Offering Circular
FIRST GLOBAL SUKUK INC.
(Incorporated in Labuan International Offshore Financial Centre, Malaysia with limited liability)
Serial Islamic Lease Sukuk Issuance
U.S.$50,000,000 Trust Certificates due 2004, Series A
U.S.$100,000,000 Trust Certificates due 2006, Series B
Advisers
Structuring & Shariah
Financial
Bank Islam (L) Ltd
ABN AMRO
Lead Arranger
Bank Islam (L) Ltd
Co-Arranger
Aseambankers Malaysia Berhad
Global Coordinator
ABN AMRO
Middle East Coordinator
Shamil Bank of Bahrain E.C.
________________
The date of this Offering Circular is December 24, 2001
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The U.S.$50,000,000 Trust Certificates due 2004, Series A (the "Series A Certificates") will be
issued on 24th December, 2001 (the "Closing Date") and will be redeemed upon the dissolution of the
related Trust (as defined below) on the Periodic Distribution Date (as defined below) falling in
December, 2004 (the "Series A Scheduled Dissolution Date"). The U.S.$100,000,000 Trust
Certificates due 2006, Series B (the "Series B Certificates" and, together with the Series A
Certificates, the "Certificates" or the "Sukuk") will be issued on the Closing Date and will be
redeemed upon the dissolution of the related Trust on the Periodic Distribution Date falling in
December, 2006 (the "Series B Scheduled Dissolution Date" and, together with the Series A
Scheduled Dissolution Date, the "Scheduled Dissolution Dates").
Bank Islam (L) Ltd (the "Trustee"), pursuant to the terms of a declaration of trust entered into by the
Trustee in respect of each Series of Certificates (each a "Trust Agreement"), will hold the assets
conveyed to it in respect of each Series of Certificates (the "Trust Assets") upon trust (the "Trusts")
for the holders of the respective Series of Certificates.
First Global Sukuk Inc., a special purpose company incorporated in Labuan, Malaysia under the
Offshore Companies Act, 1990 (the "SPV"), will enter into four purchase agreements (each a
"Purchase Agreement") with certain Malaysian subsidiaries (each a "Seller") of Kumpulan Guthrie
Berhad ("Guthrie"). Pursuant to each Purchase Agreement, the relevant Seller will declare itself a
bare trustee of its interests in the parcels of land owned by it and identified therein for the benefit of
the SPV and convey the beneficial interest in such parcels of land to the SPV. Thereafter the SPV
will lease the beneficial interest in such parcels of land to Guthrie pursuant to two series of lease
agreements (each a "Lease Agreement"). Pursuant to the Trust Agreements, the SPV will convey to
the Trustee its beneficial interest in such parcels of land and assign to the Trustee all its rights, title,
interest and benefit, present and future, in, to and under the Lease Agreements and the Purchase
Agreements. Such interests, together with all proceeds therefrom, will comprise the Trust Assets. The
Trusts will be dissolved on the relevant Dissolution Dates.
Each Suk'kun represents solely an undivided ownership interest in the relevant Trust Assets.
Holders of Series A Certificates will have no recourse to the Trust Assets in respect of the Series
B Certificates. Likewise, holders of Series B Certificates will have no recourse to the Trust
Assets in respect of the Series A Certificates. Creditors of the SPV and the Trustee (in any
capacity other than as trustee in respect of the Certificates), including, in particular, holders of
certificates relating to other trusts, will have no recourse to the Trust Assets. Proceeds of the
Trust Assets are the sole source of payments on the Certificates. The Certificates do not
represent an interest in or obligation of any of the SPV, the Trustee, Guthrie or any of their
affiliates. Accordingly, Certificateholders will have no recourse to any assets of the SPV, the
Trustee (including, in particular other assets comprised in other trusts), Guthrie (to the extent it
fulfills all of its obligations under the relevant Lease Agreements) or any of their affiliates in
respect of any shortfall in the expected amounts from the Trust Assets.
The Sukuk do not and are not intended to convey ownership in the Land Parcels within the
meaning of the (Malaysian) National Land Code 1965. Any transfer, under the National Land
Code 1965, of the Land Parcels into the name of any third party would be subject to the
provisions of the National Land Code 1965, including but not limited to the provisions in
relation to procuring the consents of the relevant authorities therefor.
The Sukuk have not been and will not be registered under the United States Securities Act of
1933, as amended (the "Securities Act") or with any securities regulatory authority of any state
or other jurisdiction of the United States and may not be offered, sold or delivered within the
United States or to U.S. persons except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and applicable state securities
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laws. The Sukuk are being offered, sold or delivered to Persons (other than U.S. Persons) (each
as defined in Regulation S) outside the United States in reliance on Regulation S ("Regulation
S") under the Securities Act. Each purchaser of the Sukuk will be deemed to have made the
representations described in "Transfer Restrictions" and is hereby notified that the offer and
sale of Sukuk to it is being made in reliance on the exemption from the registration
requirements of the Securities Act provided by Regulation S.
Distributions on each Certificate will be made on each date (each a "Periodic Distribution Date")
which falls six months after the preceding Periodic Distribution Date or, in the case of the first
Periodic Distribution Date, after the Closing Date. Each holder of a Series A Certificate will receive
on each Periodic Distribution Date, out of the relevant Trust Assets, a return equal to 1.5 per cent. per
annum above the London inter-bank offered rate for U.S. dollar deposits for the principal amount of
Series A Certificates held by such holder for each Profit Accumulation Period. Each holder of a Series
B Certificate will receive on each Periodic Distribution Date, out of the relevant Trust Assets, a return
equal to 2.0 per cent. per annum above the London inter-bank offered rate for U.S. dollar deposits for
the principal amount of Series B Certificates held by such holder for each Profit Accumulation Period.
See "Conditions of the Certificates - Periodic Distributions". Each Certificate will be in the
denomination of U.S.$500,000. Each Series of Certificates will be redeemed only upon the dissolution
of the related Trust. Each Trust will be dissolved on the related Dissolution Date and at no other time.
See "Conditions of the Certificates - Dissolution of Trust".
Application has been made to the Labuan International Financial Exchange Inc ("LFX") for the
listing of the Certificates on LFX. LFX takes no responsibility for the contents of this document,
makes no representations as to its accuracy or completeness and expressly disclaims any liability
whatsoever for any loss howsoever arising from or in reliance upon any part of the contents of this
document. Investors are advised to read and understand the contents of this document before
investing. If in doubt, the investors should consult his or her adviser.
The Certificates have been given an international rating of BBB+is by MARC International Ltd. A
rating is not a recommendation to buy, sell or hold securities and may be subject to revision,
suspension or withdrawal at any time by the assigning rating organisation.
Each Series of Certificates will be represented by a global certificate (each a "Global Certificate")
which will be deposited on or about the Closing Date with the Labuan International Financial
Exchange Inc as custodian and clearing system for the Certificates (the "Depository"). Interests in
each Global Certificate will be exchangeable for definitive Certificates only in certain limited
circumstances. See "Description of Global Certificates".
Prospective investors should be aware of the risks involved in investing in any Certificate. See
"Investment Considerations".
The directors of the SPV and Guthrie have seen and approved this Offering Circular and they
individually and collectively accept full responsibility for the accuracy of the information given herein
and confirm that there are no other facts the omission of which would make any statement herein
misleading.
The SPV accepts responsibility for the information contained in this Offering Circular. To the best of
the knowledge and belief of the SPV (having taken all reasonable care to ensure that such is the case)
the information contained in this Offering Circular is in accordance with the facts and does not omit
anything likely to affect the import of such information.
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Guthrie accepts responsibility for the information relating to itself and the Group contained in this
Offering Circular. To the best of Guthrie's knowledge and belief (having taken all reasonable care to
ensure that such is the case) the information contained in this Offering Circular insofar as it relates to
Guthrie and the Group is in accordance with the facts and does not omit anything likely to affect the
import of such information. Guthrie, having made all reasonable enquiries, confirms that this Offering
Circular contains or incorporates all information on itself and the Group which is material in the
context of the Sukuk, that the information contained or incorporated in this Offering Circular on itself
and the Group is true and accurate in all material respects and is not misleading, that the opinions and
intentions expressed in this Offering Circular on itself and the Group are honestly held and that there
are no other facts the omission on itself and the Group of which would make this Offering Circular or
any of such information or the expression of any such opinions or intentions misleading. Guthrie
accepts responsibility accordingly.
No person has been authorised to give any information or to make any representation other than those
contained in this document in connection with the offering of the Sukuk and, if given or made, such
information or representations must not be relied upon as having been authorised by Guthrie, the SPV,
the Trustee or the Initial Purchasers (as defined under "Plan of Distribution" below). Neither the
delivery of this document nor any sale made hereunder shall, under any circumstances, constitute a
representation or create any implication that there has been no change in the affairs of the Group since
the date hereof. This document does not constitute an offer of, or an invitation by, or on behalf of,
Guthrie, the SPV, the Trustee or the Initial Purchasers to purchase any of the Sukuk. This document
does not constitute an offer, and may not be used for the purpose of an offer to, or a solicitation by,
anyone in any jurisdiction or in any circumstances in which such an offer or solicitation is not
authorised or is unlawful.
Guthrie shares are listed and traded on the Kuala Lumpur Stock Exchange (the "KLSE") and
accordingly Guthrie is subject to the listing requirements of the KLSE which include the
publication of audited accounts and the filing with the KLSE of certain notices and reports
(including Guthrie's circulars to it shareholders), each of which is a public document. All
filings, reports, circulars and notices from Guthrie to the KLSE and/or its shareholders issued
or published on or prior to the date of this Offering Circular shall be deemed to be incorporated
in, and to form part of, this Offering Circular.
This Offering Circular is not intended to provide the basis of any credit or other evaluation and
should not be considered as a recommendation by Guthrie, the SPV, the Trustee or the Initial
Purchasers that any recipient of this Offering Circular should purchase any of the Sukuk.
The Initial Purchasers have entered into a purchase agreement with Guthrie, the SPV and the Trustee
pursuant to which they have severally agreed, subject to the satisfaction of certain specified
conditions, to purchase the aggregate principal amount of Sukuk to be issued as described in this
Offering Circular. See "Plan of Distribution".
Guthrie's financial statements have been prepared in accordance with generally accepted accounting
principles in effect from time to time in Malaysia as approved by the Malaysian Accounting Standards
Board under the Financial Reporting Act 1997 ("Malaysian GAAP"), which differ in certain
significant respects from United States generally accepted accounting principles, and are subject to
Malaysian auditing standards, and are thus not comparable to the financial statements of a United
States company.
All references in this document to "U.S. dollars" and "U.S.$" refer to the lawful currency of the
United States of America, to "Rupiah" and "Rp" refer to the lawful currency of Indonesia and to
"Malaysian Ringgit", "Ringgit" and "RM" refer to the lawful currency of Malaysia. For
convenience (i) certain amounts in Ringgit have been translated into U.S. dollars based on the
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prevailing exchange rate of RM3.80 = U.S.$1.00 at which the U.S. dollar, as of the date of this
Offering Circular, is pegged against the Ringgit and (ii) certain amounts in Rupiah have been
translated into (a) U.S. dollars based on the prevailing exchange rate of Rp10,135 = U.S.$1.00 and (b)
Ringgit based on the prevailing exchange rate of Rp2,671= RM1.00, each the buying exchange rate on
transactions published by Bank Indonesia on 21st December, 2001.
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements in this Offering Circular constitute "forward-looking statements". Such forwardlooking statements involve known and unknown risks, uncertainties and other factors that may cause
the actual results, performance and financial conditions of Guthrie and the Group, or industry results,
to be materially different from any future results, performance or financial condition express or
implied by such forward-looking statements. Such factors include, among other things, the economic
and political conditions in Malaysia and the rest of Southeast Asia, changes in interest rates or
exchange rates, various business and regulatory factors affecting the oil palm business in Malaysia
and the rest of Southeast Asia, the lack of an established market for the Sukuk and other factors
referenced in this Offering Circular. See "Investment Considerations".
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_______________________________________________
TABLE OF CONTENTS
Page
Summary of the Offering
Investment Considerations
Conditions of the Certificates
Description of the Global Certificates
Use of Proceeds
Ratings
Plan of Distribution
The Trusts
The Trustee
The Leases (Ijarah)
Description of the SPV
Description of the Group
Capitalisation of the Group
Summary of Financial Information of the Group
Overview of the Palm Oil Industry
Listing, Clearance and Settlement
Transfer Restrictions
Tax Considerations
General Information
Legal Matters
Independent Accountants
Appendix A - Index of Defined Terms
Appendix B - Accountant's Report
Appendix C - Audited Financial Statements for the years 1999 and 2000
______________________________________________
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19
26
42
44
45
46
47
49
50
52
54
65
66
73
84
86
87
89
91
91
A-1
B-1
C-1
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SUMMARY OF THE OFFERING
The following summary does not purport to be complete and is qualified in its entirety by reference to
the detailed information appearing elsewhere in this Offering Circular and related documents
referred to herein. Certain capitalised terms used in this Offering Circular are defined in the Index of
Defined Terms included as Appendix A hereto.
Parties
SPV
:
First Global Sukuk Inc., a bankruptcy remote, special
purpose company incorporated in Labuan under the
Offshore Companies Act, 1990. The SPV has been
incorporated solely for the purpose of participating in the
transactions contemplated in the Transaction Documents.
SPV Ownership/Administration of
the SPV
:
The issued share capital of the SPV is U.S.$2.00 divided
into two ordinary shares of par value U.S.$1.00 each.
Pursuant to the SPV Administration Agreement, the SPV's
ordinary shares are owned by BIMB International Islamic
Trust (Labuan) Sdn Bhd as SPV Administrator, which also
provides certain administrative services on behalf of the
SPV.
Sellers
:
Kumpulan Jerai Sdn Bhd (the "Series A Seller"), Kumpulan
Linggi Sdn Bhd and Kumpulan Kamuning Sdn Bhd
(together, the "Series B Sellers"), each a subsidiary of
Kumpulan Guthrie Berhad. The Series A Seller will declare
itself a bare trustee, for the benefit of the SPV, over all its
rights, title and interests in the Series A Land Parcels
pursuant to the Series A Purchase Agreement and each of
the Series B Sellers will declare itself a bare trustee, for the
benefit of the SPV, over all its rights, title and interests in
the Series B Land Parcels pursuant to the Series B Purchase
Agreements and will convey to the SPV the beneficial
interest in such Land Parcels pursuant to the relevant
Purchase Agreement.
Guthrie
:
Kumpulan Guthrie Berhad has its origins in a firm
established in 1821 and was converted to a public company
under the Companies Act, 1965 on 2nd September, 1987.
Guthrie's shares have been listed and traded on the KLSE
since 25th August, 1989. Guthrie will lease from the SPV (i)
the Series A Land Parcels on the terms set out in the Series
A Lease Agreement for a period of three years commencing
on the Closing Date and terminating, with the acquisition of
the Series A Land Parcels from the SPV, on the Series A
Scheduled Dissolution Date, and (ii) the Series B Land
Parcels on the terms set out in the Series B Lease
Agreement for a period of five years commencing on the
Closing Date and terminating, with the acquisition of the
Series B Land Parcels from the SPV, on the Series B
Scheduled Dissolution Date, and will operate and maintain
the Land Parcels in the ordinary course of its business.
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Initial Purchasers
:
Bank Islam (L) Ltd, Maybank International (L) Ltd, Shamil
Bank of Bahrain E.C., Bumiputra Commerce Bank (L) Ltd,
AMMB International (L) Ltd, ABN AMRO Bank N.V.,
Labuan Branch, Bank Muamalat Malaysia Berhad, Labuan
Offshore Branch, and RHB Bank (L) Limited as initial
purchasers under the Certificate Purchase Agreement,
pursuant to which they have each agreed to purchase the
aggregate principal amount of the Sukuk.
Trustee
:
Bank Islam (L) Ltd, a company incorporated in Labuan
under the Offshore Companies Act, 1990 and licensed under
the Offshore Banking Act, 1990, in its capacity as trustee on
behalf of the Sukukholders in respect of the Trusts in
accordance with the Trust Agreements. Pursuant to the
Series A Trust Agreement, the Trustee holds the Series A
Trust Assets on behalf of the Series A Sukukholders.
Pursuant to the Series B Trust Agreement, the Trustee holds
the Series B Trust Assets on behalf of the Series B
Sukukholders.
Transaction Administrator
:
ABN AMRO Bank N.V., Labuan Branch, as transaction
administrator under the Transaction Administration
Agreement. Among other things, the Transaction
Administrator operates the Transaction Accounts and the
Reserve Accounts, receives payments from Guthrie under
the Lease Agreements and makes payments on the Sukuk.
Listing Sponsor
:
Bank Islam (L) Ltd, in its capacity as listing sponsor in
respect of the Sukuk, has applied for the Sukuk to be listed
on LFX.
Sukuk
:
U.S.$50,000,000 Trust Certificates due 2004, Series A and
U.S.$100,000,000 Trust Certificates due 2006, Series B.
Additional Sukuk
:
Guthrie and its subsidiaries may hereafter desire to sell
other land parcels to the SPV which the SPV will lease to
Guthrie pursuant to lease agreements on terms similar to the
Lease Agreements. In connection therewith the SPV may
establish additional trusts similar to the Trusts which may
issue additional trust certificates, the proceeds of which will
be used to acquire the SPV's rights, titles and interests in
such further land parcels and lease agreements.
Distributions on such further trust certificates will be
derived from Guthrie's payments under such lease
agreements, on terms similar to the Conditions. It is
currently anticipated that the aggregate principal amount of
such further trust certificates will not exceed
U.S.$245,000,000.
Closing Date
:
24th December, 2001, or such other date on which the
Sukuk will be issued.
Summary of Certificates
9
Issue Price
:
100 per cent of the aggregate principal amount of the Sukuk.
Rate of Return on Trust Assets
:
Each holder of a Series A Suk'kun will receive on each
Periodic Distribution Date, out of the Series A Trust Assets,
a return equal to 1.5 per cent. per annum above LIBOR for
the principal amount of Series A Sukuk held by such holder
for each Profit Accumulation Period.
Each holder of a Series B Suk'kun will receive on each
Periodic Distribution Date, out of the Series B Trust Assets,
a return equal to 2.0 per cent. per annum above LIBOR for
the principal amount of Series B Sukuk held by such holder
for each Profit Accumulation Period. See "Conditions of the
Certificates - Periodic Distributions".
Scheduled Dissolution of the Trust
:
Under each Lease Agreement, the SPV will have the option
(the "Put Option"), which it will assign to the Trustee for
the benefit of the holders of the related Series of Sukuk
pursuant to the related Trust Agreement, to require Guthrie
to purchase the beneficial interest in the related Land
Parcels at a price equal to the principal amount of such
Series of Sukuk plus the aggregate Periodic Distribution
Amount payable on the Sukuk on the date of such
redemption (the "Dissolution Distribution Amount"):
(a) on the Periodic Distribution Date immediately
following the occurrence of a Dissolution Event; and
(b) on the Scheduled Dissolution Date in respect of such
Series of Certificates; and
Under each Lease Agreement, Guthrie will have the option
(the "Call Option") to require the SPV or, after the
assignment to the Trustee of the SPV's interests in such
Lease Agreement pursuant to the relevant Trust Agreement,
the Trustee to sell the beneficial interest in the relevant
Land Parcels to it on the related Scheduled Dissolution Date
at the related Dissolution Distribution Amount.
In respect of a Scheduled Dissolution of a Trust, on each
Partial Deposit Date, Guthrie will deposit in the relevant
Transaction Account an amount equal to 20 per cent. of the
related Dissolution Distribution Amount. Such monies may
not be withdrawn or transferred until the exercise of the Put
Option or the Call Option. In respect of an Unscheduled
Dissolution of a Trust, Guthrie will deposit the aggregate
Dissolution Distribution Amount into the relevant
Transaction Account prior to the Unscheduled Dissolution
Date in accordance with the instructions of the Trustee
issued in connection with its exercise of the Put Option.
Upon the exercise of either the Put Option or the Call
Option in respect of a Lease Agreement, the Trustee will
use the Dissolution Distribution Amount standing to the
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credit of the relevant Transaction Account to redeem the
relevant Series of Sukuk.
Unless previously dissolved pursuant to the occurrence of a
Dissolution Event, (a) the Series A Trust will be dissolved
on the Periodic Distribution Date falling in December, 2004
(the "Series A Scheduled Dissolution Date") and the
related Dissolution Distribution Amount will be used by the
Trustee to redeem the Series A Sukuk on the Series A
Scheduled Dissolution Date, and (b) the Series B Trust will
be dissolved on the Periodic Distribution Date falling in
December, 2006 (the "Series B Scheduled Dissolution
Date") and the related Dissolution Distribution Amount will
be used by the Trustee to redeem the Series B Sukuk on the
Series B Scheduled Dissolution Date.
Early Dissolution of the Trusts
:
The Trusts will not be subject to dissolution, and the Sukuk
will not be redeemed, prior to their respective Dissolution
Dates.
Form and Denomination
:
The Sukuk (or Certificates) will be issued in bearer form,
serially numbered and in denominations of U.S.$500,000
each. Title to the Certificates will pass by delivery.
Each Series of Certificates will be represented by a Global
Certificate which will be deposited on the Closing Date with
the Depository. Interests in the Global Certificate will be
exchangeable for Definitive Certificates only in certain
limited circumstances. See "Description of Global
Certificates".
Status
:
Each Series A Suk'kun represents an undivided 1.0%
ownership interest in the Series A Trust Assets and will
rank pari passu, without any preference, with the other
Series A Sukuk. Each Series B Suk'kun represents an
undivided 0.5% ownership interest in the Series B Trust
Assets and will rank pari passu, without any preference,
with the other Series B Sukuk.
Trusts
:
Pursuant to each Trust Agreement, the SPV will:
(a) convey to the Trustee its beneficial interest in the
relevant Land Parcels; and
(b) assign to the Trustee all its rights, title, interest
benefit, present and future, in, to and under
relevant Purchase Agreement, Lease Agreement
Service Agency Agreement and all proceeds of
foregoing.
and
the
and
the
Such interests, together with the relevant Reserve Account
and Transaction Account and the monies deposited therein
comprise the "Trust Assets".
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Transaction Accounts
:
The Transaction Administrator will maintain and operate
the Series A Transaction Account and the Series B
Transaction Account on behalf of the Series A Trust and the
Series B Trust respectively. Distributions from the relevant
Trust Assets to holders of the related Series of Sukuk will
be made out of funds standing to the credit of the related
Transaction Account.
Reserve Accounts
:
The Transaction Administrator will maintain and operate
the Series A Reserve Account and the Series B Reserve
Account on behalf of the Series A Trust and the Series B
Trust respectively. Guthrie shall ensure that there shall at all
times be standing to the credit of each Reserve Account an
amount equal to the return, in accordance with the
Conditions, expected to be distributed on the related Series
of Sukuk on the next Periodic Distribution Date. The
monies deposited in each Reserve Account may be used to
meet any distributions on the related Series of Sukuk to the
extent that there is an insufficient amount standing to the
credit of the related Transaction Account to make when due
any distribution on the Sukuk. Any such amount withdrawn
from any Reserve Account shall be replenished by Guthrie
at least one month prior to the next Periodic Distribution
Date.
Periodic Distributions
:
The Series A Lease Payments and the Series B Lease
Payments will be made by Guthrie on each Periodic
Distribution Date. An amount equal to each such Lease
Payment will be paid, on the date falling one month prior to
each Periodic Distribution Date, directly to the related
Transaction Account. The deposit of such monies will not
constitute a Lease Payment, and may not be withdrawn or
transferred by the Transaction Administrator or the Trustee,
until the relevant Periodic Distribution Date upon which the
Transaction Administrator will withdraw such monies on
deposit in the relevant Transaction Account and use such
amount to make payments on, among other things, the
related Sukuk in the order of priority set out below.
If such funds are insufficient to make the full amount of the
payment due to be distributed to Sukuk holders in
accordance with the Conditions on the relevant Series of
Sukuk, the Transaction Administrator may withdraw from
the related Reserve Account an amount equal to such
shortfall.
Priority of Distributions for each :
Trust
Pursuant to each Trust Agreement, the Trustee holds the
relevant Trust Assets for and on behalf of the holders of the
related Series of Sukuk.
