, controlling,
monitoring and reporting of risks on an enterprise-wide basis.
In recent years, the Group and the Company enhanced key controls to ensure
effectiveness of risk management and its independence from risk taking activities.
The Group and the Company will continue to develop its human resources, review
existing processes and introduce new approaches in line with best practices in risk
management. It is the Group’s and the Company's aim to create strong risk awareness
amongst both its front-line and back office staff, where risks are systematically managed
and the levels of risk taking are closely aligned to the risk appetite and risk-reward
requirements set by the Board of Directors.
The Board Risk Committee assists the Board of Directors by ensuring that there
is effective oversight and development of strategies, policies and infrastructure to
manage the Group’s and the Company's risks.
Credit risk is the possibility that a borrower or counterparty fails to fulfill its
financial obligations when they fall due. Credit risk arises in the form of on-
statement of financial position items such as lending and investments, as well as
in the form of off- statement of financial position items such as treasury hedging
activities.
37
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The Group and the Company manage its credit risk by screening borrowers and
counterparties, stipulates prudent eligibility criteria and conducts due diligence on
loans and financing to be purchased. The Group and the Company have in place
an internal rating system which sets out the maximum credit limit permissible for
each category of rating. The credit limits are reviewed periodically and are
determined based on a combination of external ratings, internal credit
assessment and business requirements. All credit exposures are monitored on a
regular basis and non-compliance is independently reported to management
and the Board of Directors for immediate remedy.
Credit risk is also mitigated via underlying assets which comprised mainly of
mortgage assets, hire purchase assets/Islamic mortgage assets and Islamic hire
purchase assets.
Market risk is the potential loss arising from adverse movements of market prices
such as foreign exchange rates, interest/profit rates and market prices. The
market risk exposure is limited to interest/profit rate risk and foreign exchange
rates only as the Group and the Company is not engaged in any equity or
commodity trading activities.
The Group and the Company control its market risk exposure by imposing
threshold limits and entering in derivatives contract. The limits are set based on
the Group’s and the Company's risk appetite and the risk-return relationship.
These limits are regularly reviewed and monitored. The Group and the Company
have an Asset Liability Management System which provides tools such as
duration gap analysis, interest/profit sensitivity analysis and income simulations
under different scenarios to monitor the interest/profit rate risk.
The Group and the Company also use derivative instruments such as interest
rate swaps, profit rate swaps, CCS and ICCS to manage and hedge its market
risk exposure against fluctuations in interest rates, profit rates and foreign
currency exchange rate.
Liquidity risk arises when the Group and the Company do not have sufficient
funds to meet its financial obligations when they fall due.
The Group and the Company mitigate its liquidity risk by matching the timing of
purchases of loans and debts with issuance of Bonds or Sukuk. The Group and
the Company plan its cash flow pos i t io ns and monitors closely every business
transaction to ensure that available funds are sufficient to meet business
requirements at all times. In addition, the Group and the Company set aside
considerable reserve liquidity to meet any unexpected shortfall in cash flow or
adverse economic conditions in the financial market.
38
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The Group’s and the Company's liquidity management process, as carried out
within the Company and its subsidiaries and monitored by related departments,
includes:
(a) Managing cash flow mismatch and liquidity gap limits which involves
assessing all of the Group’s and the Company's cash inflows against
its cash outflows to identify the potential for any net cash shortfalls
and the ability of the Group and the Company to meet its cash obligations
when they fall due;
(b) Matching funding of loan purchases against its expected cash flows,
duration and tenure of the funding;
(c) Monitoring the liquidity ratios of the Group and the Company against
internal requirements; and
Operational risk is defined as the potential loss resulting from inadequate or failed
internal processes, people and systems or from external events. It includes
reputational risk associated with the Company’s business practices or market
conduct. It also includes the risk of failing to comply with applicable laws and
regulations.
39
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
The derivative financial instruments used by the Group and the Company to hedge
against its interest/profit rate exposure and foreign currency exposure are IRS, IPRS,
CCS and ICCS.
IRS/IPRS are used by the Group and the Company to hedge against its interest/profit rate
exposure arising from the following transactions:
(i) Issuance of fixed rate bonds/Sukuk to fund floating rate asset purchases
The Group and the Company pay the floating rate receipts from its floating rate
asset purchases to the swap counterparties and receive fixed rate interest/profit
in return. This fixed rate interest/profit will then be utilised to pay coupon on the
fixed rate bonds/Sukuk issued. Hence, the Group and Company are protected
from adverse movements in interest rate.
The Group and the Company will issue short duration bonds/Sukuk and enter into
swap transaction to receive floating rate interest/profit from and pay fixed rate
interest/profit to the swap counterparty. Upon receiving instalment from assets,
the Group and the Company pay fixed rate interest/profit to the swap
counterparty and receive floating rate interest/profit to pay to the
bondholders/Sukukholders.
40
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
CCS and ICCS is also used by the Group and the Company to hedge against foreign
currency exposure arising from the issuance of foreign currency bonds/Sukuk to fund
assets in functional currency. Illustration of the transaction as follows:
(i) At inception, the Group and the Company will swap the proceeds from the foreign
currency bonds/Sukuk to the functional currency at the pre-agreed exchange rate
with CCS/ICCS counterparty.
(ii) In the interim, the Group and the Company will receive interest/profit payment in
foreign currency from the CCS/ICCS counterparty and remit the same to the foreign
currency bonds/Sukuk holders for coupon payment. Simultaneously, the Group and
the Company pay interest/profit to the CCS/ICCS counterparty in functional currency
using instalment received from assets purchased.
(iii) On maturity, the Group and the Company will pay principal in functional currency at
the same pre-agreed exchange rate to the CCS/ICCS counterparty and receive
amount of principal in foreign currency equal to the principal of the foreign currency
bonds/Sukuk which will then be used to redeem the bonds/Sukuk. The Group’s and
the Company’s foreign currency exposures are from Renminbi (“CNH”), Hong Kong
Dollar (“HKD”), US Dollar (“USD”), Singapore Dollar (“SGD”) and Australian Dollar
(“AUD”).
The objective when using any derivative instrument is to ensure that the risk and reward
profile of any transaction is optimised. The intention is to only use derivatives to create
economically effective hedges. However, because of the specific requirements of MFRS
139 to achieve hedge accounting, not all economic hedges are accounted for as
accounting hedges, either because natural accounting offsets are expected or because
achieving hedge accounting would be especially onerous.
The Group and the Company have designated a number of derivative financial
instruments as cash flow hedges during the financial year. The total fair value of
derivatives included within cash flow hedges at 31 December 2017 was a credit of
RM249.5 million (2016: RM853.5 million).
The Group and the Company do not designate any derivatives as fair value hedges.
The Group and the Company do not designate any derivatives as net investment
hedges.
41
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The table below summarises the derivatives financial instruments entered by the Group
and the Company.
Derivatives
designated
as cashflow hedges:
IRS
One to three
years 2,585,000 2,344 (11,386) 1,525,000 4,808 (13,154)
Three to five years 545,000 - (7,904) - - -
More than five years 270,000 7,100 (12,147) 570,000 5,340 (20,434)
──────── ─────── ─────── ──────── ─────── ───────
3,400,000 9,444 (31,437) 2,095,000 10,148 (33,588)
──────── ─────── ─────── ──────── ─────── ───────
CCS/ICCS
Maturing within
one year 2,630,696 157,081 (47,104) 2,452,543 95,405 (237)
One to three
years 3,268,500 299,814 (138,330) 2,800,000 781,808 -
──────── ─────── ─────── ──────── ─────── ───────
5,899,196 456,895 (185,434) 5,252,543 877,213 (237)
──────── ─────── ─────── ──────── ─────── ───────
Derivatives not
designated
as cashflow hedges:
IPRS
Maturing within
one year - - - 500,000 465 -
──────── ─────── ─────── ──────── ─────── ───────
- - - 500,000 465 -
──────── ─────── ─────── ──────── ─────── ───────
9,299,196 466,339 (216,871) 7,847,543 887,826 (33,825)
════════ ═══════ ═══════ ════════ ═══════ ═══════
42
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
At fair value
Malaysian government securities 81,687 10,060
Corporate bonds 504,181 428,062
Government investment issues 627,143 442,200
Sukuk 554,681 348,602
Quasi government Sukuk 602,446 340,328
Unit trust 101,292 81,266
──────── ────────
2,471,430 1,650,518
════════ ════════
Relating to:
Mortgage loans 19,545,875 13,872,352
Hire purchase and leasing debts 286,304 258,746
Personal loans 38,199 165,067
──────── ────────
19,870,378 14,296,165
════════ ════════
43
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Relating to:
Islamic house financing 5,434,616 4,225,536
Islamic hire purchase financing - 382,819
Islamic personal financing 109,762 699,334
──────── ────────
5,544,378 5,307,689
════════ ════════
44
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
45
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
14 OTHER ASSETS
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Furniture
Office and Motor
equipment fittings vehicles Total
RM’000 RM’000 RM’000 RM’000
Group and Company
Cost
Accumulated depreciation
46
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Furniture
Office and Motor
equipment __fittings vehicles ___Total
RM’000 RM’000 RM’000 RM’000
Group and Company
Cost
Accumulated depreciation
47
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
16 INTANGIBLE ASSETS
Computer
Service Computer software Work in
rights software licenses progress ___Total
RM’000 RM’000 RM’000 RM’000 RM’000
Group and Company
Cost
Accumulated amortisation
Cost
Accumulated amortisation
Service rights are amortised on a straight line basis over the tenure of RMBS/IRMBS. The
remaining amortisation period of the intangible assets ranges from 3 to 10 years (2016: 4 to 11
years).
48
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
17 DEFERRED TAXATION
Deferred tax assets and liabilities are offsetted when there is a legally enforceable right to
set off current tax assets against current tax liabilities and when the deferred taxes that
relates to the same tax authority. The following amounts, determined after appropriate
offsetting, are shown on the statement of financial position.
As at 1 January (8,365) 29
Debit/(credit) to income statement (Note 32) 2,057 (767)
Credit to other comprehensive income (1,657) (7,627)
──────── ────────
As at 31 December (7,965) (8,365)
════════ ════════
The movements in deferred tax assets and liabilities of the Group and the Company
during the financial year comprise the following:
2017
49
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The movements in deferred tax assets and liabilities of the Group and the Company
during the financial year comprise the following (continued):
2017
2016
50
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
2016
18 INVESTMENT IN SUBSIDIARIES
Company
2017 2016
RM’000 RM’000
51
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group
2017 2016
Year of Amount Effective Amount Effective
maturity outstanding interest rate outstanding interest rate
RM’000 % RM’000 %
(c) Medium-term
notes 2017 - - 5,795,017 1.600 - 4.640
2018 6,429,072 1.520 – 5.710 4,887,493 1.520 - 5.710
2019 5,078,550 2.745 – 5.280 5,288,107 2.745 - 5.280
2020 4,053,485 2.530 – 6.000 540,000 2.530 - 6.000
2021 315,000 4.150 – 5.380 315,000 4.150 - 5.380
2022 5,510,000 3.900 – 4.650 485,000 3.900 - 4.480
2023 525,000 4.250 – 6.050 525,000 4.250 - 6.050
2024 430,000 4.000 – 5.520 430,000 4.000 - 5.520
2025 640,000 4.550 – 4.850 640,000 4.550 - 4.850
2026 10,000 4.410 10,000 4.410
2027 275,000 4.140 – 4.900 275,000 4.140 - 4.900
2028 890,000 4.750 – 6.500 890,000 4.750 - 6.500
2029 245,000 5.500 – 5.750 245,000 5.500 - 5.750
2035 160,000 5.070 160,000 5.750
───────── ─────────
24,561,107 20,485,617
Add:
Interest payable 201,523 166,929
Unaccreted premium 5,852 29
Less:
Deferred financing fees (4,572) (4,372)
Unamortised discount (1,268) (2,669)
───────── ─────────
24,762,642 20,645,534
───────── ─────────
25,764,940 20,946,586
═════════ ═════════
52
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Company
2017 2016
Year of Amount Effective Amount Effective
maturity outstanding interest rate outstanding interest rate
RM’000 % RM’000 %
(b) Commercial
paper 2018 700,000 3.560 - -
Add:
Interest payable 1,297 -
──────── ────────
701,297 -
──────── ────────
(c) Medium-term
notes 2017 - - 3,530,000 3.300 - 4.640
2018 3,840,000 3.420 – 5.710 3,550,000 3.420 - 5.710
2019 3,045,000 3.650 – 5.280 3,045,000 3.650 - 5.280
2020 2,630,000 4.100 – 6.000 540,000 4.100 - 6.000
2021 315,000 4.150 – 5.380 315,000 4.150 - 5.380
2022 5,510,000 3.900 – 4.650 485,000 3.900 - 4.480
2023 525,000 4.250 – 6.050 525,000 4.250 - 6.050
2024 430,000 4.000 – 5.520 430,000 4.000 - 5.520
2025 640,000 4.550 – 4.850 640,000 4.550 - 4.850
2026 10,000 4.410 10,000 4.140
2027 275,000 4.140 – 4.900 275,000 4.140 - 4.900
2028 890,000 4.750 – 6.500 890,000 4.750 - 6.500
2029 245,000 5.500 – 5.750 245,000 5.500 - 5.750
2035 160,000 5.070 160,000 5.070
──────── ────────
18,515,000 14,640,000
Add:
Interest payable 183,401 142,015
Unaccreted premium 5,852 29
Less:
Unamortised discount (1,268) (2,669)
──────── ────────
18,702,985 14,779,375
──────── ────────
19,705,283 15,080,427
════════ ════════
53
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The maturity structure of unsecured bearer bonds and notes are as follows:
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Bonds with variable coupon plus a spread redeemable at par on the due dates.
