1. BACKGROUND INFORMATION. (i) Name : Kuala Lumpur Kepong Berhad ( KLK or the Issuer ).

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1 A) PRINCIPAL TERMS AND CONDITIONS OF THE RINGGIT ISLAMIC MEDIUM TERM NOTES PURSUANT TO A MULTI-CURRENCY ISLAMIC MEDIUM TERM NOTES PROGRAMME OF UP TO RM1,600.0 MILLION IN NOMINAL VALUE (OR ITS EQUIVALENT IN FOREIGN CURRENCIES) 1. BACKGROUND INFORMATION (a) Issuer (i) Name : Kuala Lumpur Kepong Berhad ( KLK or the Issuer ). (ii) Address : Wisma Taiko 1 Jalan S.P. Seenivasagam Ipoh Perak Darul Ridzuan. (iii) Business registration number (iv) Date and place of incorporation : V. : 6 July 1973/Malaysia. (v) (vi) Date of listing, where applicable Status on residence, i.e. whether it is a resident controlled company or non-resident controlled company : 6 February 1974 on the Main Market of Bursa Malaysia Securities Berhad. : Resident-controlled Company. (vii) Principal activities : The Issuer carries on the business of producing and processing palm products and natural rubber of its plantations. The Issuer and its subsidiaries and associated companies are involved in the business of plantation, manufacturing, property development and investment holding. (viii) Board of directors : The board of directors of KLK as at 31 March 2015 is as follows: 1. Tan Sri YM Raja Muhammad Alias bin Raja Muhammad Ali 2. Tan Sri Dato Seri Lee Oi Hian 3. Roy Lim Kiam Chye 4. Dato Lee Hau Hian 5. Dato Yeoh Eng Khoon 6. Kwok Kian Hai 7. Tan Sri Azlan bin Mohd Zainol 1

2 (ix) Structure of shareholdings and names of shareholders or, in the case of public company, names of all substantial shareholders : As at 31 March 2015, the substantial shareholders of KLK and their respective shareholdings, based on KLK s Register of Substantial Shareholders, are as follows: Name Direct Indirect No. of Shares % # No. of Shares % # Batu Kawan Berhad Employees Provident Fund Board** Amanah Raya Trustees Berhad-Skim Amanah Saham Bumiputera 495,901, ,448, ,017, Wan Hin Investments Sdn Bhd Tan Sri Dato Seri Lee Oi Hian Dato Lee Hau Hian Grateful Blessings Inc Di-Yi Sdn Bhd Cubic Crystal Corporation High Quest Holdings Sdn Bhd 448, ,901,5 27* 72, ,350,0 27* 83, ,350,0 27* ,350,0 27* ,350,0 27* ,350,0 27* ,350,0 27* # Calculated based on 1,064,965,692 shares, which do not include 2,539,000 treasury shares. * Grateful Blessings Inc (which is wholly-owned by Tan Sri Dato Lee Oi Hian) and Cubic Crystal Corporation (which is whollyowned by Dato Lee Hau Hian) are substantial shareholders of Di- Yi Sdn Bhd and High Quest Holdings Sdn Bhd respectively, which in turn are substantial shareholders of Wan Hin Investments Sdn Bhd (which is a substantial shareholder of Batu Kawan Berhad). Accordingly all these parties are also substantial shareholders of Kuala Lumpur Kepong Berhad by virtue of their deemed interests. ** Includes those held through Citigroup Nominees (Tempatan) Sdn Bhd. 2

3 (x) Authorised, issued and paid up capital : As at 31 March 2015: Authorised capital: RM5,000,000, comprising of 5,000,000,000 ordinary shares of RM1.00 each. Issued and Paid-up capital: RM1,067,504, comprising of 1,067,504,692 ordinary shares of RM1.00 each. (xi) Disclosure of the following : If the Issuer or its board members have been convicted or charged with any offence under the securities laws, corporation laws or other laws involving fraud or dishonesty in a court of law, for the past five years prior to the date of application; and If the Issuer has been subjected to any action by the stock exchange for any breach of the listing requirements or rules issued by the stock exchange, for the past five years prior to the date of application. None. None. 3

4 2. PRINCIPAL TERMS AND CONDITIONS (a) Names of parties involved in the proposal, where applicable (i) Principal adviser : CIMB Investment Bank Berhad ( CIMB ) and Maybank Investment Bank Berhad ( Maybank IB ) as the Joint Principal Advisers. (ii) Lead arranger : CIMB and Maybank IB as the Joint Lead Arrangers. (iii) Co-arranger : Not applicable. (iv) Solicitor : Messrs. Zaid Ibrahim & Co. ( Legal Counsel ). (v) Financial adviser : Not applicable. (vi) Technical adviser (vii) Sukuk trustee (viii) Shariah adviser (ix) Guarantor : Not applicable. : Maybank Trustees Berhad : CIMB Islamic Bank Berhad and Maybank Islamic Berhad as the Joint Shariah Advisers ( Joint Shariah Advisers ). : Not applicable. (x) Valuer : Not applicable. (xi) Facility agent (xii) Primary subscriber (under a bought-deal arrangement) and amount subscribed (xiii) Underwriter and amount underwritten (xiv) Central depository (xv) Paying agent (xvi) Reporting accountant (xvii) Calculation agent : CIMB. : The primary subscribers (applicable under a bought deal arrangement) for any issuance will be determined prior to such issuance. : The Ringgit Sukuk (as defined in paragraph 2(c)) will not be underwritten. : Bank Negara Malaysia ( BNM ). : BNM. : KPMG. : Not applicable. (xviii) Others (please specify) : Joint Lead Managers ( JLMs ) and Joint Bookrunners CIMB and Maybank IB. 4

5 (b) Islamic principles used : Ijarah and/or Wakalah Bi Al-Istithmar as approved by the Securities Commission Malaysia ( SC ) s Shariah Advisory Council ( SAC ). Where it is proposed to issue IMTN (as defined in paragraph 2(c)) based on a Shariah principle which is not listed above, the prior approval of the SC will be sought. The transaction documents will provide that no approval from the Sukukholders will be required for Ringgit Sukuk (as defined in paragraph 2(c)) or Non- Ringgit Sukuk (as defined in paragraph 2(c)) issuances throughout the tenure of the Multi- Currency IMTN Programme (as defined in paragraph 2(c)): (a) (b) (c) for the Issuer to issue Ringgit Sukuk or Non- Ringgit Sukuk based on Shariah principles other than Ijarah and/or Wakalah Bi Al- Istithmar; or to amend the structure described in these Principal Terms and Conditions ( PTC ) so as to comply with any future requirements of the Ijarah and/or Wakalah Bi Al-Istithmar principle; or to amend the structure of any Shariah principles (other than Ijarah and/or Wakalah Bi Al-Istithmar) which may be adopted by the Issuer, so as to comply with any future requirements of those Shariah principles. However, the prior approvals of the SC and the Joint Shariah Advisers will have to be obtained and confirmation from the Rating Agency that the rating of the Multi-Currency IMTN Programme will not be affected. For the avoidance of doubt, any changes to the Shariah principle(s) and/or the structure of the Shariah principle(s) of any Ringgit Sukuk or Non- Ringgit Sukuk which are outstanding, shall require the prior approval of the Sukukholders of such outstanding Ringgit Sukuk or Non-Ringgit Sukuk and confirmation from the Rating Agency that the rating of the Multi-Currency IMTN Programme will not be affected. 5

6 (c) Facility description : A multi-currency Islamic medium term notes ( IMTN ) programme of up to RM1,600.0 million in nominal value (or its equivalent in foreign currencies) ( Multi-Currency IMTN Programme ). The Multi-Currency IMTN Programme shall comprise Ringgit denominated IMTN ( Ringgit Sukuk ) and non-ringgit denominated IMTN ( Non- Ringgit Sukuk ) issuances. Any Ringgit Sukuk issued under the Multi-Currency IMTN Programme may be issued under the Shariah principle(s) of Ijarah ( Ringgit Sukuk Ijarah ) and/or Wakalah Bi Al-Istithmar ( Ringgit Sukuk Wakalah Bi Al-Istithmar ). Ringgit Sukuk Ijarah The Ijarah transaction may be in two forms: 1) Ijarah transaction whereby the Lease Assets (as defined in paragraph 2(d)) are owned by KLK ( Ijarah Structure with KLK s Assets ); or 2) Ijarah transaction whereby the Lease Assets are owned by KLK s subsidiary(ies) ( Ijarah Structure with KLK s Subsidiaries Assets ). The Lease Assets will be identified and endorsed by the Joint Shariah Advisers prior to each issuance of Ringgit Sukuk Ijarah. The Lease Assets shall be free from encumbrances. If any of the Lease Assets are encumbered, KLK shall obtain the relevant consents to allow KLK to use the Lease Assets for the Ringgit Sukuk Ijarah. For the avoidance of doubt, as long as an issuance of Ringgit Sukuk Ijarah remains outstanding, the Lease Assets used under the Ijarah transaction in respect of such Ringgit Sukuk Ijarah issuance shall not be used as the Lease Assets for any other Ringgit Sukuk Ijarah and/or any non-ringgit sukuk Ijarah issuances unless such Ringgit Sukuk Ijarah issuance is redeemed or the Issuer has substituted the Lease Assets with the Replacement Assets (as defined below), upon which such Lease Assets shall be available for use as the Lease Assets for other Ringgit Sukuk Ijarah and/or non-ringgit sukuk Ijarah issuances. 6

