avic international investments...

INFORMATION MEMORANDUM DATED 10 AUGUST 2011

THIS DOCUMENT IS IMPORTANT. IF YOU ARE IN ANY DOUBT AS TO THE ACTION YOU SHOULDTAKE, YOU SHOULD CONSULT YOUR LEGAL, FINANCIAL, TAX, OR OTHER PROFESSIONALADVISER.

This document is issued in connection with our application to the Singapore Exchange Securities TradingLimited (the “SGX-ST”) for permission to deal in, and for quotation of all the ordinary shares (the“Shares”) in the share capital of AVIC International Investments Limited (our “Company”) alreadyissued or to be issued comprising the Consideration Shares (as defined herein) by way of the Scheme ofArrangement (as defined herein) and the Compliance Placement Shares (as defined herein). Suchpermission will be granted when our Company has been admitted to the Official List of the SGX-ST.

It is presently anticipated that an offer information statement will be lodged with the Monetary Authority ofSingapore (the “Authority”) for the purpose of the Compliance Placement (as defined herein). TheCompliance Placement will comprise an offering of the Compliance Placement Shares. The dealing inand quotation of our Shares will be in Singapore dollars.

The SGX-ST assumes no responsibility for the correctness of any of the statements made, reportscontained or opinions expressed in this Information Memorandum. Approval in-principle granted by theSGX-ST for the admission of our Shares on the Official List of the SGX-ST is not to be taken as anindication of the merits of the Scheme of Arrangement, the Compliance Placement, our Company, oursubsidiaries, and our Shares, including the Consideration Shares and the Compliance Placement Shares.

This Information Memorandum does not constitute a prospectus and has not been and will not be lodgedwith or registered by the Authority. The Authority assumes no responsibility for the contents of thisInformation Memorandum.

INVESTING IN OUR SHARES INVOLVES RISKS WHICH ARE DESCRIBED UNDER THE “RISKFACTORS” SECTION OF THIS INFORMATION MEMORANDUM.

AVIC International Investments Limited(Incorporated in Singapore on 11 November 2010)

(Registration Number: 201024137N)

OFFERS OF SHARES IN AVIC INTERNATIONAL INVESTMENTS LIMITED MADE PURSUANT TO THE SCHEME OF ARRANGEMENT IN RELATION TO

SINO-ENVIRONMENT TECHNOLOGY GROUP LIMITED (IN JUDICIAL MANAGEMENT)

Financial Adviser

DMG & Partners Securities Pte Ltd

TABLE OF CONTENTS

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CORPORATE INFORMATION ............................................................................................................ 4

DEFINITIONS AND INTERPRETATION.............................................................................................. 6

GLOSSARY OF TECHNICAL TERMS ................................................................................................ 12

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS ...................................... 14

EXCHANGE RATES............................................................................................................................ 16

SCHEME OF ARRANGEMENT .......................................................................................................... 17

DETAILS ON THE COMPLIANCE PLACEMENT................................................................................ 19

INFORMATION MEMORANDUM SUMMARY .................................................................................... 21

OVERVIEW OF OUR GROUP AND BUSINESS ACTIVITIES .................................................... 21

OUR COMPETITIVE STRENGTHS.............................................................................................. 22

OUR PROSPECTS ...................................................................................................................... 22

OUR BUSINESS STRATEGIES AND FUTURE PLANS .............................................................. 23

OUR CONTACT DETAILS ............................................................................................................ 24

SUMMARY OF FINANCIAL INFORMATION ................................................................................ 24

USE OF PROCEEDS FROM THE COMPLIANCE PLACEMENT AND EXPENSES INCURRED .... 26

RISK FACTORS .................................................................................................................................. 28

RISKS RELATING TO OUR BUSINESS ...................................................................................... 28

RISKS RELATING TO THE SHIP-TRADING AND SHIPBUILDING INDUSTRY.......................... 33

RISKS RELATING TO THE PRC .................................................................................................. 34

RISKS RELATING TO THE OWNERSHIP OF OUR SHARES .................................................... 40

DIVIDEND POLICY ............................................................................................................................ 42

CAPITALISATION AND INDEBTEDNESS .......................................................................................... 43

DILUTION............................................................................................................................................ 44

SELECTED PRO FORMA FINANCIAL INFORMATION .................................................................... 45

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTSOF OPERATIONS .............................................................................................................................. 49

BASIS OF PRESENTATION AND PREPARATION ...................................................................... 49

OVERVIEW .................................................................................................................................. 49

REVIEW OF PAST PERFORMANCE .......................................................................................... 52

MATERIAL CAPITAL EXPENDITURES AND DIVESTMENTS .................................................... 55

WORKING CAPITAL .................................................................................................................... 56

COMPLIANCE WITH RULE 210(4)(a) OF THE LISTING MANUAL ............................................ 56

FOREIGN EXCHANGE MANAGEMENT ...................................................................................... 57

GENERAL INFORMATION ON OUR GROUP.................................................................................... 58

SHARE CAPITAL .......................................................................................................................... 58

SHAREHOLDERS ........................................................................................................................ 59

MORATORIUM .............................................................................................................................. 61

RESTRUCTURING EXERCISE .......................................................................................................... 62

GROUP STRUCTURE ........................................................................................................................ 63

SUBSIDIARIES ............................................................................................................................ 63

OVERVIEW OF THE SHIPBUILDING INDUSTRY.............................................................................. 64

HISTORY AND BUSINESS ................................................................................................................ 68

HISTORY AND DEVELOPMENT OF OUR GROUP .................................................................... 68

BUSINESS AND PRINCIPAL ACTIVITIES .................................................................................. 70

AWARDS AND CERTIFICATES.................................................................................................... 73

PRODUCTION FACILITIES .......................................................................................................... 74

PROPERTIES AND FIXED ASSETS............................................................................................ 74

MAJOR CUSTOMERS.................................................................................................................. 75

CREDIT MANAGEMENT .............................................................................................................. 78

MAJOR SUPPLIERS .................................................................................................................... 78

INVENTORY MANAGEMENT ...................................................................................................... 79

SALES AND MARKETING............................................................................................................ 79

INSURANCE ................................................................................................................................ 79

INTELLECTUAL PROPERTY........................................................................................................ 80

RESEARCH AND DEVELOPMENT.............................................................................................. 80

QUALITY CONTROL .................................................................................................................... 80

STAFF TRAINING AND DEVELOPMENT .................................................................................... 80

GOVERNMENT REGULATIONS .................................................................................................. 80

COMPETITION.............................................................................................................................. 81

COMPETITIVE STRENGTHS ...................................................................................................... 81

PROSPECTS ................................................................................................................................ 82

BUSINESS STRATEGIES AND FUTURE PLANS........................................................................ 84

DIRECTORS, EXECUTIVE OFFICERS AND EMPLOYEES .............................................................. 86

DIRECTORS ................................................................................................................................ 86

EXECUTIVE OFFICERS .............................................................................................................. 89

MANAGEMENT REPORTING STRUCTURE .............................................................................. 90

EMPLOYEES ................................................................................................................................ 90

REMUNERATION OF DIRECTORS, EXECUTIVE OFFICERS AND RELATED EMPLOYEES ...... 91

TABLE OF CONTENTS

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SERVICE AGREEMENTS ............................................................................................................ 92

BOARD PRACTICES .................................................................................................................... 93

CORPORATE GOVERNANCE...................................................................................................... 93

INTERESTED PERSON TRANSACTIONS ........................................................................................ 97

PAST TRANSACTIONS ................................................................................................................ 97

PRESENT AND ON-GOING TRANSACTIONS ............................................................................ 97

REVIEW PROCEDURES FOR FUTURE INTERESTED PERSON TRANSACTIONS ................ 99

POTENTIAL CONFLICTS OF INTERESTS........................................................................................ 100

EXCHANGE CONTROLS .................................................................................................................. 103

CLEARANCE AND SETTLEMENT .................................................................................................... 106

GENERAL AND STATUTORY INFORMATION .................................................................................. 107

APPENDIX A : INDEPENDENT AUDITORS’ REPORT AND UNAUDITED PRO FORMA FINANCIAL INFORMATION FOR THE YEAR ENDED 31 DECEMBER 2008, 2009 AND 2010 .......................................................................................................... A-1

APPENDIX B : SUMMARY OF MEMORANDUM OF ASSOCIATION AND SELECTED ARTICLESOF ASSOCIATION OF OUR COMPANY.................................................................... B-1

APPENDIX C : SUMMARY OF RELEVANT PRC LAWS AND REGULATIONS ................................ C-1

APPENDIX D : TAXATION .................................................................................................................. D-1

TABLE OF CONTENTS

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BOARD OF DIRECTORS : Diao Weicheng (Non-Executive Chairman)Li Jin (Non-Executive Deputy Chairman)Zhang Wanping (Executive Director and CEO)Cheng Xuhui (Executive Director)Wu Weidong (Executive Director)Teng Cheong Kwee (Lead Independent Director)Chong Teck Sin (Independent Director)Alice Lai Kuen Kan (Independent Director)

COMPANY SECRETARY : Yap Lian Seng, LL.B. (Hons)

REGISTERED OFFICE : 10 Collyer Quay#27-00 Ocean Financial CentreSingapore 049315

PRINCIPAL PLACE OF BUSINESS : 24th Floor, North Star Times TowerNo. 8 Beichendong RoadChaoyang DistrictBeijing 100101The People’s Republic of China

COMPANY REGISTRATION NUMBER : 201024137N

FINANCIAL ADVISER TO OUR : DMG & Partners Securities Pte LtdCOMPANY 10 Collyer Quay

#09-08 Ocean Financial CentreSingapore 049315

INDEPENDENT AUDITORS AND : Deloitte & Touche LLPREPORTING ACCOUNTANTS Certified Public Accountants

6 Shenton Way #32-00 DBS Building Tower TwoSingapore 068809(Partner-in-charge: Ernest Kan Yaw Kiong, Certified Public Accountant)

LEGAL ADVISER TO OUR COMPANY : Stamford Law CorporationON SINGAPORE LAW 10 Collyer Quay

#27-00 Ocean Financial CentreSingapore 049315

LEGAL ADVISER TO OUR COMPANY : Zhong Lun Law FirmON PRC LAW 10/F, Tower A

Rongchao Centre6003 Yitian RoadFutian DistrictShenzhen 518026The People’s Republic of China

LEGAL ADVISER TO THE FINANCIAL : Colin Ng & Partners LLPADVISER ON SINGAPORE LAW 36 Carpenter Street

Singapore 059915

CORPORATE INFORMATION

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LEGAL ADVISER TO THE FINANCIAL : GFE Law OfficeADVISER ON PRC LAW 18th Floor, Guangdong Holdings Tower

No. 555 DongFeng East RoadGuangzhou 510050The People’s Republic of China

SHARE REGISTRAR AND SHARE : Boardroom Corporate & Advisory Services Pte. Ltd.TRANSFER OFFICE 50 Raffles Place

#32-01 Singapore Land TowerSingapore 048623

PRINCIPAL BANKERS : The Export-Import Bank of ChinaNo. 30, Fu Xing Men Nei StreetXicheng DistrictBeijing 100031The People’s Republic of China

China Bank of Communications, Beijing BranchNo. 33 Jinrong StreetXicheng DistrictBeijingThe People’s Republic of China

China Construction Bank, Beijing BranchNo. 28 Xuanwumen West StreetXuanwu DistrictBeijingThe People’s Republic of China

CORPORATE INFORMATION

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In this Information Memorandum, unless the context otherwise requires, the following definitions applythroughout where the context so admits:

Our Group Companies“Company” : AVIC International Investments Limited

“Group” : Our Company and our subsidiaries as at the date of thisInformation Memorandum

“Kaixin (Beijing)” : AVIC Kaixin (Beijing) Ship Industry Co., Ltd

“Kaixin Industrial” : Kaixin Industrial Pte. Ltd.

Other Companies and Organisations

“Authority” or “MAS” : The Monetary Authority of Singapore

“AVIC” : Aviation Industry Corporation of China

“AVIC Group” : AVIC and its subsidiaries as at the date of this InformationMemorandum

“AVIC International” : AVIC International Holding Corporation

“AVIC International Beijing” : AVIC International Beijing Co., Ltd

“AVIC International Group” : AVIC International and its subsidiaries as at the date of thisInformation Memorandum

“AVIC International Guangzhou” : AVIC International Guangzhou Co., Ltd

“AVIC International Kairong” : AVIC International Kairong Limited

“AVIC International Shanghai” : AVIC International Shanghai Co., Ltd

“AVIC International Xiamen” : AVIC International Xiamen Co., Ltd

“AVIC Shipbuilding : The business division of AVIC International Beijing providing M&C Management Business” Services

“CATIC Shenzhen” : CATIC Shenzhen Holdings Limited

“CDP” or “Depository” : The Central Depository (Pte) Limited

“CPF” : Central Provident Fund

“Financial Adviser” or “DMG” : DMG & Partners Securities Pte Ltd, being the financial adviser toour Company in relation to the Listing

“HKSE” : Hong Kong Stock Exchange

“IRISL” : Islamic Republic of Iran Shipping Lines

“IRISL Marine Services” : IRISL Marine Services and Engineering Co., Ltd

“MARPOL” : International Convention for the Prevention of Pollution from Ships

“MOC” : Ministry of Commerce of the PRC

“PBOC” : People’s Bank of China

DEFINITIONS AND INTERPRETATION

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“SAFE” : State Administration for Foreign Exchange of the PRC

“SASAC” : State-owned Assets Supervision and Administration Commission

“Scheme Administrators” : The administrators of the Scheme as described in the SchemeDocument

“SETGL” : Sino-Environment Technology Group Limited (in judicialmanagement)

“SETGL Creditors” : The creditors of SETGL as described in the Scheme Document

“SETGL Judicial Managers” : Mr Seshadri Rajagopalan and Ms Ee Meng Yen Angela, thejudicial managers of SETGL as at the date of this InformationMemorandum

“SETGL Shareholders” : The shareholders of SETGL as described in the SchemeDocument

“SGX-ST” : Singapore Exchange Securities Trading Limited

“Taizhou CATIC” : Taizhou CATIC Shipbuilding Heavy Industry Limited

“Taizhou Kouan” : Taizhou Kouan Shipbuilding Co., Ltd

General

“Actual Compliance Placement : The actual issue price of each Compliance Placement SharePrice”

“Articles of Association” : The articles of association of our Company

“Associate” : (a) In relation to any director, chief executive officer, substantialshareholder or controlling shareholder (being an individual)means:

(i) his immediate family;

(ii) the trustees of any trust of which he or his immediatefamily is a beneficiary or, in the case of adiscretionary trust, is a discretionary object; and

(iii) any company in which he and his immediate familytogether (directly or indirectly) have an interest of30% or more;

(b) in relation to a substantial shareholder or a controllingshareholder (being a company) means any other companywhich is its subsidiary or holding company or is asubsidiary of such holding company or one in the equity ofwhich it and/or such other company or companies takentogether (directly or indirectly) have an interest of 30% ormore

“Audit Committee” : The audit committee of our Company as at the date of thisInformation Memorandum, unless the context otherwise requires

“Board” or “Board of Directors” : Our board of Directors as at the date of this InformationMemorandum, unless the context otherwise requires

“CEO” : Chief Executive Officer


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“CFO” : Chief Financial Officer

“Commencement Date” : 1 April 2011

“Companies Act” : Companies Act, Chapter 50 of Singapore

“Completion Date” : The date on which the Consideration Share Issue is completed

“Compliance Placement” : The placement of the Compliance Placement Shares by ourCompany for subscription and/or purchase at the ActualCompliance Placement Price, on the terms and subject to theconditions of the Offer Information Statement for the purposes ofcomplying with related shareholding spread and distributionrequirements under Rule 210(1) of the Listing Manual

“Compliance Placement Shares” : Up to 65,000,000 new Shares which are the subject of theCompliance Placement

“Consideration Share Issue” : The allotment and issuance of S$6 million in value of Shares inour Company to the Scheme Administrators for distribution to theSETGL Creditors and the SETGL Shareholders in the proportionsset out in the Scheme, in consideration of the settlement andcompromise of the SETGL Debts, in each case by means of theScheme of Arrangement

“Consideration Shares” : S$6 million in value of Shares in our Company to be distributed tothe SETGL Creditors and the SETGL Shareholders by theScheme Administrators pursuant to the Scheme of Arrangement

“Controlling Shareholders” : The controlling shareholders of our Company

“Directors” : The directors of our Company as at the date of this InformationMemorandum, unless the context otherwise requires

“EPS” : Earnings per Share

“Executive Directors” : The executive Directors of our Company as at the date of thisInformation Memorandum, unless the context otherwise requires

“Executive Officers” : Unless the context otherwise requires, the key executives of ourGroup as at the date of this Information Memorandum, who makeor participate in making decisions that affect the whole or asubstantial part of our business or have the capacity to makedecisions which affect significantly our financial standing and asset out in the “Directors, Executive Officers and Employees”section of this Information Memorandum

“FIEs” : Foreign investment enterprises

“Financial Controller” : The financial controller of our Company as at the date of thisInformation Memorandum, unless the context otherwise requires

“First Trading Date” : The date on which our Shares will commence trading, following,inter alia, the completion of the Compliance Placement

“FY” : Financial year ended or ending 31 December, as the case maybe

“Implementation Agreement” : The implementation agreement dated 7 January 2011 andentered into between SETGL and AVIC International Kairong,more particularly described in the “Scheme of Arrangement”section of this Information Memorandum


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“Independent Directors” : The non-executive independent Directors of our Company as atthe date of this Information Memorandum, unless the contextotherwise requires

“Information Memorandum” : This information memorandum dated 10 August 2011 issued byour Company

“Latest Practicable Date” : 29 July 2011, being the latest practicable date prior to the printingof this Information Memorandum

“Listing” : The proposed listing of and quotation for our Shares on the SGX-ST

“Listing Manual” : The listing manual issued by the SGX-ST

“M&C Services” : The project management and consultancy services provided byAVIC Shipbuilding Management Business relating to shipbuilding,including ship design, construction (both of which are out-sourcedto third parties), procurement, newbuilding management andmarine finance arrangement

“Management Agreement” : The management agreement dated 29 June 2011 and enteredinto between our Company and AVIC International Beijing, moreparticularly described in the “History and Business - Business andPrincipal Activities” and “Interested Person Transactions” sectionsof this Information Memorandum

“Market Day” : A day on which the SGX-ST is open for trading in securities

“Memorandum of Association” : The memorandum of association of our Company

“NAV” : Net asset value

“Nominating Committee” : The nominating committee of our Company as at the date of thisInformation Memorandum, unless the context otherwise requires

“NTA” : Net tangible assets

“Offer Information Statement” : The offer information statement to be issued by our Company inconnection with the Compliance Placement and to be lodged withthe Authority

“Outstanding Projects” : The 19 vessels to be delivered by 2013 under the order book ofAVIC International Beijing as at the end of FY2010

“Period Under Review” : FY2008, FY2009 and FY2010

“Placement Agent” : The placement agent to be appointed in connection with theCompliance Placement

“PRC” or “China” The People’s Republic of China excluding Hong Kong and Macaufor the purposes of this Information Memorandum

“Projected Compliance : The projected price of S$0.50 payable for each Compliance Placement Price” Placement Share under the Implementation Agreement


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“Proposed Internal Restructuring” : The internal restructuring of the AVIC Group, pursuant to whichCATIC Shenzhen will acquire, inter alia, the entire equity interestof each of AVIC International Beijing, AVIC InternationalGuangzhou and AVIC International Xiamen, more particularlydescribed in the “History and Business” section of this InformationMemorandum

“Remaining Subsidiaries” : Has the meaning ascribed to it in the “Potential Conflicts ofInterests” section of this Information Memorandum

“Remuneration Committee” : The remuneration committee of our Company as at the date ofthis Information Memorandum, unless the context otherwiserequires

“Restructuring Exercise” : The restructuring exercise that we carried out to streamline ourcorporate structure as described in the “Restructuring Exercise”section of this Information Memorandum

“Scheme” or “Scheme of : The scheme of arrangement relating to the SETGL Creditors and Arrangement” the SETGL Shareholders, more particularly described under the

“Scheme of Arrangement” section of this InformationMemorandum

“Scheme Document” : Has the meaning ascribed to it in the “Scheme of Arrangement”section of this Information Memorandum

“Securities Account” : A securities account maintained by a Depositor with CDP (butdoes not include a securities sub-account)

“Securities and Futures Act” : Securities and Futures Act, Chapter 289 of Singapore

“Service Agreements” : The service agreements of our Executive Directors, as describedunder the “Directors, Executive Officers and Employees – ServiceAgreements” section of this Information Memorandum

“SETGL Debts” : Has the meaning ascribed to it in the “Scheme of Arrangement”section of this Information Memorandum

“Shareholders” : Registered holders of Shares, except where the registered holderis CDP, the term “Shareholders” shall, in relation to such Shares,mean the Depositors whose Securities Accounts are credited withShares

“Shares” : Ordinary shares in the share capital of our Company

“Ship-trading Related Businesses” : Has the meaning ascribed to it in the “Potential Conflicts ofInterests” section of this Information Memorandum

“VAT” : Value added tax

“WFOE” : Wholly foreign owned enterprise

Currencies, Units and Others

“RMB” and “RMB cents” : Renminbi and cents, respectively

“S$” or “$” and “cents” : Singapore dollars and cents, respectively


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“US$” and “US cents” : United States dollars and cents, respectively

“sq m” : Square metre

“N.A.” : Not applicable

“%” or “per cent.” : Per centum or percentage

The terms “Depositor”, “Depository Agent” and “Depository Register” shall have the same meaningsascribed to them respectively in Section 130A of the Companies Act. The terms “subsidiary” and“Substantial Shareholder” shall have the same meanings ascribed to them respectively in Sections 5 and81 of the Companies Act.

Any reference to “we”, “us”, “our” and “ourselves” in this Information Memorandum is a reference to ourCompany, our Group or any member of our Group as the context requires.

The terms “associated company”, “associated entity”, “controlling interest-holder”, “controllingshareholder”, “entity”, “related corporation”, “related entity”, “subsidiary”, “subsidiary entity” and“substantial interest-holder” shall have the same meanings ascribed to them respectively in the Securitiesand Futures (Offers of Investments) (Shares and Debentures) Regulations 2005.

Words importing the singular shall, where applicable, include the plural and vice versa, and wordsimporting the masculine gender shall, where applicable, include the feminine and neuter genders andvice versa. References to persons shall include corporations.

Any discrepancies in the tables included in this Information Memorandum between the listed amountsand the totals thereof are due to rounding. Accordingly, figures shown as totals in certain tables may notbe an arithmetic aggregation of the figures which precede them.

Unless otherwise indicated, any reference in this Information Memorandum to any statute or enactment isa reference to that statute or enactment for the time being amended or re-enacted. Any word definedunder the Companies Act, the Securities and Futures Act or any statutory modification thereof or theListing Manual and used in this Information Memorandum shall, where applicable, have the meaningascribed to it under the Companies Act, the Securities and Futures Act or such statutory modificationthereof, or the Listing Manual as the case may be.

Any reference to a time of day in this Information Memorandum shall be a reference to Singapore time,unless otherwise stated.

All exchange rates referred to in this Information Memorandum are extracted from Bloomberg L.P..

Certain names written with Chinese characters have been translated into English. Such translations areprovided solely for the convenience of Singapore-based investors who may be unfamiliar with Chinese.These English names may not be registered with the relevant PRC authorities and should not beconstrued as representations that the English names actually or officially represent the Chinese namesand/or characters.

For illustrative purposes, certain information in this Information Memorandum has beenpresented on the basis that the Compliance Placement of 65,000,000 Compliance PlacementShares will be made at a Projected Compliance Placement Price of S$0.50 per CompliancePlacement Share.

Investors should note that the foregoing terms are only indicative, and should not be construedas a representation that the Compliance Placement will be made on those terms or at all, or that,if made, the Compliance Placement will be successfully completed for the purpose of fulfilling theshareholding spread requirements as set out in the Listing Manual. Please refer to the “Detailson the Compliance Placement” section of this Information Memorandum for more details on theCompliance Placement.


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To facilitate a better understanding of the business of our Group, the following glossary provides adescription of technical terms which are relevant to our Group or our business. The terms and theirassigned meanings may not correspond to standard industry or common meanings or usage of theseterms, as the case may be.

“Aframax” : A tanker of 80,000 to 119,999 DWT

“Capesize” : Dry bulk vessels above 100,000 DWT

“CBM” : Cubic metre

“CGT” : Compensated gross tonnage, a measurement of shipbuildingoutput and capacity used to estimate the amount of work involvedin building a ship

“containerships” : Containerships are cargo ships that carry all of their load in truck-size containers, in a technique called containerization

“DWT” : Deadweight tonnage, a measurement which refers to the weightof cargo and consumables that a ship is designed to carry inmetric tonnes

“EPC” : Engineering, procurement and construction

“FPSOs” : Floating production, storage and offloading units

“keel” : A structural keel is a large beam around which the hull of a shipis built. The keel runs in the middle of the ship, from the bow tothe stern, and serves as the foundation or spine of the structure,providing the major source of structural strength of the hull. Thekeel is generally the first part of a ship’s hull to be constructed

“keel laying” : The placing of the first block in the slipway or drydock in which avessel will be built

“LNG” : Liquefied natural gas

“LPG” : Liquefied petroleum gas

“MPP Ships” : Multipurpose ships

“Panamax” : Ships classified as Panamax are of the maximum dimensions thatwill fit through the locks of the Panama Canal, each of which is1,000 feet long by 110 feet wide and 85 feet deep. Accordingly, aPanamax ship will usually have dimensions of close to 965 feetlong (294.0 meters), 106 feet wide (32.3 meters) and a draft of39.5 feet (12.0 meters)

“Post-Panamax” : Ships larger than Panamax, which currently do not fit through thelocks of the Panama Canal but will be able to do so after theexpansion of the Panama Canal is complete

“Ro-Ro vessels” : This is an abbreviation of roll-on, roll-off. The Ro-Ro ship isdesigned to allow wheeled cargo to drive or be pulled onboard.The ship will be fitted with at least one ramp, the key componentto providing the flexibility to deliver cargo into ports with very littleinfrastructure

GLOSSARY OF TECHNICAL TERMS

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“Suezmax tankers” : A tanker of 120,000 to 199,999 DWT, with dimensions allowing itto transit the Suez Canal fully loaded

“tonnage” : A measure of the size or cargo capacity of a ship, and a “tonne”is a unit of such measure

“VLCCs” : Very large crude carriers

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GLOSSARY OF TECHNICAL TERMS

All statements contained in this Information Memorandum, statements made in press releases and oralstatements that may be made by us or our Directors, Executive Officers or employees acting on ourbehalf, that are not statements of historical fact, constitute “forward-looking statements”. You can identifysome of these forward-looking statements by terms such as “expect”, “believe”, “plan”, “intend”,“estimate”, “anticipate”, “possible”, “probable”, “project”, “may”, “should”, “will”, “would” and “could” orsimilar words. However, you should note that these words are not the exclusive means of identifyingforward-looking statements. All statements regarding our expected financial position, business strategy,plans and prospects are forward-looking statements. These forward-looking statements, includingstatements as to:

(a) our revenue and profitability;

(b) expected growth in demand;

(c) expected industry trends;

(d) anticipated expansion plans; and

(e) other matters discussed in this Information Memorandum regarding matters that are not historicalfact,

are only predictions. These forward-looking statements involve known and unknown risks, uncertaintiesand other factors that may cause our actual results, performance or achievements to be materiallydifferent from any future results, performance or achievements expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include, inter alia:

(i) changes in political, social and economic conditions and the regulatory environment in Singapore,the PRC and other countries in which we conduct business;

(ii) changes in currency exchange rates;

(iii) our anticipated growth strategies and expected internal growth;

(iv) changes in the availability and prices of materials;

(v) changes in customer demand;

(vi) changes in competitive conditions and our ability to compete under these conditions;

(vii) changes in our future capital needs and the availability of financing and capital to fund theseneeds; and

(viii) other factors beyond our control.

These factors are discussed in greater detail in this Information Memorandum, in particular, but notlimited to discussions in the “Risk Factors” and “Management’s Discussion and Analysis of FinancialCondition and Results of Operations” sections of this Information Memorandum. All forward-lookingstatements made by or attributable to us, or persons acting on our behalf, contained in this InformationMemorandum are expressly qualified in their entirety by such factors. These forward-looking statementsare applicable only as of the date of this Information Memorandum.

Given the risks and uncertainties that may cause our actual future results, performance or achievementsto be materially different from expected, expressed or implied by the forward-looking statements in thisInformation Memorandum, we advise you not to place undue reliance on those statements which applyonly as at the date of this Information Memorandum. None of our Company, our Directors, the FinancialAdviser, or their respective advisers or any other person represents or warrants to you that our actualfuture results, performance or achievements will be as discussed in those statements.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Our actual future results may differ materially from those anticipated in these forward-looking statementsas a result of the risks faced by us. Our Company, our Directors and the Financial Adviser disclaim anyresponsibility to update any of these forward-looking statements or publicly announce any revisions tothese forward-looking statements to reflect future developments, events or circumstances. We are,however, subject to the provisions of the Securities and Futures Act and the Listing Manual regardingcorporate disclosure.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

The table below sets forth the high and low exchange rates for RMB/S$ for each month for the past sixcalendar months prior to the Latest Practicable Date. The table indicates how many RMB it would take tobuy one S$.

RMB/S$(1)

High Low

February 2011 5.176 5.133

March 2011 5.205 5.140

April 2011 5.302 5.186

May 2011 5.305 5.194

June 2011 5.273 5.210

July 2011 5.367 5.265

The following table sets forth, for the financial periods indicated, the average and closing exchange ratesfor RMB/S$. The average exchange rates were calculated using the average of the closing exchangerates on the last day of each month during each financial period. Where applicable, the exchange rates inthis table are used for the translation of our Group’s financial statements in respect of the same financialperiod disclosed elsewhere in this Information Memorandum.

RMB/S$(1)

Average Closing

FY2008 4.918 4.748

FY2009 4.703 4.872

FY2010 4.970 5.141

These exchange rates have been presented solely for information only and should not be construed asrepresentations that the RMB amounts actually represent such S$ or could be converted into S$ at therate indicated or at any other rate and vice versa.

As at the Latest Practicable Date, the closing exchange rate for RMB/S$ was 5.341.

Note:

(1) The above exchange rates were extracted from Bloomberg L.P.. Bloomberg L.P. has not consented to the inclusion of theabove exchange rates and accordingly, Bloomberg L.P. is not liable for these statements under Sections 253 and 254 of theSecurities and Futures Act. While our Directors have taken reasonable steps to ensure that the information is extractedaccurately and fairly and has been included in this Information Memorandum in its proper form and context, they have notindependently verified the accuracy of the information set out above.

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EXCHANGE RATES

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SETGL is a public company whose shares are listed on the Main Board of the SGX-ST. It is presentlyunder judicial management, and its shares are presently suspended from trading.

Pursuant to the Implementation Agreement (as described below), AVIC International Kairong agreed withSETGL, inter alia, that our Company will, through the implementation of the Scheme of Arrangement,make an exit offer to the SETGL Creditors and the SETGL Shareholders.

Implementation Agreement

On 7 January 2011, AVIC International Kairong and SETGL entered into the Implementation Agreementto implement the Scheme of Arrangement. Pursuant to the Scheme of Arrangement:

(i) The SETGL Creditors shall release and discharge SETGL from a portion of debts owing fromSETGL to the SETGL Creditors (the “SETGL Debts”) in consideration of the distribution of theConsideration Shares by the Scheme Administrators to the SETGL Creditors and the SETGLShareholders, in accordance with the Scheme of Arrangement and upon the Scheme ofArrangement becoming effective pursuant to Section 210(3) and Section 210(3) read with Section227X of the Companies Act; and

(ii) AVIC International Kairong shall, subject to the terms and conditions of the ImplementationAgreement and the Scheme of Arrangement, procure that our Company allot and issue theConsideration Shares to the Scheme Administrators for distribution to the SETGL Creditors andthe SETGL Shareholders in the proportions set out in the Scheme of Arrangement (the “AgreedApportionment”), in consideration of the settlement and compromise of the SETGL Debts, in eachcase by means of the Scheme of Arrangement.

Entitlements to the Consideration Shares

The Consideration Shares are valued at the aggregate sum of S$6 million to be allotted and issued freefrom encumbrances, in accordance with the Scheme of Arrangement, to the Scheme Administrators fordistribution to the SETGL Creditors and the SETGL Shareholders, in each case credited as fully paid upand in the Agreed Apportionment.

Pursuant to the Implementation Agreement, the SETGL Creditors and the SETGL Shareholders will beentitled to such aggregate number of Consideration Shares, subject at all times to the AgreedApportionment, to be determined based on the Actual Compliance Placement Price. Based on theAgreed Apportionment, the SETGL Creditors will receive a proportionate number of ConsiderationShares with an aggregate value of S$5,320,000 and the SETGL Shareholders will receive aproportionate number of Consideration Shares with an aggregate value of S$680,000. Please refer to the“Dilution” and “General Information on our Group – Shareholders” sections of this InformationMemorandum for further details.

No Encumbrances

Pursuant to the Implementation Agreement, the Consideration Shares will be distributed to the SETGLCreditors and the SETGL Shareholders fully-paid, free from any form of legal, equitable or securityinterests, including but not limited to any mortgage, charge (whether fixed or floating), pledge, lien(including without limitation any unpaid vendor’s lien or similar lien), assignment of rights and receivables,debenture, right of first refusal, option, hypothecation, title retention or conditional sale agreement, lease,hire or hire purchase agreement, restriction as to transfer, use or possession, easement, subordination toany right of any other person, and any other encumbrance or security interest.

Scheme Document

Further information on the terms and conditions upon which the Scheme of Arrangement will beimplemented by SETGL and AVIC International Kairong will be set out in the document to be issued bySETGL to the SETGL Creditors and the SETGL Shareholders containing, inter alia, details on theScheme of Arrangement (the “Scheme Document”). The Scheme Document is despatched together, andshould be read in conjunction with this Information Memorandum. For the avoidance of doubt, the

SCHEME OF ARRANGEMENT

Scheme Document is not issued by our Company. Each of our Company and our Directors do not make,or purport to make, any statement in the Scheme Document or any statement upon which a statement inthe Scheme Document is based, and expressly disclaim and take no responsibility for any liability to anyperson which is based on, or arises out of, the statements, information or opinions in the SchemeDocument.

Listing and Quotation of our Shares

Upon the completion of the Scheme of Arrangement, the shares in SETGL will be withdrawn from theOfficial List of the SGX-ST and transferred to the SETGL Judicial Managers fully paid and free from anyencumbrances. The SETGL Judicial Managers shall hold the shares in SETGL in their office as judicialmanagers of SETGL for the benefit of the SETGL Shareholders. Our Company has applied to the SGX-ST for approval for the listing of and quotation for our Shares on the Official List of the SGX-ST.

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SCHEME OF ARRANGEMENT

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Shareholding spread requirements

Following the completion of the Scheme of Arrangement but prior to the Compliance Placement, ourCompany is expected to have a market capitalisation of approximately S$116 million, based on an issuedshare capital of 232,000,000 Shares at the Projected Compliance Placement Price of S$0.50. UnderRule 210(1)(a) of the Listing Manual, at least 25% of our Company’s issued share capital must be held inthe hands of at least 500 public shareholders post-listing. Further, under Rule 724 of the Listing Manual,the SGX-ST may suspend trading of our Shares if less than the required 10% of our Company’s issuedshare capital is held in the hands of the public.

The SGX-ST may allow our Company a period of one month commencing on the date of admission ofour Shares on the Official List of the SGX-ST, or such longer period as it may agree, to raise thepercentage of our Shares held in the hands of the public in order to meet the requirements under Rule210(1)(a) of the Listing Manual. Our Company intends, if necessary, to undertake the CompliancePlacement within one month of completion of the Scheme of Arrangement or such period of time as maybe permitted by the SGX-ST if these requirements are not met as at the completion of the Scheme ofArrangement. Subject to the terms of the Compliance Placement at the point of offering, it is proposedthat the placees for the Compliance Placement may include institutional investors, retail investors, and/orexisting Shareholders (so long as such placees are acceptable to the SGX-ST for the purposes offulfilling the free float requirements under Rule 210(1)(a) of the Listing Manual).

The Compliance Placement

The proposed Compliance Placement will comprise an offer of 65,000,000 Compliance PlacementShares, representing approximately 28.0% of the share capital of our Company after the Scheme ofArrangement but prior to the Compliance Placement, and approximately 21.9% of the enlarged sharecapital of our Company after the Compliance Placement. Taking into consideration the ConsiderationShares held by the SETGL Creditors and the SETGL Shareholders, approximately 25.9% of our enlargedshare capital will be held by public shareholders after the Compliance Placement. The proposedCompliance Placement will be made pursuant to an Offer Information Statement to be issued by ourCompany in connection with the Compliance Placement and lodged with the Authority. The CompliancePlacement Shares, when issued, will rank pari passu in all respects with the then-existing issued Shares.Please refer to the “Use of Proceeds from the Compliance Placement and Expenses Incurred” section ofthis Information Memorandum for further details on the intended utilisation of proceeds raised by theissue of the Compliance Placement Shares. Our Company will announce the deployment and utilisationof the proceeds at regular intervals pursuant to the issue of Compliance Placement Shares. More detailson the Compliance Placement will be set out in the Offer Information Statement.

Statistics relating to Compliance Placement

Certain information in this Information Memorandum has been computed on the basis that theCompliance Placement of 65,000,000 Compliance Placement Shares will be made at the ProjectedCompliance Placement Price of S$0.50 per Compliance Placement Share. The number ofCompliance Placement Shares and the Projected Compliance Placement Price are only indicativeand are subject to change. The final size of the Compliance Placement will be decided at a laterdate by our Board in consultation with the SGX-ST.

Please refer to the “General Information on Our Group – Shareholders” section of this InformationMemorandum for a summary of our Shareholders and their respective shareholdings immediately beforeand after the Compliance Placement.

The Actual Compliance Placement Price will be determined through a book-building exercise andnegotiations between us and the Placement Agent, and may not be indicative of prices that will prevail inthe trading market.

DETAILS ON THE COMPLIANCE PLACEMENT

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Application for listing and quotation

We have applied to the SGX-ST for permission to deal in, and for quotation of all our Shares alreadyissued or to be issued comprising the Consideration Shares by way of the Scheme of Arrangement andthe Compliance Placement Shares. Such permission will be granted when our Company has beenadmitted to the Official List of the SGX-ST.

Investors should note that the foregoing terms of the Compliance Placement are only indicative,and should not be construed as a representation that the Compliance Placement will be made onthose terms, or that the Compliance Placement on the foregoing terms will be successfullycompleted for the purpose of fulfilling the shareholding spread requirements as set out in theListing Manual.