Commercial papers are short term instruments with maturities ranging from 1 to
12 months and were issued at a discount or at par (coupon-bearing).
The medium-term notes are redeemable at par on the due dates, unless
previously redeemed, together with the accrued interest where applicable.
Group
2017 2016
RM’000 RM’000
CNH - 974,256
HKD 521,812 580,170
USD 3,870,347 3,279,146
SGD 1,349,057 1,032,586
AUD 318,441 -
──────── ────────
6,059,657 5,866,158
════════ ════════
54
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
20 SUKUK
Group
2017 2016
Year of Amount Effective Amount Effective
maturity outstanding profit rate outstanding profit rate
RM’000 % RM’000 %
(a) Islamic
commercial 2017 - - 500,000 3.6200
papers 2018 305,000 3.5100 - -
Add:
Profit payable 1,173 248
──────── ────────
306,173 500,248
──────── ────────
(b) Islamic
medium-term 2017 - - 2,625,512 2.300 - 4.050
2018 1,592,025 1.850 – 5.800 1,145,000 1.850 - 5.800
2019 1,187,000 3.750 – 5.280 1,187,000 3.750 - 5.280
2020 2,230,000 3.980 – 6.000 1,180,000 3.980 - 6.000
2021 245,000 4.150 – 5.380 245,000 4.150 - 5.380
2022 2,150,000 3.900 – 4.700 460,000 3.900 - 4.700
2023 995,000 4.250 – 6.350 995,000 4.250 - 6.350
2024 315,000 4.000 – 5.520 315,000 4.000 - 5.520
2025 455,000 4.550 – 4.650 455,000 4.550 - 4.650
2026 20,000 4.410 – 4.920 20,000 4.410 - 4.920
2027 15,000 4.140 15,000 4.140
2028 1,080,000 4.750 – 6.500 1,080,000 4.750 - 6.500
2029 180,000 5.500 – 5.750 180,000 5.500 - 5.750
2033 675,000 5.000 675,000 5.000
──────── ────────
11,139,025 10,577,512
Add:
Profit payable 114,351 116,678
Unaccreted premium 39,014 21,857
Less:
Deferred financing fees (29) (75)
Unamortised discount (656) (1,307)
──────── ────────
11,291,075 10,714,665
──────── ────────
11,597,878 11,214,913
════════ ════════
55
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
20 SUKUK (CONTINUED)
Company
2017 2016
Year of Amount Effective Amount Effective
maturity outstanding profit rate outstanding profit rate
RM’000 % RM’000 %
(a) Islamic
commercial 2017 - - 500,000 3.6200
papers 2018 305,000 3.5100 - -
Add:
Profit payable 1,173 248
──────── ────────
306,173 500,248
──────── ────────
(b) Islamic
medium-term 2017 - - 2,160,000 3.300 – 4.050
2018 1,440,000 3.510 – 5.800 1,145,000 3.510 – 5.800
2019 1,187,000 3.750 – 5.280 1,187,000 3.750 – 5.280
2020 2,230,000 3.980 – 6.000 1,180,000 3.980 – 6.000
2021 245,000 4.150 – 5.380 245,000 4.150 – 5.380
2022 2,150,000 3.900 – 4.700 460,000 3.900 – 4.700
2023 995,000 4.250 – 6.350 995,000 4.250 – 6.350
2024 315,000 4.000 – 5.520 315,000 4.000 – 5.520
2025 455,000 4.550 – 4.650 455,000 4.550 – 4.650
2026 20,000 4.410 – 4.920 20,000 4.410 – 4.920
2027 15,000 4.140 15,000 4.140
2028 1,080,000 4.750 – 6.500 1,080,000 4.750 – 6.500
2029 180,000 5.500 – 5.750 180,000 5.500 – 5.750
2033 675,000 5.000 675,000 5.000
──────── ────────
10,987,000 10,112,000
Add:
Profit payable 113,504 113,362
Unaccreted premium 39,014 21,857
Less:
Unamortised discount (656) (1,307)
──────── ────────
11,138,862 10,245,912
──────── ────────
11,445,035 10,746,160
════════ ════════
56
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
20 SUKUK (CONTINUED)
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Islamic commercial papers are short term instruments with maturities ranging
from 1 to 12 months and were issued at a discount or at par (profit-bearing).
Islamic medium-term notes are issued by the Group based on various Islamic
principles. The IMTNs have tenures of more than 1 year and are issued at
discount or at par (profit-bearing). Profit distributions of the IMTNs are normally
made on half year/quarterly basis.
Islamic variable medium-term notes are issued by the Group and the Company
based on various Islamic principles. These Sukuk have tenures of more than 1
year and carry a profit rate which is determined at point of issuance. Profit
distributions of the IMTNs are normally made on half year/quarterly basis.
Included in Islamic medium-term notes are Islamic medium-term notes issued in foreign
currency (“Islamic EMTN”). The Islamic EMTN are issued by CGS, and are
unconditionally and irrevocably guaranteed by the Company. The Sukuk outstanding at
the end of financial year which are not in the functional currencies of the Group are as
follows:
Group
2017 2016
RM’000 RM’000
57
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Loans from subsidiary outstanding at financial year ended that are not in the functional
currencies of the Group are as follows:
Company
2017 2016
RM’000 RM’000
CNH - 975,934
HKD 521,812 580,170
USD 3,874,422 3,282,148
SGD 1,502,915 1,502,290
AUD 318,716 -
──────── ────────
6,217,865 6,340,542
════════ ════════
Loans/financing from subsidiary are unsecured and subject to interest/profit rates ranging
from 1.520% to 2.745% per annum (2016: 1.710% to 3.860% per annum).
Company
2017 2016
RM’000 RM’000
22 OTHER LIABILITIES
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
58
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
23 SHARE CAPITAL
Group and Company
2017 2016
Number of Number of
shares Amount shares Amount
’000 RM’000 ’000 RM’000
Ordinary shares
Issued:
As at 1 January/
31 December 150,000 150,000 150,000 150,000
════════ ════════ ════════ ════════
24 RESERVES
This amount represents the unrealised fair value gains or losses on AFS
investment securities, net of taxation.
The Group and the Company have adopted the BNM Guidelines on Classification
and Impairment Provisions for Loans/Financing – Maintenance of Regulatory
Reserves which was effective from 31 December 2015 on voluntary basis. The
policy document requires banking institution to maintain, in aggregate, collective
impairment provisions and regulatory reserves of no less than 1.2% of the total
outstanding loans/financing, net of individual impairment provisions.
The net tangible assets per share is calculated by dividing the net tangible assets of
RM3,405,211,000 of the Group and RM 3,397,473,000 of the Company respectively
(2016: RM3,202,006,000 of the Group and RM3,198,368,000 of the Company
respectively) by 150,000,000 ordinary shares of the Group and the Company in issue.
Basic and diluted earnings per share is calculated by dividing the profit for the
financial year of RM241,715,000 of the Group and RM237,615,000 of the Company
respectively (2016: RM255,036,000 of the Group and RM253,476,000 of the Company
respectively) by 150,000,000 ordinary shares of the Group and the Company in issue.
For the diluted earnings per share calculation, no adjustment has been made to
weighted number of ordinary shares in issue as there are no dilutive potential ordinary
shares.
59
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
26 INTEREST INCOME
27 INTEREST EXPENSE
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
28 NON-INTEREST EXPENSE
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
60
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
29 PERSONNEL COSTS
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
The following items have been charged/(credited) in arriving at profit before taxation and
zakat:
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
61
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
31 DIRECTORS’ REMUNERATION
The Directors who served since the date of the last report and the date of this report are:
Non-Executive Directors
Datuk Shaik Abdul Rasheed bin Abdul Ghaffour (appointed as Chairman on 1.7.2017)
Dato' Halipah binti Esa
Dr. Roslan bin A. Ghaffar
Dato' Md Agil bin Mohd Natt
Encik Philip Tan Puay Koon
Dato' Wee Yiaw Hin
Encik Nazrul Hisyam bin Mohd Noh
Dato' Ooi Sang Kuang (redesignated as Director on 1.7.2017 and resigned on 1.1.2018)
Encik Tang Wing Chew (resigned on 1.3.2017)
Executive Director
The aggregate amount of emoluments received by the Directors during the financial
year is as follows:
D&O insurance premium of RM170,000 (2016: RM170,000) were paid to cover all the
Directors and Officers of the Group and were borne by the Company.
62
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
32 TAXATION
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Current tax:
- Current year 74,763 78,001 74,743 77,981
- under/(over) provision in
prior year 1,313 (1,246) 1,313 (1,246)
──────── ──────── ──────── ────────
76,076 76,755 76,056 76,735
Deferred taxation:
Origination and reversal of
temporary differences
(Note 17) 2,057 (767) 2,057 (767)
──────── ──────── ──────── ────────
78,133 75,988 78,113 75,968
════════ ════════ ════════ ════════
63
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
32 TAXATION (CONTINUED)
The tax on the Group’s and the Company's profit before taxation and zakat differs
from the theoretical amount that would arise using the statutory income tax rate of
Malaysia as follows:
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
33 DIVIDENDS
At the forthcoming Annual General Meeting, a final dividend in respect of the financial
year ended 31 December 2017 of 15 sen per share (2016: 15 sen per share) amounting
to RM22,500,000 (2016: RM22,500,000) will be proposed for shareholder's approval.
64
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The related parties and their relationships with the Group and the Company are as
follows:
Entities in which key management personnel have control are defined as entities
that are controlled or significantly influenced by, or for which significant voting
power in such entity resides with, directly or indirectly by key management
personnel.
Most of the transactions involving mortgage loans, personal loans, hire purchase
and leasing debts and Islamic financing facilities as well as issuance of unsecured
Corporate Bonds and Sukuk are transacted with the shareholders of the ultimate
holding company. These transactions have been disclosed on the statement of
financial position and income statement of the Group and the Company.
During the financial year ended 31 December 2017, the Company entered into a
shared service arrangement with Cagamas SRP Berhad (“CSRP”). Under this
arrangement, the Company sets out the scope of services performed for CSRP in
the normal course of business.
65
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Set out below are significant related party transactions and balances of the
Group and the Company.
Group
Other
Related related
company party
RM'000 RM'000
2017
Income
2016
Income
66
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Set out below are significant related party transactions and balances of the
Group and the Company (continued).
Company
Other
Related related
Subsidiaries company party
RM'000 RM'000 RM'000
2017
Income
67
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Set out below are significant related party transactions and balances of the
Group and the Company (continued).
Company
Other
Related related
Subsidiaries company party
RM'000 RM'000 RM'000
2016
Income
Expenses
The Group and the Company key management personnel received remuneration
for services rendered during the financial year. The total compensation paid to the
Group’s key management personnel was RM7,390,607 (2016: RM8,049,828).
The total remuneration paid to the Directors is disclosed in Note 31 to the financial
statements.
68
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
As BNM has significant influence over the ultimate holding company, the GOM
and entities controlled, jointly controlled or has significant influence by the GOM are
related parties of the Group and the Company.
The Group and the Company enter into transactions with many of these entities
to purchase mortgage loans, personal loans and hire purchase and leasing debts
and to issue bonds and notes to finance the purchase as part of its normal
operations. The Group and the Company also purchase Islamic financing facilities
such as home financing, personal financing and hire purchase financing and
funded by issuance of Sukuk.