7 In respect of the Ijarah Structure with KLK s Subsidiaries Assets, subsidiary(ies) of KLK ( Asset Owner ) shall, first, transfer the Lease Assets to KLK by way of hibah (gift). In respect of each issue of Ringgit Sukuk Ijarah, the Sukukholders (represented by the Sukuk Trustee) shall, from time to time, purchase the Lease Assets from KLK (in such capacity, the Seller ), at the asset purchase price ( Asset Purchase Price ) pursuant to an asset purchase agreement ( Asset Purchase Agreement ). The Asset Purchase Price will be equivalent to the Ringgit Sukuk Ijarah proceeds. The value of the Lease Assets shall be in compliance with the SAC s asset pricing requirements as set out in the SC s Guidelines on Sukuk (revised and effective on 28 August 2014) as may be amended from time to time ( Sukuk Guidelines ). The Sukuk Trustee (acting on behalf of the Sukukholders), in its capacity as the lessor ( Lessor ), shall then, from time to time, enter into an agreement with KLK ( Ijarah Agreement ) to lease the Lease Assets to KLK ( Lessee ) for a predetermined rental amount ( Rental ) and lease period from the date of the issuance of the Ringgit Sukuk Ijarah up to the maturity of the Ringgit Sukuk Ijarah ( Lease Period ) pursuant to the relevant Ijarah Agreement. Under the trust deed entered into between the Issuer (hereinafter defined) and the Sukuk Trustee ( Trust Deed ), the Sukuk Trustee (in its capacity as the Asset Trustee ) shall declare a trust over the Lease Assets for the benefit of the Sukukholders ( Trust Assets ). KLK (in its capacity as the Issuer ) shall issue the Ringgit Sukuk Ijarah to represent the Sukukholders undivided and proportionate beneficial ownership and interest over the Trust Assets (including the right to receive the Rental) held by the Sukuk Trustee as constituted under the Trust Deed. The Ringgit Sukuk Ijarah proceeds shall be the price consideration for the Asset Purchase Price payable to KLK under the Asset Purchase Agreement. The Lessee shall pay Rental payable in respect of 7

8 the Lease Assets upon: (a) (b) the Maturity Date (as defined below) or upon an Event of Default/Dissolution Event (as defined in paragraph 2(v)) ( One-Off Distribution Date ) in relation to the Ringgit Sukuk Ijarah without Periodic Distributions (as defined in paragraph 2(i)); or the Periodic Distribution Dates (as defined below) in relation to the Ringgit Sukuk Ijarah with Periodic Distributions, as the case may be. Rental shall be utilised for payments of the one-off distribution ( One-off Distribution ) which is due and payable on the One-off Distribution Date or Periodic Distributions which are due and payable on the Periodic Distribution Dates under the Ringgit Sukuk Ijarah to the Sukukholders in proportion to their holdings. KLK shall grant a purchase undertaking ( Purchase Undertaking ) to the Sukuk Trustee (acting on behalf of the Sukukholders), under which KLK shall purchase the relevant Lease Assets from the Sukuk Trustee (acting on behalf of the Sukukholders) at the relevant Exercise Price (as defined in paragraph 2(y)(v)) for the relevant Ringgit Sukuk Ijarah and shall enter into a sale agreement for such purchase ( Sale Agreement ) on the earlier of: (a) (b) the Maturity Date (as defined below); or the Event of Default/Dissolution Event (as defined in paragraph 2(v)). Under the terms of a servicing agency agreement ( Servicing Agency Agreement ), KLK shall be appointed as the servicing agent ( Servicing Agent ) by the Lessor (acting on behalf of the Sukukholders) and will be responsible, on behalf of the Lessor, for, among others, major maintenance and/or structural repair and the cost associated with procuring the takaful/insurance coverage in respect of the Lease Assets ( Ownership Expenses ), which shall be reimbursed by the Sukuk Trustee to KLK upon the payment of the Exercise Price (as defined in paragraph 2(y)(v)) under the Purchase Undertaking. The Servicing Agent shall also ensure that the takaful/insurance is for a covered/insured 8

9 amount at all times and shall be responsible for the related payment of the relevant takaful contribution or insurance premium. Under a substitution undertaking ( Substitution Undertaking ), the Issuer shall have the right to substitute from time to time (i) throughout the tenure of the Ringgit Sukuk Ijarah at the option of the Issuer or (ii) upon the occurrence of a Partial Loss Event (as defined below), via an exchange agreement ( Asset Exchange Agreement ), the Lease Assets throughout the tenure of the Ringgit Sukuk Ijarah with qualified asset(s) that is/are Shariah-compliant and approved by the Joint Shariah Advisers ( Replacement Assets ). The Replacement Assets shall form part of the Lease Assets. In respect of the Ijarah Structure with KLK s Subsidiaries Assets, following the execution of the Asset Exchange Agreement between the Sukuk Trustee (acting on behalf of the Sukukholders) and the Issuer, KLK shall transfer the Lease Assets to the Asset Owner by way of a second hibah (gift). In respect of the Ijarah Structure with KLK s Subsidiaries Assets, following the exercise of the Purchase Undertaking by the Sukuk Trustee (acting on behalf of the Sukukholders) upon the Maturity Date or upon an Event of Default/Dissolution Event, whichever is earlier and purchase of the Lease Assets by KLK from the Sukuk Trustee, KLK shall transfer the Lease Assets to the Asset Owner by way of a second hibah (gift). In the event the Lease Assets are affected by Total Loss Event (as defined below), the particular Ijarah Agreement will be terminated accordingly and the Ringgit Sukuk Ijarah will be redeemed immediately. The takaful/insurance proceeds are payable to the Sukukholders as the loss payee. The Servicing Agent shall irrevocably and unconditionally undertake to make good the difference if the proceeds of takaful/insurance is insufficient to pay the amounts due under the relevant Ringgit Sukuk Ijarah and the Ownership Expenses. Any excess from the takaful/insurance proceeds over the amount required to redeem the relevant Ringgit Sukuk Ijarah and the Ownership Expenses, if any, shall be paid to the Servicing Agent as an incentive fee. Thereafter, the relevant Ringgit Sukuk Ijarah 9

10 shall be cancelled. In the event the Lease Assets are affected by a Partial Loss Event (as defined below), proceeds from the takaful/insurance claim over the affected Lease Assets shall be utilised for the replacement or repair of the affected Lease Assets. For the avoidance of doubt, the Ijarah Agreement will not be terminated in the event of the occurrence of a Partial Loss Event. Please refer to Appendix A(i) for the diagrammatic illustration of the Ringgit Sukuk Ijarah Structure with KLK s Assets. Please refer to Appendix A(ii) for the diagrammatic illustration of the Ringgit Sukuk Ijarah Structure with KLK s Subsidiaries Assets. Ringgit Sukuk Wakalah Bi Al-Istithmar Pursuant to a Wakalah agreement between the Sukuk Trustee (acting on behalf of the Sukukholders) and KLK ( Wakalah Agreement ), the Sukuk Trustee (acting on behalf of the Sukukholders) shall appoint KLK as its agent ( Wakeel ) to perform certain duties in respect of the Wakalah Portfolio (as defined below), for a nominal fee, including investment in and management of the Wakalah Portfolio, in accordance with the Wakalah Agreement. KLK shall issue, from time to time, Ringgit Sukuk Wakalah Bi Al-Istithmar to the Sukukholders which represent the Sukukholders proportionate beneficial ownership and interest in the Shariah-compliant Wakalah portfolio (the Wakalah Portfolio ). The Sukukholders shall subscribe to the Ringgit Sukuk Wakalah Bi Al- Istithmar by paying the Ringgit Sukuk Wakalah Bi Al-Istithmar proceeds to KLK. The Wakalah Portfolio shall comprise a combination of: (i) the Tangible Assets (as defined below) and (ii) the Commodity Murabahah Investment (as defined below). Under the Wakalah Agreement, the Wakeel (in its capacity as the Asset Trustee ) shall declare a trust over the Wakalah Portfolio for the benefit of the Sukukholders ( Trust Assets ). 10

