PTC INTEREST/COUPON (%)

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1 PTC INTEREST/COUPON (%)

2 BRITISH AMERICAN TOBACCO (MALAYSIA) BERHAD Proposed Issuance Programme of up to RM300 million Commercial Papers/Medium Term Notes Principal Terms and Conditions of the Proposal

3 Principal Terms and Conditions of the Proposal BACKGROUND INFORMATION 1. Issuer Name British American Tobacco (Malaysia) Berhad ( BATM ) Address Registered Office: Virginia Park, Jalan Universiti Petaling Jaya Selangor Darul Ehsan Business Registration No. Company No: 4372-M Date/Place of Incorporation Incorporated on 11 September 1961 in the Federation of Malaya as Rothmans of Pall Mall (Malaya) Limited Date of Listing (in case of a public listed company) Listed on the Main Board of the Bursa Malaysia Securities Berhad (the then Kuala Lumpur Stock Exchange) on 27 October 1961 under the name of Rothmans of Pall Mall (Malaya) Limited. Rothmans of Pall Mall (Malaysia) Berhad changed its name to British American Tobacco (Malaysia) Berhad on 2 November 1999 and acquired the tobacco business of Malaysian Tobacco Company Berhad on 3 November Status : resident/non-resident controlled company Non-resident controlled company (NRCC) : Bumiputera/non-Bumiputera controlled company Non-Bumiputera controlled company 1

4 Principal Activities BATM is an investment holding company and through its wholly owned subsidiaries, Commercial Marketers and Distributors Sdn Bhd ( CMD ) and Tobacco Importers and Manufacturers Sdn Bhd ( TIM ) is principally engaged in the manufacture, importation and marketing of high quality tobacco products (such as cigarettes, pipe tobacco and cigars) designed to meet diverse consumer preferences. Board of Directors (as of 1 May 2004) Name of Directors Positions Nationality Tan Sri Abu Talib bin Othman Andrew Maclachlan Gray Tan Sri Kamarul Ariffin bin Mohamed Yassin Mej Jen (Rtd) Dato Haji Fauzi bin Hussain Datuk Oh Chong Peng James Richard Suttie James Campbell Irvine Dato Chan Choon Ngai Dr Syed Hussain bin Syed Husman Dato Phan Boon Siong Independent Non-Executive Director, (Chairman) Non-Independent Executive Director, (Managing Director) Independent Non-Executive Director Independent Non-Executive Director Independent Non-Executive Director Non-Independent Non- Executive Director Non-Independent Executive Director Non-Independent Executive Director Non-Independent Executive Director Non-Independent Executive Director Malaysian British/Brazil ian Malaysian Malaysian Malaysian British British Malaysian Malaysian Malaysian Structure of shareholdings and names of shareholders or, in the case of a public company, names of all substantial shareholders as at 1 May 2004 Name of Substantial Shareholders British American Tobacco Holdings (Malaysia) B.V. Total Shareholding 142,765,000 shares % Equity Held 50.0% 2

5 Name of Substantial Shareholders Total Shareholding % Equity Held Employees Provident Fund Board 19,664,700 shares 6.9% Authorised and paid-up capital Share capital as at 1 May 2004 Authorised ordinary share capital Issued and fully paid-up share capital Description RM385,000,000 consisting of 770,000,000 ordinary shares of RM0.50 each RM142,765,000 consisting of 285,530,000 ordinary shares of RM0.50 each PRINCIPAL TERMS AND CONDITIONS 2. Names of parties involved in the proposed transaction (where applicable) i. Principal Adviser(s)/Lead Arranger(s) Citibank Berhad ii. Arranger(s) Commerce International Merchant Bankers Berhad, and HSBC Bank Malaysia Berhad iii. Valuers iv. Solicitors Albar & Partners v. Financial Adviser vi. Technical Adviser 3

6 vii. Guarantor viii. Trustee Mayban Trustees Berhad ix. Facility Agent Citibank Berhad x. Primary Subscriber(s) and Amount subscribed (where applicable) xi. Underwriter(s) and amount underwritten Underwriting is not required by the Issuer xii. Syariah Adviser (where applicable) xiii. Central Depository Commercial Papers ( CPs )/Medium Term Notes ( MTNs ) issued shall be deposited with Citibank Berhad as depository xiv. Paying Agent Citibank Berhad xv. Reporting Accountant PricewaterhouseCoopers xvi. Others (please specify) None 3. Principle (Conventional/Islamic) Conventional 4. Facility Description Commercial Papers (CPs)/Medium Term Notes (MTNs) Issuance Programme 4

