(1) BACKGROUND INFORMATION OF THE ISSUER. (i) Name : TSH Sukuk Ijarah Sdn Bhd

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1 (Collectively referred as the Sukuk Ijarah ) (1) BACKGROUND INFORMATION OF THE ISSUER (a) Issuer (i) Name : TSH Sukuk Ijarah Sdn Bhd (ii) Address : Level 10, Menara TSH No.8 Jalan Semantan Damansara Heights Kuala Lumpur Malaysia (iii) (iv) (v) (vi) (vii) Business registration/ Company no. Date/place of incorporation Date of listing (in the case of a public listed company) Status Resident/ nonresident controlled company Bumipute ra / non- Bumipute ra controlled company Principal activities : X : 9 June 2008/ Malaysia : Not applicable : Resident controlled company : Non-Bumiputera controlled company : (1) To enter into a series of Sale and Purchase Agreements ( SPA ) with the Seller, in respect of the Identified Assets; (2) To enter into a series of Ijarah Agreements ( IA ) with the Lessee; and Page 1 of 39

2 (Collectively referred as the Sukuk Ijarah ) (3) To issue Sukuk to the Sukuk Holders for proceeds to finance the acquisition of the beneficial title, interest and rights in the Identified Assets. (viii) (ix) Board of directors Structure of shareholdings and names of shareholders or, in the case of a public company, names of all substantial shareholders : Board of Directors as at 13 June 2008: (1) Tan Aik Sim; (2) Lim Fook Hin; and (3) Tan Aik Yong. : Not applicable as at 13 June However, TSH Sukuk Ijarah Sdn Bhd has become a subsidiary of TSH Resources Berhad pursuant to the announcement made on Bursa Malaysia Securities Berhad on 7 August The structure of shareholdings is as follows: Shareholder TSH Resources Berhad (49548-D) Number of shares held and percentage 2 (100%) (x) Authorised and paid-up capital : Authorised Share Capital as at 13 June 2008 RM100,000 comprising 100,000 ordinary shares of RM1.00 each : Issued and Fully Paid-up Share Capital as at 13 June 2008 RM2.00 comprising 2 ordinary shares at RM1.00 each Page 2 of 39

3 (Collectively referred as the Sukuk Ijarah ) (2) PRINCIPAL TERMS AND CONDITIONS (a) Names of parties involved in the proposed transaction (where applicable) (i) Principal : OSK Investment Bank Berhad ( OSK ) (14152-V) adviser(s)/ Lead arranger(s) (ii) Valuer : Appraisal (Malaysia) Sdn Bhd (iii) Solicitors : Raja Eleena Siew Ang & Associates (iv) Financial adviser : Not applicable (v) Technical : Not applicable adviser (vi) Guarantor : Not applicable (vii) Trustee : Malaysian Trustees Berhad (21666-V) (viii) (ix) (x) (xi) Facility agent Primary subscriber(s ) and amount subscribed (where applicable) Underwriter( s) and amount underwritten Central Depository : OSK : Not applicable : The ICP and IMTN will not be underwritten. : Bank Negara Malaysia ( BNM ) (xii) Syariah : Dr. Mohd Daud Bakar Adviser (xiii) Paying Agent : BNM (xiv) Reporting Accountants : Ernst & Young (AF:0039) Page 3 of 39

4 (Collectively referred as the Sukuk Ijarah ) (xv) Others Seller Lessor Lessee Service Agent Beneficial Owner of the Trust Assets Tender Panel Members ( TPMs ) (b) Islamic Principle Used : TSH Resources Berhad (49548-D) ( TSH ) and/or its subsidiaries and/or associated companies. : Issuer : TSH : TSH The role of the Service Agent is to service, administrate, and carry out such duties in respect of the Identified Assets, on behalf of the Issuer. Such duties include, carrying out major maintenance on the Identified Assets, procuring all necessary insurance (if any) over the Identified Assets, responding to queries from the Trustee and the Sukuk Holders in relation to the Identified Assets, and such other duties stipulated under the Service Agent Agreement. : The Issuer shall hold the beneficial title, interests and rights in the Trust Assets on behalf of the Sukuk Holders. The Sukuk Holders will have proportionate undivided ownership over the Trust Assets (as defined hereinafter). : Persons to whom an issue of, or an offer or invitation to subscribe for the Sukuk ICP and/or Sukuk IMTN, falling within Section 4(6) of the Companies Act, 1965 of Malaysia (as amended from time to time). : Ijarah Page 4 of 39

5 (Collectively referred as the Sukuk Ijarah ) (c) description : Proposed issuance of up to RM100.0 Million Sukuk ICP and up to RM300.0 Million Sukuk IMTN, under the Syariah principle of Ijarah ( Sukuk Ijarah ). (1) The Issuer shall, from time to time, acquire the beneficial title, interests and rights over the Identified Assets from the Seller via a SPA. The beneficial title, interests and rights of the Issuer in the Identified Assets acquired shall be safeguarded by an irrevocable Power of Attorney ( PA ) to be granted by the Seller to the Issuer for the latter to take possession, deal with, and/or have full power over the Identified Assets as the owner. (2) The value of the Identified Assets has been determined by the Valuer and the purchase price of the Identified Assets shall comply, at all times, during the tenure of the Sukuk Ijarah with the requirements under the Securities Commission s ( SC ) Syariah Advisory Council ( SAC ) Pricing Guidelines issued on 31 December 2003 and 30 April 2004, as amended from time to time. (3) Subsequent to the sale of the Identified Assets to the Issuer, the Issuer and the Lessee shall enter into an Ijarah Agreement ( IA ) whereby the Issuer leases back the Identified Assets to the Lessee. (4) The Issuer shall thereafter issue Sukuk ICP and/or Sukuk IMTN to fund the acquisition of the beneficial title, interests and rights over the Identified Assets from the Seller. The Issuer may opt to issue either Sukuk ICP and/or Sukuk IMTN at any one time within the tenure of the Sukuk Ijarah wherein the aggregate amount outstanding of all Sukuk ICP and/or Sukuk IMTN issued shall not exceed the issue size of the Sukuk ICP and Sukuk IMTN, respectively. Page 5 of 39