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On each Periodic Distribution Date, the Transaction
Administrator shall apply (i) the monies standing to the
credit of the related Transaction Account, (ii) to the extent
that the monies referred to in (i) above are insufficient to
meet the distributions set out in paragraph (a) below, an
amount equal to the shortfall from the related Reserve
Account or (iii) if such Periodic Distribution Date is a
Dissolution Date in respect of the relevant Series of Sukuk,
all monies standing to the credit of the related Reserve
Account, in the following order of priority:
(a) first, in or towards payment pari passu and rateably of
all amounts due and unpaid on such Series of Sukuk in
respect of Periodic Distributions
(b) second, only if such payment is made on the related
Dissolution Date, in or towards payment pari passu
and rateably of all principal due and unpaid in respect
of such Series of Sukuk; and
(c) third, only if such payment is made on the related
Dissolution Date, in payment of the surplus (if any) to
Guthrie.
Investment of Monies in Accounts
:
Pursuant to the Transaction Administration Agreement, the
Transaction Administrator may invest the monies from time
to time standing to the credit of the Reserve Accounts and
the Transaction Accounts in U.S. dollar denominated
Islamic time deposits of depository institutions licensed to
carry on business in Labuan which become due not later
than one Business Day before the next Periodic Distribution
Date or can be withdrawn at any time without penalty (the
"Eligible Investments").
Limited Recourse
:
Each Suk'kun represents solely an undivided ownership
interest in the relevant Trust Assets. Holders of Series A
Sukuk will have no recourse to the Series B Trust Assets.
Likewise, holders of Series B Sukuk will have no recourse
to the Series A Trust Assets. Creditors of the SPV and the
Trustee (in any capacity other than as trustee in respect of
the Sukuk), including, in particular, holders of certificates
relating to other trusts, will have no recourse to the Trust
Assets. Proceeds of the Trust Assets are the sole source of
payments on the Sukuk. The Sukuk do not represent an
interest in or obligation of any of the SPV, the Trustee,
Guthrie or any of their affiliates.
Accordingly,
Sukukholders will have no recourse to any assets of the
SPV, the Trustee (including, in particular other assets
comprised in other trusts), Guthrie (to the extent it fulfils all
of its obligations under the related Lease Agreements) or
any of their affiliates in respect of any shortfall in the
expected amounts from the Trust Assets.
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Negative Pledge
:
So long as any of the Sukuk remains outstanding, the SPV
has undertaken that it will not create or have outstanding
any Security Interest upon, or with respect to, any of its
present or future business, undertaking, assets or revenues
(including any uncalled capital).
Guthrie's Covenants
:
Under the terms of each Lease Agreement, Guthrie will
agree, among other things:
(a) to maintain a Gearing Ratio of not more than 1.5;
(b) to maintain a Debt Service Coverage Ratio of not less
than 1.5; and
(c) not to declare or pay any dividend on its shares for so
long as:
(i)
the Debt Service Coverage Ratio is less than 1.5;
or
(ii) the amount deposited in any Reserve Account is,
either before or after such declaration or payment
of dividend, less than the amount required to be
deposited in such Reserve Account pursuant to
Condition 3(1),
provided that Guthrie shall, notwithstanding the above,
be allowed to declare and pay an annual gross dividend
of 5.0 per cent. (or such other percentage stipulated, as
amended from time to time, under the (Malaysian)
Trustee Act, 1949) of its paid-up capital at the time of
such declaration on each of its shares for so long as the
payment of such dividend constitutes one of the
criteria that must exist, under Section 4(2)(b) of the
(Malaysian) Trustee Act 1949, before a trust fund may
invest in the shares of any particular company. For
projections on the Debt Service Coverage Ratio of the
Group, see "Summary of Financial Information of the
Group - Selected Financial Information of the Group Projections".
Dissolution Events
:
Each of the following events, among others, constitutes a
Dissolution Event (each as more fully described in
Condition 10) in respect of each Trust:
(a) if default is made on any Lease Payments forming part
of the Trust Assets of such Trust and the default
continues for a period of 14 days; or
(b) if default is made in the payment of any amounts due
in respect of any Suk'kun of the Series related to such
Trust and such default continues for 14 days;
14
(c) if the Put Option or the Call Option is exercised in
respect of the Land Parcels forming part of the Trust
Assets of such Trust and Guthrie fails to deliver the
Dissolution Distribution Amount and complete its
purchase of such Land Parcels in accordance with the
related Lease Agreement;
(d) if Guthrie is subject to winding-up proceedings;
(e) if it is or will become unlawful for the Trustee to
perform or comply with any of its obligations under or
in respect of such Series of Sukuk or the related Trust
Agreement or any of such obligations shall be or
become unenforceable or invalid; or
(f) if the lease constituted by the related Lease Agreement
is terminated prior to the Scheduled Dissolution Date
in respect of such Series of Sukuk;
(g) if any event occurs which under the laws of the
relevant jurisdiction has or may have, in the Trustee's
opinion, an analogous effect to any of the events
referred to in paragraphs (d) and (e) above.
In the case of any event described above, the Trustee will
give notice of the occurrence of such Dissolution Event to
the holders of Series of Sukuk relating to such Trust with a
request to such holders to indicate if they wish such Trust to
be dissolved. If so requested in writing by the holders of at
least three-quarters in principal amount of such Series of
Sukuk then outstanding or if so directed by an Extraordinary
Resolution of the holders of such Series of Sukuk, the
Trustee shall (subject in each case to being indemnified to
its satisfaction), give notice to all the holders of such Series
of Sukuk that such Trust is to be dissolved and such Series
of Sukuk are, and they shall accordingly forthwith become,
due and repayable at their Dissolution Distribution Amount
on the Periodic Distribution Date following the date of such
notice (the "Unscheduled Dissolution Date").
Enforcement
:
Following the distribution of the Trust Assets in respect of a
Series of Sukuk to the related Sukukholders in accordance
with the Conditions and the relevant Trust Agreement, the
Trustee shall not be liable for any further sums or assets,
and accordingly such Sukukholders may not take any action
against the Trustee or any other person to recover any such
sum or asset in respect of such Sukuk or Trust Assets.
The Trustee shall not in any circumstances take any action
to enforce or to realise such Trust Assets or take any action
against Guthrie under the relevant Lease Agreement unless
and to the extent directed to do so by such Sukukholders
and then only to the extent indemnified to its satisfaction.
15
No Sukukholders shall be entitled to proceed directly
against Guthrie or enforce such Trust Assets unless (i) the
Trustee, having become bound so to proceed, fails to do so
within two months of becoming so bound and such failure is
continuing and (ii) the relevant Sukukholder (or such
Sukukholder together with the other Sukukholders who
propose to proceed directly against Guthrie or enforce such
Trust Assets) holds at least 75 per cent. of the outstanding
principal amount of the relevant Series of Sukuks.
The foregoing is subject to the following. After enforcing
or realising such Trust Assets and distributing the net
proceeds in accordance with Condition 3(2), the obligations
of the Trustee in respect of such Sukuk shall be satisfied and
no holder of such Sukuk may take any further steps against
the Trustee to recover any further sums in respect of such
Sukuk and the right to receive any such sums unpaid shall
be extinguished. In particular, no holder of such Sukuk shall
be entitled in respect thereof to petition or to take any other
steps for the winding-up of the SPV or the Trustee nor shall
any of them have any claim in respect of the trust assets of
any other trusts (including the Trust in respect of the other
Series of Sukuk) established by the Trustee.
Taxation
:
All distributions in respect of the Sukuk by or on behalf of
the Trust shall be made without withholding or deduction
for, or on account of, any present or future Taxes imposed
or levied by or on behalf of Labuan, unless the withholding
or deduction of the Taxes is required by law. In that event,
no additional amounts will be distributed to the
Sukukholders and distributions in respect of the Sukuk will
be made after withholding or deduction for, or on account
of, such Taxes. See "Conditions of Certificates - Taxation".
Use of Proceeds
:
The net proceeds of the issue of the Sukuk (after deducting
issuance expenses and the initial deposits required to be
made to the Series A Reserve Account and the Series B
Reserve Account) will be applied by the Trustee to acquire
from the SPV the relevant Trust Assets. Such proceeds will
be used by the SPV to purchase the beneficial interests in
the Land Parcels from the Sellers pursuant to the Purchase
Agreements. The Sellers will lend such proceeds to Guthrie
to be used to refinance a portion of the financing facilities
totalling RM1.5 billion entered into by Guthrie and its
subsidiaries to fund its Indonesian acquisition and
operations.
Listing
:
Application has been made to LFX to list the Sukuk on
LFX.
Rating
:
The Sukuk have been given an international rating of
BBB+is by MARC International Ltd. The letters "is" denote
Islamic Sukuk, asset-based instruments.
16
Offers of Sukuk
:
The Sukuk will be offered by way of private placement and
will be initially purchased by the Initial Purchasers pursuant
to the Certificate Purchase Agreement. See "Plan of
Distribution".
Transfer Restrictions
:
For a description of certain restrictions on offers, sales and
deliveries of the Sukuk and the distribution of offering
material relating to the Sukuk, see "Transfer Restrictions".
Governing Law
:
Each of the Trust Agreements, the Certificate Purchase
Agreement, the Transaction Administration Agreement and
the Sukuk will be governed by, and construed in accordance
with, New York law. The Lease Agreements and the
Purchase Agreements will be governed by Malaysian law.
17
Transaction Diagram
Sukuk
9
6
Semi-annual
distributions
derived from
Lease
Payments
Sukuk are issued, each of which
represents an undivided ownership
interest in the Trust Assets
5
Trustee
7
8
Proceeds of
Sukuk issue
paid directly to
Acquisition
Facility
Financiers to
fund
Acquisition
Facility Call
Option
SPV
Convey to Trustee for the benefit of
Sukukholders (i) beneficial interest in
Land Parcels and (ii) all rights under
Lease Agreements
Semiannual
Lease
Payments
4
Lease beneficial interest in
Land Parcels to Guthrie
Guthrie
1
3
Transfer
beneficial
interest in
the Land
Parcels to
the SPV
Seller
Transfer beneficial interest in Land
Parcels back to the Seller
Acquire
beneficial
interest in
Land Parcels
via
Acquisition
Facility Call
Option
2
Acquisition
Facility
Financiers
The above diagram sets out the principal terms for the issue of each Series of Sukuk. The Trust related
to each Series of Sukuk will only be dissolved on the relevant Dissolution Date. Upon such
dissolution, the beneficial interest in the relevant Land Parcels will be sold to Guthrie and the
purchase price paid by Guthrie will be used to redeem the relevant Series of Sukuk and the relevant
Trust will thereafter be dissolved.
18
Funds Flow Diagram
Transaction
Administrator
Sukukholders
d
Trustee
Trustee
owns the
designated
accounts
Transaction
Account
Sukuk
Proceeds
Account
Reserve
Account
a
b
c
Guthrie
a.
Lease Payments shall be deposited into the Transaction Account one month before each
Periodic Distribution Date. Principal payment for purchase of the Land Parcels under the
Lease Agreements shall be deposited into the Transaction Account in five equal instalments
on each of the Partial Deposit Dates.
b.
At any one time the amount equal to the following Lease Payment shall be deposited in the
Reserve Account. Guthrie shall top up if the amount in the Reserve Account falls below the
amount equal to the following Lease Payment.
c.
The net proceeds from the Sukuk issue (after deduction of expenses of the issue and the
amounts to be deposited into the Reserve Account) shall be deposited into the Sukuk Proceeds
Account and transferred thereafter to the Acquisition Facility Financiers.
d.
Transaction Administrator manages the payment, remittance and distribution of all payments
on the Sukuk.
19
INVESTMENT CONSIDERATIONS
The purchase of the Sukuk may involve substantial risks and is suitable only for sophisticated
investors who have the knowledge and experience in financial and business matters necessary to
enable them to evaluate the risks and the merits of an investment in the Sukuk. The following is a
summary of certain aspects of the issue about which prospective holders of the Sukuk should be
aware, but it is not intended to be exhaustive. Prospective purchasers of Sukuk should consider
carefully, in the light of their own financial circumstances and investment objectives, all the
information set forth in this Offering Circular before making an investment decision.
Considerations relating to Guthrie and its Business
Credit Risk
Proceeds of the Trust Assets are the sole source of payments on the Sukuk and such proceeds are
derived ultimately from Lease Payments made by Guthrie under the Lease Agreements. Accordingly,
payment due on the Sukuk will be directly related to Guthrie's creditworthiness and financial
condition. A prospective purchaser of Sukuk should have such knowledge and experience in financial
and business matters and expertise in assessing such credit risk that it is capable of evaluating the
merits, risks and suitability of investing in the Sukuk including the credit risk associated with Guthrie
and the Trust Assets. In particular, each prospective purchaser of Sukuk should note the investment
considerations set out below in respect of Guthrie and the Group.
Financial and Economic Factors Affecting Malaysia and Indonesia
Malaysia remains one of Guthrie's more important markets, with 15% of Malaysia's production
consumed domestically and remaining 85% exported in the form of refined palm oil products. No
assurances can be made as to future growth rates of Malaysia or the palm oil export markets as this
may be affected by (among others): (i) adverse developments in the economies of countries to which
Malaysia exports; (ii) changes in inflation and interest rates; (iii) taxation; (iv) the Malaysian
Government's budget deficit/surplus and (v) political and social developments affecting Malaysia.
The Federation of Malaysia currently maintains long-term investment grade foreign currency ratings
of Baa2 and BBB with a Stable outlook by both S&P and Moody's respectively.
In November 2000, Guthrie decided to venture into Indonesia through the Share Acquisition. The
long-term business and growth prospects in Indonesia will be dependent on the political stability and
economic policies of the country. At the present time there is uncertainty as to the political and
economic stability of Indonesia. S&P and Moody's current long-term foreign currency rating for
Indonesia are CCC+ and Caa1with a Stable outlook.
Issues relating to the Indonesian Acquisition
On 27th November, 2000, Guthrie entered into two sale and purchase agreements (each an
"Acquisition SPA") with PT Holdiko Perkasa and PT Gemahripah Pertiwi (together, the "Share
Vendors") and the Indonesian Bank Restructuring Agency ("IBRA"). Pursuant to one of the
Acquisition SPAs (the "Group A Acquisition SPA"), Guthrie acquired from the Share Vendors
shares in PT Salim Sawitindo and PT Bhaskaramulti Permata, each an Indonesian holding company
which provided Guthrie with indirect interests in a group of Indonesian companies ("Group A
Companies") involved in the palm oil industry. Under the second Acquisition SPA (the "Group B
Acquisition SPA"), Guthrie acquired from the Share Vendors shares in PT Anugerah Sumbermakmur
and PT Minamas Gemilang (together with PT Salim Sawitindo and PT Bhaskaramulti Permata, the
"Acquiree Companies"), each an Indonesian holding company, which provided Guthrie with indirect
interests in other Indonesian companies ("Group B Companies") involved in the palm oil industry.
20
On 12th December, 2000, the Acquisition SPAs were amended, modified and varied by two
designation agreements among the Share Vendors, Guthrie and IBRA designating Guthrie
International Investments (L) Limited and Laverton Holdings (Mauritius) Limited, newly incorporated
wholly-owned subsidiaries of Guthrie (together, the "Share Purchasers") as purchasers of the shares
in the Acquiree Companies (the "Acquired Shares") in place of Guthrie. The acquisition by Guthrie
of the Acquired Shares is referred to as the "Share Acquisition".
The aggregate purchase price for the Acquired Shares was U.S.$368 million (equivalent to
approximately RM1.398 billion) (the "Acquisition Purchase Price"). The Acquisition Purchase Price
was paid by Guthrie in cash and financed by bank financing in the form of a RM1.5 billion Islamic
Al-Ijarah Al-Muntahiyah Bit-Tamlik syndicated financial facility (the "Acquisition Facility").
Guthrie had arranged for the disbursement of funds for the settlement of the Acquisition Purchase
Price in view of the fulfillment of all conditions precedent set out in the Acquisition SPAs. Hence,
with the receipt in full of the funds by the Share Vendors on 15th March, 2001, the acquisition of
interests in the Group A Companies and Group B Companies were regarded as completed.
The terms of the Acquisition SPAs include certain representations from the Share Vendors. In respect
of certain of these representations ("Acquisition Recission Representations"), the Share Purchasers'
have been advised by their Indonesian counsel that their remedy for any breach thereof consists of a
recission of the Share Acquisition. If the Share Purchasers are successful in seeking to exercise their
rights of recission, they will be entitled to transfer all of the Acquired Shares back to the Share
Vendors and obtain a refund of the Acquisition Purchase Price (without interest or other costs). The
Share Purchasers have been further advised that such right of recission expires on the earlier of 1st
February, 2004 and any date on which IBRA ceases to exist. If the Share Purchasers decide to
exercise the rights of recission referred to above, there can be no assurance that the Share Vendors
will return to the Share Purchasers the total Acquisition Purchase Price.
One of the Acquisition Recission Representations is the representation that the shares in and the assets
of the Acquiree Companies and the Group B Companies are free from, inter alia, any third party
claim, property interest or other interest or right of ownership. After the completion of the Share
Acquisition, Guthrie conducted a post-closing due diligence exercise. In relation to the transfer of
certain shares in the Acquiree Companies and the Group B Companies:
(i)
there was no evidence of spousal consents having been obtained in respect of such transfers as
required under Indonesian Marital Law (Law No. 1/1974), which stipulates that all assets
owned or acquired by married couples during their marriage are deemed to be joint assets
(harta bersama) and that husband and wife should act jointly in relation to such joint assets,
unless a pre-nuptial agreement is entered into prior to a marriage which provides for a
separation of their assets owned or acquired during such marriage; and
(ii)
certain sale and purchase documents relating to such transfers had stipulated as a condition
precedent to the effectiveness of such transfers that the consent of certain named banks be
obtained and there has been no evidence that such bank consent has been obtained.
Guthrie has written to the Share Vendors and IBRA to seek their assistance in obtaining the spousal
consents or pre-nuptial agreements (if any). Guthrie has also asked the Share Vendors and IBRA, in
relation to those transfers in which the consent of a bank was made a condition precedent to the
effectiveness of such transfers, to obtain such consent for verification by Guthrie.
In respect of certain other representations ("Acquisition Escrow Representations"), U.S.$18 million
was deposited by the Share Vendors into an escrow account (the "Acquisition Escrow Account")
maintained with ABN AMRO Bank N.V., Jakarta Branch. A breach of any of such Acquisition
Escrow Representations would entitle the Share Purchasers to be paid damages from the monies in the
21
Acquisition Escrow Account. In the post-completion due diligence exercise conducted by Guthrie, it
was discovered that the Share Vendors may be in breach of certain of such Acquisition Escrow
Representations.
A first escrow claim for approximately U.S.$11,000,000 has been submitted to the Share Vendors.
The Share Vendors have accepted part of the amount claimed and have disputed the remainder,
amounting to approximately U.S.$9,000,000. The Share Purchasers are in the process of resolving
with the Share Vendors the disputed claims and the exchange rate at which such claims should be
calculated.
A second potential claim against the Acquisition Escrow Account relates to certain employee benefits
issues. The employees' manual of the Group B Companies includes a provision to the effect that if any
employees of the Group B Companies were to resign within a period of two years from a change in
ownership or change of status of the Group B Companies, such employees would be entitled to
compensation payment as provided under Presidential Decree 150, commonly referred to as "Kep
Men 150". Such amount may be claimed from the Acquisition Escrow Account.
In order to claim any amounts in the Acquisition Escrow Account, the Share Purchasers must submit
all escrow claims by the date (the "Acquisition Escrow Termination Date") which is the later of (i)
12th September, 2001 and (ii) the date 60 days after the date of receipt by the Share Purchasers of the
last of the "Final Tax Clearance" letters or "Surat Ketetapan Pajak" which are to be issued upon
completion of the tax audit by the Indonesian tax authorities on PT Anugerah Sumbermakmur, PT
Minamas Gemilang and the Group B Companies. To date only a few Final Tax Clearance letters
have been issued. Any balance on deposit in the Acquisition Escrow Account will be released to the
Share Vendors on the later of the Acquisition Escrow Termination Date and the first date as of which
there is no pending claim against the Acquisition Escrow Account.
Guthrie's post-completion due diligence exercise is ongoing and, as a result, further issues relating to
the Share Vendors' representations and warranties in the Acquisition SPAs may be discovered.
Relationship with the Government of Malaysia
The substantial shareholders of Guthrie as at 31st October, 2001 were as follows:
Shareholders
Permodalan Nasional Berhad ("PNB")#
Sekim Amanah Saham Bumiputera ("ASB")
Employees Provident Fund Board
+
*
#
Stake (%)
41.83+
27.20*
6.74
13.50% of the shares are held by Mayban Nominees (Tempatan) Sdn. Bhd. as nominee for PNB
The shares are held by Amanah Raya Nominees (Tempatan) Sdn Berhad as nominee for ASB
Together with the shares held by the various units trusts (including ASB) managed by PNB, PNB holds 72.04% of the shares in Guthrie
PNB is wholly-owned by the Malaysian government. The Minister of Finance, Incorporated holds
one share in PNB and the remainder of the shares are held by Yayasan Pelaburan Bumiputra
(Bumiputra Investment Foundation). Yayasan Pelaburan Bumiputra ("YPB") is a company
incorporated in Malaysia and limited by guarantee. The Board of Trustees of YPB comprises Hon.
Datuk Seri Dr. Mahathir Mohamad, the Prime Minister of Malaysia, Hon. Datuk Seri Abdullah
Ahmad Badawi, the Deputy Prime Minister of Malaysia, Hon. Datuk Paduka Rafidah Aziz, the
Minister of International Trade and Industry, Hon. Tan Sri Dato' Seri Ahmad Sarji Abdul Hamid, the
Chairman of PNB and Hon. Tan Sri Geh Ik Cheong.
The principal activities of the PNB group of companies consist of investment holding, management of
property, property trusts and unit trusts, providing management services, acting as investment agent
and portfolio manager and providing equity financing to companies. PNB is principally involved in
22
the acquisition and holding of shares to promote greater ownership of share capital in the corporate
sector in Malaysia by the Bumiputera (indigenous people).
By virtue of PNB's shareholding in Guthrie (including PNB's indirect interest through the unit trusts
managed by it), out of Guthrie's 10 directors and two alternate directors, five of Guthrie's directors
(including the Chairman) and one of Guthrie's alternate directors are nominees of PNB.
Foreign Exchange Exposure and Exchange Controls
Changes in exchange rates influence Guthrie's results of operations. Guthrie's crude palm oil sales are
based on the traded crude palm oil price, which is quoted in U.S. dollars. As of the date hereof, the
U.S. dollar is pegged against the Ringgit at a rate of RM3.80 to U.S.$1.00. This acts as a natural
hedge for Guthrie's U.S. dollar indebtedness. Due to this peg, any rise in the crude palm oil price in
U.S. dollars will be earnings positive to Guthrie as this will be similarly be reflected in a matching rise
in Guthrie's operating income. There can be no assurance that the Ringgit peg will continue nor, if it
is removed, that the impact thereof will not have a negative effect on Guthrie and its financial
conditions and prospects.
Malaysia has in place limited currency controls for the purposes of economic stability. These apply
primarily in respect of short-term equity investments. In respect of external borrowing, Malaysian
residents are required to obtain the permission of the Malaysian Controller of Foreign Exchange (the
"FX Controller") before they can obtain credit facilities, including financial guarantees from nonresidents, in foreign currency equivalent to more than RM10.0 million in aggregate. Permission has
generally been given for all foreign loans raised on reasonable terms to finance productive activity in
Malaysia and for foreign exchange income generating investments overseas.
Guthrie has obtained the permission of the FX Controller for the remittance of the RM1.5 billion
raised earlier for the payment of the Acquired Shares. The FX Controller has asked that Guthrie refinance this sum via a U.S. dollar financing. It is anticipated therefore, that the FX Controller will
provide the requisite approvals for Guthrie to remit the lease payments under the Lease Agreements to
the Trusts in order for the Trusts in turn to meet its payment obligations incurred under the Sukuk.
Currently, there are no restrictions on the repatriation of profits, capital derived from investments in
Indonesia and on the transfer of funds abroad. There are also no restrictions on foreign exchange
operations, specifically including the purchase and sale of foreign exchange and transfers and all other
types of international settlements. However, there can be no assurance that there will be no
restrictions on the repatriation of profits, capital derived from investments in Indonesia and on the
transfer of funds abroad in the future.
Competition
The demand for crude palm oil is dependent upon the world-wide traded prices for competing oils,
such as soya, rapeseed, sunflower seed and other such substitutes for palm oil . As such, good soya
harvests will normally lower the price and impact demand levels for palm oil. Similarly, palm kernel
oil demand is closely tied to that for coconut oil, as they are close substitutes. The demand for these
lauric oils is driven by non-food uses where they have an environmental advantage over mineral oil.
