: 9 December 1963, Malaysia. : 17 December 1993

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1 1. BACKGROUND INFORMATION (a) Issuer (i) Name : Southern Steel Berhad ( SSB or Issuer ) (ii) Address Registered Address : Level 9, Wisma Hong Leong, 18 Jalan Perak, Kuala Lumpur. Business Address : 2435 Lorong Perusahaan 12, Prai Industrial Estate, Prai, Penang (iii) Business registration no. : 5283-X (iv) Date and place of incorporation (v) Date of listing, where applicable : 9 December 1963, Malaysia : 17 December 1993 (vi) Status on residence : Resident-controlled company (vii) Principal activities : The principal activities of the Issuer are manufacturing, sale and trading in billets, steel bars and wire rods whilst the principal activities of its subsidiaries consist of the manufacturing, sale and trading in steel products, wire mesh, prestressed concrete wire products and steel pipes, and investment holding. (viii) Board of directors (as at 5 August 2014) (ix) Structure shareholdings names of and of shareholders or, in the case of a public company, names of all substantial : 1. YBhg Datuk Kwek Leng San 2. Chow Chong Long 3. YBhg Dato Dr Tan Tat Wai 4. YM Raja Dato Seri Abdul Aziz bin Raja Salim 5. Tang Hong Cheong 6. Ang Kong Hua 7. Seow Yoo Lin 8. Dr Kwa Lay Keng : Based on the Record of Depositors of the Issuer as at 30 June 2014 obtained from Bursa Malaysia Depository Sdn Bhd, the shareholding structure of the Issuer as at 30 June 2014 is as follows: 1

2 shareholders (as at 30 June 2014) Category of No. of Shares % Shareholders Bumiputera Individual 492, Body Corporate Banks/finance 2,346, companies Investment trusts / foundation / charities Other types of companies 13, Nominees 2,538, Sub Total 5,391, Non-Bumiputera Individual 23,706, Body Corporate Banks/finance companies Investment trusts / foundation / charities Other types of companies 73,662, Nominees 311,491, Sub Total 408,860, Foreign Individual 1,834, Body Corporate Banks/finance companies Other types of companies 40, Nominees 3,290, Sub Total 5,164, Total 419,417,

3 Based on the Register of Substantial Shareholders of the Issuer, the substantial shareholders of the Issuer and their shareholdings as at 5 August 2014 are as follows: Substantial Shareholder Direct Indirect No. of shares % No. of shares % (a) Hong Leong Manufacturing Group Sdn. Bhd. (b) Signaland Sdn. Bhd. (c) Hong Leong Company (Malaysia) Berhad (d) HL Holdings Sdn. Bhd. (e) YBhg Tan Sri Quek Leng Chan (f) Hong Leong Investment Holdings Pte. Ltd. (g) Kwek Holdings Pte. Ltd. (h) Kwek Leng Beng (i) (j) Davos Investment Holdings Private Limited Kwek Leng Kee (k) Quek Leng Chye 173,879, ,281, (1) 120,281, ,160, (1) ,160, ,541, ,541, ,541, ,541, ,541, ,541, ,541, (2) (3) (3) (3) (3) (3) (3) (3) 3

4 (l) Hong Realty (Private) Limited (m) Southern Amalgamated Co Sdn. Bhd. (n) Su Hock Company Sdn. Bhd. (o) YBhg Dato' Dr Tan Tat Wai ,531, ,487, (3) , ,487, (4) 14, ,742, (5) (1) Held through subsidiary(ies) (2) Held through HLCM (3) Held through HLCM and company(ies) in which the substantial shareholder has interest (4) Held through a company in which the substantial shareholder has interest (5) Held through spouse and companies in which the substantial shareholder has interest (x) Authorised, issued and paid-up capital (as at 5 August 2014) : Authorised capital RM502,000, divided into 500,000,000 ordinary shares of RM1.00 each and 2,000,000 preference shares of RM1.00 each. Issued and Paid-up capital RM419,417, divided into 419,417,208 ordinary shares of RM1.00 each. (xi) Disclosure of the following: : If the issuer or its board members have been convicted or charged with any offence under the securities laws, corporation laws or other laws involving fraud or dishonesty in a court of law, for the past five years prior to the date of application; and None. 4

5 If the issuer has been subjected to any action by the stock exchange for any breach of the listing requirements or rules issued by the stock exchange, for the past five years prior to the date of application. None. 5

6 2. (a) Names of parties involved in the proposal (where applicable) (i) Principal Adviser : Hong Leong Investment Bank Berhad ( HLIB ) (ii) Lead Arranger : Not applicable (iii) Co-arranger : Not applicable (iv) Solicitor : For the Principal Adviser: Rahmat Lim & Partners For the Issuer: Not applicable (v) Financial Adviser : Not applicable (vi) Technical Adviser : Not applicable (vii) Bond Trustee : AmTrustee Berhad (the Trustee ) (viii) Guarantor : Not applicable (ix) Valuer : Not applicable (x) Facility Agent : Not applicable (xi) Primary subscriber (under a bought-deal arrangement) and amount subscribed (xii) Underwriter and amount underwritten : Not applicable : Not applicable (xiii) Central depository : Bursa Malaysia Depository Sdn Bhd (xiv) Paying Agent : Hong Leong Share Registration Services Sdn Bhd (xv) Reporting accountant : KPMG (xvi) Calculation Agent : Hong Leong Share Registration Services Sdn Bhd (xvii) Others specify) (please : Not applicable 6