35 CAPITAL COMMITMENTS
Capital expenditure:
Authorised and contracted for 12,054 20,501
Authorised but not contracted for 3,911 3,258
──────── ────────
15,965 23,759
════════ ════════
Analysed as follows:
Equipment and others 196 616
Computer hardware and software 15,769 23,143
──────── ────────
15,965 23,759
════════ ════════
36 LEASE COMMITMENTS
The Group and the Company have lease commitments in respect of rented premise and
hired equipment, all of which are classified as operating leases. A summary of the long-
term commitments are as follows:
69
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Cash flow interest/profit rate risk is the risk that the future cash flows of a financial
instrument will fluctuate because of changes in market interest/profit rates. Fair value
interest/profit rate risk is the risk that the value of a financial instrument will fluctuate
because of changes in market interest/profit rates. The Group and the Company take
on the exposure of the effects of fluctuations in the prevailing levels of market
interest/profit rates on both its fair value and cash flow risks. Interest/profit margin may
increase as a result of such changes but may reduce or create losses in the event that an
unexpected movement in the market interest/profit rates arise.
The following tables summarise the Group’s and the Company's exposure to
interest/profit rate risks. Included in the tables are the Group’s and the Company's assets
and liabilities at carrying amounts, categorised by the earlier of contractual repricing or
maturity dates. The carrying amounts of derivative financial instruments, which are
principally used to reduce the Group’s and the Company's exposure to interest/profit rates
movements, are included in "other assets" and "other liabilities".
The tables also represent a static position which provides an indication of the potential
impact on the Group’s and the Company's statement of financial position through gap
analysis of the interest/profit rate sensitive assets, liabilities and off-statement of financial
position items by time bands. A positive interest/profit rate sensitivity gap exists when
more interest/profit sensitive assets than interest/profit sensitive liabilities reprice or
mature during a given time period. Similarly, a negative interest/profit rate sensitivity gap
exists when more interest/profit sensitive liabilities than interest/profit sensitive assets
reprice or mature during a given time period. Any negative interest/profit rate sensitivity
gap is to be funded by the Group’s and the Company's shareholder's funds, unsecured
bearer bonds and notes/Sukuk or money market borrowings.
For decision-making purposes, the Group and the Company manage their exposure to
interest/profit rate risk. The Group and the Company set limits on the sensitivity of the
Group’s and the Company's forecasted net interest income/profit income at risk to
projected changes in interest/profit rates. The Group and the Company also undertakes
duration analysis before deciding on the size and tenure of the Bonds/Sukuk to be issued
to ensure that the Group’s and the Company's assets and liabilities are closely matched
within the tolerance limit set by the Board of Directors.
70
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Non-interest/
Within One to Three More than Non-profit
one year three years to five years five years bearing Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2017
Financial assets
71
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Non-interest/
Within One to Three More than Non-profit
one year three years to five years five years bearing Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2017
Financial liabilities
Unsecured bearer bonds and notes 7,626,244 9,138,696 5,825,000 3,175,000 - 25,764,940
Sukuk 2,011,864 3,456,014 2,395,000 3,735,000 - 11,597,878
Other liabilities 58,490 146,234 - 12,147 73,219 290,090
──────── ──────── ──────── ──────── ──────── ────────
9,696,598 12,740,944 8,220,000 6,922,147 73,219 37,652,908
════════ ════════ ════════ ════════ ════════ ════════
72
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Non-interest/
Within One to Three More than Non-profit
one year three years to five years five years bearing Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2016
Financial assets
73
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Non-interest/
Within One to Three More than Non-profit
one year three years to five years five years bearing Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2016
Financial liabilities
Unsecured bearer bonds and notes 6,260,024 10,171,562 855,000 3,660,000 - 20,946,586
Sukuk 3,242,363 2,352,550 1,425,000 4,195,000 - 11,214,913
Other liabilities 13,391 - - 20,434 77,464 111,289
──────── ──────── ──────── ──────── ──────── ────────
9,515,778 12,524,112 2,280,000 7,875,434 77,464 32,272,788
════════ ════════ ════════ ════════ ════════ ════════
74
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Non-interest/
Within One to Three More than Non-profit
one year three years to five years five years bearing Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Company
2017
Financial assets
75
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Non-interest/
Within One to Three More than Non-profit
one year three years to five years five years bearing Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Company
2017
Financial liabilities
Unsecured bearer bonds and notes 5,021,775 5,683,508 5,825,000 3,175,000 - 19,705,283
Sukuk 1,859,021 3,456,014 2,395,000 3,735,000 - 11,445,035
Loans/financing from subsidiary 2,760,830 3,457,035 - - - 6,217,865
Other liabilities 58,490 146,234 - 12,147 71,914 288,785
──────── ──────── ─────── ──────── ─────── ────────
9,700,116 12,742,791 8,220,000 6,922,147 71,914 37,656,968
════════ ════════ ═══════ ════════ ═══════ ════════
76
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Non-interest/
Within One to Three More than Non-profit
one year three years to five years five years bearing Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Company
2016
Financial assets
77
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Non-interest/
Within One to Three More than Non-profit
one year three years to five years five years bearing Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Company
2016
Financial liabilities
Unsecured bearer bonds and notes 3,973,096 6,592,331 855,000 3,660,000 - 15,080,427
Sukuk 2,773,610 2,352,550 1,425,000 4,195,000 - 10,746,160
Loans/financing from subsidiary 2,759,942 3,580,600 - - - 6,340,542
Other liabilities 13,391 - - 20,434 76,452 110,277
──────── ──────── ─────── ──────── ─────── ────────
9,520,039 12,525,481 2,280,000 7,875,434 76,452 32,277,406
════════ ════════ ═══════ ════════ ═══════ ════════
78
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The table below summarises the sensitivity of the Group’s and the Company's
financial instruments to interest/profit rates movements. The analysis is based on the
assumptions that interest/profit will fluctuate by 100 basis points, with all other variables
held constant.
Group
+100 basis -100 basis
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Company
+100 basis -100 basis
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
38 CREDIT RISK
The Group’s and the Company's counterparties are mainly the GOM, financial
institutions and individuals in Malaysia. The financial institutions are governed by
the Financial Services Act ("FSA"), 2013 and the Islamic Financial Services Act
("IFSA"), 2013 and are subject to periodic review by the BNM. The following tables
summarise the Group’s and the Company’s maximum exposure to credit risk by
counterparty or customer or the industry in which they are engaged as at the
statement of financial position date.
79
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Amount Hire
Cash and Derivatives AFS due from Islamic Mortgage Mortgage purchase
short-term financial investment counter financing assets- assets- assets- Other
funds instruments securities parties assets Conventional Islamic Islamic assets Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2017
80
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Amount Hire
Cash and Derivatives AFS due from Islamic Mortgage Mortgage purchase
short-term financial investment counter financing assets- assets- assets- Other
funds instruments securities parties assets Conventional Islamic Islamic assets Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2016
81
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Amount Hire
Cash and Derivatives AFS due from Islamic Mortgage Mortgage purchase
short-term financial investment counter financing assets- assets- assets- Other
funds instruments securities parties assets Conventional Islamic Islamic assets Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Company
2017
82
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Amount Hire
Cash and Derivatives AFS due from Islamic Mortgage Mortgage purchase
short-term financial investment counter financing assets- assets- assets- Other
funds instruments securities parties assets Conventional Islamic Islamic assets Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Company
2016
83
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
38.2 Amount due from counterparties, Islamic financing assets, mortgage assets and hire purchase assets/Islamic mortgage assets and Islamic
hire purchase assets
All amount due from counterparties, Islamic financing assets, mortgage assets and hire purchase assets are categorised as either:
- neither past due nor impaired; or
- past due but not individually impaired.
The impairment allowance is assessed on a pool of financial assets which are not individually impaired.
Credit risk loans comprise amount due from counterparties, Islamic financing assets, mortgage assets and hire purchase assets/Islamic
mortgage assets and Islamic hire purchase assets which are due more than 90 days. The coverage ratio is calculated in reference to total
impairment allowance and the carrying value (before impairment) of credit risk loans.
Past due
Neither past but not Total
due nor individually Impairment carrying Credit Coverage
impaired impaired* Total allowance value risk loans ratio
Group and Company RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %
2017
84
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
38.2 Amount due from counterparties, Islamic financing assets, mortgage assets and hire purchase assets/Islamic mortgage assets and Islamic
hire purchase assets (continued)
Past due
Neither past but not Total
due nor individually Impairment carrying Credit Coverage
impaired impaired* Total allowance value risk loans ratio
Group and Company RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 %
2016
85
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
38.2 Amount due from counterparties, Islamic financing assets, mortgage assets and
hire purchase assets/Islamic mortgage assets and Islamic hire purchase assets
(continued)
Amount due from counterparties, Islamic financing assets, mortgage assets and
hire purchase assets Islamic mortgage assets and Islamic hire purchase assets
neither past due nor individually impaired are as below:
The amount due from counterparties, Islamic financing assets, mortgage assets
and hire purchase assets/Islamic mortgage assets and Islamic hire purchase
assets of the Group and the Company has been identified with strong credit risk
quality which has a very high likelihood for full recovery.
86
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
38.2 Amount due from counterparties, Islamic financing assets, mortgage assets and
hire purchase assets/Islamic mortgage assets and Islamic hire purchase assets
(continued)
Mortgage assets:
- Conventional 3,866 3,252 3,396 43,554 54,068
- Islamic 4,049 2,656 3,776 35,413 45,894
2016
Mortgage assets:
- Conventional 5,719 3,138 3,268 61,744 73,869
- Islamic 4,519 3,480 2,124 40,487 50,610
For the purpose of this analysis, an asset is considered past due and included
above when payment due under strict contractual terms is received late or
missed. The amount included is either the entire financial asset, not just the
payment, of both principal and interest, overdue on mortgage assets and hire
purchase assets/Islamic mortgage assets and Islamic hire purchase assets. This
may result from administrative delays on the side of the borrower leading to
assets being past due but not impaired. Therefore, loans and advances less than
90 days past due are not usually considered impaired, unless other information is
available to indicate the contrary.
87
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
38.2 Amount due from counterparties, Islamic financing assets, mortgage assets
and hire purchase assets/Islamic mortgage assets and Islamic hire purchase
assets (continued)
For the financial year ended 31 December 2017, the Group and the Company
have deemed it impracticable to disclose the financial effect of collateral for its
mortgage assets and hire purchase assets/Islamic mortgage assets and Islamic
hire purchase assets.
2017
Mortgage assets:
- Conventional 38,371 502 (902) 37,971
- Islamic 30,146 217 (166) 30,197
Hire purchase
assets:
- Conventional 2 - - 2
- Islamic 215 - (153) 62
─────── ─────── ─────── ───────
68,734 719 (1,221) 68,232
═══════ ═══════ ═══════ ═══════
2016
Mortgage assets:
- Conventional 40,387 (1,526) (490) 38,371
- Islamic 36,167 (6,536) 515 30,146
Hire purchase
assets:
- Conventional 1 - 1 2
- Islamic 70 - 145 215
─────── ─────── ─────── ───────
76,625 (8,062) 171 68,734
═══════ ═══════ ═══════ ═══════
88
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
AFS investment securities are measured on fair value basis. The Group and the
Company u s e the rating by external rating agencies, mainly RAM and MARC.
The table below presents an analysis of AFS investment securities external
rating:
2017
2016
None of these assets are impaired nor past due but not impaired.
None of these assets are impaired nor past due but not impaired.
89
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
2016
Derivatives
financial
liabilities (33,825) - (33,825) - 13,690 (20,135)
═══════ ═══════ ═══════ ═══════ ═══════ ═══════
39 LIQUIDITY RISK
90
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The liquidity pool comprised the following cash and unencumbered assets:
Cash and
short term
funds with
licensed Derivative AFS Islamic Amount Islamic Other
financial financial investment Mortgage mortgage due from financing available
institutions instruments securities assets assets counterparties assets liquidity Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
2017 534,591 466,339 2,471,430 5,848,119 6,300,576 19,870,378 5,544,378 8,396 41,044,207
═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════
2016 409,396 887,826 1,650,518 6,238,337 6,662,093 14,296,165 5,307,689 10,236 35,462,260
═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════
Company
2017 524,185 466,339 2,471,430 5,848,119 6,300,576 19,870,378 5,544,378 15,124 41,040,529
═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════
2016 405,476 887,826 1,650,518 6,238,337 6,662,093 14,296,165 5,307,689 15,136 35,463,240
═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════ ═════════
91
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The table below presents the cash flows payable by the Group and the Company under financial liabilities by remaining contractual maturities at
the date of the statement of financial position. The amounts disclosed in the table are contractual undiscounted cash flow, whereas the Group
and the Company manage the liquidity risk based on a different basis, which does not result in a significantly different analysis.