Aside from world-wide demand, supply and price of oils and fats, there are a number of other factors
affecting the movement of palm oil prices (some of which are interrelated and unpredictable), which
could cause price volatility in the world vegetable oils market. These include: (i) import and export
tariff barriers; (ii) agricultural policies imposed by importing and exporting countries; and (iii)
weather and other agricultural influences.
23
Environmental Issues
Guthrie and its operations are required to comply with various environmental laws relating to water,
air, noise pollution and the disposal of waste materials. Although Guthrie believes that it is in
compliance in all material respects to these environmental laws, some risks of environmental costs
and liabilities is inherent in its operations and there can be no assurance that material costs and
liabilities will not be incurred in the future in this regard. Compliance with environmental laws and
regulations may add extra costs to the development and replanting of oil palm.
Accounting Standards
Guthrie prepares its financial statements using generally accepted accounting principles in Malaysia
issued by the Malaysian Accounting Standards Board which differ in certain respects from
international accounting standards. As a result, Guthrie's financial statements and results of
operations may differ from those of companies in other countries.
Cashflow Projections
The primary source of repayment for the Sukuk is expected to be from Guthrie's operational
cashflows. A summary of Guthrie’s projected cashflow is appended to this Offering Circular as
Appendix B hereto. The cashflow is dependent on various key assumptions and has been prepared to
the best of Guthrie's current market knowledge.
Considerations relating to the Sukuk
Limited Recourse
Each Suk'kun represents solely an undivided ownership interest in the relevant Trust Assets. Holders
of Series A Sukuk will have no recourse to the Series B Trust Assets. Likewise, holders of Series B
Sukuk will have no recourse to the Series A Trust Assets. Creditors of the SPV and the Trustee (in
any capacity other than as trustee in respect of the Sukuk), including, in particular, holders of
certificates relating to other trusts, will have no recourse to the Trust Assets. Proceeds of the Trust
Assets are the sole source of payments on the Sukuk. The Sukuk do not represent an interest in or
obligation of any of the SPV, the Trustee, Guthrie or any of their affiliates. Accordingly,
Sukukholders will have no recourse to any assets of the SPV, the Trustee (including, in particular
other assets comprised in other trusts), Guthrie (to the extent it satisfies all of its obligations under the
related Lease Agreements) or any of their affiliates in respect of any shortfall in the expected amounts
from the Trust Assets.
Interest in the Land Parcels
The issue of the Sukuk and the related transactions involve the transfer of the beneficial interest in the
Land Parcels by the Sellers to the SPV. Such transfer of only the beneficial interest in (and not the
legal title to) the Land Parcels is (i) to facilitate the issue of the Sukuk and (ii) does not and is not
intended to convey ownership in the Land Parcels to the SPV within the meaning of the National Land
Code 1965 of Malaysia. Consequently, the Trustee also would only acquire a beneficial interest in the
Land Parcels. If for any reason the Land Parcels or any part thereof are proposed to be sold by the
Trustee, such sale would be subject to the consent or approval of the relevant land authority. By virtue
of Section 214A of the National Land Code 1965, any sale of the Land Parcels to two or more persons
would require the consent of the Estate Land Board as the Land Parcels fall within the meaning of
estate land as defined in Section 214A. By virtue of Part Thirty-Three (A) of the National Land Code
1965, a foreigner or a foreign company may acquire land only after having obtained the approval of
the relevant State Authority.
24
Limited Liquidity
No secondary market for the Sukuk currently exists and, in the event that a secondary market in the
Sukuk does develop, whether as a result of the Initial Purchasers offering to buy such Sukuk or
otherwise, there can be no assurance that it will continue. Accordingly, the purchase of a Suk'kun is
suitable only for investors who can bear the risks associated with a lack of liquidity in the Sukuk and
the financial and other risks associated with an investment in the Sukuk.
Provision of Information
None of the Trustee, the Initial Purchasers or any of their affiliates makes any representation as to the
credit quality of Guthrie or the Trust Assets. Any of such persons, whether by virtue of the types of
relationships described herein or otherwise, may have acquired, or during the term of any Sukuk may
acquire, non-public information with respect to Guthrie or the Trust Assets. None of such persons is
under any obligation to make such information directly available to any Sukukholder.
Restrictions on Malaysian Residents Acquiring Sukuk
Residents of Malaysia are not permitted to purchase the Certificates without first having had and
obtained all the necessary approvals from all relevant regulatory authorities, including but not limited
to all the necessary approvals from Bank Negara Malaysia. The onus of obtaining such approvals is on
the residents concerned and none of the Trustee, the Initial Purchasers, the SPV or Guthrie accepts
any responsibility for the purchase of any Sukuk by the residents as aforesaid without the necessary
approvals being in place. Malaysian residents are advised to seek independent professional advice as
may be necessary before making any such purchase.
Business Relationships
The Trustee, the Initial Purchasers or any of their affiliates may have existing or future business
relationships with Guthrie or any other member of the Group (including, but not limited to, lending,
depository, risk management, advisory and banking relationships), and will pursue actions and take
steps that they deem or it deems necessary or appropriate to protect their or its interests arising
therefrom without regard to the consequences for such member of the Group or for any Sukukholder
or otherwise (including, without limitation any action which might constitute or give rise to a
Dissolution Event).
Legality of Purchase
None of the Trustee, the Initial Purchasers, Guthrie or any of their affiliates has or assumes
responsibility for the lawfulness of the acquisition of any Sukuk by a prospective purchaser of any
Sukuk, whether under the laws of the jurisdiction of its incorporation or the jurisdiction in which it
operates (if different), or for compliance by that prospective purchaser with any law, regulation or
regulatory policy applicable to it.
Independent Review and Advice
Each prospective purchaser of a Suk'kun must determine, based on its own independent review and
such professional advice as it deems appropriate under the circumstances, that its acquisition of the
Sukuk (i) is fully consistent with its (or if it is acquiring the Sukuk in a fiduciary capacity, the
beneficiary's) financial needs, objectives and condition, (ii) complies and is fully consistent with all
investment policies, guidelines and restrictions applicable to it (whether acquiring the Sukuk as
principal or in a fiduciary capacity) and (iii) is a fit, proper and suitable investment for it (or if it is
25
acquiring the Sukuk in a fiduciary capacity, for the beneficiary), notwithstanding the clear and
substantial risks inherent in investing in or holding the Sukuk.
Withholding Tax
If the Trustee is obliged to deduct or withhold for or on account of Taxes as set out in Condition 8, or
if any tax or duty is deducted or withheld from payments received by the Trustee on the Trust Assets,
the Trustee shall be under no obligation to pay, and the other assets (if any) of the Trustee (including,
in particular, other assets constituting other trust funds) will not be available for payment of, the
resultant shortfall.
Rating
It is a condition of the issuance of the Sukuk that the Sukuk be assigned, on issue, an international
rating of BBB+is by MARC International Ltd for timely payment on the Sukuk. The rating will
address the likelihood of the receipt by Sukukholders of the distributions to which they are entitled
under the Conditions which is a function of Guthrie's ability to make payments under the Lease
Agreements. A rating is not a recommendation to buy, sell or hold securities and may be subject to
revision, suspension or withdrawal at any time. There is no assurance that a rating will remain for any
given period of time or that a rating will not be lowered or withdrawn entirely by the relevant rating
agency if in its judgment circumstances in the future so warrant. The rating of the Sukuk will be
based, inter alia, on the structure of the issue.
26
CONDITIONS OF THE CERTIFICATES
The following is the text of the Conditions of the Certificates which (subject to modification) will be
endorsed on each Certificate in definitive form (if issued):
Each of the U.S.$50,000,000 Trust Certificates due 2004, Series A (the "Series A Certificates")
represents an undivided 1.0 per cent. ownership interest in the assets (the "Series A Trust Assets")
held on trust (the "Series A Trust") for the holders of such Certificates pursuant to a declaration of
trust (the "Series A Trust Agreement") dated the Closing Date made between the SPV (as defined in
Condition 3(1)) and Bank Islam (L) Ltd, as trustee (the "Trustee", which expression shall include its
successor(s)) for the holders of the Series A Certificates (the "Series A Certificateholders") and as
authentication agent (in such capacity, the "Authentication Agent").
Each of the U.S.$100,000,000 Trust Certificates due 2006, Series B (the "Series B Certificates")
represents an undivided 0.5 per cent. ownership interest in the assets (the "Series B Trust Assets"
and, together with the Series A Trust Assets, the "Trust Assets") held on trust (the "Series B Trust"
and, together with the Series A Trust, the "Trusts") for the holders of such Certificates pursuant to a
declaration of trust (the "Series B Trust Agreement" and, together with the Series A Trust
Agreement, the "Trust Agreements") dated the Closing Date made between the SPV and the Trustee
as trustee for the holders of the Series B Certificates (the "Series B Certificateholders" and, together
with the Series A Certificateholders, the "Certificateholders") and as Authentication Agent.
In these Conditions, the Series A Certificates and the Series B Certificates shall collectively be
referred to as the "Certificates" and any reference to a "Series" of Certificates shall be deemed to be
a reference to either the Series A Certificates or the Series B Certificates, as the context requires.
References in these Conditions to "Certificates" shall be references to the Certificates as represented
by a global Certificate or definitive Certificates, as described in Condition 1.
Payments relating to the Certificates will be made pursuant to a transaction administration agreement
dated the Closing Date (the "Transaction Administration Agreement") made among Kumpulan
Guthrie Berhad ("Guthrie"), Bank Islam (L) Ltd, as Trustee and as Authentication Agent and ABN
AMRO Bank N.V., Labuan Branch as transaction administrator (the "Transaction Administrator",
which expression shall include any successor transaction administrator).
The statements in these Conditions include summaries of, and are subject to, the detailed provisions of
the Trust Agreements and the Transaction Administration Agreement. In these Conditions, words and
expressions defined and rules of construction and interpretation set out in the Master Definitions
Schedule dated the Closing Date signed by, among others, the SPV, the Trustee and the Transaction
Administrator (the "Master Definitions Schedule") shall, unless the context otherwise requires, have
the same meanings herein. Copies of the Trust Agreements, the Transaction Administration
Agreement and the Master Definitions Schedule are available for inspection during normal business
hours by the Certificateholders at the principal office for the time being of the Trustee, being at the
date of issue of the Certificates at Level 15, Block 4, Financial Park Complex, Jalan Merdeka, 87000
Labuan F.T., Malaysia and at the specified office of the Transaction Administrator. The
Certificateholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the
provisions of the relevant Trust Agreement and the Transaction Administration Agreement applicable
to them.
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1.
FORM, DENOMINATION AND TITLE
(1)
Form and Denomination
The Certificates are in bearer form, serially numbered, in the denominations of U.S.$500,000
each.
(2)
Title
Subject as set out below (i) title to the Certificates will pass by delivery and in accordance
with applicable law in accordance with these Conditions and the provisions of the relevant
Trust Agreement and (ii) the bearer of any Certificate will (except as otherwise required by
law) be treated as the absolute owner thereof (whether or not overdue and notwithstanding
any notice of ownership or writing thereon or notice of any previous loss or theft thereof) for
all purposes.
Each Series of Certificates will be represented by a global Certificate (the "Global
Certificate") in bearer form, without coupons for the payment of distributions attached,
which will be deposited on behalf of the purchasers of the Certificates with Labuan
International Financial Exchange Inc, as custodian and clearing system for the Certificates
(the "Depository") on or prior to the Closing Date, date of issue of the Certificates. Each
Global Certificate will only be exchangeable for related definitive Certificates upon the
occurrence of an Exchange Event. For these purposes, "Exchange Event" means that (i) a
Dissolution Event has occurred or (ii) the Depository has been closed for business for a
continuous period of 14 days (other than by reason of holiday, statutory or otherwise) or has
announced an intention permanently to cease business or have in fact done so and no
alternative clearing system satisfactory to the Trustee is available.
(3)
Global Certificates
For so long as any of the Certificates represented by a Global Certificate is held by the
Depository, each person who is for the time being shown in the records of the Depository as
the holder of a particular principal amount of such Certificate or interests in such Certificate
(in which regard any certificate or other document issued by the Depository as to the principal
amount of such Certificate or interests in such Certificate standing to the account of any
person shall be conclusive and binding for all purposes save in the case of manifest error)
shall be treated by the Trustee and the Transaction Administrator as the holder of such
principal amount of such Certificate or interests in such Certificate for all purposes other than
with respect to payments in respect of such Certificate or interests in such Certificate, for
which purpose the bearer of the relevant Global Certificate shall be treated by the Trustee and
the Transaction Administrator as the holder of such nominal amount of such Certificate or
interests in such Certificate in accordance with and subject to the terms of the relevant Global
Certificate. The expressions "Certificateholders" and "holder of Certificates" and related
expressions shall be construed accordingly.
2.
STATUS; LIMITED RECOURSE
(1)
Status
Each Series A Certificate evidences an undivided 1.0 per cent. ownership interest in the Series
A Trust Assets and will rank pari passu, without any preference, with the other Series A
Certificates. Each Series B Certificate evidences an undivided 0.5 per cent. ownership interest
in the Series B Trust Assets and will rank pari passu, without any preference, with the other
Series B Certificates. Holders of Series A Certificates will have no recourse to the Series B
28
Trust Assets. Likewise, holders of Series B Certificates will have no recourse to the Series A
Trust Assets.
(2)
Limited Recourse
Proceeds of the relevant Trust Assets are the sole source of payments on the related Series of
Certificates. The Certificates do not represent an interest in or obligation of any of the SPV,
the Trustee, Guthrie (as defined in Condition 3(1)) or any of their affiliates. Accordingly,
Certificateholders will have no recourse to any assets of the SPV, the Trustee (including, in
particular other assets comprised in other trusts), Guthrie (to the extent it fulfils all of its
obligations under the relevant Lease Agreements) or any of their affiliates in respect of any
shortfall in the expected amounts from the Trust Assets.
The net proceeds of the realisation of, or enforcement with respect to, the relevant Trust
Assets may not be sufficient to make all payments due in respect of the related Series of
Certificates. If, following distribution, there remains a shortfall, no holder of such
Certificates will have any claim against the SPV, the Trustee, Guthrie or any of their affiliates
or any of its other assets in respect of such shortfall and any unsatisfied claims shall be
extinguished. In particular, no holder of such Certificates will be able to petition for, or join
any other person in instituting proceedings for, the reorganisation, liquidation, winding up or
receivership of the SPV, the Trustee, Guthrie or any of their affiliates as a consequence of
such shortfall or otherwise.
3.
TRUST
(1)
Summary of the Trust
First Global Sukuk Inc., a special purpose company incorporated in Labuan, Malaysia under
the Offshore Companies Act, 1990 (the "SPV"), will enter into four purchase agreements
(each a "Purchase Agreement") with certain subsidiaries (the "Sellers") of Guthrie. Pursuant
to Purchase Agreements, the Sellers will declare themselves bare trustee of their respective
interests in the parcels of land owned by them and identified therein for the benefit of the SPV
and convey the beneficial interest in such parcels of land to the SPV. Thereafter the SPV will
lease its beneficial interest in such parcels of land to Guthrie pursuant to two lease agreements
(the "Series A Lease Agreement" and the "Series B Lease Agreement").
Pursuant to the Series A Trust Agreement, the SPV will assign, grant, convey and sell to the
Trustee its beneficial interest in the Series A Land Parcels and assign to the Trustee all its
rights, title, interest and benefit, present and future, in, to and under the Series A Purchase
Agreement, the Series A Lease Agreement (including the Lease Payments) and the Series A
Service Agency Agreement and all proceeds of the foregoing. Such interests, together with all
proceeds therefrom and all monies standing to the credit of the Series A Transaction Account
(as defined below) and the Series A Reserve Account (as defined below) will comprise the
Series A Trust Assets. All payments by Guthrie under the Series A Lease Agreement will be
deposited into an account of the Trustee maintained for such purpose and operated by the
Transaction Administrator (the "Series A Transaction Account").
Pursuant to the Series B Trust Agreement, the SPV will assign, grant, convey and sell to the
Trustee its beneficial interest in the Series B Land Parcels and assign to the Trustee all its
rights, title, interest and benefit, present and future, in, to and under the Series B Purchase
Agreements and the Series B Lease Agreement (including the Lease Payments) and the Series
B Service Agency Agreement and all proceeds of the foregoing. Such interests, together with
all proceeds therefrom and all monies standing to the credit of the Series B Transaction
Account (as defined below) and the Series B Reserve Account (as defined below) will
29
comprise the Series B Trust Assets. All payments by Guthrie under the Series B Lease
Agreement will be deposited into an account of the Trustee maintained for such purpose and
operated by the Transaction Administrator (the "Series B Transaction Account").
The Trustee will establish and maintain two accounts (the "Series A Reserve Account" and
the "Series B Reserve Account") which will be operated by the Transaction Administrator.
Guthrie shall ensure that there shall at all times be standing to the credit of each Reserve
Account an amount equal to the return expected, in accordance with the Condition 5, to be
distributed on the related Series of Certificates on the following Periodic Distribution Date.
(2)
Application of Proceeds from Trust Assets
Pursuant to each Trust Agreement, the Trustee holds the relevant Trust Assets for and on
behalf of the holders of the related Series of Certificates. On each Periodic Distribution Date
(as defined in Condition 5(1) below), the Transaction Administrator shall apply (i) the monies
standing to the credit of the related Transaction Account, (ii) to the extent that the monies
referred to in (i) above are insufficient to meet the distributions set out in paragraph (a) below,
an amount equal to the shortfall from the related Reserve Account or (iii) if such Periodic
Distribution Date is a Dissolution Date in respect of the relevant Series of Certificates, all
monies standing to the credit of the related Reserve Account, in the following order of
priority:
(a)
first, in or towards payment pari passu and rateably of all amounts due and unpaid on
such Series of Sukuk in respect of Periodic Distributions;
(b)
second, only if such payment is made on the related Dissolution Date, in or towards
payment pari passu and rateably of all principal due and unpaid in respect of such
Series of Sukuk; and
(c)
third, only if such payment is made on the related Dissolution Date, in payment of the
surplus (if any) to Guthrie.
Subject as set out in Condition 7 and Condition 11, the Certificateholders will not be
entitled to request that the Trust be dissolved or to institute proceedings directly against
Guthrie. The Certificateholders' sole recourse will be to the Trust Assets. In certain
circumstances, these assets may be insufficient to fund expected distributions to
Certificateholders and, taken as a whole, may have a value less than that of the face
amount of the Certificates. The Certificateholders will have no recourse to any other
assets of the Trustee (including, in particular, other assets constituting other trust funds)
in respect of any shortfall in the expected amounts from the Trust.
4.
COVENANTS
(1)
Covenants of the SPV
The SPV has covenanted in the Trust Agreements that, among other things, for so long as any
Certificate is outstanding, it shall not without the prior written consent of the Trustee:
(i)
Assets: use, invest, sell or dispose of, or create or permit to subsist any mortgage,
pledge, lien (unless arising by operation of law) or charge upon, the whole or any part
of its assets, present or future (including any uncalled capital) or its undertaking;
(ii)
(a)
Proceeds of Certificate Issue: use the proceeds of the issue of the
Certificates for any purpose other than as set out in the Offering Circular;
30
(b)
Accounts: (a) open any bank account or have any interest in any bank
account unless such account or interest is assigned, pledged or otherwise
charged to or secured in favour of the Trustee, and (b) apply all amounts in
such accounts in accordance with the Transaction Administration Agreement;
or
(c)
Subsidiaries: have any subsidiaries, employees or premises;
(iii)
Dividends: redeem any of its shares or pay any dividend or make any other
distribution to its shareholders;
(iv)
Indebtedness: incur any indebtedness in respect of borrowed money whatsoever, or
give any guarantee in respect of any obligation of any person or issue any shares other
than those in issue as at the Closing Date;
(v)
Consolidation: reduce its stated capital, consolidate or merge with any other person
or convey or transfer its properties or assets substantially as an entirety to any other
person;
(vi)
Transaction Documents: cause or permit, to the extent it is able to do so, any of the
Transaction Documents, or the priority of the security interests created thereby, to be
amended, terminated or discharged or cause or permit any party to any of the
Transaction Documents to be released from any obligations thereunder;
(vii)
Issue of Shares: issue any shares or rights, warrants or options in respect of shares or
securities convertible into or exchangeable for shares;
(viii)
Enforcement: take any action, or fail to take any action, if such action or failure to
take action may interfere with the proper enforcement of any material rights of the
Trustee under the Transaction Documents;
(ix)
Withholding: take or (if within its control) permit to be taken any action which
would have the effect directly or indirectly of causing any amount to be deducted or
withheld from payments on any of the Certificates for or on account of any taxes,
assessments or governmental charges of whatever nature and will perform all of its
obligations under the Transaction Documents to which it is a party to prevent or cure
any default by, or other condition or event with respect to, the SPV which would have
the effect, directly or indirectly, of causing any amount to be deducted or withheld
from payments on any of the Certificates for or on account of any taxes, assessments
or governmental charges of whatever nature;
(x)
Other Transactions: enter into any contract, transaction, amendment, obligation or
liability other than the Transaction Documents or as expressly permitted or required
thereunder;
(xi)
Insolvency: put to its directors or shareholders any resolution for or appoint any
liquidator for the winding up of the SPV or any resolution for the commencement of
any other bankruptcy or insolvency proceeding with respect to the SPV without the
prior written consent of the Trustee;
31
(xii)
Disposal of Assets: sell, factor, discount, transfer, assign or hire out, lend or
otherwise dispose of any of its assets or agree to do any of the foregoing except as
expressly required or permitted by the Transaction Documents to which it is a party;
(xiii)
Business: engage in any business or activity other than:
(a)
as provided for or permitted in the Transaction Documents to which it is a
party and entering into the Transaction Documents to which it is a party;
(b)
the ownership, management, disposal and charging of the Trust Assets as
provided in the Transaction Documents; and
(c)
and such other matters which are incidental thereto;
(xiv)
Commingling: except as required or permitted under the Transaction Documents,
commingle any moneys held by it with those held by any other person;
(xv)
Security: create or have outstanding any mortgage, charge, lien, pledge or other
security interest (each a "Security Interest") upon, or with respect to, any of its
present or future business, undertaking, assets or revenues (including any uncalled
capital), other than the Trust;
(xvi)
No merger: undergo any consolidation, amalgamation, merger or reconstruction or
effect any sale or transfer of all or substantially all of its assets or initiate any plan or
agreement relating thereto; or
(xvii) Foreign exchange: undertake any transaction with the residents of, or deal in the
currencies of, Israel and the Federal Republic of Yugoslavia (Serbia and Montenegro)
without the prior permission of the Malaysian Controller of Foreign Exchange.
In giving any consent to the foregoing, the Trustee may require the SPV to make such
modifications or additions to the provisions of any of the Transaction Documents or may
impose such other conditions or requirements as the Trustee may deem expedient in the
interests of the Certificateholders.
(2)
Covenants of the Trustee
The Trustee has covenanted in the Trust Agreements that for so long as any Certificate is
outstanding, it shall not undertake any transaction with the residents of, or deal in the
currencies of, Israel and the Federal Republic of Yugoslavia (Serbia and Montenegro) without
the prior permission of the Malaysian Controller of Foreign Exchange.
5.
PERIODIC DISTRIBUTIONS
(1)
Periodic Distribution Dates
Subject as set out in Condition 3(2) and Condition 7, the Trustee shall instruct the Transaction
Administrator to distribute to holders of each Series of Certificates pro rata out of the
relevant Trust Assets and on a pari passu basis, distributions in relation to such Certificates
("Periodic Distributions") as follows:
(a)
in respect of the Series A Certificates distributions, derived from the Lease Payments
made by Guthrie under the Series A Lease Agreement, equal to 1.5 per cent. per
annum above the London inter-bank offered rate for U.S. dollar deposits ("LIBOR")
32
for the aggregate principal amount of Series A Certificates for each Profit
Accumulation Period (as defined below); and
(b)
in respect of the Series B Certificates distributions, derived from the Lease Payments
made by Guthrie under the Series B Lease Agreement, equal to 2.0 per cent. per
annum above LIBOR for the aggregate principal amount of Series B Certificates for
each Profit Accumulation Period.