6 (Collectively referred as the Sukuk Ijarah ) (5) During the tenure of the Sukuk ICP and/or Sukuk IMTN, the Lessee, as stipulated in the IA, is obliged to pay fixed Ijarah Payment ( Ijarah Payment ) at a specific payment date ( Ijarah Payment Date ) for a pre determined time frame to the Issuer. The Ijarah Payment shall then be utilized by the Issuer to meet its obligation under the Sukuk ICP and/or Sukuk IMTN. (6) In addition, the Lessee shall grant a Purchase Undertaking to the Issuer, to acquire the Identified Assets at a pre determined Exercise Price (as defined under (z)(ii) below) upon maturity of the IA ( Ijarah Maturity Date ) and/or upon occurrence of an Event of Default. The proceeds received by the Issuer from the Purchase Undertaking shall then be utilized by the Issuer to meet its obligation under the Sukuk ICP and/or Sukuk IMTN. (7) Concurrent to the above, the Issuer shall declare that it holds the beneficial title, interests and rights in the Trust Assets on behalf of the Sukuk Holders. The Sukuk Holders will have proportionate undivided ownership over the Trust Assets. The Trust Assets shall consist of:- (i) (ii) (iii) (iv) The Issuer s beneficial title, interests, rights, and/or benefits, in the Identified Assets under and pursuant to the SPA; The Issuer s beneficial title, interests, rights, and/or benefits, in the IA; The Issuer s beneficial title, interests, rights, and/or benefits, in the Purchase Undertaking; and All monies outstanding in the Designated Accounts. Please refer to the diagram in Attachment B for description on the transaction and structure of the Sukuk Ijarah. Page 6 of 39

7 (Collectively referred as the Sukuk Ijarah ) (d) Issue size (RM) : Sukuk ICP Up to RM100.0 Million in nominal value. The Sukuk ICP amount is subject to the proposed reduction schedule as follows:- Reduction Date (Years from date of first issuance) Reduction Amount (RM million) Cumulative Limit (RM million) Sukuk IMTN Up to RM300.0 Million in nominal value. The Sukuk IMTN amount is subject to the proposed reduction schedule as follows:- Reduction Date (Years from date of first issuance) (e) Issue Price (RM) : Sukuk ICP Reduction Amount (RM million) Cumulative Limit (RM million) The Sukuk ICP shall be issued at a discount to its nominal value and the issue price is calculated in accordance with the Rules on Fully Automated System for Issuing/Tendering ( FAST ) issued by BNM, as amended from time to time ( FAST Rules ). Sukuk IMTN The Sukuk IMTN shall be issued at par to its nominal value. Page 7 of 39

8 (Collectively referred as the Sukuk Ijarah ) (f) Tenure of the Sukuk Ijarah /issue : Sukuk ICP The tenure of the Sukuk ICP is seven (7) years from the date of the first issuance of the Sukuk ICP, subject to the initial issuance to be effected within two (2) years after the date of approval from SC. (g) Coupon / Profit or equivalent rate (%) The tenure of each issuance of the Sukuk ICP shall be a minimum of one (1) month and maximum of twelve (12) months from the issuance date. Sukuk IMTN The tenure of the Sukuk IMTN is fifteen (15) years from the date of the first issuance of the Sukuk IMTN, subject to the initial issuance to be effected within two (2) years after the date of approval from SC. The tenure of each issuance of the Sukuk IMTN shall be more than one (1) year and up to fifteen (15) years from the issuance date. The actual issue date, maturity date and tenure of the Sukuk ICP and/or Sukuk IMTN will be determined prior to the proposed issue date of the Sukuk ICP and/or the Sukuk IMTN. The SC will be notified accordingly. : The profit rate for the Sukuk ICP and/or Sukuk IMTN will only be known prior to the proposed issue date and upon the agreement between the Issuer and the Sukuk Holders. The SC will be notified accordingly. Page 8 of 39

9 (Collectively referred as the Sukuk Ijarah ) (h) Profit payment frequency and basis : Sukuk ICP Payable in arrears on the respective maturity dates of the Sukuk ICP. (i) (j) Yield to maturity ( YTM ) (%) Security/collateral (if any) The profit will be calculated on the actual number of days elapsed and on the basis of a 365-day year. Sukuk IMTN Payable semi-annually in arrears with the first profit payment commencing six (6) months from the date of the first issuance of the Sukuk IMTN with the last profit payment to be made on the respective maturity dates of the Sukuk IMTN. The profit will be calculated on the basis of actual number of days in a year and the actual number of days elapsed. : The YTM will only be known prior to the proposed issue date and upon the agreement between the Issuer and the Sukuk Holders. The SC will be notified accordingly. : There is no security but the Issuer shall declare that it holds the beneficial title, interests and rights in the Trust Assets on behalf of the Sukuk Holders. Page 9 of 39

10 (Collectively referred as the Sukuk Ijarah ) (k) Details on utilisation of proceeds : The proceeds raised from the issuance of the Sukuk ICP and/or Sukuk IMTN shall be utilized by the Issuer for the following:- Purpose To finance the Issuer s acquisition of the beneficial title, interests and rights in the Identified Assets (a). Up to RM 400,000,000 Total 400,000,000 Notes: (a) The proceeds from the sale of the Identified Assets shall be utilised by the Seller as follows: Purpose (1) To refinance TSH s existing RM100.0 million Al-Murabahah Commercial Papers ( MCP )/Medium Term Notes ( MMTN ) ( Murabahah CP/MTN ) (i) ; and (2) To finance the general working capital (ii) and capital expenditure requirement of TSH Group which are Syariah compliant. Up to RM 100,000, ,000,000 Total 400,000,000 Note: (i) The proceeds allocated under purpose (1) shall be used to repurchase or redeem all outstanding MCP and/or MMTN under TSH s existing Murabahah CP/MTN. In the event the amount is not fully utilized, the balance of proceeds shall be utilized for purpose (2). (ii) The general working capital shall include financing or part financing the payment of the Exercise Price in relation to the Purchase Undertakings. Page 10 of 39