11 The Wakeel shall utilise the Ringgit Sukuk Wakalah Bi Al-Istithmar proceeds to invest in the Wakalah Portfolio which must comply with the minimum onethird tangible assets requirement ( Tangible Assets Requirement ). The tangible assets shall constitute Shariah-compliant leasable assets or combination of Shariah-compliant leasable assets and such other Shariah-compliant income generating assets which meet the tangibility requirement set out in the Wakalah Agreement ( Tangible Assets ). On each issue date of the Ringgit Sukuk Wakalah Bi Al-Istithmar ( Issue Date ), the Wakeel (as Asset Buyer ) shall utilise at least one-third of the Ringgit Sukuk Wakalah Bi Al-Istithmar proceeds to acquire the Tangible Assets from KLK (as Asset Seller ) at the tangible assets purchase price ( Tangible Assets Purchase Price ) pursuant to a sale and purchase agreement ( Sale and Purchase Agreement ). The remaining Ringgit Sukuk Wakalah Bi Al- Istithmar proceeds shall be utilised for investment in a commodity murabahah investment ( Commodity Murabahah Investment ). Pursuant to the Commodity Murabahah Investment Agreement entered into between the Wakeel, KLK (as Commodity Buyer ) and the Sukuk Trustee, the Commodity Buyer, shall issue to the Wakeel and the Sukuk Trustee a purchase order with an undertaking to buy commodities ( Commodities ) from the Sukukholders (via the Wakeel). The Wakeel shall purchase Commodities from commodity broker(s)/supplier(s) at the commodity purchase price equivalent to such remaining Ringgit Sukuk Wakalah Bi Al-Istithmar proceeds on spot basis ( Commodity Purchase Price ). The Wakeel (as Commodity Seller ) shall sell the Commodities to the Commodity Buyer for a deferred sale price (equivalent to the Commodity Purchase Price plus profit margin) ( Deferred Sale Price ) payable in accordance with the Commodity Murabahah Investment Agreement. The Commodity Buyer shall subsequently sell the Commodities to a commodity broker(s)/bursa Malaysia Islamic Services (BMIS) on spot basis for an amount equal to the Commodity Purchase Price. The Wakeel shall manage the Wakalah Portfolio to ensure compliance of the Wakalah Portfolio with the Tangible Assets Requirement, throughout the tenure 11

12 of the Ringgit Sukuk Wakalah Bi Al-Istithmar. The Wakeel shall also ensure that the takaful/insurance of the Shariah-compliant leasable assets which forms part of the Tangible Assets is for a covered/insured amount at all times and shall be responsible for the related payment of the relevant takaful contribution or insurance premium. The Wakeel may from time to time: (i) throughout the tenure of the Ringgit Sukuk Wakalah Bi Al-Istithmar at the option of the Issuer or (ii) upon the occurrence of a Total Loss Event or Partial Loss Event, substitute the existing Tangible Assets with any other form of eligible Shariah-compliant assets. The replacement tangible assets shall form part of the Wakalah Portfolio. In the event the Shariah-compliant leasable assets which form part of the Tangible Assets are affected by Total Loss Event or Partial Loss Event, the proceeds from the takaful/insurance claim for the affected leaseable assets shall be utilised for replacement or repair of the affected leaseable assets. For the avoidance of doubt, the Sukuk Wakalah Bi Al-Istithmar will not need to be early redeemed. KLK (as Obligor ) shall grant a purchase undertaking ( Purchase Undertaking ) to the Sukuk Trustee (acting on behalf of the Sukukholders), under which KLK as Obligor shall purchase the relevant Tangible Assets from the Sukuk Trustee(acting on behalf of the Sukukholders) at the relevant Exercise Price for the relevant Ringgit Sukuk Wakalah Bi Al-Istithmar and shall enter into a Sale Agreement (as defined below) for such purchase on the earlier of: (a) (b) the Maturity Date; or the Event of Default/Dissolution Event (as defined in paragraph 2(v)). During the tenure of the Ringgit Sukuk Wakalah Bi Al-Istithmar, in respect of Ringgit Sukuk Wakalah Bi Al-Istithmar with Periodic Distributions (as defined below), the Wakeel shall distribute any income generated from the Wakalah Portfolio up to the expected periodic distribution amount in the form of periodic distributions to the Sukuk Trustee (on behalf of the Sukukholders) on each periodic distribution date ( Periodic Distribution Date ). 12

13 On the Ringgit Sukuk Wakalah Bi Al-Istithmar s Maturity Date or date of declaration of an Event of Default/Dissolution Event, KLK, as Obligor, shall purchase the relevant Tangible Assets from the Sukuk Trustee (acting on behalf of the Sukukholders) at the relevant Exercise Price for the relevant Ringgit Sukuk Wakalah Bi Al-Istithmar and shall enter into a Sale Agreement for such purchase. Proceeds from the Wakalah Portfolio including the Exercise Price and the outstanding Deferred Sale Price received from KLK in respect of the Commodity Murabahah Investment shall be paid to the Sukukholders to redeem the outstanding Ringgit Sukuk Wakalah Bi Al-Istithmar. Provided that the income generated from the Wakalah Portfolio is sufficient to satisfy all payments due and payable under the Ringgit Sukuk Wakalah Bi Al-Istithmar, any excess income generated from the Wakalah Portfolio shall be retained by the Wakeel as an incentive fee upon the full redemption of the relevant Ringgit Sukuk Wakalah Bi Al- Istithmar. Please refer to Appendix B for the diagrammatic illustration of the Ringgit Sukuk Wakalah Bi Al- Istithmar structure. Maturity Date refers to the maturity date of the Ringgit Sukuk. Sale Agreement refers to sale agreement of the Ringgit Sukuk Ijarah or the Ringgit Sukuk Wakalah Bi Al-Istithmar (as the case may be). Sukukholders refers to the holders of the Ringgit Sukuk Ijarah or the Ringgit Sukuk Wakalah Bi Al- Istithmar (as the case may be). Total Loss Event is the total loss or destruction of, or damage to the whole (and not part only) of the Lease Assets of a particular Ijarah Agreement in the case of Ringgit Sukuk Ijarah (or the leasable assets which form part of the Tangible Assets in the case of Ringgit Sukuk Wakalah Bi Al-Istithmar) or any event or occurrence that renders the whole (and not part only) of the Lease Assets in the case of Ringgit Sukuk Ijarah (or the leasable assets which form part of the Tangible Assets in the case of Ringgit Sukuk Wakalah Bi Al-Istithmar) permanently unfit for any 13

14 economic use and the repair or remedial work in respect thereof is wholly uneconomical. Partial Loss Event is the total loss or destruction of, or damage to only part of the Lease Assets of a particular Ijarah Agreement in the case of Ringgit Sukuk Ijarah (or the leasable assets which form part of the Tangible Assets in the case of Ringgit Sukuk Wakalah Bi Al-Istithmar) or any event or occurrence that renders the part of the Lease Assets in the case of Ringgit Sukuk Ijarah (or the leasable assets which form part of the Tangible Assets in the case of Ringgit Sukuk Wakalah Bi Al-Istithmar) permanently unfit for any economic use and the repair or remedial work in respect thereof is wholly uneconomical. (d) Identified assets : Ijarah Shariah-compliant leasable assets (Ijarah assets) which are owned either by KLK and/or by KLK s subsidiary(ies) ( Lease Assets ). Wakalah Bi Al-Istithmar A Shariah-compliant Wakalah portfolio of assets comprising the Tangible Assets and Commodities for the Commodity Murabahah Investment subject to the Tangible Assets Requirement. (e) Purchase and selling price/rental (where applicable) : Ijarah The Asset Purchase Price shall be equivalent to the proceeds of the relevant Ringgit Sukuk Ijarah issued pursuant to the Multi-Currency IMTN Programme. The rental is the Ijarah lease payment which the Issuer (in its capacity as the Lessee) is obliged to pay to the Sukuk Trustee (in its capacity as the Lessor) pursuant to the Ijarah Agreement. Wakalah Bi Al-Istithmar The aggregate of the Tangible Assets Purchase Price and the Commodity Purchase Price shall be equivalent to the proceeds of the relevant Ringgit Sukuk Wakalah Bi Al-Istithmar issued pursuant to the Multi-Currency IMTN Programme. (f) Issue/sukuk programme size : The aggregate outstanding nominal value of the Ringgit Sukuk and Non-Ringgit Sukuk issued under the Multi-Currency IMTN Programme at any point in time shall not exceed RM1,600.0 million (or its equivalent in foreign currencies). 14