7 5. Issue Size (RM) Up to RM300 million 6. Issue Price (RM) CPs The CPs shall be issued at a discount to face value and the price payable for each CP purchased shall be calculated in accordance with the formula specified in the Rules for the Fully Automated System for Tendering ( FAST Rules ) for Private Debt Securities ( PDS ) issued by Bank Negara Malaysia ( BNM ) or in the rules governing such issues and approved by BNM. The formula used to calculate the proceeds for CPs pursuant to FAST Rules is illustrated as follow: - P = FV x 1 - ( r x t ) where, P = Proceeds FV = the Face Value/Nominal Value r = the applicable yield/rate at which the offer was accepted (expressed to three decimal places) t = the number of days in the tenor of the papers (which shall include the Issue Date but shall exclude the Maturity Date) MTNs The MTNs shall be issued at par, discount or premium to face value. The price payable for each MTN purchased shall be calculated in accordance with the formula specified in the FAST Rules or in the rules governing such issues and approved by BNM. The formula used to calculate the proceeds for MTNs pursuant to FAST Rules is illustrated as follow: - Price (P) = RV + K=1 C/2 1 + r N 1+ T/E 1 + r N K - 1+ T/E where, FV = Face value RV = Redemption value (=FV, if redemption is at par) C = Coupon rate 5

8 r = market yield for a similar maturity period N = Number of semi-annual interest payments between the value date and maturity date T = Number of days from the value date to the next interest payment date E = Number of days in the coupon period in which settlement takes place 7. Tenure of the facility/issue The Programme Seven (7) years from the date of first issuance, where the first issuance shall be made within 2 years from the date of SC s approval. The Issue CPs: Not less than one (1) month and not more than twelve (12) months MTNs: Exceeding one (1) year and not more than seven (7) years 8. Interest/Coupon/Profit or equivalent rate (%) (please specify) to CPs as the CPs will be issued at a discount to face value. The rates for MTNs shall be determined upon issuance in the following manner: (a) tender via FAST system; or (b) at an agreed yield between the Issuer and investor(s) under private placement. 9. Interest/Coupon/Profit Payment frequency to CPs as the CPs will be issued at a discount to face value. The coupon of the MTNs shall be payable semi-annually. 10. Interest/Coupon/Profit Payment basis to CPs as the CPs will be issued at a discount to face value The coupon payment of the MTNs shall be on Actual/Actual days basis. 11. Yield to Maturity (%) To be determined upon issuance 6

9 12. Security/Collateral (if any) None 13. Details on utilisation of proceeds The Issuer plans to utilise the proceeds raised from the Programme for the refinancing of up to RM300 million of BATM s RM300 million 7.1% redeemable unsecured bonds issued by the Issuer and constituted by a trust deed dated 22 October 1999 ( 1999/2004 Bonds ) maturing on 2 November The balance from the proceeds, if any, will be utilised for BATM Group s working capital requirements. 14. Sinking fund (if any) None 15. Rating Credit Rating Assigned : AAA for the MTNs and P1 for the CPs Name of Rating Agency : Rating Agency Malaysia Berhad 16. Form and Denomination The CPs and MTNs shall be represented at all times by global certificates issued in bearer form (exchangeable for definitive certificates only in limited circumstances) and in denomination of RM1,000,000 each, or such other denomination as the Issuer and Facility Agent may agree or as determined by SC. 17. Mode of Issue The Principal Adviser shall invite a selection of financial institutions and investors to participate as Tender Panel Members ( TPMs ) to bid competitively for the CPs and MTNs. The composition of the TPMs may be varied from time to time by the Issuer in consultation with the Principal Adviser or the Facility Agent. The CPs/MTNs could also alternatively be placed privately via the Facility Agent to selected investors at an agreed yield between the Issuer and such investors. The CPs and MTNs would be reported and/or tendered on the Fully Automated System for Issuing/Tendering (FAST). 18. Selling Restriction The CPs or MTNs may not be offered or sold, directly or indirectly, nor may any document or other materials in connection therewith be distributed in Malaysia, 7

