TANCO HOLDINGS BERHAD ( Tanco Or Company )

ANNOUNCEMENT (For Immediate Release)

TANCO HOLDINGS BERHAD (“Tanco” or “Company”)

- SETTLEMENT SCHEME BETWEEN TANCO GROUP OF COMPANIES AND LEHMAN BROTHERS COMMERCIAL CORPORATION ASIA LIMITED (IN LIQUIDATION) FOR A CASH SETTLEMENT SUM OF RM44 MILLION AND THE TRANSFER AND VESTING OF CERTAIN PROPERTIES AT AGREED VALUE OF RM100,637,395 (“SETTLEMENT SCHEME”)

1. INTRODUCTION

The Board of Directors of Tanco (“Board”) wishes to announce that Tanco with JKMB Development Sdn. Bhd., Palm Springs Development Sdn. Bhd., Palm Springs Resort Management Berhad, Popular Elegance (M) Sdn. Bhd., Tanco Development Sdn. Bhd., Tanco Land Sdn. Bhd., Tanco Properties Sdn. Bhd., Tanco Resorts Berhad, Tanco Club Berhad (collectively known as the “Borrowers”); Point Resort Club Sdn. Bhd., Regal Resort Sdn. Bhd., Tanco Lake Resorts Sdn. Bhd., Noreast Company Limited, Palm Springs Resort (MM2H) Sdn. Bhd., TRB Leisure (Mauritius) Pte. Ltd., TRB Vacation (Mauritius) Pte. Ltd. (collectively known as the “Additional Guarantors”); Dato’ Tan Jing Nam, Dato’ Tan Lee Sing (collectively known as the “Limited Recourse Guarantors”); and World Vacation Ownership Sdn. Bhd. (collectively known as “Tanco Parties”) have entered into a Settlement Agreement with Lehman Brothers Commercial Corporation Asia Limited (In Liquidation) (the “Lender”), Lehman Brothers Pan Asian Investments Limited and Malaysian Trustees Berhad (the “Security Agent”) (collectively known as the “LB Parties”) to formalize a Settlement Scheme which will involve payment of a cash settlement sum of USD equivalent of Ringgit Malaysia Forty Four Million (RM44,000,000.00) only (“Cash Settlement Sum”) to the Lender and the transfer and vesting of certain properties of the Tanco Group for the agreed value of Ringgit Malaysia One Hundred Million Six Hundred and Thirty-Seven Thousand Three Hundred and Ninety Five (RM100,637,395) to the Security Agent for the benefit of the Lender or such other person nominated by the Lender (“Settlement Properties”) on 21st February 2011 (“Settlement Agreement”). Details of the Settlement Properties together with their corresponding agreed value are as set out in Appendices B to D in the Settlement Agreement.

Salient details of the Settlement Scheme are as set out in section 3 below.

2. INFORMATION ON TANCO

Tanco is a public limited company incorporated in Malaysia and listed on Bursa Malaysia Securities Berhad. Tanco and its subsidiaries (“Tanco Group”) are principally engaged in investment holding, provision of management services, property development, management and operation of resorts, vacation ownership schemes, and point-based schemes and investments properties.

Tanco has an authorised share capital of RM1,000,000,000 comprising 1,000,000,000 ordinary shares of RM1.00 each, of which RM334,886,726 had been issued and fully paid-up. 3. DETAILS OF THE SETTLEMENT SCHEME

3.1 Background to the Settlement Scheme

Pursuant to a facility agreement dated 16th November 2007 between the Borrowers, the Additional Guarantors, the Limited Recourse Guarantors and the Lender (as amended on 24th December 2007) (the “Facility Agreement”), the Lender agreed to grant to the Borrowers US$ credit facilities of up to a principal amount equivalent to Ringgit Malaysia Three Hundred Million (RM300,000,000) only (the “Facilities”). All securities for the Facilities have been duly registered with the relevant authorities, where applicable, and the original copies of the relevant security documents and applicable documents of title deposited with the Security Agent.

On 29th May 2009, the Tanco Parties commenced litigation proceedings against the LB Parties in the High Court of Malaya vide Civil Suit No. D-22-1012-2009 (the “Civil Suit”). In the Civil Suit, the Tanco Parties alleged inter alia that the Facility Agreement, and the finance, security and charge documents relating thereto were void and unenforceable, as being in purported breach of the Moneylenders Act, 1951.

On 9th March 2010, the High Court of Kuala Lumpur granted the Tanco Parties’ application for an interlocutory injunction against the Lehman Parties from inter alia, exercising any rights over any securities pursuant to the Facilities.

The Civil Suit is being contested by the LB Parties, and the Lender has filed a counterclaim in the Civil Suit for the principal amounts utilized under the Facilities, together with interest thereon, damages and costs.