11 (Collectively referred as the Sukuk Ijarah ) (l) Sinking fund (if any) : The sinking fund shall be represented by the credit balances in the following Designated Accounts. Designated Accounts (Issuer) The Issuer is required to open and maintain the following Syariah compliant Designated Accounts with a bank to be designated by the Trustee: (1) Escrow Account ( EA ) To capture all the proceeds from the issuance of the Sukuk ICP and/or Sukuk IMTN and to be utilized in accordance with the purposes approved by the SC as stated under Paragraph (2)(k) above. (2) Sukuk Service Account ( SSA ) To remit and/or deposit all the Ijarah payments received under and pursuant to the IA, equity contribution, the proceeds from the Purchase Undertaking, the proceeds from the sale of the Identified Assets upon occurrence of an Event of Default and all other monies received by the Issuer other than net proceeds from the issuance of Sukuk ICP and/or Sukuk IMTN. The funds from this account shall be utilized for the following purposes:- (i) To pay all general operating and administrative expenses of the Issuer (if any); and (ii) Redemption of principal and profit payment for the Sukuk ICP and/or Sukuk IMTN. Page 11 of 39

12 (Collectively referred as the Sukuk Ijarah ) Designated Accounts (Lessee) The Lessee is required to open and maintain the following Syariah compliant Designated Account with a bank to be designated by the Trustee: (1) Reserve Account ( RA ) To capture all funds to meet the Lessee s payment obligations under the IA. The Lessee shall ensure that the minimum credit balances required under the Ijarah Payment Reserve (as defined below) and the Purchase Undertaking Payment Reserve (as defined below) are maintained and accumulated in the RA in the following manner:- Sukuk ICP Ijarah Payment Reserve:- The Lessee shall deposit 100% of the Ijarah Payment due and payable, one (1) week prior to the Ijarah Payment Date, as stipulated under the IA. Purchase Undertaking Payment Reserve:- The Lessee shall ensure that the RA has a minimum credit balance of 100% of the value of the Exercise Price one (1) week prior to the respective Ijarah Maturity Dates. Sukuk IMTN Ijarah Payment Reserve:- The Lessee shall deposit 100% of the next Ijarah Payment due and payable, one (1) month prior to the Ijarah Payment Date, as stipulated under the IA. Page 12 of 39

13 (Collectively referred as the Sukuk Ijarah ) Purchase Undertaking Payment Reserve:- The Lessee shall ensure that in respect of each IA, there shall be a gradual built up for the payment of the Exercise Price six (6) months prior to the respective Ijarah Maturity Dates. The RA shall have a minimum credit balance of 100% of the value of the Exercise Price one (1) month prior to the respective Ijarah Maturity Dates. The EA, SSA and RA will be operated solely by the Trustee or such other person appointed by the Trustee. (m) Rating Credit rating assigned [Please specify if this is an indicative rating] Name of rating agency : Sukuk IMTN Indicative rating of AA- IS. Sukuk ICP Indicative rating of MARC-1 IS. : Malaysian Rating Corporation Berhad ( MARC ). (n) Form and denomination : The Sukuk will be in bearer form in denomination of RM1.0 million each. The Sukuk Ijarah shall be represented by global certificates to be deposited with the Central Depository and are exchangeable for definitive certificates only in limited circumstances. No physical delivery of the global certificates will be made. Page 13 of 39

14 (Collectively referred as the Sukuk Ijarah ) (o) Mode of issue : Via competitive tender by the TPMs and/or direct placement on a best effort basis. Tender Basis The Facility Agent shall invite a selection of financial institutions and investors to participate as TPMs to bid for the Sukuk ICP and/or Sukuk IMTN respectively. The composition of the tender panel may vary from time to time by the Facility Agent in consultation with the Issuer. The Sukuk ICP and/or Sukuk IMTN to be issued via tender basis shall be subjected to the FAST Rules and/or any other regulations imposed by BNM from time to time. Direct Placement Alternatively, the Sukuk ICP and/or Sukuk IMTN could be placed privately via the Facility Agent on a best effort basis to selected Sukuk Holders at yields to be agreed between the Issuer and the Sukuk Holders. The Sukuk ICP and/or Sukuk IMTN can also be placed out via a book running exercise by the Facility Agent on a best effort basis. Such private placement and book running shall be subjected to terms and conditions to be agreed between the Issuer and the Facility Agent. The issuance of the Sukuk ICP and/or Sukuk IMTN shall be in accordance with FAST and RENTAS Rules, where applicable, from time to time. (p) Selling restriction : The Sukuk ICP and/or Sukuk IMTN may not be offered or sold, directly or indirectly, nor may any document or other material in connection therewith be distributed in Malaysia, other than to categories of persons specified in Section 4(6) of the Companies Act, 1965 of Malaysia (as amended from time to time). (q) Listing status : The Sukuk ICP and/or Sukuk IMTN shall not be listed on the Bursa Malaysia Securities Berhad or on any other stock exchange. Page 14 of 39

15 (Collectively referred as the Sukuk Ijarah ) (r) Minimum level of subscription (RM or %) : The minimum level of subscription for each issuance of the Sukuk ICP and/or Sukuk IMTN shall be 10% of the issue size of each Sukuk ICP and/or Sukuk IMTN. In respect of each issuance of the Sukuk ICP and/or Sukuk IMTN, the issue will be aborted should the minimum level of subscription is not met. The Issuer shall return all considerations received to the Sukuk Holders. (s) Other regulatory approvals required in relation to the issue, offer, or invitation and whether or not obtained : Not applicable Page 15 of 39