2017
Financial liabilities
Unsecured bonds and notes 5,287 988,206 6,449,841 14,963,696 3,175,000 25,582,030
Sukuk - 547,843 1,349,344 5,851,014 3,735,000 11,483,201
Other liabilities - - - - 36,734 36,734
──────── ──────── ──────── ──────── ──────── ────────
5,287 1,536,049 7,799,185 20,814,710 6,946,734 37,101,965
═════════ ═════════ ═════════ ═════════ ═════════ ═════════
Assets held for managing liquidity risk 778,830 2,072,620 7,307,662 21,935,616 9,759,398 41,854,126
═════════ ═════════ ═════════ ═════════ ═════════ ═════════
92
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The table below presents the cash flows payable by the Group and the Company under financial liabilities by remaining contractual maturities at
the date of the statement of financial position. The amounts disclosed in the table are contractual undiscounted cash flow, whereas the Group
and the Company manage the liquidity risk based on a different basis, which does not result in a significantly different analysis.
2016
Financial liabilities
Unsecured bonds and notes 2,958 722,096 5,391,903 11,026,562 3,660,000 20,803,519
Sukuk - 1,048,751 2,080,000 3,777,550 4,195,000 11,101,301
Other liabilities - - - - 41,209 41,209
──────── ──────── ──────── ──────── ──────── ────────
2,958 1,770,847 7,471,903 14,804,112 7,896,209 31,946,029
═════════ ═════════ ═════════ ═════════ ═════════ ═════════
Assets held for managing liquidity risk 517,919 1,166,321 8,091,461 14,819,484 11,133,515 35,728,700
═════════ ═════════ ═════════ ═════════ ═════════ ═════════
93
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
2017
Financial liabilities
Unsecured bonds and notes - 985,000 3,853,865 11,508,508 3,175,000 19,522,373
Sukuk - 395,000 1,349,344 5,851,014 3,735,000 11,330,358
Loan from Subsidiary Company 5,576 156,991 2,598,264 3,457,034 - 6,217,865
Other liabilities - - - - 36,734 36,734
──────── ──────── ──────── ──────── ──────── ────────
5,576 1,536,991 7,801,473 20,816,556 6,946,734 37,107,330
═════════ ═════════ ═════════ ═════════ ═════════ ═════════
Assets held for managing liquidity risk 786,153 2,072,620 7,307,662 21,935,616 9,382,565 41,484,616
═════════ ═════════ ═════════ ═════════ ═════════ ═════════
94
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
2016
Financial liabilities
Unsecured bonds and notes - 300,000 3,530,029 7,447,331 3,660,000 14,937,360
Sukuk - 580,000 2,080,000 3,777,550 4,195,000 10,632,550
Loans/financing from subsidiary 3,017 892,764 1,864,161 3,580,600 - 6,340,542
Other liabilities - - - - 41,209 41,209
─────── ─────── ─────── ──────── ──────── ────────
3,017 1,772,764 7,474,190 14,805,481 7,896,209 31,951,661
════════ ════════ ════════ ═════════ ═════════ ═════════
Assets held for managing liquidity risk 522,870 1,166,321 8,091,461 14,819,484 11,133,515 35,733,651
════════ ════════ ════════ ═════════ ═════════ ═════════
95
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The Group’s and the Company's derivatives comprise IRS, IPRS and CCS entered
by the Company for which net cash flows are exchanged for hedging purposes.
The derivatives held by the Company a r e settled on either net or gross basis.
The following table analyses the Group’s and the Company's derivatives financial
liabilities that will be settled on e i t h e r net or gross basis into relevant maturity
groupings based on the remaining period at the date of the statement of
financial position to the contractual maturity date. Contractual maturities are
assessed to be essential for an understanding of all derivatives. The amounts
disclosed in the table below are the contractual undiscounted cash flows.
2017
Derivatives held
for hedging
- IRS/IPRS (4,204) 17,029 (9,403) 20,358 (38,449) (14,669)
- CCS/ICCS 318,831 (644,764) 1,790,793 (1,295,756) - 169,104
════════ ════════ ════════ ════════ ════════ ════════
2016
Derivatives held
for hedging
- IRS/IPRS - 1,243 (12,804) (17,938) (3,397) (32,896)
- CCS/ICCS - (138) (140) - - (278)
════════ ════════ ════════ ════════ ════════ ════════
96
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The Group and the Company are exposed to translation foreign exchange rate on its
PWR assets and unsecured bonds and notes denominated in currencies other than the
functional currencies of the Group.
The Group hedges 100% of its foreign currency denominated unsecured bonds and notes
and Sukuk. The Group and the Company take minimal exposure to the effects of
fluctuations in the prevailing foreign currency exchange rates on its financial position and
cash flows. The Group and the Company manage its exposure by entering into
derivatives contracts.
Group
AUD HKD USD SGD CNH
RM’000 RM’000 RM’000 RM’000 RM’000
2017
Derivatives financial
Instruments 319,497 521,812 3,851,753 1,505,110 -
──────── ──────── ──────── ──────── ────────
319,497 521,812 3,851,753 1,505,110 -
════════ ════════ ════════ ════════ ════════
2016
Derivatives financial
Instruments - 583,885 3,280,824 1,508,608 -
Amount due from
Counterparties - - - - 974,781
──────── ──────── ──────── ──────── ────────
- 583,885 3,280,824 1,508,608 974,781
════════ ════════ ════════ ════════ ════════
97
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
__ Company
AUD HKD USD SGD CNH
RM’000 RM’000 RM’000 RM’000 RM’000
2017
Derivatives financial
Instruments 319,497 521,812 3,851,753 1,505,110 -
──────── ──────── ──────── ──────── ────────
319,497 521,812 3,851,753 1,505,110 -
════════ ════════ ════════ ════════ ════════
2016
Derivatives financial
Instruments - 583,885 3,280,824 1,508,608 -
Amount due from
Counterparties - - - - 974,781
──────── ──────── ──────── ──────── ────────
- 583,885 3,280,824 1,508,608 974,981
════════ ════════ ════════ ════════ ════════
98
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
Equity Profit Equity Profit
RM’000 RM’000 RM’000 RM’000
2017
HKD 2 - 2 -
USD (166) (1) (166) (1)
SGD 18 - 18 -
AUD 6 - 6 -
─────── ─────── ─────── ───────
(140) (1) (140) (1)
═══════ ═══════ ═══════ ═══════
2016
99
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The face value of financial assets (less any estimated credit adjustments) and
financial liabilities with a maturity period of less than one year is assumed to
approximate their fair values.
Where available, quoted and observable market prices are used as the measure
of fair values. Where such quoted and observable market prices are not
available, fair values are estimated based on a number of methodologies
and assumptions regarding risk characteristics of various financial
instruments, discount rates, estimates of future cash flows and other
factors. Changes in the assumptions could materially affect these estimates and
the corresponding fair values.
The fair value of the AFS investment securities is derived from market indicative
quotes or observable market prices at the date of the statement of financial
position.
The estimated fair value of the IRS, IPRS and CCS are based on the
estimated cash flows discounted using the market interest/profit rate, taking into
account the effect of the entity's net exposure to the credit risk of the
counterparty at the statement of financial position date.
The table below analyses financial instruments carried at fair value, by valuation
method. The different levels have been defined as follows:
- Level 1: Quoted prices (unadjusted) in active markets for identical assets and
liabilities.
- Level 2: Inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (i.e. prices) or
indirectly (i.e. derived from prices).
- Level 3: Inputs for the asset or liability that are not based on observable
market data (unobservable inputs).
100
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
2017
Assets
AFS investment
Securities - 2,471,430 - 2,471,430
Derivatives
financial
instruments - 466,339 - 466,339
════════ ════════ ════════ ════════
Liabilities
Derivatives
financial
instruments - 216,871 - 216,871
════════ ════════ ════════ ════════
2016
Assets
AFS investment
Securities - 1,650,518 - 1,650,518
Derivatives
financial
instruments - 887,826 - 887,826
════════ ════════ ════════ ════════
Liabilities
Derivatives
financial
instruments - 33,825 - 33,825
════════ ════════ ════════ ════════
101
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
41.2 Fair value of financial instruments carried other than fair value
The following methods and assumptions were used to estimate the fair value of
financial instruments as at the statement of financial position date:
(a) Cash and short-term funds and deposits and placements with licensed
financial institutions
The carrying amount of cash and short-term funds and deposits and
placements with licensed financial institutions are used as reasonable
estimate of fair values as the maturity is less than or equal to a month.
Other financial assets include other debtors and deposits. The fair value of
other financial assets is estimated at their carrying amount due to short
tenure of less than one year.
The fair value of amount due from related company is estimated at their
carrying amount due to short tenure of less than one year.
Other financial liabilities include creditors and accruals. The fair value of
other financial liabilities is estimated at their carrying amount due to short
tenure of less than one year.
102
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
41.2 Fair value of financial instruments carried other than fair value (continued)
The estimated fair values of the Group’s and the Company's financial
instruments approximated their carrying values in the statement of financial
position except for the following (continued):
Group
2017 2016
Carrying Fair Carrying Fair
value value value value
RM’000 RM’000 RM’000 RM’000
Financial assets
Financial liabilities
Unsecured bearer
bonds and notes 25,764,940 26,158,440 20,946,586 21,317,956
Sukuk 11,597,878 11,925,862 11,214,913 11,587,453
──────── ──────── ──────── ────────
37,362,818 38,084,302 32,161,499 32,905,409
════════ ════════ ════════ ════════
103
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
41.2 Fair value of financial instruments carried other than fair value (continued)
The estimated fair values of the Group’s and the Company's financial
instruments approximated their carrying values in the statement of financial
position except for the following (continued):
Company
2017 2016
Carrying Fair Carrying Fair
value value value value
RM’000 RM’000 RM’000 RM’000
Financial assets
Financial liabilities
Unsecured bearer
bonds and notes 19,705,283 20,094,241 15,080,427 15,447,425
Sukuk 11,445,035 11,772,990 10,746,160 11,118,626
Loans/financing
from subsidiary 6,217,865 6,331,393 6,340,542 6,237,081
──────── ──────── ──────── ────────
37,368,183 38,198,624 32,167,129 32,803,132
════════ ════════ ════════ ════════
104
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
41.2 Fair value of financial instruments carried other than fair value (continued)
The fair value of the fixed rate assets portfolio of amount due from counterparties
is based on the present value of estimated future cash flows discounted at the
prevailing market rates of loans with similar credit risk and maturities at the
statement of financial position date and is therefore within Level 3 of the fair value
hierarchy. The fair value of the floating rate assets portfolio of amount due from
counterparties is based on their carrying amount as the repricing date of the floating
rate assets portfolio is not greater than 6 months.
The fair value of the Islamic financing assets is based on the present value of
estimated future cash flows discounted at the prevailing market rates of financing
with similar credit risk and maturities at the statement of financial position date and
is therefore within Level 3 of the fair value hierarchy.
The fair value of the mortgage assets and hire purchase assets/Islamic mortgage
assets and Islamic hire purchase assets are derived at using the present value of
future cash flows discounted based on the mortgage assets and hire purchase
assets/Islamic mortgage assets and Islamic hire purchase assets yield to maturity at
the statement of financial position date and, is therefore within Level 3 of the fair value
hierarchy.
The fair value of the unsecured bearer bonds and notes and Sukuk are derived at
using the present value of future cash flows discounted based on the coupon
rate at t h e statement of financial position date and, is therefore within Level 3 of the
fair value hierarchy.
42 SEGMENT REPORTING
The Chief Executive Officer (the chief operating decision maker) of the Company makes
strategic decisions and allocation of resources on behalf of the Group. The Group and the
Company have determined the following operating segments based on reports reviewed by
the chief operating decision maker in making its strategic decisions:
(a) PWR
Under the PWR scheme, the Group and the Company purchase the mortgage
loans, personal loans, hire purchase and leasing debts and Islamic financing
facilities such as home financing, hire purchase financing and personal financing
from the primary lenders approved by the Group and the Company. The loans and
financing are acquired with recourse to the primary lenders should the loans and
financing fail to comply with agreed prudential eligibility criteria.
105
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
(b) PWOR
Under the PWOR scheme, the Group and the Company purchase the mortgage
assets and hire purchase assets from counterparty on an outright basis for the
remaining tenure of the respective assets purchased. The purchases are made
without recourse to counterparty, other than certain warranties to be provided
by the seller pertaining to the quality of the assets.
There were no changes in the reportable segments during the financial year.