IMMEDIATELY AFTER THE COMPLETION OF THE SCHEME OF ARRANGEMENT AND ASSUMINGTHE REQUIREMENTS OF RULE 210(1)(a) OF THE LISTING MANUAL ARE NOT MET, THE TRADINGOF OUR SHARES ON THE SGX-ST WILL BE SUSPENDED. IN THE CASE WHERE THECOMPLIANCE PLACEMENT (THAT IS EXPECTED TO BE COMPLETED WITHIN ONE MONTH OFCOMPLETION OF THE SCHEME OF ARRANGEMENT OR SUCH PERIOD OF TIME AS MAY BEPERMITTED BY THE SGX-ST) IS NOT OR IS UNABLE TO BE CARRIED OUT SO AS TO MEET THEAPPLICABLE SHAREHOLDING SPREAD AND DISTRIBUTION REQUIREMENTS OF THE LISTINGMANUAL, THE TRADING OF OUR SHARES MAY CONTINUE TO BE SUSPENDED.

Placement Agent

It is presently contemplated that our Company will appoint a Placement Agent in connection with theCompliance Placement. Further details and the procedures in respect of the Compliance Placement willbe set out in the Offer Information Statement.

Other matters

None of our Company, our Directors, the Financial Adviser, or any other parties involved in theCompliance Placement is making any representation to any person regarding the legality of aninvestment in our Shares by such person under any investment or other laws or regulations. Noinformation in this Information Memorandum should be considered as being business, legal or tax adviceregarding an investment in our Shares. Each prospective investor should consult his own professional orother advisers for business, legal or tax advice regarding an investment in our Shares.

No person has been or is authorised to give any information or to make any representation not containedin this Information Memorandum and, if given or made, such information or representation must not berelied upon as having been authorised by our Company, our Directors or the Financial Adviser. Neitherthe delivery of this Information Memorandum nor any document relating to the Compliance Placementshall, under any circumstances, constitute a continuing representation or create any suggestion orimplication that there has been no change in the affairs of our Company or our subsidiaries or in anystatement of fact or information contained in this Information Memorandum since the date of thisInformation Memorandum. Where such changes occur, we may make an announcement of the same tothe SGX-ST and will comply with the requirements of the Securities and Futures Act and/or any otherrequirements of the SGX-ST. All applicants should take note of any such announcement, orsupplementary or replacement Information Memorandum and, upon the release of such anannouncement, or supplementary or replacement Information Memorandum, shall be deemed to havenotice of such changes.

Save as expressly stated in this Information Memorandum, nothing herein is, or may be relied upon as, apromise or representation as to the future performance or policies of our Company or our subsidiaries.This Information Memorandum has been prepared solely for the purpose of the Scheme of Arrangementand may not be relied upon by any persons for any other purpose.

This Information Memorandum does not constitute an offer, solicitation or invitation to subscribefor and/or purchase our Shares in any jurisdiction in which such offer, solicitation or invitation isunlawful or is not authorised or to any person to whom it is unlawful to make such an offer,solicitation or invitation.

DETAILS ON THE COMPLIANCE PLACEMENT

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The information contained in this summary is derived from and should be read in conjunction with the fulltext of this Information Memorandum. Prospective investors should read the entire InformationMemorandum carefully, especially the matters set out under the “Risk Factors” section of this InformationMemorandum, before deciding to invest in our Shares.

OVERVIEW OF OUR GROUP AND BUSINESS ACTIVITIES

Our Company was incorporated on 11 November 2010 under the laws of Singapore and became theholding company of our Group pursuant to the Restructuring Exercise.

As part of the Restructuring Exercise, the personnel of AVIC Shipbuilding Management Business wastransferred to our Group from 1 January 2011 and the shipbuilding management business washenceforth undertaken by our Group. As one of the business divisions of AVIC International Beijing, AVICShipbuilding Management Business was principally involved in the provision of M&C Services.

Our Group is principally involved in the provision of M&C Services. We work with established shipyards inthe PRC as co-sellers whereby the shipyard is responsible for the construction of the vessels and we arein charge of the non-construction aspects of the shipbuilding project. We out-source the design of vesselsto several renowned ship-design institutes in the PRC. As part of the state-owned AVIC Group, we havehad strong support from the PRC domestic financial institutions and have been able to assist theshipyards that we have worked with in obtaining loans and/or procuring the issuance of refundguarantees by banks and the shipowners in obtaining financing, when required.

In FY2010, we began to provide marketing and consultancy services to a shipyard in the PRC, namelyTaizhou CATIC, to help promote its corporate profile in the overseas markets, seek out shipowners andsecure shipbuilding contracts, including working with the shipyards to negotiate with shipowners on theterms and other details of the shipbuilding contracts, amongst others. AVIC International Beijing owns45% of the equity interest in Taizhou CATIC pursuant to a joint venture entered into in 2007, with TaizhouKouan holding 44% and other domestic investors holding the remaining 11%.

As at the end of FY2010, AVIC International Beijing had an order book consisting of 19 vessels to bedelivered by 2013. In order to enable AVIC International Beijing to manage and complete the OutstandingProjects following the Restructuring Exercise, AVIC International Beijing and our Company had on 29June 2011 entered into the Management Agreement, pursuant to which AVIC International Beijingengaged our Company to provide M&C Services for the Outstanding Projects with effect from 1 January2011 until the 19 vessels are delivered. The Management Agreement is a transitional arrangement whichaims to ensure a smooth completion of the Outstanding Projects following the Restructuring Exercise.Going forward, all new shipbuilding contracts secured after the Commencement Date will be entered intodirectly by our Group.

After our Company is successfully listed on the SGX-ST, we intend to diversify into shipbuilding in thenear future by acquiring existing reputable shipyards in the PRC, including but not limited to, those withinthe AVIC International Group as provided in the undertaking given by AVIC International and AVICInternational Beijing. To the extent that our Group is not able to legally acquire and hold part or all of suchinterests pursuant to the said undertaking under current PRC law due to restrictions on foreignownership, our Company intends to obtain effective control over such interests by entering into a seriesof contracts through AVIC International Beijing. These may include management and consultancy serviceagreements, assignment agreements, equity interests pledge agreements, exclusive purchaseagreements and powers of attorney. Please refer to the “Potential Conflicts of Interests” section of thisInformation Memorandum for details on the said undertaking. Please refer to the “Risk Factors – We maynot be able to successfully implement our future plans”, “Risk Factors – Changes in the New M&ARegulations by the PRC government could adversely affect our future acquisitions of PRC businesses”and “Risk Factors – If the PRC government takes the view that the Contractual Arrangements do notcomply with PRC government restrictions on foreign investment in the shipbuilding industry, our business,financial condition, results of operations and prospects could be materially and adversely affected”sections of this Information Memorandum for other related risk factors.

Please refer to the “History and Business” section of this Information Memorandum for further details onour Group and business activities.

INFORMATION MEMORANDUM SUMMARY

OUR COMPETITIVE STRENGTHS

We believe our competitive strengths are as follows:

(1) Association with the AVIC Group and support from the PRC Central Government

Our association with the state-owned AVIC Group has given us a competitive edge in obtainingsupport from the local major financial institutions to expand our shipbuilding project managementand consultancy service business on an even larger scale and carry on our future plans. Webelieve we will be able to continue to grow our business based on the business experience andindustry contacts built up over the years.

As we are a member of the AVIC Group, which is not only one of the largest industrial groupsowned by the PRC Central Government but also a key strategic institution of the PRC, our Groupis well positioned to capitalise on its excellent business relationships and strong fundamentals toensure seamless execution and delivery of its projects. Our international brand recognition is oneof the key reasons why we have been able to build up our M&C Services, as most internationalcustomers prefer to deal through an internationally known group of substance.

(2) An experienced and driven management team with in-depth industry knowledge

We have an experienced and professional management team, led by our Executive Directors, thatwe believe can identify opportunities and respond to market trends. Most of the members of oursenior management team have extensive experience in the shipbuilding industry and some havebeen with the AVIC International Group for over 10 years. Their in-depth industry knowledge andstrategic vision have made significant contributions to the growth of our business.

(3) Strong backing from financial institutions

Availability of credit and ability to obtain bank facilities are critical in closing a shipbuilding contractdue to the substantial amount of contract value. The shipyard needs to obtain bank loans tofinance the building of vessels and have the refund guarantee issued to the shipowner, while someshipowners may need to obtain bank loans for making the progress payments.

As part of the state-owned AVIC Group, we have had strong support from the PRC domesticfinancial institutions and have been able to assist the shipyards that we have worked with inobtaining loans and/or procuring the issuance of refund guarantees by banks and the shipownersin obtaining financing, when required.

Please refer to the “History and Business – Competitive Strengths” section of this InformationMemorandum for further details.

OUR PROSPECTS

The following information is primarily based on the market knowledge of our Executive Directors.

In 2009, the volume of vessels built in the PRC amounted to an aggregate of 36.0 million DWT.1 ThePRC’s market share for ships in the global order book by CGT amounted to 37.7%, ahead of Japan.2 In2010, the volume of vessels completed in the PRC amounted to 61.2 million DWT, an increase of 70%compared to 20093, and is expected to become the world’s largest shipbuilding country.

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1 Clarkson Research Services Limited, World Shipyard Monitor Vol 18. No.1, January 2011. Clarkson Research ServicesLimited has not consented for the purposes of Section 249 of the Securities and Futures Act to the inclusion of theinformation referred to above and is thereby not liable for such information under Sections 253 and 254 of the Securities andFutures Act. Our Company has included the above information in its proper form and context and has not verified theaccuracy of such information.

2 Ibid.

3 Ibid.

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Our Executive Directors expect that international trade could decline following the global financial crisis,resulting in a corresponding decrease in the need for vessels. For example, crude oil trade decreasedfrom 20.6 million barrels per day in 2008 to 18.2 million barrels per day in 2010, and steel productiondeclined from 818.2 million tonnes in 2008 to 805.6 million tonnes in 2009, and coal trade importdropped from 494.0 million tonnes in 2008 to 462.0 million tonnes in 2010.4 Financial institutions mayreduce the amount of shipping loans, restricting the ability of shipowners to construct new vessels.Shipowners may also order fewer vessels if the future development of the economy is not clear, andthere is a risk that shipowners may abandon their vessels, thereby adversely affecting orders already inhand.

Although there may be a decline in orders in the market, our Executive Directors expect that we may beable to take advantage of AVIC International Beijing’s existing network, our financing capabilities andlower costs of expansion to compete against smaller and less efficient players in the industry. Forexample, as stated in the “History and Business – History and Development of our Group” section of thisInformation Memorandum, AVIC Shipbuilding Management Business managed to secure contracts fortwo 27,000 DWT bulk carriers, two 35,000 DWT bulk carriers and two 51,000 DWT bulk carriers in 2000,when the industry was experiencing a downturn.

Based on the foregoing and our competitive strengths, our Directors are cautiously optimistic about theprospects of our Group.

OUR BUSINESS STRATEGIES AND FUTURE PLANS

We intend to implement the following business strategies and future plans to grow and expand ourbusiness:

(1) Establish and improve our shipbuilding capabilities and efficiencies

After our Company is successfully listed on the SGX-ST, we intend to acquire shipbuilding andrelated businesses from AVIC International and its subsidiaries, including AVIC InternationalBeijing in the near future, subject to relevant governmental and regulatory approvals. Please referto the “Potential Conflicts of Interests” section of this Information Memorandum for furtherinformation on our Company’s plans. The acquisitions, if and when they materialise, are expectedto contribute to the growth of our Company.

We plan to use approximately S$25 million of the net proceeds from the Compliance Placement topartly finance the acquisition of a shipyard.

(2) Establish our research and design capabilities

In order to maximise the potential of the shipbuilding strategies and achieve overall development ofour Company’s shipbuilding business, we intend to acquire or form strategic alliances with shipdesign houses and other business partners in order to develop new vessels to differentiateourselves from our competitors. This will enable us to own proprietary rights in our future shipdesigns and compete more effectively against our competitors. As part of our business strategy, weintend to expand our products/services and value chains in the next few years. We will establishand build up on our capability in ship design to provide better and environmentally-friendlyproducts to customers, and increase the capacity of our manufacturing bases.


4 Clarkson Research Services Limited, Shipping Intelligence Weekly Issue No. 967, 15 April 2011. Clarkson Research ServicesLimited has not consented for the purposes of Section 249 of the Securities and Futures Act to the inclusion of theinformation referred to above and is thereby not liable for such information under Sections 253 and 254 of the Securities andFutures Act. Our Company has included the above information in its proper form and context and has not verified theaccuracy of such information.

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(3) Improve on our business model

We will continue to improve on our business model, in particular the financing structure which weare able to package, so as to provide a greater variety of financial products such as financialleasing to our customers. These products/services and various value-added services will boost ourGroup’s competitiveness globally as it aims to satisfy the needs and preferences of a wider rangeof customers worldwide.

(4) Expand our global reach and build our overseas network

AVIC International has already established over 60 overseas offices across the world, and itsbusiness covers over 180 countries and regions. We plan to leverage on AVIC International’sexisting network in order to expand our business activities globally.

(5) Develop more sophisticated and higher value-added vessels

We intend to enhance and develop our design and manufacturing capabilities in order to be able tobuild higher value-added vessels such as LNG carriers, LPG carriers, chemical tankers andoffshore vessels.

Please refer to the “History and Business – Business Strategies and Future Plans” section of thisInformation Memorandum for further details.

OUR CONTACT DETAILS

Our registered address is 10 Collyer Quay, #27-00 Ocean Financial Centre, Singapore 049315 and ourprincipal place of business is 24th Floor, North Star Times Tower, No. 8 Beichendong Road, ChaoyangDistrict, Beijing 100101, PRC.

The telephone and fax numbers of our registered office are (65) 6389 3000 and (65) 6389 3099,respectively. The telephone and fax numbers of our principal place of business are (86) 10 8497 1051and (86) 10 8497 1149 respectively. Our company registration number is 201024137N.

SUMMARY OF FINANCIAL INFORMATION

The following tables present a summary of the consolidated financial highlights of our Group and shouldbe read in conjunction with the “Management’s Discussion and Analysis of Financial Condition andResults of Operations” section of this Information Memorandum and the “Independent Auditors’ Reportand Unaudited Pro Forma Financial Information for the Year Ended 31 December 2008, 2009 and 2010”in Appendix A of this Information Memorandum. Our financial statements are prepared and presented inaccordance with Singapore Financial Reporting Standards.

Selected items from the “Unaudited Pro Forma Statements of Comprehensive Income of ourGroup”

RMB’000 FY2008 FY2009 FY2010

Revenue 42,367 24,566 76,495

Other operating income 11,967 8,506 8,718

Profit before tax 47,913 25,005 74,934

Profit for the year, representing the total 35,893 18,629 56,146comprehensive income for the year(1)

EPS(2) (RMB cents) 15.5 8.0 24.2

EPS (as adjusted for the Compliance 12.1 6.3 18.9Placement)(3) (RMB cents)


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Notes:

(1) Had the Service Agreements as set out in the “Directors, Executive Officers and Employees – Service Agreements” sectionof this Information Memorandum been in existence since 1 January 2010, our net profit for FY2010 would have beenapproximately RMB54.7 million.

(2) For comparative purposes, the EPS has been calculated based on our net profit and the pre-Compliance Placement issuedshare capital of 232,000,000 Shares.

(3) For comparative purposes, the EPS (as adjusted for the Compliance Placement) has been calculated based on our net profitattributable to Shareholders and the post-Compliance Placement issued share capital of 297,000,000 Shares.

Selected items from the “Unaudited Pro Forma Statement of Financial Position of our Group”

RMB’000 As at the Completion Date

Current assets(1) 32,046

Equity 32,046

NAV per Share(2) (RMB cents) 13.8

Notes:

(1) The share capital of S$6 million has been fully paid by our Shareholder, AVIC International Kairong, as at the LatestPracticable Date. As at the Completion Date, our Company will have current assets of S$6 million (equivalent toRMB32,046,000 based on the exchange rate as at the Latest Practicable Date), which represents the capital injected by ourShareholder, and will have no non-current assets and liabilities.

(2) The NAV per Share has been calculated based on our NAV as at the Completion Date and the pre-Compliance Placementshare capital of 232,000,000 Shares.


Net proceeds from the issue of the Compliance Placement Shares

Upon the completion of the Scheme of Arrangement and in compliance with the rules of the ListingManual, we intend to carry out the Compliance Placement to meet the required spread of shareholdings.

The net proceeds to be raised by our Company from the issue of the Compliance Placement Shares(after deducting the estimated issue expenses) are estimated to be approximately S$28.7 million(1). Weintend to utilise the net proceeds as follows:

(i) S$25.0 million (or equivalent to approximately RMB133.5 million) to partly finance the acquisitionof a shipyard; and

(ii) the balance for our working capital purposes and any future acquisitions, joint ventures andstrategic alliances.

Note:

(1) The net proceeds amount of S$28.7 million may vary due to the final terms of the Compliance Placement. Further, this netproceeds amount is only an indicative figure and cannot be guaranteed due to market conditions, unforeseen circumstances,difficulties and complications.

Our Company expects that it will require additional funds of approximately S$75 million to complete theacquisition of the shipyard.

Please refer to the “History and Business – Business Strategies and Future Plans” section of thisInformation Memorandum for further details on our plans above. In particular, apart from the proceedsfrom the issue of the Compliance Placement Shares, our future plans may be funded either through debt-financing, internally generated funds and/or external borrowings.

Pending the deployment of the net proceeds as aforesaid, the funds will be placed in short-term depositswith financial institutions, used to invest in short-term money market instruments and/or used for workingcapital requirements as our Directors may deem appropriate.

In the event that more funds are raised from the Compliance Placement, we shall deploy the excessamounts for the uses stated in paragraph (ii) above. More details will be set out in the Offer InformationStatement.

The allocation of each principal intended use of proceeds and each item of expenses borne by ourCompany is as follows:

Estimated amount used foreach S$ raised from theissue of the Compliance

Placement SharesS$’000 (cents)

Use of proceeds

Acquisition of shipyard, part-finance 25,000 76.9

General working capital requirements and any future 3,664 11.3acquisitions, joint ventures and strategic alliances

Listing Expenses

Listing fees 70 0.2

Professional fees 2,129 6.6

Placement commission and brokerage(1) 1,137 3.5

Miscellaneous expenses(2) 500 1.5

Total 32,500 100.0

USE OF PROCEEDS FROM THE COMPLIANCE PLACEMENT AND EXPENSES INCURRED

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Notes:

(1) For illustrative purposes, we have assumed that the placement commission and brokerage is 3.5%.

(2) This includes applicable goods and services tax payable for, inter alia, listing fees, professional fees, placement commissionand brokerage, out-of-pocket expenses and other miscellaneous expenses.

The foregoing discussion represents our Company’s best estimate of its allocation of the net proceedsfrom the issue of the Compliance Placement Shares based on its current plans and estimates regardingits anticipated expenditures. Actual expenditures may vary from these estimates and our Company mayfind it necessary or advisable to reallocate the net proceeds within the categories described above or touse portions of the net proceeds for other purposes. In the event that our Company decides to reallocatethe net proceeds from the issue of the Compliance Placement Shares, our Company will publiclyannounce its intention to do so through an SGXNET announcement to be posted on the internet at theSGX-ST website, http://www.sgx.com.

The estimated S$3.8 million of all expenses in connection with the Compliance Placement will be borneby our Company.

In the opinion of our Directors, there is no minimum amount which must be raised from the CompliancePlacement.

USE OF PROCEEDS FROM THE COMPLIANCE PLACEMENT AND EXPENSES INCURRED

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Prospective investors should consider carefully, together with all other information contained in thisdocument, the risks described below before deciding to invest in our Shares. The risks described beloware not the only ones we face. Additional risks not presently known to us or that we currently deemimmaterial may also impair our business operations. Our business, financial condition, results ofoperations and prospects could be materially and adversely affected by any of these risks. The marketprice of our Shares could decline due to any of these risks and you may lose all or part of yourinvestment.

This Information Memorandum also contains forward-looking statements that involve risks anduncertainties. The actual results of our operations could differ materially from those anticipated in theseforward-looking statements as a result of certain factors, including the risks we face as described belowand elsewhere in this Information Memorandum.

Before deciding to invest in our Shares, prospective investors should seek professional advice from theiradvisers about their particular circumstances.

RISKS RELATING TO OUR BUSINESS

You should not rely on the past track record of AVIC Shipbuilding Management Business as anindication of our growth in the future

Benefiting from the recent boom in the PRC shipbuilding industry, AVIC Shipbuilding ManagementBusiness experienced a significant growth in revenue from approximately RMB42.4 million in FY2008 toapproximately RMB76.5 million in FY2010.

Our future growth in the industry will depend on a number of factors, many of which are beyond ourcontrol, including the growth of the world economy, demand for new vessels, the macroeconomic andmonetary policies of the PRC government, and the level of competition in the PRC and internationalshipbuilding industry. For example, following the onset of the global financial crisis in the third quarter of2008, seaborne trade fell sharply and demand for new vessels declined significantly. Consequently, ourrevenue decreased. Since the end of 2008 till the Latest Practicable Date, and in line with the generaldownward industry trend, our Company has seen a reduction in orders and enquiries received. Wetherefore expect that our revenue and/or profits could be affected.

We cannot assure you that we will be able to maintain the historical rate of growth or track record of AVICShipbuilding Management Business, and its past growth rate is not an indication of our growth in thefuture. To the extent that we experience any significant decrease in demand for our services or increasein competition, our business, financial condition, results of operations and prospects may be materiallyand adversely affected.

The fluctuations in demand for our services may adversely affect our financial performance

In general, demand for our services is highly related to demand for new ships. Demand for new ships ismainly driven by shipping freight rates, the growth in global carriage of goods by sea and thereplacement of old ships that are sold for scrap. Please refer to the “Overview of the ShipbuildingIndustry” section of this Information Memorandum for more details. The numbers of orders received byshipyards and the shipyard’s profit margins for each project will also affect the service fees whichshipyards are willing to pay us.

Accordingly, any significant adverse fluctuation in demand for our services may result in a decline in ourservice fees, and hence our business operations and financial performance may be materially andadversely affected.

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RISK FACTORS

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We may not be able to successfully implement our future plans

We have identified some plans to be carried out in the near future as set out in the “History and Business– Business Strategies and Future Plans” section of this Information Memorandum. In particular, we intendto establish our own shipbuilding capabilities by acquiring existing reputable shipyards when suitableopportunities arise. The acquisition of shipyards will involve commercial negotiation process andapprovals from relevant authorities, our Shareholders and the SGX-ST, as the case may be. In addition,such acquisitions, to the extent that they are to be funded by the proceeds other than from theCompliance Placement, may strain our financial resources. It may also overstretch our managementpersonnel and require us to restructure our management structure. Further, in conjunction with theproposed Listing of our Company on the SGX-ST, AVIC International and AVIC International Beijing havegiven an undertaking to our Group to, inter alia, transfer all interests of the AVIC International Group inany business or assets engaged in or connected to the ship-trading and shipbuilding industry, includingbut not limited to its shipyards and clients (the “Core Business”) to our Group on normal commercialterms which are not prejudicial to the interest of our Company and our Shareholders. Please refer to the“Potential Conflicts of Interests” section of this Information Memorandum for further details on the saidundertaking.

All future acquisitions of business relating to the Core Business will be subject to the latest Catalogue ofForeign Investment Industries promulgated by the National Development and Reform Commission andthe MOC, and the State Shipping Industry Mid-and-Long-Term Development Plan (2006-2015), and thefuture acquisitions of shipyards might also be subject to the New M&A Regulations as described on page38 of this Information Memorandum. Please refer to the “Risk Factors – Changes in the New M&ARegulations by the PRC government could adversely affect our future acquisitions of PRC businesses”and “Risk Factors – If the PRC government takes the view that the Contractual Arrangements do notcomply with PRC government restrictions on foreign investment in the shipbuilding industry, our business,financial condition, results of operations and prospects could be materially and adversely affected”sections of this Information Memorandum for further details on the potential risks we face with respect toour future acquisitions.

If we are unable to successfully implement our future plans or face any unexpected delays, we willcontinue with our existing business and source for alternative plans to diversify, but our businessprospects and financial results may be materially and adversely affected.

Our business model is expected to change, our business is expected to become more diversifiedand our historical results of operations may not be indicative of our future performance

We have been concentrating on the provision of M&C Services. However, we intend to diversify ourbusiness into shipbuilding in the near future. As we may not have sufficient experience and expertise inmanaging the shipbuilding business, we may encounter greater risks of cost overruns and delays indelivery on shipbuilding contracts. We may not have adequate technology or intellectual property rights inbuilding certain types of vessels and may have to invest a substantial amount of capital and otherresources in conducting research and designing and building prototypes. These factors may adverselyaffect our business, financial condition, results of operations and prospects.

In view of our plan to diversify into shipbuilding, our business model and risk profile are expected tochange. There can be no assurance that we will successfully diversify into shipbuilding and that our newbusinesses will be profitable. As a result, our historical results of operations may not be indicative of ourfuture performance.

Tightening of credit may adversely affect our business

Business conditions in the shipbuilding industry in general are affected by the availability of credit.Tightening of credit may result in higher costs to finance building of new ships and also in the slowing ofgrowth in the world economy. Existing orders for new ships may be cancelled as shipowners may struggleto secure financing or reassess the demand for new vessels. Any cancellation of our existing orders, orreduction in new orders would have a material adverse effect on our business, financial condition, resultsof operations and prospects.

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The shipbuilding industry is highly competitive and we cannot assure you that we will be able tocompete successfully against our competitors and new entrants to the industry

Our business is highly competitive. We face competition from existing competitors in the PRC and othercountries, in particular Japan and South Korea, as well as new entrants to this industry. Some of ourcompetitors have more resources and may have lower costs of operations than us. In addition, some ofour competitors may have competitive advantages in building certain types of vessels compared to ourbusiness partners. Our competitors, particularly those in the PRC, may engage in aggressive pricing fromtime to time in order to gain market share.

We cannot assure you that we will be able to compete successfully against our competitors as well asnew entrants in this industry in the future. Accordingly, our business, financial condition, results ofoperations and prospects will be adversely and materially affected if we are unable to maintain ourcompetitive advantage and compete successfully against our competitors and any new entrants to thisindustry in the future.

Our order book may not be an accurate indicator of our future performance

As at the end of FY2010, AVIC International Beijing had an outstanding order book of 19 ships with anaggregate contract value of approximately US$801.5 million, which are the subject of the ManagementAgreement entered into between AVIC International Beijing and our Company. These shipbuilding ordersare to be completed between 2011 and 2013. Please refer to the “History and Business – Prospects”section of this Information Memorandum for further details. The contract value of US$801.5 million doesnot represent our Company’s revenue, which will be based on the services rendered under theManagement Agreement. Further details of the Management Agreement are set out in the “History andBusiness – Business and Principal Activities” and “Interested Person Transactions” sections of thisInformation Memorandum. With effect from 1 April 2011, we will enter into new shipbuilding contractsdirectly with shipyards and shipowners. Our revenue will be recognised based on a percentage of thecontract value derived from these new shipbuilding contracts depending on the terms of the relevantshipbuilding contract. Generally, only a percentage of the value of a shipbuilding contract will be paid tous as a service fee, depending on the terms of such contract, and the rest of the contract value will bepaid to the shipyard as co-seller under the contract. Please refer to the “Management’s Discussion andAnalysis of Financial Condition and Results of Operations” section of this Information Memorandum forfurther details on how we recognise our revenue.

We have not taken into account any potential delays in construction or delivery problems in calculatingour order book. The successful conversion of these orders into our revenue depends on a number offactors including, among other things, absence of adverse changes in the PRC and global shippingmarkets, the availability of funds to shipowners, competition, the shipyard’s production capacity and ourproject management capability. Some of the factors are beyond our control and by nature, are subject touncertainty. Going forward, our order book may be affected by delays, cancellations and therenegotiations of the contracts, hence we cannot assure you that we will be able to deliver all of ourexisting orders on schedule and successfully turn them into our revenue. Therefore, you should notconsider our order book as an accurate indicator of our future performance or future revenue.

The terms of the Management Agreement are subject to modification and the management feepayable thereunder is subject to adjustments

We have entered into the Management Agreement with AVIC International Beijing to manage certainshipbuilding contracts that had been entered into by AVIC International Beijing prior to the RestructuringExercise, for a management fee of RMB28 million per annum. Under the terms of the ManagementAgreement, our Company will provide M&C Services for the Outstanding Projects with effect from 1January 2011 until the 19 vessels under the Outstanding Projects are delivered by 2013. The terms of theManagement Agreement may be subject to modification and the annual management fee of RMB28million is also subject to adjustments depending on the progress of the construction of the vessels. Forexample, if any of the shipbuilding projects is delayed or cancelled, the fee payable to us for the particularyear may be adjusted downwards accordingly. There can be no assurance that we will be able to

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successfully receive the full management fee or that the terms of the Management Agreement will not beamended. Therefore, you should not consider the management fee as an accurate indicator of our futurerevenue and any adjustments to the management fee may adversely affect our financial condition andresults of operations.

Please refer to the “History and Business – Business and Principal Activities” and “Interested PersonTransactions” sections of this Information Memorandum for further information on the ManagementAgreement.

We may not be able to secure new contracts if our banks fail to issue the requisite refundguarantees

As the contract prices for new vessels are high, we are usually required to furnish the shipbuyers withrefund guarantees issued by our banks as security for the refund of installment payments made by theshipbuyers if we fail to fulfill our contractual obligations under the shipbuilding contracts. The costs of therefund guarantees are borne entirely by the shipyards, and are generally about 0.36% per annum of theamount received from the shipowner from time to time pursuant to the contract. In order to decidewhether to grant us the refund guarantees, banks review, among other things, our financial standing andcreditworthiness. Previously, the refund guarantees from the banks were secured by AVIC InternationalBeijing. Following the Restructuring Exercise, our Group will apply for the refund guarantees on our ownfor future shipbuilding contracts. Existing refund guarantees secured by AVIC International Beijing willcontinue to subsist in its name until the shipbuilding contracts underlying the Management Agreementare fulfilled. In the event that we are unable to secure refund guarantees from the banks, we may beunable to secure new contracts, which may adversely affect our prospects and future financialperformance.

Depreciation of the US$ may adversely affect our financial condition and results of operations

Our financial statements are prepared in RMB, which is our functional currency. Our foreign exchangeexposure arises from our sales that are denominated in US$, whereas our operating expenses aremainly denominated in RMB. In the event that the US$ depreciates against RMB, other things beingequal, our sales (after conversion to RMB) and our profit margin will decline. Further, any restriction overthe conversion or timing of conversion of foreign currencies into RMB may also expose us to fluctuationsin the exchange rates between US$ and RMB. Please refer to the “Management’s Discussion andAnalysis of Financial Conditions and Results of Operations – Foreign Exchange Management” section ofthis Information Memorandum for more details on our foreign exchange exposure during the PeriodUnder Review.

In addition, depreciation of the US$ will also result in the lower profit margins of shipyards, which will beless willing to pay a favourable fee to us. Accordingly, any significant fluctuations between the RMB andUS$, specifically any appreciation of the RMB against the US$, will adversely affect our revenue, whichcould adversely affect our business, financial condition, results of operations and prospects.

We are dependent on the shipyards that we work with as co-sellers to produce vessels that meetthe quality and delivery requirements of our customers and comply with the rules and regulationsof the classification societies

We are dependent on the shipyards that we work with as co-sellers for the timely delivery of vessels thatmeet the contractual and regulatory requirements. Any delay in the construction of a vessel by oursuppliers, including for reasons beyond our and/or our suppliers’ control, could restrict our ability to meetthe delivery dates in our shipbuilding contracts. For example, our suppliers’ shipbuilding facilities may bedisrupted by accidents, power failures, outbreaks of infectious diseases or natural calamities such asfires, floods or snow storms. Their ability to meet the delivery schedules may also depend on reliable andadequate supply of raw materials at acceptable prices.

The shipyards which we work with as co-sellers may use poor quality or defective sub-components orunderqualified or less skilled workers at their facilities, which may result in our inability to meet the qualityspecifications in accordance with the shipbuilding contracts.

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Further, as the shipyard is responsible for the construction of vessels while our Company is in charge ofthe non-construction aspects of the shipbuilding project, the insurance for a shipbuilding project is paid bythe shipyard accordingly. Although our Company and the shipyard are jointly responsible for productionliabilities or damage to vessels under construction or prior to delivery, pursuant to the separate contractbetween our Company and the relevant shipyard, the shipyard is required to bear such liabilities and/orcosts. In the event that the shipyard is in financial difficulties and the insurance it has taken is insufficientto cover such liabilities and/or costs, our business and financial performance may be materially andadversely affected.

Apart from the contractual specifications and requirements, shipyards are required to construct thevessels in accordance with the rules and regulations of classification societies, which are organisationsthat establish and maintain technical standards for the construction and operation of ships. If theshipyards are unable to obtain the necessary certifications from the classification societies, they mayexperience delays and disruptions in the shipbuilding process.

If any of the abovementioned events occurs, our customers may cancel or rescind their shipbuildingcontracts with us. Upon cancellation or rescission of the contracts by customers, we and the shipyard arejointly required under the contracts to refund all payments we have received from the customers plusinterest to the customers. However, pursuant to separate contracts between our Company and theshipyards, the shipyards are contractually required to bear the cost of refunds. Our Company will beresponsible for the refunds only if the shipyards are not able to bear the cost of refunds. As a result, ourfinancial performance, customer relationships and company reputation will be adversely affected.

We are dependent on our management team and key personnel

We attribute our success to the leadership and contributions of our management team comprising ourExecutive Directors and Executive Officers, who have been instrumental in charting the businessdirection and spearheading our growth. We rely on their extensive knowledge and experience incorporate management, strategic planning, finance and business practices of the shipbuilding industry.We expect to face increasing competition for management personnel from our competitors, driven largelyby strong growth in the PRC shipbuilding industry. Our continued success is therefore dependent to alarge extent on our ability to retain our key management personnel, who are responsible for formulatingand implementing growth, corporate development and overall business strategies. The demand for suchexperienced personnel is intense and the search for personnel with the relevant skill sets can be timeconsuming. The loss of our key management personnel without suitable and timely replacements, or ourinability to attract a sufficient number of management personnel to meet the needs of our growth, willhave a material and adverse effect on our business operations and financial performance.

We may not have sufficient insurance coverage

We have maintained insurance coverage for our employees, office and service facilities, details of whichare set out in the “History and Business – Insurance” section of this Information Memorandum. However,we currently do not maintain any insurance policies against loss of key personnel and businessinterruption, service liability claims or delay of delivery of ships or damage to ships. There is noassurance that our insurance coverage would be sufficient and as such, any uninsured loss or a loss inexcess of insured limits may have a material adverse impact on our business and financial performance.

We could incur losses as a result of cancellation of orders and requests for delayed delivery byour customers

Since the onset of the global financial crisis, shipowners with vessels on order have experiencedfinancing problems as a result of decreased demand in the shipping market, declines in asset values andlack of financing facilities. These factors make the risk of cancellation or delays of orders significant, andhave caused delays and cancellations of orders for new vessels.

The global economy may further deteriorate or may not improve, which could adversely affect theeconomic conditions and seaborne trade in particular of the PRC and other countries where ourcustomers are located. Any of these events may result in additional requests by our customers forcancellation of orders or for delays of delivery of vessels in the future.

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Any cancellation of orders by our customers or significant delay in the delivery of vessels at ourcustomers’ request, which could affect our recognition of revenue from such contracts, could materiallyand adversely affect our business, financial condition, results of operations and prospects.

We rely on external design houses for our vessel model designs

As we do not have the independent capability to carry out vessel model designs, we out-source all of ourvessel model designs, including preliminary designs and detailed designs, to external design houses. Toensure the quality of the designs, we have established business relationships with a few reputable designhouses, including Shanghai Merchant Ship Design & Research Institute , a leadingstate-owned vessel research and design house in the PRC, Shanghai Odely Marine Engineering Co., Ltd and Marine Design & Research Institute of China

. We are reliant on these few external design houses for vessel model designs. As we continueto expand our products/services offerings, our dependence on these external houses may increase. If wefail to maintain good relationships with these design houses or if they fail to deliver quality designproducts to us on a timely basis, we could lose business opportunities or may not be able to meet ourdelivery schedule. In addition, when global demand for ships is strong, we face competition from othershipbuilders for the services of well-known design houses. If we are required to pay substantially higherdesign fees to procure the services of these design houses, our costs will increase and we may not beable to maintain our cost structure. Any of these events would materially and adversely affect ourbusiness, financial condition, results of operations and prospects.

The outbreak of any severe communicable disease in the PRC, if uncontrolled, could adverselyaffect our business

We may experience disruptions to our business as a result of severe communicable disease, such assevere acute respiratory syndrome (SARS), avian influenza (H5N1 bird flu), and H1N1 flu. As anillustration, the SARS outbreak in 2003 resulted in an adverse impact on the health of our employees andconsequently their ability to carry out their responsibilities, the closure of our office premises and ourcustomers being unwilling to come to our offices. These business disruptions could have a materialadverse effect on our business, financial condition, results of operations and prospects. In addition, thespread of any severe communicable disease in the PRC could result in a general slow-down in the PRCeconomy and may affect the operations of our suppliers and customers, as well as our own operationsincluding our key management and employees, as we rely on them to carry out marketing activities andnegotiate with our customers and suppliers. Any of these events could have a material adverse effect onour business, financial condition, results of operations and prospects.

We may be involved in legal or other proceedings arising out of our operations from time to timeand may face significant liabilities as a result

We may be involved from time to time in material disputes with various parties in the ordinary course ofour business. These disputes may lead to protests, or legal or other proceedings, and may result indamages to our reputation, substantial costs and diversion of our resources and management’s attention.If such legal proceedings occur, we cannot assure you as to their outcome, and any negative outcomemay materially and adversely affect our business, financial condition and results of operations.

RISKS RELATING TO THE SHIP-TRADING AND SHIPBUILDING INDUSTRY

The recent global financial crisis and economic downturn has impacted the shipbuilding andship-trading industry and could materially and adversely affect our business, financial condition,results of operations and prospects

The global capital and credit markets have in the last few years experienced periods of extreme volatilityand disruption. The global financial crisis, concerns over recession, inflation or deflation, energy costs,geopolitical issues, commodity prices and the availability and cost of credit, have contributed tounprecedented levels of market volatility and diminished expectations for the global economy and thecapital and consumer markets. These factors, combined with others, have precipitated a severe globaleconomic downturn, the extent of which remains uncertain. Due to the global financial crisis, our

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customers have been reluctant to or lack sufficient financing or funds to place orders for new vessels. Theglobal economy may further deteriorate, causing a decline in the economies of the PRC and othercountries where our customers are located and in seaborne trade in particular. If that happens we maynot experience a sufficient number of new orders in the future. The usual business factors and risks,including those described in this “Risk Factors” section may adversely affect our business (including thenumber of completed vessels delivered), financial condition, results of operations and prospects in thecurrent and future financial years. Our aim is to market to potential customers and to add new orders onacceptable terms from 2011 onwards. However, we cannot assure you that we will be able to do so, andaccordingly, our failure to add new orders on acceptable terms from 2011 onwards may also adverselyaffect our business, financial condition, results of operations and prospects.