7 (b) Facility description : Proposed renounceable rights issue of up to RM209,708,604 in nominal value of 5-year 5% redeemable convertible unsecured loan stocks at 100% of its nominal value ( RCULS ) on the basis of RM1.00 nominal value of RCULS for every two (2) existing ordinary shares of RM1.00 each held in SSB ( SSB Shares ) on an entitlement date ( Entitlement Date ) to be determined later by the board of directors of SSB ( Proposed Rights Issue of RCULS ). The actual number of RCULS to be issued pursuant to the Proposed Rights Issue of RCULS would depend on the issued and paid-up ordinary share capital of SSB on the Entitlement Date. The Proposed Rights Issue of RCULS is renounceable in full or in part. Accordingly, the entitled shareholders of the Issuer ( Entitled Shareholders ) can subscribe for or renounce their entitlements to the RCULS in full or in part. The RCULS are convertible into new SSB Shares. The RCULS are unsecured and will be listed on the Main Market of Bursa Malaysia Securities Berhad ( Bursa Securities ), subject to the terms stipulated herein. (c) (d) (e) (f) (g) (h) Issue/debt programme size Tenure of issue/debt programme Availability period of debt programme Interest/coupon rate Interest/coupon payment frequency Interest/coupon payment basis : Up to RM209,708,604 in nominal value of RCULS on the basis of RM1.00 nominal value of RCULS for every two (2) existing SSB Shares held on the Entitlement Date. : Five (5) years from the Issue Date (as defined in item 2(v)(iii) below) ( Maturity Date ). : Not applicable : Fixed rate of 5% per annum calculated on the nominal value of the RCULS then outstanding. : The payment of the coupon shall be in arrears on a semi-annual basis commencing six (6) months from the Issue Date. : Actual number of days / 365 days 7

8 (i) Security/collateral, where applicable : Not applicable as the RCULS will be issued on an unsecured basis. (j) Details on utilisation of proceeds by Issuer : The proposed utilisation of the proceeds from the Proposed Rights Issue of RCULS is as follows: Proposed utilisation of proceeds Minimum Subscription Level Amount (RM 000) Maximum Subscription Level Amount (RM 000) Repayment of 74, ,000 bank borrowings (1) Working capital (2) 72, ,809 Estimated expenses in relation to the Proposed Rights Issue of RCULS and the Proposed Increase in Authorised Share Capital (defined in item (2)(q)(vi)) (3) Total 147, ,709 Notes: (1) As at 5 August 2014, SSB and its subsidiaries (the SSB Group ) utilise floating-rate bank borrowings amounting to approximately RM1,076.8 million (including floating-rate term loans). The part repayment of the SSB Group s floating-rate bank borrowings of RM74.0 million based on the Minimum Subscription Level and RM105.0 million based on the Maximum Subscription Level is intended to replace the aforesaid floating-rate bank borrowings with a reasonable fixed rate borrowing. (2) The proceeds to be raised of approximately RM72.2 million under the Minimum Subscription Level and RM103.8 million under the Maximum Subscription Level will be used for general working capital purposes of the SSB Group, including but not limited to the payment of existing trade and other payables. Any proceeds not utilised from the allocation to working capital (as indicated above) will be used to repay the SSB Group s floating-rate bank borrowings. (3) The estimated expenses relating to the Proposed Rights Issue of RCULS comprising, amongst others, professional fees, fees 8

9 payable to the relevant authorities, printing costs of the circular and abridged prospectus to be despatched to the shareholders of the Issuer and other miscellaneous expenses. Any surplus or shortfall will be adjusted accordingly from/to the portion being earmarked for funding for working capital. Pending the utilisation of the proceeds from the Proposed Rights Issue of RCULS upon its issuance, the proceeds will be placed in interest-bearing deposit accounts or investments in money markets as the board of directors of SSB deems fit and in the best interest of SSB. (k) Sinking fund and designated accounts, where applicable : Not applicable (l) Rating : The RCULS are exempted from rating requirements pursuant to paragraph 4.11(c) of the SC s Guidelines on Private Debt Securities as this is an issuance of convertible loan stocks whereby: (i) (ii) holders of the RCULS ( RCULS Holders ) are given the right to convert the RCULS into new SSB Shares at any time during the tenure of the RCULS; and the underlying SSB Shares are listed on Bursa Securities. (m) Mode of issue : The RCULS will be issued directly to the Entitled Shareholders (or their renouncee(s)) in registered form in denominations of RM1.00 or multiples thereof, accompanied by an abridged prospectus and constituted by the Trust Deed (as defined in item 2(v)(xvii) below). (n) (o) Selling restriction, including tradability (i.e. whether tradable or non-tradable) Listing status and types of listing, where applicable : The RCULS shall be tradable upon listing in board lots of 100 units of RCULS, or such denomination as may be determined by Bursa Securities. No selling restriction is imposed on the RCULS. : An application will be made to Bursa Securities for the admission of the RCULS to the Official List of Bursa Securities, and listing of and quotation for the RCULS to be issued pursuant to the Proposed Rights Issue of RCULS and the new SSB Shares to be issued 9