10 other than to Malaysian residents falling within any one of the categories specified in Schedules 2 and 5 of the Securities Commission Act, 1993 (as amended) from time to time, subject to any law, order, regulation or official directive of BNM, SC and/or any other regulatory authority from time to time. 19. Listing Status The CPs and MTNs will not be listed 20. Minimum Level of Subscription (RM or %) The minimum level of subscription is 50% of each issue amount. 21. Other regulatory approvals required in relation to the issue, offer or invitation and whether or not obtained (please specify) Not required 22. Additional information for Islamic PDS 23. Conditions Precedent Issuance of CPs/MTNs under the Programme is subject to compliance with conditions precedent including but not limited to the following: (a) Satisfactory completion and execution of all issue documents of the CPs/MTNs and duly endorsed as exempted under Stamp Duty Exemption (No. 23) Order 2000; (b) Approval of the SC in writing; (c) Approvals or resolutions from the Issuer s Board of Directors authorising the Programme and the execution of all relevant documents thereto; (d) Satisfactory legal opinion from the Solicitors as to the legality, validity and enforceability of all legal documentation; (e) No material adverse change in the business, condition (financial or otherwise) or operations of the Issuer from the date of the financial statements upon which the Principal Adviser based its decision to arrange the Programme; (f) No material adverse change in the economic, financial, interest rates, property market, stock market, or political conditions in Malaysia or internationally which will materially and adversely affect any of the aforesaid in Malaysia, and in any case which will impact on the successful arrangement of the Programme; and (g) No event of default has occurred or is continuing or will occur as a result of the issuance of the CPs/MTNs. 8

11 24. Representations and Warranties Representations and warranties usual and customary for a programme of this nature including but not limited to the following: (a) the Issuer is duly incorporated with limited liability under the laws of Malaysia and is validly existing; (b) save as disclosed in the Information Memorandum, neither the Issuer nor any of its Principal Subsidiaries is involved, nor has the Issuer knowledge of any threat of, or circumstances likely to lead to, any litigation or arbitration or administrative proceedings which would, individually or in the aggregate, have a Material Adverse Effect in the context of the offer and issue of the CPs/MTNs; (c) no event having a Material Adverse Effect has occurred since the date of the latest audited financial statement of the Issuer; and (d) the information memorandum and the written information provided by the Issuer in connection with the issue documents of the CPs/MTNs to which it is a party do not contain any untrue statement or omit to state any fact the omission of which makes the statements therein, in the light of the circumstances under which they were made, misleading, and all expressions of expectation, intention, belief and opinion contained therein were honestly made on reasonable grounds after due and careful enquiry by the Issuer. 25. Events of Default Events of default, including but not limited to the following: (a) any event or events of a Material Adverse Effect has or have occurred; (b) any representation, warranty or statement which is made (or acknowledged to have been made) by the Issuer under the trust deed or the other Issue Documents to which it is a party or which is contained in any certificate, statement, legal opinion or notice provided or caused to be provided by the Issuer under or in connection with the trust deed or the other Issue Documents to which it is a party proves to be inaccurate in any material respect or, if repeated at any time with reference to the facts and circumstances then existing, would not be accurate in all material respects and in the case of a misrepresentation, warranty or statement made in good faith but subsequently proved to be incorrect, such misrepresentation, warranty or statement has been certified in writing to the Issuer by the Trustee to be, in its reasonable opinion, materially prejudicial to the interests of the holders of the CPs/MTNs; (c) the Issuer or a Principal Subsidiary fails to discharge on due date any payment obligations contracted by it in respect of any indebtedness, individually or in aggregate, of not less than Ringgit Malaysia Eighty Million (RM80,000,000.00) (other than payment obligations in respect of any indebtedness that are contested in good faith) or such indebtedness is 9