During the global financial crisis, the value of vessels and prices which our suppliers can charge forvessels they build have declined, leading to a corresponding drop in our fees. If prices do not recover, ourbusiness, financial condition, results of operations and prospects may be materially and adverselyaffected.

Fluctuations in freight and charter rates and vessel values may result in volatility of our financialperformance

The commercial shipping industry has traditionally experienced fluctuations in freight and charter ratesand vessel values, which are dependent on factors including the demand for, and supply of, shippingcapacity. Shipowners tend to order more new ships when freight and charter rates are rising. Whenshipowners place orders for more new ships, additional capacity is generated which in turn results inovercapacity when supply outstrips demand for ships. Overcapacity exerts a downward pressure onfreight and charter rates. Falling freight and charter rates typically reduce the demand for new ships,which results in a shrinking fleet because fewer new ships are built and an increased scrapping of olderships. The shrinking fleet creates a shortfall in capacity, which generally leads to an increase in freightand charter rates over time. The increasing freight and charter rates again result in orders for new ships.Accordingly, if we are not able to receive new orders as a result of reduction in the demand of new ships,our financial performance will be adversely affected. As part of our marketing strategy, we also need topredict these cycles and we face the challenge of doing so accurately. If we are unable to accuratelypredict these cycles, our business, financial condition, results of operations and prospects could bematerially and adversely affected.

We expect global shipbuilding capacity to continue to expand, which could result in overcapacityin the shipbuilding industry

In recent years, driven in part by strong growth in global demand for vessels, global shipbuilding capacityhas expanded significantly, particularly in the PRC and South Korea. Since 2002, global shipbuildingcapacity may have increased by as much as nine times. However, since the third quarter of 2008, globaldemand for shipbuilding has fallen as a result of the global economic crisis. The shipbuilding industry hasperiodically suffered from depressed prices and lower profit margins due to overcapacity. Overcapacity inthe shipbuilding industry may return if global demand for commercial vessels does not recover or keeppace with the growth in production capacity. Overcapacity would reduce the prices in US$ terms of ourprincipal services, which would adversely affect our business, financial condition, results of operationsand prospects.

RISKS RELATING TO THE PRC

Our operations are subject to the laws and regulations of the PRC

The PRC legal system is based on the PRC constitution and is made up of written laws, regulations,circulars and directives. The PRC government is still in the process of developing its legal system to,amongst others, meet the needs of investors and to encourage foreign investment. As the PRC economyis undergoing development at a faster pace than its legal system, some degree of uncertainty exists inconnection with whether and how existing laws and regulations will apply to certain events orcircumstances.

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Some of the laws and regulations, and the interpretation, implementation and enforcement thereof, arestill subject to policy changes. There is no assurance that the introduction of new laws, changes toexisting laws and the interpretation or application thereof or the delays in obtaining approvals from therelevant authorities will not have an adverse impact on our business or prospects.

Further, precedents on the interpretation, implementation and enforcement of PRC laws and regulationsare limited, and unlike other common law countries such as Singapore, decisions on precedent cases arenot binding on lower courts. As such, the outcome of dispute resolutions may not be as consistent orpredictable as in the other more developed jurisdictions and it may be difficult to obtain swift or equitableenforcement of laws in the PRC, or obtain enforcement of legal judgments by a court of anotherjurisdiction.

Changes in the PRC government rules and regulations will have a significant impact on ourbusiness

Currently, our business and operations in the PRC entail the procurement of licences and permits fromthe relevant authorities. Thus, our business and operations in the PRC are subject to the PRCgovernment rules and regulations. From time to time, changes in the rules and regulations or theimplementation thereof may require us to obtain additional approvals and licences from the PRCauthorities for the conduct of our operations in the PRC, or we may be required to renew our existingapprovals and licences. In the event of such an occurrence, we may need to incur additional expenses inorder to comply with such requirements. This will in turn affect our financial performance as our businesscosts will increase. Further, there can be no assurance that such approvals or licences will be granted tous promptly or at all. If we experience delay in or are unable to obtain such required approvals orlicences, our operations and business in the PRC, and hence our overall financial performance, will beadversely affected. Please refer to the “History and Business – Government Regulations” section and the“Summary of Relevant PRC Laws and Regulations” in Appendix C of this Information Memorandum fordetails.

Our operating results and financial conditions are highly susceptible to changes in the PRC’spolitical, economic and social conditions as our revenue is currently wholly derived from ouroperations in the PRC

Since 1978, the PRC government has undertaken various reforms in its economic framework. Suchreforms have resulted in economic growth for the PRC in the last three decades. However, many of thereforms are unprecedented or experimental, and are expected to be refined and modified from time totime. Other political, economic and social factors may also lead to further reforms. This refinement andadjustment process may consequently have a material impact on our operations in the PRC or a materialadverse impact on our financial performance. Our results and financial condition may be adverselyaffected by changes in the PRC’s political, economic and social conditions.

Our operations could be adversely affected if we fail to comply with PRC laws and regulationsand the conditions stipulated in our licenses, permits or approvals

Our business and operations and that of our business partners in the PRC are subject to governmentrules and regulations, including safety and health regulations. We and our business partners may not beable to meet the requirements set by the PRC authorities at all times. We and our business partners mayalso be required to incur higher costs to comply with new PRC regulations if stricter or more onerouslaws, rules or regulations are imposed, and our business, financial condition, results of operations andprospects could be materially and adversely affected if our business partners pass on the costs to us bylowering our fees.

We are required to obtain various licenses, permits and approvals for our operations, including foreigninvestment approvals, business licenses, tax registration certificates and foreign exchange registrationcertificates. Failure by us or our business partners to obtain and maintain any licenses, permits andapprovals necessary to operate our respective businesses could have a material adverse effect on ourbusiness, financial condition, results of operations and prospects.

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Breach or non-compliance with these PRC laws and regulations may result in the suspension, withdrawalor termination of our business licenses or permits, or the imposition of penalties, by the relevantauthorities. Any suspension, withdrawal, termination or refusal to extend our business licenses or permitswould require us to cease production of some or all of our products/services, which would adverselyaffect our business, financial condition, results of operations and prospects.

Failure by our business partners to comply with laws and regulations which they are subject tomay materially and adversely affect our business, financial condition, results of operations andprospects

The operations of our business partners in China are subject to laws and regulations of the PRC. ThePRC government may impose significant fines or penalties for violations of these laws and regulations. Ifour business partners fail to comply with these requirements or fail to pass any inspections conducted byany relevant PRC authorities, they could be subject to fines. In addition, as some of the vessels areexported to overseas markets, our business partners are also subject to the applicable environmentallaws and regulations of various jurisdictions or international industry organisations. As awareness ofenvironmental issues and protection increases, our business partners may be required to adapt to newlaws and regulations and any failure to comply with such laws and regulations will cause them to be inbreach and be subject to penalties. Any resulting suspension of their operations could materially andadversely affect our business, financial condition, results of operations and prospects.

Any changes in environmental or other laws affecting our business partners may further increase ourcosts, which could have a material adverse effect on our business, financial condition, results ofoperations and prospects.

Protection afforded to our Shareholders under Singapore laws is limited as substantially all ourassets and operations are located in the PRC

Our operations and significant assets are or will be located in the PRC and are therefore subject to therelevant laws and regulations of the PRC. In addition, most of our Directors and Executive Officers arenot residents in Singapore and their assets are located outside Singapore. As a result, it may be difficultfor investors to effect service of process in Singapore, or to enforce a judgment obtained in Singaporeagainst us or any of such persons. It may also be difficult for investors to take legal action against us in aforeign jurisdiction and the costs of bringing such action could be prohibitive.

Changes in tax and other preferential policies may adversely affect our business, financialcondition, results of operations and prospects

Our Company is incorporated under the laws of Singapore with substantially all of our operations in thePRC. Any increase of the income tax rate applicable to our subsidiaries operating in the PRC could havea material adverse effect on our business, financial condition, results of operations and prospects andmay adversely affect the value of our Shares.

Our Company may be deemed a PRC resident enterprise under the New Income Tax Law and besubject to PRC taxation on our world-wide income

Under the New Income Tax Law (as defined in “Taxation – PRC Taxation” in Appendix D of thisInformation Memorandum), enterprises established outside the PRC whose “de facto managementbodies” are located in the PRC are considered “resident enterprises” and their global income willgenerally be subject to the uniform 25.0% enterprise income tax rate. On 6 December 2007, the PRCState Council promulgated the Implementation Regulations on the New Income Tax Law (the“Implementation Regulations”), which define “de facto management bodies” as bodies that havematerial and overall management control over the business, personnel, accounts and properties of anenterprise. In addition, a recent circular issued by the State Administration of Taxation on 22 April 2009provides that a foreign enterprise controlled by a PRC company or a PRC company group will beclassified as a “resident enterprise” with its “de facto management bodies” located within the PRC if thefollowing requirements are satisfied:

(i) the senior management and core management departments in charge of its daily operationsfunction mainly in the PRC;

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(ii) its financial and human resources decisions are subject to determination or approval by persons orbodies in the PRC;

(iii) its major assets, accounting books, company seals, and minutes and files of its board andshareholders’ meetings are located or kept in the PRC; and

(iv) more than half of the enterprise’s directors or senior management with voting rights reside in thePRC.

The New Income Tax Law and Implementation Regulations are relatively new and ambiguities exist withrespect to the interpretation of the provisions relating to resident enterprise issues. We cannot assure youthat we will not be deemed to be a PRC resident enterprise under the New Income Tax Law andImplementation Regulations. If we are deemed to be a PRC resident enterprise, we will be subject toPRC enterprise income tax at the rate of 25.0% on our world-wide income.

If we became a PRC resident enterprise under the New Income Tax Law and received income other thandividends, our profitability and cash flows would be adversely affected due to our world-wide incomebeing taxed in the PRC under the New Income Tax Law.

Dividends payable by our Company to our foreign investors on our Shares may become subjectto withholding taxes under the New Income Tax Law and Implementation Regulations

Under the previous PRC tax laws and regulations, dividends paid by our Company to investors who werenot residents of the PRC were not subject to PRC withholding tax or income tax. Under the New IncomeTax Law and Implementation Regulations, PRC withholding tax at the rate of 10.0% is applicable todividends payable to investors that are “non-resident enterprises” (and that do not have an establishmentor place of business in the PRC, or that have such establishment or place of business but the relevantincome is not effectively connected with the establishment or place of business) to the extent suchdividends have their source within the PRC. The 10.0% withholding tax rate applicable to dividends maybe subject to a reduced rate of tax based on an available tax treaty between the PRC and thegovernment of the jurisdiction of which the recipient is a tax resident. It is uncertain whether we will beconsidered a PRC “resident enterprise”, and it is unclear whether the dividends payable to our foreigninvestors would be treated as income coming from “sources within the PRC” and be subject to PRC tax.

On 24 August 2009, the State Administration of Taxation issued the Administrative Measures for Non-resident Enterprises to Enjoy Treatments under Tax Treaties (For Trial Implementation) (“Notice 124”),which became effective on 1 October 2009. This legislation requires non-resident enterprises to obtainthe competent tax authority’s approval to enjoy preferential tax treatments under tax treaties. Noassurance can be given that we can satisfy all the requirements set forth by the aforementioned laws andregulations and obtain necessary approval to enjoy preferential treatment of the tax treaty. If ourCompany is considered a PRC “resident enterprise” under the “de facto management bodies” test of theNew Income Tax Law and Implementation Regulations, dividends on the Shares may be regarded asincome from “sources within the PRC” and therefore become subject to a 10.0% withholding tax, unlessotherwise reduced by applicable tax treaties. If our Company is required under the New Income Tax Lawto withhold PRC income tax on any dividends it pays to our Shareholders who are not PRC residents, thevalue of your investment in our Shares may be materially and adversely affected.

Gains on the sale of our Shares may become subject to withholding taxes under the New IncomeTax Law and Implementation Regulations

Under the previous PRC tax laws and regulations, gains on the sale of the Shares were not subject toPRC withholding tax or income tax. Under the New Income Tax Law and Implementation Regulations,however, if our Company is considered a PRC “resident enterprise” under the “de facto managementbodies” test, gains on the sale of the Shares may be regarded as income from “sources within the PRC”and therefore become subject to a 10.0% withholding tax. If our Shareholders who are not PRC residentsare required to pay PRC withholding tax or income tax on capital gains on sale of our Shares, the valueof your investment in our Shares may be materially and adversely affected.

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The enforcement of the Labour Contract Law and other labour-related regulations in the PRC mayadversely affect our business, financial condition, results of operations and prospects

On 29 June 2007, the National People’s Congress of China enacted the Labour Contract Law, which became effective on 1 January 2008. Compared to the prior Labour Law , the

Labour Contract Law establishes more restrictions and increases the cost to employers of terminatingemployment, including specific provisions related to fixed-term employment contracts, temporaryemployment, probation, consultation with labour unions and employee general assemblies, employmentwithout a contract, dismissal of employees, compensation upon termination and overtime work, andcollective bargaining. According to the Labour Contract Law, an employer is obligated to sign an unlimitedterm labour contract with an employee if the employer continues to employ the employee after twoconsecutive fixed term labour contracts. The employer also has to pay compensation to employees if theemployer terminates an unlimited term labour contract. Unless an employee refuses to extend an expiredlabour contract, such compensation is also required when the labour contract expires.

Further, under the Regulations on Paid Annual Leave for Employees , which becameeffective on 1 January 2008, employees who have served more than one year for an employer areentitled to a paid vacation ranging from five to 15 days, depending on their length of service. Employeeswho waive such vacation time at the request of employers must be compensated at three times theirnormal salaries for each waived vacation day. As a result of these new protective labour measures, ourlabour costs may increase. Any disputes, work stoppages or strikes that arise in the future could have amaterial adverse effect on our business, financial condition, results of operations and prospects.

Moreover, we are required to contribute to a number of employee social insurance schemes such aspension insurance. We provide social insurance and housing funds to our employees in accordance withlocal government authorities’ implementation policies. Therefore, we may be required to incur additionalexpenses to comply with such laws and regulations, which in turn may affect our results of operations.

Changes in the New M&A Regulations by the PRC government could adversely affect our futureacquisitions of PRC businesses

On 8 August 2006, six PRC central government bodies, the MOC, the SASAC, the State Administrationof Taxation (“SAT”), the State Administration for Industry and Commerce (“SAIC”), the China SecuritiesRegulatory Commission (“CSRC”) and the SAFE jointly issued new Regulations on Foreign Investors’Merger and Acquisition of Domestic Enterprises (the “New M&ARegulations”) effective on 8 September 2006 and amended on 22 June 2009 by the MOC. Under theNew M&A Regulations, the overseas listing and trading of shares of a special purpose vehicle requiresthe approval of the CSRC if the shareholder of the special purpose vehicle proposes to acquire his or herequity interest in PRC domestic companies or subscribe for the increased registered capital of suchcompanies by way of a share swap with the purpose of listing the interests of such PRC domesticcompanies on an overseas stock exchange. The term “special purpose vehicles” is defined as overseascompanies directly or indirectly controlled by PRC companies or individuals formed for the purpose ofoverseas listing of their equity interests in PRC domestic entities.

The Restructuring Exercise for the purposes of our Listing on the SGX-ST includes (i) the incorporationof each of our Company, Kaixin Industrial and Kaixin (Beijing), (ii) the transfer of personnel of AVICShipbuilding Management Business to, and the undertaking of the shipbuilding business by, our Group,and (iii) the entry into the Management Agreement by our Company with AVIC International Beijing.Please refer to the “Restructuring Exercise” section of this Information Memorandum for further details.As none of these steps under the Restructuring Exercise involves the acquisition of PRC companies byway of a share swap as stipulated in the New M&A Regulations, and none of our overseas subsidiariesshall be considered as a special purpose vehicle pursuant to the New M&A Regulations, the New M&ARegulations are not applicable to the Listing of our Company.

RISK FACTORS

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In conjunction with the proposed Listing of our Company on the SGX-ST, AVIC International and AVICInternational Beijing have given an undertaking to our Group to, inter alia, transfer all interests of theAVIC International Group in any business or assets engaged in or connected to the ship-trading andshipbuilding industry to our Group. For further details on the said undertaking, please refer to the“Potential Conflicts of Interests” section of this Information Memorandum.

The New M&A Regulations also establish additional procedures and requirements that apply to someacquisitions of PRC companies by foreign entities, including requirements of obtaining approvals from thecompetent counterpart of the MOC. Our future acquisitions of shipbuilding and ship-trading assetspursuant to the undertaking provided by AVIC International and AVIC International Beijing could besubject to the procedures and requirements of the New M&A Regulations, depending on the structure ofthe transactions to be implemented when such acquisitions take place. If applicable, the futureacquisitions by our Company shall comply with such procedures and requirements of the New M&ARegulations. We cannot assure you that the PRC regulatory authorities will not issue new regulations orfurther interpretations on the New M&A Regulations or other current PRC laws and regulations that mayrequire us to obtain further approvals from PRC government bodies with respect to our futureacquisitions. Any of these factors could have a material adverse effect on our business, financialcondition, results of operations and prospects.

Complying with the requirements of the New M&A Regulations to complete transactions could be time-consuming, and any required approval processes, including obtaining approval from the MOC, may delayor inhibit the completion of such transactions, which could affect our ability to expand our business.

If the PRC government takes the view that the Contractual Arrangements (as defined below) donot comply with PRC government restrictions on foreign investment in the shipbuilding industry,our business, financial condition, results of operations and prospects could be materially andadversely affected

According to the latest Catalogue of Foreign Investment Industries promulgated by the NationalDevelopment and Reform Commission and the MOC on 31 October 2007, which became effective on 1December 2007, and the State Shipping Industry Mid-and-Long-Term Development Plan (2006-2015),some ship-related industries in the PRC, including the shipbuilding industry, are classified as restrictedindustries where foreign ownership is allowed only up to 49.0%.

In conjunction with the proposed Listing of our Company on the SGX-ST, AVIC International and AVICInternational Beijing have given an undertaking to our Group to, inter alia, transfer all interests of theAVIC International Group in the Core Business to our Group on normal commercial terms which are notprejudicial to the interest of our Company and our Shareholders.

Due to the above restrictions, our Company intends to acquire the maximum equity interest of 49.0% inthe relevant companies which carry on the Core Business as permitted by the relevant PRC laws. To theextent that our Group is not able to legally acquire and hold part or all of the interests of the AVICInternational Group in the Core Business, our Company intends to enter into a series of contractsthrough AVIC International Beijing (the “Contractual Arrangements”), that will provide our Group witheffective operational control over and (to the extent permitted by PRC law) a right to acquire the equityinterests in such companies. These may include management and consultancy service agreements,assignment agreements, equity interests pledge agreements, exclusive purchase agreements, andpowers of attorney. For more details on the Contractual Arrangements, please refer to the “PotentialConflicts of Interests” section of this Information Memorandum.

Given the substantial uncertainties regarding the interpretation and application of current or future PRClaws and regulations, we cannot assure you that our understandings of the Contractual Arrangements willbe consistent with those of PRC authorities. In addition, we cannot assure you that the ContractualArrangements will not be considered by the PRC government, courts or tribunals of the PRC to be inbreach of relevant PRC laws, regulations, policies and provisions. We cannot assure you that thegovernment authorities will not in the future issue new interpretations and/or issue new laws, regulations,policies or provisions that result in the Contractual Arrangements being deemed to be in violation of thethen prevailing PRC laws, regulations, policies or provisions.

RISK FACTORS

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In the event of occurrence of any of the above, we would not be able to gain the other economic benefitsfrom the remaining equity interest of the Core Business. We could also as a result, lose control over theoperations of the relevant companies which carry on the Core Business and not be able to effect ourfuture plans as set out in the “History and Business – Business Strategies and Future Plans” section ofthis Information Memorandum. Accordingly, you should not consider the economic benefits to be derivedfrom the Core Business as an accurate indicator of our future revenue, and any adjustments to our rightto such economic benefits may materially and adversely affect our financial condition and results ofoperations.

RISKS RELATING TO THE OWNERSHIP OF OUR SHARES

The Compliance Placement may not be successfully carried out

It is proposed that our Company places out the Compliance Placement Shares pursuant to theCompliance Placement in order for our Company to comply with the shareholding spread and distributionrequirements under Rule 210(1) of the Listing Manual and maintain its listing status. It is envisaged thatthe trading of our Shares will be suspended from the date of transfer of listing status to our Company andsuch suspension will continue during the period allowed for the placement of the Compliance PlacementShares and until such time as the requirements under the Listing Manual are met. There is no assurancethat the Compliance Placement will be successfully carried out. If the Compliance Placement is not or isunable to be carried out so as to meet the applicable shareholding spread requirements of the ListingManual, trading of our Shares may continue to be suspended and the SGX-ST may require our Shares tobe de-listed.

There is no prior public market for our Shares and there may not be an active or liquid market forour Shares

Prior to the listing of our Shares on the SGX-ST, there has been no public market for our Shares. TheSGX-ST has approved our application to list our Shares on the SGX-ST. However, we cannot assure youthat an active public market will develop or be sustained after the completion of the CompliancePlacement. Liquidity of a securities market is often a function of the volume of the underlying shares thatare publicly held by unrelated parties. Active, liquid trading markets generally result in lower price volatilityand more efficient execution of buy and sell orders for investors.

Our Share price may be volatile in future which could result in substantial losses for investorspurchasing our Shares pursuant to the Compliance Placement

The Actual Compliance Placement Price will be determined through a book-building exercise andnegotiations between us and the Placement Agent, and may not be indicative of prices that will prevail inthe trading market. You may not be able to resell your Shares at or above the Actual CompliancePlacement Price. Volatility in the trading price of our Shares may be caused by factors outside our controland may be unrelated or be disproportionate to our operating results.

The trading price of our Shares may fluctuate significantly and rapidly after the Compliance Placement asa result of, among others, the following factors, some of which are beyond our control:

(i) variations in our operating results;

(ii) changes in securities analysts’ estimates of our financial performance;

(iii) announcements by us of significant acquisitions, strategic alliances or joint ventures;

(iv) additions or departures of key personnel;

(v) fluctuations in stock market prices and volume;

(vi) involvement in litigation; and

(vii) changes in general economic and stock market conditions.

RISK FACTORS

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Further, shares of other companies listed on the SGX-ST with significant operations and assets in thePRC have experienced price volatility in the past due to reasons unrelated to their performance, and ourShares may also be subject to changes in price not directly related to our performance.

Future sale or issuance of our Shares could adversely affect our Share price

Any future sale, availability or issuance of our Shares could exert a downward pressure on our Shareprice. The sale of a significant amount of our Shares in the public market after the CompliancePlacement, or the perception that such sales may occur, could materially and adversely affect the marketprice of our Shares. These factors also affect our ability to sell additional equity securities. Except asotherwise described in the “General Information on Our Group — Moratorium” section of this InformationMemorandum, there will be no restriction on the ability of our existing Shareholders to sell their Shareseither on the SGX-ST or otherwise.

Negative publicity which includes those relating to any of our Directors, Executive Officers orSubstantial Shareholders may adversely affect our Share price

Negative publicity or announcements relating to any of our Directors, Executive Officers or SubstantialShareholders may adversely affect the market perception or the share performance of our Company,whether or not it is justified. Examples of these include unsuccessful attempts in joint ventures,acquisitions or takeovers, or involvement in insolvency proceedings.

We may require additional funding for our growth plans, and such funding may result in a dilutionof your investment

We have attempted to estimate our funding requirements for the implementation of our growth plans asset out in the “History and Business - Business Strategies and Future Plans” section of this InformationMemorandum.

In the event that the costs of implementing such plans should exceed these estimates significantly or ifwe come across opportunities to grow through expansion plans which cannot be predicted at thisjuncture, and if our funds generated from our operations prove insufficient for such purposes, we mayneed to raise additional funds to meet these funding requirements.

These additional funds may be raised by issuing equity or debt securities or by borrowing from banks orother resources. We cannot ensure that we will be able to obtain any additional financing on terms thatare acceptable to us, or at all. If we fail to obtain additional financing on terms that are acceptable to us,we will not be able to implement such plans fully. Such financing, even if obtained, may be accompaniedby conditions that limit our ability to pay dividends or require us to seek lenders’ consent for payment ofdividends, or restrict our freedom to operate our business by requiring lenders’ consent for certaincorporate actions.

Further, if we raise additional funds by way of a placement or by a rights offering or through the issuanceof new Shares, any Shareholders who are unable or unwilling to participate in such an additional round offund raising may suffer dilution in their investment.

Control by our Controlling Shareholder may limit your ability to influence the outcome ofdecisions requiring the approval of Shareholders

After the completion of the Scheme and the Compliance Placement, our Controlling Shareholder, namelyAVIC International Kairong, will beneficially own not less than 50.0% of our enlarged share capital afterthe Compliance Placement. As a result, AVIC International Kairong will be able to significantly influenceall matters requiring approval by our Shareholders, including the appointment of directors and theapproval of significant corporate transactions. This concentration of ownership may have the effect ofdelaying, preventing or deterring a change in control of our Company and our Group or otherwisediscourage a potential acquirer from attempting to obtain control of us through corporate actions such asmerger or take-over attempts, which could conflict with the interests of other Shareholders.

RISK FACTORS

Our Company was incorporated on 11 November 2010. No member of our Group has declared or paiddividends in the last three financial years in FY2008, FY2009 and FY2010 and from 1 January 2011 tothe Latest Practicable Date.

We currently do not have a dividend policy. The form, frequency and amount of future dividends on ourShares will depend on our earnings, our financial position, our results of operations, our capital needs,our plans for expansion and other factors which our Directors may deem appropriate. The dividends thatour Directors may recommend or declare in respect of any particular financial year or period will besubject to the factors outlined below as well as any other factors deemed relevant by our Directors:

� the level of our cash and retained earnings;

� our actual and projected financial performance;

� our projected levels of capital expenditure and other investment plans; and

� restrictions on payment of dividends imposed on us by our financing arrangements (if any).

No inference should or can be made from any of the foregoing statements as to our actual profitability orour ability to pay any dividends in the future.

We may declare annual dividends with the approval of our Shareholders in a general meeting, but theamount of such dividends shall not exceed the amount recommended by our Directors. Our Directorsmay also declare interim dividends without seeking Shareholders’ approval. Our Company must pay alldividends out of our profits. There can be no assurance that dividends will be paid in the future or of theamount or timing of any dividends that will be paid in the future.

Information relating to taxes payable on dividends is set out under “Taxation” in Appendix D of thisInformation Memorandum.

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DIVIDEND POLICY

The following information should be read in conjunction with the “Independent Auditors’ Report andUnaudited Pro Forma Financial Information for the Year Ended 31 December 2008, 2009 and FY2010” asset out in Appendix A of this Information Memorandum and the “Management’s Discussion and Analysisof Financial Condition and Results of Operations” section of this Information Memorandum.

The following table shows the cash and bank balances, indebtedness and capitalization of our Group,based on our unaudited management accounts as at 30 June 2011 and as adjusted for the net proceedsfrom the issue of the Compliance Placement Shares.

As adjusted for the netproceeds from the

As at the issue of the(RMB’000) As at 30 June Completion Compliance Placement

2011 Date Shares(3)

Cash and bank balancesCash and bank balances 4,525(1) 32,046 185,168

4,525(1) 32,046 185,168

Share capital(4) 32,046(2) 32,046 185,168

Total capitalisation and indebtedness 32,046(2) 32,046 185,168

Notes:

(1) The cash and bank balances are converted from US$ to RMB at the closing exchange rate of US$1:RMB6.4639 as at 30June 2011.

(2) For comparative purposes, the total shareholders’ equity and total capitalisation and indebtedness have been converted fromS$ to RMB based on the closing exchange rate of S$1:RMB5.341 as of the Latest Practicable Date.

(3) Assuming that the net proceeds from the Compliance Placement are converted from S$ to RMB at the closing exchange rateof S$1:RMB5.341 as at the Latest Practicable Date.

(4) Total shareholders’ equity as at 30 June 2011 consists of share capital and retained earnings for the period.

To the best of our Directors’ knowledge, we are not in breach of any of the terms and conditions orcovenants associated with any credit arrangements or bank loans which could materially affect ourfinancial position and results or business operations, or the investments of our Shareholders, as we donot have any banking facilities as at the Latest Practicable Date.

As at the Latest Practicable Date, our Group has no other borrowings or indebtedness in the nature ofborrowings.

Contingent liabilities

As at the Latest Practicable Date, we do not have any contingent liabilities.

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CAPITALISATION AND INDEBTEDNESS

44

Dilution is defined herein as the amount by which the Projected Compliance Placement Price to be paidby the applicants for our Compliance Placement Shares pursuant to the Compliance Placement (“NewInvestors”) exceeds our NAV per Share as at the Completion Date, immediately after the CompliancePlacement.

This represents an immediate increase in NAV per Share of 9.1 cents to our existing Shareholdersimmediately prior to the Compliance Placement and an immediate dilution in NAV per Share of 38.3cents (or approximately 76.6%) to our New Investors. The following table illustrates such dilution perShare as at the Completion Date:

Cents

Projected Compliance Placement Price 50.0

NAV per Share as at the Completion Date 2.6(1)

Increase in NAV per Share contributed by New Investors pursuant to theCompliance Placement 9.1(2)

Adjusted NAV per Share after the Compliance Placement 11.7

Dilution in NAV per Share to New Investors 38.3

Notes:

(1) Translated from RMB to S$ based on the closing exchange rate of S$1.00:RMB5.341 as at the Latest Practicable Date.

(2) Assuming that the net proceeds from the Compliance Placement are converted from S$ to RMB at the closing exchange rateof S$1.00:RMB5.341 as at the Latest Practicable Date.

For illustrative purposes, the following table summarises the total number of Shares acquired by ourDirectors and Substantial Shareholders and their Associates during the period of three years prior to thedate of this Information Memorandum, the total consideration paid by them and the effective cash costper Share to them, and to the New Investors pursuant to the Compliance Placement:

Total Effective cashconsideration cost per Share

Number of (Approximate) (Approximate) Shares acquired (S$’000) (cents)

AVIC International Kairong(1) 220,000,000 6,000 2.6

SETGL Creditors pursuant to the Scheme(2) 10,640,000 N.A. 2.6

SETGL Shareholders pursuant to the Scheme(2) 1,360,000 N.A. 2.6

New Shareholders pursuant to the 65,000,000 32,500 50.0Compliance Placement

Notes:

(1) The effective cash cost per Share for AVIC International Kairong is computed based on our Company’s NTA as at theCompletion Date.

(2) The effective cash cost per Share paid by the SETGL Creditors and the SETGL Shareholders pursuant to the Scheme iscomputed based on the capital injection of S$6 million by AVIC International Kairong and 232,000,000 Shares, being thenumber of Shares in the capital of our Company subscribed by AVIC International Kairong, of which 12,000,000 Shares werethen transferred to the SETGL Creditors and the SETGL Shareholders pursuant to the terms of the ImplementationAgreement.

Save as disclosed above, no Director, Substantial Shareholder or their Associate has acquired anyShares during the period of three years prior to the date of this Information Memorandum.

DILUTION

SELECTED PRO FORMA FINANCIAL INFORMATION

45

The following information should be read in conjunction with the full text of this Information Memorandum,including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations”section and the “Independent Auditors’ Report and Unaudited Pro Forma Financial Information for theYear Ended 31 December 2008, 2009 and 2010” as set out in Appendix A of this InformationMemorandum.

Unaudited Pro Forma Statements of Comprehensive Income of our Group

RMB’000 FY2008 FY2009 FY2010

Revenue 42,367 24,566 76,495


Employee benefits expense (2,346) (2,866) (4,262)

Travelling and entertainment expenses (1,352) (2,219) (2,553)

Office rental and office expenses (1,050) (1,403) (1,830)

Other operating expenses (1,673) (1,579) (1,634)


Income tax expense (12,020) (6,376) (18,788)

Profit for the year, representing total comprehensive income for the year(1) 35,893 18,629 56,146

EPS(2) (RMB cents) 15.5 8.0 24.2

EPS (as adjusted for the Compliance Placement)(3)

(RMB cents) 12.1 6.3 18.9

Notes:

(1) Had the Service Agreements as set out in the “Directors, Executive Officers and Employees – Service Agreements” section ofthis Information Memorandum been in place since 1 January 2010, our net profit for FY2010 would have been approximatelyRMB54.7 million.


(3) For comparative purposes, the EPS (as adjusted for the Compliance Placement) has been calculated based on our net profitand the post-Compliance Placement issued share capital of 297,000,000 Shares.

Unaudited Pro Forma Statement of Financial Position of our Group

RMB’000 As at the Completion Date

ASSETS

Current assets(1)

Cash and bank balances, representing total assets 32,046

EQUITY

Capital

Share capital, representing total equity 32,046

NAV per Share(2) (RMB cents) 13.8

Notes:

(1) The share capital of S$6 million has been fully paid by our Shareholder, AVIC International Kairong, as at the LatestPracticable Date. As at the Completion Date, our Company will have current assets of S$6 million (equivalent toRMB32,046,000 based on the exchange rate as at the Latest Practicable Date), which represents the capital injected by ourShareholder, and will have no non-current assets and liabilities.



46

For the convenience of investors, the financial statements below have been translated and presented inS$ and cents. This translation is made with reference to the average exchange rate for the relevantfinancial year or financial period, as the case may be, set out in the “Exchange Rates” section of thisInformation Memorandum and has not been audited.

Unaudited Pro Forma Statements of Comprehensive Income of our Group

(translated to S$)

S$’000 FY2008 FY2009 FY2010

Revenue 8,615 5,223 15,391


Employee benefits expense (477) (609) (858)

Travelling and entertainment expenses (275) (472) (514)

Office rental and office expenses (214) (298) (368)

Other operating expenses (340) (336) (329)


Income tax expense (2,444) (1,356) (3,780)

Profit for the year, representing total comprehensive income for the year(1) 7,298 3,961 11,296

EPS(2) (cents) 3.1 1.7 4.9

EPS (as adjusted for the Compliance Placement)(3) (cents) 2.5 1.3 3.8

Notes:

(1) Had the Service Agreements as set out in the “Directors, Executive Officers and Employees – Service Agreements” sectionof this Information Memorandum been in place since 1 January 2010, our net profit for FY2010 would have beenapproximately S$11.0 million.


(3) For comparative purposes, the EPS (as adjusted for the Compliance Placement) has been calculated based on our net profitand the post-Compliance Placement issued share capital of 297,000,000 Shares.


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For the convenience of investors, the financial statement below has been translated and is presented inS$ and cents. This translation is made with reference to the closing exchange rates for the LatestPracticable Date set out in the “Exchange Rates” section of this Information Memorandum and has notbeen audited.

Unaudited Pro Forma Statement of Financial Position of our Group(translated to S$)

S$’000 As at the Completion Date

ASSETS

Current assets(1)

Cash and bank balances, representing total assets 6,000

EQUITY

Capital

Share capital, representing total equity 6,000

NAV per Share(2) (cents) 2.6

Notes:

(1) The share capital of S$6 million has been fully paid by our Shareholder, AVIC International Kairong, as at the LatestPracticable Date. As at the Completion Date, the Company will have current assets of S$6 million (equivalent toRMB32,046,000 based on the exchange rate as at the Latest Practicable Date), which represents the capital injected by ourShareholder, and will have no non-current assets and liabilities.



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BASIS OF PRESENTATION AND PREPARATION

AVIC Shipbuilding Management Business was a division of AVIC International Beijing during the PeriodUnder Review and maintained its own divisional ledgers. Revenue for AVIC Shipbuilding ManagementBusiness is distinctively identifiable and costs are mainly direct costs attributable to its personnel andbusiness activities. As such, the unaudited pro forma statements of comprehensive income of our Groupfor the Period Under Review are prepared from the divisional general ledgers of AVIC ShipbuildingManagement Business, which was a division of AVIC International Beijing during the Period UnderReview.

The financial information presented in the unaudited pro forma statements of comprehensive income ofour Group represents the income and expenses of AVIC Shipbuilding Management Business for thePeriod Under Review and has been prepared by the management of our Group in accordance withSingapore Financial Reporting Standards and in a manner consistent with both the format of the financialstatements and accounting policies adopted by our Group.

The unaudited pro forma statements of comprehensive income of our Group for the Period Under Reviewhave not been audited or reviewed. An agreed-upon procedure was performed with respect to theunaudited pro forma statements of comprehensive income of our Group, in accordance with SingaporeStandard on Related Services 4400, Engagements to Perform Agreed-Upon Procedures RegardingFinancial Information.

The financial information has been prepared for illustrative purposes only and has been prepared basedon certain assumptions and after making certain adjustments to show:

(i) what the unaudited pro forma results of our Group for the Period Under Review would have been ifour Group has been in place since 1 January 2008; and

(ii) the unaudited pro forma statement of financial position of our Group as at the Completion Date.

The unaudited pro forma statements of financial position of our Group as at the end of FY2008, FY2009and FY2010 and the unaudited pro forma statements of cash flows for the Period Under Review are notprepared as AVIC Shipbuilding Management Business does not maintain a divisional bank account orhave divisional assets or liabilities. Accordingly, the preparation of the unaudited pro forma statements offinancial position as at the end of FY2008, FY2009 and FY2010, and unaudited pro forma statements ofcash flows of our Group for the Period Under Review will not be meaningful.

OVERVIEW

Revenue

We are principally involved in the provision of M&C Services. In FY2010, we began to provide marketingand consultancy services for Taizhou CATIC to help promote their corporate profile in overseas markets,seek out shipowners and secure shipbuilding contracts, including negotiating on behalf of shipyards withshipowners on the terms and other details of the shipbuilding contract, amongst others. We work withseveral ship-design institutes and have an extensive network with local shipyards in the PRC toundertake the building of a variety of ships such as bulk carriers, tankers, MPP Ships and LPG ships.

Our revenue comprises (i) service fee income relating to shipbuilding; and (ii) management service feeincome as described below.

Our service fee income mainly derives from the services that we provide in relation to shipbuildingcontracts. Typically, we enter into a tripartite shipbuilding contract with the shipyard and the shipownerwhere we and the shipyard are the co-sellers, while the shipowner is the buyer. In connection with theshipbuilding contract, we enter into a separate agreement with the shipyard to define, inter alia, the scopeof each other’s responsibilities, services to be provided by us and service fees payable to us in respect of

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

49

such services under the shipbuilding contract. Generally, the shipyard is responsible for the constructionof the vessels, while our Group is in charge of the non-construction aspects of the shipbuilding project,such as arranging for marine finance, handling export procedural matters and overseeing the utilisation ofthe progress payment by the shipowner. Our service fee income is usually determined based on apercentage of the value of the contract, less sales taxes and surcharges of approximately 5.5% of ourservice fee income.

As a common market practice, the shipowner makes progress payments in accordance with the followingmilestones: (1) signing of shipbuilding contract; (2) steel cutting; (3) keel laying; (4) launching; and (5)delivery of vessel. The percentage for each of the milestones varies from case to case depending onmutual agreement and market conditions. The shipowner makes payment to us, being one of the co-sellers, and we will subsequently disburse the same to the shipyard, after deducting the fee payable tous.