15 (g) Tenure of issue/sukuk programme : Programme Tenure The Multi-Currency IMTN Programme shall have a tenure of twelve (12) years from the date of first issuance of the Ringgit Sukuk and/or the Non- Ringgit Sukuk (as the case may be) under the Multi- Currency IMTN Programme which shall be made within two (2) years from the date of approval and authorisation by the SC. (h) Availability period of sukuk programme Issue Tenure The tenure of the Ringgit Sukuk shall be more than one (1) year and up to twelve (12) years as may be determined by the Issuer and the JLMs, provided always that the maturity of the Ringgit Sukuk shall not exceed the tenure of the Multi-Currency IMTN Programme. : The period commencing from the date of completion of documentation and, unless waived by the JLMs, compliance of all conditions precedent and other applicable conditions to the satisfaction of the JLMs provided that the Ringgit Sukuk shall mature on or prior to the expiry of the Multi-Currency IMTN Programme. (i) Profit/coupon/rental rate : The Ringgit Sukuk may be issued with or without periodic distributions ( Periodic Distributions ). The expected periodic distribution rate (in the case of Ringgit Sukuk Wakalah Bi Al-Istithmar) or periodic distribution rate (in the case of Ringgit Sukuk Ijarah) ( Periodic Distribution Rate ) (if any) shall be determined at the point of issuance. (j) (k) Profit/coupon/rental payment frequency Profit/coupon/rental payment basis : For Ringgit Sukuk with Periodic Distributions, payable semi-annually or such period to be agreed between the Issuer and the JLMs in arrears from the date of issue of the Ringgit Sukuk with the last Periodic Distribution to be made on the relevant maturity dates ( Periodic Distribution Dates ). For Ringgit Sukuk without Periodic Distributions, this item is not applicable. : For Ringgit Sukuk with Periodic Distributions, actual/365. For Ringgit Sukuk without Periodic Distributions, this item is not applicable. (l) Security/collateral, where : Not applicable. 15

16 applicable (m) Details on utilisation of proceeds by issuer/obligor and originator (in the case of ABS). If proceeds are to be utilised for project or capital expenditure, description of the project or capital expenditure, where applicable : To finance the KLK Group s Shariah-compliant general corporate purposes including but not limited to finance the KLK Group s capital expenditure, working capital requirements and to refinance the Issuer s existing borrowings. KLK Group means KLK, its subsidiaries and associated companies from time to time. (n) (o) Sinking fund and designated accounts, where applicable Rating Credit ratings assigned and whether the rating is final or indicative. In the case of a sukuk programme where the credit rating is not assigned for the full amount, disclosures set out in paragraph 9.04 of these guidelines must be made. Name of credit rating agencies : Not applicable. : The Ringgit Sukuk have been accorded an indicative long term rating of AA 1. : RAM Rating Services Berhad ( RAM ). (p) Mode of issue : Via direct placement on a best effort basis or a bought deal basis or, book running on a best effort basis. Issuance of the Ringgit Sukuk under the Multi- Currency IMTN Programme shall be in accordance with (1) the Participation and Operation Rules for Payment and Securities Services issued by Malaysian Electronic Clearing Corporation SdnBhd ( MyClear ) ( MyClear Rules ) and (2) the Operational Procedures for Securities Services issued by MyClear ( MyClear Procedures ), each as amended or substituted from time to time (collectively, MyClear Rules and Procedures ), subject to such exemptions (if any) granted from time to time. (q) Selling restriction, including tradability, i.e. whether tradable or non-tradable : Selling Restrictions at Issuance The Ringgit Sukuk shall not be offered, sold, transferred or otherwise disposed, directly or 16

17 indirectly other than to persons falling within any of the categories of persons or in the circumstances specified under: (a) (b) Schedule 6 (or Section 229(1)(b)); and Schedule 7 (or Section 230(1)(b)), read together with Schedule 9 (or Section 257(3)) of the Capital Markets and Services Act 2007, as amended from time to time ( CMSA ). Selling Restrictions after Issuance The Ringgit Sukuk shall not be offered, sold, transferred or otherwise disposed of, directly or indirectly, other than to persons to falling within any of the categories of persons or in the circumstances specified under: (a) (b) Schedule 6 (or Section 229(1)(b)); read together with Schedule 9 (or Section 257(3)) of the CMSA. (r) (s) Listing status and types of listing Other regulatory approvals required in relation to the issue, offer or invitation to subscribe or purchase sukuk and whether or not obtained : The Ringgit Sukuk will not be listed on Bursa Malaysia Securities Berhad or any other stock exchange. : None. (t) Conditions precedent : Usual and customary conditions precedent for a facility of such nature, which shall include but not limited to the following: A. Main Documentation Satisfactory completion and execution of the Transaction Documents (as defined in paragraph (y)(i)) and, where applicable, duly endorsed as exempted under the Stamp Duty Exemption (No. 23) Order 2000 and presented for registration. B. The Issuer (i) Receipt from the Issuer of: (a) Certified true copies and satisfactory review by the 17

18 Legal Counsel of the Issuer s Certificate of Incorporation and the Memorandum and Articles of Association of the Issuer; (b) (c) Certified true copies of the latest Forms 24, 44 and 49 of the Issuer; Certified true copy of the board resolution of the Issuer authorising, among others, the issuance of the IMTN, and the execution of the Transaction Documents; (d) A list of the Issuer s authorised signatories and their respective specimen signatures who will sign all Transaction Documents and will thereafter be giving notices in relation to the Ringgit Sukuk; (ii) A report of the relevant company search of the Issuer; and (iii) A report of the relevant winding up search conducted on the Issuer confirming that the Issuer has not been wound up, or the relevant statutory declaration of the Issuer to the same effect. C. General (i) Evidence that the approval and authorisation from the SC in respect of the Multi-Currency IMTN Programme have been obtained. (ii) (iii) Evidence that the Ringgit Sukuk shall have received a minimum long term rating of AA 1 from RAM; Receipt of satisfactory legal opinion from the Legal Counsel advising with respect to, among others, the legality, validity and enforceability of the Transaction Documents and that all 18

19 the conditions precedents in relation to the Transaction Documents have been duly fulfilled or waived (as the case may be); (iv) (v) (vi) Evidence of the confirmation from the Joint Shariah Advisers that the structure and mechanism together with the Transaction Documents of the Multi-Currency IMTN Programme are in compliance with Shariah; Evidence that all fees, costs and expenses in relation to the Multi Currency IMTN Programme have been paid in full to the extent that the same are due and payable before the issuance; and Such other conditions precedent as may be advised by the Legal Counsel and to be mutually agreed between the JLMs and the Issuer. Conditions precedent for subsequent issuance(s) of the Ringgit Sukuk: (i) (ii) (iii) (iv) (v) Evidence that the Ringgit Sukuk shall be maintained at a minimum rating of AA 1, based on the latest prevailing ratings available from RAM; Issuer s certification that it is in compliance with all Representations and Warranties and Covenants under the Transaction Documents; No Event of Default/Dissolution Event has occurred or shall occur if the relevant issuance is made; Evidence of the confirmation from the Joint Shariah Advisers that the issuance including the Identified Assets are Shariah-compliant; and Such other conditions precedent as may be advised by the Legal Counsel and to be mutually agreed between the JLMs and the Issuer. 19

20 (u) Representations and warranties : Including but not limited to the following: (i) The Issuer is a company duly incorporated and existing under Malaysian law and has the power and authority to enter into the business in which it is engaged and to own its property and assets, and has full beneficial ownership of all its property and assets; (ii) (iii) (iv) The Memorandum and Articles of Association of the Issuer incorporate provisions which authorise, and all necessary corporate and other relevant actions have been taken to authorise, and all relevant consents and approvals of any administrative, governmental or other authority or body in Malaysia have been duly obtained and are in full force and effect which are required to authorise the Issuer to execute and deliver and perform the transactions contemplated in the Transaction Documents in accordance with their terms; All necessary actions, authorisations and consents required under the Transaction Documents by the Issuer have been taken, fulfilled and obtained and remain in full force and effect; Neither the execution and delivery of any of the Transaction Documents nor the performance of any of the transactions contemplated by the Transaction Documents did or does as at the date of this representation and warranty is made or repeated (a) contravene or constitute a default under any provision contained in any agreement, instrument, law, ordinance, decree, judgment, order, rule, regulation, licence, permit or consent by which the Issuer or any of its assets is bound or which is applicable to the Issuer or any of its assets, (b) cause any limitation on the Issuer or the powers of its directors, whether imposed by or contained in its Memorandum and Articles of Association or in any agreement, instrument, law, ordinance, decree, order, rule, regulation, judgment or otherwise, to be exceeded, or (c) cause the creation or imposition of any security interest or restriction of any nature on any of the Issuer s assets; 20

21 (v) (vi) (vii) (viii) (ix) (x) (xi) The Transaction Documents are or will when executed be in full force and effect and constitute valid, binding and enforceable obligations of the Issuer in accordance with its terms; The Issuer s audited financial statements have been prepared in accordance with approved accounting principles and standards in Malaysia and fairly represent its financial position as at the date of the financial statements; No Event of Default/Dissolution Event has occurred and there is no encumbrance on the assets of the Issuer, but excluding liens arising in the ordinary course of business by operation of law and not by way of contract; There is no litigation or arbitration that will materially and adversely affect the ability of the Issuer to perform its obligations under the Transaction Documents to which it is a party save as disclosed; Neither the Issuer nor any of its assets are entitled to immunity from process, execution, attachment or legal process; The Issuer is in compliance and will comply with any applicable laws and regulations; and Such other representations and warranties as may be advised by the Legal Counsel and to be mutually agreed between the JLMs and the Issuer. (v) Events of default, dissolution event and enforcement event, where applicable : The events of default/dissolution events ( Events of Default/Dissolution Events ) include but not limited to the following: (i) Non-Payment: The Issuer fails to pay or distribute any amount due from it under the Ringgit Sukuk or any of the Transaction Documents on the due date or, if so payable on demand; (ii) Misrepresentation: Any representation, warranty or statement which is made or given by the Issuer under the Information Memorandum and Transaction Documents 21