16 (Collectively referred as the Sukuk Ijarah ) (t) Identified Assets : The Identified Assets are currently: - (1) charged to Malaysian Trustees Berhad (Company No V) ( MTB ) as security for TSH s indebtedness to MTB and the MCP and/or MMTN holders under TSH s existing Murabahah CP/MTN (2) where applicable, tenanted to the tenants whose names and addresses are stated in Attachment A hereof ( the Tenants ) under the tenancy agreement(s) made the date(s) stated in Attachment A hereof between the Tenants and the Seller. The prior written consent must be obtained by the Seller from MTB and the Tenants, respectively, to allow the Seller to utilize Identified Asset No. 6, as stated in Attachment A hereof, for the first issuance of Sukuk ICP and/or Sukuk IMTN under the Sukuk Ijarah. The Identified Assets may be substituted with such other assets, as approved by the Syariah Adviser, which shall then form the Identified Assets to be made available for the purposes of the sale and purchase and Ijarah transactions. The value ascribed for the Identified Assets shall be based on the valuation report or such other documentary evidence, from time to time by the Valuer. The list of Identified Assets is attached to this Principal Terms and Conditions under Attachment A. Page 16 of 39

17 (Collectively referred as the Sukuk Ijarah ) (u) Purchase and Selling Price / Ijarah Payment : Purchase Price The purchase price refers to the price payable by the Issuer to the Seller for the acquisition of the beneficial title, interests and rights of the Identified Assets from the Sellers. The purchase price shall be determined prior to the proposed issue date of the Sukuk ICP and/or Sukuk IMTN, and shall be in compliance with the SC s SAC Pricing Guidelines issued on 31 December 2003 and 30 April 2004, as amended from time to time. Ijarah Payment Sukuk ICP The Identified Assets shall be leased to the Lessee at an agreed Ijarah Payment based on the pre agreed rates, to be determined prior to the issuance of the Sukuk ICP. The agreed Ijarah Payment for the Sukuk ICP is payable in one lump sum at the Ijarah Maturity Date. Sukuk IMTN The Identified Assets shall be leased to the Lessee at an agreed Ijarah Payment based on the pre agreed rates, to be determined prior to the issuance of the Sukuk IMTN. The agreed Ijarah Payment for the Sukuk IMTN is payable semi-annually in arrears. Page 17 of 39

18 (Collectively referred as the Sukuk Ijarah ) The Ijarah Payments will be structured as a net lease without any set-off, deduction, or counter claims. The Issuer will be responsible for the insurance of the Identified Assets (if any), operation and major maintenance costs, and such other expenses (the Major Expenses ), that are to be borne by the Issuer as the beneficial owner of the Identified Assets. However, it shall be agreed upfront, through a Service Agent Agreement, that the Lessee will take full responsibility to bear the costs of Major Expenses for the Identified Assets, on behalf of the Issuer. The Lessee shall pay on behalf of the Issuer and accumulate all the costs of the Major Expenses and submit its claim at the respective Ijarah Maturity Dates. The Issuer will irrevocably agree to reimburse the Lessee on the Ijarah Maturity Date the accumulated costs of the Major Expenses paid by the Lessee. This amount will however, be set-off against the Exercise Price. The actual Ijarah Payment can only be determined prior to the issuance of the Sukuk ICP and/or Sukuk IMTN, once the profit margin and tenure of the respective Sukuk ICP and/or Sukuk IMTN to be issued are agreed upon. Page 18 of 39

19 (Collectively referred as the Sukuk Ijarah ) (v) Conditions precedent : Conditions precedent to the initial issuance of the Sukuk ICP and/or Sukuk IMTN shall be subject, but not be limited to the following: (1) receipt by the Facility Agent of certified true copies of the board resolution authorizing the Sukuk Ijarah and issuance of the Sukuk ICP and/or Sukuk IMTN and the execution of the documents thereto; (2) prior approvals and/or consents of the SC, Syariah Adviser, and/or other relevant authorities in Malaysia for issuance of the Sukuk ICP and/or Sukuk IMTN, and the Issuer s compliance with all conditions of such approvals have been obtained by the Lead Arranger; (3) no Event of Default has occurred or is continuing or will occur as a result of the issuance of the Sukuk ICP and/or Sukuk IMTN; (4) the Issuer shall have furnished to the Facility Agent certified true copies of its Form 24, 44 & 49, Memorandum and Articles of Association and a list of authorized signatories and their specimen signatures; (5) confirmation from the rating agency of an initial rating of at least AA- IS for the Sukuk IMTN and MARC-1 IS for the Sukuk ICP; (6) receipt by the Facility Agent of the Solicitors confirmation that the necessary legal documents pertaining to the Sukuk Ijarah have been executed, stamped (or endorsed as exempt from stamp duty) and presented for registration (where applicable); (7) receipt by the Facility Agent of the Solicitor s confirmation that the Power of Attorney granted by the Issuer in favour of the Trustee in respect of the Identified Assets has been presented for registration at the High Court of Malaya; Page 19 of 39

20 (Collectively referred as the Sukuk Ijarah ) (8) completion of the due diligence exercise as required under the Capital Markets and Services Act 2007 ( CMSA ) to the satisfaction of the Lead Arranger; (9) all documents evidencing the establishment of the Syariah-compliance Designated Accounts have been delivered to the Facility Agent; (10) receipt by the Facility Agent of the valuation report or such other documentary evidence on the Identified Assets, to ensure that the purchase price for the Identified Assets is in compliance with the SC s SAC Pricing Guidelines issued on 31 December 2003 and 30 April 2004, as amended from time to time; (11) receipt by the Facility Agent of the prior written consent from MTB and the Tenants to allow the Seller to utilize Identified Asset No. 6, as stated in Attachment A hereof, for the first issuance of Sukuk ICP and/or Sukuk IMTN under the Sukuk Ijarah ; (12) receipt by the Facility Agent of a letter from Aseambankers Malaysia Berhad (Company No H) ( AMB ) in form and content acceptable to the Facility Agent confirming the total amount due and payable to MTB to repurchase or redeem all outstanding MCP and/or MMTN under TSH s existing Murabahah CP/MTN ( Redemption Sum ); (13) receipt by the Facility Agent of the letter of undertaking from AMB in form and content acceptable to the Facility Agent to refund the Redemption Sum received by AMB in the event the discharge of charge from MTB cannot be registered for any reason whatsoever; Page 20 of 39