In FY2010, we began to provide marketing and consultancy services to Taizhou CATIC whereby a fixedmanagement service fee is charged for the engagement of our marketing and consultancy services for2010 and on top of the fixed fee, we charge a service fee based on a percentage of the value of theshipbuilding contract or the banking facilities that we have assisted Taizhou CATIC in obtaining, in theevent that our marketing efforts or services come to fruition.

We begin to recognise our service fee income relating to shipbuilding upon commencement of steelcutting based on the stage-of-completion method, while we recognise the management service fee on anaccrual basis when services are rendered.

The types of vessels that we had focused on were initially bulk carriers, tankers, MPP Ships andcontainerships. Since 2008, we have expanded to engineering ships, such as dredgers, tug boats andoffshore vessels. To the best of our Directors’ knowledge, the vessels that we supply usually operateinternationally, such as from South America to Europe or from Africa or Asia to the Middle East, giventhat our customers are international shipowners.

We have delivered the following vessels during the Period Under Review:

No. of vessels FY2008 FY2009 FY2010

Bulk carrier 3 4 1Tanker – 2 –Oil tanker 1 – –Bunkering oil tanker – 1 1

Total 4 7 2

These vessels comprise: (a) three 53,100 DWT bulk carriers and one 73,000 DWT oil tanker in FY2008;(b) one 92,500 DWT bulk carrier, three 53,100 DWT bulk carriers, two 114,000 DWT tankers and one6,500 DWT bunkering oil tanker in FY2009; and (c) one 92,500 DWT bulk carrier and one 6,500 DWTbunkering oil tanker in FY2010.

Although we delivered seven vessels in FY2009 as compared to four in FY2008 and two in FY2010, ourrevenue decreased from RMB42.4 million in FY2008 to RMB25.0 million in FY2009 and increased toRMB76.5 million in FY2010 mainly because we recognised revenue progressively with reference to thestage-of-completion of the vessels. Most of the revenue for building the seven vessels that weredelivered in FY2009 had been recognised in FY2008; in addition, only three vessels commenced steelcutting in FY2009 as compared to eight in FY2008. Other key factors attributable to the higher revenue inFY2008 and FY2010 as compared to FY2009, despite the lower number of vessels delivered, include (i)a service fee income of RMB7.8 million and RMB3.5 million for the procurement of port machinery for ourcustomers in FY2008 and FY2010 respectively; (ii) a one-off service fee of RMB25.5 million in FY2010;


50

and (iii) service agreement with Taizhou CATIC with a total fee income of RMB25.5 million (after salestaxes and surcharges of approximately 5.5%). Accordingly, our revenue has increased from RMB42.4million for FY2008 to RMB76.5 million for FY2010 and our profit after tax increased from RMB35.9 millionto RMB56.1 million for the same period. Please refer to the “Management’s Discussion and Analysis ofFinancial Condition and Results of Operations – Review of Past Performance – FY2009 vs FY2008” and“Management’s Discussion and Analysis of Financial Condition and Results of Operations – Review ofPast Performance – FY2010 vs FY2009” sections of this Information Memorandum for more details.

Our customers include major shipowners based in Europe and the Middle East. Please refer to the“History and Business – Major Customers” section of this Information Memorandum for more details.

Major factors affecting our revenue

The key factors which affect our business and revenue are as follows:

� Worldwide demand for and supply of commercial vessels;� Value of contracts;� Types of vessels;� Competition;� Fluctuations of the US$ against the RMB; and� Monetary policies, which will have an impact on the availability of credit for marine finance.

Please refer to the “History and Business – Competition”, “History and Business – Competitive Strengths”and “Risk Factors” sections of this Information Memorandum for more details as to the factors and riskswhich have or may have an impact on our business operations and financial performance.

Other operating income

Our other operating income comprises interest income on cash and cash equivalents. Our interestincome is mainly derived from the cash advances and progress payments that we receive from theshipowners and deposit in banks. As such, our interest income generally changes along with the numberof new projects and/or number of vessels under construction as well as changes in interest rates.

Employee benefits expense

Our employee benefits expense comprises mainly salaries, bonuses, insurance premiums, pension fundsand housing subsidies for our employees. As such, our employee benefits expense is mainly affected bythe number of employees, salary increment and amount of bonuses.

Travelling and entertainment expenses

Travelling and entertainment expenses refer to such expenses incurred in the course of carrying out ourbusiness activities. The travelling and entertainment expenses increased from RMB1.4 million in FY2008to RMB2.6 million in FY2010, which were generally in line with the increase in our business volume.

Office rental and office expenses

Our office rental and office expenses increased from approximately RMB1.1 million in FY2008 to RMB1.8million in FY2010, which were generally in line with the increase in the number of our employees andbusiness activities.

Other operating expenses

Our other operating expenses mainly comprise advertising, promotion and exhibition costs, import andexport related expenses.

Income tax expenses

Our income tax expenses are calculated using the PRC tax rates on the estimated assessable profit forthe years. The tax rate used for each of the years during the Period Under Review is 25.0%.


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REVIEW OF PAST PERFORMANCE

Breakdown of past performance by business activities

Set out below is the breakdown of our revenue based on the nature of our services:

Revenue(RMB’000) FY2008 % FY2009 % FY2010 %

Service fee income relating to shipbuilding 42,367 100.0 24,566 100.0 68,557 89.6

Management service fee income – – – – 7,938 10.4

Total 42,367 100.0 24,566 100.0 76,495 100.0

Breakdown of past performance by geographical regions

Our geographical segmentation of revenue is based on our customers’ billing addresses. The breakdownof our revenue by geographical regions for the Period Under Review is set out below:

Revenue(RMB’000) FY2008 % FY2009 % FY2010 %

Middle East 29,970 70.7 12,496 50.9 38,499 50.3

Europe 12,397 29.3 12,070 49.1 12,481 16.3

Asia (PRC) – – – – 25,515 33.4

Total 42,367 100.0 24,566 100.0 76,495 100.0

FY2009 vs FY2008

Revenue

Our revenue decreased by approximately RMB17.8 million or 42.0% from RMB42.4 million in FY2008 toRMB24.6 million in FY2009. This decrease was mainly due to the slowdown in shipbuilding activities andship delivery during FY2009 as a result of the global financial crisis that began in the second half ofFY2008. The slowdown led to a significant increase in the “idle” fleet and excess shipping capacityaround the world. In addition, we derived service fee income of RMB7.8 million from procurement of portmachinery for a Middle Eastern customer in FY2008, which did not recur in FY2009.

Against the backdrop of the global financial crisis, we commenced steel cutting for three vessels inFY2009 as compared to eight in FY2008. Nevertheless, we managed to deliver four bulk carriers, twotankers and one oil tanker that we secured prior to the global financial crisis.

Revenue from the Middle East in FY2008 and FY2009 was mainly in relation to the construction of two6,500 DWT bunkering oil tankers and six 53,100 DWT bulk carriers that began in FY2008 for IRISLMarine Services and IRISL respectively. Revenue recognised was in accordance with the stage ofcompletion in the respective year. Revenue from Europe decreased slightly by RMB327,000 or 2.6%from RMB12.4 million in FY2008 to RMB12.1 million in FY2009. We derived revenue of RMB7.5 millionand RMB3.9 million in FY2008 and FY2009 respectively from the construction of two 114,000 DWTtankers for MT “King Charles” Tankschiffabrts GmbH & Co. KG that began in FY2008. We also recordedrevenue of RMB1.2 million from delivery of a 73,000 DWT oil tanker to D’Amato Di Navigazione inFY2008 and revenue of RMB3.6 million and RMB4.1 million in FY2008 and FY2009 respectively from theconstruction of two 92,500 DWT bulk carriers for Gestioni Armatoriali S.P.A., which began in FY2008.One of them was delivered in FY2009, while the construction for the other had progressed to launchingby the end of FY2009. We also commenced steel cutting for two 92,500 DWT bulk carriers ordered by aGreek shipowner, W-Marine Inc., which contributed approximately RMB4.0 million to our revenue inFY2009.


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Our other operating income decreased by approximately RMB3.5 million or 29.2% from RMB12.0 millionin FY2008 to RMB8.5 million in FY2009, as a result of lower interest income received on cash and cashequivalents, in line with lower revenue recorded. The average interest rate of 1.35% per annum remainedstable in FY2008 and FY2009.


Our employee benefits expense increased by approximately RMB520,000 or 22.2% from RMB2.3 millionin FY2008 to RMB2.9 million in FY2009 along with additional workforce and salary increment. Despitethe global economic slowdown, our staff headcount increased from 19 in FY2008 to 23 in FY2009 due torecruitment of additional sales and marketing personnel in FY2009 to ensure that we have sufficientexperienced workforce to continue with our marketing activities.


Our travelling and entertainment expenses increased by approximately RMB867,000 or 64.1% fromRMB1.4 million in FY2008 to RMB2.2 million in FY2009. The increase of the expenses is mainly due toan increase of approximately RMB840,000 in travelling expenses in connection with exhibition andoverseas marketing activities.


Our office rental and office expenses increased by approximately RMB353,000 or 33.6% from RMB1.1million in FY2008 to RMB1.4 million in FY2009. This is mainly due to an increase in office expenses aswe upgraded our office management system in FY2009.


Our other operating expenses decreased marginally by approximately RMB94,000 or 5.6% from RMB1.7million in FY2008 to RMB1.6 million in FY2009 mainly due to our participation in two biennial trade fairsin FY2008.

Profit before income tax

Our profit before income tax decreased by approximately RMB22.9 million or 47.8% from RMB47.9million in FY2008 to RMB25.0 million in FY2009 due to significant decreases in our revenue and otheroperating income, coupled with increases in employee benefits expense, travelling and entertainmentexpenses, and office rental and office expenses.

Income tax expense

Our income tax expense decreased by approximately RMB5.6 million or 46.7% from RMB12.0 million inFY2008 to RMB6.4 million in 2009, in line with the decline in our profit before income tax.

Net profit

Our net profit decreased by approximately RMB17.3 million or 48.2% from RMB35.9 million in 2008 toRMB18.6 million in 2009 in line with the decline in our profit before income tax.

FY2010 vs FY2009

Revenue

Our revenue more than tripled and increased by approximately RMB51.9 million or 211.0% fromRMB24.6 million for FY2009 to RMB76.5 million for FY2010 due to an increase in service fee incomerelating to shipbuilding of approximately RMB44.0 million in FY2010 and the provision of marketing,management and financial services to Taizhou CATIC, which contributed to management service feeincome of approximately RMB7.9 million for the same period. The increase in service fee income relatingto shipbuilding was mainly due to (1) the commencement of steel cutting for nine vessels in FY2010,comprising two 118,000 DWT bulk carriers, two 92,500 DWT bulk carriers and five 28,000 DWT multi-purpose carriers, as compared to three in FY2009, which our Directors believe was largely driven by thegradual recovery of the world economy from the global financial crisis; (2) a service fee income ofRMB3.5 million from the procurement of port machinery for a Middle Eastern customer; and (3) a one-offservice fee of RMB14.9 million from IRISL for our project management services and the arrangement ofcertain banking facilities. In addition, we were engaged by Taizhou CATIC to provide project managementand marketing services, for which we were paid a net fixed management service fee of approximatelyRMB7.9 million. Apart from the management service fee, we generated service fee income relating toshipbuilding amounting to approximately RMB17.6 million from the services rendered to Taizhou CATIC insecuring two shipbuilding contracts and the arrangement of certain banking facilities.

The increase of approximately RMB26.0 million in revenue from the Middle East was mainly in relation tothe commencement of steel cutting for five 28,000 DWT MPP Ships. Revenue from Europe increasedmarginally by approximately RMB411,000 or 3.3% from RMB12.1 million in FY2009 to RMB12.5 million inFY2010. We derived revenue of approximately RMB4.5 million from the commencement of steel cuttingfor two 118,000 DWT bulk carriers ordered by a German shipowner, Hartmann Schiffahrts GmbH & Co.KG, and one of which had progressed to keel laying by the end of FY2010, as compared to RMB3.9million from the delivery of two 114,000 DWT tankers to MT “King Charles” Tankschiffabrts GmbH & Co.KG in FY2009. We commenced steel cutting for two of the three 92,500 DWT bulk carriers ordered by aDutch shipowner, Seaarland Shipping Management B.V. in FY2010, which contributed approximatelyRMB4.0 million to our revenue. The above was offset by a decrease in revenue of approximately RMB4.1million from Italian and Greek shipowners in FY2010 compared to FY2009 as there was no new projectssecured from them in FY2010. We registered revenue of approximately RMB25.5 million from the PRCdue to the marketing and other services provided to Taizhou CATIC as stated above.


Our other operating income increased by approximately RMB212,000 or 2.5% from RMB8.5 million inFY2009 to RMB8.7 million in FY2010. Following the global financial crisis, shipowners generallyrequested to make lesser and fewer upfront and progress payments, and at the same time shipyardssought faster payments from us. As a result, our interest income received on cash and cash equivalentsin banks only increased marginally despite the significant increase in our revenue.


Our employee benefits expense increased by approximately RMB1.4 million or 48.3% from RMB2.9million in FY2009 to RMB4.3 million in FY2010 mainly due to the recruitment of additional sales andmarketing personnel and the increase in salary and bonus payouts as a result of strong growth in profit.We had a total of 29 employees as at the end of FY2010 as compared to 23 as at the end of FY2009.


Our travelling and entertainment expenses increased slightly by approximately RMB334,000 or 15.1%from RMB2.2 million in FY2009 to RMB2.6 million in FY2010 in line with the increase of sales andmarketing personnel and additional business trips in securing new orders and managing existing projects.


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Our office rental and office expenses increased by approximately RMB427,000 or 30.4% from RMB1.4million in FY2009 to RMB1.8 million in FY2010 mainly due to an increase in office rental of approximatelyRMB1.0 million as we moved to our current office premises in the second quarter of 2010, which resultedin an increase in monthly rental from RMB46,482 to RMB192,871. This was offset by a decrease inoffice expenses of approximately RMB531,000 as we upgraded our office management system inFY2009, which incurred a one-off expense in FY2009.


Our other operating expenses remained stable at approximately RMB1.6 million in FY2010.

Profit before income tax

Our profit before income tax increased by approximately RMB49.9 million or 199.6% from RMB25.0million in FY2009 to RMB74.9 million in FY2010 mainly due to the strong increase in revenue offset bymoderate increases in our operating expenses.

Income tax expense

Our income tax expense increased by approximately RMB12.4 million or 193.8% from RMB6.4 million inFY2009 to RMB18.8 million in FY2010 in line with the increase in our profit before income tax.

Net profit

Our net profit increased by approximately RMB37.5 million or 201.6% from RMB18.6 million FY2009 toRMB56.1 million in FY2010 in line with the increase in profit before income tax.

MATERIAL CAPITAL EXPENDITURES AND DIVESTMENTS

Capital Expenditure

We did not have major capital expenditures and capital divestments for the Period Under Review andfrom 1 January 2011 up to the Latest Practicable Date.

Capital Commitment

As at the Latest Practicable Date, we do not have any capital commitment. However, we plan topurchase the following items following the Listing:

Description (RMB’000)

(a) Office furniture and equipment 2,200(b) One motor vehicle 2,400

Total 4,600

Operating Lease Commitment

As at the Latest Practicable Date, we have the following operating lease commitment:

Description (RMB’000)

(a) Office rental(1) 14,855

Total 14,855

Note:

(1) This relates to two new office rental agreements that we have entered into in respect of our offices in Beijing and Singaporerespectively. Please refer to the “History and Business – Properties and Fixed Assets” section of this InformationMemorandum for more details.


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Save as disclosed above, we do not have any other off-balance sheet commitments as at the LatestPracticable Date.

WORKING CAPITAL

Our Directors are of the opinion that, after taking into account our cash and bank balances position andcash from operating activities, we have adequate working capital as at the date of this InformationMemorandum for our present requirements.

COMPLIANCE WITH RULE 210(4)(a) OF THE LISTING MANUAL

Rule 210(4)(a) of the Listing Manual provides that a group applying for listing on the SGX-ST must be ina healthy financial position, having regard to whether the group has a positive cash flow from operatingactivities. The Financial Adviser notes that as AVIC Shipbuilding Management Business is a businessdivision of AVIC International Beijing providing M&C Services rather than a legal entity during the PeriodUnder Review, our Company does not have its own statutory accounts for the Period Under Review.

For the purposes of complying with Rule 210(4)(a) of the Listing Manual, our Company has prepared:

(i) Unaudited Pro Forma Statements of Comprehensive Income of the Group for each of the financialyears during the Period Under Review;

(ii) Unaudited Pro Forma Statement of Financial Position of the Group as at the Completion Date; and

(iii) Mock-Up Statement of Cash Flows for the AVIC Shipbuilding Management Business for FY2010.

Having reviewed the above documents, and taking into consideration the matters outlined below includingthe Management Agreement entered into between our Company and AVIC International Beijing, theFinancial Adviser is of the opinion that as of the date of this Information Memorandum, our Group is ableto operate as a stand-alone business which does not rely on the financial support of AVIC InternationalBeijing and complies with Rule 210(4)(a) of the Listing Manual:

(a) AVIC Shipbuilding Management Business had been profitable during the Period Under Review;

(b) our Group has no borrowings as at the Latest Practicable Date;

(c) the Independent Auditors’ Report and Unaudited Pro Forma Financial Information for the YearEnded 31 December 2008, 2009 and 2010;

(d) the agreed-upon procedures carried out by and the corresponding Report of Factual Findingsissued by Deloitte & Touche LLP on the Mock-Up Statement of Cash Flows for the AVICShipbuilding Management Business for FY2010 in accordance with Singapore Standard onRelated Services 4400, Engagements to Perform Agreed-Upon Procedures Regarding FinancialInformation;

(e) our Directors’ confirmation that our Company has no significant accounts receivables or accountspayables (please refer to the “History and Business – Credit Management” section of thisInformation Memorandum for reasons); and

(f) our Directors’ confirmation that, after taking into account our Group’s cash and bank balancesposition and cash from operating activities, our Group has adequate working capital as at the dateof this Information Memorandum for our present requirements.


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FOREIGN EXCHANGE MANAGEMENT

Foreign Exchange Exposure

Our financial statements are prepared in RMB, which is our functional currency. Our foreign exchangeexposure arises from our sales that are denominated in US$, whereas our operating expenses aremainly denominated in RMB. In the event that the US$ depreciates against RMB, other things beingequal, our sales after converting to RMB will decline and our profitability will be adversely affected.Further, any restrictions over the conversion or timing of conversion of foreign currencies into RMB mayalso expose us to fluctuations in the exchange rates between US$ and RMB. Please refer to the “RiskFactors” section of this Information Memorandum for more details on our foreign exchange risk.

The percentages of our sales denominated in US$ and RMB for the Period Under Review are as follows:

Sales (%)FY2008 FY2009 FY2010

US$ 100.0 100.0 66.6RMB – – 33.4

100.0 100.0 100.0

Currently, we do not have a formal hedging policy with respect to our foreign exchange exposure as ourforeign exchange exposure for the Period Under Review has been insignificant. We will continue tomonitor our foreign exchange exposure in the future and will consider hedging any material foreignexchange exposure should the need arise. Should we enter into any hedging transaction in the future,such transaction shall be subject to review and approval by our Board. In addition, should we decide toestablish any formal hedging policy in the future, such policy shall be subject to review and approval byour Board prior to implementation. Our Audit Committee will review periodically the hedging policies (ifany), all types of instruments used for hedging as well as the foreign exchange policies and practices ofour Group.


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SHARE CAPITAL

Our Company was incorporated in Singapore on 11 November 2010 under the Companies Act as apublic company limited by shares under the name “AVIC International Investments Limited”. At the dateof incorporation, the issued and paid-up share capital of our Company was S$1.00 comprising one fullypaid-up ordinary share.

We only have one class of shares in the capital of our Company, being ordinary shares. The rights andprivileges of our Shares are stated in our Articles of Association. There are no founder, management ordeferred shares reserved for issuance for any purpose.

As at the date of this Information Memorandum, the issued and paid-up share capital of our Company isS$6,000,001 comprising 232,000,000 fully paid-up Shares pursuant to the issuance of 231,999,999Shares to AVIC International Kairong, of which 12,000,000 Shares will be held on trust by AVICInternational Kairong for the Scheme Administrators for distribution to the SETGL Creditors and theSETGL Shareholders as Consideration Shares, pending the approval of the Scheme of Arrangement.

Pursuant to a written resolution passed by our Shareholder on 1 July 2011, our Shareholder approved,inter alia, the following proposals:

(a) the issue of the Consideration Shares and the Compliance Placement Shares which when allotted,issued and fully paid, will rank pari passu in all respects with the existing issued Shares;

(b) the authorisation for our Directors to allot and issue Shares and/or convertible securities (wherethe maximum number of Shares to be issued upon conversion can be determined at the time ofissue of such convertible securities) from time to time (whether by way of rights, bonus orotherwise) and upon such terms and conditions and for such purposes and to such persons as ourDirectors may in their absolute discretion deem fit, provided that:

(i) the aggregate number of Shares and/or convertible securities which may be issued pursuantto such authority shall not exceed 50% of the issued shares of our Company excludingtreasury shares, of which the aggregate number of Shares and/or convertible securitieswhich may be issued other than on a pro-rata basis to the existing Shareholders of ourCompany shall not exceed 20% of the issued shares of our Company;

(ii) the percentage of issued shares being based on the post-Compliance Placement issuedshares of our Company after adjusting for new Shares arising from the conversion orexercise of any convertible securities or employee share options on issue at the time suchauthority is given and any subsequent consolidation or sub-division of shares;

(iii) unless revoked or varied by our Company in general meeting, such authority shall continuein force until the conclusion of the next annual general meeting of our Company or on thedate by which the next annual general meeting is required by law to be held, whichever isearlier; and

(c) the ratification and performance of the Management Agreement by our Company.

For further details on the Management Agreement, please refer to the “History and Business – Businessand Principal Activities” and “Interested Person Transactions” sections of this Information Memorandum.

Upon the allotment and issuance of the Compliance Placement Shares, the resultant issued and paid-upshare capital of our Company will be S$36,625,528 comprising 297,000,000 Shares.

GENERAL INFORMATION ON OUR GROUP

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Details of changes in our issued and paid-up capital since the date of our incorporation to the date of thisInformation Memorandum are set out below:

Number ofShares Issue price Resultant issued

Date issued per Share (S$) Purpose of issue share capital (S$)

11 November 2010 1 1.00 Subscriber share at 1.00incorporation

22 June 2011 231,999,999 0.0259 Increase in share capital 6,000,001.00

Details of the projected changes to our issued and paid-up capital following the date of this InformationMemorandum to the completion of the Scheme of Arrangement are set out below:

Number ofShares Issue price Resultant issued

Date issued per Share (S$) Purpose of issue share capital (S$)

Completion of the 65,000,000 0.50 Compliance Placement 36,625,528(1)

Compliance Placement

Note:

(1) Indicative figure, based on the Projected Compliance Placement Price of S$0.50 net of estimated listing expenses. TheActual Compliance Placement Price will be determined through a book-building exercise and negotiations between us andthe Placement Agent, and may not be indicative of prices that will prevail in the trading market.

SHAREHOLDERS

Our Directors, Shareholders and their respective shareholdings in our Company immediately before andafter the Compliance Placement are set out below:

Before the Compliance Placement After the Compliance PlacementDirect Interest Deemed Interest Direct Interest Deemed Interest

Number of Number of Number of Number ofShares % Shares % Shares % Shares %

DirectorsDiao Weicheng – – – – – – – –Li Jin – – – – – – – –Zhang Wanping – – – – – – – –Cheng Xuhui – – – – – – – –Wu Weidong – – – – – – – –Teng Cheong Kwee – – – – – – – –Chong Teck Sin – – – – – – – –Alice Lai Kuen Kan – – – – – – – –

Substantial Shareholders

AVIC International Kairong 220,000,000 94.8 – – 220,000,000 74.1 – –

AVIC International Beijing(1) – – 220,000,000 94.8 – – 220,000,000 74.1

AVIC International(2) – – 220,000,000 94.8 – – 220,000,000 74.1AVIC(3) – – 220,000,000 94.8 – – 220,000,000 74.1


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Before the Compliance Placement After the Compliance PlacementDirect Interest Deemed Interest Direct Interest Deemed Interest

Number of Number of Number of Number ofShares % Shares % Shares % Shares %

OthersSETGL Creditors 10,640,000 4.6 – – 10,640,000 3.6 – –pursuant to theScheme(4)(5)

SETGL Shareholders pursuant to the Scheme(4)(5) 1,360,000 0.6 – – 1,360,000 0.4 – –

New public Shareholders pursuant to the Compliance Placement(5) – – – – 65,000,000 21.9 – –

Total 232,000,000 100.0 – – 297,000,000 100.0 – –

Notes:

(1) AVIC International Beijing is deemed interested in the Shares held by AVIC International Kairong, its wholly-ownedsubsidiary, by virtue of Section 4 of the Securities and Futures Act.

(2) AVIC International is deemed interested in the Shares held by AVIC International Kairong through its shareholding in AVICInternational Beijing by virtue of Section 4 of the Securities and Futures Act.

(3) AVIC is deemed interested in the Shares held by AVIC International Kairong through its shareholding in AVIC International byvirtue of Section 4 of the Securities and Futures Act.

(4) The number of Shares issued to the SETGL Creditors and the SETGL Shareholders pursuant to the Scheme of Arrangementis based on the value of the Consideration Shares of S$6 million divided by the Projected Compliance Placement Price ofS$0.50.

(5) Following the completion of the Compliance Placement, the public Shareholders, comprising the new Shareholders pursuantto the Scheme of Arrangement and the new Shareholders pursuant to the Compliance Placement, will hold in aggregate77,000,000 Shares, which will amount to 25.9% of the enlarged issued share capital of our Company.

Save as disclosed above, there are no relationships among our Substantial Shareholders, Directors andExecutive Officers.

The Shares held by our Directors and Substantial Shareholders do not have different voting rights fromthe other Shareholders of our Company.

As at the Latest Practicable Date, to the best of our Directors’ knowledge, there is no knownarrangement, the operation of which may, at a subsequent date, result in a change in the control of ourCompany.

There has not been any public take-over offer by a third party in respect of our Shares or by ourCompany in respect of shares of another corporation or units of a business trust which has occurredbetween 1 January 2008 and the Latest Practicable Date.

There are no Shares that are held by or on behalf of our Company or by our subsidiaries.

As at the Latest Practicable Date, to the best of our Directors’ knowledge, no options over our Shareshave been granted to any person.


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AVIC holds 62.5% of the registered capital of AVIC International, which in turn holds 100% of theregistered capital of AVIC International Beijing. AVIC International Beijing is the sole shareholder of AVICInternational Kairong, which is the sole shareholder of our Company as at the date of this InformationMemorandum. Saved as disclosed, our Company is not directly or indirectly owned or controlled byanother corporation, any government or other natural or legal person whether severally or jointly.

Significant Changes in the Percentage of Ownership

There were no significant changes in the percentage of ownership of our Shares since its incorporationand up to the Latest Practicable Date.

MORATORIUM

To demonstrate its commitment to our Group, our Substantial Shareholder, AVIC International Kairong,which (assuming that the Compliance Placement is undertaken with 65,000,000 Compliance PlacementShares at the Projected Compliance Placement Price of S$0.50 per Compliance Placement Share) willdirectly own 220,000,000 Shares, representing approximately 74.1% of the issued share capital of ourCompany immediately after the Compliance Placement, has undertaken not to sell, realise, transfer orotherwise dispose of any part of its interest in the issued share capital of our Company immediately afterthe Compliance Placement for a period of 24 months from the First Trading Date.

The sole shareholder of AVIC International Kairong, being AVIC International Beijing, has alsoundertaken that it shall not sell, realise, transfer or otherwise dispose of any part of its interest in theissued share capital of AVIC International Kairong for a period of 24 months from the First Trading Date.

AVIC International has undertaken that, save for the transfer of the equity interest in AVIC InternationalBeijing to CATIC Shenzhen pursuant to the Proposed Internal Restructuring, which is expected to becompleted by 31 December 2011, it shall not sell, realise, transfer or otherwise dispose of any part of itsinterest in the equity interest of AVIC International Beijing for a period of six months from the First TradingDate. The transfer by AVIC International of the equity interest in AVIC International Beijing to CATICShenzhen is subject to the execution and delivery by CATIC Shenzhen of a similar undertaking to thereasonable satisfaction of the Financial Adviser in relation to the undertaking by AVIC International, andwhich is to remain in effect for the remainder of the relevant lock-up period.

In this regard, CATIC Shenzhen has given an undertaking that, upon completion of the Proposed InternalRestructuring, it shall not sell, realise, transfer or otherwise dispose of any part of its interest in the equityinterest of AVIC International Beijing from the completion of the Proposed Internal Restructuring till theend of the six-month period from the First Trading Date. In addition, CATIC Shenzhen has undertakenthat it will, directly or indirectly, hold a majority of the equity interest in AVIC International Beijing from thecompletion of the Proposed Internal Restructuring till the end of the 24-month period from the FirstTrading Date.

AVIC International has also given an undertaking that it will, directly or indirectly, hold a majority of theequity interest in AVIC International Beijing for a period of 24 months from the First Trading Date.


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Prior to the Compliance Placement, we undertook the following Restructuring Exercise in preparation forour listing on the SGX-ST, resulting in our Company becoming the investment-holding company of ourGroup:

(a) Incorporation of our Company

Our Company was incorporated under the Companies Act on 11 November 2010 as a publiclimited company. At incorporation, the share capital of our Company comprised one Share, whichwas held by AVIC International Kairong.

(b) Incorporation of Kaixin Industrial

Kaixin Industrial was incorporated under the Companies Act on 14 January 2011 as a privatelimited company. At incorporation, the share capital of Kaixin Industrial comprised one share,which was held by our Company.

(c) Incorporation of Kaixin (Beijing)

Kaixin (Beijing) was incorporated in the PRC on 19 April 2011 as a WFOE. At incorporation, Kaixin(Beijing) had a registered capital of US$650,000, which was entirely held by Kaixin Industrial.

(d) Transfer of personnel of AVIC Shipbuilding Management Business and entry intoManagement Agreement

As part of the Restructuring Exercise, the personnel of AVIC Shipbuilding Management Businesswas transferred to our Group on 1 January 2011 and the shipbuilding business was henceforthundertaken by our Group.

Separately, in order to enable AVIC International Beijing to manage and complete the OutstandingProjects, AVIC International Beijing and our Company had on 29 June 2011 entered into theManagement Agreement, pursuant to which AVIC International Beijing engaged our Company toprovide M&C Services for the Outstanding Projects with effect from 1 January 2011 until the 19vessels are delivered. The Management Agreement is a transitional arrangement which aims toensure a smooth completion of the Outstanding Projects following the Restructuring Exercise.Going forward, all new shipbuilding contracts secured after the Commencement Date will beentered into directly by our Group. Please refer to the “History and Business – Business andPrincipal Activities” and “Interested Person Transactions” sections of this Information Memorandumfor further information on the Management Agreement.

Following the completion of the Restructuring Exercise, the structure of our Group is as set out under the“Group Structure” section of this Information Memorandum.

RESTRUCTURING EXERCISE

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Our Group structure as at the date of this Information Memorandum is as follows:

SUBSIDIARIES

The details of our subsidiaries as at the date of this Information Memorandum are as follows:

Principal place Issued and Equityof business / paid-up / interest

Name of Date and place registered Principal registered held by subsidiary of incorporation address activities capital our Group

Kaixin 14 January 10 Collyer Quay, Ship-trading and S$1.00 100%Industrial Pte. Ltd. 2011, #27-00 Ocean shipbuilding

Singapore Financial Centre, businessesSingapore 049315

AVIC Kaixin 19 April 2011, A-401, Building Ship-trading US$650,000 100% (Beijing) Ship PRC No. 3, No.16 agency and Industry Hongdabei Road, import andCo., Ltd(1) Beijing Economic- export business

Technological Development Area, Beijing, PRC

Note:

(1) Under Kaixin (Beijing)’s business licence, it has a term of operation of 30 years ending on 18 April 2041. Upon the expiry ofthe business licence, the business licence of Kaixin (Beijing) may be extended upon application to the relevant authorities.

None of our subsidiaries are listed on any stock exchange.

AVIC International Investments Limited

Kaixin Industrial Pte. Ltd.

AVIC Kaixin (Beijing) Ship Industry Co., Ltd.

100%

100%

GROUP STRUCTURE

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The following write-up is based on the observations and industry knowledge of our Executive Directors,drawing, where relevant, on sources believed by them to be accurate and relevant.

The shipbuilding industry requires substantial capital outlay and technical expertise as it is a heavyengineering business, and is influenced by the cyclical nature of the wider shipping markets. Shipbuildingprices are governed by factors such as the supply and demand of shipbuilding berths, the cost of buildingships, and exchange rates. The international shipbuilding business has experienced major shifts in recentyears, being the shift from England to Japan in the 1950s, from Japan to South Korea in the 1990s andfrom South Korea to the PRC in the beginning of the 21st century. This includes a shift in the focus fromthe production of smaller to larger vessels.

Source: China Shipbuilding Industry Association 5

Because of the continued growth in carriage of goods by sea, there was an increasing demand for newships and this was followed by a subsequent build-up of shipyard capacity in the early 1970s.Shipbuilding output peaked in the mid-1970s, but the oil crisis of 1973 had already led to stagnation inthe growth of seaborne trade, particularly in the oil tanker markets. The sudden drop in demand for newvessels created vast shipyard overcapacity and this led to a long and sustained shipbuilding recession.This was further worsened by South Korea’s entry into the market. The 1980s saw many shipyardsclosing and a depressed shipbuilding market. This reached a low in 1988 when output level was similar tothat in the early 1960s.

OVERVIEW OF THE SHIPBUILDING INDUSTRY

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5 The China Shipbuilding Industry Association has not consented for the purposes of Section 249 of the Securities and FuturesAct to the inclusion of the information referred to above and is thereby not liable for such information under Sections 253 and254 of the Securities and Futures Act. Our Company has included the above information in its proper form and context andhas not verified the accuracy of such information.

By the 1990s, the market had recovered and the replacement of vessels built in the 1970s, along withrenewed growth in global seaborne trade, saw an increase in shipbuilding output. However, the numberand price of new contracts have fallen significantly since mid-2008 because of the upheaval in the world’seconomy. During 2009, delays and cancellations increased and the delivery of the order book becameincreasingly uncertain. Delays and cancellations created financial difficulties for shipyards, especially ifthe owners do not meet their payment obligations on time or are unable to take delivery of vessels.

Demand Factors

The main drivers behind the long-term demand for new ships include growth in global carriage of goodsby sea and the replacement of old ships that are then sold for scrap. However, in the short and medium-term, freight rates are very important in determining this demand. The supply of and demand for shippingcapacity influences freight rates and thus freight rates are volatile. Although shipping freight rates havebeen cyclical, these cycles have varied in length.

The replacement of old ships is directly related to the age of the fleet. Market conditions also play a partin determining the age at which ships are replaced. The growth in global seaborne trade is closely linkedto fluctuations in the world economy and this can vary greatly from one year to the next. This explainswhy the market for shipbuilding and the level of new orders can be so volatile; prices paid for ships canvary greatly from one year to another.

Growth in Seaborne Trade

The four largest segments in the shipping industry are tankers, bulk carriers, containerships and gastankers. Tankers carry cargos such as crude oil and petroleum products while bulk carriers carry iron ore,coal and grain, among others. A containership, as its name suggests, carries only containers. Likewise,gas tankers carry mostly LPG and LNG. Broadly speaking, demand for the commodities traded by sea isprincipally affected by the overall economic and political conditions of the world as well as other factorssuch as changes in transportation patterns and changes in the prices of goods. These demand cyclesgenerally move in line with the global economy, and until recently, demand for seaborne trade hadbenefited from the recent expansion in industrial production in Asia, particularly the PRC. Conversely,following the global economic crisis in 2008, seaborne trade levels fell notably.

Replacement Demand

The second factor relating to the underlying requirement for ships is the demand for replacement ships.Ships are sold for scrap when they reach the end of their lifetime or when the cost of maintaining andoperating them outweighs their earnings. The age at which ships are scrapped thus varies according tothe varying freight markets.

If freight rates are higher than normal, ships are able to operate for longer than they would under normalmarket conditions and this will increase the average scrapping age. Conversely, when freight rates arelow, ships will be scrapped earlier. In addition, regulations may require certain ships to be scrapped. Forexample, the MARPOL regulation 13G requires the gradual phase-out of single hull tankers which cameinto force in April 2005 (renamed MARPOL Annex 1, Regulation 20).

Thus, the level of scrapping is a result of the combination of the age at which ships are scrapped and theage profile of the fleet. Between 2004 and 2008, only a very small number of vessels were scrapped.However, since the onset of the global economic crisis and the corresponding fall in the freight markets,scrapping has increased once again.

Geographical Distribution and Capacity

Shipbuilding is a long cycle business. Over the last century, the centre of the global shipbuilding industryhas gradually shifted. At the start of the 20th century, shipbuilding was dominated by Great Britain.Gradually, continental Europe and Scandinavia reduced Great Britain’s share to about 40.0%; Europe stillremained the centre of the shipbuilding industry. In the 1950s, Japan gained prominence and by 1969,Japan had overtaken Europe to reach a market share of around 50.0%. In the 1980s the South Koreanshipbuilding industry started to challenge the Japanese and by the 1990s, South Korea had become thelargest shipbuilding nation. This established East Asia as the dominant shipbuilding region. In recentyears, PRC shipyards have become more important and are now the second largest shipbuilding nationbehind South Korea in terms of percentage of global CGT delivered in 2009.


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Newbuilding Prices

Newbuilding prices are very sensitive to the supply of, and demand for, shipbuilding berths asshipbuilding is a very open and competitive market. As such, newbuilding prices are highly volatile, andcan change drastically over a short period of time. Prices are primarily determined by the amount ofshipbuilding berths in the market and the demand for new ships. In a market where there are few berthsbut demand is high, builders are able to increase prices. Conversely, when many berths are available andthe demand for new ships is low, prices will come down as builders face more competition to fill availablecapacity. There is therefore a delicate balance between demand and supply that determines themovements in newbuilding prices. Furthermore, newbuilding prices are influenced by many other factorssuch as the cost of raw materials, the cost of building ships, as well as by exchange rates. Thesecontribute to the volatility of the price.

The development in newbuilding prices has been dramatic in recent years. Until the third quarter of 2008,advantageous market conditions allowed the shipping industry to prosper, and this in turn helped togenerate an increase in newbuilding activity across all sectors. This was especially true of the bulk carriermarket. A combination of elevated demand, a decrease in berth space, along with the weak US$ andrising raw material costs saw the price of newbuildings increase substantially. However, after the financialcrisis in 2008, the banks were more cautious in lending money for shipbuilding activities. With global drybulk demand volumes and charter rates falling notably, especially in Europe and America, thenewbuilding market slowed dramatically and the prices underwent a severe correction.