As of 27th May 2009, the principal amount as stated by the Lender due and owing under the Facilities was US$90,664,705.73 (being the equivalent of RM300,000,000) using an exchange rate of RM3.31:US$1.00) together with interest accruing thereon.

The affected parties are desirous of settling their differences on a without admission of liability basis, have agreed to settle the Civil Suit, and all of their respective claims under or in connection with the Facilities and the subject-matter of the Civil Suit for the sum of Ringgit Malaysia One Hundred and Forty Four Million and Six Hundred and Thirty-Seven Thousand and Three Hundred and Ninety Five (RM144,637,395), on the terms and conditions set out in the Settlement Agreement.

3.2 Salient Terms of the Settlement Scheme as set out in the Settlement Agreement

The salient terms of the Settlement Agreement include, inter-alia, the following:

3.2.1 Key Settlement Terms 3.2.1.1 Cash Payment of RM44, 000,000

The Cash Settlement Sum to the Lender is to be paid in five (5) instalments over the period of twelve (12) months from the date of Consent Judgment or such extended period as may be agreed with Tanco who also acts as agent for the other borrowers (“the Tanco Agent”) and the Lender (“the Settlement Period”) in the following manner:

Instalment No. Amount of Time of Payment Instalment (US$ Equivalent) First Instalment RM10,000,000 Within seven (7) days from the Consent Judgment Date Second Instalment RM10,000,000 Within three (3) months from the Consent Judgment Date Third Instalment RM10,000,000 Within six (6) months from the Consent Judgment Date Fourth Instalment RM10,000,000 Within nine (9) months from the Consent Judgment Date Fifth Instalment RM4,000,000 Within twelve (12) months from the Consent Judgment Date Total RM44,000,000

3.2.1.2 Transfer of Beneficial Interest in Settlement Properties for the agreed sum of RM100,637,395

Upon entry of the Consent Judgment, the full beneficial interest in the Settlement Properties shall, with immediate effect be vested in the Lender, and the relevant Tanco Property Owners who are the legal and beneficial owners of the Settlement Properties shall thereupon hold such properties on trust for the Lender until the transfer of these titles have been properly registered to the Lender or its nominee.

The transfer of the Settlement Properties to the Security Agent, as Trustee for the Lender will require the consent of the relevant State Authorities, which the relevant Tanco Property Owner will apply for from the date of the Settlement Agreement, subject to the terms in respect thereof as prescribed in the Settlement Scheme and Settlement Agreement.

A valuation on all the Settlement Properties was carried out by PPC International Sdn Bhd on 30 January 2011 in accordance with a combination of Comparison, Residual, Cost and Income Capitalization methods, the Comparison method being the primary approach.

3.2.2 Condition Precedent

Condition Precedent

The Settlement Scheme and the Settlement Agreement is conditional upon the approval of the shareholders of Tanco in a general meeting (“THB Shareholders’ Approval”); being obtained on or before three (3) months from the date of the Settlement Agreement with a further automatic extension of one (1) month, or such extended date as the Tanco Agent and the Lender may agree in writing.

Obligation to Procure It is also conditional on Tanco to within forty-five (45) days of the date of obtaining the approval from Bursa Malaysia Securities Berhad on its draft circular to the Shareholders to convene a general meeting of its shareholders for the purposes of obtaining the THB Shareholders’ Approval.

3.2.3 Progressive Release and Discharge of Existing Securities

The pre-existing security interests over the Charged Properties (not part of the Settlement Properties) created under the relevant Finance Documents and securing the Secured Liabilities shall be released and discharged progressively commencing from the second installment of the Cash Settlement Sum.

3.3 Encumbrances and Liabilities to be Assumed

Other than the continuing encumbrances and liabilities under the Facility Agreement and the security documents executed pursuant to the Facility Agreement which continue to be effective under the Settlement Agreement until discharge of the same pursuant to the Settlement Scheme, Tanco Group will not be assuming any other encumbrances and/or liabilities

3.4 Basis of Arriving at the Settlement Scheme

The settlement sum of RM144,637,395 was arrived at on a negotiated basis.

4. RATIONALE FOR THE SETTLEMENT SCHEME

The Settlement Scheme will conclusively settle the differences between Tanco and the Lender as highlighted in section 3.1 above and upon full payment of the Cash Settlement Sum, the remaining lands not transferred and/or vested pursuant to the Settlement Scheme will be discharged and released to Tanco Group. This will allow Tanco to move on and commence its development plans for the lands as opposed to the lands being presently locked up in lengthy litigation process.

5. RISK FACTORS

The Settlement Scheme will not materially change the risks of the Company’s business as the Tanco Group would still be exposed to the operational, financial and investment risks inherent in the property sector. These risks are inherently due to timely commencement or completion of projects, obtaining required approvals, satisfactory performance of contractors and adverse economic events or recession. In addition, any material escalation of cost of cement and other building materials as well as increase in petrol prices may contribute to a higher overall development cost, thereby affecting the profit margins of the Tanco Group’s projects.

