Annexure 1 TRANSACTION DIAGRAM OF THE SUKUK IJARAH PROGRAMME AND EXPLANATORY NOTES

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1 Annexure 1 TRANSACTION DIAGRAM OF THE SUKUK IJARAH PROGRAMME AND EXPLANATORY NOTES Declares Trust and Issue Sukuk Ijarah 6 Sale Undertaking 6 Purchase Undertaking 2 2 Enter into Ijarah Agreement KDU (as the Issuer / Lessee/Contractor/ Service Agent ) 1 Enter into Istisna Agreement Pay Asset Purchase Price (equivalent to Sukuk Ijarah Proceeds) Sukuk Trustee / Lessor (acting on behalf of the Sukukholders) Sukuk Ijarah proceeds Sukukholders 5 Ijarah Payments 5 Ijarah Payments 3 Appointment as Service Agent under the Service Agency Agreement The Sukuk Ijarah shall be based on the main Islamic principle of Ijarah (lease contract) which is one of the Shariah principles and concepts approved by the SC s SAC. Ijarah is a contract whereby a lessor (asset owner) leases out an asset to a lessee at an agreed lease rental for a predetermined lease period. The ownership of the leased asset shall always remain with the lessor. Other supplementary Shariah principles to be used in the transaction structure are: 1. Bai al-istisna (construction contract) - pursuant to this contract, the Issuer will agree to construct and deliver the relevant Asset to the Sukukholders. It is to facilitate the Issuer in transferring the ownership of the relevant Asset (to be constructed) to the Sukukholders which in turn shall be leased to the Issuer under the Ijarah contracts elaborated below; 2. Ijarah Mawsufah fi al-zimmah (forward lease contract) for the imposition of forward Ijarah Payments ( Forward Ijarah Payments ) during the construction period ( Construction Period ) of the relevant Asset; 3. Ijarah Muntahiah bi al-tamlik (lease culminating in transfer of ownership) the main lease contract commencing from the Asset completion date up to the Ijarah Expiration Date where the relevant Asset will eventually be transferred to the Issuer; and. Wa`d (unilateral promise) to be applied in structuring Purchase Undertaking and Sale Undertaking (as described below). 1

2 The Sukuk Trustee shall act for and on behalf of all the Sukukholders to enter into the following main agreements in respect of the Sukuk Programme: 1. Istisna Agreement; 2. ljarah Agreement; 3. Service Agency Agreement;. Purchase Undertaking; and 5. Sale Undertaking. Step 1 The Sukuk Trustee shall firstly enter into an Istisna Agreement with the Issuer (in its capacity as Contractor), to effect the following: a. The Contractor will construct, complete and deliver the Asset to the Sukuk Trustee (in its capacity as Purchaser for the benefit of the Sukukholders) in accordance with the terms of the Istisna Agreement and to deliver vacant possession of the Asset to the Purchaser on or before the Delivery Date. The Contractor and the Purchaser shall further agree as follows :- (i) All rights to full beneficial ownership of the Asset shall pass to the Purchaser (for the benefit of the Sukukholders) upon execution of the Istisna Agreement notwithstanding that payment of the purchase consideration to be paid by the Sukukholders, which is equivalent to the aggregate proceeds to be raised from the issuance of the respective Sukuk Ijarah ( Asset Purchase Price ) shall be made by the Purchaser as provided below; (ii) All rights to full beneficial ownership of the Asset shall pass to the Purchaser upon execution of the Istisna Agreement notwithstanding that the Construction Period is still subsisting, and the Asset has as at the date of the Istisna Agreement not yet been constructed by the Contractor; (iii) Pursuant to (i) and (ii) above, the Contractor shall declare a trust in favour of the Purchaser over the Asset whereby beneficial ownership of the Asset and any portion thereof shall pass to the Purchaser immediately upon such portion of the Asset coming to existence; (iv) The Contractor may appoint such sub-contractors to construct, complete and deliver the Asset. b. The Contractor and the Purchaser shall agree that the sale and purchase of the Asset, by way of transfer of beneficial ownership, shall be completed by the full and effective transfer of beneficial ownership thereto from the Contractor to the Purchaser, as and when such portion of the Asset coming to existence after the Istisna