Group
PWR PWOR Total
RM’000 RM'000 RM'000
2017
Other information:
Capital expenditure 4,312 2,028 6,340
Depreciation and amortisation 1,682 791 2,473
════════ ════════ ════════
106
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group
PWR PWOR Total
RM’000 RM'000 RM'000
2016
Other information:
Capital expenditure 5,377 3,395 8,772
Depreciation and amortisation 1,556 983 2,539
════════ ════════ ════════
107
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Company
PWR PWOR Total
RM’000 RM'000 RM'000
2017
Other information:
Capital expenditure 4,312 2,028 6,340
Depreciation and amortisation 1,682 791 2,473
════════ ════════ ════════
108
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Company
PWR PWOR Total
RM’000 RM'000 RM'000
2016
Other information:
Capital expenditure 5,377 3,395 8,772
Depreciation and amortisation 1,556 983 2,539
════════ ════════ ════════
109
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
43 CAPITAL ADEQUACY
The Group’s and the Company's objectives when managing capital, which is a broader
concept than the "equity" on the face of the statement of financial position, are:
(a) To align with industry best practices and benchmark set by the regulators;
(b) To safeguard the Group’s and the Company's ability to continue as a going
concern so that it can continue to provide returns for shareholder and benefit to
other stakeholders; and
(c) To maintain a strong capital base to support the development of its business.
The Group and the Company a r e not subject to the BNM Guidelines on the Capital
Adequacy Guidelines. However, disclosure of the capital adequacy ratios is made on a
voluntary basis for information purposes.
Capital adequacy and the use of regulatory capital are monitored by the Group’s and the
Company’s management, employing techniques based on the guidelines developed by
the Basel Committee and as implemented by BNM, for supervisory purposes.
(a) Tier I capital: share capital (net of any book values of treasury shares) and
other reserves which comprise retained profits and reserves created by
appropriations of retained profits; and
Common equity tier 1 (“CET1”) and Tier I capital ratios refer to the ratio of total Tier 1
capital to risk-weighted assets. Risk-weighted capital ratio (“RWCR”) is the ratio of total
capital to risk-weighted assets.
Group Company
2017 2016 2017 2016
% % % %
Before deducting proposed final
dividend*
* Refers to proposed final dividend which will be declared after the financial year.
110
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
CET1/Tier I capital
Tier II capital
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
111
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
44 ISLAMIC OPERATIONS
Group Company
Note 2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
ASSETS
LIABILITIES
ISLAMIC OPERATIONS’
FUNDS 1,195,648 1,106,038 1,198,764 1,108,979
──────── ──────── ──────── ────────
TOTAL LIABILITIES AND
ISLAMIC OPERATIONS’
FUNDS 12,819,249 12,452,589 12,821,475 12,454,978
════════ ════════ ════════ ════════
112
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
Note 2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
113
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
114
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Allocated Cashflow
capital AFS hedge Regulatory Retained
funds reserve reserve reserve profits Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Group
Balance as at
1 January 2017 294,159 (93) 1,326 89,137 721,509 1,106,038
Total comprehensive
Income/(loss) for the
financial year - 401 (5,380) - 94,589 89,610
Transfer to retained
profits during the
financial year - - - (5,482) 5,482 -
────── ────── ────── ────── ─────── ───────
Balance as at
31 December 2017 294,159 308 (4,054) 83,655 821,580 1,195,648
══════ ══════ ══════ ══════ ═══════ ═══════
Balance as at
1 January 2016 294,159 361 6,496 95,598 610,281 1,006,895
Total comprehensive
(loss)/income for the
financial year (454) (5,170) - 104,767 99,143
Transfer to retained
profits during the
financial year - - - (6,461) 6,461 -
────── ────── ────── ────── ─────── ───────
Balance as at
31 December 2016 294,159 (93) 1,326 89,137 721,509 1,106,038
══════ ══════ ══════ ══════ ═══════ ═══════
115
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Allocated Cashflow
capital AFS hedge Regulatory Retained
funds reserve reserve reserve profits Total
RM’000 RM’000 RM’000 RM’000 RM’000 RM’000
Company
Balance as at
1 January 2017 294,159 (93) 1,326 89,137 724,450 1,108,979
Total comprehensive
Income/(loss) for the
financial year - 401 (5,380) - 94,764 89,785
Transfer to retained
profits during the
financial year - - - (5,482) 5,482 -
────── ────── ────── ────── ─────── ───────
Balance as at
31 December 2017 294,159 308 (4,054) 83,655 824,696 1,198,764
══════ ══════ ══════ ══════ ═══════ ═══════
Balance as at
1 January 2016 294,159 361 6,496 95,598 611,283 1,007,897
Total comprehensive
(loss)/income for the
financial year - (454) (5,170) - 106,706 101,082
Transfer to retained
profits during the
financial year - - - (6,461) 6,461 -
────── ────── ────── ────── ─────── ───────
Balance as at
31 December 2016 294,159 (93) 1,326 89,137 724,450 1,108,979
══════ ══════ ══════ ══════ ═══════ ═══════
116
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
Note 2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
OPERATING ACTIVITIES
Amortisation of premium
less accretion of discount on:
- AFS investment securities (4,739) (3,152) (4,739) (3,152)
- Mortgage assets (108,739) (112,838) (108,739) (112,838)
- Hire purchases (17) (77) (17) (77)
- Sukuk 651 626 651 626
Allowance/(write-back) of impairment
losses on Islamic mortgage assets
and Islamic hire purchase assets 217 (6,536) 217 (6,536)
Reclassification adjustment on
fair value gains on CCS, transfer
from equity (12,434) (21,937) (12,434) (21,937)
Unrealised loss on foreign
exchange 27,716 8,721 27,716 8,721
Income from:
- AFS investment securities (8,949) (2,044) (8,949) (2,044)
- Operations (509,783) (558,515) (509,783) (558,515)
Profit attributable to Sukuk
holders 503,915 522,315 503,697 519,592
Gain on disposal of AFS
investment securities (49) - (49) -
Taxation 30,487 37,478 30,487 37,478
Zakat 927 1,011 927 1,011
──────── ──────── ──────── ────────
Operating profit/(loss) before
working capital changes 13,792 (30,181) 13,749 (30,965)
117
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
Note 2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
(Increase)/decrease in financing
assets (230,874) 275,436 (230,874) 275,436
Decrease in mortgage assets 457,581 452,490 457,581 452,490
Decrease in hire purchase
assets 1,205 2,559 1,205 2,559
(Increase)/decrease in other assets
and prepayments (26) (29) 127 548
Increase/(decrease) in Sukuk 382,462 (845,629) 698,223 (817,026)
Increase in deferred financing (174) (450) - -
Decrease in financing from
subsidiary company - - (316,088) (28,663)
Decrease/(increase) in
derivatives 11,270 (12,326) 11,270 (12,326)
(Decrease)/increase in other
liabilities (112,137) 30,527 (112,101) 30,344
──────── ──────── ──────── ────────
Cash generated from/(utilized in)
operating activities 523,099 (127,603) 523,092 (127,603)
Profit received from assets 518,384 565,931 518,384 565,931
Profit paid to Sukuk holders (503,697) (405,981) (503,697) (405,981)
Payment of:
- Taxation (34,273) (26,429) (34,273) (26,429)
- Zakat (1,011) (2,777) (1,011) (2,777)
──────── ──────── ──────── ────────
Net cash generated from
operations 502,502 3,141 502,495 3,141
──────── ──────── ──────── ────────
INVESTING ACTIVITIES
Purchase of AFS
investment securities (1,770,718) (30,430) (1,770,718) (30,430)
Sale of AFS investment
securities 1,242,510 78,688 1,242,510 78,688
Income received
from AFS investment securities 2,712 2,056 2,712 2,056
──────── ──────── ──────── ────────
Net cash (utilised in)/generated
from investing activities (525,496) 50,314 (525,496) 50,314
──────── ──────── ──────── ────────
118
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
Note 2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
119
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
At fair value:
Sukuk 91,321 10,044
Government investment issues 50,723 30,075
Quasi government securities 434,527 -
─────── ───────
576,571 40,119
═══════ ═══════
120
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Relating to:
House financing 5,434,616 4,225,536
Hire purchase financing - 382,819
Personal financing 109,762 699,334
──────── ────────
5,544,378 5,307,689
════════ ════════
121
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
(f) Sukuk
122
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Income from:
Mortgage assets 103,008 110,853 103,008 110,853
Hire purchase assets (213) (300) (213) (300)
Financing assets 18,196 28,329 18,176 30,121
AFS investment securities 13,737 5,195 13,737 5,195
Deposit and placements with
financial institutions 4,872 6,155 4,872 6,155
Non-profit income expense (5,966) (10,918) (5,966) (10,917)
──────── ──────── ──────── ────────
133,634 139,314 133,614 141,107
════════ ════════ ════════ ════════
123
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
* Refers to proposed final dividend which will be declared after the financial year.
124
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
Tier II capital:
Add: Regulatory reserves 83,655 89,137 83,655 89,137
Allowance for impairment
losses 30,259 30,361 30,259 30,361
──────── ──────── ──────── ────────
Total Tier II capital 113,914 119,498 113,914 119,498
──────── ──────── ──────── ────────
Total capital 1,207,291 1,136,153 1,210,407 1,138,014
════════ ════════ ════════ ════════
Group Company
2017 2016 2017 2016
RM’000 RM’000 RM’000 RM’000
The Group and the Company are not subject to the BNM Guidelines on the
Capital Adequacy Guidelines. However, disclosure of the capital adequacy ratios
is made on a voluntary basis for information purposes.
125
Company No.
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
During the financial year, the Company entered into a shared service arrangement with
Cagamas SRP Berhad (“CSRP”). Under this arrangement, the Company sets out the
scope of services performed for CSRP in the normal course of business. The details and
nature of the transactions are disclosed in Note 34 to the financial statements.
The financial statements have been approved for issue in accordance with the resolution
of the Board of Directors.
126
CAGAMAS BERHAD
(Company No. 157931-A)
AND ITS SUBSIDIARY COMPANIES
(Incorporated in Malaysia)
Domiciled in Malaysia.
Registered Office:
Level 32, The Gardens North Tower,
Mid Valley City, Lingkaran Syed Putra,
59200 Kuala Lumpur.
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
The condensed interim financial statements should be read in conjunction with the audited financial statements of the Company for the financial year ended
31 December 2017 and the accompanying explanatory notes on pages 8 to 54 attached to the condensed interim financial statements.
The condensed interim financial statements were approved for issue by the Board of Directors on 13 August 2018.
1
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
CONDENSED INCOME STATEMENT FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018
Group Company
6 Months to 6 Months to 6 Months to 6 Months to
30 Jun 2018 30 Jun 2017 30 Jun 2018 30 Jun 2017
RM’000 RM’000 RM’000 RM’000
The condensed interim financial statements should be read in conjunction with the audited financial statements of the Company for the financial year ended
31 December 2017 and the accompanying explanatory notes on pages 8 to 54 attached to the condensed interim financial statements.
The condensed interim financial statements were approved for issue by the Board of Directors on 13 August 2018
2
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Group Company
6 Months to 6 Months to 6 Months to 6 Months to
30 Jun 2018 30 Jun 2017 30 Jun 2018 30 Jun 2017
RM’000 RM’000 RM’000 RM’000
3
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018
Issued and
fully paid
ordinary
shares of
RM1 each Non-distributable
Financial Cash flow
Share AFS investment hedge Regulatory Retained Total
capital reserves at FVOCI reserves reserves profits equity
Group RM'000 RM'000 RM'000 RM'000 RM'000 RM’000 RM'000
Balance as at 1 January 2018 150,000 (724) - (28,357) 161,032 3,139,614 3,421,565
Effects of adopting MFRS 9 on 1 January 2018 - 724 (724) - - 6,623 6,623
As restated 150,000 - (724) (28,357) 161,032 3,146,237 3,428,188
4
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018
Issued and
fully paid
ordinary
shares of
RM1 each Non-distributable
Financial Cash flow
Share AFS investment hedge Regulatory Retained Total
capital reserves at FVOCI reserves reserves profits equity
Company RM'000 RM'000 RM'000 RM'000 RM'000 RM’000 RM'000
Balance as at 1 January 2018 150,000 (724) - (28,357) 161,032 3,131,876 3,413,827
Effects of adopting MFRS 9 on 1 January 2018 - 724 (724) - - 6,623 6,623
As restated 150,000 - (724) (28,357) 161,032 3,138,499 3,420,450
5
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
6
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Purchase of :
- AFS investment securities - (1,596,180) - (1,596,180)
- Financial investment at FVOCI (2,811,848) - (2,811,848) -
Proceeds from sale/redemption of :
- AFS investment securities - 913,185 - 913,185
- Financial investment at FVOCI 1,964,930 - 1,964,930 -
Purchase of:
- Property and equipment (366) (2,431) (366) (2,431)
- Intangible assets (1,624) (2,708) (1,624) (2,708)
Income received from:
- AFS investment securities - 30,406 - 30,406
- Financial investment at FVOCI 41,304 - 41,304 -
──────── ──────── ──────── ────────
Net cash utilised in investing activities (807,604) (657,728) (807,604) (657,728)
──────── ──────── ──────── ────────
FINANCING ACTIVITY
7
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
A1 General information
The principal activities of the Company consist of the purchases of mortgage loans, personal loans and hire
purchase and leasing debts from primary lenders approved by the Company and the issuance of bonds
and notes to finance these purchases. The Company also purchases Islamic financing facilities such as
home financing, personal financing and hire purchase financing and funded by issuance of Sukuk. The
ultimate holding company is Cagamas Holdings Berhad, a company incorporated in Malaysia. Subsidiary
companies of the Company are Cagamas Global PLC (“CGP”) and Cagamas Global Sukuk Berhad
(“CGS”):
CGP is a conventional fund raising vehicle incorporated in Labuan. Its main principal activity is to
undertake the issuance of bonds and notes in foreign currency.