It is important to note that newbuilding prices for different types of ships generally move in tandem withone another to a large extent. Reduced demand in one sector may reduce prices in another sector. Thisis because the newbuilding price is affected by the supply of berths to the overall market as a whole andnot just individual fleet sectors.

Shipbuilding Costs

The shipbuilding industry is highly capital intensive and huge funds and investments are required tosupport the operations and expansion of business. Shipbuilding is a complex process and the level ofefficiency and costs varies across different shipyards to a considerable extent. On one hand, shipyards indeveloping countries have low productivity and a large workforce but low wages while highly technicalshipyards with a high rate of production have high labour costs but a smaller workforce. The shipyardswith lower production typically depend on a high degree of internal production and import sophisticatedequipment from abroad. The developed shipyards, on the other hand, source for their materials,equipment and services from a range of local or regional suppliers. Costs of building materials, facilities,skilled labour, wages, labour productivity, the availability of local materials and equipment suppliers,exchange rates and, in some cases, government subsidies, will influence the competitiveness andprofitability of a shipyard.

A major problem that shipyards face is the risk of escalating costs, such as labour, building materials, andexchange rate movements. Labour costs are one of the main outlays for a shipyard and costs mayincrease as it takes on more staff to increase output or as the average hourly wage of a shipbuildingcountry increases due to improvements in the economy. Exchange rates also have a large bearing on thepotential earnings of a shipyard as a shipyard often has many foreign customers and while the buildingcosts may be in local currency, its revenue is often in a foreign currency. This is particularly true forshipyards that receive the US$ for ship sales but use their local currency to pay for their costs. Inaddition, the majority of a shipbuilding contract bill is normally paid on the delivery of the ship, which canbe more than three years after signing of the contract and by which time the exchange rate may havechanged considerably. For example, a revaluation of the RMB may lead to a change in the costs for PRCshipyards. While some shipyards do hedge positions, this can also create difficulties. Finally, materialcosts can change dramatically in a short period of time, in particular the price of steel plates.

The PRC Shipbuilding Industry

The PRC has been one of the key drivers behind the growth in global seaborne trade in recent years. Agreat deal of global seaborne trade has been driven by the strength of PRC exports. In particular, sincethe PRC’s entry to the World Trade Organisation, the export of manufactured goods has increased due tothe transfer of production facilities to the PRC from the rest of the world. Trade with developed economiesin the West has shown the most notable growth.


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However, PRC imports have also grown significantly, in particular for raw materials such as crude oil, ironore, capital goods and intermediate/semi-finished goods. Indeed, despite the economic downturn in 2008,PRC demand for imports has increased in 2009, unlike many other nations.

In terms of delivery levels, the PRC has overtaken Japan to become the second largest shipbuildingnation in 2009. The PRC shipbuilding industry grew dramatically in the mid-1990s because of a largeincrease in both capacity and output. It is the PRC government’s stated aim to become the biggestshipbuilding nation in the world. In June 2009, the State Council released a stimulus plan which outlineda number of measures to support the PRC shipbuilding industry. This included output targets of 50 millionDWT and 35.0% global market share by 2011. The PRC has achieved its previously stated aims inrelation to global market share development well ahead of schedule. However, this was significantly downon expected deliveries in this period, as owners and yards sought to reach agreements on delays. Someshipyards also faced problems in maintaining the delivery schedule.

The PRC shipbuilding industry has been well supported by domestic owners, some of whom have stakesin particular shipyards or close links with the state. This may encourage them to place their orders withinthe PRC. By the end of 2008, the total number of registered vessels in China had reached 250,000vessels with a total shipping capacity of 96,000,000 DWT.6 However, despite the strong performance in2008 and 2009, the future outlook could become more uncertain as there are fewer new contracts due tothe global economic situation and newer shipyards are finding it increasingly difficult to deliver the heavyorder book load on schedule.

On top of the number of ships delivered, the PRC shipbuilding industry’s capability in building varioustypes and sizes of ships has also evolved. In the 1980s, PRC shipyards mainly built a limited number ofsmall ship types such as small bulk carriers and cargo vessels. During the late 1990s, the PRC started tobuild larger vessels such as Suezmax tankers, Panamax bulk carriers and Ro-Ro vessels. More recently,PRC shipyards have started to build large, value-added vessels such as Capesize bulk carriers, VLCCs,Post-Panamax containerships, FPSOs and LNG carriers. The PRC’s first LNG carrier was delivered in2008 by the Hudong Zhonghua shipyard, marking a technological first for the PRC shipbuilding industry.Another LNG carrier was ordered in February 2010. Although the number of large ship types built in thePRC is now higher than in the past, South Korea still has a greater market share of larger vessel orders.

In recent years there have been numerous plans for new shipbuilding sites in the PRC and for theexpansion of existing sites. Some of the greenfield shipyards are currently owned by finance corporationswith little or no shipbuilding experience. As such, it is unlikely that all of these sites will be developed.However, some are owned and will be operated by experienced shipbuilding entities and a large numberare already marketing berths. Some have also taken orders.

The PRC enjoys several advantages such as low costs of labour, plentiful resources, good infrastructurefor development and a huge market with a fast-growing economy. The recent global financial crisis hasalso helped to eliminate smaller unqualified businesses. This will be conducive to the long-termdevelopment of the shipping market. As the Chinese economy continues to develop rapidly and the globaleconomic situation improves, demand for trade and shipping will continue to be strong.

Please refer to the “History and Business – Prospects” section of this Information Memorandum for moredetails on the prospects and trends of the shipbuilding industry applicable to our Group’s businessoperations.


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6 Li, Bob of DC Marine Supply China and Mehlsen, Anne Katherine of DI-Asia Base Business Services Ltd, The Report on TheChinese Shipbuilding Industry: Targets after 2008. DC Marine Supply China and DI-Asia Base Business Services Ltd havenot consented for the purposes of Section 249 of the Securities and Futures Act to the inclusion of the information referred toabove and is thereby not liable for such information under Sections 253 and 254 of the Securities and Futures Act. OurCompany has included the above information in its proper form and context and has not verified the accuracy of suchinformation.

HISTORY AND DEVELOPMENT OF OUR GROUP

About our Company

Our Company was incorporated on 11 November 2010 under the laws of Singapore and became theholding company of our Group pursuant to the Restructuring Exercise.

As part of the Restructuring Exercise, the personnel of AVIC Shipbuilding Management Business weretransferred to our Group from 1 January 2011 and the shipbuilding business was henceforth undertakenby our Group. As one of the business divisions of AVIC International Beijing, AVIC ShipbuildingManagement Business was principally involved in the provision of M&C Services.

AVIC International Beijing began to provide M&C Services in 1994, when a Middle Eastern shipownerordered five 21,000 DWT MPP Ships through AVIC International’s marketing network. As AVICInternational is focused on the aircraft business, the orders were undertaken by AVIC InternationalBeijing. In 1996, the shipowner and AVIC International Beijing entered into an agreement to export thefive MPP Ships via an Export Credit financing arrangement. Export Credit is a form of financing providedby PRC banks to the shipowners to finance their purchase of ships. AVIC Shipbuilding ManagementBusiness acts as an arranger by facilitating this arrangement between the bank and the shipowners. Ourassociation with the state-owned AVIC Group has given us a competitive edge in obtaining support fromthe major local financial institutions. This paved the way for the Chinese shipbuilding industry to beginexporting vessels using Export Credit financing arrangements.

With the development of China’s shipbuilding industry in the late 1990s, foreign shipowners, in particularEuropean shipowners, began to recognise the quality of China-built vessels. Against this backdrop, AVICInternational Beijing decided to set up a new division, AVIC Shipbuilding Management Business, to focuson the M&C Services in August 2000. AVIC Shipbuilding Management Business managed to securecontracts for two 27,000 DWT bulk carriers, two 35,000 DWT bulk carriers and two 51,000 DWT bulkcarriers in 2000.

As the shipping industry began to recover in 2003, AVIC Shipbuilding Management Business took theopportunity to build on its foundation and increase its marketing efforts in the industry. This proved to berewarding, as AVIC Shipbuilding Management Business secured contracts for a total of 39 vessels,consisting of bulk carriers, MPP Ships and tankers, with an aggregate value of US$1.35 billion from 2003to 2008, before the global financial crisis. At the same time, AVIC Shipbuilding Management Businessplaced great emphasis on building up its management team and recruited new employees from ShanghaiJiaotong University and Harbin Engineering University, being two of the more renowned shippingeducational institutes in the PRC, to join its management team. The size of its team increased to 19employees in 2008.

As at the end of FY2010, AVIC International Beijing had an order book consisting of 19 vessels to bedelivered by 2013. In order to enable AVIC International Beijing to manage and complete the OutstandingProjects, AVIC International Beijing and our Company had on 29 June 2011 entered into theManagement Agreement, pursuant to which AVIC International Beijing engaged our Company to provideM&C Services for the Outstanding Projects with effect from 1 January 2011 until the 19 vessels aredelivered. The Management Agreement is a transitional arrangement which aims to ensure a smoothcompletion of the Outstanding Projects following the Restructuring Exercise. Going forward, all newshipbuilding contracts secured after the Commencement Date will be entered into directly by our Group.

About the AVIC Group

Our Company is an indirect wholly-owned subsidiary of AVIC through AVIC International, AVICInternational Beijing and AVIC International Kairong. AVIC holds 62.5% of the registered capital of AVICInternational, which in turn holds 100% of the registered capital of AVIC International Beijing. AVICInternational Beijing is the sole shareholder of AVIC International Kairong, which is the sole shareholderof our Company as at the date of this Information Memorandum.

HISTORY AND BUSINESS

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AVIC is a large state-owned enterprise and an investment institution that is authorised and managed bythe Central Government of the PRC. Its key business units are Defense, Transport Aircraft, AviationEngine, Helicopters, Avionics, General Aviation Aircraft, Aviation Research and Development, Flight Test,Trade and Logistics, and Asset Management. Further information on the AVIC Group may be found onthe following website: http://www.avic2.com.

AVIC International’s predecessor, China National Aero-Technology Import and Export Corporation, was established in January 1979. As an important part of the aviation

industry, AVIC International has become a comprehensive platform that leads the rapid development ofworld sectors like world aviation, trade and logistics, real estate & service and industrial investment. Sofar, AVIC International has established wholly-owned or holding subsidiaries in main cities in the PRC,owns seven listed companies and about 60 overseas offices, and its business covers over 180 countriesand regions. The business assets of AVIC International have a collective asset value of nearly RMB100billion. More details can be found on the following website: http://www.avic-intl.cn.

AVIC International Beijing was established in 1992 in the PRC, and is a state-owned enterprise whichmainly focuses on trading and manufacturing of ships, EPC services relating to port machinery andequipment (such as quayside and rubber type gantry cranes) and investment-holding.

AVIC International Kairong, a company incorporated on 16 August 2010 under the laws of Hong Kong, isprincipally an investment holding company.

AVIC International has recently approved the Proposed Internal Restructuring. The Proposed InternalRestructuring is part of an acquisition exercise to be executed by CATIC Shenzhen (the “Acquisition”) to,inter alia, broaden CATIC Shenzhen’s existing manufacturing and trading platform with a greater varietyof products and services, as well as introduce some prospective sectors including tendering, constructionand shipbuilding, thereby creating synergy with the current businesses of CATIC Shenzhen and providethe AVIC Group with opportunities for continuous development. Pursuant to the Acquisition, CATICShenzhen will be acquiring the entire equity interest of each of AVIC International Beijing, AVICInternational Guangzhou and AVIC International Xiamen, and a few other companies from AVICInternational and other subsidiaries of the AVIC Group. The businesses undertaken by these targetcompanies are diversified and wide-ranging, including trading and logistics of shipping, cementproduction lines, petrochemical facilities, electric power facilities, trading and logistics of bitumen,motorcycles bearings, coal and medical facilities, trading and logistics of marine engineering andshipping and related equipment, chemicals, stone materials, minerals and medical equipment, projecttendering, internet communications and trading of wind power energy equipment, production of fastenersfor aviation use and real estate development.

CATIC Shenzhen is a subsidiary of AVIC International which is listed on the HKSE. CATIC Shenzhen is adiversified strategic investment holding company, and is principally engaged in electronic components,luxurious goods, commercial real estate industries and resource business via its subsidiaries, of which itscore companies include Shenzhen Tian Ma Microelectronics Co., Ltd, Shenzhen Shennan Circuit Ltd.Corp, Shenzhen Fiyta Holdings Limited, and Shenzhen CATIC Resources Company Limited. Furtherinformation on CATIC Shenzhen may be found on the following website: http://www.avic161.com.

CATIC Shenzhen is currently 58.8% held by AVIC International through its wholly-owned subsidiary, AVICInternational Shenzhen Company Limited (“AVIC International Shenzhen”), and after completion of theProposed Internal Restructuring, CATIC Shenzhen will be 39.4% held directly by AVIC International and35.6% held indirectly by AVIC International through AVIC International Shenzhen. Our Company will alsobecome an indirect subsidiary of CATIC Shenzhen through its wholly-owned subsidiary, AVICInternational Beijing, and AVIC International Beijing’s wholly-owned subsidiary, AVIC InternationalKairong, after completion of the Proposed Internal Restructuring.

The Proposed Internal Restructuring, along with the acquisitions of other subsidiaries of the AVIC Groupby CATIC Shenzhen, has been approved by the SASAC in July 2011. The Proposed InternalRestructuring is expected to be completed by 31 December 2011.


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In conjunction with the proposed Listing of our Company on the SGX-ST, AVIC International and AVICInternational Beijing have given an undertaking to our Group to, inter alia, transfer all interests of theAVIC International Group in any business or assets engaged in or connected to the ship-trading andshipbuilding industry to our Group. The Proposed Internal Restructuring will not have an impact on thesaid undertaking, and it remains the intention that all business or assets of AVIC International and AVICInternational Beijing engaged in or connected to the ship-trading and shipbuilding industry will beconsolidated under our Group.

Any acquisitions of shipyards pursuant to the said undertaking will still be subject to the approval of therelevant PRC authorities. For further details on the said undertaking, please refer to the “PotentialConflicts of Interests” section of this Information Memorandum.

BUSINESS AND PRINCIPAL ACTIVITIES

Overview

Our Group is principally involved in the provision of M&C Services. In delivering our M&C Services, weenter into a tripartite shipbuilding contract where we and the shipyard are the co-sellers and theshipowner is the buyer. In connection with a typical shipbuilding contract, we usually enter into a separateagreement with the shipyard to define, inter alia, the scope of each other’s responsibilities, services to beprovided by us and service fees payable to us in respect of such services under the shipbuilding contract.Generally, the shipyard is responsible for the construction of the vessels while we are in charge of thenon-construction aspects of the shipbuilding project such as marketing, deals origination, clientmanagement, and project management including arranging for marine financing, handling exportprocedural matters and overseeing the utilisation of the progress payments by the shipowner.

We work with several ship-design institutes in the course of our business, such as Shanghai MerchantShip Design & Research Institute , Shanghai Odely Marine Engineering Co., Ltd

and Marine Design & Research Institute of China . We tap on our network of shipyards to build various types of vessels such as bulk carriers,

tankers, containerships, MPP Ships, LPG ships and offshore vessels. These shipyards include ShandongHuanghai Shipbuilding Co., Ltd , Guangzhou Shipyard International Co., Ltd

, Jiangnan Shipyard (Group) Co., Ltd ,Yangzhou Dayang Shipbuilding Co., Ltd , New Times Shipbuilding Co., Ltd

and Jiangsu New Yangzi Shipbuilding Co., Ltd. .

Over the years, we have established relationships with many reputable shipowners such as ITOCHUCorporation, Hartmann Schiffahrts GmbH & Co. KG, Dockendale, the Clipper Group and SeaarlandShipping Management B.V..

In FY2010, we began to provide marketing and consultancy services to a shipyard in the PRC, namelyTaizhou CATIC, to help promote its corporate profile in the overseas markets, seek out shipowners andsecure shipbuilding contracts, including working with the shipyards to negotiate with shipowners on theterms and other details of the shipbuilding contracts, amongst others. AVIC International Beijing owns45% of the equity interest in Taizhou CATIC pursuant to a joint venture entered into in 2007 with TaizhouKouan holding 44% and other domestic investors holding the remaining 11%.

We believe that high calibre staff contributes to the competitiveness and success of the business. Thus,human resource is an important aspect of our business, from staff employment to staff training. As at 31December 2010, we have 29 staff equipped with good international business skills and shipbuildingknowledge. Please refer to the “Directors, Executive Officers and Employees” section of this InformationMemorandum for further details.


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Our Business Process

A brief description of our business process, which takes about 30 months on average (depending on thenumber of vessels ordered), is set out below:

1. Deal origination and receipt of intention from customers: As a result of our marketingactivities, a customer indicates the type of vessel it requires. We then prepare technical andcommercial proposals in relation to the construction and sale of the vessel, and propose a shipyardto work with, in accordance with the requirements of the shipowner.

2. Negotiation of technical and commercial proposals: Shipyards typically sign two contracts witha shipowner, one setting forth the technical specifications of the vessel and the other setting forththe commercial terms such as those relating to payment and delivery. We work closely with theshipyard to negotiate the technical and commercial terms of the contracts with the shipownerbefore they enter into such contracts. We then enter into a tripartite shipbuilding contract with theshipyard and the shipowner where we and the shipyard are the co-sellers, while the shipowner isthe buyer.

3. Financing arrangements: We prepare the necessary documents, which are issued on behalf ofour Company, for submission to the banks in order for the banks to issue a refund guarantee to theshipowner in accordance with the terms of the contract. Should the refund guarantee be invoked,our Company will make a corresponding claim against the shipyard. If financing is required, theshipowner will also prepare the necessary financing documents so that our Company is able toliaise with the relevant governmental departments and the bank to provide Export Credit financingarrangements and to obtain the requisite approvals for the project. Our Company helps to facilitatenegotiations between the shipowner and the bank on the terms of the loan agreement. At the sametime, we supervise the shipowner’s payment of the first instalment to our Company and fees inaccordance with the export contract and the loan agreement respectively by ensuring that itadheres to the payment terms stipulated in the shipbuilding contract, and preparation of thenecessary documents before the contract takes effect. The contract becomes effective after ourcustomers make the requisite payments.

4. Construction process: During the construction of the vessel, our representatives are sent to theshipyard to oversee the production schedule and general use of funds. This includes (i)coordinating between the shipyard and the shipowner, and (ii) supervising the progress ofconstruction to ensure that the project is proceeding smoothly and that payments by the shipownerare used for the construction of the vessel instead of other purposes. At the same time, we ensurethat the shipowner makes the progress payments promptly under the terms of the tripartiteshipbuilding contract.

Deal origination and receipt of intention from customers

Negotiation of technical and commercial proposals

Financing arrangements

Construction process

Delivery of vessel


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5. Delivery of vessel: We are responsible for preparing the necessary declarations after constructionis complete. After the necessary documents to hand over the vessel are signed, we arrange for therefund guarantee to be cancelled, and assist the shipyard in obtaining the tax reimbursement forexports.

Management Agreement and Service Agreement with AVIC International Beijing

As at the end of FY2010, AVIC International Beijing had an order book consisting of 19 vessels to bedelivered by 2013. In order to enable AVIC International Beijing to manage and complete the OutstandingProjects following the Restructuring Exercise, AVIC International Beijing and our Company had on 29June 2011 entered into the Management Agreement, pursuant to which AVIC International Beijingengaged our Company to provide M&C Services for the Outstanding Projects with effect from 1 January2011 until the 19 vessels are delivered, for an annual fee of RMB28 million. The fee of RMB28 millionwas arrived at based on the order book of AVIC International Beijing as at the end of FY2010. The fee ispayable quarterly and will be subject to adjustments as may be agreed upon between the parties,depending on the progress of the construction of the vessels.

The Management Agreement is a transitional arrangement which aims to ensure a smooth completion ofthe Outstanding Projects following the Restructuring Exercise and will not be renewed after it has lapsed.Going forward, all new shipbuilding contracts secured after the Commencement Date will be entered intodirectly by our Group.

Our Group has also entered into an agreement with AVIC International Beijing, pursuant to which ourGroup will provide M&C Services to AVIC International Beijing in order for the latter to fulfill its obligationsunder the service agreement with Taizhou CATIC. In return, AVIC International Beijing will pay the netfees (after sales taxes and surcharges of approximately 5.5%) received from Taizhou CATIC to our Groupwithin three business days. Going forward, the service agreement between AVIC International Beijing andTaizhou CATIC will not be renewed after it has lapsed, and instead, will be entered into directly betweenour Group and Taizhou CATIC for FY2012, subject to the needs of Taizhou CATIC, our Group’s capacityand the terms and conditions of the agreement to be entered into between the parties.

For further details on the Management Agreement and service agreement with AVIC InternationalBeijing, please refer to the “Interested Person Transactions” section of this Information Memorandum.

Our Company has put in place the following measures to monitor the payment of the fees from AVICInternational Beijing to our Company under the Management Agreement and the service agreement withAVIC International Beijing:

(a) All personnel of AVIC Shipbuilding Management Business, who will be in charge of the executionof the shipbuilding projects, including liaising with the shipowner and the shipyard in relation to themilestone payments, will be transferred to our Company. Although AVIC International Beijing willprepare a monthly report on the milestone payments, it will not take part in the execution of theshipbuilding projects. Our Company will be able to effectively monitor the receipt of milestonepayments from the shipowners against the progress of the shipbuilding projects.

(b) The teams or personnel monitoring the progress of the shipbuilding projects will be independentand separate from the teams or personnel monitoring the receipt of milestone payments in order toeliminate any potential or perceived conflict of interest.

(c) The finance team of our Company will prepare monthly statements of account for our customersand accounts receivables (“AR”) schedule and AR aging report for the review by, and necessaryaction of, the management and the Audit Committee.

(d) The Audit Committee will review the progress of the shipbuilding projects and the receipt ofmanagement fees on a quarterly basis, based on internally generated schedules such as the ARschedule, shipbuilding status report, and/or external sources such as bank statements.

(e) As part of the audit process, the auditors will perform an audit on related parties in accordancewith Singapore Standard of Auditing 550 Related Parties and related party disclosures will bemade in accordance with Singapore Financial Reporting Standards 24 Related Party Disclosures.Their findings will be reported to the Audit Committee accordingly.


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AWARDS AND CERTIFICATES

Over the years, AVIC International Beijing has been accorded the following awards and certificates inrelation to its business:

Awarding Month and Nature of Award /Award / Certificate organisation(s) Year of issue Validity Certificate

“Most Advanced Unit” AVIC July 2010 N.A. Award forfor Non-Aviation outstandingRelated Unit for 2010 performance in

relation to tradingof non-aviation

civilian products.

ISO 9001:2008 System SGS United December Until 7 Certificate for theCertification for import Kingdom Ltd 2009 December management systemand export of shipping, Systems & Services 2012(1) of the awardeeport machinery, Certification that has been complete equipment, assessed andconstruction and certified for meetingagricultural machinery, the requirements ofvehicles, measure and ISO 9001:2008cutting tools, machinery for the activitiesand electronic products specified in the

certificate.

Certification of “AA” Grade Beijing Customs November N.A. Certificate awardeefor Enterprise Management District, PRC 2009 will be granted

less supervisionduring the validity

period of thecertificate.

Outstanding Achievement AVIC International February N.A. Award for for Management of 2009 achievement inShipbuilding Business relation tofor 2008 management of

shipbuilding businessduring the relevantappraisal period.

Outstanding Enterprise Beijing Municipal January N.A. Award in relationUnit Commission of 2009 to outstanding

Commerce performance duringthe relevant

appraisal period.

Certification of “AAA” China Shippers’ September Until Award in relationCredit Grade Association 2008 September to credit-worthiness

2011(2) during the relevantappraisal period.


Awarding Month and Nature of Award / Award / Certificate organisation(s) Year of issue Validity Certificate

Certification of “AAA” China Chamber March 2008 Until Award in relationCredit Grade of Commerce 1 March to credit-worthiness

for Import and 2011(2) during the relevantExport for Machinery appraisal period.

and Electronic Products

“Top 100 Enterprises East Beijing Government April 2007 N.A. Award in relationfor Tax Compliance in to tax complianceEast Beijing” for 2006 East Beijing Government during the relevant

Tax Authority appraisal period.

East Beijing Local Tax Authority

Certified “A” Grade for Beijing State January 2007 Until 31 Award in relationTax Compliance Taxation Bureau December to tax compliance

2008 during the relevantBeijing Local appraisal period.

Taxation Bureau

“Trustworthy Enterprise” Beijing Administration December 2005 N.A. Award in relationfor the Year of 2005 for Industry and to trustworthiness

Commerce during the relevantappraisal period.

Notes:

(1) The certificate is subject to annual inspection. AVIC International Beijing has passed the annual inspection on 10 January2011.

(2) It is not compulsory to seek renewal of these certificates when they lapse. Our Company believes that our operations will notbe materially affected if these certifications are not renewed, as the awarding organisations are industry associations and notgovernment departments or financial institutions and non-renewal is not tantamount to non-compliance of any regulations orflaws in our credit track record.

PRODUCTION FACILITIES

As at the Latest Practicable Date, we do not own any production facilities.

PROPERTIES AND FIXED ASSETS

Land Use Rights

As at the Latest Practicable Date, we do not own any properties or possess any land use rights.

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Property Leased by our Group

The following property is currently leased by our Group:

Rental Land/Floor Per Annum

Location Area (sq m) Purpose / Use Lease Term (’000) Lessor

24th Floor, North Star 614 Office Two years RMB2,262 Beijing North StarTimes Tower, No. 8 until 14 April Industrial Co., LtdBeichendong Road, 2013 Office Building Chaoyang District, ManagementBeijing 100101, PRC Company

(1)

Rental Land/Floor Per Annum

Location Area (sq m) Purpose / Use Lease Term (’000) Lessor

9 Raffles Place 390 Office Three years from S$584 CDL Properties#52-01 Republic Plaza 15 September Ltd(1)

Singapore 048619 2011 to 14September 2014with an option to

renew for a furtherterm of three years

Note:

(1) The lessor is not related to our Directors or Controlling Shareholder.

MAJOR CUSTOMERS

AVIC International Beijing currently has Outstanding Projects. On 29 June 2011, in order to enable AVICInternational Beijing to manage and complete the Outstanding Projects, AVIC International Beijing andour Company had entered into the Management Agreement, pursuant to which AVIC International Beijingengaged our Company to provide M&C Services for the Outstanding Projects with effect from 1 January2011 until the 19 vessels are delivered. The Management Agreement is a transitional arrangement whichaims to ensure a smooth completion of the Outstanding Projects following the Restructuring Exercise.Going forward, all new shipbuilding contracts secured after the Commencement Date will be entered intodirectly by our Group. Please refer to the “History and Business – Business and Principal Activities” and“Interested Person Transactions” sections of this Information Memorandum for further information on theManagement Agreement.


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The following are our customers which account for 5% or more of our Group’s total revenue for the PeriodUnder Review:

Percentage of Revenue

Customer Type of product(s) FY2008 FY2009 FY2010

Hartmann Schiffahrts GmbH & Co. KG Bulk carrier – – 5.9

Seaarland Shipping Management B.V. Bulk carrier – – 5.2

W-Marine Inc. Bulk carrier – 16.3 3.9

IRISL and its subsidiary IRISL Marine MPP Ship, bulk 52.3 50.9 45.8 Services(1) carrier and

bunkering oil tanker

Gestioni Armatoriali S.P.A. Bulk carrier 8.5 16.9 1.4

MT “King Charles” Tankschiffabrts Oil tankers 17.8 16.0 – GmbH & Co. KG

Taizhou CATIC Management services – – 33.4 relating to shipbuilding

Ports & Maritime Organization Port machinery 18.4 – 4.5

Note:

(1) IRISL and its subsidiary, IRISL Marine Services are currently sanctioned by the United States (“U.S.”) Department ofTreasury’s Office of Foreign Assets Control and the United Nations (“U.N.”) pursuant to U.N. Security Council Resolutions1803 (2008) and 1929 (2010). The U.S. sanctions prohibit U.S. persons from dealing with IRISL, while the U.N. sanctionsrequire member states to, inter alia, communicate to the U.N. Security Council any information on the transfer of vesselsowned or operated by IRISL to other companies, as well as any other activity that may have been undertaken in order toevade sanctions. Singapore has in place certain legislation to give effect to the U.N. Security Council resolutions. However,these sanctions are not expected to have an adverse impact on our Group’s business as:

(i) the sanctions are not issued against our Group;

(ii) IRISL and IRISL Marine Services are not our Group’s direct customers as our Group’s principal customer is AVICInternational Beijing pursuant to the Management Agreement; and

(iii) since the sanctions were imposed in 2008 and 2010 respectively, our Group has diversified its customer base andreceived new orders for vessels, none of which are from IRISL. AVIC International Beijing has not entered into newcontracts with IRISL Marine Services and IRISL since 2006 and 2007 respectively. The contract value of ordersreceived from IRISL is US$314.85 million, of which the revenue attributable to our Group for FY2011 and FY2012 isexpected to be RMB11.4 million and RMB21.8 million respectively.

In view of the abovementioned sanctions, other than providing M&C Services to AVIC International Beijing to enable the latterto fulfil its obligations under the existing shipbuilding contracts, our Group will not deal further with IRISL and IRISL MarineServices as long as any such sanctions are in place. We believe that the sanctions will not affect our Company’s businessand prospects in the near future as we have diversified our customer base and shipowners usually order new vessels basedon their needs in order to replace old vessels or expand their fleet capacity.

The percentage of total revenue contributed by our customers for the Period Under Review is dependenton the number of projects secured and the stage of completion in the relevant year in relation to suchprojects.

Hartmann Schiffahrts GmbH & Co. KG is a limited partnership company set up by Hartmann Reederei.Established in 1981, Hartmann Reederei is based in Germany and has grown to become a worldwideoperating group of companies with a reputation in the maritime world as a first class shipping andlogistics company. It has a fleet of about 60 vessels, which mainly includes bulk carriers, gas tankers andcontainer vessels. Further information may be found on the following website: www.hartmann-reederei.de.We derived approximately 5.9% of our total revenue in FY2010 from the commencement of steel cuttingfor two 118,000 DWT bulk carriers ordered by Hartmann Schiffahrts GmbH & Co. KG, and one of whichhad progressed to keel laying by the end of FY2010.


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Seaarland Shipping Management B.V. is a Netherlands-based ship management company whichoperates high quality tankers and bulk carriers. It belongs to the Zacchello Group based in Venice, Italy.Further information may be found on the following website: www.seaarland.nl. We commenced steelcutting for two of the three 92,500 DWT bulk carriers ordered by this customer in FY2010, whichcontributed to approximately 5.2% of total revenue in FY2010.

W-Marine Inc. is a Greek shipping company, engaged mainly in the operation of bulk carriers. Wecommenced steel cutting for two 92,500 DWT bulk carriers ordered by this customer in FY2009, whichcontributed to approximately 16.3% of total revenue in that year. The construction of these two bulkcarriers continued through and contributed to approximately 3.9% of total revenue in FY2010.

IRISL is the Middle East’s largest bulk shipping company, with nearly 100 vessels, and is listed on theTehran Stock Exchange. IRISL was established in August 1967 under the name of Aria Shipping Lines,and was renamed IRISL in January 1979. At present, IRISL owns a fleet of 115 ocean-going vessels withmore than 3.3 million DWT and is able to transport 22 million tonnes of cargo annually. IRISL MarineServices is a subsidiary of IRISL, responsible for helping it provide oil and other related materials to theIranian port. Further information may be found on the following website: www.irisl.net. Revenue derivedfrom IRISL and IRISL Marine Services in FY2008 and FY2009 was mainly in relation to the constructionof two 6,500 DWT bunkering oil tankers and six 53,100 DWT bulk carriers that commenced in FY2008and continued through FY2010. In addition, we commenced steel cutting for five 28,000 DWT MPP Shipsordered by IRISL in FY2010.

Gestioni Armatoriali S.P.A. is an Italian shipping company headquartered in Naples and established in1993, involved in the international shipping operation, management and trading businesses. It has arelatively young fleet comprising 12 ships with an average age of less than five years. The fleetcomprises seven bulk carriers with a capacity ranging from 57,000 to 114,000 DWT and five chemicaltankers with a capacity ranging from 40,000 to 50,000 DWT. Further information may be found on thefollowing website: http://gestioniarmatoriali.it/index.php. We derived 8.5% and 16.9% of our total revenuefrom Gestioni Armatoriali S.P.A. in FY2008 and FY2009 respectively due to the construction of two92,500 DWT bulk carriers for this customer that commenced in FY2008. One of them was delivered inFY2009 while the construction for the other had progressed to launching by the end of FY2009. Hence,most of the revenue from the construction of these two bulk carriers was recognised in FY2008 andFY2009.

MT “King Charles” Tankschiffabrts GmbH & Co. KG is a special purpose company set up by KOENIG &CIE. GmbH & Co., KG specifically for the construction of the King Charles oil tanker under the relevantshipbuilding contracts. KOENIG & CIE. GmbH & Co., KG is a close-ended fund founded by Tobias Koenigin 1999 with a current total investment volume of more than 4.2 billion Euros, and its principal business isin the shipping investment sector, although it is also involved in other areas such as real property,insurance and construction of infrastructure. The company currently owns 16 Suezmax and Aframax oiltankers, with 12,500 to 35,000 DWT capacities. Further information may be found on the followingwebsite: www.emissionshaus.com/en. Revenue derived from this customer in FY2008 and FY2009 was inrelation to the construction of two 114,000 DWT tankers which commenced in FY2008 and completed inFY2009.

Taizhou CATIC was established in 2007 pursuant to a joint venture between AVIC International Beijingand Taizhou Kouan. Taizhou Kouan has nearly 40 years’ shipbuilding history tracing back to the 1970sand is mainly engaged in the building of various motored vessels. AVIC International Beijing owns 45%of the equity interest in Taizhou CATIC, but is not involved in the management or day-to-day operations ofTaizhou CATIC. We derived approximately 33.4% of total revenue from Taizhou CATIC in FY2010 as aresult of the service agreement with Taizhou CATIC. Please refer to the “Interested Person Transactions –Past Transactions” section of this Information Memorandum for details.

Ports & Maritime Organization was established in 1914 and is the maritime administration of Iran,managing the port affairs of the country. Further information may be found on the following website:www.pmo.ir. We derived approximately 18.4% and 4.5% of total revenue in FY2008 and FY2010respectively from this customer for procurement of port machinery.


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Save as disclosed above, our business and profitability is not materially dependent on any industrial,commercial or financial contract with any of our customers.

Save as disclosed above, none of our Directors, Substantial Shareholders or Executive Officers or theirrespective Associates has any interest, direct or indirect, in any of our customers. To the best of ourDirectors’ knowledge and belief, there are no arrangements or understandings with any customerspursuant to which any of our Directors and Executive Officers were appointed.

CREDIT MANAGEMENT

Credit Policy for our customers

As a common market practice, the shipowner makes progress payments in accordance with the followingmilestones: (1) signing of contract; (2) steel cutting; (3) keel laying; (4) launching; and (5) delivery. Uponthe occurrence of each milestone, the shipowner is usually allowed between five and 10 working days tosettle the relevant progress payment. Up to the Latest Practicable Date, we have not had any bad debts.

In addition, to further improve the collectability of our account receivables, we have put in place thefollowing measures:

(i) it is our practice to receive payment for the first instalment before the shipbuilding contractbecomes effective;

(ii) shipowners are required to make payment in full before the delivery of ships; and/or

(iii) having charges over vessels being built.

Allowance for doubtful trade receivables

Allowance for doubtful trade receivables are based on management’s best estimate of the carryingamounts of receivables that are doubtful after evaluation of collectability and ageing analysis of accounts.These include assessment of current creditworthiness and the past collection history of each customer.As at the Latest Practicable Date, we have not made any allowance for doubtful trade receivables.

Credit Policy of our suppliers

The shipowner makes payment to us, one of the co-sellers, and we will subsequently disburse the sameto the shipyard, after deducting the fee payable to us, within five to 10 working days.

MAJOR SUPPLIERS

We usually enter into tripartite shipbuilding contracts with shipyards and shipowners where we and theshipyards are co-sellers, while the shipowners are buyers. In connection with a typical shipbuildingcontract, we usually enter into a separate agreement with the shipyard to define, inter alia, the scope ofeach other’s responsibilities, services to be provided by us and service fees payable to us in respect ofsuch services under the shipbuilding contract. The shipowner usually makes progress payments to us,being one of the co-sellers, and we will subsequently disburse the same to the shipyard, after deductingthe service fee that is payable to us.

Due to the above contractual arrangement, we do not have cost of sales. For the purpose of thisInformation Memorandum, we view shipyards as our suppliers and the percentage stated in the tablebelow represents the total fee that we derive from the projects that we have worked with shipyards as co-sellers as a percentage of our total revenue.


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The following table sets forth our suppliers, accounting for 5% or more of our revenue in the Period UnderReview:

Percentage of Revenue

Supplier Type of supply FY2008 FY2009 FY2010

Yangzhou Dayang Shipbuilding Co., Ltd LPG carrier and 47.3 31.5 5.9 bulk carrier

Taizhou CATIC Bulk carrier – 16.3 9.1

Shandong Huanghai Shipbuilding Co., Ltd MPP Ship – 16.0 25.8

Jiangsu New Yangzi Shipbuilding Co., Ltd Bulk carrier 8.5 16.9 1.4

New Times Shipbuilding Co., Ltd Oil tanker 20.8 16.0 –

Zhenjiang SOPO Shipbuilding Co., Ltd Bunkering oil 5.1 3.4 0.5 tanker

As we derive our revenue mainly from shipbuilding projects, changes in the transaction value with oursuppliers are correlated with the value and the status of the shipbuilding contracts that we have securedwith the shipyards as co-sellers.

Save for Taizhou CATIC, which is 45% owned by AVIC International Beijing, none of our Directors,Substantial Shareholders or Executive Officers or their respective Associates has any interest, direct orindirect, in any of our suppliers. To the best of our Directors’ knowledge and belief, there are noarrangements or understandings with any suppliers pursuant to which any of our Directors and ExecutiveOfficers were appointed.

INVENTORY MANAGEMENT

Due to the current nature of our business, we do not have any inventory.

SALES AND MARKETING

Our sales and marketing team is led by our Executive Director, Mr Cheng Xuhui, who is supported by ateam of 20 staff as at 31 December 2010.

We advertise our services in leading industry publications, and we participate in trade fairs, exhibitionsand seminars held in countries such as Germany, Greece, Norway and Singapore in order to boost ourmarket presence. We also conduct marketing calls through AVIC International’s and AVIC InternationalBeijing’s overseas offices in America, Europe, Asia and the Middle East.

We select our customers based on market status, reputation and creditworthiness, committed purchasevolume, pricing and payment terms.