22 or which is contained in any specific certificate, document or statement furnished at any time pursuant to the terms of the Transaction Documents proves to be incorrect or misleading in any material respect on or as of the date made or given or deemed made or given, and in the case of representations which are repeated, or deemed repeated, such representation is similarly materially incorrect or materially misleading when repeated or deemed repeated; (iii) (iv) Breach of obligations: The Issuer fails to observe or perform its obligations under any of the Transaction Documents or under any undertaking or arrangement entered into in connection therewith other than the obligation of the type referred to in paragraph (i) above, and in the case of a failure which in the opinion of the Sukuk Trustee is capable of being remedied, the Issuer does not remedy the failure within a period of thirty (30) days after the Issuer becomes aware or having been notified by the Sukuk Trustee of the failure, whichever is the earlier; Breach of existing contractual obligations: There has been a breach by the Issuer of any obligation under any of the Issuer s existing contractual obligations which may materially and adversely affect the Issuer s ability to perform its obligations under the Transaction Documents and, if in the opinion of the Sukuk Trustee is capable of being remedied, the Issuer does not remedy the breach within a period of thirty (30) days after the Issuer becomes aware or having been notified by the Sukuk Trustee of the breach; (v) Cross-Default: Any indebtedness for borrowed moneys of the Issuer becomes due or payable or capable of being declared due or payable prior to its stated maturity or where the security created for any indebtedness becomes enforceable or any guarantee or similar obligations of the Issuer is not discharged at maturity or when called and such declaration of indebtedness being 22

23 due or payable or such call on the guarantee or similar obligations is not discharged or disputed in good faith by the Issuer in a court of competent jurisdiction within thirty (30) days from the date of such declaration or call, or the Issuer goes into default under, or commits a breach of, any agreement or instrument relating to any such indebtedness, guarantee or other obligations, or any security created to secure such indebtedness becomes enforceable; (vi) (vii) Invalidity: Any provision of the Transaction Documents becomes, for any reason, invalid, illegal, void, voidable or unenforceable; Appointment of receiver, legal process: An encumbrancer takes possession of, or a trustee, receiver, receiver and manager or similar officer is appointed in respect of the whole or substantial part of the business or assets of the Issuer, or distress, legal process, sequestration or any form of execution is levied or enforced or sued out against the Issuer which may have a Material Adverse Effect on the Issuer or any security interest which may for the time being affect any of its assets becomes enforceable; For the purposes of this principal terms and conditions: (1) substantial shall mean such value equivalent to or more than 5% of the KLK Group s net tangible assets as reflected in its latest annual consolidated audited financial statements; and (2) Material Adverse Effect shall mean any material adverse effect on the business or condition (financial or otherwise) or results of the operations of the Issuer and/or the KLK Group or the occurrence of an event which may materially and adversely affect the ability of the Issuer to perform any of its obligations under any of the 23

24 Transaction Documents. (viii) Judgment Passed: The Issuer fails to satisfy any judgment passed against it by any court of competent jurisdiction and no action has been taken in good faith to set aside or to appeal against such judgment or no application for stay of execution has been made to any appropriate appellate court within the time prescribed by law or such appeal or application for stay of execution by the Issuer has been dismissed by a final court of competent jurisdiction; (ix) Composition: The Issuer convenes a meeting of its creditors or proposes or makes any arrangement including any scheme of arrangement or composition or begins negotiations with its creditors, or takes any proceedings or other steps, with a view to a rescheduling or deferral of all or any part of its indebtedness or a moratorium is agreed or declared by a court of competent jurisdiction in respect of or affecting all or any part of its indebtedness or any assignment for the benefit of its creditors (other than for the purposes of and followed by a reconstruction previously approved in writing by the Sukuk Trustee, unless during or following such reconstruction the Issuer becomes or is declared to be insolvent) or where a scheme of arrangement under section 176 of the Companies Act 1965 has been instituted against the Issuer; (x) (xi) Winding up: Any step is taken for the winding up, dissolution or liquidation of the Issuer or a resolution is passed for the winding up of the Issuer or a petition for winding up is presented against the Issuer and the Issuer has not taken any action in good faith to set aside such petition within thirty (30) days from the date of service of such winding up petition or a winding up order has been made against the Issuer; Assets: Any of the assets, undertakings, rights or revenue of the Issuer are seized, nationalised, expropriated or compulsorily acquired by or under the authority of any governmental body which in the opinion of 24

25 the Sukuk Trustee may have a Material Adverse Effect; (xii) Cessation/Change of business: The Issuer changes or threatens to change the nature or scope of a substantial part of its business, or suspends or threatens to suspend, or cease or threatens to cease the operation of a substantial part of its business which it now conducts directly or indirectly and such change or suspension or cessation in the opinion of the Sukuk Trustee may have a Material Adverse Effect; (xiii) Revocation of licenses and approvals: Where there is a revocation, withholding or modification of any license, authorisation, approval or consent which in the opinion of the Sukuk Trustee may materially and adversely impair or prejudice the ability of the Issuer to comply with the terms and conditions of the Ringgit Sukuk or the Transaction Documents; (xiv) (xv) (xvi) (xvii) Inability to pay debts: The Issuer is deemed unable to pay any of its debts or becomes unable to pay any of its debts as they fall due or suspend or threaten to suspend making payments with respect to all or any class of its debts; Exercise of contractual right over financial management: Any creditor of the Issuer exercises a contractual right to take over the financial management of the Issuer and such event in the opinion of the Sukuk Trustee may have a Material Adverse Effect; Repudiation: The Issuer repudiates any of the Transaction Documents or the Issuer does or causes to be done any act or thing evidencing an intention to repudiate any of the Transaction Documents; Material Adverse Events: Any event or events has or have occurred or a situation exists which in the opinion of the Sukuk Trustee may have a Material Adverse Effect and in the case of the occurrence of such event or situation which in the opinion of the Sukuk Trustee is capable of being remedied, 25

26 the Issuer does not remedy it within a period of thirty (30) days after the Issuer became aware or having been notified by the Sukuk Trustee of the event or situation; (xviii) Such other events as may be advised by the Legal Counsel and to be mutually agreed between the JLMs and the Issuer. If any of the above occurs, the Sukuk Trustee may, or if instructed in writing by the Sukukholder(s), shall, declare (by giving notice to the Issuer) that an Event of Default/Dissolution Event has occurred and the Sukuk Trustee is entitled to enforce its rights under the Transaction Documents including: (i) (ii) in the case of Ringgit Sukuk Ijarah, requiring KLK to purchase the Lease Assets at the Exercise Price and execute the Sale Agreement for such purchase pursuant to exercise of the Purchase Undertaking and pay the Exercise Price, and in the case of Ringgit Sukuk Wakalah Bi Al- Istithmar, requiring KLK to purchase the Tangible Assets at the Exercise Price and execute the Sale Agreement for such purchase pursuant to exercise of the Purchase Undertaking and, pay the outstanding amounts of the Deferred Sale Price (subject to Ibra as set out in paragraph 2(y)(ix) below, if applicable). Proceeds from the Wakalah Portfolio including the Exercise Price and the outstanding Deferred Sale Price received from KLK in respect of the Commodity Murabahah Investment shall be paid to the Sukukholders to redeem the Ringgit Sukuk Wakalah Bi Al-Istithmar in accordance with the terms of the Transaction Documents. The declaration of an Event of Default/Dissolution Event under the Ringgit Sukuk will not by itself constitute a declaration of an Event of Default/Dissolution Event under the Non-Ringgit Sukuk issued under the Multi-Currency IMTN Programme. (w) Covenants (i) Financial Covenants : The Issuer shall maintain the following financial 26

27 covenants throughout the tenure of the Multi- Currency IMTN Programme: (a) (b) Debt to Equity Ratio of not more than one (1) time; and such other financial covenants as may be determined by the Rating Agency and mutually agreed with the Issuer. Debt to Equity Ratio ( D:E Ratio ) The D:E Ratio is the ratio of indebtedness of the KLK Group represented by: (1) all principal amounts outstanding under the Multi-Currency IMTN Programme; and (2) all other indebtedness for borrowed monies or Islamic financing (be it actual or contingent), hire purchase obligations, finance lease obligations, net exposure determined on a marked to market basis under any derivative instrument (but excluding forward contracts entered into in the ordinary course of business which are trade in nature) and obligations/contingent liabilities under guarantees/call or put options of the KLK Group. For the avoidance of doubt, indebtedness shall also include Shariah-compliant financing; to the consolidated shareholders funds of the KLK Group including, if any, preference equity, subordinated shareholders advances/loans, minority interests of the KLK Group (if any), irredeemable convertible unsecured loan stocks of the KLK Group (if any) and retained earnings/ losses. The D:E Ratio shall be calculated for each financial year during the tenure of the Multi-Currency IMTN Programme based on the latest audited consolidated accounts of the KLK Group. The calculation of the D:E Ratio shall be duly confirmed by the Issuer s external auditors on an annual basis and as and when required under Item (vi) of the Negative Covenant clause. The Issuer shall arrange for the external auditor s confirmation to be forwarded to the Facility Agent for its distribution to the Sukuk Trustee and the Rating Agency. For the avoidance of doubt, any double counting shall be disregarded. 27