CGS is an Islamic fund raising vehicle. Its main principal activity is to undertake the issuance of Sukuk
in foreign currency.
There were no significant changes in the nature of these activities during the financial period.
A2 Basis of preparation
The unaudited condensed interim financial statements for the financial period ended 30 June 2018 have
been prepared under the historical cost convention except for the following assets and liabilities which are
stated at fair values: financial assets at fair value through profit or loss ("FVTPL"), financial investments at
fair value through other comprehensive income ("FVOCI") and derivative financial instruments.
The unaudited condensed interim financial statements of the Group and the Company for the financial
period 30 June 2018 have been prepared in accordance with the Malaysian Financial Reporting Standards
(“MFRS”) 134: Interim Financial Reporting issued by the Malaysian Accounting Standards Board (“MASB”).
The unaudited condensed interim financial statements do not include all of the information required for full
annual financial statements, and should be read in conjunction with the audited financial statements of the
Company for the financial year ended 31 December 2017. The explanatory notes attached in the unaudited
condensed interim financial statements provide an explanation of events and transactions that are
significant for an understanding of the changes in the financial position and performance of the Company
since financial year ended 31 December 2017. The Group’s and the Company’s unaudited interim financial
statements include the financial statements of the Company and its subsidiaries.
All significant accounting policies and methods of computation applied in the unaudited condensed interim
financial statements are consistent with those adopted in the most recent audited annual financial
statements for the year ended 31 December 2017.
8
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
i. Standards and amendments to published standards that are effective and applicable
The new accounting standards and amendments to published accounts that are effective and
applicable to the Company for the financial year beginning on 1 January 2018 are as follows:
MFRS 9 ‘Financial Instruments’ replaced MFRS 139 ‘Financial Instruments: Recognition and
Measurement’.
The Company has adopted MFRS 9 as issued by the MASB in November 2014 with a date of
transition of 1 January 2018, which resulted in changes in accounting policies and adjustments to
the amounts previously recognised in the financial statements.
The basis of classification depends on the entity’s business model and the cash flow
characteristics of the financial asset. Investments in equity instruments are always measured at
FVTPL with an irrevocable option at inception to present changes in FVOCI (provided the
instrument is not held for trading). A debt instrument is measured at amortised cost only if the
entity is holding it to collect contractual cash flows and the cash flows represent principal and
interest.
The classification and measurement of financial assets will depend on how these are managed
(i.e. the entity’s business model) and their contractual cash flow characteristics. These factors
determine whether the financial assets are measured at amortised cost, FVOCI or FVTPL. The
combined effect of the application of the business model and the contractual cash flow
characteristics tests may result in some differences in the population of financial assets measured
at amortised cost or fair value compared with MFRS 139.
For liabilities, the standard retains most of the MFRS 139 requirements. These include amortised
cost accounting for most financial liabilities, with bifurcation of embedded derivatives. The main
change is that, in cases where the fair value option is taken for financial liabilities, the part of a fair
value change due to an entity’s own credit risk is recorded in other comprehensive income rather
than the profit or loss, unless this creates an accounting mismatch.
Impairment
MFRS 9 introduces an expected credit loss (“ECL”) model on impairment that replaces the
incurred loss impairment model used under MFRS 139. The ECL model is forward looking and
eliminates the need for a trigger event to have occurred before credit losses are recognised
The impairment requirement applies to financial assets measured at amortised cost, FVOCI,
certain financial commitments and financial guarantee contracts.
.
9
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
i. Standards and amendments to published standards that are effective and applicable (Continued)
MFRS 9 ‘Financial Instruments’ replaced MFRS 139 ‘Financial Instruments: Recognition and
Measurement’(continued)
Impairment (continued)
Allowance for impairment is made based on the following three-stage approach which reflects the
change in credit quality of the financial instrument since initial recognition:
The assessment of credit risk, as well as the estimation of ECL, are required to be unbiased,
probability-weighted and should incorporate all available information which is relevant to the
assessment, including information about past events, current conditions and reasonable and
supportable forecasts of future events and economic conditions at the reporting date. In addition,
the estimation of ECL should also take into account the time value of money.
MFRS 15 ‘Revenue from contracts with customers’ replaced MFRS 118 ‘Revenue’ and MFRS
111 ‘Construction contracts’ and related interpretations. The core principle in MFRS 15 is that an
entity recognises revenue to depict the transfer of promised goods or services to the customer in
an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services.
Revenue is recognised when a customer obtains control of goods or services, i.e. when the
customer has the ability to direct the use of and obtain the benefits from the goods or services.
10
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
i. Standards and amendments to published standards that are effective and applicable (continued)
MFRS 15 ‘Revenue from contracts with customers’ replaced MFRS 118 ‘Revenue’ and MFRS
111 ‘Construction contracts’ and related interpretations (continued)
- Any bundled goods or services that are distinct must be separately recognised, and
any discounts or rebates on the contract price must generally be allocated to the
separate elements.
- If the consideration varies (such as for incentives, rebates, performance fees,
royalties, success of an outcome etc), minimum amounts of revenue must be
recognised if they are not at significant risk of reversal.
- The point at which revenue is able to be recognised may shift: some revenue which is
currently recognised at a point in time at the end of a contract may have to be
recognised over the contract term and vice versa.
- There are new specific rules on licenses, warranties, non-refundable upfront fees, and
consignment arrangements, to name a few.
- As with any new standard, there are also increased disclosures.
The amendments clarify the existing provisions in the Standard on transfer to, or from the
investment property category.
The IC Interpretation addresses the issue on which exchange rate is to be used in reporting
foreign currency transactions that involve advance consideration paid or received. .
The amendments address the issues arising from the transitional challenges of applying the
temporary exemption from MFRS 9 for an insurer in view that the upcoming new insurance
contracts standard MFRS 17 is expected to be issued soon.
The expiration date of the temporary exemption from MFRS 9 coincides with the tentative
effective date of MFRS 17, as decided by IASB in November 2016. In addition, to reduce the
impact of temporary volatility in reported results of entity dealing with insurance contracts, the
amendments introduce two additional voluntary options, namely an overlay approach and a
deferral approach.
11
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
ii. Standards and amendments to published standards and interpretations to existing standards that
are applicable but not yet effective.
MFRS 16 ‘Leases’ (effective from 1 January 2019) supersedes MFRS 117 ‘Leases’ and the
related interpretations.
Under MFRS 16, a lease is a contract (or part of a contract) that conveys the right to control
the use of an identified asset for a period of time in exchange for consideration.
MFRS 16 eliminates the classification of leases by the lessee as either finance leases (on
balance sheet) or operating leases (off balance sheet). MFRS 16 requires a lessee to
recognise a “right-of-use” of the underlying asset and a lease liability reflecting future lease
payments for most leases.
The right-of-use asset is depreciated in accordance with the principle in MFRS 116 ‘Property,
Plant and Equipment’ and the lease liability is accreted over time with interest expense
recognised in the income statement.
For lessors, MFRS 16 retains most of the requirements in MFRS 117. Lessors continue to
classify all leases as either operating leases or finance leases and account for them
differently.
The adoption of new accounting standards will not have a significant impact on the financial
results of the Group and the Company.
If an entity concludes that it is not probable that the tax treatment will be accepted by the tax
authority, the effect of the tax uncertainty should be included in the period when such
determination is made. An entity shall measure the effect of uncertainty using the method
which best predicts the resolution of the uncertainty.
12
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
The measurement category and the carrying amount of financial assets and liabilities in accordance with MFRS 139 and MFRS 9 at 1 January 2018
are compared as follows:
MFRS 139 MFRS 9
Measurement Carrying Measurement Carrying
Group category amount category amount
RM’000 RM’000
Financial assets
Cash and short-term funds Amortised cost 534,591 Amortised cost 534,591
Financial assets designated as fair value through
(1)
profit or loss (FVTPL) Not Applicable - FVTPL 101,292
(1)
Derivative financial instruments FVTPL (Held to maturity) 466,339 FVTPL 466,339
(2)
Available-for-sale investment securities FVOCI (AFS) 2,471,430 Not Applicable -
Financial Investment at fair value through other
(2)
comprehensive income (FVOCI) Not Applicable - FVOCI 2,370,138
Amount due from counterparties Amortised cost 19,870,378 Amortised cost 19,870,337
Islamic financing assets Amortised cost 5,544,378 Amortised cost 5,544,156
Mortgage assets:
- Conventional Amortised cost 5,848,119 Amortised cost 5,854,973
- Islamic Amortised cost 6,300,576 Amortised cost 6,302,640
Hire purchase assets:
- Conventional Amortised cost - Amortised cost -
- Islamic Amortised cost 953 Amortised cost 1,013
Total financial assets 41,036,764 41,045,479
(1)
Fair Value through Profit and Loss
(2)
Fair Value through other comprehensive income
13
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
The measurement category and the carrying amount of financial assets and liabilities in accordance with MFRS 139 and MFRS 9 at 1 January 2018
are compared as follows:
MFRS 139 MFRS 9
Measurement Carrying Measurement Carrying
Company category amount category amount
RM’000 RM’000
Financial assets
Cash and short-term funds Amortised cost 524,185 Amortised cost 524,185
Financial assets designated as fair value through
(1)
profit or loss (FVTPL) Not Applicable - FVTPL 101,292
(1)
Derivative financial instruments FTVPL (Held to maturity) 466,339 FVTPL 466,339
(2)
Available-for-sale investment securities FVOCI (AFS) 2,471,430 Not Applicable -
Financial Investment at fair value through other
(2)
comprehensive income (FVOCI) Not Applicable - FVOCI 2,370,138
Amount due from counterparties Amortised cost 19,870,378 Amortised cost 19,870,337
Islamic financing assets Amortised cost 5,544,378 Amortised cost 5,544,156
Mortgage assets:
- Conventional Amortised cost 5,848,119 Amortised cost 5,854,973
- Islamic Amortised cost 6,300,576 Amortised cost 6,302,640
Hire purchase assets:
- Conventional Amortised cost - Amortised cost -
- Islamic Amortised cost 953 Amortised cost 1,013
Total financial assets 41,026,358 41,035,073
(1)
Fair Value through Profit and Loss
(2)
Fair Value through other comprehensive income
14
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
ii. Reconciliation of statement of financial position balances from MFRS 139 to MFRS 9
Assets
Cash and short-term funds 534,591 - - 534,591 -
Financial assets designated as fair value through
profit or loss (FVTPL) - 101,292 - 101,292 -
Derivative financial instruments 466,339 - - 466,339 -
Available-for-sale investment securities 2,471,430 (2,471,430) - - -
Financial Investment at fair value through other
comprehensive income (FVOCI) - 2,370,138 - 2,370,138 -
Amount due from counterparties 19,870,378 - (41) 19,870,337 (31)
Islamic financing assets 5,544,378 - (222) 5,544,156 (169)
Mortgage assets:
- Conventional 5,848,119 - 6,854 5,854,973 5,209
- Islamic 6,300,576 - 2,064 6,302,640 1,569
Hire purchase assets:
- Conventional - - - - -
- Islamic 953 - 60 1,013 45
Total change to financial asset balances,
reclassification and remeasurement at
1 Jan 2018 41,036,764 - 8,715 41,045,479 6,623
15
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
ii. Reconciliation of statement of financial position balances from MFRS 139 to MFRS 9 (Continued)
Assets
Cash and short-term funds 524,185 - - 524,185 -
Financial assets designated as fair value through
profit or loss (FVTPL) - 101,292 - 101,292 -
Derivative financial instruments 466,339 - - 466,339 -
Available-for-sale investment securities 2,471,430 (2,471,430) - - -
Financial Investment at fair value through other
comprehensive income - 2,370,138 - 2,370,138 -
Amount due from counterparties 19,870,378 - (41) 19,870,337 (31)
Islamic financing assets 5,544,378 - (222) 5,544,156 (169)
Mortgage assets:
- Conventional 5,848,119 - 6,854 5,854,973 5,209
- Islamic 6,300,576 - 2,064 6,302,640 1,569
Hire purchase assets:
- Conventional - - - - -
- Islamic 953 - 60 1,013 45
Total change to financial asset balances,
reclassification and remeasurement at
1 Jan 2018 41,026,358 - 8,715 41,035,073 6,623
16
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
The following table reconciles the prior year's closing impairment allowance for the Company measured in accordance with the MFRS 139
incurred loss model to the new impairment allowance measured in accordance with the MFRS 9 expected loss model at 1 January 2018:
Impairment Impairment
allowance under allowance
MFRS 139 Reclassification Remeasurement under MFRS 9
Group and Company RM’000 RM’000 RM’000 RM’000
17
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
The audit report on the audited financial statements for the financial year ended 31 December 2017 was
not subject to any qualification.