INSURANCE

Our Group has in place social insurance, including the basic pension insurance, medical insurance,unemployment insurance, industrial injury insurance, birth insurance and housing insurance, in respect ofwhich the insurance premium is borne by our Group and the employees in a specific proportion governedby the relevant PRC regulations.

As at the Latest Practicable Date, all the above policies are in existence and the premiums have beenpaid hereon. These insurance policies are reviewed annually to ensure that the coverage is adequate.Our Directors believe that the coverage from these insurance policies is adequate for our presentoperations.


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INTELLECTUAL PROPERTY

Currently, our business and profitability is not materially dependent on any intellectual property such aspatents, patent rights, licences and processes or other intangible assets. We have not paid or receivedroyalties for any licence or use of any intellectual property.

RESEARCH AND DEVELOPMENT

Currently, we do not conduct product research and development activities.

QUALITY CONTROL

The manufacturing process is conducted by the shipyard. As such, the quality control over themanufacturing process is within its purview. However, our Company will assign specialists to monitor theprogress of the vessel’s construction and supervise the use of progress payments received from theshipowner for such construction.

For the Period Under Review, we have not experienced any material sales returns by shipowners andhave not experienced any product liability or other legal claims due to allegations relating to, or problemswith the quality of vessels.

STAFF TRAINING AND DEVELOPMENT

Our employees are one of the key contributors to the growth of our Group. We recognise that oursuccess and ability to maintain our competitiveness are largely dependent on the quality and skills of ourstaff. As such, we believe that our staff should constantly upgrade their skills in order to increase theircompetency and to stay relevant in their respective areas of work.

Our staff training is typically conducted internally by our senior management and the various heads ofdepartments at our premises. The training that we provide includes:

(1) Orientation and training for new employees to educate them on our Company’s policies, safetymeasures and basic technical and commercial skills and knowledge. For example, qualityassurance staff will receive training on the implementation of our ISO9001:2008 qualitymanagement system.

(2) Technical training is conducted at the shipyards on an ongoing basis for our staff to equip themwith the relevant technical skills and knowledge necessary for their respective job functions.

(3) Lectures by external parties such as industry experts and lecturers for our staff to familiarise themwith knowledge necessary for their respective jobs, including but not limited to general contract lawand business-specific training. We also send our employees to educational institutes to attendprogrammes relating to project management, customer relationship management and maritimelaw.

Our staff training expenditure for the Period Under Review was not significant.

GOVERNMENT REGULATIONS

As at the Latest Practicable Date, we have all the necessary business licenses and permits for ourbusiness operations in the PRC and we are in compliance with all applicable PRC laws and regulationswhich are material to our business operations. A summary of the relevant PRC laws and regulationsrelevant to our Group is set out in the “Summary of Relevant PRC Laws and Regulations” in Appendix Cof this Information Memorandum.


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COMPETITION

We face competition from other ship-trading companies and shipyards in the PRC, including state-ownedenterprises, private enterprises and foreign-invested enterprises. We consider the following companies tobe our main competitors:

Principal product(s) of competitors whichName of competitor compete with our Group’s products

Hudong-Zhonghua Shipbuilding (Group) Co., Ltd Bulk carriers and containerships

Jiangsu Hantong Ship Heavy industry Co., Ltd Bulk carriers

Taizhou Sanfu Ship Engineering Co., Ltd Bulk carriers

China Changjiang National Shipping Group Qingshan Shipyard Bulk carriers

None of our Directors, Substantial Shareholders or Executive Officers or their respective Associates hasany interest, direct or indirect, in any of our above competitors.

COMPETITIVE STRENGTHS

We believe that our competitive strengths are as follows:

(1) Association with the AVIC Group and support from the PRC Central Government

As described in the “History and Business – History and Development of our Group” section of thisInformation Memorandum, AVIC Shipbuilding Management Business was a business division ofAVIC International Beijing, a subsidiary of AVIC International. AVIC International has an aggregateof over 60 overseas offices, of which about 20 belong to AVIC International Beijing. We are able toleverage the AVIC Group’s overseas network to conduct marketing activities, identify potentialbuyers, establish extensive business contacts with reputable shipowners and secure newshipbuilding contracts with overseas shipowners.

Our association with the state-owned AVIC Group has given us a competitive edge in obtainingsupport from the local major financial institutions to expand our shipbuilding project managementand consultancy service business on an even larger scale and carry on our future plans. Webelieve we will be able to continue to grow our business based on the business experience andindustry contacts built up over the years.

As we are a member of the AVIC Group, which is not only one of the largest industrial groupsowned by the PRC Central Government but also a key strategic institution of the PRC, our Groupis well positioned to capitalise on its excellent business relationships and strong fundamentals toensure seamless execution and delivery of its projects. Our international brand recognition is oneof the key reasons why we have been able to build up our M&C Services, as most internationalcustomers prefer to deal through an internationally known group of substance.

(2) An experienced and driven management team with in-depth industry knowledge

We have an experienced and professional management team, led by our Executive Directors, thatwe believe can identify opportunities and respond to market trends. Most of the members of oursenior management team have extensive experience in the shipbuilding industry and some havebeen with the AVIC International Group for over 10 years. Their in-depth industry knowledge andstrategic vision have made significant contributions to the growth of our business.


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7 Clarkson Research Services Limited, World Shipyard Monitor Vol 18. No.1, January 2011. Clarkson Research ServicesLimited has not consented for the purposes of Section 249 of the Securities and Futures Act to the inclusion of theinformation referred to above and is thereby not liable for such information under Sections 253 and 254 of the Securities andFutures Act. Our Company has included the above information in its proper form and context and has not verified theaccuracy of such information.

8 Ibid.

9 Ibid.

10 Clarkson Research Services Limited, Shipping Intelligence Weekly Issue No. 967, 15 April 2011. Clarkson Research ServicesLimited has not consented for the purposes of Section 249 of the Securities and Futures Act to the inclusion of theinformation referred to above and is thereby not liable for such information under Sections 253 and 254 of the Securities andFutures Act. Our Company has included the above information in its proper form and context and has not verified theaccuracy of such information.

(3) Strong backing from financial institutions

Availability of credit and ability to obtain bank facilities are critical in closing a shipbuilding contractdue to the substantial amount of contract value. The shipyard needs to obtain bank loans tofinance the building of vessels and have the refund guarantee issued to the shipowner, while someshipowners may need to obtain bank loans for making the progress payments.

As part of the state-owned AVIC Group, we have had strong support from the PRC domesticfinancial institutions and have been able to assist the shipyards that we have worked with inobtaining loans and/or procuring the issuance of refund guarantees by banks and the shipownersin obtaining financing, when required.

PROSPECTS

The following information is primarily based on the market knowledge of our Executive Directors.

In 2009, the volume of vessels built in the PRC amounted to an aggregate of 36.0 million DWT.7 ThePRC’s market share for ships in the global order book by CGT amounted to 37.7%, ahead of Japan.8 In2010, the volume of vessels completed in the PRC amounted to 61.2 million DWT, an increase of 70%compared to 20099, and is expected to become the world’s largest shipbuilding country.

Our Executive Directors expect that international trade could decline following the global financial crisis,resulting in a corresponding decrease in the need for vessels. For example, crude oil trade decreasedfrom 20.6 million barrels per day in 2008 to 18.2 million barrels per day in 2010, steel production declinedfrom 818.2 million tonnes in 2008 to 805.6 million tonnes in 2009, and coal trade import declined from494.0 million tonnes in 2008 to 462.0 million tonnes in 2010.10 Financial institutions may reduce theamount of shipping loans, restricting the ability of shipowners to construct new vessels. Shipowners mayalso order fewer vessels if the future development of the economy is not clear, and there is a risk thatshipowners may abandon their vessels, thereby adversely affecting orders already in hand.

Although there may be a decline in orders in the market, our Executive Directors expect that we may beable to take advantage of AVIC International Beijing’s existing network, our financing capabilities andlower costs of expansion to compete against smaller and less efficient players in the industry. Forexample, as stated in the “History and Business – History and Development of our Group” section of thisInformation Memorandum, AVIC Shipbuilding Management Business managed to secure contracts fortwo 27,000 DWT bulk carriers, two 35,000 DWT bulk carriers and two 51,000 DWT bulk carriers in 2000,when the industry was experiencing a downturn.

Based on the foregoing and our competitive strengths, our Directors are cautiously optimistic about theprospects of our Group.


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Order book

Our order book on hand as of a certain date represents the total nominal contract value of the contractsthat have not been completed, including the portion of revenue in respect of those orders that we haverecognised as of such date. For the purpose of calculating AVIC International Beijing’s order book in2010, we consider an order to be effective when it signs the shipbuilding contract and receives the firstinstalment payments.

On 29 June 2011, our Company entered into the Management Agreement with AVIC InternationalBeijing, pursuant to which our Company agreed to provide M&C services for the Outstanding Projectswith effect from 1 January 2011 until the date when the Outstanding Projects are completed, for anannual fee of RMB28.0 million (before sales taxes and surcharges of approximately 5.5%). TheOutstanding Projects refer to the 19 vessels to be delivered by 2013 under the order book of AVICInternational Beijing as at the end of FY2010. Please refer to the “History and Business – Business andPrinciple Activities” and “Interested Persons Transactions” sections of this Information Memorandum formore details of the Management Agreement.

Our Company has delivered three vessels under the Management Agreement since 1 January 2011. Setout below are the remaining 16 vessels which are to be delivered between 2011 and 2013 by ourCompany under the Management Agreement as at the Latest Practicable Date:

No. of Expected YearType of Vessel Vessels Shipbuilding Company of Delivery

28,000 DWT MPP Ship 9 Huanghai Shipbuilding Co., Ltd 2011 to 2012

92,500 DWT bulk carrier 3 Taizhou CATIC 2011 to 2012

118,000 DWT bulk carrier 1 Yangzhou Dayang Shipbuilding Co., Ltd 2011

12,000 CBM LPG vessel 1 Yangzhou Dayang Shipbuilding Co., Ltd 2012

82,000 DWT bulk carrier 2 Taizhou CATIC 2012 to 2013

On 18 June 2011, Kaixin (Beijing) entered into a sale and purchase agreement (the “Sale and PurchaseAgreement”) with China National Aero-Technology Import and Export Corporation

(“CATIC”) pursuant to which a fee of RMB28.3 million is payable to Kaixin (Beijing) for, interalia, the provision of project management services, the handling of export procedural matters, and thedelivery of 19 vessels by our Group. The vessels will subsequently be sold by CATIC to a third partybuyer.

The following table shows a list of vessels which are to be delivered by our Group pursuant to the Saleand Purchase Agreement:

Type of Vessel No. of Vessels

Cutter Suction Dredger CSD600 4

Tugboat 1

Landing craft vessel 1

Multi-craft workboat 6

Barge 4

Backhoe Dredger 2

Cutter Suction Dredger CSD1700 1

These vessels are expected to be delivered in 2013.


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11 Clarkson Research Services Limited, World Shipyard Monitor Vol 18. No.3, March 2011. Clarkson Research Services Limitedhas not consented for the purposes of Section 249 of the Securities and Futures Act to the inclusion of the informationreferred to above and is thereby not liable for such information under Sections 253 and 254 of the Securities and Futures Act.Our Company has included the above information in its proper form and context and has not verified the accuracy of suchinformation.

In addition, Taizhou CATIC has renewed its service agreement with AVIC International Beijing forFY2011, pursuant to which a fee of RMB25 million (before sales taxes and surcharges) is payable toAVIC International Beijing by Taizhou CATIC for financial and sales and marketing services to beprovided in 2011 in respect of the latter’s shipbuilding business. Our Group has since entered into anagreement with AVIC International Beijing pursuant to which our Group will provide M&C Services toAVIC International Beijing in order for the latter to fulfil its obligations under the service agreement withTaizhou CATIC. In return, AVIC International Beijing will pay the net fees (after sales taxes andsurcharges of approximately 5.5%) received from Taizhou CATIC to our Group within three businessdays.

Trend information

We expect our revenue and results of operations in FY2011 to be affected by the following principalconsiderations:

� The volume of international trade following the global financial crisis is subject to uncertainty andmay be likely to decline, resulting in a corresponding drop in demand for vessels. The volume ofnew orders received globally since the beginning of 2011 was 58% less than that in 2010.11 Theamount of loans from financial institutions may also be reduced, restricting the ability of shipownersto purchase new ships. This would adversely affect our Company’s ability to secure new orders andexpand internationally. Our Company expects that it may face difficulty in securing new orders, inline with the general industry trend of a decline in new orders globally.

� The value of the RMB relative to the US$ as at the beginning of 2011 has strengthened comparedto the beginning of 2010. Any increase in the value of the RMB relative to the US$ will reduce thevalue of our US$ denominated revenue, as reported in RMB, thereby adversely affecting ouroperating results.

� Our operating expenses are expected to increase due mainly to salary adjustments, additionalheadcount to the sales and marketing team and increased marketing activities.

Save as disclosed above and under the “Risk Factors” and “Management’s Discussion and Analysis andFinancial Condition and Results of Operations” sections of this Information Memorandum, and barringany unforeseen circumstances, our Directors are not aware of any other known recent trends in FY2011or other known trends, uncertainties, demands, commitments or events that are reasonably likely to havea material and adverse effect on our revenue, profitability, liquidity or capital resources, or that wouldcause financial information disclosed in this Information Memorandum to be not necessarily indicative ofour future operating results or financial condition.

BUSINESS STRATEGIES AND FUTURE PLANS

We intend to implement the following business strategies and future plans to grow and expand ourbusiness:

(1) Establish and improve our shipbuilding capabilities and efficiencies

We plan to establish our own shipbuilding capabilities by acquiring existing reputable shipyardswhen suitable opportunities arise. We believe the expansion into shipbuilding and improvementson the manufacturing processes will complement our existing businesses and broaden our revenuestreams.

AVIC International Beijing intends to position our Company as an investment-holding vehicle in theship-trading and shipbuilding industry. The intention is to make long-term strategic investments andacquisitions in this industry globally through our Company.


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After our Company is successfully listed on the SGX-ST, we intend to acquire shipbuilding andrelated businesses from AVIC International and its subsidiaries, including AVIC InternationalBeijing in the near future, subject to relevant governmental and regulatory approvals. Please referto the “Potential Conflicts of Interests” section of this Information Memorandum for furtherinformation on our Company’s plans. The acquisitions, if and when they materialise, are expectedto contribute to the growth of our Company.

We plan to use approximately S$25 million of the net proceeds from the Compliance Placement topartly finance the acquisition of a shipyard.

(2) Establish our research and design capabilities

In order to maximise the potential of the shipbuilding strategies and achieve overall development ofour Company’s shipbuilding business, we intend to acquire or form strategic alliances with shipdesign houses and other business partners in order to develop new vessels to differentiateourselves from our competitors. This will enable us to own proprietary rights in our future shipdesigns and compete more effectively against our competitors. As part of our business strategy, weintend to expand our products/services and value chains in the next few years. We will establishand build up on our capability in ship design to provide better and environmentally-friendlyproducts to customers, and increase the capacity of our manufacturing bases.

(3) Improve on our business model

We will continue to improve on our business model, in particular the financing structure which weare able to package, so as to provide a greater variety of financial products such as financialleasing to our customers. These products/services and various value-added services will boost ourGroup’s competitiveness globally as it aims to satisfy the needs and preferences of a wider rangeof customers worldwide.

(4) Expand our global reach and build our overseas network

AVIC International has already established over 60 overseas offices across the world, and itsbusiness covers over 180 countries and regions. We plan to leverage on AVIC International’sexisting network in order to expand our business activities globally.

(5) Develop more sophisticated and higher value-added vessels

We intend to enhance and develop our design and manufacturing capabilities in order to be able tobuild higher value-added vessels such as LNG carriers, LPG carriers, chemical tankers andoffshore vessels.

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DIRECTORS, EXECUTIVE OFFICERS AND EMPLOYEES

DIRECTORS

Our Directors are entrusted with the responsibility for the overall management of our Group, eachresponsible for different functions. The particulars of our Directors as at the date of this InformationMemorandum are set out below:

Name Age in 2011 Address Designation

Diao Weicheng 48 No. 8, Beichendong Road, Non-ExecutiveChaoyang District, Beijing, the PRC Chairman

Li Jin 59 3-502, Building No. 204, Non-Executive DirectorHuizhongbeili, Chaoyang District, and Deputy ChairmanBeijing, the PRC

Zhang Wanping 39 3-501, Building No. 39, Executive Director andHuayanbeili, Chaoyang District, CEOBeijing, the PRC

Cheng Xuhui 40 2-602, Building No. 14, Shuguangli, Executive DirectorChaoyang District, Beijing, the PRC

Wu Weidong 43 3-8, Building No. 9, Dongjunzhuang, Executive DirectorChaoyang District, Beijing, the PRC

Teng Cheong Kwee 58 16B Margoliouth Road #06-03 Lead IndependentSingapore 258542 Director

Alice Lai Kuen Kan 57 1203 Lippo Centre Tower 2, Independent DirectorAdmiralty, Hong Kong

Chong Teck Sin 56 16 Jalan Kakatua, Independent DirectorSingapore 598533

Information on the business and working experience, education and professional qualifications, if any, andareas of responsibilities of our Directors are set out below:

Mr Diao Weicheng is our Non-Executive Chairman. He has been the president of AVIC InternationalBeijing since March 2008, and is responsible for the overall management of AVIC International Beijing’sbusiness. Prior to joining AVIC International Beijing, he was the vice president of AVIC InternationalHolding Corporation from August 2004 to February 2008 and was incharge of strategic planning, ship-trading and shipbuilding. From 2002 to 2004, Mr Diao was the vicepresident cum director of Shenzhen Pengji Group Limited , a company involved inproperty development and management and other industrial investment activities, where he was incharge of the overall management of the company’s industrial investment and certain property business.From 1995 to 2002, he was the vice president of Shenzhen Investment Limited, a company listed on theHKSE and involved in property development and investment, and was in charge of the overall investmentmanagement of the company’s business. From 1990 to 1995, Mr Diao was the director of the

administration department of AVIC International Shenzhen Company Limited . Prior tojoining the AVIC Group, Mr Diao was a lecturer in business management and economics related coursesin Beijing Administrative College from 1987 to 1990. Mr Diao is a certified senior engineeraccredited by the Shenzhen city government. He graduated from Zhongshan University with aBachelor of Science in 1985, and obtained a Masters in Business Administration and PhD inManagement Science and Engineering from Tongji University in 1996 and 2002 respectively.From 2005 to 2006, Mr Diao was engaged in postdoctoral research on strategic studies in politics inPeking University .

Mr Li Jin is our Non-Executive Deputy Chairman. He has been a director and vice president of AVICInternational Beijing since April 2010. From December 2004 to 2009, Mr Li was the vice president ofChina National Aero-Technology International Supply Corporation . Prior tothis, he was a director at the corporate culture department of AVIC International from April 1997 toNovember 2004. From 1993 to 1997, Mr Li worked for AVIC Equipment Centre (one ofthe branches of the AVIC Group) and was responsible for the general management of the centre. From1975 to 1993, Mr Li was working in the Research Institute of China Ministry of Aviation Industry and hewas the director of its operation planning department from 1986 to 1993. Mr Li graduated with a Diplomain Industrial Economic Management from the Renmin University of China in 1983, and aBachelor of Chinese Literature from the Beijing Normal University in 1985.

Mr Zhang Wanping is our Executive Director and CEO. He is responsible for the overall managementand strategic development of our Group. He was the deputy general manager and chief accountant ofAVIC International Beijing from October 2009 until the Restructuring Exercise, where he was not onlyresponsible for the internal financial affairs of AVIC International Beijing but also assisted the generalmanager in managing the company’s internal affairs and strategic development. Prior to joining AVICInternational Beijing, Mr Zhang was the chief accountant of AVIC International Engineering Co., Ltd

from February 2008 to October 2009. From April 2005 to February 2008, MrZhang was the deputy general manager of the finance department at AVIC International. From 1996 to2005, Mr Zhang was the head of the finance department of AVIC International Trade & EconomicCorporation Ltd . From 1993 to 1996, he was working as a project managerat AVIC International Beijing, assisting with the internal financial affairs and accounting functions of thecompany. He obtained the Certificate of Accounting Professional issued by theMinistry of Finance of the PRC in August 1997 and is a qualified senior economist accredited by ChinaAviation Industry Corporation. Mr Zhang graduated with a Bachelor of Economics from Xiamen University

in 1993 and a Masters in Business Administration from the Chinese University of Hong Kongin 2003.

Mr Cheng Xuhui is our Executive Director in charge of business development and project management.He started his career in 1993 when he joined AVIC International Beijing as an assistant project managerin charge of assisting in the marketing activities relating to newbuilding management and execution of theshipbuilding projects. He was promoted to project manager in June 1996 and senior project manager inMarch 2002, overseeing the marketing activities relating to newbuilding management and execution ofthe shipbuilding projects. He became the vice president of the Shipbuilding Division of AVIC InternationalBeijing in December 2003 and the director of the same division in April 2006, where he was in charge ofthe daily operations of the shipbuilding division. Subsequently, he has worked as assistant to generalmanager cum director of the shipbuilding division since March 2009. Mr Cheng graduated from theBeijing University of Aeronautics and Astronautics with a Bachelor of Engineering in1993. He is also a qualified engineer accredited by AVIC.

Mr Wu Weidong is our Executive Director in charge of administrative and human resource matters. Hehas been appointed as head of the management department of AVIC International Beijing since June2004, and has been responsible for administrative matters. Prior to this, he was a project manager atAVIC International Trade & Economic Corporation Ltd , where he wasinvolved in the execution of export/trading related projects from September 2000 to June 2004. He was a


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project manager at Beijing Jeep Corporation Limited from 1994 to 2000, wherehe was involved in research and development and an assistant engineer at Beijing Heavy Duty TrucksManufacturer from 1991 to 1994, supervising the assembly line. Mr Wu graduatedfrom Tsinghua University with a Bachelor of Engineering in 1991.

Mr Teng Cheong Kwee is currently a non-executive director of Pheim Asset Management (Asia) Pte Ltd.He is also serving as an independent director of several listed companies. He was the head of the riskmanagement & regulatory division of the Singapore Exchange Ltd. from 1999 to 2000. Prior to this, hewas executive vice president at the Stock Exchange of Singapore, responsible for the listings,inspectorate and investigation departments from 1989 to 1999. From 1982 to 1989, Mr Teng was in MAS,where he was initially appointed secretary of the Securities Industry Council. He was later appointed asassistant director in the banking and financial institutions department of MAS from 1985 to 1988, beforebeing appointed as deputy director of the same department in 1988. Mr Teng was working at the Ministryof Finance from 1979 to 1981, where he was seconded to the Securities Industry Council as assistantsecretary. Mr Teng graduated from the University of Newcastle, New South Wales, Australia in 1977 witha Bachelor of Commerce and a First Class Honours in Bachelor of Engineering (Industrial).

Mr Chong Teck Sin is currently an independent director of two companies listed on the SGX-ST.Between April 2004 and March 2010, he was a board member of the Accounting and CorporateRegulatory Authority. Between October 2008 and July 2010, he was also a board member of TheNational Kidney Foundation. Prior to this, he was the group managing director (Commercial) of SeksunCorporation Ltd between 1999 and 2004. He joined Glaxo Wellcome Asia Pacific Pte Ltd as its strategicdevelopment director for the PRC from 1997 to 1999. From 1994 to 1997, he was the general manager(Marketing/Commercial) and subsequently senior general manager (Marketing, Singapore operations andSingapore branch) of China-Singapore Suzhou Industrial Park Development Co., Ltd, the developer ofthe Suzhou Industrial Park. Before that, he was with Standard Chartered Bank from 1989 to 1994 as amanager of the institutional banking services and cross border investment unit, and subsequently aregional business development manager of corporate & institutional banking, Asia Pacific Region. MrChong was with the Economic Development Board from 1986 to 1989 as a senior industry officer/centredirector. He worked as a surveyor for international ship classification society Nippon Kaiji Kyokai from1981 to 1986. Mr Chong graduated with a Bachelor of Engineering from the University of Tokyo in 1981and a Masters of Business Administration from the National University of Singapore in 1987.

Ms Alice Lai Kuen Kan is a controlling shareholder and the managing director of a corporate advisorycompany, Asia Investment Management Limited and a research company, Asia Investment ResearchLimited since 1999 and 2003 respectively, both of which are licensed corporations by the Securities andFutures Commission of Hong Kong. She is also serving as an independent director of several listedcompanies in Hong Kong. Ms Kan has been a responsible officer for Lotus Asset Management Limited,which is principally involved in investment management, for research support since 2005. From 1997 to2002, Ms Kan was the managing director of Asia Financial Capital Limited, where she was involved incorporate finance related advisory and investment management business in Hong Kong and the PRC.From 1995 to 1997, she was an executive director at Creditanstalt Capital Limited and assistant generalmanager at Creditanstalt-Bankverein, Hong Kong branch. Both of these companies are involved inmerchant banking and corporate finance activities. Ms Kan was an executive director at ING CapitalMarkets (Hong Kong) Limited, principally involved in merchant banking and corporate finance activities,from 1992 to 1995. She was an associate director at Sun Hung Kai International Limited, a companyinvolved in corporate finance activities, from 1986 to 1992. Prior to this, she was the group accountant ofa trading and investment holding company, G.S. Yuill & Company Pty Ltd, from 1984 to 1986, in charge ofthe overall accounting and financial control and management of the company. Between 1981 and 1984,Ms Kan was the financial controller of Sun Hey Investment Company Limited, which is an investmentholding company. She was also the financial controller of Hip Yick Company Limited, a company which isinvolved in the manufacturing of garments, from 1980 to 1981 and the financial controller of the GulfeastGroup, which is principally involved in shipping, between 1979 and 1980. From 1977 to 1979, Ms Kanwas the financial controller of a trading company, Mauri Brother and Thompsons Company Limited. MsKan was an assistant assessor at the Inland Revenue Department, Hong Kong Government from 1975 to1977. Ms Kan is a fellow member of the Association of Certified Accountants, the Hong Kong Institute of


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Directors and the Australian Society of Certified Practising Accountants, and an associate member of theHong Kong Society of Accountants. She is also a licensed responsible officer under the Securities andFutures Ordinance with the Securities and Futures Commission of Hong Kong.

None of our Directors are related to each other or to any of our Executive Officers or SubstantialShareholder.

EXECUTIVE OFFICERS

Our Executive Officers as at the date of this Information Memorandum comprise our Executive Directors,Mr Zhang Wanping, Mr Cheng Xuhui, Mr Wu Weidong and our Financial Controller, Ms Li Ying. Theparticulars of our Executive Directors are set out in the “Directors” section above, and the particulars ofour Financial Controller as at the date of this Information Memorandum are set out below:

Name Age in 2011 Address Designation

Li Ying 36 Block 4, Teban Garden, #09-24, Financial ControllerSingapore 600004

Information on the business and working experience, education and professional qualifications, if any, ofour Financial Controller are set out below:

Ms Li Ying is our Financial Controller and is responsible for overseeing the finance and accountingfunctions of our Group. She was a finance manager at Ferrell International Limited, heading the financedepartment of the company since December 2010, and she relinquished the role to join us on 27 July2011. From May 2008 to December 2010, Ms Li was a finance manager at JES International HoldingsLimited, responsible for preparing statutory and SGX-ST reporting of the company and the group, andassisting the CFO in financial, accounting, internal controls, taxation matters and investor relations of thegroup. She joined BDO LLP as an audit assistant in December 2005, and left the firm as an audit seniorin May 2008. From November 1999 to November 2005, Ms Li worked at Pacific International Lines (Pte)Ltd, where she joined as an account officer and was over time promoted to an assistant accountingexecutive, primarily responsible for leading a finance team to review revenue reporting and collectionsfrom overseas agents/subsidiaries and review related accounting records. Ms Li is a member of theInstitute of Certified Public Accountants of Singapore and a Fellow of the Association of CharteredCertified Accountants, United Kingdom. Ms Li graduated from Oxford Brookes University with a Bachelorof Science in Applied Accounting in 2008.

To the best of our Directors’ knowledge and belief, none of our Directors or Executive Officers had beenselected pursuant to any arrangement or understanding with a Substantial Shareholder, customer orsupplier of our Company.


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MANAGEMENT REPORTING STRUCTURE

Our management reporting structure as at the Latest Practicable Date is set out below:

EMPLOYEES

As at 31 December 2010, we had 29 full-time employees. The increase in the number of our employeesfrom 19 employees as at 31 December 2008 to 29 employees as at 31 December 2010 was mainly dueto recruitment of additional sales and marketing personnel in order to support the increased marketingactivities, such as marketing calls, participation in trade fairs and exhibitions. As at 31 December 2010,all of our employees are based in the PRC. Our Financial Controller who joined us on 27 July 2011 isbased in Singapore.

Our employees are unionised. We believe that our management enjoys a cordial and harmonious workingrelationship with our employees and this is expected to continue. There has not been any incidence ofwork stoppages or labour disputes which affected our operations during the Period Under Review.

We maintain employee benefit plans such as contributions to pension, unemployment insurance, medicalinsurance, industrial injury insurance, birth insurance and housing pension for our employees as requiredunder relevant PRC laws.

Board of Directors

Diao Weicheng Non-Executive Chairman

Li Jin Non-Executive

Deputy Chairman

Cheng Xuhui Executive Director

Business Development and Project Management

Wu Weidong Executive Director

Administration and HumanResource

Zhang Wanping Executive Director and

CEO

Li Ying Financial Controller


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The breakdown of our employees by function in FY2008, FY2009 and FY2010 are as follows:

As at 31 December

Function 2008 2009 2010

Management(1) 3 3 5Finance and administration 4 4 4Sales and marketing 12 16 20

Total 19 23 29

Note:

(1) Mr Diao Weicheng, Mr Li Jin and our Executive Directors are included under management.

REMUNERATION OF DIRECTORS, EXECUTIVE OFFICERS AND RELATED EMPLOYEES

Directors and Executive Officers

The remuneration paid to each of our Directors and Executive Officers for services rendered to us in allcapacities in FY2009 and FY2010, and the estimated remuneration payable for FY2011, on an aggregatebasis in bands of S$250,000 were or are as follows:

FY2011FY2009 (1)(2) FY2010 (1)(2) (estimated) (2)

Directors

Diao Weicheng N.A. N.A. Band ILi Jin – N.A. Band IZhang Wanping N.A. N.A. Band ICheng Xuhui Band I Band I Band IWu Weidong N.A. N.A. Band ITeng Cheong Kwee – – Band IChong Teck Sin – – Band IAlice Lai Kuen Kan – – Band I

Executive Officer

Li Ying – – Band I

Notes:

(1) For FY2009 and FY2010, save for Mr Cheng Xuhui, the remuneration of the other Directors, namely Mr Diao Weicheng, MrZhang Wanping and Mr Wu Weidong, was for services rendered to AVIC International Beijing as a whole, including AVICShipbuilding Management Business. Mr Li Jin only joined AVIC International Beijing in FY2010.

(2) Band I: remuneration of up to S$250,000 per annum.

Pension or retirement benefits

Save for the compulsory contributions to pension funds required under PRC law, we do not set aside oraccrue any pension or retirement benefits for any of our employees.


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Related Employees

None of our employees are related to our Directors and Substantial Shareholders by blood or marriage.

Any new employment of related employees and the proposed terms of their employment will be subject tothe review and approval of our Nominating Committee. In the event that a member of our RemunerationCommittee or Nominating Committee is related to the employee under review, he will abstain from thereview. The remuneration of employees who are related to our Directors and Substantial Shareholders (ifany) will be reviewed annually by our Remuneration Committee to ensure that their remunerationpackages are in line with our staff remuneration guidelines and commensurate with their respective jobscopes and level of responsibilities. Any bonuses, pay increases and/or promotions for these relatedemployees will also be subject to the review and approval of our Remuneration Committee.

SERVICE AGREEMENTS

On 1 July 2011, our Company entered into separate service agreements (the “Service Agreements”)with each of our Executive Directors, namely, Mr Zhang Wanping, Mr Cheng Xuhui and Mr Wu Weidong,for an initial term of three years commencing from the date of admission of our Company to the OfficialList of the SGX-ST, which will continue thereafter until terminated by not less than six months’ notice inwriting served by either party on the other. Pursuant to the terms of their respective Service Agreements,our Executive Directors are entitled to an annual basic salary as follows:

Executive Director Annual basic salary (S$)

Zhang Wanping 180,000Cheng Xuhui 180,000Wu Weidong 144,000

Mr Zhang Wanping, Mr Cheng Xuhui and Mr Wu Weidong will devote all their normal working hours tothe interests and affairs of our Group in the discharge of their duties. Following the listing of ourCompany, Mr Zhang Wanping will not be holding any executive position in AVIC International Beijing.

In addition, our Company will contribute to compulsory pension plans as required under relevant PRCand/or Singapore laws. The annual basic salaries of the Executive Directors will be reviewed andapproved by the Board of Directors (as recommended by the Remuneration Committee). Directors’ feesdo not form part of the terms of the Service Agreements as these require the approval of Shareholders inour Company’s annual general meeting. The bonus to be paid to the Executive Directors will bedetermined by our Remuneration Committee in their absolute discretion.

We may terminate their respective Service Agreements prior to the expiry of the term without any noticeor payment in lieu of notice if any of these Executive Directors, in the reasonable opinion of the Board,shall be guilty of any gross misconduct, breaches any of the material terms of the Service Agreement,commits any act of criminal breach of trust or dishonesty, becomes bankrupt or makes any arrangementor composition with his creditors generally. None of these Executive Directors will be entitled to claim anycompensation or damages for or in respect or by reason of such termination.

All travelling, hotel, entertainment and other expenses reasonably incurred by the Executive Directors inthe process of discharging their duties on behalf of our Group will be borne by our Company.


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Pursuant to their respective Service Agreements, each Executive Director shall not during the period ofhis employment with our Company and for a period of 24 months upon his ceasing to be an ExecutiveDirector in Singapore, Hong Kong, the PRC and any country in which our Group has operations orcarries on business, whether directly or indirectly, except with our Company’s prior written consent:

(i) either on his own account or for any other person directly or indirectly solicit, interfere with orendeavour to entice away from any member of our Group any person who to his knowledge is nowor has been a client, customer or employee of, or in the habit of dealing with, any member of ourGroup;

(ii) either alone or jointly with or as a manager, agent for or employee of any person, directly orindirectly carry on or be engaged or concerned or interested in any business which shall be indirect or indirect competition with the business carried on by any member of our Group Companyat the date of the Service Agreement or as at the time of cessation of employment (as the casemay be) (the “Relevant Business”); and

(iii) act as a director or otherwise of any other person, firm or company engaging directly or indirectlyin the Relevant Business which is in direct or indirect competition with the business of any memberof our Group.

Save as disclosed above, there are no existing or proposed service contracts entered or to be enteredinto by our Directors with our Company or any of our subsidiaries which provide for benefits upontermination of employment, and there are no other existing or proposed service agreements between ourCompany or our subsidiaries and any of our Directors.

BOARD PRACTICES

Term of office

Each of our Directors has served in office in our Company since the following dates:

Name Date

Diao Weicheng 11 November 2010Li Jin 10 March 2011Zhang Wanping 11 November 2010Cheng Xuhui 10 March 2011Wu Weidong 10 March 2011Teng Cheong Kwee 18 April 2011Chong Teck Sin 18 April 2011Alice Lai Kuen Kan 18 April 2011

Our Articles of Association provide that our Board of Directors shall consist of not less than two Directors.Our Directors are appointed by our Shareholders at a general meeting and an election of directors is heldannually. One-third (or the number nearest to one-third) of our Directors are required to retire from officeat each annual general meeting. Further, all our Directors are required to retire from office at least oncein every three years. However, a retiring director is eligible for re-election at the meeting at which heretires. Please refer to the “Summary of Memorandum of Association and Selected Articles of Associationof our Company” in Appendix B of this Information Memorandum for more details on the appointment andretirement of directors.

CORPORATE GOVERNANCE

Our Directors recognise the importance of corporate governance and the offering of high standards ofaccountability to our Shareholders. Accordingly, our Directors have established an Audit Committee, aRemuneration Committee and a Nominating Committee.


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Audit Committee

Our Audit Committee comprises Mr Teng Cheong Kwee, Mr Chong Teck Sin and Ms Alice Lai Kuen Kan.The Chairman of the Audit Committee is Mr Chong Teck Sin.

Our Audit Committee will assist our Board in discharging its responsibility to safeguard our assets,maintain adequate accounting records, and develop and maintain effective systems of internal control,with the overall objective of ensuring that our management creates and maintains an effective controlenvironment in our Group.

Our Audit Committee will meet periodically to perform the following functions:

(a) review with the external auditors the audit plan, their evaluation of the system of internalaccounting controls, their letter to management and the management’s response. It is intended thatthe Audit Committee shall, at least once a year, have a separate session with the external auditors;

(b) review the half yearly and annual, and quarterly if applicable, financial statements and resultsannouncements before submission to our Board for approval, focusing in particular on changes inaccounting policies and practices, major risk areas, significant adjustments resulting from the audit,compliance with accounting standards and compliance with the Listing Manual and any otherrelevant statutory or regulatory requirements;

(c) review the internal control procedures implemented by our Group and ensure co-ordinationbetween the external auditors and our management, and review the assistance given by ourmanagement to the auditors, and discuss problems and concerns, if any, arising from audits, andany matters which the auditors may wish to discuss (in the absence of our management, wherenecessary);

(d) review and discuss with the external auditors any suspected fraud or irregularity, or suspectedinfringement of any relevant laws, rules or regulations, which has or is likely to have a materialimpact on our Group’s operating results or financial position, and our management’s response;

(e) consider and recommend the appointment or re-appointment of the external auditors and mattersrelating to the resignation or dismissal of the auditors;

(f) review interested person transactions (if any) falling within the scope of Chapter 9 of the ListingManual;

(g) review the procedures by which employees of our Group may, in confidence, report to theChairman of the Audit Committee, possible improprieties in matters of financial reporting or othermatters and ensure that there are arrangements in place for independent investigations and follow-up actions in relation thereto;

(h) review potential conflicts of interests, if any;

(i) undertake such other reviews and projects as may be requested by our Board, and report to ourBoard its findings from time to time on matters arising and requiring the attention of our AuditCommittee;

(j) generally undertake such other functions and duties as may be required by statute or the ListingManual, or by such amendments as may be made thereto from time to time;

(k) to approve and review all hedging policies and instruments to be implemented by our Group, if any; and

(l) review and approve the appointment of the CFO to the extent that the finance and accountingfunction is appropriately resourced.


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Our Audit Committee will meet, at a minimum, on a quarterly basis every year. Apart from the dutieslisted above, our Audit Committee shall commission and review the findings of internal investigations intomatters where there is any suspected fraud or irregularity, or failure of internal controls or infringement ofany Singapore law, rule or regulation which has or is likely to have a material impact on our operatingresults and/or financial position. In the event that a member of our Audit Committee is interested in anymatter being considered by our Audit Committee, he will abstain from reviewing that particular transactionor voting on that particular resolution.