10 pursuant to the conversion of RCULS, on the Main Market of Bursa Securities. (p) Other regulatory approvals required in relation to the issue, offer or invitation to subscribe or purchase PDS, and whether or not obtained : Not applicable (q) Conditions precedent : The issuance of the RCULS is subject to compliance with the following conditions precedent (in form and substance acceptable to the Principal Adviser): (i) (ii) (iii) (iv) The approval from the SC for the Proposed Rights Issue of RCULS. The approval of Bursa Securities for the admission of the RCULS to the Official List of Bursa Securities, and listing of and quotation for the RCULS to be issued pursuant to the Proposed Rights Issue of RCULS and the new SSB Shares to be issued pursuant to the conversion of RCULS, on the Main Market of Bursa Securities. All Transaction Documents (as defined in item 2(v)(xvi) below) have been duly executed, and where applicable, stamped (unless otherwise exempted) and where applicable, presented for registration with the relevant authorities; Certified true copies of the Certificate of Incorporation, Memorandum and Articles of Association, latest Form 24, 44 and 49 of the Issuer; (v) Certified true copy of board resolutions authorising, amongst others, the execution of the Transaction Documents and issuance of the RCULS; (vi) Certified true copy of the resolutions passed by the shareholders of the Issuer for the Proposed 10

11 Rights Issue of RCULS, the issuance of new SSB Shares pursuant to the conversion of RCULS, and the proposed increase in the authorised share capital of SSB (the Proposed Increase in Authorised Share Capital ); (vii) A list of the Issuer s authorised signatories and their respective specimen signatures; (viii) A company search report on the Issuer conducted at the Companies Commission of Malaysia and a winding up search report on the Issuer revealing that no winding up order has been made against the Issuer; (ix) Receipt of a satisfactory legal opinion(s) from the Solicitor, to be addressed to the Principal Adviser, advising with respect to the legality, validity and enforceability of the Transaction Documents and with respect to the due diligence process and the application to the SC on the Proposed Rights Issue of RCULS, and written confirmation that all conditions precedent have been fulfilled; (x) Documentary evidence that the trustee reimbursement account has been established and the deposit of RM30,000 has been made; (xi) Evidence that all fees, costs and expenses in relation to establishing the Proposed Rights Issue of RCULS have been paid in full to the extent that the same are due and payable before the issuance of the RCULS; and (r) Representations and warranties (xii) Such other conditions to be advised by the Solicitor and mutually agreed between the Principal Adviser and the Issuer. : The representations and warranties shall be the following: (i) The Issuer and each of the Material Subsidiaries (as defined in item 2(v)(xviii)) are duly established and validly in existence and have the power and authority to carry out their respective businesses; 11

12 (ii) (iii) (iv) (v) The Issuer has the power to enter into the Transaction Documents and exercise its rights to perform its obligations under the Transaction Documents; The Memorandum and Articles of Association of the Issuer incorporate provisions which authorise, and all necessary corporate and other relevant actions have been taken to authorise, and all relevant consents and approvals of any administrative, governmental or other authority or body in Malaysia have been duly obtained and are in full force and effect which are required to authorise, the Issuer to execute and deliver and perform the transactions contemplated in the Transaction Documents in accordance with their terms; Entry into and the exercise of the rights, performance and obligations of the Issuer under the Transaction Documents do not constitute a default under any provision contained in any agreement, instrument, law, ordinance, decree, judgment, order, rule, regulation, licence, permit or consent which the Issuer or any of its assets is bound or which is applicable to the Issuer or any of its assets; Neither the execution and delivery of any of the Transaction Documents nor the performance of any of the transactions contemplated by the Transaction Documents did or does as at the date this representation and warranty is made or repeated (a) contravene or constitute a default under any provision contained in any agreement, instrument, law, ordinance, decree, judgment, order, rule, regulation, license, permit or consent by which the Issuer or any of its assets is bound or which is applicable to the Issuer or any of its assets, (b) cause any limitation on the Issuer or the powers of its directors, whether imposed by or contained in its Memorandum and Articles of Association or in any agreement, instrument, law, ordinance, decree, order, rule, regulation, judgment or otherwise, to be exceeded, or (c) cause the creation or imposition of any security 12

13 interest or restriction of any nature on any of the Issuer s assets; (vi) The Transaction Documents constitute legal, valid, binding and enforceable obligations of which are enforceable on and against the Issuer; (vii) All necessary actions, authorisations and consents required under the Transaction Documents and the RCULS have been obtained and remain in full force and effect; (viii) The audited financial statements of the Issuer and each of the Material Subsidiaries of each of its financial year have been prepared on a basis consistently applied in accordance with the approved accounting principles and standards in Malaysia and give a true and fair view of its financial condition; (ix) (x) (xi) There is no winding up petition or any litigation or arbitration which would have a Material Adverse Effect (as defined herein) on the Issuer and/or any of the Material Subsidiaries which has occurred and is continuing; There has been no event or occurrence which constitutes a violation of the law or contravention of or default under any agreement by the Issuer and/or any of the Material Subsidiaries which would have a Material Adverse Effect; There is no change in the business condition (financial or otherwise) or performance of the Issuer and/or any of the Material Subsidiaries which would have a Material Adverse Effect; (xii) All registration and payment of any duty or tax or other action which are required or necessary to ensure the legality, validity, enforceability or admissibility in evidence in Malaysia of the Transaction Documents have been duly and unconditionally obtained and remain in full force and effect; (xiii) To the best of the Issuer s knowledge, no governmental action has occurred which shall 13