Agreement is executed between the Contractor and the Purchaser. In particular, no legal title to the Asset shall be transferred to the Purchaser and where applicable, the Contractor shall continue to hold the same. Additionally, the Contractor will continue to retain physical possession of the Asset during the Construction Period and thereafter and as such no physical delivery of possession of the Asset shall be effected by the Contractor to the Purchaser, as mutually agreed between the Contractor and the Purchaser. Insofar as legal title or legal ownership to any of the Asset continues to remain with the Contractor as the registered proprietor of the Asset, the Contractor shall (and shall declare that it does) to that extent, be holding the Asset on trust for the Sukukholders. 2

3 c. The Asset Purchase Price shall be disbursed progressively to the Contractor in accordance with the construction progress of the Asset, in cash on the relevant Issue Date and subject always that the Asset Purchase Price shall at all times comply with the SC's Shariah Advisory Council asset pricing requirements. d. The Purchaser shall declare that it holds all its contractual rights, entitlements and remedies hereunder on trust for the Sukukholders and the Contractor shall acknowledge the existence of such trust and agrees and acknowledges that all its obligations, representations, warranties, undertakings, covenants and indemnities hereunder shall accrue beneficially to the Sukukholders and that the Sukuk Trustee shall thereby be entitled to enforce (by any means legally possible and available) all the provisions of the Istisna Agreement against the Contractor. e. Upon the completion of construction of the Asset, the Contractor shall notify the Purchaser in writing of the completion and deliver the Asset to the Purchaser (for the benefit of the Sukukholders). Upon such delivery in accordance with item (b) above, the Istisna Agreement shall be completed. f. In the event the Contractor fails to complete construction and delivery of the Asset, the Sukuk Trustee may either provide Extended Construction Period (as defined below) or invoke declaration of an Event of Default (as defined below), whereupon the Istisna Agreement shall be terminated immediately and the Contractor shall be liable to pay the Istisna Termination Amount (as defined below). 2 The Sukuk Trustee as the lessor ( Lessor ) shall subsequently execute Ijarah Agreement(s) with the Issuer as the lessee ( Lessee ) to lease the respective Asset to the Lessee for an Ijarah Period. The salient terms in relation to the Ijarah Agreement are as follows: a. The Lessor shall lease to the Lessee, and the Lessee shall lease from the Lessor, the Asset for the Ijarah Period at the related Ijarah Payments for each Ijarah Payment Period, which shall not be affected or prejudiced by reason of any prior use of the Asset by the Lessee; b. The Lessee shall agree to use the Asset at its own risk. The Lessee shall bear the risk of loss of or damage to the Asset or any part thereof arising from the use or operation thereof by the Lessee; c. The Lessee shall be responsible for all costs and expenses associated with the use and operation of the Asset (excluding maintenance such as repairs, restoration and takaful/insurance ( Asset s Ownership Maintenance ); d. The Lessor shall agree to be responsible for the performance of all Asset s Ownership Maintenance, and in that regard the Issuer as the Service Agent, in accordance with the terms and conditions set out in the Service Agency Agreement, shall perform, or shall procure the performance of, the Asset s Ownership Maintenance on behalf of the Lessor. e. The Lessor shall declare that it holds all its contractual rights, entitlements and remedies thereunder on trust for the Sukukholders and the Lessee shall 3