21 (Collectively referred as the Sukuk Ijarah ) (14) receipt by the Facility Agent of a letter of undertaking from MTB in form and content acceptable to the Facility Agent to forward to the Trustee the original documents of title to the Identified Assets together with the duplicate registered charges(s) of MTB s existing charge(s) and the duly executed and valid discharge of charge(s) in respect of MTB s existing charge(s) upon receipt of the written confirmation from AMB that the Redemption Sum has been received by AMB; (15) receipt by the Facility Agent of a letter from AMB that upon the payment of the Redemption Sum to AMB, TSH s existing Murabahah CP/MTN shall be ended or terminated and will not be available; (16) receipt by the Facility Agent of the Solicitors confirmation that a caveat in favour of the Trustee over the Identified Assets has been presented for registration at the relevant land registry/office; (17) receipt by the Facility Agent of the Solicitors confirmation that the Seller has the beneficial title, interest and rights over the Identified Assets for the sale and purchase transaction under the Sukuk Ijarah ; (18) receipt by the Facility Agent of the confirmation from the Solicitors that they have conducted searches on the Issuer, Seller and the Lessee at the Registrar of Companies and the searches revealed that there is no existing encumbrances over the Issuer s, Seller s and the Lessee s assets and undertakings that are detrimental to the interest of the Trustee and the Sukuk Holders; Page 21 of 39

22 (Collectively referred as the Sukuk Ijarah ) (19) receipt by the Facility Agent of the confirmation from the Solicitors that they have conducted searches on the Issuer, Seller and the Lessee at the office of the Official Receiver and the searches revealed that the Issuer, the Seller and the Lessee have not been wound up, or if the outcome of such searches is not available, the Issuer and/or the Seller and/or the Lessee, as the case may be, shall have provided statutory declarations declaring that it/they is/are not wound up and no winding up proceedings has been taken against it/them; (20) receipt by the Facility Agent documentary evidence that all fees due and payable under the Sukuk Ijarah have been received by the relevant parties; and (21) receipt of confirmation from the Solicitors that all conditions precedent to the issuance have been complied with. Page 22 of 39

23 (Collectively referred as the Sukuk Ijarah ) Conditions precedent for subsequent issuance of the Sukuk ICP and/or Sukuk IMTN shall be subject, but not be limited to the following: (1) the Issuer is in compliance with all Representations and Warranties under the Transaction Documents (as defined hereinafter); (2) no Event of Default has occurred or is continuing or will occur as a result of the issuance of the Sukuk ICP and/or Sukuk IMTN; (3) All the Identified Assets are free of encumbrances subject to the existing interest of the Lessee and Trustee to the Sukuk Ijarah which consent must be obtained; (4) where applicable, receipt by the Facility Agent of the written consent from the Lessee and the Trustee to utilize the Identified Assets or any part thereof for the sale and purchase transaction under the Sukuk Ijarah ; (5) receipt by the Trustee of the original document of title to the Identified Assets free from all encumbrances (save for the caveat in favour of the Trustee); (6) receipt of the valuation report or such other documentary evidence on the Identified Assets, to ensure that the purchase price for the Identified Assets is in compliance with the SC s SAC Pricing Guidelines issued on 31 December 2003 and 30 April 2004, as amended from time to time; and (7) the nominal value of each Sukuk ICP and/or Sukuk IMTN issued shall not exceed the stipulated issue size of the Sukuk Ijarah. Page 23 of 39

24 (Collectively referred as the Sukuk Ijarah ) (w) Representations and warranties : The Representations and Warranties by the Issuer, the Seller and the Lessee shall include but not be limited to the following: (1) Status: The Issuer, the Seller and the Lessee are companies duly established and existing under Malaysian law and they have the power and authority to enter into the business in which they are or propose to be engaged; (2) Powers: The Issuer, the Seller and the Lessee have the power to enter into, exercise their rights under and perform their obligations under the respective documents relating to the Sukuk Ijarah (as the case may be); (3) Authorization: All necessary actions, authorizations and consents required under the respective documents relating to the Sukuk Ijarah (as the case may be) have been taken, fulfilled and obtained and remain in full force and effect; (4) Binding Obligation: The respective documents relating to the Sukuk Ijarah create valid and binding obligations which are enforceable on and against the Issuer, the Seller, the Lessee, and the relevant security parties; (5) Accounts: The respective audited accounts are prepared in accordance with generally accepted accounting principles and standards; and (6) Litigation: No litigation or arbitration is current or threatened to the Issuer s knowledge, which if adversely determined would have a material adverse effect on the ability of the Issuer, the Seller and the Lessee to comply and perform their obligations under the respective documents relating to the Sukuk Ijarah. Page 24 of 39

25 (Collectively referred as the Sukuk Ijarah ) (x) Events of default : Standard Events of Default shall include but not be limited to the following:- (1) Covenants: Failure to meet any covenants, representations and warranties under the Transaction Documents after the prescribed remedy periods (if any); or (2) Amounts due: Failure to pay any amounts due under the Sukuk Ijarah on the due date or on demand, if so payable; or (3) Balance in RA: Lessee s failure to meet its obligation to maintain the provisions of the balance in the RA; or (4) Misrepresentation: Any representation, warranty or statement which is made by the Issuer, the Seller and/or the Lessee in the Transaction Documents proves to be incorrect or misleading in any respect; or (5) Invalidity: It is or will become unlawful under Malaysia laws for the Issuer, the Seller and/or the Lessee to perform or comply with any one or more of its material obligations under the Transaction Documents; or (6) Cessation of business: The Issuer, the Seller and/or the Lessee changes the nature or scope of its business, suspends or ceases a substantial part of the present business operations; or (7) Appointment of receiver, legal process: An encumbrance takes possession of, or a trustee, liquidator, receiver or similar official is appointed in respect of, all or any part of the business or assets of the Issuer, the Seller and/or the Lessee and is not paid out, withdrawn, discharged or stayed within thirty (30) days of such appointment; or Page 25 of 39