Our Audit Committee has reviewed the appointment of Ms Li Ying as our Financial Controller, and is ofthe opinion that she is suitable for such appointment, taking into account her working experience,educational and professional qualifications, bilingual capabilities and familiarity with the shipping andshipbuilding industries as a result of her past working experience. In particular, she is familiar with theshipping industry through her work at Pacific International Lines (Pte) Ltd and the shipbuilding industrythrough her in-depth involvement with the costing, financial reporting internal controls and investorrelations of JES International Holdings Limited. Please refer to the “Directors, Executive Officers andEmployees – Executive Officers” section of this Information Memorandum for further details on Ms Li’sbusiness and working experience, education and professional qualifications.

Although Ms Li only joined us since 27 July 2011, she will be guided by our CEO, Mr Zhang Wanping,who has been managing the financial affairs and accounting functions in various companies within theAVIC International Group since 1993. In particular, he has been the deputy general manager and chiefaccountant of AVIC International Beijing since 2009, and the chief accountant of AVIC InternationalEngineering Co., Ltd from 2008 to 2009. He was also the deputy general managerof the finance department at AVIC International from 2005 to 2008. Please refer to the “Directors,Executive Officers and Employees – Directors” section of this Information Memorandum for further detailson Mr Zhang’s business and working experience, education and professional qualifications.

Further, Ms Li will be supported by a team of four staff stationed in the PRC, two of which have 20 yearsof experience in the accounting and finance field and have obtained the Certificate of AccountingProfessional issued by the Ministry of Finance of the PRC, while the other two haveabout two years of relevant experience. The Company also intends to beef up the finance team inSingapore by recruiting experienced accounting and finance personnel in the near future.

Remuneration Committee

Our Remuneration Committee comprises Mr Teng Cheong Kwee, Mr Chong Teck Sin and Ms Alice LaiKuen Kan. The Chairman of the Remuneration Committee is Ms Alice Lai Kuen Kan.

Our Remuneration Committee will recommend to our Board a framework of remuneration for theDirectors and Executive Officers, and determine specific remuneration packages for each ExecutiveDirector. The recommendations of our Remuneration Committee shall be submitted for endorsement bythe entire Board. All aspects of remuneration, including but not limited to directors’ fees, salaries,allowances, bonuses, options and benefits in kind shall be covered by our Remuneration Committee. Inaddition, our Remuneration Committee will perform an annual review of the remuneration of employeesrelated to our Directors and Substantial Shareholders to ensure that their remuneration packages are inline with our staff remuneration guidelines and commensurate with their respective job scopes and levelof responsibilities. They will also review and approve any bonuses, pay increases and/or promotions forthese employees. Our Remuneration Committee is also responsible for ensuring that the disclosure of theremuneration of these employees in our annual report will be in accordance with the applicablerequirements of the Listing Manual, including the Code of Corporate Governance 2005. Each member ofthe Remuneration Committee shall abstain from voting on any resolutions in respect of his remunerationpackage or that of employees related to him.


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Nominating Committee

Our Nominating Committee comprises Mr Diao Weicheng, Mr Teng Cheong Kwee, Mr Chong Teck Sinand Ms Alice Lai Kuen Kan. The Chairman of the Nominating Committee is Mr Teng Cheong Kwee.

Our Nominating Committee will be responsible for:

(a) reviewing and recommending the nomination or re-nomination of the directors of our Company,having regard to their contribution and performance;

(b) determining on an annual basis whether or not a director of our Company is independent;

(c) assessing the performance of the directors and contribution of each director to the effectiveness ofthe board of directors of our Company; and

(d) reviewing and approving any new employment of related persons and the proposed terms of theiremployment.

Our Nominating Committee will recommend a framework for the evaluation of the Board’s and individualDirector’s performance for the approval of the Board. Each member of our Nominating Committee shallabstain from voting on any resolutions in respect of the assessment of his performance or re-nominationas Director.

Internal Audit Function

Our Company, being a subsidiary of AVIC International Kairong, which is in turn a wholly-ownedsubsidiary of AVIC International Beijing, will have to follow the internal control requirements of AVICInternational Beijing and comply with the relevant rules and regulations under PRC law.

AVIC International Beijing has put in place the following internal control measures with respect to itssubsidiaries:

(i) AVIC International Beijing has obtained ISO9001:2008 Quality Management Certificate andconducts the internal audit and external audit on its subsidiaries in accordance with the ISO qualitymanagement system requirements on an annual basis;

(ii) in accordance with its internal control policy, AVIC International Beijing conducts audit on itsoverseas subsidiaries and investments annually, with focus on their internal control procedures,financial management and reporting system, among other things; and

(iii) to mitigate potential financial and legal risks, AVIC International Beijing has put in placeprocedures to review major contracts as well as the framework and approving limits for makingpayments.

As overseas subsidiaries of AVIC International Beijing, both AVIC International Kairong and our Companywill be subject to the above internal audit conducted by AVIC International Beijing accordingly, which isconducted by internal auditors from within its organisation and/or qualified external parties. Following theListing, the Audit Committee will review the effectiveness of the existing internal audit function andrecommend additional measures, including the appointment of independent Singapore certified practicingaccountants for the review of the internal control functions of our Group, if necessary, in order to enhanceour Group’s accounting and financial reporting, control and compliance functions.


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INTERESTED PERSON TRANSACTIONS

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In general, transactions between our Group and any of its interested persons (namely, the Directors orControlling Shareholders of our Company or the Associates of such Directors or ControllingShareholders) are known as interested person transactions. The following discussion on materialinterested person transactions for the Period Under Review and the period from 1 January 2011 to theLatest Practicable Date (collectively, the “Relevant Period”) is based on our Group and interestedpersons as construed accordingly.

Save as disclosed below and under the “Restructuring Exercise” section of this InformationMemorandum, none of our Directors, Controlling Shareholders or their respective Associates (collectivelyreferred to as “Interested Persons”) has any interest in any material transactions undertaken by ourGroup for the Relevant Period.

PAST TRANSACTIONS

1. Service agreement with Taizhou CATIC

On 10 February 2010, AVIC International Beijing entered into a service agreement with TaizhouCATIC. Under the service agreement, a fee of approximately RMB25.5 million(1) was payable toAVIC International Beijing by Taizhou CATIC for financial and sales and marketing servicesprovided in 2010 in respect of the latter’s shipbuilding business. The fee of approximately RMB25.5million was determined based on the actual services and work done in FY2010. The fee consistsof (i) a fixed fee of RMB3.2 million and RMB4.7 million for marketing services and projectmanagement respectively; (ii) approximately RMB5.0 million for arranging financing facilities; and(iii) approximately RMB12.6 million for securing two shipbuilding contracts. The fee was arrived aton an arms’ length basis.

AVIC International Beijing owns 45% of the equity interest in Taizhou CATIC pursuant to a jointventure it entered into with Taizhou Kouan in 2007.

Note:

(1) The gross fee before sales taxes and surcharges of approximately 5.5% was RMB27 million.

PRESENT AND ON-GOING TRANSACTIONS

1. Management agreement with AVIC International Beijing

On 29 June 2011, our Company entered into the Management Agreement with AVIC InternationalBeijing, pursuant to which our Company agreed to provide M&C Services for the OutstandingProjects with effect from 1 January 2011 until the date when the outstanding order books arefulfilled, for an annual fee of RMB28.0 million (before sales taxes and surcharges of approximately5.5%). The fee is payable quarterly and will be subject to adjustments as may be agreed uponbetween the parties, depending on the progress of the construction of the vessels. As at the LatestPracticable Date, the fees for the first two quarters net of expenses paid by AVIC InternationalBeijing on behalf of the Group is still outstanding and will be paid within 14 days of this InformationMemorandum.

The fee of RMB28.0 million was arrived at based on the order book of AVIC International Beijingas at the end of FY2010. The total revenue to be recognised from the existing contracts relating tothe Outstanding Projects is estimated to be approximately RMB70 million, of which approximatelyRMB56 million (or 80%) will be payable to our Company as management fees under theManagement Agreement over a two-year period. The terms of the Management Agreement are onnormal commercial terms and are not prejudicial to the interests of our Company and our minorityShareholders. This fee sharing arrangement was arrived at on an arm’s length basis throughnegotiation and mutual agreement after considering:

(a) AVIC International Beijing is a party to the shipbuilding contracts and has to bear all therisks and responsibilities under the contracts;

(b) AVIC International Beijing has provided its own banking facilities for the issuance of bankguarantees; and

(c) that the bulk of services under the shipbuilding contracts will be carried out by our Companypursuant to the Management Agreement.


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Our Shareholder has approved, inter alia, the proposal to allow our Company to enter into theManagement Agreement with AVIC International Beijing by means of a written resolution passedon 1 July 2011. The Management Agreement is a transitional arrangement which aims to ensure asmooth completion of the Outstanding Projects following the Restructuring Exercise and will not berenewed after it has lapsed. Going forward, all new shipbuilding contracts secured after theCommencement Date will be entered into directly by our Group.

As the provision of M&C Services under the Management Agreement will not constitute recurrenttransactions of a revenue or trading nature or those necessary for its day-to-day operations, ourCompany will not be seeking a general mandate from Shareholders for recurrent transactions withinterested persons pursuant to Rule 920(1) of the Listing Manual.

2. Service agreement with AVIC International Beijing

On 28 February 2011, Taizhou CATIC renewed its service agreement with AVIC InternationalBeijing. Under the service agreement, a fee of RMB25 million (before sales taxes and surchargesof approximately 5.5%) is payable to AVIC International Beijing by Taizhou CATIC for financial andsales and marketing services to be provided in 2011 in respect of Taizhou CATIC’s shipbuildingbusiness. The fee payable is an estimate based on the scope of work and past years’ experience.The actual amount of fees payable will be determined on an arm’s length basis and settledquarterly in arrears. The financial and sales and marketing services to be provided includearranging banking facilities, conducting marketing activities in overseas markets, seeking outpotential shipowners, securing shipbuilding contracts and handling administrative matters relatingto export of vessels and import of shipbuilding machinery and equipment.

On 3 August 2011, our Group entered into an agreement with AVIC International Beijing, pursuantto which our Group will provide M&C Services to AVIC International Beijing in order for the latter tofulfil its obligations under the service agreement with Taizhou CATIC. In return, AVIC InternationalBeijing will pay the net fees (after sales taxes and surcharges of approximately 5.5%) receivedfrom Taizhou CATIC to our Group within three business days. The service agreement is for a termof one year.

The service agreement between AVIC International Beijing and Taizhou CATIC will not be renewedafter it has lapsed, and instead, will be entered into directly between our Group and Taizhou CATICfor FY2012, subject to the needs of Taizhou CATIC, our Group’s capacity and the terms andconditions of the agreement to be entered into between the parties.

3. Sale and purchase agreement with China National Aero-Technology Import and ExportCorporation

On 18 June 2011, Kaixin (Beijing) entered into a sale and purchase agreement (the “Sale andPurchase Agreement”) with China National Aero-Technology Import and Export Corporation

(“CATIC”) pursuant to which a fee of RMB28.3 million is payable toKaixin (Beijing) for, inter alia, the provision of project management services, the handling of exportprocedural matters, and the delivery of 19 vessels by our Group. The vessels will subsequently besold by CATIC to a third party buyer.

The fee payable is determined based on the actual cost of the vessels and arrived at on an arms-length basis. The total fee is payable to Kaixin (Beijing) within 15 days of receipt of milestonepayments received by CATIC on the sale of the vessels to the third party buyer. The terms of theSale and Purchase Agreement are on normal commercial terms and are not prejudicial to theinterests of our Group and our minority Shareholders.

All of the above transactions between our Group and each of AVIC International Beijing and CATIC werearrived at on an arm’s length basis and on normal commercial terms. We may enter into similaragreements with CATIC after the admission of our Company to the Official List of the SGX-ST, and willsubject all such transactions to the “Review Procedures for Future Interested Person Transactions” set outbelow and Chapter 9 of the Listing Manual.


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REVIEW PROCEDURES FOR FUTURE INTERESTED PERSON TRANSACTIONS

Our Audit Committee will review all future interested person transactions to ensure that they are carriedout on normal commercial terms, which are generally no more favourable than those extended tounrelated third parties, and are not prejudicial to the interests of our Company and our minorityShareholders. They will adopt the following procedures when reviewing such interested persontransactions:

(i) When purchasing items from or engaging the services of an interested person, two otherquotations from non-interested persons will be obtained (where available) for comparison to ensurethat the interests of minority Shareholders are not disadvantaged. The purchase price or fee forservices shall not be higher than the most competitive price or fee of the two other quotations fromnon-interested persons, taking into account all pertinent factors, including but not limited to quality,delivery time and track record;

(ii) When selling items or supplying services to an interested person, the price and terms of othersuccessful sales of a similar nature to non-interested persons will be used in comparison to ensurethat the interests of minority Shareholders are not disadvantaged. The sale price or fee for thesupply of services shall not be lower than the lowest sale or fee of the two other successfultransactions with non-interested persons; and

(iii) When renting properties from or to an interested person, the directors of our Company shall takeappropriate steps to ensure that such rent is commensurate with the prevailing market rates,including adopting measures such as making relevant enquiries with landlords of similar propertiesand obtaining necessary reports or reviews published by property agents (including anindependent valuation report by a property valuer, where considered appropriate). The amountpayable shall be based on the most competitive market rental rate of similar properties in terms ofsize and location, based on the results of the relevant enquiries.

Transactions falling within the above categories, if any, will be reviewed at least quarterly by our AuditCommittee to ensure that they are carried out on normal commercial terms and in accordance with theprocedures outlined above. All relevant non-quantitative factors will also be taken into account. Suchreview includes the examination of the transaction and its supporting documents or such other datadeemed necessary by our Audit Committee. Our Audit Committee may request for any additionalinformation pertaining to the transaction under review from independent sources, advisers or valuers asthey deem fit.

In the event that a member of the Audit Committee is interested in any interested person transaction, hewill abstain from reviewing that particular transaction.

In addition, the board of directors of our Company will also ensure that all disclosure, approval and otherrequirements on interested person transactions, including those required by prevailing legislation, theListing Manual and relevant accounting standards, are complied with.

Our Audit Committee shall review from time to time such guidelines and procedures to determine if theyare adequate and/or commercially practicable in ensuring that transactions between us and interestedpersons are conducted on normal commercial terms.

Our Audit Committee is of the view that the methods and procedures for determining transaction prices,as set out above, are sufficient to ensure that our Group’s transactions with interested persons are onnormal commercial terms which will not be prejudicial to the interests of our Company and our minorityShareholders.

POTENTIAL CONFLICTS OF INTERESTS

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Save as disclosed below and under the “Restructuring Exercise” and “Interested Person Transactions”sections of this Information Memorandum, during the Relevant Period:

(a) none of our Directors, Controlling Shareholders or their respective Associates has any interest,direct or indirect, in any material transactions to which our Company or any of our subsidiaries wasor is a party;

(b) none of our Directors, Controlling Shareholders or their respective Associates has any interest,direct or indirect, in any entity carrying on the same business or dealing in similarproducts/services as our Group; and

(c) none of our Directors, Controlling Shareholders or their respective Associates has any interest,direct or indirect, in any enterprise or company that is our Group’s customer or supplier of goods orservices.

Apart from AVIC International Beijing, AVIC International has three other subsidiaries engaged in theship-trading and shipbuilding industry, namely AVIC International Xiamen, AVIC International Shanghaiand AVIC International Guangzhou (AVIC International Xiamen, AVIC International Shanghai and AVICInternational Guangzhou collectively referred to hereinafter as the “Remaining Subsidiaries”). AVICInternational holds 100% of the equity interest in each of the Remaining Subsidiaries. The principalbusinesses of the Remaining Subsidiaries involve machinery, the import and export of electronic productsand investment-holding, with only a small portion of their businesses involved in M&C Services. AVICInternational Xiamen’s business focus is on offshore vessels, AVIC International Shanghai focuses ondevelopment of mid to high-end chemical tankers, in particular small to medium-sized LPG and LNGships, while AVIC International Guangzhou’s business strategy is to invest in shipyards specialising inhandsize bulk carriers and/or ferries as and when appropriate opportunities arise. In particular, AVICInternational Shanghai currently has an interest in a shipyard with a capacity of 200,000 DWT.

The Proposed Internal Restructuring, along with the acquisitions of other subsidiaries of the AVIC Groupby CATIC Shenzhen, has recently been approved by the SASAC. Pursuant to the Proposed InternalRestructuring, CATIC Shenzhen will acquire, inter alia, the entire equity interest of each of AVICInternational Beijing, AVIC International Guangzhou and AVIC International Xiamen. AVIC InternationalShanghai will be acquired by CATIC Shenzhen at a later stage subject to relevant approvals received.CATIC Shenzhen is a subsidiary of AVIC International which is listed on the HKSE.

While it appears that there are potential avenues for conflicts of interests arising from similar businessesundertaken by the Remaining Subsidiaries, our Group has taken measures to mitigate the potentialconflicts of interests, and which, in the view of our Directors, could safeguard the interests of our Group.

AVIC International and AVIC International Beijing have given an undertaking to our Group (the“Undertaking”) that:

(a) all future activities and business of AVIC International and AVIC International Beijing relating toship-trading, including without limitation thereto design, procurement and construction (by thirdparties) of ships, newbuilding management and marine finance (the “Ship-trading RelatedBusinesses”), will be referred to and undertaken by and through our Group with effect from theCommencement Date, while the activities and business of (i) AVIC International relating toshipbuilding and (ii) the Remaining Subsidiaries relating to the Ship-Trading Related Businessesand shipbuilding will be consolidated at our Group level as soon as possible, but in any eventwithin:

(A) one year of the Listing, for all Ship-Trading Related Businesses other than shipbuilding; and

(B) two years of the Listing, for the existing shipbuilding business,

in accordance with paragraph (b), save that the activities and business of AVIC InternationalBeijing relating to shipbuilding shall be referred to and undertaken by and through our Group notlater than 31 December 2012;

(b) subject to the requirements under the PRC laws and regulations, all interests of the AVICInternational Group in any business or assets engaged in or connected to the ship-trading andshipbuilding industry, including but not limited to its shipyards and clients (the “Core Business”)will be offered for transfer to our Group on normal commercial terms and terms which are notprejudicial to the interests of our Company and its minority shareholders, at a price based on anindependent valuation, as soon as possible, but in any event within:

(A) one year of the Listing for all Ship-Trading Related Businesses other than shipbuilding, or

(B) two years of the Listing for the shipbuilding business;

(c) in accordance with paragraph (b) above, subject to requirements under the PRC laws andregulations, all acquisitions of shares, business or assets in the Core Business by AVICInternational and/or AVIC International Beijing on or after the Commencement Date shall beacquired through our Group. If any memorandum of understanding or other preliminary letters ofintent has been entered into on or after the Commencement Date by AVIC International and/orAVIC International Beijing, we shall procure that the definitive agreement shall be entered into byand for the benefit of our Group and shall assist our Group in completing those acquisitions assoon as possible. From the date of the successful transfer of the relevant subsidiary’s interest inthe Core Business in accordance with paragraph (b) or the date falling:

(A) one year from the Listing for all Ship-Trading Related Businesses other than shipbuilding, or

(B) two years from the Listing for the shipbuilding business,

the preceding two sentences shall apply, mutatis mutandis, to the Remaining Subsidiaries; and

(d) subject to paragraph (b) above, on or after the Commencement Date, AVIC International and AVICInternational Beijing shall not carry on, be engaged or be interested in a capacity (either solely orjointly with or on behalf of any person, firm or corporation) which competes with our Group inrespect of the Core Business in any country. From the date of the successful transfer of therelevant subsidiary’s interest in the Core Business in accordance with paragraph (b) or the datefalling:

(A) one year from the Listing for all Ship-Trading Related Businesses other than shipbuilding, or

(B) two years from the Listing for the shipbuilding business,

the preceding sentence shall apply, mutatis mutandis, to the Remaining Subsidiaries.

According to the latest Catalogue of Foreign Investment Industries promulgated by the NationalDevelopment and Reform Commission and the MOC on 31 October 2007, which became effective on 1December 2007, and the State Shipping Industry Mid-and-Long-Term Development Plan (2006-2015),some ship-related industries in the PRC, including the shipbuilding industry, are classified as restrictedindustries where foreign ownership is allowed only up to 49.0%.

To the extent that our Group is not able to legally acquire and hold part or all of the interests of the CoreBusiness of the AVIC International Group pursuant to paragraphs (a) to (c) above, our Company intendsto acquire the maximum equity interest in the relevant companies which carry on the Core Business aspermitted by the relevant PRC laws. In relation to the remaining equity interest, our Company intends toenter into a series of contracts through AVIC International Beijing (the “Contractual Arrangements”),that will provide our Group with effective operational control over and (to the extent permitted by PRClaw) a right to acquire the equity interests in such companies. These may include managementconsultancy service agreements, assignment agreements, equity interests pledge agreements, exclusivepurchase agreements, and powers of attorney.

The Contractual Arrangements will collectively enable our Company, through AVIC International Beijing,to receive the income and other economic benefits accruing to the Core Business through (i) the right toreceive the management consultancy service fees, (ii) the acquisition (if and when the PRC law allowsour Company to hold more than a 49.0% equity interest in the relevant companies which carry on theCore Business) of all the equity interest in such companies, and (iii) the right to govern the financial andoperating policies as well as, in substance, all of the voting rights of such companies.


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As at the date of this Information Memorandum, taking into consideration (i) the intention to acquire up to49.0% interest in the Core Business of the AVIC International Group as allowed by the relevant PRCregulations, and (ii) failing which, the implementation of the Contractual Arrangements, we do not foreseeany legal obstacles with regards to us acquiring the effective operational control over such businessesand thereby allowing us to receive income and other economic benefits accruing to the Core Business aswe intend to structure the proposed acquisitions to be in compliance with the relevant PRC regulatoryrequirements, and in particular, those of New M&A Regulations (if applicable). Please refer to the “RiskFactors – Changes in the New M&A Regulations by the PRC government could adversely affect ourfuture acquisitions of PRC businesses” and “Risk Factors – If the PRC government takes the view thatthe Contractual Arrangements do not comply with PRC government restrictions on foreign investment inthe shipbuilding industry, our business, financial condition, results of operations and prospects could bematerially and adversely affected” sections of this Information Memorandum for risks involved in futureacquisitions pursuant to the Undertaking.

Any acquisitions of the Core Business by our Group pursuant to the above Undertaking will be subject tothe provisions of Chapter 9 of the Listing Manual which governs transactions with Interested Persons. Forthe avoidance of doubt, the subscription of our Shares by investors will not constitute approval for suchinterested person transactions, and Shareholders’ approval will be sought separately if required.

Such acquisitions will also be subject to the approval of the relevant PRC regulatory authorities.

In view of the Proposed Internal Restructuring, following which our Company will become an indirectsubsidiary of CATIC Shenzhen, a company listed on the HKSE, our Company has been advised byJackson Woo & Associates (the “Hong Kong lawyers”) (solely for the benefit of our Company) that onthe basis that:

(a) AVIC International Beijing, AVIC International Guangzhou, AVIC International Xiamen and AVICInternational Shanghai will be wholly-owned subsidiaries of CATIC Shenzhen at the time of theacquisitions of the shipbuilding business and the Ship-trading Related Businesses by our Companyfrom these four entities pursuant to the Undertaking;

(b) our Company is an indirect non wholly-owned subsidiary of CATIC Shenzhen; and

(c) no connected person(s) as defined under the Rules Governing the Listing of Securities on TheStock Exchange of Hong Kong Limited (the “HK Listing Rules”) of CATIC Shenzhen (other than atthe level of its subsidiaries) is/are (individually or together) entitled to exercise, or control theexercise of, 10% or more of the voting power at any general meeting of our Company and ourCompany is not a connected person of CATIC Shenzhen under the HK Listing Rules; and

(d) the H shares of CATIC Shenzhen will continue to be listed on HKSE,

barring any unforeseeable circumstances, any acquisitions of the shipbuilding business and the Ship-trading Related Businesses as aforesaid would be exempted from the requirement for shareholders’approval of CATIC Shenzhen under Chapter 14A of the HK Listing Rules (Connected Transactions).However, such transactions would be subject to the shareholders' approval of CATIC Shenzhen underChapter 14 of the HK Listing Rules (Notifiable Transactions) if they constitute (whether individually or inaggregate) a major or very substantial disposal under such rules.

Assuming that AVIC International and AVIC International Shenzhen, as shareholders of CATIC Shenzhenfollowing the Proposed Internal Restructuring, and none of their respective associates hold any shares inour Company (other than via CATIC Shenzhen) and have any direct or indirect material interest in theaforesaid transactions which is different from those of the other shareholders of CATIC Shenzhen, theHong Kong lawyers, to the best of their knowledge and belief are of the view that they shall be entitled tovote at the shareholders’ meeting of CATIC Shenzhen to approve the aforesaid transactions unless HKSEdetermines otherwise. The HK Listing Rules are not exhaustive and HKSE has the discretion to imposerequirements whenever it considers it appropriate.

As at the date of this Information Memorandum, it is expected that AVIC International and AVICInternational Shenzhen will collectively hold majority equity interest in CATIC Shenzhen immediately afterthe Proposed Internal Restructuring. Barring any unforeseen circumstances, taking this and theUndertaking as provided by AVIC International into consideration, we do not foresee any major obstaclesfor the aforesaid acquisitions to be approved, if required, by shareholders of CATIC Shenzhen.


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EXCHANGE CONTROLS

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The following is a description of the exchange controls existing in the jurisdictions in which our Groupoperates which may affect the repatriation of capital and the remittance of profits by or to our Company.

SINGAPORE

Foreign exchange controls in Singapore have been lifted since 1979. Currently, no foreign exchangecontrol restrictions exist in Singapore.

PRC

Prior to 31 December 1993, enterprises in the PRC requiring foreign currency were required to obtainapproval from the State Planning Committee and the Ministry of Foreign Trade and EconomicCooperation before it could convert RMB into foreign currency, and such conversion had to be effected atthe official rate prescribed by the SAFE. RMB reserved by FIEs could also be converted into foreigncurrency at swap centres with the prior examination and verification by SAFE. The exchange rates usedby swap centres were largely determined by the supply of and demand for foreign currencies and RMB.

On 28 December 1993, the PBOC announced that the dual exchange rate system for RMB againstforeign currencies would be abolished with effect from 1 January 1994 and be replaced by the unifiedexchange rate system. Under the new system, the PBOC publishes the RMB exchange rate against theUnited States dollar daily. The daily exchange rate is set by reference to the RMB/United States dollartrading price on the previous day on the “inter-bank foreign exchange market”.

On 1 April 1996, the Foreign Exchange Control Regulations of the PRC (as amended on 14 January 1997 and further amended on the 1 August 2008) came into effect. On 20June 1996, the Regulations on Sale and Purchase of and Payment in Foreign Exchange

were promulgated by the PBOC and came into effect on 1 July 1996. On 25 October1998, the PBOC and SAFE issued a Joint Announcement on Abolishment of Foreign Exchange SwapBusiness which stated that from 1December 1998, foreign exchange transactions for FIEs may only be conducted at designated banks. On9 September 2002, Notice on Further Policy and Related Issues Concerning Current Transaction ForeignExchange Accounts of Domestic Entities

was promulgated by the SAFE.

On 6 June 2006, SAFE issued a Circular on the Revision of Certain Foreign Exchange Control PoliciesRelating to Overseas Investment (“No. 27Circular”), which came into effect on 1 July 2006. No. 27 Circular provides the preliminary resources andprocedures for the purchase and payment of foreign exchange required of domestic investors qualified aslegal persons when investing overseas and sets out the requirements for the purpose of use and themaximum amount of the preliminary costs for an overseas investment project to be remitted out of thePRC as well as the approval procedures for the remittance thereof.

On 13 August 2007, SAFE promulgated the Notice On the Retaining of Recurrent Foreign ExchangeEarnings by Domestic Entity , which provides that from13 August 2007, domestic entities may retain their recurrent foreign exchange earnings according to theirneeds for operation.

In summary, taking into account the promulgation of the recent new regulations and to the extent theexisting provisions stipulated in previous regulations do not contradict these new regulations, the presentposition under the PRC law relating to foreign exchange control are as follows:

1. The previous dual exchange rate system for RMB was abolished and a unified floating exchangerate system based largely on supply and demand was introduced. The PBOC, having regard to thetrading prices between RMB and major foreign currencies on the inter-bank foreign exchangemarket, publishes on each bank business day the exchange rates against major foreign currencies.

EXCHANGE CONTROLS

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2. The PRC enterprises had been generally required to sell their foreign exchange earnings todesignated banks unless specifically approved otherwise and purchase foreign exchange atdesignated banks for current account transactions. However, after the Notice on Further Policy andRelated Issues Concerning Current Transaction Foreign Exchange Accounts of Domestic Entities

was promulgated bythe SAFE on 9 September 2002, PRC enterprises with foreign exchange accounts are entitled toreserve their foreign exchange earnings in their foreign exchange accounts and pay for currenttransactions with the foreign exchanges in such accounts to the extent that its foreign exchangeearnings in the accounts do not exceed the maximal limit as approved by the relevant foreignexchange control authorities. From 13 August 2007, domestic entities may retain their recurrentforeign exchange earnings according to their needs for operation.

3. FIEs may have their own foreign currency account and are also permitted to retain their recurrentexchange earnings freely.

4. Under the Foreign Exchange Control Regulations of the PRC (as amended on 14 January 1997),international payments and transfers were segregated into current account items and capitalaccount items. All organizations and individuals within the PRC, including FIEs, were required toremit their foreign exchange earnings to the PRC. The foreign exchange earnings under the currentaccount items of all PRC enterprises, other than those FIEs, which were allowed to retain a part oftheir regular foreign exchange earnings or specifically exempted under the relevant regulations,were to be sold to designated banks. Foreign exchange earnings under the capital account itemsobtained from borrowings from foreign institutions or issues of shares or bonds denominated inforeign currency need not be sold to designated banks, but must be kept in foreign exchange bankaccounts of designated banks unless specifically approved otherwise. On 1 August 2008, the StateCouncil further amended the Foreign Exchange Control Regulations of the PRC (“New ForeignExchange Control Regulations”) which became effective from 5 August 2008. According to theNew Foreign Exchange Control Regulations, foreign exchange earnings of domestic institutionsand individuals could be repatriated into the PRC as well as deposited overseas. The conditionsand time limitation for repatriation into the PRC or deposit overseas shall be specified by the StateCouncil foreign exchange management departments in accordance with the international balancepayments situations and the needs of foreign exchange managements. Furthermore, foreignexchange earnings under the current account items could be retained or to be sold to financialinstitutions which conduct business of settlement, sale and payment of foreign exchange.

5. FIEs which require foreign exchange for their ordinary trading activities such as trade services andpayment of interest on foreign debts may purchase foreign exchange from designated foreignexchange banks if the application is supported by proper payment notices or supportingdocuments.

6. FIEs may require foreign exchange for the payment of dividends that are payable in foreigncurrencies under applicable regulations, such as distributing profits to their foreign investors. Theycan withdraw funds in their foreign exchange bank accounts kept with designated foreign exchangebanks, subject to the due payment of tax on such dividends. Where the amount of the funds inforeign exchange is insufficient, the enterprise may, upon the presentation of the resolutions of thedirectors on the profit distribution plan of the particular enterprise and other relevant documents,purchase foreign exchange from designated foreign exchange banks.

7. FIEs may apply to the Bank of China or other designated foreign exchange banks to remit theprofits out of the PRC to the foreign parties of equity or cooperative joint ventures or the foreigninvestors in WFOEs if the requirements provided by the PRC laws, rules and regulations are met.

EXCHANGE CONTROLS

8. Strict supervision and control by SAFE and its local branches/offices has been imposed upon FIEsestablished in the manner of acquisitions of PRC enterprises by foreign enterprises with PRCresidents as shareholders.

Save as disclosed above, there are no restrictions on the ability of our subsidiaries to transfer funds toour Company in the form of dividends or for the repayment of loans or advances.

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CLEARANCE AND SETTLEMENT

Upon listing and quotation on the Official List of the SGX-ST, our Shares will be traded under the book-entry settlement system of CDP, and all dealings in and transactions of our Shares through the SGX-STwill be effected in accordance with the terms and conditions for the operation of Securities Accounts withCDP, as amended from time to time.

Our Shares will be registered in the name of CDP or its nominee and held by CDP for and on behalf ofpersons who maintain, either directly or through Depository Agents, Securities Accounts with CDP.Persons named as direct securities account holders and Depository Agents in the Depository Registermaintained by CDP, rather than CDP itself, will be treated, under our Articles of Association and theCompanies Act, as members of our Company in respect of the number of Shares credited to theirrespective Securities Accounts.

Persons holding our Shares in Securities Accounts may withdraw the number of Shares they own fromthe book-entry settlement system in the form of physical share certificates. Such share certificates will,however, not be valid for delivery pursuant to trades transacted on the SGX-ST, although they will beprima facie evidence of title and may be transferred in accordance with our Articles of Association. A feeof S$10.00 for each withdrawal of 1,000 Shares or less and a fee of S$25.00 for each withdrawal of morethan 1,000 Shares is payable upon withdrawing our Shares from the book-entry settlement system andobtaining physical share certificates. In addition, a fee of S$2.00 or such other amount as our Directorsmay decide, is payable to the share registrar for each share certificate issued and a stamp duty ofS$10.00 is also payable where our Shares are withdrawn in the name of the person withdrawing ourShares or S$0.20 per S$100 or part thereof of the last-transacted price where it is withdrawn in the nameof a third party. Persons holding physical share certificates who wish to trade on the SGX-ST mustdeposit with CDP their share certificates together with the duly executed and stamped instruments oftransfer in favour of CDP, and have their respective Securities Accounts credited with the number ofShares deposited before they can effect the desired trades. A fee of S$10.00 is payable upon the depositof each instrument of transfer with CDP.

Transactions in our Shares under the book-entry settlement system will be reflected by the seller’sSecurities Account being debited with the number of Shares sold and the buyer’s Securities Accountbeing credited with the number of Shares acquired. No transfer stamp duty is currently payable for theShares that are settled on a book-entry basis.

A Singapore clearing fee for trades in our Shares on the SGX-ST is payable at the rate of 0.04% of thetransaction value subject to a maximum of S$600.00 per transaction. The clearing fee, instrument oftransfer deposit fee and share withdrawal fee may be subject to Singapore goods and services tax of 7%(or such other rate prevailing from time to time).

Dealings of our Shares will be carried out in Singapore Dollars and will be effected for settlement on CDPon a scripless basis. Settlement of trades on a normal “ready” basis on the SGX-ST generally takes placeon the third Market Day following the transaction date, and payment for the securities is generally settledon the following business day. CDP holds securities on behalf of investors in Securities Accounts. Aninvestor may open a direct account with CDP or a sub-account with a CDP Depository Agent. The CDPDepository Agent may be a member company of the SGX-ST, bank, merchant bank or trust company.

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GENERAL AND STATUTORY INFORMATION

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INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS

1. The present and past directorships (held in the five years preceding the date of this InformationMemorandum) of each of our Directors in other companies, other than those held in our Company,are set out below:

Name Present Directorships Past Directorships

Diao Weicheng Group Companies Group Companies

Kaixin (Beijing) NilKaixin Industrial

Other Companies Other Companies

AVIC International Beijing AVIC International EngineeringAVIC International Kairong Corporation, LtdAVIC Weihai Shipyard Co., Ltd

AVIC International XiamenBeijing TGI Friday’s RestaurantCo., Ltd

Kaihang Industrial Limited

Max Glory Industries Limited

Schneider Electric Low Voltage (Tianjin) Co., Ltd

Schneider Shanghai Low Voltage Terminal Apparatus Co., Ltd

Taizhou CATIC Tianjin Merlin Gerin Co., Ltd

Li Jin Group Companies Group Companies

Nil Nil


AVIC International Beijing China National Aero-TechnologyAVIC International Renewable International Supply Energy Company Corporation

Kaichang Technology andSupply Company

Zhang Wanping Group Companies Group Companies

Kaixin (Beijing) NilKaixin Industrial


AVIC International Kairong NilAVIC Weihai Shipyard Co., Ltd


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Cheng Xuhui Group Companies Group Companies

Kaixin (Beijing) Nil


AVIC Weihai Shipyard Co., Ltd Nil

Taizhou CATIC

Wu Weidong Group Companies Group Companies

Nil Nil


Kaihang Industrial Limited Nil

Max Glory Industries Limited

Teng Cheong Group Companies Group CompaniesKwee

Kaixin Industrial Nil


AEI Corporation Ltd Junma Tyre Cord Company LtdASEAN Emerging Growth Fund Ltd Pacific King Shipping HoldingFirst Resources Ltd LtdJunma Tyre Cord Company Ltd Sinomem Technology LtdMemtech International Ltd Tianjin Zhongxin PharmaceuticalPheim Asset Management (Asia) Group Corporation LtdPte LtdSTATS ChipPac LtdT3Z Advisory & Consultancy Pte LtdTechcomp (Holdings) LtdThe Vittoria Fund Ltd

Chong Teck Sin Group Companies Group Companies

Nil Nil


Atlas Vending Pte Ltd British-American TobaccoBeyonics Technology Ltd (Singapore) Pte LtdBlackgold International Holdings Eastgate Technology LtdLimited JES International Holdings LtdChangan Minsheng APLL Logistics Midsouth Holdings LtdCo., Ltd Shengda (Group) Holdings LtdGRN Singapore Pte Ltd Sihuan PharmaceuticalWanxiang International Ltd Holdings Group Ltd

The National Kidney Foundation


109


Alice Lai Kuen Group Companies Group CompaniesKan

Nil Nil


Asia Investment Corporate Asia Investment CorporateManagement Limited Services LimitedAsia Investment Group International Kannach Limited (British VirginHoldings Limited Islands)Asia Investment Management Limited Kannach Limited (Hong Kong)Asia Investment Research Limited Shougang Concord TechnologyChina Energine International Holdings Limited(Holdings) Ltd. SNP Leefung Holdings LimitedG-Vision International (Holdings) Ltd. Sunac China Holdings Ltd.Gladstone Investments LimitedRegal Hotels International Holdings Ltd.Shimao Property Holdings Ltd.Shougang Concord International Enterprises Co. Ltd.Sunway International Holdings Ltd.Van Hoff Limited

2. The present and past directorships (held in the five years preceding the date of this InformationMemorandum) of our Financial Controller in other companies (including companies in our Group)are set out below:


Li Ying Group Companies Group Companies

Nil Nil


Nil General Biotech Pte. Ltd.