4 acknowledge the existence of such trust and shall agree and acknowledge that all its obligations, representations, warranties, undertakings, covenants and indemnities thereunder shall accrue beneficially to the Sukukholders. f. The Lessee shall acknowledge that it will have possession of the Asset upon the completion of construction of the Asset and that, accordingly, the Lessor s obligation to deliver the Asset, for the purposes of the Ijarah Agreement, will be deemed to be fulfilled upon the completion of construction of the Asset. g. To the extent that the Asset remains not fully completed, and for the duration of the Construction Period, the Lessee shall agree and acknowledge that the Ijarah Agreement shall operate as a forward lease of the Asset and, notwithstanding the same, the Lessee shall agree and acknowledge that the Ijarah Payments remain fully payable by it during the Construction Period as Forward Ijarah Payments and are not diminished, impaired or reduced in any way whatsoever by virtue of the Asset remaining under construction during such time. Upon completion of the Asset, the normal Ijarah Payments shall continue to be paid by the Lessee to the Lessor. All the Forward Ijarah Payments paid to the Sukukholders shall be refundable to the Lessee but any such amounts to be refunded shall be completely set-off against the amount payable by the Issuer as provided in the Purchase or Sale Undertaking exercise price ( Exercise Price ) and the Issuer shall remain liable to pay the remainder of the Exercise Price after such set-off h. In the event the Contractor fails to complete the asset/project construction and delivery of the Asset within the agreed construction period or the Contractor has become aware of such failure, whichever is earlier, the Sukuk Trustee shall have the option either to: (a) Provide written notice to the Contractor within fourteen (1) days from the date of such failure, to allow extension on the construction period ( Extended Construction Period ) until full completion of the Asset failing which, event of default shall be declared. Forward Ijarah Payments will continue to be paid during such period and the provision for set-off upon completion of Asset under (g) above shall be applied; or (b) Invoke declaration of an event of default during the Construction Period where the Ijarah Agreement shall be terminated and the Istisna Termination Amount shall immediately become due and payable by the Issuer to the Sukuk Trustee (for the benefit of the Sukukholders). All the Forward Ijarah Payments paid to the Sukukholders shall be refundable to the Lessee but any such amounts to be refunded shall be completely setoff against the amount payable by the Issuer as provided in the Istisna Termination Amount and the Issuer shall remain liable to pay the remainder of the Istisna Termination Amount after such set-off. i. Upon the occurrence of a Total Loss Event, the Ijarah shall be terminated upon confirmation by the Lessee to the Lessor within an agreed timeframe. The Sukuk Ijarah therefore, shall be redeemed by the Issuer and such redemption shall be made using Takaful/insurance proceeds. However, it is acceptable for the Issuer to use its own monies first to redeem the Sukuk Ijarah and the Takaful/insurance

5 will be reassigned to the Issuer. Nonetheless, should the Service Agent notifies its intention to substitute the Asset, and for the duration of the Substitution Period, the Lessee and Lessor shall agree to continue the lease with the Total Loss Substitute Assets under the terms of the existing Ijarah Agreement. Additionally, the Lessee shall agree and acknowledge that the Ijarah Payments during the Substitution Period remain fully payable by it during the Substitution Period and shall be regarded as Forward Ijarah Payments of the Total Loss Substitute Assets, and are not diminished, impaired or reduced in any way whatsoever by virtue of the Total Loss Substitute Assets not yet being available during the Substitution Period. Upon availability of the Total Loss Substitute Assets, the Lessee agrees that the total Forward Ijarah Payments paid during Substitution Period shall be completely set off against part of the total Ijarah Payments on the subsequent Ijarah Payment Date as mutually agreed between the Lessor and the Lessee in the Exchange Agreement. The Lessee shall remain liable to pay the remainder of the total Ijarah Payments after such set-off. j. The Lessee shall agree that the Ijarah Payments in respect of the Total Loss Substitute Assets shall be as follows:- Ijarah Payments = A+B Where, A = Ijarah Payments in relation to relevant Ijarah Payment Period. B = the aggregate Forward Ijarah Payments paid and any Forward Ijarah Payments accrued but unpaid during the Substitution Period k. During the Ijarah Period, should the Asset be partially damaged but does not constitute a Total Loss Event without affecting the usufruct of the Asset, the ljarah Agreement will continue and the Lessee shall continue to pay the Ijarah Payments. l. In the event of the exercise of the Purchase Undertaking or Sale Undertaking, where applicable and in accordance with the terms thereunder, the Ijarah Agreement and the lease thereunder shall be terminated. 