26 (Collectively referred as the Sukuk Ijarah ) (8) Insolvency: The Issuer, the Seller and/or the Lessee is deemed unable to pay its debts within the meaning of Section 218 (2) of the Companies Act 1965; or (9) Composition of winding up: The Issuer, the Seller and/or the Lessee fails to satisfy any judgment passed against it by any court of competent jurisdiction which would have a material adverse effect on the Issuer s obligations under the Sukuk Ijarah and no appeal against such judgment has been made to any appropriate appellate court within the time prescribed by law; or (10) Assets: All or a material part of the property or assets of the Issuer, the Seller and/or the Lessee shall be condemned, seized or otherwise appropriated or nationalized by any person acting under the authority of the Government of Malaysia that will have a material adverse effect on the Issuer s obligations under the Sukuk Ijarah. Should an Event of Default occurs, the Sukuk Holders shall have recourse to the Trust Assets. (y) Principal terms and conditions for warrants (where applicable) (z) Other principal terms and conditions for the issue (i) Purchase Undertaking : Not applicable : Under the purchase undertaking, the Lessee shall grant an undertaking to the Issuer to purchase the Identified Assets from the Issuer at the Exercise Price, on the respective Ijarah Maturity Dates or upon the occurrence of an Event of Default, under the Wa d principle. Upon occurrence of either of the above, the Identified Assets shall be transferred to the Lessee in exchange for payment of the Exercise Price. Page 26 of 39

27 (Collectively referred as the Sukuk Ijarah ) (ii) Exercise Price : The Exercise Price shall be calculated based on the following formula: (1) On the Ijarah Maturity Date: Exercise Price = Purchase Price of the Identified Asset plus any other outstanding Issuer s expenses* (2) On the declaration of an Event of Default ( EOD ): Exercise Price = Redemption Value plus any other outstanding Issuer s expenses* The Redemption Value shall be calculated as the following:- Redemption Value = PP [ 1 + (DR x n/365) ] PP = Purchase Price of the Identified Asset DR = Default profit rate (r + p) r = The profit rate as agreed prior to the issuance of the Sukuk ICP and/or Sukuk IMTN p = Compensation rate for late payment [to be determined and subject to confirmation by Syariah Adviser] n = Number of days between the date of the EOD and the actual maturity date of the Sukuk. Page 27 of 39

28 (Collectively referred as the Sukuk Ijarah ) * Issuer s expenses shall include all the accumulated cost for the Major Expenses, which shall be borne by the Issuer as the beneficial owner of the Identified Assets. (iii) Transaction Documents : Standard documentation for a facility of this nature, shall include, but not limited to the following:- (1) Agreement; (2) SPA; (3) IA; (4) Trust Deed; (5) Power of Attorney; (6) Purchase Undertaking Agreement; and (7) Any other legal documentation as advised by the Lead Arranger s solicitors. (iv) Permitted Investment : The Issuer shall be permitted from time to time to utilize funds held in the Designated Accounts to make permitted investments, provided that such funds utilized for permitted investments shall be remitted to the corresponding Designated Account in a timely manner to meet any payment obligations of the Issuer when due and payable. The permitted investments shall have a maturity date to match the utilization of the monies, denominated in Ringgit Malaysia and comply with the relevant Syariah principles. Upon maturity which shall be at least five (5) days before such funds are required to repay or redeem the Sukuk ICP and/or Sukuk IMTN, the proceeds (i.e. principal plus profit) shall be remitted to the corresponding Designated Account. Permitted investments shall mean :- (1) deposits in profit bearing accounts and negotiable certificates of deposits issued by licensed banking and financial institutions; and (2) Islamic Sukuk, treasury bills or Islamic financial instruments issued by the Government. Page 28 of 39

29 (Collectively referred as the Sukuk Ijarah ) The types of investment must be from the list of investments allowed by the Syariah Advisory Council of the SC and/or other recognized authorities which are issued from time to time. (v) Positive covenants : The Issuer, the Seller and the Lessee covenant and undertake that until all the liabilities and obligations under the Sukuk Ijarah have been discharged, the Issuer, the Seller and the Lessee will, amongst others : (1) Compliance: Comply with all provisions of the Transaction Documents; (2) Insurance: Acquire and maintain insurance policies (during the periods in which such policies are relevant) required by law to the satisfaction of the Trustee and notify the Trustee of any event which will or may give rise to any claim or right of action under the insurances; (3) License: Undertake to preserve and keep in force and effect all licenses, permits, approvals and rights necessary for the conduct of its business; (4) Remedy for event of default: Take such steps as may have been notified by the Trustee following the occurrence of an Event of Default or potential Event of Default and to remedy or mitigate the effect of that Event of Default or potential Event of Default or any other steps as the Trustee may reasonably request; (5) Designated Accounts: Open and maintain the Designated Accounts and pay all amounts into such accounts, and make all payments from such accounts only as permitted under the Transaction Documents; Page 29 of 39