The business operations of the Group and the Company are not subject to material seasonal or cyclical
fluctuations.
There was no unusual items affecting assets, liabilities, equity, net income or cash flows of the Group and
the Company for the financial period ended 30 June 2018.
A7 Changes in estimates
There were no changes in estimates of amounts reported in prior financial years that have a material effect
on the financial results and position of the Company for the financial period 30 June 2018.
A8 Dividend
A single tier final dividend of 15 sen per ordinary share on 150,000,000 ordinary shares amounting to
RM22,500,000 in respect of the financial year ended 31 December 2017 was paid on 30 March 2018.
A9 Subsequent events
There were no material events subsequent to the end of the reporting date that require disclosure or
adjustments to the interim financial statements.
There were no material changes in the composition of the Group during the financial period.
18
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Group Company
30 Jun 2018 31 Dec 2017 30 Jun 2018 31 Dec 2017
RM’000 RM’000 RM’000 RM’000
All cash and short-term funds balances are within Stage 1 allocation (12-months ECL) as at 30 June 2018.
Derivative financial instruments measured at their fair values together with their corresponding
contract/notional amounts are as follows:
Derivatives designated
as cash flow hedges:
IRS/IPRS
Maturing within
one year 1,150,000 636 (8,728) 2,585,000 2,344 (11,386)
One to three
years 1,860,000 - (6,258) 545,000 - (7,904)
More than five years 815,000 4,624 (17,369) 270,000 7,100 (12,147)
──────── ────── ─────── ────── ───── ──────
3,825,000 5,260 (32,355) 3,400,000 9,444 (31,437)
──────── ────── ─────── ────── ───── ──────
19
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
CCS/ICCS
Maturing within
one year 1,358,946 19,002 (69,875) 2,630,696 157,081 (47,104)
One to three
years 3,268,500 268,528 (165,631) 3,268,500 299,814 (138,330)
──────── ────── ────── ────── ────── ───────
4,627,446 287,530 (235,506) 5,899,196 456,895 (185,434)
──────── ────── ────── ────── ────── ───────
──────── ────── ─────── ───── ───── ─────
8,452,446 292,790 (267,861) 9,299,196 466,339 (216,871)
════════ ══════ ═══════ ══════ ═════ ═════
20
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Group Company
30 Jun 2018 31 Dec 2017 30 Jun 2018 31 Dec 2017
RM’000 RM’000 RM’000 RM’000
For financial asset designated as fair value through profit or loss (FVTPL), all balances are within stage 1
allocation (12-months ECL) as at 30 June 2018.
21
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
At fair value:
Malaysian government securities 129,994 -
Corporate bonds 747,589 -
Government investment issues 816,279 -
Sukuk 848,741 -
Quasi government Sukuk 643,803 -
─────── ───────
3,186,406 -
═══════ ═══════
For financial investment at fair value through other comprehensive income (FVOCI), all balances are within
stage 1 allocation (12-months ECL) as at 30 June 2018.
Relating to:
Mortgage loans 19,242,450 19,545,875
Hire purchase and leasing debts 627,549 286,304
Personal loans - 38,199
─────── ────────
19,869,999 19,870,378
Less: Allowance for impairment losses (96) -
─────── ───────
19,869,903 19,870,378
═══════ ═══════
22
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
At 1 January - -
Adoption of MFRS 9 41 -
Allowance made during the year 55 -
─────── ───────
At 30 June/ 31 Dec 96 -
═══════ ═══════
The gross carrying value of amount due from counterparties and the impairment allowance are within stage 1
allocation (12-months ECL) as at 30 June 2018.
23
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
At 1 January - -
Adoption of MFRS 9 222 -
Allowance made during the year 84 -
─────── ───────
At 30 June/ 31 Dec 306 -
═══════ ═══════
The gross carrying value of Islamic financing assets and the impairment allowance are within stage 1
allocation (12-months ECL) as at 30 June 2018.
24
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Gross Impairment
Carrying value allowance
30 Jun 2018 30 Jun 2018
Upon adoption of MFRS 9: RM’000 RM’000
By stage allocation:
25
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Gross Impairment
Carrying value allowance
30 Jun 2018 30 Jun 2018
Upon adoption of MFRS 9: RM’000 RM’000
By stage allocation:
26
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
At 1 January 62 62
Adoption of MFRS 9 (62) -
─────── ───────
At 30 June/ 31 Dec - 62
═══════ ═══════
Gross Impairment
Carrying value allowance
30 Jun 2018 30 Jun 2018
Upon adoption of MFRS 9: RM’000 RM’000
By stage allocation:
27
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Group Company
30 Jun 2018 31 Dec 2017 30 Jun 2018 31 Dec 2017
RM’000 RM’000 RM’000 RM’000
28
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Group
30 Jun 2018 31 Dec 2017
Year of Amount Effective Amount Effective
maturity outstanding interest rate outstanding interest rate
RM’000 % RM’000 %
Less:
Deferred financing fees (2,871) (4,572)
Unamortised discount (594) (1,268)
──────── ────────
25,043,871 24,762,642
──────── ────────
26,148,051 25,764,940
════════ ════════
29
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Company
30 Jun 2018 31 Dec 2017
Year of Amount Effective Amount Effective
maturity outstanding interest rate outstanding interest rate
RM’000 % RM’000 %
Less:
Unamortised discount (594) (1,268)
──────── ────────
20,283,132 18,702,985
──────── ────────
21,387,312 19,705,283
════════ ════════
30
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
The maturity structure of unsecured bearer bonds and notes are as follows:
Group Company
30 Jun 2018 31 Dec 2017 30 Jun 2018 31 Dec 2017
RM’000 RM’000 RM’000 RM’000
Bonds with variable coupon plus a spread redeemable at par on the due dates.
Commercial papers are short term instruments with maturities ranging from 1 to 12 months
and were issued at a discount or at par (coupon-bearing).
The medium-term notes are redeemable at par on the due dates, unless previously redeemed,
together with the accrued interest where applicable.
Included in medium term notes are medium term-notes issued in foreign currency (“EMTN”). The
EMTN are issued by CGP, and are unconditionally and irrevocably guaranteed by the Company. The
unsecured bearer bonds and notes outstanding as at the date of statement of financial position that
are not in the functional currencies of the Group are as follows:
Group
30 Jun 2018 31 Dec 2017
RM’000 RM’000
31
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
13. SUKUK
Group
30 Jun 2018 31 Dec 2017
Year of Amount Effective Amount Effective
maturity outstanding profit rate outstanding profit rate
RM’000 % RM’000 %
Add:
Profit payable 1,233 1,173
──────── ────────
306,233 306,173
──────── ────────
Less:
Deferred financing fees - (29)
Unamortised discount (249) (656)
──────── ────────
14,080,435 11,291,075
──────── ────────
14,386,668 11,597,878
════════ ════════
32
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Add:
Profit payable 1,233 1,173
──────── ────────
306,233 306,173
──────── ────────
(b) Islamic medium-term notes
2018 1,345,000 3.510 – 5.800 1,440,000 3.510 - 5.800
2019 1,187,000 3.750 – 5.280 1,187,000 3.750 - 5.280
2020 2,230,000 3.980 – 6.000 2,230,000 3.980 - 6.000
2021 1,770,000 4.150 – 5.380 245,000 4.150 - 5.380
2022 2,150,000 3.900 – 4.700 2,150,000 3.900 - 4.700
2023 2,495,000 4.250 – 6.350 995,000 4.250 - 6.350
2024 315,000 4.000 – 5.520 315,000 4.000 - 5.520
2025 455,000 4.550 – 4.650 455,000 4.550 - 4.650
2026 20,000 4.410 – 4.920 20,000 4.410 - 4.920
2027 15,000 4.140 15,000 4.140
2028 1,080,000 4.750 – 6.500 1,080,000 4.750 - 6.500
2029 180,000 5.500 – 5.750 180,000 5.500 - 5.750
2033 675,000 5.000 675,000 5.000
──────── ────────
13,917,000 10,987,000
Add:
Profit payable 133,727 113,504
Unaccreted premium 29,957 39,014
Less:
Unamortised discount (249) (656)
──────── ────────
14,080,435 11,138,862
──────── ────────
14,386,668 11,445,035
════════ ════════
33
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Islamic commercial paper are short term instruments with maturities ranging from 1 to 12 months
and were issued at a discount or at par (profit-bearing).
Islamic medium-term notes are issued by the Group based on various Islamic principles including
Sukuk ALIm and fixed rate Sukuk Murabahah. These Sukuk have tenures of more than 1 year and
are issued at a discount or at par (coupon-bearing). Profit on these Sukuk is paid on a half-
yearly/quaterly basis depending on issuance.
Included in Islamic medium-term notes are Islamic medium-term notes issued in foreign currency
(“Islamic EMTN”). The Islamic EMTN are issued by CGS, and are unconditionally and irrevocably
guaranteed by the Company. The Sukuk outstanding as at the date of statement of financial
position that are not in the functional currencies of the Group are as follows:
Group
30 Jun 2018 31 Dec 2017
RM’000 RM’000
SGD - 152,843
═══════ ══════
Loans/financing from subsidiaries outstanding as at the date of statement of financial position that are not
in the functional currencies of the Group is as follows:
Company
30 Jun 2018 31 Dec 2017
RM’000 RM’000
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Loans/financing from subsidiaries are unsecured and subject to interest/profit rates ranging from 1.520% to
2.745% per annum (Dec 2017: 1.520% to 2.745% per annum).
Company
30 Jun 2018 31 Dec 2017
RM’000 RM’000
Group Company
30 Jun 2018 31 Dec 2017 30 Jun 2018 31 Dec 2017
RM’000 RM’000 RM’000 RM’000
35
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
The Chief Executive Officer (the chief operating decision maker) of the Company makes strategic decisions
and allocation of resources on behalf of the Group. The Group and the Company has determined the
following operating segments based on reports reviewed by the chief operating decision maker in making
its strategic decisions;
There were no changes in the reportable segments during the financial period.
36
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Group
PWR PWOR Total
RM’000 RM’000 RM’000
30 Jun 2018
Company
30 Jun 2018
37
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Group
PWR PWOR Total
RM’000 RM’000 RM’000
30 Jun 2017
Company
30 Jun 2017
38
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Common equity tier 1 (“CET1”) and Tier 1 capital ratios refer to the ratio of total Tier 1 capital to risk-
weighted assets. Risk-weighted capital ratio (“RWCR”) is the ratio of total capital to risk-weighted assets.
