Contents :

(a) (i) Class C Non-Convertible Redeemable Preference Shares (“NCRPS”) consisting of up to 2,000 Class C NCRPS; which are linked to

(ii) Sukuk Ijarah Class A of nominal value up to RM1,998,000,000.00; and

(b) (i) Class D NCRPS consisting of up to 1,000 Class D NCRPS; which are linked to

(ii) Sukuk Ijarah Class B of nominal value up to RM999,000,000.00,

(collectively, the “Proposed Transaction”).

The Islamic Stapled Income Securities would be issued to the existing holders of the Existing Stapled Securities (as defined below).

The NCRPS would be issued at RM1,000.00 per NCRPS with RM1.00 par value and RM999.00 being the premium (“Proposed NCRPS Issue”). The basis of the issue price of RM1,000.00 per NCRPS is in line with market practice for similar types of issuances undertaken in connection with stapled securities.

The issue price of the Sukuk shall be calculated in accordance with the formula specified in Part III paragraph 5.1(d)(ii) of the Rules on Fully Automated System for Issuing/Tendering or in the rules governing such issues and approved by Bank Negara Malaysia.

The purpose of the Proposed Transaction is intended to replace the existing stapled securities issued in year 2003 which are conventional in nature (“Existing Stapled Securities”) with Shariah compliant financing instruments. The Existing Stapled Securities comprise of:

(a) 1,000 RPS A and 1,000 RPS B and RM1,983.4 million nominal value tranche 1 bonds and RM2,000 million nominal value tranche 2 bonds, all issued by TM to Rebung Utama Sdn Bhd (“RUSB”), a special purpose company incorporated for purposes of the Existing Stapled Securities;

(b) 1,987 RPS A and 2,000 RPS B issued by RUSB to Tekad Mercu Berhad (“Tekad Mercu”), a special purpose company incorporated for purposes of the Existing Stapled Securities; and

(c) RM2,000 million nominal value tranche 1 bonds and up to RM2,000 million nominal value tranche 2 bonds issued by Tekad Mercu to investors, of which RM1,000 million nominal value tranche 2 bonds have been issued.

In order for the Company’s shares to be included in the Dow Jones Islamic Index, the Company needs to comply with requirements for inclusion in the index. These requirements inter alia, state that the ratio of our non-Islamic based borrowings to assets do not exceed a prescribed ratio. Accordingly, we will need to convert a certain amount of our existing non-Islamic based borrowings to Islamic based financing. To this end, we have identified the Existing Stapled Securities to be replaced with the instruments issued pursuant to the Proposed Transaction.

The Islamic Stapled Income Securities will be offered to holders of the Existing Stapled Securities and as such there will be no new funds being raised.

Indicative terms of the Class C and Class D NCRPS (“NCRPS”)

(a) The NCRPS will not be convertible to ordinary shares of the Company.

(b) The NCRPS will be issued and redeemable at a premium of RM999.00 per share.

(c) The NCRPS will pay preference dividends of a predetermined sum in relation to the rental payments obligations, which would otherwise be paid under the Sukuk Ijarah.

(d) The Company will have the option of redeeming the NCRPS at any time with advance notice.

(e) There will be no voting rights except with regards to the proposal to reduce the capital of the Company, sanctioning the disposal of the whole of the Company’s property, business and undertaking or where the proposition to be submitted to the meeting directly affects the rights and privileges of the NCRPS holders or as provided for in the Companies Act, 1965.

(f) The NCRPS will not be listed on any of the boards of Bursa Malaysia Securities Berhad.

(g) The NCRPS shall rank pari passu among themselves but below the Special Share and ahead of the Company’s ordinary shares in a distribution of capital in the event of the winding-up or liquidation of the Company.

Indicative terms of the Sukuk Ijarah Class A and Class B (“Sukuk”)

(a) The Sukuk will be issued by a wholly-owned subsidiary of TM (the “Issuer”).

(b) The Sukukholders, through the Issuer, shall acquire assets from TM (“Assets”). The Issuer shall issue Sukuk certificates to Sukukholders to represent the Sukukholders’ undivided interest in the Assets. The Issuer (on behalf of the Sukukholders) shall lease the Assets to TM for a pre-determined rental amount. Pursuant to the Purchase Undertaking to be granted by TM in favour of the Issuer, TM shall acquire the Assets upon the dissolution date (which is the date of declaration of an event of default under the Sukuk, or the maturity thereof, as the case may be).

(c) The Sukuk shall pay periodic distribution if dividends are not paid on the NCRPS.

(d) The Sukuk Ijarah Class A and Sukuk Ijarah Class B will have maturities of six and half years and eleven and half years from the date of issuance.

(e) The Sukuk will not be listed on any of the boards of Bursa Malaysia Securities Berhad.

(f) The Sukuk shall constitute trust obligations of the Issuer in relation to, and represent undivided beneficial ownership in the Assets. The Sukuk will also constitute the obligations of TM in relation to the Purchase Undertaking.

The obligations of TM pursuant to the Purchase Undertaking in respect of the Sukuk will constitute direct, unconditional and unsecured obligations of TM and shall at all times rank pari passu, without discrimination, preference or priority amongst themselves and at least pari passu with all other present and future unsecured and unsubordinated obligations of TM, subject to those preferred by law or the transaction documents.

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  The total issued and paid up share capital of the Company will be increased by up to RM3,000.00 as a result of the issuance of up to 3,000 NCRPS of RM1.00 each (issued at a premium of RM999.00 each).

• There will be no effect on the shareholding and percentage of shareholding of the substantial shareholders as the Proposed NCRPS Issue only involves the issuance of up to 3,000 NCRPS which is not convertible into ordinary shares.

• The Proposed Transaction, which incorporates the Proposed NCRPS Issue, is to replace the existing Stapled Securities with Shariah compliant financing instruments and will not materially affect the earnings per share for the year ending 31 December 2007.

• There will be no material effect on the net assets per ordinary share or the gearing of the Group.

• It is not expected that the Proposed Transaction will affect the ability of the Company to declare dividends to the ordinary shareholders.