The Tanco Group seeks to limit these risks through, inter-alia, careful planning and identification of the type of developments, innovative pricing strategies, prudent financial policy, close supervision on projects and effective management.

Pursuant to the terms of the Settlement Agreement, in the event the State Authority’s consent for the transfer and vesting of the Settlement Properties cannot be obtained within the required time frame period as stated in section 3.2.1.2, the Lender can demand for payment from Tanco the agreed value as set out in the Settlement Agreement on the affected Settlement Properties. The potential risk of this occurring can result in the Group requiring to meet an aggregate cash outlay of approximately RM35 million which the Group will need to source internally as well as externally should it arises.

6. SOURCE OF FUNDS

The Cash Settlement Sum shall be funded through internally generated funds and bank borrowings.

7. EFFECTS OF THE SETTLEMENT SCHEME

7.1 Share Capital and Substantial Shareholders’ Shareholding

The Settlement Scheme will not have any effect on the share capital and substantial shareholders' shareholding of Tanco as the settlement does not involve any issuance of new shares.

7.2 Earnings Per Share, Net Assets Per Share and Gearing

The successful conclusion of the Settlement Scheme will enable the Tanco Parties to substantially settle all its Existing Secured Debts and consequently there will be a positive impact to the net assets per share of the Group as well as a significant reduction in its gearing. This estimated positive impact is as a result of a net exceptional gain of approximately RM131 million before taxation effect, if any, arising mainly from the waiver of the remaining secured debts pursuant to the Settlement Scheme.

The net exceptional gain would result in the Group’s net earnings per share to increase by 39 sen, the net asset per share of the Group increasing from 52 sen to 91 sen and the gearing reduced from 1.83 times to 0.11 times on a proforma basis, based on the 31 st December 2009 Audited Financial Statement of the Group

8. APPROVALS REQUIRED

The Settlement Scheme requires the approval from the shareholders of Tanco at the extraordinary general meeting to be convened which is made a condition precedent to the effectiveness of the Settlement Agreement. The consent from the relevant State Authority to the transfer of titles of the Settlement Properties to the Lender or its nominee is also required but such consent is not stipulated as a condition precedent to the Settlement Agreement .

The highest percentage ratio applicable to the transaction pursuant to paragraph 10.02(g) of the Listing Requirements is 80.63%

9. DIRECTORS’ AND MAJOR SHAREHOLDERS’ INTERESTS

None of the directors or major shareholders of Tanco or persons connected with them has any interest, direct or indirect, in the Settlement Scheme. Dato’ Tan Jing Nam who is the Group Managing Director and major shareholder of Tanco and Dato’ Tan Lee Sing who is the Executive Director of Tanco provided limited recourse guarantees to the Lender under the Facility Agreement whereby they shall only be liable under such guarantees upon the occurrence and declaration of an event of default under the Facility Agreement relating to limited recourse events. The event of default declared by the Lender was not based on such limited recourse events and as such, no claim has been made on the limited recourse guarantees against Dato’ Tan Jing Nam and Dato’ Tan Lee Sing. The Proposed Settlement Scheme if fully complied with and implemented will result in the release and discharge of all the existing securities created to secure the indebtedness under the Facility Agreement. As such, the limited recourse guarantees referred to herein will also be discharged and released. The directors do not take the view that the Settlement Scheme which is mainly intended to settle the outstanding civil suit, Tanco’s indebtedness and to obtain the release and discharge of Tanco’s charged properties (other than the Settlement Properties which are transferred and vested to the Lender or its nominee) can be viewed as involving the interest of Dato’ Tan Jing Nam and/or Dato’ Tan Lee Sing merely because there is a consequential discharge of the limited recourse guarantees which were given solely for the benefit of Tanco in connection with the Facility Agreement.

10. STATEMENT BY THE BOARD

The Board, having considered all aspects of the Settlement Scheme including its rationale and the terms of the Settlement Agreement as at the date of this announcement, is of the opinion that the Settlement Scheme is fair and reasonable and is in the best interests of the Tanco Group.

11. ESTIMATED TIMEFRAME FOR COMPLETION OF THE PROPOSED SETTLEMENT SCHEME

Barring any unforeseen circumstances, the Settlement Scheme is expected to be completed by the second half of 2012.

12. DOCUMENT AVAILABLE FOR INSPECTION

The Settlement Agreement will be available for inspection by the shareholders of Tanco at its registered office at No. 1, Persiaran Ledang, Off Jalan Duta, 50480 Kuala Lumpur during the normal business hours from Mondays to Fridays (except public holidays) for a period of 3 months from the date of this announcement.

This announcement is dated 22nd February 2011.