28 (ii) Information Covenants : To include but not limited to the following: (i) (ii) The Issuer shall provide to the Sukuk Trustee at least on an annual basis, a certificate confirming that it has complied with all its obligations under the Transaction Documents and the terms and conditions of the Multi-Currency IMTN Programme and that there does not exist or had not existed, from the date the Ringgit Sukuk was issued, any Event of Default/Dissolution Event, where applicable and if such is not the case, to specify the same; The Issuer shall deliver to the Sukuk Trustee the following: (a) (b) (c) as soon as they become available (and in any event within one hundred and eighty (180) days after the end of each of its financial year) copies of its annual consolidated financial statements for that financial year which shall contain the income statements and balance sheets of the Issuer and which are audited and certified without qualification by a firm of independent certified public accountants acceptable to the Sukuk Trustee; within ninety (90) days after the end of the first half of its financial year, copies of its unaudited half yearly consolidated financial statements for that period which are duly certified by any one of its directors; promptly, such additional financial or other information relating to the Issuer s business and its operations as the Sukuk Trustee may from time to time reasonably request; and (d) promptly, all notices or other documents received by the Issuer from any of its shareholders or its creditors which contents would materially and adversely affect the interests of the Ringgit Sukuk 28

29 investors, and a copy of all documents dispatched by the Issuer to its shareholders (or any class of them) in their capacity as shareholders or its creditors generally at the same time as these documents are dispatched to these shareholders or creditors. (iii) (iv) (v) (vi) The Issuer shall promptly notify the Sukuk Trustee of any change in its condition (financial or otherwise) and of any litigation or other proceedings of any nature whatsoever being threatened or initiated against the Issuer before any court or tribunal or administrative agency which may materially and adversely affect the ability of the Issuer to perform any of its obligations under any of the Transaction Documents; The Issuer shall promptly give notice to the Sukuk Trustee of the occurrence of any Event of Default/Dissolution Event or potential Event of Default/Dissolution Event, and it shall take all reasonable steps and/or such other steps as may reasonably be requested by the Sukuk Trustee to remedy and/or mitigate the effect of the Event of Default/Dissolution Event or the potential Event of Default/Dissolution Event; The Issuer shall promptly give notice to the Sukuk Trustee of any amendments, variations, terminations, replacements or supplements of any of the Transaction Documents; and such other information covenants as may be advised by the Legal Counsel and to be mutually agreed between the JLMs and the Issuer. (iii) Positive Covenants : To include but not limited to the following: (i) The Issuer shall maintain in full force and effect all relevant authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) and will promptly obtain any further authorisations, consents, rights, licences, approvals and permits (governmental and otherwise) which 29

30 is or may become necessary to enable the Issuer to own its assets, to carry on its business or for the Issuer to enter into or perform its obligations under the Transaction Documents or to ensure the validity, enforceability, admissibility in evidence of the obligations of the Issuer or the priority or rights of the financiers under the Transaction Documents and the Issuer shall comply with the same; (ii) The Issuer shall at all times on demand execute all such further documents and do all such further acts reasonably necessary at any time or times to give further effect to the terms and conditions of the Transaction Documents; (iii) The Issuer shall exercise reasonable diligence in carrying out its business and affairs in a proper and efficient manner and in accordance with sound financial and commercial standards and practices of the industry; (iv) The Issuer shall promptly perform and carry out all its obligations under all Transaction Documents (including but not limited to redeeming the Ringgit Sukuk on the relevant Maturity Date(s) or any other date on which the Ringgit Sukuk are due and payable) and ensure that it shall immediately notify the Sukuk Trustee in the event that the Issuer is unable to fulfil or comply with any of the provisions of the Transaction Documents; (v) The Issuer shall prepare its financial statements on a basis consistently applied in accordance with approved accounting standards in Malaysia and those financial statements shall give a true and fair view of the results of the operations of the Issuer for the period to which the financial statements are made up and shall disclose or provide against all liabilities (actual or contingent) of the Issuer; (vi) The Issuer shall at all times maintain a paying agent in Malaysia, and the Issuer shall cause and procure such paying agent to notify the Sukuk Trustee (through the 30

31 Facility Agent) in the event the paying agent does not receive payment from the Issuer on the due dates as required under the Ringgit Sukuk; (vii) The Issuer shall promptly comply with all applicable laws including provisions of the CMSA and/or the notes, circulars, conditions or guidelines issued by SC, BNM and any other relevant regulatory authorities from time to time; (viii) The Issuer will maintain adequate takaful/insurance necessary for the business of its nature with reputable takaful provider/insurance companies and shall notify the Sukuk Trustee of any claim or right of action under any takaful/insurances in excess of RM1,000,000.00; (ix) (x) (vii) The Issuer shall as soon as practicable, deliver a certified copy of any material documents related to the transaction entered into subsequent to the Transaction Documents; The Issuer shall provide the Sukuk Trustee, Facility Agent and their representatives reasonable access to the site where the Lease Assets and Tangible Assets are located (where applicable) and inspection of all relevant Transaction Documents and books; and Such other positive covenants as may be advised by the Legal Counsel and to be mutually agreed between the JLMs and the Issuer. (iv) Negative Covenants : To include but not limited to the following: (i) Assets: The Issuer shall not dispose of assets in excess of 5% of its net tangible assets (as reflected in the KLK Group s latest annual consolidated audited financial statements) in any financial year and that will materially and adversely affect its business operations, save and except for disposals which occur in the ordinary course of business and/or due to obsolescence; 31

32 (ii) (iii) (iv) (v) (vi) Negative Pledge: The Issuer shall not create or permit to exist any encumbrance, mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, assignment by way of security, trust arrangement for the purposes of providing security or other security interest of any kind including, without limitation, title transfer and/or retention arrangements having a similar effect or any agreement to create any of the foregoing, but excluding liens arising in the ordinary course of business by operation of law and not by way of contract; Indebtedness: The Issuer shall not obtain or permit to exist any loans or advances from its shareholders or associated companies unless these loans and advances are subordinated to the Ringgit Sukuk; Memorandum and Articles of Association: The Issuer shall not add to, delete, vary or amend its Memorandum and/or Articles of Association in a manner inconsistent with the provisions of the Transaction Documents or which may be materially prejudicial to the interests of the Sukukholders; Share Capital: The Issuer shall not reduce its authorised and issued paid-up capital; Dividends: The Issuer shall not declare or pay any dividend or make any distributions whether income or capital in nature to its shareholders, unless the following conditions are met: (a) all financial covenants and obligations in relation to the Multi- Currency IMTN Programme are complied with before and after such dividend payments; and (b) no Event of Default/Dissolution Event has occurred and is occurring. (vii) Dissolution: The Issuer shall not dissolve its affairs or consolidate with or merge with any other person, or transfer all or substantially all its assets to another entity which would have a Material Adverse Effect; 32

33 (viii) (ix) Surrender Rights: The Issuer shall not surrender, transfer, assign, relinquish or otherwise dispose of any of its rights and interest under the Transaction Documents; Takaful/Insurance: The Issuer shall not do or suffer to be done any act, matter or thing whereby any takaful/insurance may be rendered void, voidable or incapable of being effected, maintained or renewed; (x) Financing/Loans: The Issuer shall not finance/lend any money to any party other than to the Issuer s directors, officers or employees as part of their terms of employment; (xi) Related Party Transactions: The Issuer shall not enter into any agreement with any member of the KLK Group or any of their associated companies unless such agreement is entered into: (a) (b) in the ordinary course of its business; on an arm s length basis or on terms which are no less favourable to the Issuer than in a comparable transaction with persons who are not its shareholders, directors, subsidiaries or associated companies; and (xii) (c) will not have a Material Adverse Effect; Interested Persons: The Issuer shall not enter into any transaction, whether directly or indirectly with its directors, major shareholders and chief executive officer ("Interested Persons") unless: (a) such transaction shall be on terms that are no less favourable to the Issuer than those which could have been obtained in a comparable transaction from persons who are not Interested Persons; and (b) with respect to transactions involving an aggregate payment or value equal 33