14 make it improbable for the Issuer to perform the covenants and obligations on its part to be performed under the Transaction Documents; (xiv) The Issuer has not issued any securities which are convertible into new SSB Shares or granted any options to subscribe for new SSB Shares save under the existing executive share scheme extended by the Issuer to eligible employee and directors; and (xv) Such other representations and warranties as may be advised by the Solicitor and mutually agreed between the Principal Adviser and the Issuer. Material Adverse Effect means, in relation to any event, the occurrence of which would materially and adversely affect: (i) (ii) (iii) the financial condition of the SSB Group taken as a whole; the ability of the Issuer to perform any of its obligations under any of the Transaction Documents; or the legality, validity or enforceability of any of the Transaction Documents and/or the rights, benefits and remedies available to the Trustee or the RCULS Holders under any provision of the Transaction Documents. (s) Events of default and enforcement event, where applicable : The events of default ( Event of Default ) shall be the following: (i) the Issuer commits a default in payment of any principal or coupon under the RCULS; (ii) the Issuer is in breach of any provision, term or condition in the RCULS or the Transaction Documents (other than those as set out in paragraph (i) above), or of any other document relating to the issue, offer or invitation in respect of the RCULS which, in the opinion of the Trustee, is not capable of being remedied or if capable of being remedied, is not remedied within a period of 14

15 30 days from the date of such breach; (iii) any representation or warranty made or given by the Issuer under the Transaction Documents or which is contained in any certificate, notice, opinion, document, information or statement furnished at any time pursuant to the terms of the Transaction Documents proves to have been incorrect or misleading in any material respect on or as at the date on which the representation or warranty was made or given; (iv) there is a revocation, withholding, invalidation, suspension or modification of any license, authorisation, approval or consent that impairs or prejudices the Issuer s ability to comply with the terms and conditions of the RCULS, the Transaction Documents, and any other document relating to the issue, offer or invitation in respect of the RCULS; (v) the Issuer and/or any of the Material Subsidiaries enters into or proposes to enter into, or there is declared by any competent court or authority, a moratorium on the payment of indebtedness or other suspensions of payments generally; (vi) any provision of the Transaction Documents is or becomes illegal, void, voidable or unenforceable; (vii) any step or action is taken for the winding up, dissolution or liquidation of the Issuer and/or any of the Material Subsidiaries (including but not limited to the presentation of a petition for the winding up against the Issuer and/or any of the Material Subsidiaries, or the making of any order or the passing of any resolution for the winding up, dissolution or liquidation of the Issuer and/or any of the Material Subsidiaries unless it is contested in good faith and set aside within thirty (30) days (or such extended period as the Trustee may consent, which consent shall not be unreasonably withheld)) from the date of service of such winding up petition; (viii) the Issuer and/or any of the Material Subsidiaries undergoes any scheme of reconstruction 15

16 arrangement or compromise pursuant to Section 176 of the Companies Act 1965 or the same has been instituted against the Issuer and/or any of the Material Subsidiaries, unless such reconstruction, arrangement or compromise would not in the reasonable opinion of the Trustee have a Material Adverse Effect; (ix) a receiver, manager, liquidator, trustee, administrator or similar officer is appointed in respect of the Issuer and/or any of the Material Subsidiaries over all or any substantial part of the respective assets, properties or undertaking of the Issuer and/or any of the Material Subsidiaries. For the purposes of this paragraph, references to substantial shall mean such value equivalent to or more than 25% of the net asset value of the SSB Group as reflected in the latest annual audited consolidated financial statements of SSB; (x) the Issuer and/or any of the Material Subsidiaries ceases or threatens to cease to carry on all or substantially all of its business; (xi) the Issuer and/or any of the Material Subsidiaries becomes insolvent or commits an act of insolvency, or is unable to pay its debts within the meaning of Section 218(2) of the Companies Act 1965, and the Issuer has not taken any action in good faith to rectify such circumstance within 30 days of the date such circumstance occurred; (xii) the Issuer and/or any of the Material Subsidiaries stops, suspends or threatens to stop or suspend payment of all or any part of its debts, begins negotiations or takes any proceedings or other steps with a view of readjusting, rescheduling or deferring all of its indebtedness (or of any part of its indebtedness which it will or might otherwise be unable to pay when due) or proposes or makes a general assignment or any arrangement or composition with or for the benefit of its creditors which event would have a Material Adverse Effect; (xiii) the Issuer and/or any of the Material Subsidiaries fails to satisfy any judgment which has in the 16