Distributions on the Certificates will be made on each date (each a "Periodic Distribution
Date") which falls six months after the preceding Periodic Distribution Date or, in the case of
the first Periodic Distribution Date, after the Closing Date. If there is no numerically
corresponding day in the calendar month in which a Periodic Distribution Date should occur,
such Periodic Distribution Date shall be the last day that is a Business Day in the relevant
month. If any Periodic Distribution Date would otherwise fall on a day which is not a
Business Day, it shall be postponed to the next day which is a Business Day unless it would
then fall into the next calendar month, in which event the Periodic Distribution Date shall be
brought forward to the immediately preceding Business Day. The period from and including
the Closing Date to but excluding the first Periodic Distribution Date and each successive
period from and including a Periodic Distribution Date to but excluding the next succeeding
Periodic Distribution Date is called an "Profit Accumulation Period".
(2)
Cessation of Accrual
No further amounts will be payable on any Certificate from and including its due date for
redemption unless, upon due presentation, payment in respect of the Certificate is improperly
withheld or refused or unless default is otherwise made in respect of payment, in which event
such amounts payable on the Certificate shall continue to be due and payable as provided in
the relevant Trust Agreement.
(3)
Determination of LIBOR
LIBOR will be determined by the Transaction Administrator on the basis of the following
provisions:
(a)
On each LIBOR Determination Date (as defined below), the Transaction
Administrator or its duly appointed successor will determine the Screen Rate (as
defined below) at approximately 11.00 a.m. (London time) on the LIBOR
Determination Date in question and such Screen Rate shall be the value of LIBOR for
the forthcoming Profit Accumulation Period.
(b)
If the Screen Rate is unavailable, the Transaction Administrator will request the
principal London office of each of the Reference Banks (as defined below) to provide
the Transaction Administrator with the rate at which deposits in U.S. dollars are
offered by it to prime banks in the London interbank market for six months at
approximately 11.00 a.m. (London time) on the LIBOR Determination Date in
question and for a Representative Amount (as defined below) and, so long as at least
two of the Reference Banks provide such rates, the arithmetic mean (rounded if
necessary to the fifth decimal place, with 0.000005 being rounded upwards) as
established by the Transaction Administrator of such rates shall be the value of
LIBOR for the forthcoming Profit Accumulation Period.
(c)
If fewer than two rates are provided as requested, the value of LIBOR for the
forthcoming Profit Accumulation Period will be the arithmetic mean of the rates
quoted by such major banks in Labuan, Malaysia as selected by the Transaction
33
Administrator, at approximately 11.00 a.m., London time, on the first day of such
Profit Accumulation Period for loans in U.S. dollars to leading European banks for a
period of six months commencing on the first day of such Profit Accumulation Period
and for a Representative Amount.
(4)
(d)
If LIBOR cannot be determined in accordance with the above provisions, the value of
LIBOR for the forthcoming Profit Accumulation Period shall be as determined at the
preceding LIBOR Determination Date.
(e)
In these Conditions, (except where otherwise defined), the expression:
(i)
"Business Day" means a day which is both a day on which commercial banks
and foreign exchange markets settle payments and are open for general
business (including dealing in foreign exchange and foreign currency
deposits) in London, Labuan, Singapore and New York City;
(ii)
"LIBOR Determination Date" means the second Business Day before the
commencement of the Profit Accumulation Period for which the rate will
apply;
(iii)
"Margin", in relation to the Series A Certificates, means 1.5 per cent. per
annum and, in relation to the Series B Certificates, means 2.0 per cent. per
annum;
(iii)
"Reference Banks" means the principal London office of each of four major
banks engaged in the London interbank market selected by the Transaction
Administrator, provided that once a Reference Bank has first been selected by
the Transaction Administrator, that Reference Bank shall not be changed
unless and until it ceases to be capable of acting as such;
(iv)
"Representative Amount" means an amount that is representative for a
single transaction in the relevant market at the relevant time; and
(v)
"Screen Rate" means the rate for six month deposits in U.S. dollars which
appears on Telerate page 3750 (or such replacement page on that service
which displays the information).
Determination of Periodic Distribution Amount
The Transaction Administrator shall, as soon as practicable after 11.00 a.m. (London time) on
each LIBOR Determination Date, but in no event later than the third Business Day thereafter,
determine the U.S. dollar amount payable on each denomination of Certificates (the "Periodic
Distribution Amount") for the relevant Profit Accumulation Period. The Periodic
Distribution Amount shall be determined by adding LIBOR for the relevant Profit
Accumulation Period to the Margin and applying the result to each denomination of the
Certificates, multiplying the sum by the actual number of days in the Profit Accumulation
Period concerned divided by 360 and rounding the resultant figure to the nearest cent (half a
cent being rounded upwards).
(5)
Publication of Periodic Distribution Amount
The Transaction Administrator shall cause (i) the sum of the Margin and LIBOR for each
Profit Accumulation Period after the initial Profit Accumulation Period and (ii) the Periodic
Distribution Amount for the relative Periodic Distribution Date to be notified to the Trustee
34
and to any stock exchange on which the Certificates are at the relevant time listed and to be
published in accordance with Condition 13 as soon as possible after their determination but in
no event later than the second Business Day thereafter. The Periodic Distribution Amount
and Periodic Distribution Date may subsequently be amended (or appropriate alternative
arrangements made by way of adjustment) without notice in the event of an extension or
shortening of the Profit Accumulation Period.
(6)
Determination by the Trustee
The Trustee shall, if the Transaction Administrator defaults at any time in its obligation to
determine LIBOR and the Periodic Distribution Amount in accordance with the above
provisions, determine LIBOR and the Periodic Distribution Amount, the former at such rate
as, in its absolute discretion (having such regard as it shall think fit to the procedure described
above), it shall deem fair and reasonable in all the circumstances and the latter in the manner
provided in paragraph (4) above and the determinations shall be deemed to be determinations
by the Transaction Administrator.
(7)
Notifications, etc. to be Final
All notifications, opinions, determinations, certificates, calculations, quotations and decisions
given, expressed, made or obtained for the purposes of the provisions of this Condition,
whether by the Reference Banks (or any of them) or the Transaction Administrator, will (in
the absence of wilful default, bad faith or manifest error) be binding on the Trustee, the
Transaction Administrator and all Certificateholders (in the absence as referred to above) no
liability to the Trustee or the Certificateholders shall attach to the Transaction Administrator
in connection with the exercise or non-exercise by it of its powers, duties and discretions
under this Condition.
(8)
Transaction Administrator
The Trustee will procure that so long as any of the Certificates remains outstanding there shall
at all times be a Transaction Administrator for the purposes of the Certificates and the Trustee
may terminate the appointment of the Transaction Administrator. In the event of the
appointed office of any bank being unable or unwilling to continue to act as the Transaction
Administrator or failing duly to determine the value of LIBOR and the Periodic Distribution
Amount for any Profit Accumulation Period, the Trustee shall appoint the Labuan office of
another major bank engaged in the London interbank market to act in its place. The
Transaction Administrator may not resign its duties or be removed without a successor having
been appointed.
6.
PAYMENT
(1)
Payments in respect of Certificates
Payments in respect of each Certificate will be made against presentation and surrender (or, in the case
of part payment or payments of Periodic Distribution Amounts only, endorsement indicating the amount
paid) of the Certificate at the specified office of the Transaction Administrator.
(2)
Method of Payment
Payments will be made by credit or transfer to an account in U.S. dollars maintained by the
payee with or, at the option of the payee, by a cheque in U.S. dollars drawn on, a bank in
Labuan.
35
(3)
Payments subject to Applicable Laws
Payments in respect of Certificates are subject in all cases to any fiscal or other laws and
regulations applicable in the place of payment, but without prejudice to the provisions of
Condition 8.
(4)
Payment only on a Presentation Date
A holder shall be entitled to present a Certificate for payment only on a Presentation Date and
shall not, except as provided in Condition 5, be entitled to any further payment if a
Presentation Date is after the due date.
"Presentation Date" means a day which (subject to Condition 9):
(a)
is or falls after the relevant due date; and
(b)
is a Business Day in Labuan; and
(c)
in the case of payment by credit or transfer to a U.S. dollar account in Labuan as
referred to above, is a Business Day in New York City.
In this Condition, "Business Day" means, in relation to any place, a day on which commercial
banks and foreign exchange markets settle payments and are open for general business
(including dealing in foreign exchange and foreign currency deposits) in that place.
(5)
Initial Transaction Administrator
The name of the Transaction Administrator and its initial specified office is set out at the end
of these Conditions. The Trustee reserves the right at any time to vary or terminate the
appointment of the Transaction Administrator and to appoint additional or other Transaction
Administrators provided that it will at all times maintain a Transaction Administrator having
its specified office in Labuan. Notice of any termination or appointment and of any changes
in specified offices will be given to the Certificateholders promptly by the Trustee in
accordance with Condition 13.
7.
DISSOLUTION OF TRUST
(1)
Summary of Dissolution
Under each Lease Agreement:
(a)
the SPV has the option (the "Put Option"), which it has assigned to the Trustee for
the benefit of the holders of the related Series of Certificates pursuant to the related
Trust Agreement, to require Guthrie to purchase the beneficial interest in the related
Land Parcels at a price equal to the principal amount of such Series of Certificates
plus the aggregate Periodic Distribution Amount payable on the Certificates on the
date of such redemption (the "Dissolution Distribution Amount"):
(i)
on the Unscheduled Dissolution Date (as defined below) in respect of such
Series of Certificates; and
(ii)
on the Scheduled Dissolution Date (as defined below) in respect of such
Series of Certificates; and
36
(b)
Guthrie has the option (the "Call Option") to require the SPV or, after the assignment
to the Trustee of the SPV's interests in such Lease Agreement pursuant to the relevant
Trust Agreement, the Trustee to sell the beneficial interest in the relevant Land
Parcels to it on the related Scheduled Dissolution Date at the related Dissolution
Distribution Amount.
In respect of a dissolution of the Series A Trust on a Scheduled Dissolution Date (a
"Scheduled Dissolution"), on each Series A Partial Deposit Date, Guthrie will deposit in the
Series A Transaction Account an amount equal to 20 per cent. of the Dissolution Distribution
Amount in respect of the Series A Certificates. Upon the exercise of either the Put Option or
the Call Option in respect of the Series A Lease Agreement, the Trustee will use the
Dissolution Distribution Amount standing to the credit of the Series A Transaction Account to
redeem the Series A Certificates. In respect of a dissolution of the Series A Trust on an
Unscheduled Dissolution Date (an "Unscheduled Dissolution"), Guthrie will deposit the
aggregate Dissolution Distribution Amount in respect of the Series A Certificates into the
Series A Transaction Account prior to the Series A Scheduled Dissolution Date in accordance
with the instructions of the Trustee issued in connection with its exercise of the Put Option in
respect of the Series A Lease Agreement.
In respect of a Scheduled Dissolution of the Series B Trust, on each Series B Partial Deposit
Date, Guthrie will deposit in the Series B Transaction Account an amount equal to 20 per
cent. of the Dissolution Distribution Amount in respect of the Series B Certificates. Upon the
exercise of either the Put Option or the Call Option in respect of the Series B Lease
Agreement, the Trustee will use the Dissolution Distribution Amount standing to the credit of
the Series B Transaction Account to redeem the Series B Certificates. In respect of an
Unscheduled Dissolution of the Series B Trust, Guthrie will deposit the aggregate Dissolution
Distribution Amount in respect of the Series B Certificates into the Series B Transaction
Account prior to the Series B Scheduled Dissolution Date in accordance with the instructions
of the Trustee issued in connection with its exercise of the Put Option in respect of the Series
B Lease Agreement.
(2)
Scheduled Dissolution
The Series A Certificates will, unless previously redeemed pursuant to Condition 10, be
redeemed by the Trustee on the Periodic Distribution Date falling in December, 2004 (the
"Series A Scheduled Dissolution Date") at their Dissolution Distribution Amount.
The Series B Certificates will, unless previously redeemed pursuant to Condition 10, be
redeemed by the Trustee on the Periodic Distribution Date falling in December, 2006 (the
"Series B Scheduled Dissolution Date" and, together with the Series A Scheduled
Dissolution Date, the "Scheduled Dissolution Dates") at their Dissolution Distribution
Amount.
(3)
Dissolution upon the occurrence of a Dissolution Event
Upon the occurrence of a Dissolution Event in respect of a Trust, such Trust may in
accordance with Condition 10 be dissolved by the Trustee, whereupon the Series of
Certificates relating to such Trust will be redeemed by the Trustee on the Periodic
Distribution Date following the occurrence of such Dissolution Event.
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(4)
Cancellations
All Certificates which are redeemed will forthwith be cancelled and accordingly may not be
held, reissued or resold.
8.
TAXATION
All payments in respect of the Certificates by or on behalf of the Trustee shall be made
without withholding or deduction for, or on account of, any present or future taxes, levies,
imports, duties, fees, assessments or other charges of whatever nature, imposed by Labuan or
by any department, agency or other political subdivision or taxing authority thereof or therein,
and all interest, penalties or similar liabilities with respect thereto ("Taxes"), unless the
withholding or deduction of the Taxes is required by law. In that event, the Trustee will not
pay any additional amounts and payments in respect of the Certificates will be made after
withholding or deduction for, or on account of, such Taxes.
9.
PRESCRIPTION
Certificates will become void unless presented for payment within periods of 10 years (in the
case of Dissolution Distribution Amounts) and five years (in the case of Periodic
Distributions Amounts) from the Relevant Date in respect of the Certificates, subject to the
provisions of Condition 6. In this Condition 9, "Relevant Date" means the date on which the
payment first becomes due but, if the full amount of the money payable has not been received
by the Transaction Administrator or the Trustee on or before the due date, it means the date
on which, the full amount of the money having been so received, notice to that effect shall
have been duly given to the Certificateholders by the Trustee in accordance with
Condition 13.
10.
DISSOLUTION EVENTS
Upon the occurrence of any of the following events ("Dissolution Events") in respect of a
Trust:
(a)
if default is made on any Lease Payments forming part of the Trust Assets of such
Trust and the default continues for a period of 14 days; or
(b)
if default is made in the payment of any amount due in respect of any Certificate of
the Series related to such Trust and the default continues for a period of 14 days; or
(c)
if the Put Option or the Call Option is exercised in respect of the Land Parcels
forming part of the Trust Assets of such Trust and Guthrie fails to deliver the
Dissolution Distribution Amount and complete its purchase of such Land Parcels in
accordance with the related Lease Agreement;
(d)
if:
(i)
any order is made by any competent court or resolution passed for the winding
up or dissolution of Guthrie, save for the purposes of reorganisation; or
(ii)
(1) proceedings are initiated against Guthrie under any applicable liquidation,
insolvency, composition, reorganisation or other similar laws or an
application is made for the appointment of an administrative or other receiver,
manager, administrator or other similar official, or an administrative or other
receiver, manager, administrator or other similar official is appointed, in
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relation to Guthrie or, as the case may be, in relation to the whole or a part of
its undertaking or assets or an encumbrancer takes possession of the whole or
a part of its undertaking or assets, or a distress, execution, attachment,
sequestration or other process is levied, enforced upon, sued out or put in
force against the whole or a part of its undertaking or assets or any of them,
and (2) in any such case (other than the appointment of an administrator) is
not discharged within l4 days; or
(iii)
Guthrie initiates or consents to judicial proceedings relating to itself under
any applicable liquidation, insolvency, composition, reorganisation or other
similar laws or makes a conveyance or assignment for the benefit of, or enters
into any composition or other arrangement with, its creditors generally (or any
class of its creditors) or any meeting is convened to consider a proposal for an
arrangement or composition with its creditors generally (or any class of its
creditors); or
(e)
if it is or will become unlawful for the Trustee to perform or comply with any of its
obligations under or in respect of such Series of Certificates or the related Trust
Agreement or any of such obligations shall be or become unenforceable or invalid; or
(f)
the termination of the lease constituted by the Lease Agreement forming part of the
Trust Assets of such Trust at any time prior to the Scheduled Dissolution Date; or
(g)
if any event occurs which under the laws of the relevant jurisdiction has or may have,
in the Trustee's opinion, an analogous effect to any of the events referred to in
paragraphs (d) and (e) above,
the Trustee shall give notice of the occurrence of such Dissolution Event to the holders of
Series of Certificates relating to such Trust in accordance with Condition 13 with a request to
such holders to indicate if they wish such Trust to be dissolved. If so requested in writing by
the holders of at least three-quarters in principal amount of such Series of Certificates then
outstanding or if so directed by an Extraordinary Resolution of the holders of such Series of
Certificates, the Trustee shall (subject in each case to being indemnified to its satisfaction),
give notice to all the holders of such Series of Certificates in accordance with Condition 13
that such Trust is to be dissolved and such Series of Certificates are, and they shall
accordingly forthwith become, due and repayable at their Dissolution Distribution Amount on
the Periodic Distribution Date following the date of such notice (the "Unscheduled
Dissolution Date").
11.
ENFORCEMENT AND EXERCISE OF RIGHTS
(a)
Following the distribution of the Trust Assets in respect of a Series of Certificates to the
related Certificateholders in accordance with these Conditions and the relevant Trust
Agreement, the Trustee shall not be liable for any further sums or assets, and accordingly such
Certificateholders may not take any action against the Trustee or any other person to recover
any such sum or asset in respect of such Certificates or Trust Assets.
(b)
The Trustee shall not in any circumstances take any action to enforce or to realise such Trust
Assets or take any action against Guthrie under the relevant Lease Agreement unless and to
the extent directed to do so by such Certificateholders and then only to the extent indemnified
to its satisfaction.
(c)
No Certificateholders shall be entitled to proceed directly against Guthrie or enforce such
Trust Assets unless (i) the Trustee, having become bound so to proceed, fails to do so within
39
two months of becoming so bound and such failure is continuing and (ii) the relevant
Certificateholder (or such Certificateholder together with the other Certificateholders who
propose to proceed directly against Guthrie or enforce such Trust Assets) holds at least 75 per
cent. of the outstanding principal amount of the relevant Series of Certificates.
(d)
Conditions 11(a), 11(b) and 11(c) are subject to this Condition 11(d). After enforcing or
realising such Trust Assets and distributing the net proceeds in accordance with Condition
3(2), the obligations of the Trustee in respect of such Certificates shall be satisfied and no
holder of such Certificates may take any further steps against the Trustee to recover any
further sums in respect of such Certificates and the right to receive any such sums unpaid shall
be extinguished. In particular, no holder of such Certificates shall be entitled in respect
thereof to petition or to take any other steps for the winding-up of the SPV or the Trustee nor
shall any of them have any claim in respect of the trust assets of any other trusts (including the
Trust in respect of the other Series of Certificates) established by the Trustee.
12.
REPLACEMENT OF CERTIFICATES
Should any Certificate be lost, stolen, mutilated, defaced or destroyed it may be replaced at
the specified office of the Trustee upon payment by the claimant of the expenses incurred in
connection with the replacement and on such terms as to evidence and indemnity as the
Trustee may reasonably require. Mutilated or defaced Certificates must be surrendered before
replacements will be issued.
13.
NOTICES
All notices to the Certificateholders will be valid if published in a leading English language
daily newspaper published in (i) Malaysia which is expected to be the New Straits Times and
(ii) Labuan which is expected to be the Daily Express. The Trustee shall also ensure that
notices are duly published in a manner which complies with the rules and regulations of any
stock exchange on which the Certificates are for the time being listed. Any such notice will
be deemed to have been given on the date of the first publication or, where required to be
published in more than one newspaper, on the date of the first publication in all required
newspapers. If publication as provided above is not practicable, notice will be given in such
other manner, and shall be deemed to have been given on such date, as the Trustee may
approve.
14.
MEETINGS
OF
CERTIFICATEHOLDERS,
AUTHORISATION AND DETERMINATION
MODIFICATION,
WAIVER,
(1)
Each Trust Agreement contains provisions for convening meetings of the related
Certificateholders to consider any matter affecting their interests, including the modification
or abrogation by Extraordinary Resolution of these Conditions or the provisions of such Trust
Agreement. The quorum at any meeting for passing an Extraordinary Resolution will be one
or more persons present holding or representing more than 75 per cent. in principal amount of
the related Certificates for the time being outstanding, or at any adjourned such meeting one
or more persons present whatever the principal amount of such Certificates held or
represented by him or them, except that, at any meeting the business of which includes the
modification or abrogation of certain of the provisions of these Conditions and certain of the
provisions of such Trust Agreement, the necessary quorum for passing an Extraordinary
Resolution will be one or more persons present holding or representing not less than twothirds, or at any adjourned such meeting not less than one-third, of the principal amount of
such Certificates for the time being outstanding. An Extraordinary Resolution passed at any
meeting of such Certificateholders will be binding on all holders of the related Series of
Certificates, whether or not they are present at the meeting.
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(2)
The Trustee may agree, without the consent of the Certificateholders, to any modification of,
or to the waiver or authorisation of any breach or proposed breach of, any of these Conditions
or any of the provisions of the related Trust Agreement, or determine, without any such
consent as aforesaid, that any Dissolution Event or Potential Dissolution Event (as defined in
such Trust Agreement) shall not be treated as such, which in any such case is not, in the
opinion of the Trustee, materially prejudicial to the interests of such Certificateholders or may
agree, without any such consent as aforesaid, to any modification which, in its opinion, is of a
formal, minor or technical nature or to correct a manifest error.
(3)
In connection with the exercise by it of any of its trusts, powers, authorities and discretions
(including, without limitation, any modification, waiver, authorisation determination or
substitution), the Trustee shall have regard to the general interests of the Certificateholders as
a class but shall not have regard to any interests arising from circumstances particular to
individual Certificateholders (whatever their number) and, in particular but without limitation,
shall not have regard to the consequences of any such exercise for individual
Certificateholders (whatever their number) resulting from their being for any purpose
domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any
particular territory or any political sub-division thereof and the Trustee shall not be entitled to
require, nor shall any Certificateholder be entitled to claim, from the Trustee or any other
person any indemnification or payment in respect of any tax consequence of any such exercise
upon individual Certificateholders.
(4)
Any modification, abrogation, waiver, authorisation, determination or substitution shall be
binding on the Certificateholders and any modification, abrogation, waiver, authorisation,
determination or substitution shall be notified by the Trustee to the Certificateholders as soon
as practicable thereafter in accordance with Condition 13.
15.
INDEMNIFICATION AND LIABILITY OF THE TRUSTEE
(a)
Each Trust Agreement contains provisions for the indemnification of the Trustee in certain
circumstances and for its relief from responsibility, including provisions relieving it from
taking action unless indemnified to its satisfaction. In particular, in connection with the
exercise of any of its rights under the Trust Assets, the Trustee shall in no circumstances take
any action unless directed to do so in accordance with Condition 11(b), and then only if it
shall have been indemnified to its satisfaction. Subject thereto, the Trustee waives any right
to be indemnified by the Certificateholders in circumstances where the Trust Assets are
insufficient therefor.
(b)
The Trustee makes no representation and assumes no responsibility for the validity,
sufficiency or enforceability of the obligations of Guthrie under the Lease Agreements and
shall not under any circumstances have any liability or be obliged to account to the
Certificateholders in respect of any Lease Payments which should have been made by
Guthrie, but is not so made, and shall not in any circumstances have any liability arising from
the Trust Assets other than as expressly provided in these Conditions or in the Trust
Agreements.
(c)
The Trustee is excepted from any liability in respect of any loss or theft of the Trust Assets or
any cash from any obligation to insure the Trust Assets or any cash and from any claim
arising from the fact that the Trust Assets or any cash are held by or on behalf of the Trustee
or on deposit or in an account with any depositary or clearing system or are registered in the
name of the Trustee or its nominee.
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16.
GOVERNING LAW
Each Trust Agreement, the Transaction Administration Agreement and the Certificates are
governed by, and will be construed in accordance with, New York law.
42
DESCRIPTION OF THE GLOBAL CERTIFICATES
The following is a summary of the provisions to be contained in the Trust Agreements to constitute the
Certificates and in each Global Certificate which will apply to, and in some cases modify, the
Conditions of the Certificates while the Certificates are represented by a Global Certificate.
Exchange
Each Global Certificate will be exchangeable in whole but not in part (free of charge to the holder) for
definitive Certificates only (i) upon the occurrence of a Dissolution Event or (ii) if the Depository is
closed for business for a continuous period of 14 days (other than by reason of holiday, statutory or
otherwise) or announces an intention permanently to cease business or does in fact do so and no
alternative clearing system satisfactory to the Trustee is available.