Group Company
30 Jun 2018 31 Dec 2017 30 Jun 2018 31 Dec 2017
% % % %
CET I capital ratio 27.4 20.9 27.3 20.8
Tier I capital ratio 27.4 20.9 27.3 20.8
Total capital ratio 29.2 22.3 29.1 22.3
═══════ ═══════ ═══════ ═══════
Tier II capital
39
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
ASSETS
Cash and short-term funds (a) 80,340 110,090 80,303 110,083
AFS investment securities (b) - 576,571 - 576,571
Derivative financial instruments 33 - 33 -
Financial investments at fair value
through other comprehensive
Income (FVOCI) (c) 880,966 - 880,966 -
Financing assets (d) 8,285,300 5,544,378 8,285,300 5,544,378
Mortgage assets (e) 6,122,711 6,297,302 6,122,711 6,297,302
Hire purchase assets (f) 182 457 182 457
Deferred taxation 1,210 1,058 1,210 1,058
Other assets and prepayments 288,497 289,393 291,680 291,626
─────── ─────── ─────── ───────
TOTAL ASSETS 15,659,239 12,819,249 15,662,385 12,821,475
═══════ ═══════ ═══════ ═══════
LIABILITIES
Sukuk (g) 14,386,668 11,597,878 14,386,668 11,445,035
Derivative financial instruments 5,271 10,315 5,271 10,315
Other liabilities (h) 21,372 15,408 21,271 167,361
─────── ─────── ─────── ───────
TOTAL LIABILITIES 14,413,311 11,623,601 14,413,210 11,622,711
═══════ ═══════ ═══════ ═══════
40
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
CONDENSED INCOME STATEMENT FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018
Income attributable to the Sukuk holders (k) (279,971) (245,258) (279,975) (245,269)
41
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Group Company
6 Months to 6 Months to 6 Months to 6 Months to
30 Jun 2018 30 Jun 2017 30 Jun 2018 30 Jun 2017
RM’000 RM’000 RM’000 RM’000
42
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
CONDENSED STATEMENT OF CHANGES IN ISLAMIC OPERATIONS’ FUNDS FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018
Non-distributable
Allocated Financial Cash flow
Capital AFS investment hedge Regulatory Retained Total
funds reserves at FVOCI reserves reserves profits equity
Group RM'000 RM'000 RM'000 RM'000 RM'000 RM’000 RM'000
Balance as at 1 January 2018 294,159 308 - (4,054) 83,655 821,580 1,195,648
Effects of adopting MFRS 9 on 1 January 2018 - (308) 308 - - 640 640
As restated 294,159 - 308 (4,054) 83,655 822,220 1,196,288
43
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
CONDENSED STATEMENT OF CHANGES IN ISLAMIC OPERATIONS’ FUNDS FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018
Non-distributable
Allocated Financial Cash flow
Capital AFS investment hedge Regulatory Retained Total
funds reserves at FVOCI reserves reserves profits equity
Company RM'000 RM'000 RM'000 RM'000 RM'000 RM’000 RM'000
Balance as at 1 January 2018 294,159 308 - (4,054) 83,655 824,696 1,198,764
Effects of adopting MFRS 9 on 1 January 2018 - (308) 308 - - 640 640
As restated 294,159 - 308 (4,054) 83,655 825,336 1,199,404
44
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
CONDENSED STATEMENT OF CASH FLOWS FOR THE FINANCIAL PERIOD ENDED 30 JUNE 2018
Group Company
6 Months to 6 Months to 6 Months to 6 Months to
30 Jun 2018 30 Jun 2017 30 Jun 2018 30 Jun 2017
RM’000 RM’000 RM’000 RM’000
OPERATING ACTIVITIES
45
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Group Company
6 Months to 6 Months to 6 Months to 6 Months to
30 Jun 2018 30 Jun 2017 30 Jun 2018 30 Jun 2017
RM’000 RM’000 RM’000 RM’000
──────── ──────── ──────── ────────
Purchase of:
- AFS investment securities - (919,512) - (919,512)
- Financial investment at FVOCI (1,371,011) - (1,371,011) -
Sale of:
- AFS investment securities - 501,660 - 501,660
- Financial investment at FVOCI 1,071,237 - 1,071,237 -
Derivative financial instruments (4,701) 22,802 (4,701) 22,802
Income received from
- AFS investment securities - 527 - 527
- Financial investment at FVOCI 6,329 - 6,329 -
───────── ───────── ───────── ────────
Net cash utilised in investing activities (298,146) (394,523) (298,146) (394,523)
───────── ───────── ───────── ────────
Net increase in cash and cash equivalents (29,750) (46,740) (29,780) (46,794)
Cash and cash equivalents as at 1 January 110,090 133,084 110,083 133,084
───────── ───────── ───────── ────────
Cash and cash equivalents as at 30 June 80,340 86,344 80,303 86,290
═════════ ═════════ ═════════ ════════
46
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Group Company
30 Jun 2018 31 Dec 2017 30 Jun 2018 31 Dec 2017
RM’000 RM’000 RM’000 RM’000
All cash and short-term funds balances are within Stage 1 allocation (12-months ECL) as at 30 June
2018.
47
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
At fair value:
Sukuk 161,785 -
Government investment issues 439,255 -
Quasi government issues 279,926 -
─────── ───────
880,966 -
═══════ ═══════
For financial investment at fair value through other comprehensive income (FVOCI), all balances are
within stage 1 allocation (12-months ECL) as at 30 June 2018.
Relating to:
House financing 8,265,595 5,434,616
Personal financing 19,971 109,762
─────── ───────
8,285,566 5,544,378
Less: Allowance for impairment losses (266) -
─────── ───────
8,285,300 5,544,378
═══════ ═══════
The maturity structure of financing assets are as follows:
48
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
At 1 January - -
Adoption of MFRS 9 222 -
Allowance made during the year 44 -
─────── ───────
At 30 June/ 31 Dec 266 -
═══════ ═══════
The gross carrying value of financing assets and the impairment allowance are within stage 1 allocation
(12-months ECL) as at 30 June 2018.
49
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Gross Impairment
Carrying value allowance
30 Jun 2018 30 Jun 2018
Upon adoption of MFRS 9: RM’000 RM’000
By stage allocation:
At 1 January 62 75
Adoption of MFRS 9 (62) -
Write - off - (13)
─────── ───────
At 30 June/ 31 Dec - 62
═══════ ═══════
50
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Gross Impairment
Carrying value allowance
30 Jun 2018 30 Jun 2018
Upon adoption of MFRS 9: RM’000 RM’000
By stage allocation:
Group Company
30 Jun 2018 31 Dec 2017 30 Jun 2018 31 Dec 2017
RM’000 RM’000 RM’000 RM’000
(c) Sukuk
51
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Group Company
6 Months to 6 Months to 6 Months to 6 Months to
30 Jun 2018 30 Jun 2017 30 Jun 2018 30 Jun 2017
RM’000 RM’000 RM’000 RM’000
Income from:
Mortgage assets 45,990 57,537 45,990 57,537
Financing assets 9,719 10,254 9,715 10,243
Deposit and placements with financial
institutions 2,662 2,120 2,662 2,120
Financial assets designated as FVOCI 12,243 - 12,243 -
Hire purchase assets (108) (94) (108) (94)
AFS investments securities - 4,483 - 4,483
Non-profit expense (3,323) (2,728) (3,323) (2,728)
─────── ─────── ─────── ───────
67,183 71,572 67,179 71,561
═══════ ═══════ ═══════ ═══════
52
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Group Company
6 Months to 6 Months to 6 Months to 6 Months to
30 Jun 2018 30 Jun 2017 30 Jun 2018 30 Jun 2017
RM’000 RM’000 RM’000 RM’000
Tier II capital
Add: Regulatory reserves 80,737 83,655 80,737 83,655
Allowance for impairment losses 27,400 30,259 27,400 30,259
────── ────── ────── ──────
Total Tier II capital 108,137 113,914 108,137 113,914
────── ────── ────── ──────
Total capital 1,277,349 1,207,291 1,280,596 1,210,407
══════ ══════ ══════ ══════
53
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Group Company
30 Jun 2018 31 Dec 2017 30 Jun 2018 31 Dec 2017
RM’000 RM’000 RM’000 RM’000
Market environment
Global economy expanded at a robust pace in the first quarter of 2018 with steady growth witnessed
across regions. Global growth is projected to reach 3.1% in 2018 (2017:3.1%). Growth in advanced
economies and major emerging market and developing economies are attributed by strong investment and
export activities. Global trade continued to grow, fuelled by higher investment and expansionary fiscal
policy.
The Malaysian economy expanded by 5.4% in 1Q2018 (4Q 2017: 5.9%) fuelled mainly by robust and
steady domestic demand led by private sector expenditure. Private consumption grew by 6.9% (4Q 2017:
7.0%) attributed by steady employment and low inflation rate. Private investment moderated to 0.5% (4Q
2017: 9.2%) due to lower capital spending residential and commercial properties, machinery and
equipment during the quarter. As for the supply side, all sectors registered positive growth, particularly the
expansion of the services and manufacturing sector at 6.5% and 5.3% respectively. The services sector
saw higher growth in the finance and insurance sub-sector, resulting from higher lending activity by the
household. Malaysia’s strong growth performance in 2017 is expected to be sustained through 2018.
Headline inflation declined to 1.8% in 1Q2018 (4Q 2017: 3.5%) contributed by relatively slower increase in
fuel prices and stronger ringgit. The labour market witnessed a falling unemployment rate to 3.3% (4Q
2017: 3.4%) while total employment was recorded at 14.7 million. The services sector remained major
driver of employment (61.7%), followed by manufacturing (17.4%) and agriculture (10.9%) sectors. The
ringgit continued to appreciate against the US dollar and other regional currencies in 1Q2018. The
strengthening on the ringgit is driven primarily by foreign direct inflows as investors are positive on
Malaysia’s growth outlook. Following the OPR increase in Jan 2018, interest rates in wholesale and retail
markets trended higher. Liquidity remains supportive of banks’ financing activities. In light of the overall net
capital inflows during the quarter, the level of surplus liquidity placed with BNM also increased. At the
institutional level, most banks continued to maintain surplus liquidity positions. The banking system
remains well capitalised with the Common Equity Tier 1 Capital Ratio, Tier 1 Capital Ratio and Total Capital
Ratio stood at 13.2%, 14% and 17.5% respectively in the first quarter of 2018 (4Q 2017: 13.5%, 14.5% and
17.3%, respectively).The growth of net financing sustained at 6.3% in 1Q2018 (4Q 2017: 6.4%) attributed
by steady growth of outstanding loans. Overall gross impaired loans ratio stood at 1.57% yoy (4Q 2017:
1.54%)
54
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Financial performance
The Group registered a pre-tax profit of RM167.5 million for the 6 months ending 30 June 2018 as
compared to RM158.1 million in the previous corresponding period.
The increase in the Group’s net interest income is mainly due to increase in net interest income
contribution from new PWR asset purchased during the financial period. The total assets of the Group
stood at RM44.4 billion, a 8.0% growth since 31 Dec 2017.
Cagamas recorded RM6.1 billion of purchases of loans and financing (1H 2017: RM5.2 billion) in the 1H
2018. All purchases were under PWR scheme while residential mortgage continued to dominate Cagamas’
portfolio at 98.4% (1H 2017: 96.2%), followed by personal loans and financing at 1.6% (1H 2017 : 2.3%)
and hire purchase loans and financing at 0.1% (1H 2017: 1.5%).
As at end-June 2018, Cagamas has issued a total of 15 new issuances totalling RM7.5 billion, comprising
an aggregate of RM3.9 billion bonds and RM3.6 billion sukuk. Total issuance of RM7.5 billion was raised
solely from the ringgit market under the Company’s MTN Programme.
Cagamas’ corporate bonds and sukuk continue to be assigned the highest ratings of AAA and P1 by RAM
Rating Services Berhad and AAA/AAAID and MARC-1/MARC-1ID by Malaysian Rating Corporation
Berhad, denoting its strong credit quality. Cagamas is also well regarded internationally and has been
assigned local and foreign currency long-term issuer ratings of A3 by Moody’s Investors Service Inc. that
are in line with Malaysian sovereign ratings.
Capital management
The Group’s core capital ratio as at 30 June 2018 increased to 27.4% as compared to 20.9% as at 31
December 2017. As at 1H 2018 RWCR remains stable at 29.2%, above the minimum ratio of 20% as
stipulated in the Guidelines on Capital Adequacy Ratio, computed in accordance with the Basel II Capital
Adequacy Framework. The improvements in the Group’s capital adequacy ratio is subsequent to adoption
of local ratings in determining the risk weight for all counterparties under the standardised approach and
consistent with risk assessment for MFRS 9.
Total shareholder’s funds for the Group had grown to RM3.5 billion from RM3.4 billion arising from profits
generated during the period, while net tangible assets per share increased by 2% to RM23.18 per share as
at 30 June 2018.
55
Company No:
157931 A
CAGAMAS BERHAD
(Incorporated in Malaysia)
Explanatory notes to the Condensed Interim Financial Statements at 30 June 2018 (Continued)
Information About Company Employees, Social And Community Issues Including The Impact Of The
Company’s Business On The Environment
As part of its Corporate Social Responsibility (CSR) efforts, Cagamas continues to provide assistance to
the less fortunate through its ongoing CSR and Zakat initiatives. For the financial period ended 30 June
2018, Cagamas had participated as a Corporate Pledge Partner for Teach for Malaysia’s Empowered To
Unlock MY Potential Campaign which is in line with the Company’s efforts to promote sustainable, positive
social and environmental change through education. The Cagamas Scholarship Programme (CSP) which
was launched last year continues to see the Company reaching out to deserving Malaysians who are in
need of financial aid to pursue their education through its second enrolment of undergraduates for the CSP.
In addition, Cagamas launched its sponsored Islamic Finance in Malaysia, Growth & Development
publication which was a partnership with the International Centre for Education in Islamic Finance
(INCEIF). Cagamas also co-sponsored the Islamic Economics Textbook to be published by the
International Shari’ah Reseach Academy (ISRA). It is hoped that the book sponsorships, which are in line
with the Malaysia International Islamic Finance Centre’s (MIFC) initiative to promote the country as an
international Islamic financial hub, will assist in the advancement of the Islamic finance sector.
56