30 (Collectively referred as the Sukuk Ijarah ) (6) Notification: Promptly notify the Trustee of any default or Event of Default under or in relation to any of the Transaction Documents, or any other contractual obligation of the Issuer, the Seller and/or the Lessee or any litigation, investigation, arbitration or proceeding before any court or government regulatory agency affecting the Issuer, the Seller and/or the Lessee, which if determined, could have material adverse effect or materially impair the business, operations, property or financial condition of the Issuer, the Seller and/or the Lessee or its ability to carry on its normal course of business; (7) Monies due: Use all reasonable endeavors to collect all monies due and payable; (8) Information: Deliver to the Trustee within one hundred twenty (120) days of the end of each financial year, and within ninety (90) days of each half year period of its financial statements period which shall also contain detailed calculation of the required financial ratios, together with a certificate by two of its directors that such financial statements present a true and fair view; (9) Accounts: Maintain an accounting system and keep adequate records in compliance with applicable statutory requirements and in accordance with generally accepted accounting principles of Malaysia; (10) Declare/payment of dividends: Declare or pay any dividend on share capital to shareholders subject to; (i) (ii) financial covenants are not breached in the event prior and after the payment; or no Event of Default has occurred or is continuing or would occur if such payment is made. Page 30 of 39

31 (Collectively referred as the Sukuk Ijarah ) (11) Payment: Punctually pay all of its financial obligations within its specified grace period; and (12) Conduct: Carry on and conduct its affairs and business with due diligence and efficiency and in accordance with sound financial and commercial standards and practices. The above positive covenants are not exhaustive and include any other customary covenants as may be advised by the Lead Arranger s solicitors. (vi) Negative covenants : The Issuer, the Seller and the Lessee covenant and undertake that until all the liabilities and obligations under the Sukuk Ijarah have been discharged, the Issuer, the Seller and the Lessee will not without prior written consent of the Trustee and the Sukuk Holders: (1) Negative pledge: With respect to the Issuer and Lessee only, create or permit to subsist any other security interest or permit to arise or affect, all or any part of its rights, undertaking, business or assets, other than security interest arising from the Sukuk Ijarah and existing financing disclosed in the Transaction Documents, if any; (2) Authorized and issued paid-up capital; change in shareholders and their respective shareholdings: With respect to the Issuer only, reduce its authorized and issued paid-up share capital and register or permit any change in its existing shareholder or its shareholdings as at the date hereof save for as permitted/disclosed under the Transaction Documents; (3) Financing agreements: Save as otherwise expressly contemplated in the Transaction Documents, amend, vary or replace any or other relevant agreements relating to the Sukuk Ijarah ; Page 31 of 39

32 (Collectively referred as the Sukuk Ijarah ) (4) Surrender rights: Surrender, transfer, assign, relinquish or otherwise dispose any of its rights and interest under the Transaction Documents (except as permitted or required under the Transaction Documents); (5) Loans and advances: Make, assume or permit to exist any loans or grant advances to others or provide or extend any credit or accommodation or provide any guarantee, indemnity or assurance against loss to or for the benefit of any person, enterprise or company or act as surety or otherwise voluntarily assume any liability, whether actual or contingent except as permitted under the Transaction Documents; (6) Memorandum and/or Articles of Association: Amend any provisions of its Memorandum and/or Articles of Association, which may have a material adverse effect on its ability to meet its respective obligations under the Sukuk Ijarah ; (7) Business nature: With respect to the Issuer only, carry on any business other than its authorized business in accordance with its obligations under the Transaction Documents; (8) Identified Assets: Allow the interest of the Issuer in the Identified Assets or any part thereof to be prejudiced; and (9) Dissolution: Dissolve its affairs or consolidate with or merge with other person. (vii) Financial covenants : (1) Debt to Equity Ratio ( D/E Ratio ) Throughout the tenure of the Sukuk Ijarah, TSH Group shall ensure that its D/E Ratio shall not exceed 1.50 times. The D/E Ratio is defined as the ratio of indebtedness of TSH Group represented by: Page 32 of 39

33 (Collectively referred as the Sukuk Ijarah ) (i) total Exercise Price under the Purchase Undertaking, and such other amounts outstanding under the IA (less balances standing in the RA); (ii) all other outstanding external borrowings, both conventional and Islamic financing, secured and unsecured; and (iii) all outstanding redeemable loan stocks, secured and unsecured to TSH Group s shareholders funds, loan stocks (that are irredeemable and convertible) plus loans/advances from shareholders/ directors that are subordinated to the Ijarah payments and such other amounts in relation to the IA. (2) Finance Service Cover Ratio ( FSCR ) TSH Group shall maintain an annual FSCR of not less than 1.75 times throughout the tenure of the Sukuk Ijarah. The FSCR is the ratio of cumulative Available Cash Flow (as defined below) to the aggregate of all net indebtedness (principal plus profit/interest), in respect of borrowed money due during the financial year, which include the annual Ijarah Payments and the Exercise Price under the Purchase Undertaking in relation to the Sukuk Ijarah. Available Cash Flow during a financial year is the sum of: (i) (ii) All revenue received (including interest/profits from placement of deposits or permitted investments and dividends); All cash and bank balances (including the Designated Accounts, permitted investments, and cash deposits) brought forward from the preceding financial year; Page 33 of 39

34 (Collectively referred as the Sukuk Ijarah ) (iii) (iv) (v) Proceeds from insurance claims, if any; All drawdowns from borrowings made during the financial year; and All capital injection and shareholders advances. Less (for the same relevant period): (i) (ii) General, Operating and Capital Expenditure; Tax paid. The D/E and FSCR Ratios shall be calculated at the end of each financial year period based on the latest consolidated accounts of the Lessee i.e. TSH Group on an annual basis and to be duly confirmed by the Lessee s external auditors. (viii) Redemption and/or cancellation : The Sukuk ICP and/or Sukuk IMTN will be redeemed at the nominal value in full by the Issuer on the respective maturity dates, via the Purchase Undertaking. The Issuer may also at any time purchase the Sukuk ICP and/or Sukuk IMTN in the open market by private treaty for redemption purposes. The Sukuk ICP and/or Sukuk IMTN redeemed or purchased in this manner will be cancelled but can be reissued subject to the issue size and tenure of the facility. (ix) Availability period (x) Compensation for Late and default Payment(s) ( Ta widh ) : Upon completion of documentation and compliance of all relevant conditions to the satisfaction of the Lead Arranger, the Sukuk ICP and/or Sukuk IMTN shall be issued within two (2) years from the date of the SC approval. : In the event of overdue payments on the Sukuk ICP and/or Sukuk IMTN, the Issuer shall pay late and default payments representing compensation charges on such defaulted amounts calculated in the manner as prescribed by SC s Syariah Advisory Council from Page 34 of 39