3 Pursuant to a Service Agency Agreement to be executed between the Issuer (in its capacity as Service Agent) and the Sukuk Trustee (on behalf of the Sukukholders): a. The Service Agent shall fully undertake and discharge the responsibilities in respect of the Asset s Ownership Maintenance expenses. As Service Agent, the Lessee shall pay for all costs and expenses in respect of the expenses including payment for takaful contribution/insurance premium during the Ijarah period on behalf of the Lessor. b. The Service Agent shall be responsible to procure takaful/insurance, including without limitation, to the fire and peril takaful/insurance for the Asset which shall be full insurable value thereof (which shall not be less than the Asset Purchase Price), in accordance with the industry practice, failing which the Service Agent shall bear any shortfall from the proceeds received. The Service Agent shall agree that the existence of shortfall in the takaful/insurance proceeds as compared to the Asset Purchase Price shall be conclusive evidence that the Asset were not fully insured. Any excess from the insurance/takaful proceeds shall be paid to the Service Agent as an incentive fee. 5

6 c. The Service Agent shall substitute the Asset, as the case may be, with qualified assets to be approved by the Shariah Adviser in accordance to the Total Loss Substitute Assets. d. The Service Agent will bear, defray and accumulate such Asset s Ownership Maintenance expenses paid and may only submit its claim for such expenses paid by the Service Agent on the Lessor s behalf at the Ijarah Expiration Date. Further, the Lessor and the Service Agent agree that the Asset s Ownership Maintenance expenses to be included in the determination of the Termination Price and as a result, no actual reimbursement will be made to the Service Agent. e. In the event that any of the Asset be partially damaged but not be a Total Loss Event, the Service Agent shall either:- (i) perform all repairs, restoration and maintenance works on the respective Asset and pay the applicable expenses without delay; or (ii) make good such damage on its own accord by utilising without limitation the takaful/insurance for the relevant Asset; or (iii) substitute the relevant Asset, as the case may be, with qualified assets to be approved by the Shariah Adviser in accordance with the provision on Total Loss Substitute Asset. Upon the execution of the respective Istisna Agreement and Ijarah Agreement, the Sukuk Ijarah of up to RM200.0 million in nominal value shall be issued by Issuer to the Sukukholders to represent the Sukukholders beneficial interest over the Asset and all benefits, rights and obligations thereto. 5 During the tenure of the Sukuk Ijarah, the Issuer, as stipulated in the Ijarah Agreement, is obliged to pay lease payments for the Asset which equals to the Ijarah Payments which comprised Sukuk Profit Distribution Payment and Fixed Portion Ijarah Payment amounts payable to the Sukukholders on the Ijarah Payment Dates. 6 Pursuant to a Purchase Undertaking to be granted by the Issuer to the Sukuk Trustee, the Issuer shall undertake to purchase the asset from the Sukuk Trustee upon the declaration of an Event of Default after completion of the Asset (save and except for Total Loss Event). Pursuant to Sale Undertaking to be granted by the Sukuk Trustee to the Issuer, the Sukuk Trustee shall undertake to sell the Assets to the Issuer on the Ijarah Expiration Date and upon Early Redemption of the entire Sukuk Ijarah. Upon exercising the Sale Undertaking or Purchase Undertaking, as the case may be, and execution of Asset Sale Agreement at an agreed Termination Price, the trust over the relevant Assets will subsequently end and the Sukukholders shall not have any further rights or interests in the relevant Assets. Concurrently, the respective Sukuk Ijarah shall terminate. 6