17 opinion of the Trustee a Material Adverse Effect passed against it by any court of competent jurisdiction and no appeal against such judgment has been made to the appropriate appellate court within the time prescribed by law or such appeal has been dismissed; (xiv) any indebtedness of the Issuer and/or any of the Material Subsidiaries becomes due or payable or capable of being declared due or payable prior to its stated maturity by reason of a default by the Issuer in its obligations in respect of the same, or the Issuer and/or any of the Material Subsidiaries fail to make payment in respect thereof on the due date for such payment or if due on demand when demanded, or the security for any such indebtedness becomes legally enforceable, or any guarantee or similar obligations of the Issuer and/or any of the Material Subsidiaries for any indebtedness is not discharged at maturity or when called, and (1) such event would have a Material Adverse Effect, and (2) in the case of a failure to make payment, such failure to pay is not being contested in good faith by the Issuer and/or any of the Material Subsidiaries; (xv) the Issuer repudiates any of the Transaction Documents or the Issuer does or causes to be done any act or thing evidencing an intention to repudiate any of the Transaction Documents; (xvi) all or any part of the property or assets of the Issuer and/or any of the Material Subsidiaries has been condemned, seized or otherwise appropriated, nationalised or compulsorily acquired by any person acting under the authority of any governmental body, which would in the reasonable opinion of the Trustee have a Material Adverse Effect; (xvii) any event has occurred or a situation exists which in the reasonable opinion of the Trustee would materially and adversely affect the ability of the Issuer to pay any coupon and/or default interest on any outstanding coupon; and (xviii) such other Events of Default as may be advised 17

18 by the Solicitor and mutually agreed between the Principal Adviser and the Issuer and which are set out in the Transaction Documents. Upon occurrence of an Event of Default, the Trustee may at its discretion, or shall if so instructed by the RCULS Holders by way of an extraordinary resolution, declare that an Event of Default has occurred whereupon all the outstanding aggregate nominal value of the RCULS together with the coupon and all other amounts accrued or outstanding under the Transaction Documents shall become immediately due and payable by the Issuer to the RCULS Holders provided that the RCULS Holders shall be entitled within thirty (30) days from the date of such declaration of Event of Default to exercise their Conversion Rights in respect of all or any part of their RCULS, and the Trustee shall be entitled to exercise its rights to enforce any provision under the Transaction Documents. (t) Covenants (i) Positive Covenants : The positive covenants shall be the following: (i) (ii) (iii) The Issuer shall redeem or settle in full all outstanding RCULS in accordance with the terms and conditions of the Transaction Documents; The Issuer shall comply at all times with the provisions of the Transaction Documents and the terms and conditions of the RCULS. The Issuer shall (and shall cause and procure that each of the Material Subsidiaries shall) preserve and keep in full force and effect all relevant authorisations, consents, licences, approvals, permits and rights (governmental or otherwise) and will promptly obtain any further authorisations, consents, rights, licenses, approvals and permits (governmental and otherwise) which is or may become necessary to enable it to own its assets, to carry on its business or for the Issuer to enter into or perform its obligations under the Transaction Documents or to ensure the validity, enforceability, 18

19 admissibility in evidence of the obligations of the Issuer or the rights of the RCULS Holders under the Transaction Documents; (iv) (v) (vi) The Issuer shall (and shall cause and procure that each of the Material Subsidiaries shall) exercise reasonable diligence in carrying out its respective business in a proper and efficient manner which shall ensure, amongst others, that all necessary approvals or relevant licenses are obtained and maintained; The Issuer shall (and shall cause and procure that each of the Material Subsidiaries shall) maintain and keep proper books and accounts at all times in compliance with applicable statutory requirements and in accordance with generally accepted accounting principles in Malaysia and, subject to reasonable advance notice being given to the Issuer, provide the Trustee and any person appointed by it (e.g. auditors) access to such books and accounts to the extent permitted by law; The Issuer shall (and shall cause and procure that each of the Material Subsidiaries shall) maintain and/or cause to be maintained such insurances with a licensed insurance company or companies in respect of its assets and business, against all risks which a reasonable company carrying on a business similar to that of the Issuer would normally insure; (vii) The Issuer shall ensure that the terms in the Transaction Documents do not contain any matter which is inconsistent with the provisions of the abridged prospectus relating to the RCULS, unless the Issuer has obtained the approval of the RCULS Holders by way of a special resolution or written consent of the Trustee (which consent may be given, where in its opinion, is not materially prejudicial to the interests of the RCULS Holders to give such consent) for the negative covenants set out in paragraphs 2(t)(ii)(i) and 2(t)(ii)(iii); (viii) The Issuer shall (and shall cause and procure 19

20 that each of the Material Subsidiaries shall) promptly comply with all applicable laws including the provisions of the Capital Markets and Services Act 2007, and/or practice notes, circular or guidelines issued by the SC, Bursa Securities and other regulatory body(ies) from time to time; (ix) (x) (xi) The Issuer shall use its best endeavours to maintain or cause the maintenance of the listing of the SSB Shares and the RCULS on Bursa Securities; The Issuer shall maintain a paying agent, or its equivalent, who is based in Malaysia ( Paying Agent ); The Issuer shall procure the Paying Agent to notify the Trustee in the event that the Paying Agent does not receive payment from the Issuer on the due dates as required under the Transaction Documents and the terms and conditions of the RCULS; (xii) The Issuer shall (and shall cause and procure that the Material Subsidiaries shall) pay and discharge all taxes imposed upon it or its assets within the time period allowed without incurring penalties save to the extent that (a) payment is being contested in good faith, and for which adequate reserves are being maintained for those taxes, or (b) payment can be lawfully withheld; (xiii) The Issuer will not later than four months after the end of its financial year, furnish to the Trustee a copy of its annual audited financial statements; (xiv) The Issuer will not later than two months after the end of each financial half-year period, furnish to the Trustee a copy of its semi-annual unaudited results; (xv) The Issuer will promptly, and in any event within such period of time as shall be agreed with the Trustee after receipt of such request from the 20