On or after the date scheduled for the exchange of a Global Certificate for definitive Certificates the
holder of such Global Certificate may or, in the case of (ii) above, shall surrender such Global
Certificate to or to the order of the Trustee. In exchange for such Global Certificate the Trustee will
deliver, or procure the delivery of, an equal aggregate principal amount of definitive Certificates,
security printed in accordance with any applicable legal and stock exchange requirements and in or
substantially in the form set out in the relevant Trust Agreement. On exchange of such Global
Certificate, the Trustee will procure that it is cancelled and, if the holder so requests, returned to the
holder together with any relevant definitive Certificates.
Payments
Payments in respect of Certificates represented by a Global Certificate will be made to the accounts of
Trading Agents maintained with Citibank Berhad in Kuala Lumpur through the settlement system
operated by Citibank Worldwide Securities Services ("CWSS") on behalf of the Depository. A record
of each payment made will be kept in the records of CWSS and the Depository, which record shall be
prima facie evidence that such payment has been made in respect of the Certificates.
Notices
For so long as all of the Certificates of a Series are represented by a Global Certificate and such
Global Certificate is held on behalf of the Depository, notices to the related Certificateholders may be
given by delivery of the relevant notice to the Depository for communication to the relative
Accountholders rather than by publication as required by Condition 13, provided that, so long as the
Certificates are listed on LFX, LFX so agrees. Any such notice shall be deemed to have been given to
the Certificateholders on the seventh day after the day on which such notice is delivered to the
Depository as aforesaid.
Accountholders
For so long as all of the Certificates of a Series are represented by a Global Certificate and such
Global Certificate is held on behalf of the Depository, each person who is for the time being shown in
the records of the Depository as the holder of a particular principal amount of such Certificates (each
an "Accountholder") (in which regard any certificate or other document issued by the Depository as
to the principal amount of such Certificates standing to the account of any person shall be conclusive
and binding for all purposes) shall be treated as the holder of such principal amount of such
Certificates for all purposes (including for the purposes of any quorum requirements of, or the right to
demand a poll at, meetings of the Certificateholders) other than with respect to the payments in
respect of such Certificates, the right to which shall be vested, as against the Trustee, solely in the
bearer of such Global Certificate in accordance with and subject to its terms and the terms of the
43
relevant Trust Agreement. Each Accountholder must look solely to the Depository for its share of
each payment made to the bearer of the relevant Global Certificate.
Prescription
Claims against the Trustee in respect of payments due on Certificates represented by a Global
Certificate will be prescribed after 10 years (in the case of Dissolution Distribution Amounts) and five
years (in the case of Periodic Distribution Amounts) from the Relevant Date (as defined in
Condition 9).
Cancellation
Cancellation of any Certificate represented by a Global Certificate and required by the Conditions of
the Certificates to be cancelled following its redemption will be effected by endorsement by or on
behalf of the Trustee of the reduction in the principal amount of such Global Certificate on the
relevant part of the schedule thereto.
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USE OF PROCEEDS
The net proceeds of the issue of the Sukuk (after deducting issuance expenses and the initial deposits
required to be made to the Series A Reserve Account and the Series B Reserve Account) will be
applied by the Trustee to acquire from the SPV the interests in the Trust Assets. Such proceeds will be
used by the SPV to purchase the beneficial interests in the Land Parcels from the Sellers pursuant to
the Purchase Agreements. The Sellers will lend such proceeds to Guthrie to be used to refinance a
portion of the financing facilities totalling RM1.5 billion entered into by Guthrie and its subsidiaries
to fund its Indonesian acquisition and operations.
45
RATINGS
It is a condition of the issuance of the Sukuk that the Sukuk be assigned, on issue, an international
rating of BBB+is by MARC International Ltd for timely payment on the Sukuk. The rating will
address the likelihood of the receipt by Sukukholders of the distributions to which they are entitled
under the Conditions which is a function of Guthrie's ability to make payments under the Lease
Agreements.
A rating is not a recommendation to buy, sell or hold securities and may be subject to
suspension, revision or withdrawal at any time by the assigning rating organisation. A
suspension, reduction or withdrawal of the rating assigned to the Sukuk may adversely affect
the market price of the Sukuk.
46
PLAN OF DISTRIBUTION
Bank Islam (L) Ltd, Maybank International (L) Ltd, Shamil Bank of Bahrain E.C., Bumiputra
Commerce Bank (L) Ltd, AMMB International (L) Ltd, ABN AMRO Bank N.V., Labuan Branch,
Bank Muamalat Malaysia Berhad, Labuan Offshore Branch and RHB Bank (L) Ltd (together, the
"Initial Purchasers") have entered into a purchase agreement with Guthrie, the SPV and the Trustee
(the "Certificate Purchase Agreement") pursuant to which the Trustee has agreed on behalf of the
Trusts to issue and sell the Sukuk to the Initial Purchasers and the Initial Purchasers have severally
agreed to purchase, the respective principal amount of Sukuk set forth opposite their names below:
Series A Certificates:
Initial Purchasers
Purchase commitments
Bank Islam (L) Ltd
Maybank International (L) Ltd
Shamil Bank of Bahrain E.C.
Bumiputra Commerce Bank (L) Ltd
AMMB International (L) Ltd
ABN AMRO Bank N.V., Labuan Branch
Bank Muamalat Malaysia Berhad, Labuan Offshore
Branch
RHB Bank (L) Ltd
U.S.$20,500,000
U.S.$10,000.000
U.S.$7,000,000
U.S.$5,000,000
U.S.$3,000,000
U.S.$1,500,000
U.S.$1,500,000
Total
U.S.$50,000,000
U.S.$1,500,000
Series B Certificates:
Initial Purchasers
Bank Islam (L) Ltd
Maybank International (L) Ltd
Shamil Bank of Bahrain E.C.
Bumiputra Commerce Bank (L) Ltd
AMMB International (L) Ltd
ABN AMRO Bank N.V., Labuan Branch
Bank Muamalat Malaysia Berhad, Labuan Offshore
Branch
RHB Bank (L) Ltd
Total
Purchase commitments
U.S.$39,500,000
U.S.$20,000.000
U.S.$13,000,000
U.S.$10,000,000
U.S.$7,000,000
U.S.$3,500,000
U.S.$3,500,000
U.S.$3,500,000
U.S.$100,000,000
It is expected that delivery of the Sukuk will be made against payment therefor on or about the
Closing Date.
The Certificate Purchase Agreement provides that the obligation of each of the Initial Purchasers to
pay for and accept delivery of the Sukuk is subject to the approval of certain legal matters by their
counsel, including the validity of the Sukuk, receipt of certificates and legal opinions and to certain
other conditions.
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THE TRUSTS
Trust Assets
Pursuant to the Series A Trust Agreement, the SPV will convey to the Trustee its beneficial interest in
the Series A Land Parcels and assign to the Trustee all its rights, title, interest and benefit, present and
future, in, to and under the Series A Purchase Agreement, the Series A Lease Agreement (including
the Lease Payments) and the Series A Service Agency Agreement and all proceeds of the foregoing.
Such interests, together with the Series A Reserve Account and the Series A Transaction Account and
the monies deposited therein comprise the "Series A Trust Assets". Each Series A Sukuk represents
an undivided 1.0 per cent. ownership interest in the Series A Trust Assets.
Likewise, pursuant to the Series B Trust Agreement, the SPV will convey to the Trustee its beneficial
interest in the Series B Land Parcels and assign to the Trustee all its rights, title, interest and benefit,
present and future, in, to and under the Series B Purchase Agreement, the Series B Lease Agreement
(including the Lease Payments) and the Series B Service Agency Agreement and all proceeds of the
foregoing. Such interests, together with the Series B Reserve Account and the Series B Transaction
Account and the monies deposited therein comprise the "Series B Trust Assets". Each Series B
Sukuk represents an undivided 0.5 per cent. ownership interest in the Series B Trust Assets.
Leases
A summary of the terms of the Lease Agreements and the related Lease Payments, Land Parcels and
Insurance Policies is described in "The Leases (Ijarah)" below.
Accounts
The Transaction Administrator will maintain and operate on behalf of the Trust the following
accounts:
(a)
(b)
(c)
(d)
the Series A Reserve Account;
the Series B Reserve Account;
the Series A Transaction Account; and
the Series B Transaction Account.
With respect to the Reserve Accounts, Guthrie shall ensure that there shall at all times be standing to
the credit of each Reserve Account an amount equal to the Periodic Distribution Amount to be
distributed on the related Series of Sukuk on the next Periodic Distribution Date. The monies
deposited in each Reserve Account may be used to meet any distributions on the related Series of
Sukuk to the extent that there is a shortfall in the amount standing to the credit of the related
Transaction Account. Any such amount withdrawn from any Reserve Account shall be replenished by
Guthrie at least one month prior to the next Periodic Distribution Date.
Distributions from the relevant Trust Assets to holders of the related Series of Sukuk will be made out
of funds standing to the credit of the related Transaction Account.
Distributions on the Trust Assets
Pursuant to each Trust Agreement, the Trustee holds the relevant Trust Assets for and on behalf of the
holders of the related Series of Sukuk. On each Periodic Distribution Date, the Transaction
Administrator shall apply (i) the monies standing to the credit of the related Transaction Account, (ii)
to the extent that the monies referred to in (i) above are insufficient to meet the distributions set out in
paragraph (a) below, an amount equal to the shortfall from the related Reserve Account or (iii) if such
Periodic Distribution Date is a Dissolution Date in respect of the relevant Series of Sukuk, all monies
48
standing to the credit of the related Reserve Account, in the following order of priority:
(a)
first, in or towards payment pari passu and rateably of all amounts due and unpaid on such
Series of Sukuk in respect of Periodic Distributions
(b)
second, only if such payment is made on the related Dissolution Date, in or towards payment
pari passu and rateably of all principal due and unpaid in respect of such Series of Sukuk; and
(c)
third, only if such payment is made on the related Dissolution Date, in payment of the surplus
(if any) to Guthrie.
Trust Certificates
The Trustee can only deal with the Trust Assets in accordance with the provisions of the Trust
Agreements and the related Conditions, which are each governed by New York law.
The Sukuk do not represent debt obligations of the Trustee, but are instruments which evidence the
Sukukholders' beneficial ownership of, and thus proprietary interest in, the relevant Trust Assets.
Accordingly, the sole recourse of the holders of each Series of Sukuk is to the related Trust Assets.
The Sukukholders have no recourse to any other assets of the Trustee.
As the Trust Assets are held on trust for the Sukukholders, they are not assets of the Trustee. The
Trustee will be entitled, pursuant to each Trust Agreement, to reimburse itself from the relevant Trust
Assets for costs, expenses and liabilities reasonably incurred in its performance of its duties as trustee
of the related Trust. However, the Trustee's creditors (other than relevant Sukukholders) will have no
recourse to the Trust Assets. The Trustee's obligations under the Trusts will also continue
notwithstanding the commencement of winding up proceedings against the Trustee.
Consequently, the credit exposure underlying the obligations owed to the Sukukholders is primarily
that of Guthrie and not that of the Trustee.
49
THE TRUSTEE
Bank Islam (L) Ltd (the "Trustee") is, and any successor trustee appointed under the Trust
Agreements will be, a company which is incorporated in Labuan under the Offshore Companies Act,
1990 and licensed under the Offshore Banking Act, 1990. The Trustee has obtained the written
approval of the Labuan Offshore Financial Authority to act as trustee in respect of the issue of the
Certificates.
The Trustee has a general duty to preserve the Trust Assets and to act in the best interests of the
Sukukholders. The Sukukholders have a right in equity to require the Trustee to comply with its
duties as trustee and to compensate the relevant Trust if it suffers loss owing to the Trustee’s breach.
In accordance with the terms of each Trust Agreement the relevant Sukukholders will have the ability
to remove the Trustee from its position. The Trustee may retire from its position on six months'
notice provided that no such resignation may take effect until a replacement is selected.
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THE LEASES (IJARAH)
First Global Sukuk Inc., a special purpose company incorporated in Labuan, Malaysia under the
Offshore Companies Act, 1990 (the "SPV"), will enter into (i) a purchase agreement with Kumpulan
Jerai Sdn Bhd, as subsidiary of Guthrie (the "Series A Seller") in respect of the Series A Land Parcels
(the "Series A Purchase Agreement") and (ii) three purchase agreements (each a "Series B
Purchase Agreement") with each of Kumpulan Jerai Sdn Bhd, Kumpulan Linggi Sdn Bhd and
Kumpulan Kamuning Sdn Bhd, each a subsidiary of Guthrie (together, the "Series B Sellers") in
respect of the Series B Land Parcels.
Pursuant to the Series A Purchase Agreement, the Series A Seller will declare itself a bare trustee of
its interests in the Series A Land Parcels for the benefit of the SPV and convey the beneficial interest
in the Series A Land Parcels to the SPV. Thereafter the SPV will lease its beneficial interest in the
Series A Land Parcels to Guthrie pursuant to an agreement (the "Series A Lease Agreement").
Pursuant to the Series B Purchase Agreements, the Series B Sellers will declare themselves bare
trustee of their respective interests in the Series B Land Parcels for the benefit of the SPV and convey
the beneficial interest in the Series B Land Parcels to the SPV. Thereafter the SPV will lease its
beneficial interest in the Series B Land Parcels to Guthrie pursuant to an agreement (the "Series B
Lease Agreement").
Pursuant to each Lease Agreement, the SPV and Guthrie will enter into several six-month leases, with
the first such lease beginning on the Closing Date and the last such lease terminating on the Scheduled
Dissolution Date of the related Series of Certificates. The "term" of lease shall refer to the period from
the commencement of the first such six-month lease to the termination of the last such six-month
lease. The lease term under the Series A Lease Agreement is for a period of three years, commencing
on the Closing Date and terminating on the Series A Scheduled Dissolution Date. The lease term
under the Series B Lease Agreement is for a period of five years, commencing on the Closing Date
and terminating on the Series B Scheduled Dissolution Date.
The SPV will, pursuant to the Trust Agreements, convey to the Trustee its beneficial interest in the
Land Parcels and assign to the Trustee all its rights, title, interest and benefit, present and future, in, to
and under the Purchase Agreements and the Lease Agreements. See "The Trusts" above.
Under the Shariah principle of Al-Ijarah Al-Muntahiyah Bit-Tamlik, at the end of the relevant lease
terms, Guthrie will purchase the beneficial interest in the relevant Land Parcels from the Trustee.
Under each Lease Agreement, Guthrie, as lessee in respect of the relevant Land Parcels, will be
responsible for all costs and expenses associated with, among others, the use, lease and registration of
the Land Parcels. The SPV, as lessor in respect of the Land Parcels, will retain responsibility for the
maintenance of the Land Parcels. Pursuant to the Service Agency Agreements, the SPV will appoint
Guthrie as its service agent for the purposes of providing adequate maintenance (including conducing
periodic inspections of the Land Parcels on the SPV’s behalf and keeping the Land Parcels in optimal
condition) in respect of the Land Parcels and for the purpose of procuring and maintaining adequate
insurance against loss and damage to the Land Parcels. The SPV will be named in all insurance
policies as the beneficiary or loss payee. The SPV's rights, title, interest and benefit, present and
future, in, to and under such insurance policies will be assigned to the Trustee (as part of the Trust
Assets) pursuant to the Trust Agreements. See "The Trusts" above.
In exchange for its rights in respect of the Land Parcels pursuant to the Lease Agreements, Guthrie
will be obliged to make Lease Payments. Such payments will be equivalent to the aggregate amounts
payable on the Certificates on the forthcoming Periodic Distribution Date. The Series A Lease
Payments and the Series B Lease Payments will be made by Guthrie on each Periodic Distribution
51
Date. An amount equal to each such Lease Payment will be paid, on the date falling one month prior
to each Periodic Distribution Date, directly to the related Transaction Account. The deposit of such
monies will not constitute a Lease Payment, and may not be withdrawn or transferred by the
Transaction Administrator or the Trustee, until the relevant Periodic Distribution Date upon which the
Transaction Administrator will withdraw such monies on deposit in the relevant Transaction Account
and use such amount to make payments on, among other things, the related Sukuk in the order of
priority set out in "The Trusts - Distributions on the Trust Assets".
Under each Lease Agreement:
(a)
(b)
the SPV will have the option (the "Put Option"), which it will assign to the Trustee for the
benefit of the holders of the Series of Sukuk related to such Lease Agreement pursuant to the
related Trust Agreement, to require Guthrie to purchase the beneficial interest in the related
Land Parcels at a price equal to the principal amount of such Series of Sukuk plus the
aggregate Periodic Distribution Amount payable on the Sukuk (the "Dissolution Distribution
Amount") on the date of such redemption:
(i)
on the Unscheduled Dissolution Date in respect of such Series of Sukuk; and
(ii)
on the Scheduled Dissolution Date in respect of such Series of Sukuk; and
Guthrie has the option (the "Call Option") to require the SPV or, after the assignment to the
Trustee of the SPV's interests in such Lease Agreement pursuant to the relevant Trust
Agreement, the Trustee to sell the beneficial interest in the relevant Land Parcels to it on the
related Scheduled Dissolution Date at the related Dissolution Distribution Amount.
In respect of a Scheduled Dissolution of the Series A Trust, on each Series A Partial Deposit Date,
Guthrie will deposit in the Series A Transaction Account an amount equal to 20 per cent. of the
Dissolution Distribution Amount in respect of the Series A Certificates. Upon the exercise of either
the Put Option or the Call Option in respect of the Series A Lease Agreement, the Trustee will use the
Dissolution Distribution Amount standing to the credit of the Series A Transaction Account to redeem
the Series A Certificates. In respect of an Unscheduled Dissolution of the Series A Trust, Guthrie will
deposit the aggregate Dissolution Distribution Amount in respect of the Series A Certificates into the
Series A Transaction Account prior to the Series A Scheduled Dissolution Date in accordance with
the instructions of the Trustee issued in connection with its exercise of the Put Option in respect of the
Series A Lease Agreement.
In respect of an Unscheduled Dissolution of the Series B Trust, on each Series B Partial Deposit Date,
Guthrie will deposit in the Series B Transaction Account an amount equal to 20 per cent. of the
Dissolution Distribution Amount in respect of the Series B Certificates. Upon the exercise of either
the Put Option or the Call Option in respect of the Series B Lease Agreement, the Trustee will use the
Dissolution Distribution Amount standing to the credit of the Series B Transaction Account to redeem
the Series B Certificates. In respect of an Unscheduled Dissolution of the Series B Trust, Guthrie will
deposit the aggregate Dissolution Distribution Amount in respect of the Series B Certificates into the
Series B Transaction Account prior to the Series B Scheduled Dissolution Date in accordance with the
instructions of the Trustee issued in connection with its exercise of the Put Option in respect of the
Series B Lease Agreement.
52
DESCRIPTION OF THE SPV
General
First Global Sukuk Inc. (the "SPV") was incorporated in Labuan, Malaysia for an unlimited duration
and registered on 16th October, 2001 under the Offshore Companies Act, 1990 with registration
number LL03011. The registered office of the SPV is Level 14, Block 4, Office Tower, Financial
Park Labuan, Jalan Merdeka, 87000 Labuan F.T.
Bank Negara Malaysia, by way of its letter to the director of the SPV, has declared the SPV a nonresident for exchange control purposes, subject to the condition that the SPV shall not undertake any
transaction with the residents of, or deal in the currencies of, Israel and the Federal Republic of
Yugoslavia (Serbia and Montenegro) without the prior permission of the Controller of Foreign
Exchange.
The ordinary shares of the SPV are held by, or on behalf of, BIMB International Islamic Trust
(Labuan) Sdn Bhd (the "SPV Administrator") under the terms of the SPV Administration Agreement
dated 30th November, 2001 entered into between the SPV and the SPV Administrator (the "SPV
Administration Agreement"). The SPV Administrator has no beneficial interest in and derives no
benefit other than its fees from holding the ordinary shares in the SPV.
The SPV has no employees. Certain affairs of the SPV (including the preparation of the necessary
books of account and records and certain other corporate, secretarial and administrative services and
the provision of directors) will be managed by the SPV Administrator pursuant to the SPV
Administration Agreement.
Capitalisation
The authorised ordinary capital of the SPV is U.S.$2.00 divided into two ordinary shares of U.S.$1.00
par value each. All of the issued shares of the SPV are fully paid.
The initial proposed capitalisation of the SPV as of the Closing Date after giving effect to the issuance
of the Certificates (before deducting the expenses of the offering of the Certificates) is as set forth
below:
As at the
Closing Date
Share Capital .....................................................................................................................
U.S.$2.00
Total Capitalisation ...........................................................................................................
U.S.$2.00
The director of the SPV is Mr Mohamad Najib Shaharuddin. Mr. Mohamad Najib Shaharuddin was
the first head of banking operations of Bank Islam (L) Ltd and served in that capacity from 1997 to
2000. Prior to that, he was a manager in the accounting/finance department of Bank Islam Malaysia
Berhad, the holding company of Bank Islam (L) Ltd. Mr. Mohamad Najib Shaharuddin is a member of
the Malaysian Institute of Accountants and a member of the Certified Practising Accountants,
Australia. Mr Mohamad Najib Shaharuddin is also the principal officer of the SPV Administrator and
the SPV Administrator is the corporate secretary of the SPV.
The business address of the director is Level 15, Block 4, Office Tower, Financial Park, Labuan, Jalan
Merdeka, 87000 Labuan F.T.
53
Financial Statements
Since the date of incorporation, the SPV has not commenced operations. No financial statements of
the SPV have been prepared. The SPV is required to produce financial statements on an annual basis
following the requisite holding of the annual meeting of the SPV's shareholders.
54
DESCRIPTION OF THE GROUP
History and Background
Guthrie has its origins in a firm established in 1821 and was converted to a public company under the
Companies Act, 1965 on 2nd September, 1987. Guthrie's shares have been listed and traded on the
KLSE since 25th August, 1989.
Guthrie is an investment holding company and it also provides research, agricultural and advisory
services. Through its subsidiaries and associated companies, the Group's primary lines of business
include the production and processing of palm oil, palm kernel and rubber, property development and
general trading.
Plantations
Palm Oil. Plantation business has been the core activity of the Group and is expected to continue to be
so. The Group has expertise in plantation operations including research, which has been built up over
time. In the last few years, the Group has increased its planted hectarage by opening a new plantation
in Palembang, South Sumatra, Indonesia.
The higher cost of production and the higher price of land in Malaysia were the main driving factors
behind the Group's decision to begin operations in Indonesia. Guthrie has been developing plantations
in Indonesia, through P.T. Guthrie Pecconina Indonesia, with 15,682 ha of land having being
acquired. However, the organic growth in opening up new plantation land in South Sumatra, while
proved to be effective, has been very slow in increasing its plantation hectarage. At the end of 2000, a
total of 12,188 ha had been planted with oil palm seedlings in Palembang, South Sumatra.
In March 2001, pursuant to the Share Acquisition, the Group increased its plantation land bank by
more than 203,764 ha (almost double its then existing size) and increased the number of the Group's
palm oil mills by 11 units to 24 mills. As part of the acquisition, the Group also acquired a 20% stake
in another 59,094 ha of plantation land. The Group paid a total of U.S.$368 million for the
acquisitions, which were financed through the Acquisition Facility. The size of the landbanks owned
by the Group and the number of mills operated and constructed by it are as follows:
Crop
Oil Palm
- Mature (ha)
- Immature (ha)
Total (ha)
Other Plantation Land, excluding property development (ha)
Total Land Area (ha)
Mills
- In Operation
- Under Construction
Total
Total Current Capacity (tons/hour)
*Does not include 59,094 ha in which Guthrie has a partial interest.
Malaysia
Indonesia
Total
71,926
28,052
99,978
139,600
22,092
161,692
211,528
50,144
261,672
3,097
57,754
60,851
103,075
219,448*
322,523
13
0
13
11
2
13
24
2
26
361
385
746
55
The Group, through Guthrie Plantation & Agricultural Services Sdn. Berhad ("GPAS") and HRU Sdn.
Berhad. ("HRU"), also provides plantation consultancy services and oil palm planting materials to
other plantation operators in the region. In terms of market share, GPAS and HRU command
approximately 30% of the total local DxP oil palm seed sales among the 14 seed producers in
Malaysia. The Group is amongst the first oil palm seed producers accredited with MS 157 in 1975 and
ISO 9002 in 1996 by SIRIM Berhad, the government-owned national organisation for standardisation
and quality. On consultancy, GPAS provides a range of services including initial project feasibility
studies, plantation evaluation assignments, palm oil mill advisory and agronomic services covering
more than 250,000 ha of plantations both within and outside Malaysia.