34 to or greater than the percentage ratio as provided in the Main Market Listing Requirements of Bursa Malaysia Securities Berhad ("Listing Requirements"), the Issuer obtains certification from an independent adviser that the transaction is carried out on fair and reasonable terms; provided that: (i) (ii) the Issuer certifies to the Sukuk Trustee that the transaction complies with paragraph (a) above; the Issuer has received the certification referred to in paragraph (b) above (where applicable); and (iii) the transaction has been approved by the majority of the board of directors or shareholders in a general meeting as the case may require; and (c) with respect to transactions constituting a recurrent related-party transaction of a revenue or trading nature ( RRPT ) which are provided for and permitted under the listing requirements of the stock exchange, provided that: (i) (ii) (iii) the Issuer certifies to the Sukuk Trustee that the transaction complies with paragraph (a) above; the Issuer has obtained or renewed, where applicable, the shareholders mandate in accordance with the said Listing Requirements; and the Issuer furnishes at least one certificate to the Sukuk Trustee in respect of the 34

35 RRPT contemplated under one shareholders mandate; (xiii) (xiv) (xv) Other businesses: The Issuer shall not carry on any business other than its authorised businesses in accordance with its Memorandum and Articles of Association; Utilisation: The Issuer shall not use the proceeds of the Multi-Currency IMTN Programme except for the purposes set out in the Transaction Documents; and Such other negative covenants as may be advised by the Legal Counsel and to be mutually agreed between the JLMs and the Issuer. (x) (y) Provisions on buy-back and early redemption of sukuk Other principal terms and conditions for the proposal : Redemption on maturity Unless previously redeemed or purchased and cancelled, the Ringgit Sukuk shall be redeemed at their respective nominal value on the Maturity Date. Purchase and cancellation The Issuer or any of its subsidiaries or any agent(s) of the Issuer may at any time purchase the Ringgit Sukuk at any price in the open market or by private treaty, but these purchased Ringgit Sukuk shall be cancelled and cannot be reissued. Provision on buy-back and early redemption Not applicable. (i) Transaction Documents : Including but not limited to the following for the Ringgit Sukuk: (i) (ii) (iii) (iv) (v) Trust Deed; Programme Agreement; The relevant Islamic documents; Securities Lodgement Form; and All other documents of whatsoever nature executed or to be executed in connection with or pursuant to any of the above 35

36 documents or otherwise in connection with the Ringgit Sukuk. (ii) Status and Ranking (iii) Taxation (iv) Purchase Undertaking : The Ringgit Sukuk issued under the Multi-Currency IMTN Programme pursuant to the relevant Transaction Documents shall constitute direct, unsubordinated, unconditional and unsecured obligations of the Issuer and shall at all times rank pari passu, without discrimination, preference, priority amongst themselves and at least pari passu with all other present and future unsecured and unsubordinated obligations of the Issuer, subject to those preferred by law. : All payments by the Issuer shall be made without withholding or deductions for or on account of any present or future taxes, duties or charges of whatsoever nature imposed or levied by or on behalf of Malaysia or any authority thereof or therein having power to tax, and no additional amounts shall be required to be paid by the Issuer in respect of such deduction or withholding. : KLK (as Obligor ) shall enter into a Purchase Undertaking pursuant to which the Obligor shall undertake to the Sukuk Trustee (for the benefit of the Sukukholders) to purchase the relevant Lease Assets or the Tangible Assets (as the case may be) from the Sukukholders at the relevant Exercise Price and to enter into a Sale Agreement for such purchase, on the earlier of: (i) (ii) the Maturity Date; or an Event of Default/Dissolution Event, following which the relevant Ringgit Sukuk shall be cancelled. (v) Exercise Price : Exercise Price for the Ringgit Sukuk Ijarah In relation to the Purchase Undertaking, the Exercise Price for the purchase of the relevant Lease Assets is as follows: (i) in the case of a purchase of the relevant Lease Assets due to an Event of Default/Dissolution Event, the Exercise Price shall be an amount equal to the Dissolution Payment Amount (as defined below) plus the Ownership Expenses less One-off 36

37 Distributions (if any); and (ii) in the case of a purchase of the relevant Lease Assets on the Maturity Date, the Exercise Price shall be an amount equal to the Scheduled Payment Amount (as defined below) for the relevant Ringgit Sukuk Ijarah plus the Ownership Expenses less One-off Distributions (if any); Dissolution Payment Amount means the aggregate of the following in respect of: a) Ringgit Sukuk Ijarah with Periodic Distributions The Dissolution Payment Amount shall consist of: (1) the nominal value of the Ringgit Sukuk Ijarah; and (2) the accrued but unpaid Periodic Distributions (if any), accrued to the date of the Event of Default/Dissolution Event and shall be calculated in accordance with the MyClear Procedures. b) Ringgit Sukuk Ijarah without Periodic Distributions The Dissolution Payment Amount shall be the accreted nominal value of the Ringgit Sukuk Ijarah and calculated in accordance with the MyClear Procedures. Scheduled Payment Amount means the aggregate of the following in respect of: a) Ringgit Sukuk Ijarah with Periodic Distributions The Scheduled Payment Amount shall consist of: (1) the nominal value of the Ringgit Sukuk Ijarah; and (2) the accrued but unpaid Periodic Distributions (if any), accrued to the 37

38 Maturity Date and shall be calculated in accordance with the MyClear Procedures. b) Ringgit Sukuk Ijarah without Periodic Distributions The Scheduled Payment Amount shall be the nominal value of the Ringgit Sukuk Ijarah and calculated in accordance with the MyClear Procedures. The Exercise Price payable by KLK to the Sukuk Trustee (acting on behalf of the Sukukholders) shall be set off against reimbursement of the Ownership Expenses. Exercise Price for the Ringgit Sukuk Wakalah Bi Al- Istithmar (i) (ii) in the case of a purchase of the relevant Tangible Assets upon an Event of Default/Dissolution Event, the Exercise Price shall be an amount equal to the Sukuk Distribution Amount (as defined below) less the outstanding Deferred Sale Price; and in the case of a purchase of the relevant residual Tangible Assets on the maturity date of the relevant Ringgit Sukuk Wakalah Bi Al-Istithmar, the Exercise Price shall be an amount equal to the Scheduled Sukuk Distribution Amount (as defined below) for the relevant tranche less the outstanding Deferred Sale Price; Sukuk Distribution Amount means the following in respect of the relevant Ringgit Sukuk Wakalah Bi Al-Istithmar to be redeemed: (a) Ringgit Sukuk Wakalah Bi Al-Istithmar issued with Periodic Distributions The Sukuk Distribution Amount shall consist of: (1) the nominal value of the Ringgit Sukuk Wakalah Bi Al-Istithmar; and (2) the accrued but unpaid Periodic Distributions, accrued up to the date 38

39 of the declaration of an Event of Default/Dissolution Event and shall be calculated in accordance with the MyClear Rules. (b) Ringgit Sukuk Wakalah Bi Al-Istithmar issued without Periodic Distributions The Sukuk Distribution Amount shall be the accreted nominal value of the Ringgit Sukuk Wakalah Bi Al-Istithmar and calculated in accordance with the MyClear Procedures. Scheduled Sukuk Distribution Amount means (a) in the case of Ringgit Sukuk Wakalah Bi Al- Istithmar issued with Periodic Distributions the aggregate of the following: (1) the nominal value of the relevant Ringgit Sukuk Wakalah Bi Al-Istithmar to be redeemed; and (2) the accrued but unpaid Periodic Distribution accrued up to the maturity date of the relevant Ringgit Sukuk Wakalah Bi Al- Istithmar to be redeemed. In the case of Ringgit Sukuk Wakalah Bi Al-Istithmar without Periodic Distributions, nominal value of the respective Ringgit Sukuk Wakalah Bi Al-Istithmar to be redeemed, calculated in accordance with the MyClear Procedures. (vi) Ijarah Agreement : In the case of Ringgit Sukuk Ijarah, under the terms of an Ijarah Agreement between the Lessee and the Lessor from time to time, the Lessor will agree to lease to the Lessee, and the Lessee will agree to take on lease from the Lessor, the Lease Assets during the term commencing on the lease commencement date and expiring on the Maturity Date. (vii) Servicing Agreement Agency : In the case of Ringgit Sukuk Ijarah, under the Servicing Agency Agreement, KLK (in such capacity as the Servicing Agent) on behalf of the Lessor, will be responsible for among others the performance of all major maintenance and structural repair and the cost associated with procuring the takaful/insurance coverage in respect of the Lease Assets. 39

40 (viii) Voting : The Sukukholders of the Ringgit Sukuk shall constitute a single class of its own for voting purposes. Any amendment or variation to the terms of the Ringgit Sukuk and any consent or waiver which may be sought in respect of any provision of the Ringgit Sukuk, and the exercise or the restraint in exercising of any rights, powers or discretions under the Ringgit Sukuk, including the declaration of an Event of Default/Dissolution Event shall be made with the approval of the Sukukholders of the Ringgit Sukuk only and would not by itself modify, vary or affect the terms of the Non-Ringgit Sukuk or constitute a declaration of an Event of Default/Dissolution Event under the Non-Ringgit Sukuk, unless the holders of the Non-Ringgit Sukuk also consent to the same. (ix) Ibra : In relation to the Commodity Murabahah Investment, the Sukukholders in subscribing or purchasing the Ringgit Sukuk Wakalah Bi Al- Istithmar irrevocably consent to grant Ibra on the Deferred Sale Price if the Ringgit Sukuk Wakalah Bi Al-Istithmar are redeemed before the Maturity Date, upon the declaration of an Event of Default/Dissolution Event. The Ibra for redemption upon declaration of an Event of Default/Dissolution Event shall be calculated as follows: (i) In the case of Ringgit Sukuk Wakalah Bi Al- Istithmar with Periodic Distributions and issued at a discount The aggregate of unearned Periodic Distributions and the unearned discounted amount. (ii) In the case of Ringgit Sukuk Wakalah Bi Al- Istithmar without Periodic Distributions and issued at a discount The unearned discounted amount. (iii) In the case of Ringgit Sukuk Wakalah Bi Al- Istithmar with Periodic Distributions and issued at par The unearned Periodic Distributions. 40