12 declared, or becomes capable of being declared by a creditor to be prematurely due and payable or being placed on demand in accordance with the terms thereof and such failure or event would have a Material Adverse Effect; (d) the Issuer fails to pay any amount due under the CPs/MTNs on the due date (whether formally demanded or not) or on demand, if so payable; (e) the Issuer or any of its Principal Subsidiary makes or enters into a general assignment or arrangement or composition with or for the benefit of its creditors or a moratorium shall be declared on any of its indebtedness whether pursuant to Section 176(10) of the Companies Act or otherwise; (f) any authorisation, permit, act, condition, thing, approval, licence or consent which is required to be done, fulfilled, performed or obtained to enable the Issuer to enter into, exercise its rights under and perform the obligations expressed to be assumed by it in the issue documents under the CPs/MTNs is withdrawn, modified, suspended, revoked or otherwise ceases for any reason to remain in full force and effect which in the reasonable opinion of the Trustee is not capable of remedy or will have a Material Adverse Effect; (g) a resolution is passed or an order of court of competent jurisdiction is made to wind up the Issuer or any of its Principal Subsidiaries (other than for the purposes of an amalgamation, merger, reconstruction or any other purpose the terms whereof have been previously approved by an Extraordinary Resolution) and, being certified in writing to the Issuer by the Trustee to be, in its reasonable opinion, materially prejudicial to the interests of the holders of the CPs/MTNs; (h) the Issuer fails to observe or perform any of its obligations under the trust deed (other than an obligation of the type referred to in Clause (d)) and (i) such failure shall continue for a period of thirty (30) Business Days following the service by the Trustee on the Issuer of a notice requiring the same to be remedied, and (ii) the Trustee certifies to the Issuer in writing that such failure is, in its reasonable opinion, materially prejudicial to the interests of the holders of the CPs/MTNs; and (i) an encumbrancer takes possession, or a receiver is appointed in respect of, the whole or substantial part of the assets or undertakings of the Issuer or any of its Principal Subsidiaries and such taking of possession or appointment has been certified in writing by the Trustee to the Issuer to be, in its reasonable opinion, materially prejudicial to the interests of the holders of the CPs/MTNs. Upon the happening of an event of default, the holders of the CPs/MTNs may direct the Trustee and the Trustee shall upon such direction declare that an event of default has occurred whereupon the CPs/MTNs outstanding shall immediately be due and repayable by the Issuer. 10

13 26. Principal terms and conditions for warrants (where applicable) 27. Other principal terms and conditions for the issue Availability Status Redemption Purchase and Cancellation Notice to the Facility Agent Condition on First Issuance Expenses Taxation : Upon completion of all documentation and compliance with the Conditions Precedent to the satisfaction of the Principal Adviser and/or Facility Agent. : The CPs/MTNs will constitute direct, unconditional and unsubordinated obligations of the Issuer ranking pari passu amongst themselves and all other direct, unconditional and unsubordinated obligations (whether present or future) of the Issuer except those obligations preferred by law. : The CPs/MTNs, unless previously redeemed or cancelled, shall be redeemed at the face amount upon maturity. : The Issuer may at any time purchase the CPs/MTNs in the open market at any price or by private treaty. The CPs/MTNs so purchased by the Issuer shall be cancelled. : The Issuer shall give five (5) Business Days notice to the Facility Agent of its intention to make any CPs or MTNs issue. For the initial issue, the Issuer is required to give seven (7) Business Days notice to the Facility Agent of its intention to make a CP or MTN issue. : Unless otherwise agreed to between the Issuer and the Facility Agent, the first issuance of the MTNs must be on or no earlier than one (1) week before 2 November : All appropriate expenses incurred in the negotiation and execution of the Programme, including but not limited to credit rating, legal, Reporting Accountant, Facility Agent and Trustee fees, printing, advertising bills and Principal Adviser s out-of-pocket expenses reasonably incurred shall be for the account of the Issuer. All such expenses are to be reimbursed by the Issuer to the respective parties irrespective of whether the transaction contemplated herein is completed. However the Issuer shall reimburse the Principal Adviser s out-of-pocket expenses up to a maximum sum of RM20,000 only. : All payments by the Issuer shall be made free and clear of all present and future withholding and other taxes. In the event that any such taxes are in future imposed, the Issuer 11

14 will gross up and make such additional payments as are necessary so that the net amount received by the holders of the CPs/MTNs and/or the Facility Agent equals the full amount which would have been received by it had no such withholding been made (save and except for income tax). Jurisdiction Governing Law Material Adverse Effect Principal Subsidiary : The Issuer and the parties to the Programme shall unconditionally and irrevocably submit to the exclusive jurisdiction of the courts of Malaysia. : Laws of Malaysia : The term Material Adverse Effect wherever used herein means, in relation to the Issuer, any material and adverse effect on the business or condition (financial or otherwise) or the operations of the Issuer or the occurrence of any event which may materially and adversely affect the payment obligation of the Issuer under the CPs/MTNs. : COMMERCIAL MARKETERS AND DISTRIBUTORS SDN BHD (Company No T) or TOBACCO IMPORTERS AND MANUFACTURERS SDN BHD (Company No U) or any other subsidiaries which contributes not less than twenty per centum (20%) of the consolidated profit before tax of the BATM Group as shown by the latest audited consolidated profit and loss account of the BATM Group and the expression Principal Subsidiaries shall mean collectively all of the companies mentioned herein. 12