Rubber. The Group recently restructured its Malaysian rubber processing and trading under one
subsidiary, called Guthrie Rubber Processing Sdn. Berhad. This was due mainly to the depletion of
rubber production within the Group and, hence, the need to ensure rubber activities were accountable
on their own. With a majority of rubber fields being replanted with oil palms, the production of rubber
in the year 2000 was only 3,387 tons, a reduction of 81.47% from the previous year. The conversion
of rubber to oil palms is scheduled to be completed in 2002. The Group continues to maintain its
presence in the international rubber trading markets through its subsidiaries in the United Kingdom
and the United States.
Property
As part of its plan to diversify its earnings base, the Group has ventured into property development.
The Group's freehold property development is mainly centered in the Klang Valley. The Group's
showpiece property project is in Bukit Jelutong, Shah Alam, and is developed by Guthrie Property
Development Holding Sdn Berhad ("GPDH"), which is also the developer of Bukit Subang, Shah
Alam. New launches of residential units in Bukit Jelutong since its inception have consistently
attracted strong response from the public.
GPDH's wholly-owned subsidiary, Syarikat Pembangunan Hartanah Guthrie Sdn. Berhad, is
developing Sungai Kapar Indah in Klang. The mixed development project, which is located in
between Klang and Kapar, has drawn strong response from the public for residential units.
The Group's current projects are as follows:
Bukit Jelutong
Bukit Subang
Sg. Kapar Indah
Location
Shah Alam
Shah Alam
Klang
Acreage
2205
250
578
Total units
6900
3050
6185
Expected cumulative units
sold up to end of 2001
3328
2630
2600
Year of commencement
1995
1997
1998
Expected completion
2010
2004
2004
Four of the Group's properties: Bukit Jelutong, Bukit Subang, Ladang Elmina and Ladang Bukit
Lagong are proposed to be linked by a 25 km expressway (the "Guthrie Corridor Expressway") to
be built and operated by Guthrie Corridor Expressway Sdn. Berhad ("GCE"), a wholly-owned
Malaysian subsidiary of Guthrie.
56
The concession agreement to design, construct, manage and maintain the Guthrie Corridor
Expressway and other ancillary facilities on a build, operate and transfer basis for a period of 33 years
and to collect tolls in connection therewith was entered into between GCE and the government of
Malaysia on 18th July, 2000. The Guthrie Corridor Expressway will link Shah Alam to Kuang,
Selangor and will form the western link of the Kuala Lumpur outer ring road, complementing the
North-South Expressway, state and federal roads. The Guthrie Corridor Expressway, which will link
four of the Group's properties, will enhance the value of the Group's land bank in those areas.
Haron Estate Development Sdn. Bhd., a wholly-owned subsidiary of Guthrie, has entered into a sale
and purchase agreement to dispose of a parcel of land for a cash consideration of approximately
RM565,000,000 to Golden Hope Properties (Pahang) Sdn. Berhad, a wholly-owned subsidiary of
Golden Hope Plantations Berhad (one of the main producers of palm oil in Malaysia, see "Description
of the Group - Competition and Strategy - Plantations").
Corporate Information
Share capital
As at 31st October, 2001, Guthrie had an authorised share capital of RM1,500,000,000 divided into
1,500,000,000 ordinary shares of par value RM1.00 each. As at 31st October, 2001, 1,000,292,000
shares have been issued and fully paid up.
Substantial shareholders
As at 31st October, 2001, substantial shareholders (those with shareholding interests of over 5 per
cent.) of Guthrie were as follows:
Shareholders
Stake (%)
Permodalan Nasional Berhad ("PNB")#
41.83+
Sekim Amanah Saham Bumiputera ("ASB")
27.20*
Employees Provident Fund Board
6.74
+
13.50% of the shares are held by Mayban Nominees (Tempatan) Sdn. Bhd. as nominee for PNB
*
The shares are held by Amanah Raya Nominees (Tempatan) Sdn Berhad as nominee for ASB
#
Together with the shares held by the various units trusts (including ASB) managed by PNB, PNB holds 72.04% of the
shares in Guthrie
Group Restructuring
Guthrie is currently considering the possible restructuring of the Group in order to, among other
things, streamline the operations of the various companies in the Group. The proposed exercise is in
the preliminary stages. The proposed exercise, if implemented, is not expected to have a material
adverse effect on the Sukuk or on Guthrie’s ability to make payments under the Lease Agreements.
57
Employees and Labour Relations
As of 31st August, 2001, Guthrie had approximately 50,000 employees, including its employees in
Indonesia. The Group has cordial relations with the labour unions in Malaysia and Indonesia and
there have been no material disruptions of the Group's business operations on account of employee or
labour disputes or strikes. The Group has relations with the following Malaysian and Indonesian
labour unions:
(i)
Malaysian Agricultural Producers Association;
(ii)
All Malayan Estates Staff Union;
(iii)
Machinery Manufacturing Employees' Union;
(iv)
National Union of Commercial Workers; and
(v)
Serikat Pekerja Seluruh Indonesia.
Related Party Transactions
Related parties are companies with common direct or indirect shareholders and/or directors. Guthrie
has significant transactions with related parties within the Group on normal commercial terms agreed
between the parties as follows:
Guthrie
2000
1999
RM'000
RM'000
77
511
7,028
12,800
23,982
23,237
22,930
28,888
(32,354)
(29,022)
0
26,677
71,076
326,318
Advances from Guthrie's subsidiaries
(157,409)
(20,610)
Loans to Guthrie's subsidiaries
(395,358)
456,274
355,788
(356,372)
Trade transactions
Sales to directors of Guthrie (at Group level)
Selling commission and other expenses charged to Guthrie's subsidiaries
Agency fees charged to Guthrie's subsidiaries
Non-trade transactions
Interest paid to Guthrie's subsidiaries
Interest received from Guthrie's subsidiaries
Purchase of fixed assets from one of Guthrie's subsidiary
Advances to Guthrie's subsidiaries
Loans from Guthrie's subsidiaries
In addition, Guthrie provides loans to employees of the Group and, as of 1st October, 2001,
RM1,823,417.49 of such loans is outstanding.
58
Board of Directors
The Board of Directors has ultimate responsibility for the management of the affairs of Guthrie. As of
the date of this Offering Circular, the directors of Guthrie are as follows:
Age
No. of years
as director of
Guthrie
Name
Current Board Position
General (Rtd) Tan Sri Dato' Mohd Ghazali Haji Che Mat
Non-Executive Chairman
70
13
Tan Sri Dato' Abdul Khalid Ibrahim
Executive Director and
Group Chief Executive
54
13
Tan Sri Dato' Dr Lin See Yan
Non-Executive Director
62
6
Tan Sri Dato' Mohd Abu Bakar Mohd Noor
Non-Executive Director
63
3
Dato' Abdul Aziz Ibrahim
Non-Executive Director
65
11
Ghazali Awang
Executive Director
54
7
Wong Chong Wah
Non-Executive Director
57
13
Ng Kee Wei
Non-Executive Director
79
9
Siti Ramelah Yahya
Non-Executive Director
52
6
Ramli Ibrahim
Non-Executive Director
61
6
Norzilah Megawati Dato' Abdul Rahman
Alternate Director to Tan Sri
Dato' Abdul Khalid Ibrahim
41
9
Ong Euwan George
Alternate Director to Wong
Chong Wah
46
13
Material Litigation
(i)
Guthrie has been named as a defendant in a claim against it for U.S.$25,760,000.00 plus
damages in the amount of 9% of U.S.$25,760,000.00 per annum and interest in respect of an
alleged breach of contract by Guthrie. On 29th October, 2001, the plaintiff's claim was
dismissed by the Court of First Instance of South Jakarta and the plaintiff was ordered to bear
the costs of the proceedings.
(ii)
Two of Guthrie's subsidiaries have been named as defendants in a claim against them for
damages in the amount of Rp406,813,788,780 (approximately RM150,000,000 or
approximately U.S.$40,000,000) in respect of a fire allegedly caused by such subsidiaries. At
the Court of First Instance, the plaintiffs' claims were partially upheld and the subsidiaries
were ordered to pay to the plaintiffs Rp150,000,000 (approximately RM50,000 or
U.S.$10,000). The subsidiaries appealed to the High Court successfully, but this matter is
currently on appeal by the plaintiffs to the Supreme Court.
(iii)
A subsidiary of Guthrie has been named as a defendant in a claim against them for damages in
the amount of Rp71,746,458,500 (approximately RM25,000,000 or approximately
U.S.$7,000,000) in respect of the alleged wrongful occupation and use of certain land parcels
and an alleged breach of contract relating thereto. The Court of First Instance has found in
favour of the subsidiary but this matter is currently on appeal to the High Court.
Other than as set out above, there is no single legal proceeding, pending or threatened, which is above
RM20 million (approximately U.S.$5,260,000) in value or which Guthrie believes is material in the
context of the issue of the Certificates. There are a number of proceedings, other than those set out
above, currently instituted against subsidiaries of Guthrie through the Share Acquisition. However,
the aggregate claims in such proceedings are less than RM20 million.
59
Group Structure
Principal Subsidiaries of Guthrie by Sector
KUMPULAN GUTHRIE BERHAD
Plantation
Property
Trading
Manufacturing
Others
Kumpulan Linggi
Sdn. Bhd.
Guthrie Property
Development Holding
Sdn Bhd
Guthrie
Symington
Limited - UK
Integrated
Brickworks Sdn
Bhd
Guthrie
Technologies
Sdn Bhd
Kumpulan Jerai
Sdn. Bhd.
Accord Shipping &
Forwarding Sdn. Bhd.
Guthrie Latex
Inc. - USA
Guthrie MDF
Sdn Bhd
Guthrie Corridor
Expressway Sdn
Bhd
Kumpulan
Kamuning Sdn.
Bhd.
Syarikat
Pembangunan
Hartanah Guthrie Sdn
Bhd
Healthline
Products
Limited
Guthrie
Dimensional
Stones Sdn Bhd
Guthrie Rubber
Processing Sdn.
Bhd.
Guthrie Harta
(Damansara) Sdn.
Bhd.
Guthrie
Furniture Sdn
Bhd
Guthrie Polymer
Sdn Bhd
Highlands &
Lowlands Berhad
Syarikat Perumahan
Guthrie Sdn Bhd
Guthrie Wood
Products Sdn
Bhd
Guthrie Ropel
Berhad
Haron Estate
Development Sdn Bhd
Guthrie
Industries
Malaysia Sdn
Bhd
Guthrie Export
Sdn Bhd
Harvard Hotel (Jerai)
Sdn Bhd
Guthrie
Medicare
Products (NS)
Sdn Bhd
HRU Sdn Bhd
Harvard Golf Resort
(Jerai) Bhd
Guthrie Plantation
& Agricultural
Services Sdn Bhd
Guthrie Landscaping
Sdn Bhd
Guthrie Biotech
Laboratory Sdn
Bhd
Syarikat Jeleta Bumi
Sdn. Bhd.
Chemara
Laboratories Sdn
Bhd
Vicworld (M) Sdn.
Bhd.
P.T. Guthrie
Pecconina
Indonesia
Malaysia Land
Development Co. Bhd
P.T. Minamas
Gemilang
P.T. Anugerah
Sumbermakmur
60
Competition and Strategy
Plantation
As palm oil is a commodity, there is no direct competition among palm oil producers. However, the
main competitors to the palm oil industry as a whole are:
Soyabean Producers :
Rapeseed
:
Palm Oil
:
USA, Brazil, Argentina
Canada, EU 15, Australia
Indonesia
The other main palm oil producers in Indonesia are:
Company
Golden Agri-Resources Group
PT Astra Agro Lestari
Raja Garuda Mas Group
PT London Sumatera
The other main palm oil producers in Malaysia are IOI Berhad, Golden Hope Plantations Berhad,
Kuala Lumpur Kepong Berhad and Sime Darby Berhad.
In terms of plantation size, the Group currently has 103,075 ha of plantation land in Malaysia.
Between 1997 and 2000, the Group added 15,682 ha of plantation land in Indonesia to its plantation
landbank with a further 203,764 ha of plantation land being acquired in Indonesia in 2001. The size
of the Group's plantation holding allows the Group to take advantage of economies of scale. In
addition, the Share Acquisition provides the Group with the opportunity to expand into Indonesia as
the country is set to overtake Malaysia as the world's largest producer of palm oil.
Increasing Yield and Lowering Costs. Although the Group is experienced in both rubber and oil palm
cultivation, it has been aggressively phasing out rubber from its plantations and the conversion of
rubber to oil palms in Malaysia is scheduled to be completed in 2002. The Group decided on this
course of action because of the low price of rubber and its intensive labour requirements and the better
returns from palm oil. Almost all of the estates of the Group in Malaysia are now planted with oil
palm and the Group's plantations in Indonesia are also almost exclusively planted with oil palm. Out
of the 99,978 ha planted with oil palm in Malaysia, 71,926 ha (or 71.9%) is currently mature. In
Indonesia, out of the 161,692 ha planted with oil palm, 139,600 ha (or 86.3%) is currently mature,
allowing the Group to immediately earn income from this recent investment.
The Group decided to expand into Indonesia due to the rising cost of production and labour shortage
faced by the plantation sector in Malaysia. The experience of the Group through PT Guthrie
Pecconina Indonesia, a subsidiary of the Group established in Indonesia in 1995 to undertake oil palm
plantation business, has shown that the Indonesian plantation sector in Indonesia is able to record
higher yields compared to those in Malaysia and at lower cost. Labour is abundant in the country
while the price of land is much lower than that in Malaysia.
A core operating strategy of the Group is its Vision 25:25 i.e. to produce 25 tons of fresh fruit bunches
per ha and a 25% oil extraction rate with an oil yield of 6.35 tons per ha, as compared with the current
20 tons of fresh fruit bunches per ha, 19% oil extraction rate per ha and oil yield of 4 tons per ha
recorded by the Group. The Group proposes to achieve this Vision by 2007. Other than through
expansion into Indonesia, the Group plans to achieve its Vision by improved milling practices,
aggressive replanting of oil palm plantations, improved crop quality and mechanisation. The Group's
mechanisation programme seeks to address the problem of labour shortage faced by the plantation
61
sector in Malaysia. At present, mechanisation and improved field practices have improved land to
man ratio from 13 ha per manday to 19 ha per manday. The Group aims to improve this ratio to 25 ha
per manday.
Focus on Palm Oil. Palm oil faces competition from the following 16 other types of oils:
















Soybean oil
Cotton oil
Groundnut oil
Sunflower oil
Rapeseed oil
Sesame oil
Corn oil
Olive oil
Palm kernel oil
Coconut oil
Butter
Lard
Fish oil
Linseed oil
Castor oil
Tallow and greases
Although a direct substitute for palm oil is soybean oil, palm oil is able to trade at a discount to
soybean oil since it is the world's lowest cost edible oil. With an oil content of 20% (as compared
with soy at 18%), oil yield per ha of 3,200 kg (as compared with soy at 424 kg) and cost per ton of
U.S.$225 (as compared with soy at U.S.$400 per ton), the high margins of palm oil provide a strong
competitive advantage. (Source : Malaysian Palm Oil Board, LMC International)
In terms of palm oil supply, growth slowed sharply to 6% in 2000 (from 20.6 million tons in 1999 to
21.8 million tons in 2000) and an estimated 7.2% in 2001 (23.4 million tons) as compared with 22%
in 1999. Due to the financial crisis in Indonesia which led to under-investment in the oil palm sector,
supply growth is expected to be below 3% per annum between 2002 and 2004. The world
consumption of palm oil has risen by 10.6% in 1999 (19.5 million tons), by 11.6% in 2000 (21.7
million tons) and by an estimated 6.6% in 2001 (23.2 million tons). In terms of total output for the 17
oils, growth is also expected to slow to 3.1% in 2001 from 5.2% in 2000 and 4.9% in 1999. In
contrast, the demand for edible oil has grown by 2.5% since 1975. (Source : PORIM, Oil World.)
The increase in demand can be attributed to the following:


Growth in world population of which 80% is from Asia.
Growth in world income that has led to a switch from animal fats to the healthier vegetable oils.
The demand for vegetable oils has grown 4.8% annually from 1980 to 2000 as compared with the
1.6% annual growth for animal fats during the same period.
Source : Oil World.
Experience and Continuing Research and Development. The Guthrie Group has 180 years of
experience in the plantation business and is one of the oldest plantation groups in Malaysia. Guthrie
was a pioneer of large scale cultivation of rubber and oil palm. The Group's 60 years of oil palm
breeding has produced seeds for the Group's own estates and that of others. The high quality of the
seeds of the Group has resulted in the Group commanding 30% of the market share of seed sales in
Malaysia out of the 14 seed producers in the country. The Group is also among the first oil palm seed
62
producers to be accredited with MS 157 in 1975 and ISO 9002 in 1996. Currently, approximately
30% of oil palms in Malaysia originate from the Group's seeds.
The Group's continuing emphasis on research and development has led the Group to invest
approximately RM10 million in the research and development of high yielding clones. Based on
laboratory tests, the Guthrie clones are able to produce yields of up to 29 tons of fresh fruit bunches
per ha (compared with the industry average of 20 tons per ha) and an oil extraction rate of 31%
(compared with the industry average of 19%) producing a yield of 8.99 tons of oil per ha (compared
with the industry average of 4 tons per ha).
The Group has its own agriculture research organisation, Guthrie Research Chemara. Guthrie
Research Chemara provides technical expertise and advice to the Group's estates for improved crop
management. Its main focus areas are:
(i)
Continual on-going research and development in the breeding of high yielding oil palm
planting material in the form of germinated seeds and seedlings in collaboration with GPAS.
These are used for the Group's own plantings as well as for sale.
(ii)
Research and development in biotechnology (through Guthrie Biotechnology Laboratories)
for the production of clonal palm material with high oil, high olein, low height increment and
disease resistance.
(iii)
Field trials on oil palm agronomy to determine the most cost-efficient fertilizers to apply over
the Group's range of soil types.
(iv)
Research in pest and disease control.
Property
The main competitors of the Group in the area of property development are Sime-UEP Berhad, IOI
Properties Berhad and HICOM-Gamuda Berhad.
Choice of Location. The Guthrie Group being the pioneer plantation company in Malaysia had its
choice of location for its estates. This has resulted in the Group having the largest plantation
landbank in the densely populated Klang Valley as compared with major property developers in the
country. Rapid urbanization and economic growth have improved infrastructure in the Klang Valley
which in turn have given these estates potential for property development. At present, the Group has
over 17,600 acres of plantation land in the Klang Valley with property development potential.
Lower Cost. Being the original owner of the land means that the Group has low holding costs, unlike
non-plantation based property developers who have had to acquire land at current market values. The
Group is therefore better able to weather market cycles. In addition, the Group can control the speed
of this development to be in tandem with the market so as to bring into the market the product type
currently in demand. Another advantage of being a plantation based property developer is that the
Group does not face difficulty in replenishing its landbank.
Access to Property Developments. The Group has announced the development of the Guthrie Corridor
Planned Communities ("GCPC"). GCPC is a development project on a 11,650 acre piece of property
stretching from Shah Alam to Rawang, Selangor. This Corridor is situated within a 30 km radius of
Kuala Lumpur and is within 30 minutes' of the capital city. Development of the GCPC commenced in
1994 with the Bukit Jelutong development. The success of Bukit Jelutong has given the Group a
brand name.
63
The Group will be adding value to the GCPC having won a concession from the Government to build
and operate a tolled expressway through the GCPC. Construction of the 25 km expressway, the
Guthrie Corridor Expressway, has commenced and is due to be completed by 2004. The Expressway
has been designed so as to connect all the lands within the GCPC and to provide optimal access into
the lands. The Guthrie Corridor Expressway forms part of the Kuala Lumpur Outer Ring Road and is
linked to other major highways like the Federal Highway, the North Klang Valley Expressway and the
North-South Expressway.
Although the property market in Malaysia has generally softened, the market for residential property
is still strong, especially that for affordable housing. With an annual population growth of about
2.7%, decreasing household size, a young population and rising urbanization, housing in good
locations are still in demand. This environment is supported by the current low interest regime and
availability of financing from financial institutions with the encouragement of the Government.
Advance Planning. Since 1994, the Group has embarked on a programme of identifying parcels of
freehold land with property development potential and has proceeded to convert the status of these
lands from plantation land to land for property development. As a result, at any one time the Group
has at least 2,000 acres of land converted to property development status ready for implementation
with 8,000 acres in the process of being converted.
The range of products the Group has projected for its future is well balanced:
(i)
development of more landed properties in comparison with strata;
(ii)
to maintain Sungai Kapar Indah in the medium pricing category;
(iii)
whilst maintaining its upmarket property developments in Bukit Jelutong, to also introduce
medium-high cost products in such area; and
(iv)
to offer medium to medium-high cost products with high quality infrastructure and services in
Bukit Subang 2.
The Group's emphasis is on providing its buyers the best value for their purchase. All major contracts
issued out by the Group are through open tender exercise and the process maintains a high degree of
corporate governance. This process, coupled with the Group's good payment record, allows it to
attract very competitive tenders for its construction works.
64
Prospects
Plantation
The Group's palm oil operations are subject to the cyclical nature of crude palm oil prices. The
Group's expansion into Indonesia is a strategy to weather the effect of cyclical trend of crude palm oil
price. While price is one factor affecting the bottom line of plantation operations, the other factors are
productivity and costs. It is an established fact that Indonesia offers better results in terms of higher
fresh fruit bunches yield and oil extraction rate compared to Malaysia and these bode well for the
Group's strategy of achieving its Vision 25:25, a target set by the Group to obtain an annual yield of
25 tons of fresh fruit bunches per ha with an oil extraction rate of 25%. By increasing its land bank to
more than 300,000 ha and with current planted hectarage more than 250,000 ha, the Group is well
poised to deliver close to one million tons of crude palm oil in five years' time. Most of the current
planted hectarage acquired in Indonesia are currently with young palms, which will reach their peak
period of production in the near future. The cost of production is much lower in Indonesia than in
Malaysia and during the cycle of the low crude palm oil price, keeping costs to the lowest possible
level is the key to ensuring the sustainability of the Group's overall operations.
Property
The Group will continue to capitalise on the strong demand for its property units. Bukit Jelutong,
Shah Alam is again expected to outperform other property projects. The sale of property units,
especially residential units and industrial land in Sungai Kapar Indah, prompted the Group to plan for
another mixed development project at an adjoining agricultural land measuring 700 acres. As part of
the Guthrie Corridor Development, another 1,000 acres of land in Ladang Subang, Shah Alam will
also be converted to complement the existing 250-acre development of Bukit Subang.
New projects to be launched in the next 3 years:
Bukit Subang
Sg. Kapar Indah
Location
Shah Alam
Acreage
1,000
700
Total units
7,207
8,100
Expected date of launch
1st quarter 2003
Klang
3rd quarter 2002
The Group has factored into its strategy the soft market scenario for commercial and industrial
properties in its projections. The Group believes that its properties in this category will still be in
demand due to its strategic location.
65
CAPITALISATION OF THE GROUP
The consolidated capitalisation and indebtedness of the Group as at 30th June, 2001 was as follows:
30th June, 2001
unaudited
RM ‘000
Short-term debt:
Current instalments of long-term debt...
Other short-term debt ............................
Total short-term debt .............................
274,761
1,083,943
1,358,704
Long-term debt:
Long-term debt, excluding current
instalments .............................................
Total long-term debt...............................
1,688,589
1,688,589
Total Debt Funding ..........................................
3,047,293
Shareholders Funds:
Equity shares, RM1.00 par value,
Issued and Fully Paid .............................
Reserves .................................................
Total Shareholders Funds................................
1,000,292
1,189,794
2,190,086
It is noted that Guthrie's total debt or gearing position will not increase as a result of Guthrie's
obligations under the Lease Agreements since the issue of Sukuk (and the related entry into the Lease
Agreements) are effectively refinancing for existing debt.
66
SUMMARY OF FINANCIAL INFORMATION OF THE GROUP
The following tables present summary consolidated financial information for the Group and
unconsolidated financial information for Kumpulan Guthrie Berhad for each of the financial years in
the three-year period 31st December 1998, 1999 and 2000. The said financial statements have been
derived from, and should be read in conjunction with the audited financial statements of the Group as
set out in Guthrie's annual reports for the relevant years.