21 Trustee, give to the Trustee any information which the Trustee may reasonably require in order to discharge its duties and obligations under the Transaction Documents relating to the Issuer s affairs to the extent permitted by law; (xvi) The Issuer will promptly deliver to the Trustee any account (other than its financial statements), report, notice, statement or circular issued by the Issuer to all its shareholders; (xvii) The Issuer will not later than four months after each of its financial year end, deliver to the Trustee, a certificate confirming that the Issuer has complied with all its obligations under the Transaction Documents and the terms and conditions of the RCULS and that there did not exist or has not existed, from the date the RCULS were issued or date of the previous certificate as the case may be, any Event of Default or enforcement, where applicable and if such is not the case, to specify the same with details of the same; (xviii) The Issuer shall immediately notify the Trustee in writing if the Issuer becomes aware of any of the following: (a) the occurrence of an Event of Default; (b) any circumstances that have occurred that would materially prejudice the Issuer and/or any of the Material Subsidiaries; (c) any other matter that may materially prejudice the interests of the RCULS Holders; (d) any claim, litigation, arbitration or proceeding against it which would have a Material Adverse Effect; (e) any change in the withholding tax position or taxing jurisdiction of the Issuer insofar as it affects the payment obligations of the Issuer (f) any change in the utilisation of proceeds 21

22 from that stated in the Transaction Documents, abridged prospectus or any agreement entered into in connection with the issue, offer, or invitation in respect of the RCULS; (g) any substantial change in the nature of the business of the Issuer and/or any of the Material Subsidiaries; (h) the occurrence of any event that has caused or could cause, one or more of the following: (aa) any amount secured or payable under the RCULS becoming immediately payable; (bb) the RCULS becoming immediately enforceable; or (cc) any other right or remedy under the terms, provisions or covenants of the RCULS or the Trust Deed becoming immediately enforceable; (i) change in its substantial shareholders at the same time such change is announced on Bursa Securities; and (xix) Such other covenants as may be advised by the Solicitor and mutually agreed between the Principal Adviser and the Issuer and which are set out in the Transaction Documents. (ii) Negative Covenants : The negative covenants shall be the following: (i) The Issuer shall not permit any amendment, supplement or variation to its Memorandum and Articles of Association in a manner inconsistent with the Transaction Documents to which it is a party and/or which may be materially prejudicial to the interests of the RCULS Holders; (ii) The Issuer shall not enter into a transaction, whether directly or indirectly with interested persons (which includes directors, major shareholders and chief executive) unless: 22

23 (a) such transaction shall be on terms that are no less favourable to the Issuer than those which could have been obtained in a comparable transaction from persons who are not interested persons; and (b) with respect to transaction involving an aggregate payment or value which would trigger any applicable percentage ratio as provided in the Main Market Listing Requirements of Bursa Securities ( Listing Requirements ), the Issuer obtains certification from an independent adviser that the transaction is carried out on fair and reasonable terms; provided that the Issuer certifies to the Trustee that the transaction complies with paragraph (ii)(a) above, that the Issuer has received the certification referred to in paragraph (ii)(b) above (where applicable) and that the transaction has been approved by the majority of the board of directors or shareholders of SSB in a general meeting as the case may require; (c) with respect to transactions constituting a recurrent related-party transaction of a revenue or trading nature ( RRPT ) such transactions which are provided for and permitted under the Listing Requirements, provided that the Issuer certifies to the Trustee that the transaction complies with paragraph (ii)(a) above, that the Issuer has obtained or renewed, where applicable, the shareholders mandate in accordance with the Listing Requirements and that the Issuer furnishes at least one certificate to the Trustee in respect of the RRPT contemplated under the shareholders mandate; (iii) the Issuer shall not use the proceeds from the Proposed Rights Issue of RCULS for any other purposes other than as stated in the abridged prospectus or any agreement entered into in 23

24 connection with the issue, offer or invitation in respect of the RCULS; (iv) (v) (vi) The Issuer shall not declare or pay any dividends or make any distribution whether income or capital in nature to its shareholders if an Event of Default has been declared and is subsisting; The Issuer shall not make any payments (whether in relation to principal, interest or otherwise) to its subsidiaries or associated companies in connection with any financings/loans or advances from its subsidiaries or associated companies if an Event of Default has been declared and is subsisting; The Issuer shall not (and shall cause and procure that the Material Subsidiaries shall not) change nor threaten to change the nature or scope of any part of its business, or suspend or threaten to suspend the operation of any part of its business which it now conducts and which change or suspension would have a Material Adverse Effect. (vii) the Issuer will not surrender, transfer, assign, relinquish or otherwise dispose of any of its rights and interest under any of the Transaction Documents; (viii) the Issuer will not (and shall cause and procure that the Material Subsidiaries will not) enter into any amalgamation, demerger, reconstruction or winding up unless such amalgamation, demerger or reconstruction would not have a Material Adverse Effect. (ix) (x) the Issuer shall not (and shall cause and procure that the Material Subsidiaries shall not) carry out any acts which would materially and adversely affect the ability of the Issuer to pay any coupon and/or default interest on any outstanding coupon; the Issuer shall not (and shall cause and procure that the Material Subsidiaries shall not) undertake or acquire any other business or 24