41 (x) Ta widh (Compensation) : Ringgit Sukuk Ijarah (iv) In the case of Ringgit Sukuk Wakalah Bi Al- Istithmar with Periodic Distributions and issued at a premium The unearned Periodic Distributions. The Ibra in relation to (i), (ii), (iii) and (iv) above shall be calculated from the date of the declaration of an Event of Default/Dissolution Event up to the Ringgit Sukuk Wakalah Bi Al-Istithmar s respective maturity date(s). Ibra refers to an act of releasing absolutely or conditionally one s rights and claims on any obligation against another party which would result in the latter being discharged of his/its obligations or liabilities towards the former. The release may be either partially or in full. In the event of any delay in payments of any amount due and payable under the Ringgit Sukuk Ijarah to the Sukukholders, KLK shall pay the Sukukholders compensation on such delayed payments at an amount based on the rate and manner as prescribed by the SAC from time to time. Ringgit Sukuk Wakalah Bi Al-Istithmar In the event KLK: (a) (b) breaches its fiduciary duty as the Wakeel due to its failure to distribute the realized profit to the Sukukholders on the agreed date; and/or delays the distribution or payment of any amount due and payable to the Sukukholders upon the dissolution of the Wakalah arrangement; Ta widh shall be payable on such amounts to the Sukukholders at the rate and manner prescribed by the SAC from time to time. (xi) Other Conditions : The Ringgit Sukuk issued under the Multi-Currency IMTN Programme shall at all times be governed by the guidelines issued and to be issued from time to time by the SC and BNM having jurisdiction over matters pertaining to the Ringgit Sukuk and the MyClear Rules and Procedures. 41

42 (xii) No Payment of Interest (xiii) Governing Laws For the avoidance of doubt and notwithstanding any other provision to the contrary herein, it is hereby agreed and declared that nothing in this principal terms and conditions and the Transaction Documents shall oblige or entitle any party nor shall any party pay or receive or recover interest on any amount due or payable to another party pursuant to the principal terms and conditions or the Transaction Documents and the parties hereby expressly waive and reject any entitlement to recover such interest. : Laws of Malaysia. 42

43 Appendix A(i) Ringgit Sukuk Ijarah Structure with KLK s Assets Step 1 (a) The Sukukholders (represented by the Sukuk Trustee) shall, from time to time, purchase the Lease Assets from KLK (in such capacity, the Seller ), at the asset purchase price ( Asset Purchase Price ) pursuant to an asset purchase agreement ( Asset Purchase Agreement ). (b) The Asset Purchase Price will be equivalent to the Ringgit Sukuk Ijarah proceeds. Step 2 The Sukuk Trustee (acting on behalf of the Sukukholders), in its capacity as the lessor ( Lessor ), shall then, from time to time, enter into an agreement with KLK ( Ijarah Agreement ) to lease the Lease Assets to KLK ( Lessee ) for a pre-determined rental amount ( Rental ) and lease period from the date of the issuance of the Ringgit Sukuk Ijarah up to the maturity of the Ringgit Sukuk Ijarah ( Lease Period ) pursuant to the relevant Ijarah Agreement. Step 3 Under the trust deed entered into between the Issuer (hereinafter defined) and the Sukuk Trustee ( Trust Deed ), the Sukuk Trustee (in its capacity as the Asset Trustee ) shall declare a trust over the Lease Assets for the benefit of the Sukukholders ( Trust Assets ). KLK (in its capacity as the Issuer ) shall issue the Ringgit Sukuk Ijarah to represent the Sukukholders undivided and proportionate beneficial ownership and interest over the Trust Assets (including the right to receive the Rental) held by the Sukuk Trustee (acting on behalf of the Sukukholders) as constituted under the Trust Deed. The Ringgit Sukuk Ijarah proceeds shall be the price consideration for the Asset Purchase Price payable to KLK under the Asset Purchase Agreement. 43

44 The Lessee shall pay Rental payable in respect of the Lease Assets upon: Step 4 (a) (b) the Maturity Date (as defined in paragraph 2(c) of the Principal Terms and Conditions ( PTC )) or upon an Event of Default (as defined in paragraph 2(v) of the PTC) ( One-Off Distribution Date ) in relation to the Ringgit Sukuk Ijarah without Periodic Distributions (as defined below); or the Periodic Distribution Dates (as defined below) in relation to the Ringgit Sukuk Ijarah with Periodic Distributions, as the case may be. Rental shall be utilised for payments of the one-off distribution ( One-off Distribution ) which is due and payable on the One-off Distribution Date or Periodic Distributions which are due and payable on the Periodic Distribution Dates under the Ringgit Sukuk Ijarah to the Sukukholders in proportion to their holdings. Step 5 KLK shall grant a purchase undertaking ( Purchase Undertaking ) to the Sukuk Trustee (acting on behalf of the Sukukholders), under which KLK shall purchase the relevant Lease Assets from the Sukuk Trustee (acting on behalf of the Sukukholders) at the relevant Exercise Price (as defined in paragraph 2(y)(v) of the PTC for the relevant Ringgit Sukuk Ijarah and shall enter into a sale agreement for such purchase ( Sale Agreement ) on the earlier of: (a) the Maturity Date (as defined below); or (b) an Event of Default/Dissolution Event (as defined in paragraph 2(v) of the PTC). Step 6 Under the terms of the servicing agency agreement ( Servicing Agency Agreement ), KLK shall be appointed as the servicing agent ( Servicing Agent ) by the Lessor (acting on behalf of the Sukukholders) and will be responsible, on behalf of the Lessor, for, among others, major maintenance and/or structural repair and the cost associated with procuring the takaful/insurance coverage in respect of the Lease Assets ( Ownership Expenses ), which shall be reimbursed by the Sukuk Trustee to KLK upon the payment of the Exercise Price (as defined in paragraph 2(y)(v) of the PTC) under the Purchase Undertaking. The Servicing Agent shall also ensure that the takaful/insurance is for a covered/insured amount at all times and shall be responsible for the related payment of the relevant takaful contribution or insurance premium. Step 7 Under a substitution undertaking ( Substitution Undertaking ), the Issuer shall have the right to substitute from time to time (i) throughout the tenure of the Ringgit Sukuk Ijarah at the option of the Issuer or (ii) upon the occurrence of a Partial Loss Event, via an exchange agreement ( Asset Exchange Agreement ), the Lease Assets throughout the tenure of the Ringgit Sukuk 44

45 Ijarah with qualified asset(s) that is/are Shariah-compliant and approved by the Joint Shariah Advisers ( Replacement Assets ). The Replacement Assets shall form part of the Lease Assets. 45

46 Appendix A(ii) Ringgit Sukuk Ijarah Structure with KLK s Subsidiaries Assets Step 1 Step 2 Subsidiary(ies) of KLK ( Asset Owner ) shall, first, transfer the Lease Assets to KLK by way of hibah (gift). (a) The Sukukholders (represented by the Sukuk Trustee) shall, from time to time, purchase the Lease Assets from KLK (in such capacity, the Seller ), at the asset purchase price ( Asset Purchase Price ) pursuant to an asset purchase agreement ( Asset Purchase Agreement ). (b) The Asset Purchase Price will be equivalent to the Ringgit Sukuk Ijarah proceeds. Step 3 The Sukuk Trustee (acting on behalf of the Sukukholders), in its capacity as the lessor ( Lessor ), shall then, from time to time, enter into an agreement with KLK ( Ijarah Agreement ) to lease the Lease Assets to KLK ( Lessee ) for a pre-determined rental amount ( Rental ) and lease period from the date of the issuance of the Ringgit Sukuk Ijarah up to the maturity of the Ringgit Sukuk Ijarah ( Lease Period ) pursuant to the relevant Ijarah Agreement. Step 4 Under the trust deed entered into between the Issuer (hereinafter defined) and the Sukuk Trustee (in its capacity as the Asset Trustee ) shall declare a trust over the Lease Assets for the benefit of the Sukukholders ( Trust Assets ). KLK (in its capacity as the Issuer ) shall issue the Ringgit Sukuk Ijarah to represent the Sukukholders undivided and proportionate beneficial ownership and interest over the Trust Assets (including the right to receive the Rental) held by the Sukuk Trustee (acting on behalf of the Sukukholders) as 46