35 (Collectively referred as the Sukuk Ijarah ) time to time. (xi) Fees and expenses (xii) Taxes : All fees and expenses incurred by the Lead Arranger pursuant to the issuance of the Sukuk ICP and/or Sukuk IMTN (including professional fees for Trustees, Solicitors, Valuer, Rating Agency and other professionals engaged, where applicable, for purposes of independent opinions and reporting on behalf of the Lead Arranger, Facility Agent, Trustee and/or the Sukuk Holders and all legal fees and outof-pocket expenses), shall be for the account of the Issuer. : All payments shall be made free and clear of all present and future taxes, duties, withholdings or other deductions whatsoever imposed by the Government or any tax authority thereof. (xiii) Change in circumstances (xiv) Adverse Market : If, as a result of any change in applicable law, regulation or regulatory requirement or in the interpretation or application thereof or if compliance by the Lead Arranger for the Sukuk Ijarah with any applicable direction, request or requirement (whether or not having the force of law) will impose on the Lead Arranger any material condition, burden or obligation, then the commitment of the Lead Arranger to the Sukuk Ijarah will end upon notice to the Issuer of the happening of such event after becoming aware thereof. : Should there occur a material adverse change in the opinion of the Lead Arranger in the business condition (financial or otherwise) of the Issuer and/or the Lessee and/or change in the economic, social and political situation in Malaysia including but not limited to the adversities in the domestic or international financial market prior to the issuance date, the Lead Arranger reserves the right to withdraw, cancel, Page 35 of 39

36 (Collectively referred as the Sukuk Ijarah ) terminate and/ or restructure the arrangement of the Sukuk Ijarah. (xv) Business day (xvi) Other Conditions (xvii) Jurisdiction (xviii) Governing law : Means a day other than Saturday or Sunday or public holiday on which financial institutions licensed under the Banking and Financial Institutions Act 1989 are open for business. : The Sukuk Ijarah shall at all times be governed by the guidelines issued and to be issued from time to time by the SC, BNM, and/or any other authority in Malaysia having jurisdiction over matters pertaining to the Sukuk Ijarah. : The Issuer shall unconditionally and irrevocably submit to the non-exclusive jurisdictions of the courts of Malaysia. : Laws of Malaysia. Page 36 of 39

37 Attachment A List of Identified Assets No. Name of Asset 1 Maju Sawit Estate Description of Asset Title No. CL , CL , Locality M.41, Tawau Kunak Road, District of Tawau, Sabah Valuation Market Value Date Ascribed (RM) 30 June ,470,000 2 Kunak Palm Oil Mill 3 Bio-Mass Complex 4 Bio-Gas Complex 5 Eko Pulp and Paper Complex 6 Ong Yah Ho Estate Held under leasehold titles expiring on 31 December 2067 and has a total land area of approximately acres ( hectares) planted with oil palm. As per above 30 June ,500,000 As per above 30 June ,200,000 As per above 30 June ,100,000 As per above 30 June ,000,000 Title No. CL , Locality of Tenegang-Koyah, District of Kinabatangan, Off KM 46.5, Jalan Lahad Datu, Sandakan, Sabah 30 June ,150,000 Held under leasehold title expiring on 31 December 2096 and has a total land area of approximately 4, acres (2000 hectares) planted with oil palm. Total 316,420,000 No. Name and address of Tenants (where applicable) Date of Tenancy Agreement 1 Not applicable Not applicable 2 Not applicable Not applicable 3 TSH Bio Energy Sdn Bhd, Bangunan TSH, TB9, KM 7, Apas 1 August 2008 Road, Tawau, Sabah 4 TSH Bio-Gas Sdn Bhd, Bangunan TSH, TB9, KM 7, Apas 1 August 2008 Road, Tawau, Sabah 5 Eko Pulp & Paper Sdn Bhd, Bangunan TSH, TB9, KM 7, Apas 1 August 2008 Road, Tawau, Sabah 6 Not applicable Not applicable Page 37 of 39

38 Attachment B Description on the Transaction and Structure of the Issue Purchase Undertaking (1) Enter into Ijarah Agreement TSH Resources Berhad/Lessee (3) Proceeds from Ijarah Payment Trust Assets TSH Resources Berhad and/or its subsidiaries and/or associated companies/ Seller (1) Sale of Identified Assets (2) Sale consideration of the Identified Assets Issuer/ Lessor (2) Issues Sukuk Ijarah (2) Sukuk Ijarah Proceeds (3) Sukuk Ijarah Payments Sukuk Holders Power of Attorney Transaction structure of the Sukuk Ijarah is as follows: (1) The Issuer shall, from time to time, acquire the beneficial title, interests and rights over the Identified Assets from the Seller via a SPA. The beneficial title, interests and rights of the Issuer in the Identified Assets acquired shall be safeguarded by an irrevocable PA to be granted by the Seller to the Issuer for the latter to take possession, deal with, and/or have full power over the Identified Assets as the owner. Subsequent to the sale of the Identified Assets to the Issuer, the Issuer and the Lessee shall enter into an IA whereby the Issuer leases back the Identified Assets to the Lessee. (2) The Issuer shall thereafter issue Sukuk ICP and/or Sukuk IMTN to fund the acquisition of the beneficial title, interests and rights over the Identified Assets from the Seller. The Issuer may opt to issue either Sukuk ICP and/or Sukuk IMTN at any one time within the tenure of the Sukuk Ijarah wherein the aggregate amount outstanding of all Sukuk ICP and/or Sukuk IMTN issued shall not exceed the issue size of the Sukuk ICP and Sukuk IMTN, respectively. Page 38 of 39