25 subsidiaries where such undertaking or acquisition would have a Material Adverse Effect; (xi) the Issuer will not (and shall cause and procure that the Material Subsidiaries will not) do or suffer to be done any act, matter or thing whereby any insurance may be rendered void, voidable or incapable of being effected, maintained or renewed which would have a Material Adverse Effect; (u) Provisions on buyback, early redemption and redemption at maturity of PDS (xii) the Issuer shall not (and shall cause and procure that the Material Subsidiaries shall not) reduce or in any way whatsoever alter (except increase) its authorised and/or issued share capital which reduction or alteration would have a Material Adverse Effect; (xiii) such other covenants as may be advised by the Solicitor and mutually agreed between the Principal Adviser and the Issuer and which are set out in the Transaction Documents. : Buy-back Subject to all relevant approvals (if required) being obtained, the Issuer may at any time prior to the Maturity Date purchase the RCULS on Bursa Securities at any price, or through any other mode of transfer allowed under the Rules of Bursa Malaysia Depository Sdn Bhd or the Rules of Bursa Securities, as the case may be. The RCULS which have been purchased by the Issuer or by its subsidiaries or by agent(s) of the Issuer who is acting for the purchase, will be cancelled and cannot be re-sold. Early Redemption Not applicable Redemption on the Maturity Date Subject to SSB giving irrevocable notice to the RCULS Holders at least thirty (30) days prior to the Maturity Date, SSB shall have the option to redeem the outstanding RCULS (if not earlier converted) in cash at 25

26 (v) Other principal terms and conditions for the proposal 100% of the nominal amount of the RCULS, in whole or in part (but always in the same proportion in relation to each RCULS Holder), on the Maturity Date. During such notice period but not later than the eighth (8 th ) trading day prior to the Maturity Date, the RCULS Holders shall be entitled to exercise their Conversion Rights. Upon the exercise by SSB of its option to redeem the RCULS on the Maturity Date, SSB shall pay the RCULS Holders (no later than the Maturity Date) all unpaid coupon accruing from the immediately preceding coupon payment date until but excluding the Maturity Date. For the avoidance of doubt, the RCULS Holders shall not have the right to require SSB to redeem the RCULS on the Maturity Date. The RCULS which have been redeemed will be cancelled and cannot be re-sold. (i) Issue Price : At 100% of the nominal value on the basis of RM1.00 nominal value of the RCULS. (ii) Basis of Allotment : RM1.00 in nominal value of RCULS for every two (2) existing SSB Shares held on the Entitlement Date. (iii) Issue Date : The issue date for the RCULS shall be a business day and shall take place within the period commencing from the date of fulfillment of the conditions precedent set out in item 2(q) above and ending on a date falling one (1) year from the date of approval by the SC. (iv) Form denomination and : The RCULS will be issued in registrable form and in denominations and multiples of RM1.00 each. (v) Conversion Rights : The RCULS Holders shall have the right to convert all or any amount of the RCULS held by them into fully paid new SSB Shares at the Conversion Price (as defined in item 2(v)(vii) below) at any time during the 26

27 Conversion Period (as defined in item 2(v)(vi) below). Once delivered, the conversion notice shall be irrevocable. If any RCULS Holder exercises its right to convert all or any amount of the RCULS held by it into new SSB Shares, no coupon shall be payable on such RCULS as from the Issue Date or the coupon payment date immediately preceding the conversion date, whichever is the later. All outstanding RCULS which have not been earlier converted or redeemed on the Maturity Date, shall be automatically converted into new SSB Shares at the Conversion Price on the Maturity Date ( Automatic Conversion ). In the event of an Automatic Conversion, the RCULS Holders shall be deemed to have submitted a valid conversion notice on the Maturity Date for the purpose of converting such outstanding RCULS into fully paid new SSB Shares. Any fractional new SSB Shares arising from the Automatic Conversion shall be disregarded and be dealt with by the board of directors of SSB as it may deem fit and expedient in the best interest of SSB. (vi) Conversion Period : Any time after the Issue Date of the RCULS and up to the Maturity Date of the RCULS. (vii) Conversion Price : The Conversion Price will be determined and announced at a later date by the board of directors of SSB. The Conversion Price is subject to adjustments set out in item 2(v)(xi). (viii) Conversion Mode : The conversion of the RCULS will not require any cash payment by the RCULS Holders. The conversion shall be satisfied by surrendering the RCULS with an aggregate nominal value equivalent to the Conversion Price for cancellation by the Issuer. Any fraction of the new SSB Shares arising from the conversion of the RCULS shall be disregarded. (ix) Status & Ranking : The RCULS constitute direct, unsubordinated and unsecured obligations of the Issuer ranking pari passu without discrimination, preference or priority amongst themselves and pari passu with all present and future unsecured obligations of the Issuer from time to time 27