Audited
As At or for the Year Ended 31st December
1998
1999
2000
2000
RM ‘000
RM ‘000
RM ‘000
USD ‘000
BALANCE SHEET
Share Capital
Reserves
Total Capital & Reserves
1,000,003
1,190,140
2,190,143
1,000,003
1,318,783
2,318,786
1,000,292
1,321,608
2,321,900
263,234
347,791
611,026
Minority Interest
1,151,724
1,284,456
1,311,168
345,044
88,350
8,883
97,318
3,536,418
172,662
8,796
100,966
18,644
3,904,310
1,770,246
7,459
99,750
9,483
5,520,006
465,854
1,962
26,250
2,495
1,452,631
3,548,972
26,249
3,655,048
21,762
3,689,850
58,615
971,013
15,425
48,566
-
41,477
-
5,791
94,083
1,523
24,758
750,513
(837,882)
(87,369)
1,097,505
(911,482)
186,023
2,642,355
(970,688)
1,671,667
695,356
(255,444)
439,912
3,536,418
3,904,310
5,520,006
1,452,631
1,580,192
301,327
300,564
(113,795)
104,298
1,617,060
412,575
419,895
(175,175)
244,720
1,597,860
243,805
184,795
(92,527)
92,268
420,489
64,159
48,630
(24,349)
24,281
10.4 sen
24.5 sen
9.2 sen
2.4 cents
Deferred Liabilities
Long-term Borrowings
Retirement Benefits
Deferred Taxation
Deferred Income
Represented by:
Fixed assets
Investments
Deferred Expenditure/Exchange
Differences
Trade Debtors
Current Assets
Current Liabilities
Net Current Assets/(Liabilities)
STATEMENT OF INCOME
Turnover
Operating Profit
Profit after Taxation
Minority Interest
Profit attributable to Shareholders
PER SHARE DATA
Basic Earnings Per Share
67
Kumpulan Guthrie Berhad
Consolidated Profit & Loss Accounts
for the Years Ended 31st December 1998, 1999 and 2000
1998
RM ‘000
1999
RM ‘000
2000
RM ‘000
2000
USD ‘000
1,580,192
(1,061,999)
518,193
1,617,060
(1,017,642)
599,418
1,597,860
(1,169,979)
427,881
420,489
(307,889)
112,600
301,327
412,575
243,805
64,159
Profit before taxation
Taxation
Profit After Taxation
Minority Interest
300,564
(82,471)
218,093
(113,795)
408,876
11,019
419,895
(175,175)
242,946
(58,151)
184,795
(92,527)
63,933
(15,028)
48,630
(24,349)
Profit Attributable to
shareholders
104,298
244,720
92,268
24,281
Revenue Reserve Carried
Forward
386,975
538,828
535,201
140,842
Earnings per share
10.4 sen
24.5 sen
9.2 sen
2.4 cents
Turnover
Cost of Sales
Gross Profit
Operating Profit/(Loss)
68
Kumpulan Guthrie Berhad
Company Profit & Loss Accounts
for the Years Ended 31st December 1998, 1999 and 2000
1998
RM ‘000
1999
RM ‘000
2000
RM ‘000
2000
USD ‘000
43,335
43,335
37,859
37,859
33,051
33,051
8,697
8,697
7,547
(2,035)
(1,962)
(516)
Interest Income
Investment Income
39,219
175,154
29,286
169,428
34,544
141,834
9,090
37,325
Profit before taxation
Taxation
Profit After Taxation
151,000
(38,625)
112,375
155,422
(27,820)
127,602
127,296
(24,165)
103,131
33,498
(6,359)
27,139
Profit Attributable to
shareholders
112,375
127,602
103,131
27,139
Revenue Reserve Carried
Forward
222,354
233,930
249,475
65,651
Earnings per share
11.2 sen
12.8 sen
10.3 sen
2.7 cents
Turnover
Gross Profit
Operating Profit/(Loss)
69
Kumpulan Guthrie Berhad
Consolidated Balance Sheets
As At 31st December 1998, 1999 and 2000
1998
RM ‘000
1999
RM ‘000
2000
RM ‘000
2000
USD ‘000
BALANCE SHEET
Share Capital
Reserves
Total Capital & Reserves
1,000,003
1,190,140
2,190,143
1,000,003
1,318,783
2,318,786
1,000,292
1,321,608
2,321,900
263,234
347,791
611,026
Minority Interest
1,151,724
1,284,456
1,311,168
345,044
88,350
8,883
97,318
3,536,418
172,662
8,796
100,966
18,644
3,904,310
1,770,246
7,459
99,750
9,483
5,520,006
465,854
1,963
26,250
2,495
1,452,633
3,548,972
26,249
3,655,048
21,762
3,689,850
58,615
971,013
15,425
48,566
-
41,477
-
5,791
94,083
1,523
24,758
71,479
157,021
259,720
117,571
5,025
139,697
750,513
47,652
171,679
445,114
144,901
7,661
280,498
1,097,505
127,400
171,007
445,000
177,328
6,293
1,715,327
2,642,355
33,526
45,001
117,105
46,665
1,656
451,401
695,356
(94,523)
(117,840)
(456,478)
(72,000)
(97,041)
(837,882)
(100,328)
(130,219)
(18,643)
(566,108)
(87,600)
(8,584)
(911,482)
(152,065)
(146,434)
(20,233)
(569,682)
(57,617)
(24,657)
(970,688)
(40,017)
(38,535)
(5,324)
(149,916)
(15,162)
(6,488)
(255,444)
(87,369)
186,023
1,671,667
439,912
3,536,418
3,904,310
5,520,006
1,452,633
Deferred Liabilities
Long-term Borrowings
Retirement Benefits
Deferred Taxation
Deferred Income
Represented by:
Fixed assets
Investments
Deferred Expenditure/Exchange
Differences
Trade Debtors
Current Assets
Development Properties
Inventories
Trade Debtors
Other Debtors
Short-term Investments
Deposits, bank balances and cash
Current Liabilities
Trade Creditors
Other Creditors
Deferred Income
Bank Borrowings
Proposed Dividends
Taxation
Net Current Assets/(Liabilities)
70
Kumpulan Guthrie Berhad
Company Balance Sheets
As At 31st December 1998, 1999 and 2000
1998
RM ‘000
1999
RM ‘000
2000
RM ‘000
2000
USD ‘000
1,000,003
391,878
1,391,881
1,000,003
403,080
1,403,083
1,000,292
419,007
1,419,299
263,234
110,265
373,499
640
1,392,521
791
147
1,404,021
1,633,000
14
147
3,052,460
429,736
3
39
803,277
14,824
1,603,428
40,544
1,756,740
37,575
1,727,076
9,888
454,480
Current Assets
Inventories
Trade Debtors
Other Debtors
Amount Due from Subsidiaries
Deposits, bank balances and cash
180
4
70,910
639,101
5,105
533
55,420
359,764
2,744
550
60,674
782,227
1,505,049
144
15,966
205,849
396,065
Current Liabilities
Trade Creditors
Other Creditors
Amounts due to Subsidiary
Bank Borrowings
Proposed Dividends
6,470
19,363
608,138
235,060
72,000
3,898
17,079
391,782
311,365
87,600
2,070
21,299
699,442
280,263
57,617
544
5,605
184,063
73,753
15,162
(225,731)
(393,263)
1,287,809
338,897
1,392,521
1,404,021
3,052,460
803,277
BALANCE SHEET
Share Capital
Reserves
Total Capital & Reserves
Deferred Liabilities
Long-term Borrowings
Retirement Benefits
Deferred Taxation
Represented by:
Fixed assets
Investments
Net Current Assets/(Liabilities)
71
Selected Financial Information of the Group
Historical
The revenue and income of the Group by activity is set out below.
30th June, 2001
31st December, 2000
(6 months, unaudited)
(12 months, audited)
RM '000
RM '000
(1) Revenues
Plantation
254,078
469,128
Agricultural activities
5,723
19,087
Property development
105,555
478,030
Manufacturing
59,793
124,078
General trading
320,238
476,873
339
490
Quarry
Group management and others
Total
9,857
30,174
755,583
1,597,860
(2) Operating income
Plantation
(14,875)
21,680
Agricultural activities
2,034
10,603
Property development
32,617
223,747
Manufacturing
1,100
(5,785)
General trading
7,635
1,641
Quarry
*
(832)
(2,362)
Group management and others
(5,034)
(5,719)
Total
22,645
243,805
31st December, 2000
(6 months, unaudited)
(12 months, audited)
RM '000
RM '000
Total Liabilities (excl. reserves)
5,484,000
4,059,561
Total Assets
7,391,787
6,490,694
70.6
62.5
1.15(X)
0.27(X)
TL as a % of TA
Gearing Ratio
*
30th June, 2001
Total liabilities include current liabilities, minority interest, long-term borrowings and retirement benefits.
The percentage of total liabilities against total assets has increased from 62.5% to 70.6% largely
arising from the acquisition of the Minamas Plantation (Indonesia) which brought in a total of
RM846.426 million in liabilities and a total of RM1.918 billion of assets. Total liabilities as a
percentage of total assets for the Minamas Plantation (Indonesia) as at 30th June, 2001 is 44.1%.
72
30th June, 2001
(6 months, unaudited)
RM '000
Revenue
31st December, 2000
(12 months, audited)
RM '000
755,583
1,597,860
Operating profit
22,645
243,805
Finance expense
(67,649)
(46,397)
Finance and investment income
19,372
12,733
Exceptional items
(2,857)
33,086
Share in the results of associated companies
Profit before taxation
5,612
(281)
(22,877)
242,946
The audited financial results of the Group for the year ended 31st December, 2000 includes a gain of
RM148.8 million on the sale of land at Ladang Bukit Tinggi. In the same year also, crude palm oil
prices traded at an average realised selling price of RM1,012 per ton compared to RM758 per ton for
the first half year ended 30th June, 2001. The loss recorded for the first half year was also largely
attributable to high financing cost totalling RM67.6 million mainly on the RM1.5 billion syndicated
financing for the acquisition of the Minamas Plantation (Indonesia). Another major reason for the
loss in 2001 is the deterioration of Rupiah against U.S. dollar whereby the Group has to bear a net
unrealised exchange loss of RM15.551 million on translation of its U.S. dollar denominated loan.
Projections
Short-term Outlook. Since 30th June, 2001, crude palm oil prices have been on the up-trend with the
average crude palm oil price for the 3rd quarter at RM899 per ton. Crude palm oil exports have been
relatively high in recent months, growing by an average of 30% over the first seven months of this
year as compared to the same period last year. August recorded a marginally higher growth (33%)
mainly due to tight supply in the global edible oil and fat complex. The high export figures should
continue in the coming months for China which is expected to import 300,000 tons of crude palm oil
from Malaysia as a prelude to its accession to the World Trade Organisation in early-2002 and to
bridge the shortage in other edible oil imports. In addition to the above, revenues from the Indonesian
plantations are expected to add significantly to Guthrie's bottom line from 2002 onwards. The
strengthening of the Indonesian Rupiah since the first half of this year should cause a reduction in the
net unrealised loss on U.S. dollar denominated loans.
Based on the cashflows as opined by Guthrie's auditors, the Debt Service Coverage Ratio for the
Group for the following financial years are:
Financial Year
ended 31st December
Debt Service
Coverage Ratio
2001
2.18
2002
2.12
2003
2.23
2004
1.97
2005
2.22
2006
2.51
73
OVERVIEW OF THE PALM OIL INDUSTRY
The information set out in this section is extracted from various publicly available sources and do not
represent the views or forecasts of Guthrie, the SPV or the Trustee.
Industry Overview
Oils and fats are grouped into three main categories: vegetables oils, animal fats and marine oils.
Palm oil is a major vegetable oil, with both food and non-food uses, produced from the fruit of the oil
palm. The oil palm produces both crude palm oil and palm kernel oil. Crude palm oil is the world's
most widely traded vegetable oil. It accounted for 17% of worldwide edible oils consumption and
35% of worldwide edible oils exports in 1999. Oil palm, otherwise known as Elaeis Guineesis Jacq,
is a perennial crop and tends to be cultivated in larger plantations. Palm fruits are not traded but are
delivered to centralised processing plants directly from the plantation.
Total demand for edible oils is driven by world population and income growth. The distribution of
demand for the various types of oils is changing due to technological developments and shifts in
consumer attitudes. Demand varies regionally in line with local availability of edible oils and
consumer preferences. Animal oils and fats account for approximately 20% of all edible oil
consumption.
Though still a competitor of vegetable oils, market share for animal oils is declining steadily, due in
part to health considerations. From 1994 to 1999, the world consumption of all oils and fats (including
animal fats and marine oils) grew at a compounded rate of 4.0% per annum. The growth in vegetable
oils consumption was 5.1% per annum during the same period. This reflects a trend towards an
increasing share for vegetable oils in the fats and oil market. In 2000/01, in terms of the relative
market shares of different vegetable oils, soybean oil accounted for the largest share of total world
demand 23%. Palm oil's share was 20%, however, this share is expected to increase.
Due to the large manpower needs and tropical climates required to produce palm fruits, crude palm oil
is primarily produced in countries located along the equator. Malaysia and Indonesia accounted for
52% and 30% respectively of world-wide palm oil production in 1999. Similarly, developing
countries consume a majority of the product, e.g. Indonesia, China, India, Malaysia and Pakistan.
The growth of palm oil's share in world markets is linked closely to its production costs relative to the
costs of other vegetable oils. Palm oil is the only oil that has consistently been profitable in
comparison to other vegetable oils from the mid 1980s to the end of the 1990s. Improvements in seed
quality and collective estate management experience and practice have contributed significantly to its
profitability.
74
Table: World Production of Major Oils and Fats by Oil Type
Oils and Fats
Vegetable oils
Soybean
Palm
Rapeseed
Sunflower
Cotton
Groundnut
Coconut
Palm Kernel
Olive
Corn
Others
Total
Animal fats- Totals
Marine oils - Totals
Total of oils and fats
October - September (Million Tons)
96-97
97-98
98-99
21.0
23.2
24.6
17.5
17.0
19.3
11.5
12.2
12.6
9.1
8.6
9.3
4.0
4.1
3.9
4.5
4.4
4.8
3.2
3.5
2.3
2.2
2.2
2.4
2.8
2.6
2.4
1.9
1.9
2.0
1.8
1.8
2.0
94/95
20.0
15.1
10.6
8.3
3.8
4.4
3.3
1.9
2.0
1.8
1.7
95-96
20.4
16.2
11.7
8.9
4.1
4.4
2.9
2.1
1.6
1.8
1.7
72.9
18.7
1.4
75.8
19.0
1.4
79.5
19.2
1.3
81.5
19.7
0.8
93.0
96.2
100.0
102.0
99-00
25.3
21.2
14.3
9.6
3.9
4.5
3.1
2.6
2.2
2.0
2.2
00-01
26.7
23.3
14.2
8.9
3.9
4.9
3.4
2.9
2.4
2.0
2.2
85.6
20.7
1.2
90.9
21.0
1.5
94.8
21.1
1.2
107.5
113.4
117.1
Source: Oil World Annual 1998, 1999, 2000 and 2001
An analysis of the comparative production costs for leading palm oil producers reveals that Indonesia
is the lowest cost palm oil producer. Indonesia has taken this position from Malaysia principally
because of its low wage rates and higher than average yields compared to higher wage levels and
scarcity of land in Malaysia.
The Malaysian palm oil industry is the most mature. Malaysia consumes about 15% of its domestic
production and exports the remaining 85% in the form of refined palm oil products. Further growth
opportunities within Malaysia are small because of the high costs of land and labour. To take
advantage of lower production costs in Indonesia, Malaysian palm oil companies have either set up
joint ventures with Indonesian companies to develop palm oil plantations or ventured directly into
Indonesian via the acquisition of oil palm plantations.
As at 4th December, 2000, crude palm oil is trading at approximately U.S.$215 per ton (CIF
Rotterdam) and has historically traded at a slight discount to other major edible oils. Though prices of
the various oils are relatively similar, the production cost of palm oil in most instances is less than half
that of other major edible oils, thus making this industry highly competitive.
In productivity terms, oil palm is the highest producing oilseed crop per ha. The average yield for oil
palm is approximately 4.0 tons per ha, compared to less than 0.5 tons per ha for rapeseed, sunflower
and soybean oil. Production of palm oil from Indonesia and Malaysia has accounted for
approximately 80% of world palm oil production in the past 5 years. In 1998 and 1999, Malaysia
produced 9.5 million tons of palm oil compared to the 5.4 million tons produced by Indonesia.
Total global output of palm oil is expected to double its present level by the year 2015. By then,
Indonesia's production is expected to surpass that of Malaysia. This increase in output is driven by
the surge in plantings that began in the mid 1990s in response to the positive outlook for the industry.
75
Cultivation
Palm fruit grows in large fresh fruit bunches, each containing approximately several hundred to about
2,000 fruitlets. Oil palm is the most productive oil producing plant in the world, with 1 ha of oil palm
producing between 10 and 35 tons of fresh fruit bunches per year. Yield varies with age, climate and
plantation management. One fresh fruit bunch has an average oil extraction ratio of approximately
20%, resulting in crude oil production of between 2 and 7 tons per ha. In comparison, 1 ha of soybean
produces 2 to 2.6 tons of seed, yielding 0.4 to 0.5 tones of oil per ha.
High yielding, commercially planted oil palms are grown from a cross-fertilised seed called tenera.
Tenera is a hybrid between a pisifera palm and a dura palm. Tenera fruit typically have a thin shell
around the kernel and a thick mesocarp from which crude palm oil is extracted. Harvesting of oil
palms begins when the tree is three years old with peak production at eight years. The productive life
of an oil palm ranges from 20 to 30 years, after which it is normally replaced because it is too tall to
harvest efficiently.
Milling
The oil palm produces two types of oils: crude palm oil and palm kernel oil. Crude palm oil is
extracted from the mesocarp of the palm fruit. Free fatty acids begin to build in fresh fruit bunches
within 24 hours after harvesting, which reduce crude palm oil yield. As a result, mills are normally
located very close to oil palm plantations.
Each palm fruit contains a kernel from which palm kernel oil is produced. Both palm kernel oil and
crude palm oil are extracted through mechanical pressing. Palm kernel oil accounts for 10% of total
oil yield and is kept separately as it is distinct from crude palm oil. A by-product of kernel crushing is
palm kernel meal, which is a valuable compound for animal feed. A palm kernel's yield is up to 44%
oil and 54% meal.
At the mill, the fresh fruit bunches are steam sterilised and, as a result, the build up of free fatty acids
is halted and the softened fruit bunches are run through a stripper that removes the fruit from the
bunches. To extract oil from the outer flesh, the fruit is mechanically pressed. Moisture, dirt and
other impurities are removed as the oil is clarified and purified. Crude palm oil can then be refined
and fractionated to produce a wide variety of products.
Products of Palm Oil
Palm oil is most used as a fully refined product. The crude palm oil produced in the oil mill is further
refined to a neutral, near-white oil through the removal of free fatty acids, colour and unwanted
flavour.
Palm oil is a versatile vegetable oil and is used in a number of important edible and industrial
applications. Palm oil is also ideal for fractionation, the process by which liquid portions of the oil
are separated from the higher melting solid portions. This results in various commercial grades of
palm olein and palm stearin, each with different product characteristics.
Crude palm oil is rich in antioxidant, including vitamin E and carotene. One of the technical
advantages of the oil is its flexibility, which allows it to be used as it is, or in fractionated forms. It
provides a good heavy-duty frying medium because of its relatively low polyunsaturation and its slip
melting point, which is low enough to avoid excess waxiness in most uses.
76
As a cooking fat, it is important to certain foods as it provides, amongst other things, flavour, colour,
structure, texture, extended shelf lives and consistency (spreadability). For example, palm oil can
produce a similar, but lower cost, alternative to cocoa butter, which is used in chocolate products.
Some manufacturers use palm oil as a low cost replacement to dairy fats in non-dairy coffee whiteners
and coffee creamers.
As palm oil is resistant to oxidation, this leads to extended shelf life. As such, it is suitable for hot
climates and is a desirable ingredient in baked products. The non-food uses of palm oil are also
diverse. For example, palm oil and its by-products enhance the cleaning and foaming powers of
soaps.
Palm Oil Production
According to the Food & Agricultural Organization of the United Nations, the ecological
requirements for the cultivation of oil palm exist in certain zones lying either side of the equator in
West Africa, Central America, South America and South East Asia, including Indonesia and
Malaysia. Of these suitable zones, only Indonesia and Malaysia have shown substantial increases in
palm oil production levels. In Indonesia, suitable zones include Sumatera, Kalimantan, parts of
Sulawesi and Irian Jaya. Malaysia is currently the world's largest producer of palm oil, as may be
seen in the table below.
Table: World Production of Palm Oil
Country
Malaysia
Indonesia
Nigeria
Others
Total
1994-95
7.8
4.1
0.7
2.5
1995-96
8.3
4.6
0.7
2.6
15.1
16.2
October - September (Million Tons)
1996-97
1997-98
1998-99
9.0
8.5
9.8
5.1
5.1
5.9
0.7
0.7
0.7
2.7
2.7
2.9
17.5
17.0
19.3
1999-00
10.5
6.8
0.7
3.3
2000-01
11.9
7.3
0.7
3.5
21.3
23.4
Source: Oil World Annual 1998, 1999, 2000 and 2001
Although absolute production in Malaysia has been rising, its overall share of world palm oil
production has been consistent. Constraints facing Malaysia include a gradual exhaustion of available
agricultural land for plantations, a labour shortage in the plantations and a decline in the oil extraction
rate, which has followed the decline in standards of harvesting practices in response to a shortage of
harvesters.
Palm Oil Consumption
Asia is the largest consumer of palm oil as the product is a dietary staple, and India has been the
largest growing market in the past five years due to its preference for semi-solid oils for use in ghee.
Europe purchases large amounts of palm oil for use in processed foods and health products.
Consumption of palm oil in the world increased at a compounded rate of 4.0% between 1993/94 and
1998/99. The following table presents the trend in the evolution of world consumption of palm oil.
77
Table: World Consumption of Palm Oil
Country
Indonesia
Western Europe
India
China
Malaysia
Pakistan
Thailand
Egypt
Columbia
Others
Total
1994-95
2.1
1.8
0.6
1.3
1.1
1.2
0.4
0.4
0.4
5.6
1995-96
2.4
1.8
1.1
1.1
1.1
1.2
0.4
0.4
0.4
5.7
14.7
15.6
October - September (Million Tons)
1996-97
1997-98
1998-99
2.8
2.8
2.8
1.9
2.0
2.2
1.3
1.8
2.6
1.7
1.6
1.4
1.2
1.1
1.1
1.1
1.2
1.1
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
0.4
6.2
6.2
6.0
17.3
17.7
17.6
1999-00
7.8
2.4
3.5
1.3
1.3
1.1
0.4
0.4
0.4
5.0
2000-01
3.0
2.5
4.1
1.9
1.5
1.2
0.5
0.5
0.4
5.3
18.6
20.9
Source: Oil World Annual 1998 and 1999
Soyabean oil is the most widely consumed edible oil in the world and is palm oil's main competitor.
However, its position has been challenged in recent years as palm oil gained market share due to cost
and health considerations.
Palm oil is gaining ground in the European Union, particularly within the food industry. Palm oil is
highly cost competitive, as it does not require hydrogenation in most cases.
The world's largest producers of palm oil, Indonesia and Malaysia are high users. China, where palm
oil has achieved a 15% share of the market for vegetable oil, is an important destination for Malaysian
and Indonesian palm oil exports. Previous import restrictions in India limited growth in palm oil
demand over the last ten years, but a relaxation of restrictions has led to a rise in palm oil use and
demand growth is expected to continue at a rate of 4% to 5% per year. In Pakistan, demand has
grown considerably over the past ten years, where it now holds over 56% share of the market for
vegetable oil.
The demand of crude palm oil is also dependent upon the prices for competing oils, such as soya, to
which users can switch. As such, good soya harvests will lower the price and impact demand levels
for palm oil. Similarly, palm kernel oil demand is closely tied to that for coconut oil, as they are close
substitutes. The demand for these lauric oils is driven by non-food uses where they have an
environmental advantage over mineral oil.
Palm oil is the only oil that has consistently been profitable in comparison to other vegetable oils from
the mid-1980s to the end of the 1990s. Improvements in seed quality and collective estate
management experience and practice have contributed significantly to its profitability.