28 (subject to those preferred by law). (x) Status of New SSB Shares : The new SSB Shares to be issued pursuant to the conversion of the RCULS will, upon allotment and issue, rank pari passu in all respects with the existing SSB Shares in issue except that they will not be entitled to any dividends, rights, allotments and/or other distributions, in respect of which the entitlement date is prior to the date of allotment of the new SSB Shares to be issued pursuant to the conversion of the RCULS. (xi) Adjustment in the Conversion Price and/or nominal value of RCULS in the event of alteration to the issued and paid-up ordinary shares (xii) RCULS Holders right to participate in any distribution and/or offer of further securities in the Issuer (xiii) Amendments to the RCULS Holders Rights (xiv) Winding-up/ liquidation The Issuer shall make the necessary adjustment to the Conversion Price of the RCULS then outstanding in the event of any alteration in the issued and paid-up SSB Shares on or before the Maturity Date, whether by way of rights issue, capitalisation issue, consolidation of SSB Shares, subdivision of SSB Shares or reduction of capital howsoever being effected, in accordance with the provisions of the Trust Deed. The RCULS Holders are not entitled to participate in any distribution and/or offer of securities in the Issuer until and unless the RCULS have been validly converted into new SSB Shares, and such shares are allotted prior to the entitlement date of such distribution and/or offer of securities. : Save as otherwise provided in the Trust Deed, an extraordinary resolution of the RCULS Holders is required to sanction any modification, variation, abrogation or compromise of or arrangement in respect of the rights of the RCULS Holders against the Issuer. : If a resolution is passed for a voluntary winding-up of the Issuer whilst any of the RCULS remain capable of being converted, then: (a) if such winding-up is for the purpose of reconstruction or amalgamation pursuant to a scheme of arrangement to which the RCULS Holders or some person designated by them for such purpose, shall be a party, the terms of such scheme of arrangement if approved by an extraordinary resolution shall be binding on all 28

29 the RCULS Holders; and (b) in any other case every RCULS Holders shall be entitled to upon and subject to the Trust Deed at any time within six (6) weeks after the passing of such resolution for a members voluntary winding-up of the Issuer deliver to the Issuer a duly completed conversion notice in relation to the RCULS to elect to be treated as if he had on the last day of the month immediately before the commencement of such winding-up, exercised the Conversion Rights to the extent specified in the conversion notice(s) and be entitled to receive out of the assets of the Issuer which will be available in liquidation if he had on such date been the holder of the new SSB Shares to which he would have become entitled pursuant to such exercise and the liquidator of the Issuer shall give effect to such election accordingly. Upon such election taking effect, all RCULS converted under such election shall cease to carry any coupon as from the last day of the month immediately preceding the month in which the RCULS are converted or deemed converted under this provision. All Conversion Rights which have not been exercised at the expiry date of the said period of six (6) weeks shall lapse and cease to be valid for any purpose. (xv) Taxes : All payments in respect of the RCULS will be made by the Issuer after deducting or withholding any amount for or on account of any present or future taxes or duties of whatsoever nature imposed or levied by the Government of Malaysia or any authority thereof or therein having power to tax and which are required by law to be deducted or withheld. The Issuer shall not be required to pay any additional amount in respect of any such deduction or withholding or payment of principal or interest for or on account of any such taxes and duties. (xvi) Transaction Documents : The Trust Deed in respect of the RCULS and such other legal documents and agreements (if any) necessary in relation thereto in form and substance acceptable to the Principal Adviser, Trustee and the 29

30 Issuer. (xvii) Trust Deed : The RCULS shall be constituted by a trust deed, which shall be administered by the Trustee acting on behalf of the RCULS Holders. The trust deed shall be in compliance with the Trust Deeds Guidelines issued by the SC (effective 12 August 2011), as amended from time to time. (xviii) Material Subsidiary : A subsidiary is a Material Subsidiary if its: (i) net asset value ( NAV ), based on its latest audited financial statements at company level, is or exceeds 5% of the NAV of the SSB Group (based on its latest audited consolidated financial statements); or (ii) profit after tax ( PAT ), based on its latest audited financial statements at company level, is or exceeds 5% of the PAT of the SSB Group (based on its latest audited consolidated financial statements), but shall exclude Southern Steel Holdings Sdn. Bhd. and Starglow Investment Ltd. (xix) Legal fees, stamp duty and other expenses : All costs and expenses including but not limited to legal and other professional fees, stamp duty (if any), out-of-pocket expenses, fees for the Central Depository, Paying Agent, Calculation Agent, Trustee, SC and other regulatory fees (if any), and other costs and expenses, shall be for the account of the Issuer and on a full indemnity basis. (xx) Governing Law : The RCULS and the Transaction Documents shall be governed by the laws of Malaysia and be subject to the non-exclusive jurisdiction of the courts of Malaysia. (xxi) Other conditions : The RCULS shall at all times be subject to such guidelines, rules and directives to be issued from time to time by the SC and/or any other authorities having jurisdiction over matters pertaining to the RCULS. 30