78
Structure of the Malaysian Palm Oil Industry
Table:
Structure of the Malaysian Palm Oil Industry ('000 hectares)
Year
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
Peninsula Malaysia
1,645
1,699
1,745
1,775
1,828
1,840
1,903
1,926
1,956
1,987
East Malaysia
302
331
349
422
478
572
637
766
863
1,090
Total Malaysia
(Private
estates)
(Government land
scheme agencies /
small holdings)
893
912
952
991
1,054
1,154
1,255
1,402
1,498
1,751
1,054
1,118
1,142
1,206
1,252
1,258
1,285
1,290
1,321
1,326
Total
1,947
2,030
2,094
2,197
2,306
2,412
2,540
2,692
2,819
3,077
Source: Dynaquest
Oil palm plantations in Malaysia are mainly developed by private estates or government land scheme
agencies (Federal Land Development Authority, Federal Land Consolidation and Rehabilitation
Authority or State Land Schemes). These private estates (57%) and government land schemes (34%)
dominate the industry with their combined areas accounting for about 91% of total planted area. The
remaining 9% of land not under private estates and public sector management comprise independent
small holdings.
In terms of total hectarage, the pace of development has slowed considerably in the last decade mainly
owing to lack of suitable land in Peninsular Malaysia. As can be seen from the Table above, there
was less than 2% p.a. growth in Peninsular Malaysia over the last 5 years. Although the pace of
development in East Malaysia has jumped to an average of 18% p.a. over the last 5 years, this was
insufficient to offset the lower growth recorded by Peninsular Malaysia. Thus, for the country as a
whole, it can be seen that the last 5 years saw only 5.7% p.a. of growth, much lower than the 6.6%
recorded over the last 20 years. It is to be noted that the average growth rate in the 1970s was above
8% p.a.
In spite of the current extensive opening up of new palm oil areas in East Malaysia, it is expected that
the country as a whole will continue to see a slowdown in expansion in the foreseeable future because
land and especially labor are becoming increasingly scarce. It is to be noted that even in East
Malaysia, labour is also a constraint. Owing to these factors, it is expected that after the year 2000,
there will only be limited investments in new oil palm areas in Malaysia. Most new investments in oil
palm cultivation will be made outside Malaysia. Thus, many of the large local plantation groups have
in fact already moved into Indonesia to cultivate oil palm on joint-venture arrangements.
79
Palm Oil Production Cost
In comparison to other crops producing edible oils, oil palm trees have a high fruit yield, which
translates into low cost per ton. The average yield of crude palm oil is 4 tons per ha compared to 0.4
tons per ha for soybean oil and 0.5 ton per ha both for rapeseed and sunflower oil. On the basis of
lower production costs, palm oil is likely to replace soybean oil as the world's most consumed edible
oil in the medium term. An approximately 70% average extraction rate for palm olein (palm based
cooking oil) translates into production costs of U.S.$200 to U.S.$250 per ton. This compares
favorably to soybean oil, the production costs of which range between U.S.$350 and U.S.$400 per
ton.
The demand for crude palm oil is largely a function of the demand for edible oils. Crude palm oil and
soybean oil are used in the production of nearly 40% of edible oils in 1999. Positive population
growth and a rise in per capita income would support a positive outlook for the demand for edible oils.
Oil World, one of the leading forecasters of supply and demand in the edible oils industry, forecasts a
demand growth of 1.7%, 2.9%, and 4.5% in 1998, 1999, and 2000, respectively (Source: Oil World
Annual 2000).
As crude palm oil and soybean oil are product substitutes with price being a major factor determining
consumption preference, developments in the soybean oil market should not be disregarded. Oil
World estimates that crude palm oil accounted for approximately 17% of global edible oils production
while soybean oil appears to be relatively flat in the near future, any increase in the global demand for
edible oils is expected to be met by the increase in palm oil production.
Currently, the major consumers of palm oil are Indonesia, Europe, India, China, Malaysia and
Pakistan. India is the largest buyer of Malaysian crude palm oil, while the Netherlands, China and
India account for the majority of Indonesian crude palm oil exports.
Trade in Palm Oil
Palm oil is the most widely traded oil, accounting for 38% of world edible oil exports. Palm oil is the
most rapidly growing segment in vegetable oil production, growing at an annual rate of 5.1% between
1992/93 and 1997/98. After 10 years of uninterrupted increase, total production remained stable in
1997/98.
Malaysia and Indonesia dominate palm oil exports with Malaysia accounting for 60% of total exports.
By means of export tariffs on crude palm oil and a duty exemption for refined palm oil products, the
Malaysian government stimulates local processing of palm oil. Therefore, Malaysian exports consist
primarily of refined palm oil. Indonesia's exports have grown substantially, particularly in 1997 as a
result of high production and a decline in stocks. The 1998 export ban and consequent export tariff
seriously hampered Indonesia's exports.
The four largest importers of palm oil and its derivatives are India, Pakistan, China and the European
Union, accounting in aggregate for approximately 60% or 9 million tons out of 14.8 million tons of
total imports in 2000. India remains the biggest importer, with total of 3.7 million tons followed by the
European Union (2.4 million tons), China (1.7 million tons) and Pakistan (1.1million tons). (Source:
MARC Report)
80
Prospects and Price Outlook
The table below presents the historical and trend forecast in palm oil production for the two main
producers and for the world as a whole.
Table : Palm Oil Production (Million Tons)
Year
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2005
2010
2015
2020
Malaysia
6.1
6.1
6.4
7.4
7.2
7.8
8.4
9.1
8.3
9.3
10.1
11.7
12.7
14.1
15.4
Indonesia
2.4
2.7
3.0
3.4
3.9
4.2
4.5
5.4
5.0
5.6
6.7
9.4
11.4
14.8
18.0
Others
2.5
2.7
2.8
3.0
3.1
3.2
3.4
3.4
3.4
3.5
3.7
4.6
5.1
6.2
7.4
World
11.0
11.5
12.1
13.8
14.2
15.2
16.3
17.8
16.7
18.4
20.5
25.7
29.2
35.1
40.8
Source: Oil World Annual 2020
Throughout the world, and most notably in the main producing countries of Malaysia and Indonesia, it
is clear that the recent period of high prices has attracted additional interest in the industry.
During the period leading up to 2003, the forecasts incorporate the outlook for larger harvested areas
for oil palm as existing plantings mature. Prices have declined in the first half of 2000 after a period
of unusually strong prices that occurred in 1998. This was due to the build-up of other edible oils
stock and the rebound of crude palm oil production. Like any other commodity, palm oil exhibits
significant price volatility as depicted in the following diagram.
ANNUAL PRICES OF CRUDE PALM OIL, SOYABEAN OIL AND RAPESEED OIL:
1977 -2001 (JUL)
(CIF NORTH WEST EUROPE - US$/TONNE)
Crude Palm Oil
700
Soyabean Oil
Rapeseed Oil
500
400
300
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
1979
1978
200
1977
US$/MT
600
81
The price of crude palm oil (CIF Rotterdam) fell from over U.S.$900 per ton in May 1984 to a 10-year
low of U.S.$197 per ton in August 1986. The price rose again to U.S.$517 per ton in July 1988 before
softening to about U.S.$279 per ton in July 1990. From July 1990 through the end of 1998, crude
palm oil price gradually rose to a high of U.S.$700 per ton in August 1994 and again in mid 1998 after
a price correction in 1996. The rise in crude palm oil price reflected the sustained growth of world
demand for palm oil augmented by the negative effect of El-Nino on production. Since the beginning
of 1999, prices have declined to around U.S.$300 per ton and have been experiencing slight
fluctuation. They are now at around U.S.$255 per ton.
There are a number of factors affecting the movement of palm oil prices. These factors, which are
interrelated and unpredictable, could cause intense price volatility in the world vegetable oils market.
The main factors include:







The world total production and supply of oils and fats
The world demand for oils and fats
The world total production and supply of palm oil
The world demand for palm oil
Import and export tariff barriers
Agricultural policies imposed by importing and exporting countries
Weather and other agricultural influences.
The world demand for oils and fats is expected to increase sharply over the next two decades (Source:
Mielke, International Planters Conference 2000) as the world population is on an increasing trend and
consumption per capita in populous developing countries, especially in China and India, increases due
to higher income. The per capita consumption of oils and fats in India and China, two countries
which account for 37% of world population currently, has risen rapidly from 8.0 kg and 8.9 kg
respectively in 1994 to 11.1 kg and 12.7 kg respectively in 1999, as compared with an average world
per capita consumption of 18.1 kg (Source: Oil World Annual 2000)
The world consumption of palm oil had increased from 4.4 million tons in 1980 to 19.3 million tons in
1999, an increase of four-fold (Source: Oil World Annual 2000). Despite the low growth of oil
consumption in the developed countries owing to the change in diet for health reasons the overall
demand for oils and fats over the next 10 years is expected to continue growing.
Tighter supply conditions for edible oils are expected to support crude palm oil prices at RM1,100 per
ton (approximately U.S.$289 per ton) and prices could rally further if weather conditions are poor
prior to the September harvest of U.S. soya crops. Global edible oil consumption is expected to grow
by 5.6% and 3.2% in 2001 and 2002, respectively, ahead of production growth of 3.7% and 2.0%.
The tighter oil supply is due to the following:

A drop in crude palm oil production as a result of the Malaysian Government's replanting
initiatives and last-year's cost cutting measures by producers. The Malaysian Government is
spending RM600 million to subsidise the replanting of old trees, and we estimate that the
programme will cut crude palm oil production by 600,000 tons p.a. in the next three years (which
is equivalent to 5.5% of total production in 2000).

A seasonal decline in sunflower oil production. Northern Hemisphere production estimates were
scaled back, mainly for Russia and the Ukraine. Decline in world supplies is estimated at 1.7
million tons.
82

Strong demand for rapeseed oil as bio-diesel fuel in the European Union. Germany alone is
expected to burn about 1.7 million tons of rape oil as fuel by 2002, accounting for about 95% of
Germany's rapeseed oil production.
The chart below sets out Global Oil Production Growth against Global Oil Consumption Growth:
Crude palm oil exports have been growing an average 30% over the first seven months of 2001 as
compared to the same period last year. August recorded a marginally higher growth (33%) mainly
due to tight supply in the global edible oil and fat complex.
The chart below shows the trend in export sales:
The combination of lower production and stronger exports has culminated in a dip in stock levels by
nearly 40% to 0.9 million tons in July from a high of 1.5 million tons in November last year.
83
The chart below sets out the Malaysian palm oil stock levels:
84
LISTING, CLEARANCE AND SETTLEMENT
The information set out in this section has been extracted from, and should be read in conjunction
with, the Labuan Offshore Securities Industry Act, 1998 Act 579 and the LFX’s Rules of the
Exchange. Investors are advised to visit LFX’s operating website at www.lfx.com.my for further
information on the LFX and on updates.
Listing
LFX is a wholly-owned subsidiary of the KLSE. It is governed by the Labuan Offshore Securities
Industry Act, 1998 and its Rules of the Exchange, and the Offshore Companies Act, 1990 and its
Memorandum and Articles of Association. The Labuan Offshore Financial Services Authority is the
statutory regulator for LFX.
LFX, which was officially launched on 23rd November, 2000, is a web based financial exchange that
provides listing and trading facilities for a wide range of financial and non-financial products,
including Islamic products. These include mutual funds, bonds, derivatives, insurance-linked products
and intellectual properties.
LFX was established to complement the various offshore financial services currently available in
Labuan. LFX is a one-stop financial exchange that offers full services from the submission of
application for listing to approval, listing, trading and settlement, of the securities and financial
instruments listed.
All transactions conducted on LFX are not subjected to any selective capital control measures.
Transactions from Labuan as a duty free port do not attract stamp duty or exit levies, and require only
minimal dealings with the statutory regulators.
For international investors and companies world-wide, LFX offers an exchange facility that permits
trading of multi-currency instruments, in an unrestricted fashion and unencumbered by any exchange
or selective capital controls.
Trading
Trading on LFX is done via LFX’s Electronic Bulletin Board. The Board will list all financial
instruments available for trading. An investor wishing to invest or trade will usually consult the
LFX’s licensed Trading Agents of its choice, on any investment or trading advice pertaining to the
instruments listed and must enter into a client agreement with the Trading Agent of its choice before
the Trading Agent may officially begin trading. All trades can only be done by Trading Agents who
will post their bids and offers to buy/sell on the Indication of Interest Bulletin Board on LFX. Charges
for trading services rendered to investors by Trading Agents will be at their discretion.
Any interested Trading Agents will conduct their own negotiations. Direct negotiations between
interested Trading Agents via telephone or e-mail are permissible to determine the agreed bid/offer
price. Each counter party to the trade will then submit its trade to LFX for confirmation and for the
issuance of contract notes. The trade will only be considered done when the report of the trade by
both buyer and seller is received by LFX. All trades done are subject to the T+3 delivery and
settlement period.
85
Clearance and Settlement
All Trading Agents shall settle all transactions through the clearance system designated by the
Depository. The clearing function is performed by the Depository, who is responsible to notify the
Trading Agents on the clearing and settlement status of the trades. The Depository will monitor and
perform the trade comparison and confirmation for trade settlement.
The Depository has appointed Citibank Worldwide Securities Services to undertake the cash
settlement function. Securities settlement is on a "book-entry" basis; there is no physical movement
of scrips. Failed settlements, either cash or securities, will go through negotiations (as between the
Trading Agents) either to delay or cancel the trade.
Trades are subject to a T+3 rolling settlement cycle. A Trading Agent may request for a variation
from the standard settlement period for a particular financial instrument, but the Depository is not
obliged to accede to such request.
86
TRANSFER RESTRICTIONS
No action has been or will be taken by the SPV, the Trustee or the Initial Purchasers that would permit
a public offer of the Certificates in any country or jurisdiction where action for that purpose is
required. Accordingly, the Initial Purchasers have undertaken not, directly or indirectly, to offer or
sell any Certificates or distribute or publish any offering circular, prospectus, form of application,
advertisement or other document or information in any country or jurisdiction, except under
circumstances that will, to the best of their knowledge and belief, result in compliance with any
applicable laws and regulations and all offers and sales of Certificates by them will be made on the
same terms.
United States
The Certificates have not been and will not be registered under the Securities Act and may not be
offered or sold within the United States or to or for the account or benefit of a U.S. person.
Accordingly, the Certificates are being offered and sold only outside the United States to persons
other than U.S. persons (as defined in Regulation S) in offshore transactions in reliance on, and in
compliance with, Regulation S.
Neither the Initial Purchasers nor their affiliates, nor any persons acting on their behalf, have engaged
or will engage in any directed selling efforts (as defined in Regulation S) with respect to the
Certificates, and the Initial Purchasers, their affiliates and all persons acting on their behalf have
complied and will comply with the offering restrictions requirement of Regulation S.
Each purchaser of a Certificate who becomes a holder of Certificates will be deemed to have
represented and agreed that it is aware that the sale of such Certificates to it is being made in reliance
on the exemption from registration provided by Regulation S and that the Certificates so represented
may not at any time be held by or on behalf of U.S. persons (as defined in Regulation S).
Malaysia
Each Initial Purchaser has represented and agreed that the Certificates 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 persons to whom the offer or invitation to purchase the Certificates would
fall within Schedule 2 and 4/5 of the Securities Commission Act 1993.
Residents of Malaysia are not permitted to purchase the Certificates without first having had and
obtained all the necessary approvals from all relevant regulatory authorities, including but not limited
to all the necessary approvals from Bank Negara Malaysia. The onus of obtaining such approvals is on
the residents concerned and none of the Trustee, the Initial Purchasers, the SPV or Guthrie accepts
any responsibility for the purchase of any Certificate by the residents as aforesaid without the
necessary approvals being in place. Malaysian residents are advised to seek independent professional
advice as may be necessary before making any such purchase.
General
Residents of Israel and the Federal Republic of Yugoslavia (Serbia and Montenegro) are not permitted
to purchase the Certificates.
No action has been taken by the Trustee or any of the Initial Purchasers that would, or is intended to,
permit a public offer of the Certificates in any country or jurisdiction where any such action for that
purpose is required. Accordingly, each Initial Purchaser has undertaken that it will not, directly or
indirectly, offer or sell any Certificates or distribute or publish any offering circular, prospectus, form
of application, advertisement or other document or information in any country or jurisdiction except
under circumstances that will, to the best of its knowledge and belief, result in compliance with any
applicable laws and regulations and all offers and sales of Certificates by it will be made on the same
terms.
87
TAX CONSIDERATIONS
The comments below are of a general nature and are only a summary of the law and practice
currently applicable in Labuan and Malaysia. Prospective investors should consult their own
professional advisers on the relevant taxation considerations applicable to the acquisition, holding
and disposal of the Certificates and the receipt of distributions.
Exchange Control
Pursuant to a notice known as ECM 15 issued by the Governor of Bank Negara Malaysia, the central
bank of Malaysia, a Labuan offshore company shall be declared as non-resident for exchange control
purposes upon submission of specified documents to the Governor.
Bank Negara Malaysia, by way of its letter to the director of the SPV, has declared the SPV a nonresident for exchange control purposes, subject to the condition that the SPV shall not undertake any
transaction with the residents of, or deal in the currencies of, Israel and the Federal Republic of
Yugoslavia (Serbia and Montenegro) without the prior permission of the Controller of Foreign
Exchange.
Withholding Tax
Payments to any holder of the Certificates by the Trustee will not be subject to Malaysian withholding
tax pursuant to Income Tax (Exemption) (No. 16) Order 1991. This Exemption Order also provides an
income tax exemption for persons other than those, resident or non-resident, licensed to carry on
business under the Banking and Financial institutions Act 1989, the Islamic Banking Act 1983, the
Insurance Act 1963 or the Takaful Act 1984.
Trading Gains
Gains on disposal of Certificates can either be treated as trading gains or capital gains depending on
the investor’s profile. Generally gains made by banks, securities companies and bond traders would be
treated as trading gains. Trading gains on LFX are not liable to Malaysian income tax provided the
holder of the Certificates is a non-resident and does not have a business presence in Malaysia or, in
the case where the holder of the Certificate is resident in a country with a Double Taxation Agreement
with Malaysia, a permanent establishment.
Capital Gains
Capital gains are not subject to Malaysian tax unless the gains relate to the disposal of any land
situated in Malaysia and any interest, option or other right in or over such land. As this is the first time
that a Sukuk issue of this nature is being undertaken in Malaysia out of Labuan, consideration should
be given to the fact that specific legislation covering the entire scope of transactions of this nature has
yet to be developed. However, the Malaysian government is actively promoting the development of
the Islamic banking and financial markets as well as Labuan and has, in recent developments,
indicated that Islamic financing transactions should not be worse off as compared to conventional
banking transactions or bond issues.
Gift or Inheritance Tax
There is neither gift nor inheritance tax in Malaysia.
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Stamp Duties, Registrations or other Duties
There are no stamp duties imposed on the issuance and transfer of the Certificates pursuant to the
Stamp Duty (Exemption) (No. 2) Order 2000. There are no issue, registration or other duties payable
under Malaysian law by the holders of the Certificates in connection with the issue or transfer of the
ownership of the Certificates outside Malaysia.
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GENERAL INFORMATION
Authorisation
The Trustee has obtained all necessary consents, approvals and authorisations in connection with the
issue and performance of the Certificates.
Listing
Application has been made to list the Certificates on LFX. LFX takes no responsibility for the
contents of this document, makes no representations as to its accuracy or completeness and expressly
disclaims any liability whatsoever for any loss howsoever arising from or in reliance upon any part of
the contents of this document. Investors are advised to read and understand the contents of this
document before investing. If in doubt, the investors should consult his or her adviser.
Clearing System
The Certificates have been accepted for clearance through the Depository. The ISIN for the Series A
Certificates is myz100001a08 and for the Series B Certificates is myz100002a07.
Documents
Copies of the following documents will be available from the specified office of the Transaction
Administrator so long as any of the Certificates remains outstanding:
(a)
the Memorandum and Articles of Association (with an English translation thereof) of the SPV
and Guthrie;
(b)
the consolidated audited financial statements of Guthrie in respect of the financial years ended
31st December, 1998, 1999 and 2000;
(c)
the most recently published audited annual financial statements of Guthrie and the most
recently published unaudited interim financial statements (if any) of Guthrie;
(d)
the Purchase Agreements;
(e)
the Lease Agreements;
(f)
the Transaction Administration Agreement; and
(g)
the Trust Agreements.
Litigation
Save as disclosed in this Offering Circular, there are no legal or arbitration proceedings (including any
proceedings which are pending or threatened of which the SPV, the Trustee or Guthrie is aware) in
respect of any amount equal to RM20 million or more which may have or have had in the 12 months
preceding the date of this document a significant effect on the financial position of the SPV, the
Trustee or the Group, respectively.
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Accounts
The auditors of Guthrie are Ernst & Young, certified public accountants who have audited Guthrie's
accounts, without qualification, in accordance with generally accepted auditing standards in Malaysia
for each of the three financial years ended on 31st December, 1998, 1999 and 2000.
No significant change
Save as disclosed in this Offering Circular, there has been no significant change in the financial or
trading position of the Group since 31st December, 2000 and there has been no material adverse
change in the financial position or prospects of the Group since 31st December, 2000.
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LEGAL MATTERS
Certain matters relating to Malaysian and Labuan law will be passed upon by Mohamed Ismail & Co.
and certain matters relating to New York and United States law will be passed upon by Allen &
Overy, Shook Lin & Bok, Joint Law Venture.
INDEPENDENT ACCOUNTANTS
The financial statements of Guthrie and the Group included in this Offering Circular have been
audited by Ernst & Young of 4th Floor, Kompleks Antarabangsa, Jalan Sultan Ismail, 50250 Kuala
Lumpur, Malaysia, as stated in their report appearing in Appendix C.
THE ISSUER
First Global Sukuk Inc.
Level 15, Block 4, Financial Park Complex
Jalan Merdeka, 87000 Labuan F.T.
Malaysia
LEAD ARRANGER
AND STRUCTURING & SHARIAH ADVISER
BANK ISLAM (L) LTD
Level 15, Block 4, Financial Park Complex,
Jalan Merdeka, 87000 Labuan F.T.
Malaysia
CO-ARRANGER
Maybank International (L) Ltd
Level 16(B), Main Office Tower,
Financial Park Complex
Jalan Merdeka, 87000 Labuan F.T.
Malaysia
LEAD MANAGER AND MIDDLE EAST COORDINATOR
Shamil Bank of Bahrain E.C.
Chamber of Commerce Building
P.O. Box 3005,
Manama, Bahrain
LEAD MANAGER
Bumiputra-Commerce Bank (L) Ltd
Level 14(B), Main Office Tower
Financial Park Complex, Jalan Merdeka
87000 Labuan F.T., Malaysia
MANAGER, GLOBAL COORDINATOR
AND FINANCIAL ADVISER
ABN AMRO Bank (Malaysia) Berhad
Level 26, MNI Twins
Tower 2, 11 Jalan Pinang
50450 Kuala Lumpur
Malaysia
MANAGERS
AMMB International (L) Ltd
Level 12(B), block 4
Financial Park Complex,
Jalan Merdeka, 87000 Labuan F.T.,
Malaysia
Bank Muamalat Malaysia Berhad,
Labuan Branch
Level 13(A), Main Office Tower,
Financial Park Complex, Jalan
Merdeka
87000 Labuan F.T., Malaysia
RHB Bank (L) Ltd
Level 15(B), Main Office
Tower, Financial Park
Complex, 87000 Labuan F.T.,
Malaysia
TRANSACTION ADMINISTRATOR
ABN AMRO Bank N.V., Labuan Branch
Level 9(A), Main Office Tower,
Financial Park complex
Jalan Merdeka,
87000 Labuan F.T., Malaysia
TRUSTEE AND LISTING SPONSOR
Bank Islam (L) Ltd
Level 15, Block 4
Financial Park Complex,
Jalan Merdeka
87000 Labuan F.T., Malaysia
CO-LISTING SPONSOR
AMMB International (L) Ltd
Level 12(B), block 4, Financial Park Complex, Jalan Merdeka
87000 Labuan F.T., Malaysia
LEGAL ADVISERS
As to New York and United States Law
Allen & Overy, Shook Lin & Bok
Joint Law Venture
One Robinson Road
#18-00 AIA Tower
Singapore 048542
As to Malaysian Law
Mohamed Ismail & Co.
Level 5, Suite 3B
Wisma Lazenda, Jalan Kemajuan
87000 Labuan FT, Malaysia
AUDITORS
Ernst & Young
4th Floor, Kompleks Antarabangsa, Jalan Sultan Ismail,
50250 Kuala Lumpur, Malaysia
TAX CONSULTANT
KPMG Tax Services Sdn Bhd
Wisma KPMG, Jalan Dungun, Damansara Heights,
50490 Kuala Lumpur, Malaysia