3. Save as disclosed below, none of our Directors, Executive Officers or Controlling Shareholder:

(a) had at any time during the last 10 years, had an application or a petition under anybankruptcy laws of any jurisdiction filed against him or against a partnership of which he wasa partner at the time when he was a partner or at any time within two years from the date heceased to be a partner;

(b) had at any time during the last 10 years, had an application or a petition under any law ofany jurisdiction filed against an entity (not being a partnership) of which he was a director oran equivalent person or a key executive, at the time when he was a director or an equivalentperson or a key executive of that entity or at any time within two years from the date heceased to be a director or an equivalent person or a key executive of that entity, for thewinding up or dissolution of that entity or, where that entity is the trustee of a business trust,that business trust, on the ground of insolvency;

(c) has any unsatisfied judgment against him;


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(d) has ever been convicted of any offence, in Singapore or elsewhere, involving fraud ordishonesty, which is punishable with imprisonment, or has been the subject of any criminalproceedings (including any pending criminal proceedings of which he is aware) for suchpurpose;

(e) has ever been convicted of any offence, in Singapore or elsewhere, involving a breach ofany law or regulatory requirement that relates to the securities or futures industry inSingapore or elsewhere, or been the subject of any criminal proceedings (including anypending criminal proceedings of which he is aware) for such breach;

(f) had at any time during the last 10 years, had judgment entered against him in any civilproceedings in Singapore or elsewhere involving a breach of any law or regulatoryrequirement that relates to the securities or futures industry in Singapore or elsewhere, or afinding of fraud, misrepresentation or dishonesty on his part, or been the subject of any civilproceedings (including any pending civil proceedings of which he is aware) involving anallegation of fraud, misrepresentation or dishonesty on his part;

(g) has ever been convicted in Singapore or elsewhere of any offence in connection with theformation or management of any entity or business trust;

(h) has ever been disqualified from acting as a director or an equivalent person of any entity(including the trustee of a business trust), or from taking part directly or indirectly in themanagement of any entity or business trust;

(i) has ever been the subject of any order, judgment or ruling of any court, tribunal orgovernmental body, permanently or temporarily enjoining him from engaging in any type ofbusiness practice or activity;

(j) has ever, to his knowledge, been concerned with the management or conduct, in Singaporeor elsewhere, of the affairs of:

(i) any corporation which has been investigated for a breach of any law or regulatoryrequirement governing corporations in Singapore or elsewhere;

(ii) any entity (not being a corporation) which has been investigated for a breach of anylaw or regulatory requirement governing such entities in Singapore or elsewhere;

(iii) any business trust which has been investigated for a breach of any law or regulatoryrequirement governing business trusts in Singapore or elsewhere; or

(iv) any entity or business trust which has been investigated for a breach of any law orregulatory requirement that relates to the securities or futures industry in Singapore orelsewhere,

in connection with any matter occurring or arising during the period when he was soconcerned with the entity or business trust; or

(k) has been the subject of any current or past investigation or disciplinary proceedings, or hasbeen reprimanded or issued any warning, by the Authority or any other regulatory authority,exchange, professional body or governmental agency, whether in Singapore or elsewhere.


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Since 2000, Mr Teng Cheong Kwee has been a director of an asset management company (the“said company”) licensed in Singapore. In 2006, the relevant authority in Singapore notified thesaid company that it was investigating certain trades carried out by the said company in December2004 and 2005. Those trades were carried out by the said company for the account of its clients.Mr Teng had no personal involvement, direct or indirect, in the trades in question, nor anysupervisory responsibility for personnel who transacted in those trades. Mr Teng was notinterviewed nor asked to assist in the investigation by the relevant authority. To the best of hisknowledge, the investigation did not result in any further action taken against the said company.

SHARE CAPITAL

4. As at the Latest Practicable Date, there is only one class of shares in the capital of our Company,being ordinary shares. The rights and privileges attached to our Shares are stated in the Articles ofAssociation of our Company. There are no founder, management, deferred or unissued sharesreserved for issuance for any purpose. The Substantial Shareholders of our Company are notentitled to any different voting rights from the other Shareholders.

5. Save as disclosed in the “Restructuring Exercise” and “General Information on our Company –Share Capital” sections of this Information Memorandum, there were no changes in the issued andpaid-up share capital of our Company or our subsidiaries within the three years preceding theLatest Practicable Date.

BANK BORROWINGS AND WORKING CAPITAL

6. As at the Latest Practicable Date, our Group has no borrowings or indebtedness in the nature ofborrowings including bank overdrafts and liabilities under acceptances (other than normal tradingcredits) or acceptances credits, mortgages, charges, hire purchase commitments, guarantees orother material contingent liabilities.

7. Our Directors are of the opinion that, as at the Latest Practicable Date, after taking intoconsideration our cash and bank balances position and cash from operating activities, our Grouphas adequate working capital to meet our present requirements.

MATERIAL CONTRACTS

8. The following contract, not being contracts entered into in the ordinary course of business, havebeen entered into by our Group within the two years preceding the date of this InformationMemorandum and is or may be material:

(a) the Management Agreement; and

(b) the service agreement dated 3 August 2011 and entered into between Kaixin (Beijing) andAVIC International Beijing.

AVIC International Kairong has also entered into the Implementation Agreement with SETGL forand on behalf of our Company.

LITIGATION

9. Neither our Company nor any of our subsidiaries is engaged in any legal or arbitration proceedingsas plaintiff or defendant, including those which are pending or known to be contemplated, whichmay have or have had in the last 12 months before the date of this Information Memorandum amaterial effect on the financial position or the profitability of our Company.

MISCELLANEOUS

10. Save as disclosed in this Information Memorandum, our Directors are not aware of any event thathas occurred from the end of FY2010 to the Latest Practicable Date which may have a materialeffect on the financial position and results of our Company and our subsidiaries.


112

11. Save as disclosed in this Information Memorandum, our Directors are not aware of any relevantmaterial information including trading factors or risks which are unlikely to be known or anticipatedby the general public and which could materially affect the profits of our Company and oursubsidiaries.

12. Save as disclosed under the “Risk Factors”, “Capitalisation and Indebtedness”, “Management’sDiscussion and Analysis of Financial Position and Results of Operations”, “History and Business –Prospects” and “History and Business – Business Strategies and Future Plans” sections of thisInformation Memorandum, the financial condition and operations of our Group are not likely to beaffected by any of the following:

(a) known trends or demands, commitments, events or uncertainties that will result in or arereasonably likely to result in our Group’s liquidity increasing or decreasing in any materialway;

(b) material commitments for capital expenditure;

(c) unusual or infrequent events or transactions or any significant economic changes thatmaterially affected the amount of reported income from operations; and

(d) known trends or uncertainties that have had or that we reasonably expect will have amaterial favourable or unfavourable impact on revenues or operating income.

13. Details of the auditors of our Company are set out below:

Partner-in-charge/ Membership inName and address Professional qualification professional body

Deloitte & Touche LLP Ernest Kan Yaw Kiong, Institute of Certified6 Shenton Way Certified Public Public Accountants,#32-00 DBS Building Tower Two Accountant SingaporeSingapore 068809

14. No expert is engaged on a contingent basis by our Company or any of our subsidiaries, or has amaterial interest, whether direct or indirect, in our Shares, our subsidiaries or has a materialeconomic interest whether direct or indirect, in our Company, including an interest in the successof the Compliance Placement.

CONSENTS

15. Deloitte & Touche LLP has given and has not withdrawn its written consent to the issue of thisInformation Memorandum with the inclusion herein of the “Independent Auditors’ Report on theUnaudited Pro Forma Financial Information for the Year Ended 31 December 2008, 2009 and2010” as set out in Appendix A in the form and context in which they are respectively included andreferences to their name in the form and context in which they appear in this InformationMemorandum and to act in such capacity in relation to this Information Memorandum.

16. DMG has given and has not withdrawn its written consent to the issue of this InformationMemorandum with the inclusion herein of its name and references thereto in the form and contextin which it appears in this Information Memorandum and to act in such capacity in relation to thisInformation Memorandum.

17. Stamford Law Corporation has given and has not withdrawn its written consent to the issue of thisInformation Memorandum with the inclusion herein of its name and references thereto in the formand context in which it appears in this Information Memorandum and to act in such capacity inrelation to this Information Memorandum.


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18. Colin Ng & Partners LLP has given and has not withdrawn its written consent to the issue of thisInformation Memorandum with the inclusion herein of its name and references thereto in the formand context in which it appears in this Information Memorandum and to act in such capacity inrelation to this Information Memorandum.

19. Zhong Lun Law Firm has given and has not withdrawn its written consent to the issue of thisInformation Memorandum with the inclusion herein of its name and references thereto in the formand context in which it appears in this Information Memorandum and to act in such capacity inrelation to this Information Memorandum.

20. GFE Law Office has given and has not withdrawn its written consent to the issue of thisInformation Memorandum with the inclusion herein of its name and references thereto in the formand context in which it appears in this Information Memorandum and to act in such capacity inrelation to this Information Memorandum.

21. Each of the professional parties listed in paragraphs 15 to 20 above do not make or purport tomake any statement in this Information Memorandum or any statement upon which a statement inthis Information Memorandum is based and each of them makes no representation regarding anystatement in this Information Memorandum and to the maximum extent permitted by law, expresslydisclaims, and takes no responsibility for any liability to any person which is based on, or arises outof, any statements, information or opinions in, or any omission from, this Information Memorandum.

RESPONSIBILITY STATEMENT BY OUR DIRECTORS AND THE FINANCIAL ADVISER

22. Our Directors collectively and individually accept full responsibility for the accuracy of theinformation given in this Information Memorandum and confirm, having made all reasonableenquiries that, to the best of their knowledge and belief, this Information Memorandum constitutesfull and true disclosure of all material facts about the Consideration Share Issue and our Group,and our Directors are not aware of any facts the omission of which would make any statement inthis Information Memorandum misleading. Where information in this Information Memorandum hasbeen extracted from published or otherwise publicly available sources or obtained from a namedsource, the sole responsibility of the Directors has been to ensure that such information has beenaccurately and correctly extracted from those sources and/or reproduced in this InformationMemorandum in its proper form and context.

23. The Financial Adviser acknowledges that to the best of its knowledge and belief, based oninformation furnished to it by our Group, this Information Memorandum constitutes full and truedisclosure of all material facts about the Consideration Share Issue and our Group and that it isnot aware of any other facts, the omission of which would make any statements relating to theConsideration Share Issue and our Group herein misleading.

DOCUMENTS AVAILABLE FOR INSPECTION

24. The following documents or copies thereof may be inspected at the registered office of ourCompany at 10 Collyer Quay, #27-00 Ocean Financial Centre, Singapore 049315 during normalbusiness hours for a period of six months from the date of this Information Memorandum:

(a) the Memorandum of Association and Articles of Association of our Company;

(b) the letters of consent referred to in paragraphs 15 to 20 under the “General and StatutoryInformation” section of this Information Memorandum;

(c) the material contracts referred to in paragraph 8 under the “General and StatutoryInformation” section of this Information Memorandum;

(d) the Service Agreements referred to in the “Directors, Executive Officers and Employees”section of this Information Memorandum; and

(e) the “Independent Auditors’ Report and Unaudited Pro Forma Financial Information for theYear Ended 31 December 2008, 2009 and 2010” set out in Appendix A of this InformationMemorandum.

INDEPENDENT AUDITORS’ REPORT ON THE UNAUDITEDPRO FORMA FINANCIAL INFORMATION

10 August 2011

The Board of DirectorsAVIC International Investments Limited10 Collyer Quay#27-00 Ocean Financial CentreSingapore 049315

Dear Sirs

This report has been prepared for inclusion in the Information Memorandum dated 10 August 2011 to thecreditors and shareholders of Sino-Environment Technology Group Limited (the “SETGL”) in connectionwith the proposed subscription of shares and paid-up capital of AVIC International Investments Limited(“AIIL” or “AIIL Group” or the “Company”) pursuant to the Implementation Agreement dated 7 January2011, herein, the “Proposed Subscription”. The pro forma of the new business consists of the shiptrading and shipbuilding business division (the “Shipbuilding Management Division”) of AVIC InternationalBeijing Co., Ltd. (“AVIC Beijing”), following the completion of the Proposed Subscription, and treated forthe purpose of this Information Memorandum as if such group structure had been in existence since 1January 2008 are collectively known as the “AIIL Group”.

The unaudited pro forma financial information of the AIIL Group comprises the unaudited pro formastatements of comprehensive income for the year ended 31 December 2008, 2009 and 2010, and theunaudited pro forma statement of financial position as at the completion date (collectively the “unauditedPro Forma Financial Information”). The completion date is defined as the date on which the allotment ofS$6,000,000 in value of consideration shares in AIIL to the administrators of the scheme of arrangementrelating to the creditors and shareholders of SETGL is completed (the “Completion Date”).

We report on the unaudited Pro Forma Financial Information of the AIIL Group set out on pages A-3 to A-16 which have been prepared for illustrative purposes only and based on certain assumptions aftermaking certain adjustments to show what:

(i) the unaudited pro forma results of the AIIL Group for the year ended 31 December 2008, 2009 and2010 would have been if the AIIL Group had been in place since 1 January 2008; and

(ii) the unaudited pro forma statement of financial position of the AIIL Group as at the CompletionDate.

The unaudited Pro Forma Financial Information of the AIIL Group, because of their nature, may not givea true picture of the AIIL Group’s actual financial results and financial position.

The unaudited Pro Forma Financial Information is the responsibility of the management of the Company.Our responsibility is to express an opinion on the unaudited Pro Forma Financial Information of the AIILGroup based on our work.

A-1

APPENDIX A: INDEPENDENT AUDITORS’ REPORT AND UNAUDITED PRO FORMA FINANCIAL INFORMATION FOR THE YEAR ENDED

31 DECEMBER 2008, 2009 AND 2010

We carried out procedures in accordance with Singapore Statement of Auditing Practice 24: Auditors andPublic Offering Documents. Our work, which involved no independent examination of the underlyingfinancial statements, consisted primarily of comparing the unaudited Pro Forma Financial Information tothe historical results of the Shipbuilding Management Division prepared by management considering theevidence supporting the pro forma adjustments and discussing the unaudited Pro Forma FinancialInformation of the AIIL Group with the directors of the AIIL.

In our opinion:

(a) the unaudited Pro Forma Group Financial Information of the AIIL Group have been properlyprepared:

(i) in a manner consistent with both the format of the financial statements and the accountingpolicies adopted by the AIIL Group;

(ii) on the basis set out in Note 2 to the unaudited Pro Forma Financial Information of the AIIL Group; and

(b) each material adjustment made to the information used in the preparation of the unaudited ProForma Financial Information of the AIIL Group is appropriate for the purpose of preparing suchfinancial information.

Yours faithfully

Deloitte & Touche LLPPublic Accountants andCertified Public AccountantsSingapore

Ernest Kan Yaw KiongPartner

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31 DECEMBER 2008, 2009 AND 2010

UNAUDITED PRO FORMA STATEMENTS OF COMPREHENSIVE INCOMEOF THE AIIL GROUP

Year ended 31 December 2008, 2009 and 2010

Note 2008 2009 2010RMB’000 RMB’000 RMB’000

Revenue 7 42,367 24,566 76,495

Other operating income 8 11,967 8,506 8,718

Employee benefits expense (2,346) (2,866) (4,262)

Travelling and entertainment expenses (1,352) (2,219) (2,553)

Office rental and office expenses (1,050) (1,403) (1,830)

Other operating expenses (1,673) (1,579) (1,634)

Profit before income tax 47,913 25,005 74,934

Income tax expense 9 (12,020) (6,376) (18,788)

Profit for the year, representing total comprehensive income for the year and total comprehensive income attributableto owners of the Company 10 35,893 18,629 56,146

Basic and diluted earnings per share (RMB cents) 11 15.5 8.0 24.2

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31 DECEMBER 2008, 2009 AND 2010

See accompanying notes to the unaudited pro forma financial information.

UNAUDITED PRO FORMA STATEMENT OF FINANCIAL POSITIONOF THE AIIL GROUP

As at Completion Date

As atCompletion Date

RMB’000

ASSETS

Current assetsCash and bank balances, representing total assets 32,046

EQUITY

CapitalShare capital, representing total equity 32,046

Note:

The unaudited pro forma statement of financial position as at Completion Date reflects the adjustment for capital injection ofRMB32,046,000 (equivalent to S$6,000,000) for 232,000,000 ordinary shares by AVIC International Kairong Limited (“AIKL”) ofwhich 12,000,000 ordinary shares will be held on trust by AIKL for the creditors and shareholders of SETGL as considerationshares, pending the approval of the scheme of arrangement, in connection with the Proposed Subscription.

The completion date is defined as the date on which the allotment of S$6,000,000 in value of consideration shares in AIIL to theadministrators of the scheme of arrangement relating to the creditors and shareholders of SETGL is completed.

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31 DECEMBER 2008, 2009 AND 2010

See accompanying notes to the unaudited pro forma financial information.

NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATIONOF THE AIIL GROUP

1. INTRODUCTION

These selected notes form an integral part of and should be read in conjunction with theaccompanying unaudited Pro Forma Financial Information of the AIIL Group.

The unaudited Pro Forma Financial Information of the AIIL Group has been prepared for inclusionin the Information Memorandum to shareholders of the Company in connection with the proposedsubscription of the shares and paid-up capital of AVIC International Investments Limited (“AIIL”),herein, the “Proposed Subscription”.

1.1 CORPORATE INFORMATION

The Company (Registration No. 201024137N) is incorporated in Singapore with its registered officeat 10 Collyer Quay, #27-00, Ocean Financial Centre, Singapore 049315 and principal place ofbusiness at 24th Floor, North Star Times Tower, No. 8 Beichendong Road, Chaoyang District,Beijing 100101, The People’s Republic of China. The unaudited Pro Forma Financial Information ofthe AIIL Group is expressed in Chinese renminbi.

The principal activity of the Company is that of investment holding.

The principal activities of the AIIL Group involve the provision of project management andconsultancy services relating to shipbuilding and those of the subsidiaries are as disclosed below.

1.2 THE PROPOSED SUBSCRIPTION

SETGL is a public company whose shares are listed on the Main Board of the SingaporeExchange Securities Trading Limited (“SGX-ST”). It is presently under judicial management, and itsshares are presently suspended from trading.

Pursuant to the Implementation Agreement dated 7 January 2011, entered into between SETGLand AVIC International Kairong Limited (“AIKL”), the immediate holding company of AIIL Group,AIKL agreed with SETGL to implement the Scheme of Arrangement (the “Scheme”) as an exit offerto the creditors and shareholders of SETGL through a consideration share issue (the“Consideration Shares”). Pursuant to the Scheme of Arrangement:

(a) the creditors of SETGL shall release and discharge SETGL from a portion of debts owingfrom SETGL to the creditors of SETGL (the “SETGL Debts”) in consideration of thedistribution of the Consideration Shares by the administrators of the Scheme (the “SchemeAdministrators”) to the creditors and shareholders of SETGL, in accordance with theScheme and upon the Scheme becoming effective pursuant to Section 210(3) and Section210(3) read with Section 227X of the Singapore Companies Act; and

(b) AIKL shall, subject to the terms and conditions of the Implementation Agreement and theScheme, procure that the Company allot and issue the Consideration Shares to the SchemeAdministrators for distribution to the creditors and shareholders of SETGL in the proportionsset out in the Scheme (the “Agreed Apportionment”), in consideration of the settlement andcompromise of the SETGL Debts, in each case by means of the Scheme (the “ConsiderationShare Issue”).

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31 DECEMBER 2008, 2009 AND 2010

Entitlements to the Consideration Shares

The Consideration Shares are valued at the aggregate sum of S$6,000,000, to be allotted andissued free from encumbrances, in accordance with the Scheme, to the administrators of theScheme for distribution to the creditors and shareholders of SETGL, in each case credited as fullypaid up and in the Agreed Apportionment.

Pursuant to the Implementation Agreement, the creditors and shareholders of SETGL will beentitled to such aggregate number of Consideration Shares, subject at all times to the AgreedApportionment, to be determined based on the actual compliance placement price.

Listing and quotation of the Company’s shares

Upon the completion of the Scheme, the shares in SETGL will be withdrawn from the Official Listof the SGX-ST and transferred to the SETGL Judicial Managers fully paid and free from anyencumbrances. The SETGL Judicial Managers shall hold the shares in SETGL in their office asJudicial Managers of SETGL for the benefit of the shareholders of SETGL. The Company hasapplied to the SGX-ST for approval for the listing of and quotation of the shares of the Company onthe Official List of the SGX-ST.

1.3 THE ENLARGED AIIL GROUP

At Completion Date and at the date of this report, the AIIL Group or the Company will have thefollowing subsidiaries:

Country of Attributableincorporation equity interest

Name of subsidiary and operations of the Group Principal activities

Kaixin Industrial Pte. Ltd. Singapore 100% Ship-trading andshipbuilding businesses

AVIC Kaixin (Beijing) People’s Republic 100% Ship-trading agencyShip Industry Co., Ltd of China and import and export

business

2. BASIS OF PRESENTATION AND PREPARATION

The basis of presentation and preparation of the unaudited Pro Forma Financial Information of theAIIL Group is as discussed below.

2.1 BASIS OF PRESENTATION

(a) The unaudited pro forma statements of comprehensive income of the AIIL Group for theyear ended 31 December 2008, 2009 and 2010 (the “Relevant Periods”) are prepared fromthe divisional general ledgers of AVIC International Beijing Co., Ltd (“AVIC Beijing”), of whichthe ship trading and shipbuilding business (the “Shipbuilding Management Division”) is adivision for the Relevant Periods.

The financial information presented in the unaudited pro forma statements of comprehensiveincome of the AIIL Group represents the income and expenses of the ShipbuildingManagement Division of AVIC Beijing for the Relevant Periods and these are not audited orreviewed. Agreed-upon procedures were performed with respect to the unaudited pro formastatements of comprehensive income of the AIIL Group, in accordance with SingaporeStandard on Related Services (“SSRS”) 4400, Engagements to Perform Agreed-UponProcedures Regarding Financial Information. These procedures were agreed based ondiscussion with management of AVIC Beijing with respect to certain financial information

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31 DECEMBER 2008, 2009 AND 2010

regarding the Shipbuilding Management Division of AVIC Beijing for the respective yearsended 31 December 2008, 2009 and 2010, and as at the Completion Date. Accordingly,these procedures do not constitute an audit or review made in accordance with theSingapore Standards on Auditing or Singapore Standards on Review Engagements and wedo not express any opinion or draw any conclusions on the procedures we have performed.

(b) The unaudited Pro Forma Financial Information of the AIIL Group is presented in Chineserenminbi (“RMB”) and all values are rounded to the nearest thousand (“RMB’000”) exceptwhen otherwise indicated. The financial information has been prepared for illustrativepurpose only and has been prepared based on certain assumptions and after makingcertain adjustments to show what:

(i) the unaudited pro forma results of the AIIL Group for the year ended 31 December2008, 2009 and 2010 would have been if the AIIL Group had been in place since 1January 2008; and

(ii) the unaudited pro forma statement of financial position of the AIIL Group as at theCompletion Date.

The unaudited pro forma statements of financial position of the AIIL Group as at 31 December 2008, 2009 and 2010, and the unaudited pro forma statements of cash flowsfor the Relevant Periods are not prepared as the Shipbuilding Management Division in AVICBeijing does not maintain a divisional bank account or have divisional assets or liabilities.Accordingly, the preparation of the unaudited pro forma statements of financial position as at31 December 2008, 2009 and 2010, and unaudited pro forma statements of cash flows ofthe AIIL Group for the Relevant Periods are not meaningful for the Proposed Subscription.

The objective of the unaudited Pro Forma Financial Information of the AIIL Group is to showwhat the historical financial information would have been had the AIIL Group existed since 1January 2008. However, the unaudited Pro Forma Financial Information of the AIIL Group isnot necessarily indicative of the results of operations or related effects on financial positionthat would have been obtained had the AIIL Group actually existed earlier and the unauditedPro Forma Financial Information of the AIIL Group do not purport to be indicative of eitherthe future financial position and results of operations.

2.2 BASIS OF PREPARATION

The unaudited Pro Forma Financial Information of the AIIL Group has been prepared bymanagement of AVIC Beijing in accordance with the Singapore Financial Reporting Standards(“FRS”).

The preparation of unaudited Pro Forma Financial Information of the AIIL Group in conformity withFRS requires management to make certain adjustments and exercise judgement in the process ofapplying the AIIL Group’s accounting policies and requires the use of accounting estimates andassumptions that affect the reported amounts of revenue and expenses during the RelevantPeriods.

Although these estimates are based on management’s best knowledge of historical experience andother factors, including expectations of future events that are believed to be reasonable under thecircumstances, actual results may ultimately differ from those estimates. The estimates andunderlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates arerecognised in the financial period, or in the financial period of revision and future financial periodsif the revisions affect both current and future financial periods.

A-7


31 DECEMBER 2008, 2009 AND 2010

Critical accounting judgement and key sources of estimation uncertainty used that are significant tothe unaudited Pro Forma Financial Information of the AIIL Group are disclosed in Note 4 to theunaudited Pro Forma Financial Information of the AIIL Group.

In presenting the unaudited Pro Forma Financial Information of the AIIL Group, the followingadjustments were taken into account:

(a) Unaudited Pro Forma Statements of Comprehensive Income

(i) Adjustments to employee benefits expenses of a director who is also a keymanagement personnel assuming the AIIL Group had been in place since 1 January2008;

(ii) Adjustments to reflect the proportion of interest income generated assuming the AIILGroup had been in place since 1 January 2008; and

(iii) Adjustment to reflect the income tax expense as a result of the adjustment toemployee benefits expenses of a director who is also a key management personneland the interest income accrued above.

(b) Unaudited Pro Forma Statement of Financial Position as at the Completion Date

Adjustment to reflect capital injection of RMB32,046,000 (equivalent to S$6,000,000) for232,000,000 ordinary shares by AIKL of which 12,000,000 ordinary shares will be held ontrust by AIKL for the Scheme Administrators for distribution to the creditors and shareholdersof SETGL as consideration shares, pending the approval of the scheme of arrangement, inconnection with the Proposed Subscription. Accordingly, AIKL, and the creditors andshareholders of SETGL will hold an equity interest of 94.8% and 5.2% in the enlarged sharecapital of AIIL Group respectively.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The significant accounting policies adopted by the AIIL Group, which have been consistentlyapplied in preparing the Pro Forma Financial Information set out in this report, are as follows:

FINANCIAL INSTRUMENTS - Financial assets and financial liabilities are recognised on the AIIL Group’s statement of financial position when the AIIL Group becomes a party to thecontractual provisions of the instrument.

Financial assets

Financial assets are classified into the following specified categories: “financial assets at fair valuethrough profit or loss”, “available-for-sale financial assets” and “loans and receivables”. Theclassification depends on the nature and purpose of financial assets and is determined at the timeof initial recognition. The AIIL Group does not have financial assets at fair value through profit orloss and available-for-sale financial assets.

Effective interest method

The effective interest method is a method of calculating the amortised cost of a financialinstrument and of allocating interest income or expense over the relevant period. The effectiveinterest rate is the rate that exactly discounts estimated future cash receipts or payments (includingall fees on points paid or received that form an integral part of the effective interest rate,transaction costs and other premiums or discounts) through the expected life of the financialinstrument, or where appropriate, a shorter period. Income and expense are recognised on aneffective interest rate basis for debt instruments other than those financial instruments “at fair valuethrough profit or loss”.

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31 DECEMBER 2008, 2009 AND 2010

Loans and receivables

Trade receivables, loans and other receivables that have fixed or determinable payments that arenot quoted in an active market are classified as “loans and receivables”. Loans and receivablesare measured at amortised cost using the effective interest method less impairment. Interest isrecognised by applying the effective interest method, except for short-term receivables when therecognition of interest is immaterial.

Impairment of financial assets

Financial assets, other than those at fair value through profit or loss, are assessed for indicators ofimpairment at the end of each reporting period. Financial assets are impaired where there isobjective evidence that, as a result of one or more events that occurred after the initial recognitionof the financial asset, the estimated future cash flows of the investment have been impacted.

For financial assets carried at amortised cost, the amount of the impairment is the differencebetween the asset’s carrying amount and the present value of estimated future cash flows,discounted at the original effective interest rate.

The carrying amount of the financial asset is reduced by the impairment loss directly for allfinancial assets with the exception of trade receivables where the carrying amount is reducedthrough the use of an allowance account. When a trade receivable is uncollectible, it is written offagainst the allowance account. Subsequent recoveries of amounts previously written off arecredited against the allowance account. Changes in the carrying amount of the allowanceaccount are recognised in profit or loss.

Derecognition of financial assets

The AIIL Group derecognises a financial asset only when the contractual rights to the cash flowsfrom the asset expire, or it transfers the financial asset and substantially all the risks and rewardsof ownership of the asset to another entity. If the AIIL Group neither transfers nor retainssubstantially all the risks and rewards of ownership and continues to control the transferred asset,the AIIL Group recognises its retained interest in the asset and an associated liability for amountsit may have to pay. If the AIIL Group retains substantially all the risks and rewards of ownership ofa transferred financial asset, the AIIL Group continues to recognise the financial asset and alsorecognises a collaterialised borrowing for the proceeds received.

Financial liabilities and equity instruments

Classification as debt or equity

Financial liabilities and equity instruments issued by the AIIL Group are classified according to thesubstance of the contractual arrangements entered into and the definitions of a financial liabilityand an equity instrument.

Equity instruments

An equity instrument is any contract that evidences a residual interest in the assets of the AIILGroup after deducting all of its liabilities. Equity instruments are recorded at the proceedsreceived, net of direct issue costs.

Financial liabilities

Trade and other payables are initially measured at fair value, net of transaction costs, and aresubsequently measured at amortised cost, using the effective interest method, with interestexpense recognised on an effective yield basis.

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31 DECEMBER 2008, 2009 AND 2010

Interest-bearing bank loans are initially measured at fair value, and are subsequently measured atamortised cost, using the effective interest method. Any difference between the proceeds (net oftransaction costs) and the settlement or redemption of borrowings is recognised over the term ofthe borrowings in accordance with the AIIL Group’s accounting policy for borrowing costs.

Derecognition of financial liabilities

The AIIL Group derecognises financial liabilities when, and only when, the AIIL Group’s obligationsare discharged, cancelled or they expire.

LEASES - Leases are classified as finance leases whenever the terms of the lease transfersubstantially all the risks and rewards of ownership to the lessee. All other leases are classifiedas operating leases.

Rentals payable under operating leases are charged to profit or loss on a straight-line basis overthe term of the relevant lease unless another systematic basis is more representative of the timepattern in which economic benefits from the leased asset are consumed. Contingent rentalsarising under operating leases are recognised as an expense in the period in which they areincurred.

REVENUE - Revenue is measured at fair value of the consideration received or receivable forsales of goods and rendering of services provided in the normal course of business, net ofdiscounts and sales related taxes.

Service fee income

Service fee income generated from the provision of project management and consultancy servicesrelating to shipbuilding, which cover ship design and construction (both of which are outsourced tothird parties), procurement, newbuilding management and marine finance is recognised byreference to the stage of completion of the shipbuilding consultancy contracts.

Management service fee

Management service fee is recognised when services are rendered which include managementservices rendered with respect to marketing and consulting activities.

Interest income

Interest income from a financial institution is accrued on a time basis, by reference to the principaloutstanding and at the effective interest rate applicable, which is the rate that exactly discounts theestimated future cash receipts through the expected life of the financial asset to that asset’s netcarrying amount on initial recognition.

RETIREMENT BENEFIT COSTS - Payments to defined contribution retirement benefit plans arecharged as an expense as they fall due. Payments made to state-managed retirement benefitschemes, such as the Singapore Central Provident Fund, are dealt with as payments to definedcontribution plans where the AIIL Group’s obligations under the plans are equivalent to thosearising in a defined contribution retirement benefit plan.

Pursuant to the relevant regulations of the PRC government, the PRC subsidiaries of the AIILGroup (“PRC Subsidiaries”) have participated in central pension schemes (“the Schemes”)operated by local municipal governments whereby the PRC Subsidiaries are required to contributea certain percentage of the basic salaries of their employees to the Schemes to fund theirretirement benefits. The local municipal governments undertake to assume the retirement benefitobligations of all existing and future retired employees of the PRC Subsidiaries. The only obligationof the PRC Subsidiaries with respect to the Schemes is to pay the ongoing required contributionsunder the Schemes mentioned above. Contributions under the Schemes are charged as expenseswhen incurred.

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31 DECEMBER 2008, 2009 AND 2010

INCOME TAX EXPENSE - Income tax expense represents the sum of the tax currently payableand deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profitas reported in the income statement because it excludes items of income or expense that aretaxable or deductible in other years and it further excludes items that are not taxable or taxdeductible. The AIIL Group’s liability for current tax is calculated using tax rates (and tax laws)that have been enacted or substantively enacted in countries where the Company and subsidiariesoperate by the end of the reporting period.

Deferred tax is recognised on differences between the carrying amounts of assets and liabilities inthe financial statements and the corresponding tax bases used in the computation of taxable profit,and is accounted for using the balance sheet liability method. Deferred tax liabilities are generallyrecognised for all taxable temporary differences and deferred tax assets are recognised to theextent that it is probable that taxable profits will be available against which deductible temporarydifferences can be utilised.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period andreduced to the extent that it is no longer probable that sufficient taxable profits will be available toallow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liabilityis settled or the asset realised based on the tax rates (and tax laws) that have been enacted orsubstantively enacted by the end of the reporting period.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set offcurrent tax assets against current tax liabilities and when they relate to income taxes levied by thesame taxation authority and the AIIL Group intends to settle its current tax assets and liabilities ona net basis.

Current and deferred taxes are recognised as an expense or income in profit or loss.

4. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATIONUNCERTAINTY

In the application of the AIIL Group’s accounting policies, which are described in Note 3 above,management is required to make judgements, estimates and assumptions about the carryingamounts of assets and liabilities that are not readily apparent from other sources. The estimatesand associated assumptions are based on historical experience and other factors that areconsidered to be relevant. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions toaccounting estimates are recognised in the period in which the estimate is revised if the revisionaffects only that period, or in the period of the revision and future periods if the revision affectsboth current and future periods.

Critical judgements in applying the AIIL Group’s accounting policies

Management did not make any material judgements that have significant effect on the amountsrecognised in the unaudited Pro Forma Financial Information.

Key sources of estimation uncertainty

The AIIL Group did not make estimates and assumptions concerning the future for the purpose ofpreparing the unaudited Pro Forma Financial Information.

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31 DECEMBER 2008, 2009 AND 2010

5. FINANCIAL RISKS AND MANAGEMENT

The management of the AIIL Group monitors and manages the financial risks relating to theoperations of the AIIL Group to ensure appropriate measures are implemented in a timely andeffective manner. These risks include credit risk and liquidity risk as discussed below:

The AIIL Group has limited exposure to credit risk as the customers make progress payments inaccordance with the following milestones: (1) signing of shipbuilding contract; (2) steel cutting;(3) keel laying; (4) launching; and (5) delivery of vessel. The customers must pay each progresspayment in full for each milestone, therefore the AIIL Group does not have any trade receivables.The customers will have to settle in full prior to delivery of the vessel.

The AIIL Group adopts prudent liquidity risk management by maintaining sufficient cash and cashequivalents to fund its operations.

6. RELATED PARTY TRANSACTIONS

Related parties are entities with common direct or indirect shareholders and/or directors. Partiesare considered to be related if one party has the ability to control the other party or exercisesignificant influence over the other party in making financial and operating decisions.

Some of the AIIL Group’s transactions and arrangements are with related parties and the effect ofthese on the basis determined between the parties is reflected in the unaudited Pro FormaFinancial Information.

During the year, the AIIL Group entered into the following significant transactions with the relatedparties:

(a) Transactions with an associate

2008 2009 2010RMB’000 RMB’000 RMB’000

Service fee income relating to shipbuilding – – 18,600Management service fee – – 8,400

– – 27,000Less sales taxes and surcharges – – (1,485)

– – 25,515

(b) Compensation of directors and key management personnel

The remuneration of directors who are also key management personnel is as follows:

2008 2009 2010RMB’000 RMB’000 RMB’000

Short-term benefits 245 292 399Post-employment benefits 91 116 77

336 408 476

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31 DECEMBER 2008, 2009 AND 2010

7. REVENUE

2008 2009 2010RMB’000 RMB’000 RMB’000

Service fee income 44,838 25,996 72,560Management service fee from a related party (Note 6) – – 8,400

44,838 25,996 80,960Less sales taxes and surcharges (2,471) (1,430) (4,465)

Total revenue 42,367 24,566 76,495

8. OTHER OPERATING INCOME

2008 2009 2010RMB’000 RMB’000 RMB’000

Interest income 11,967 8,506 8,718

9. INCOME TAX EXPENSE

2008 2009 2010% % %

Domestic income tax rate 25.0 25.0 25.0

Domestic income tax is calculated using the PRC tax rates above on the estimated assessableprofit for the year. The total charge for the year can be reconciled to the accounting profit asfollows:

2008 2009 2010RMB’000 RMB’000 RMB’000

Profit before income tax 47,913 25,005 74,934

Income tax expense at PRC applicable tax rate 11,978 6,251 18,734Non-deductible items 42 125 54

Total income tax expense 12,020 6,376 18,788

10. PROFIT FOR THE YEAR

Profit for the year has been arrived at after charging:

2008 2009 2010RMB’000 RMB’000 RMB’000

Directors’ remuneration 336 408 476Retirement benefit scheme contributions included in employee benefits expense 894 1,027 965

Minimum lease payments 435 558 1,606

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31 DECEMBER 2008, 2009 AND 2010

11. EARNINGS PER SHARE

Earnings per share for the relevant periods have been calculated based on the profit attributable tothe equity holders of the company for each of the year and pre-compliance placement issuedshare capital of 232,000,000 shares.

12. SEGMENT INFORMATION

The AIIL Group is engaged in the provision of shipbuilding consultancy services and managementservices with respect to marketing activities and financing facilities arrangement. Accordingly, thisforms the basis of identifying the operating segments of the AIIL Group under FRS 108 OperatingSegments.

The AIIL Group’s reportable operating segments under FRS 108 are as follows:

(a) Service fee income – provision of shipbuilding consultancy services.

(b) Management service fee – services rendered in respect to marketing and consultingactivities.

Segment revenue represents revenue from external customer and a related party. Segment profitrepresents the profit earned by each segment without allocation of central administrative costs andincome tax. This is the measure reported to the chief decision maker for the purpose ofassessment of segment performance.

Information regarding the AIIL Group’s reportable segments is presented as below:

2008

Service fee Managementincome service fee Total

RMB’000 RMB’000 RMB’000

RevenueExternal revenue 42,367 – 42,367

ResultSegment result 35,946 – 35,946Unallocated other operating income 11,967

Profit before income tax 47,913Income tax expense (12,020)

Profit for the year 35,893

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31 DECEMBER 2008, 2009 AND 2010

2009

Service fee Managementincome service fee Total

RMB’000 RMB’000 RMB’000

RevenueExternal revenue 24,566 – 24,566

ResultSegment result 16,499 – 16,499Unallocated other operating income 8,506


Profit for the year 18,629

2010Service fee Management

income service fee TotalRMB’000 RMB’000 RMB’000

RevenueExternal 50,980 – 50,980Related party 17,577 7,938 25,515

68,557 7,938 76,495

ResultSegment result 61,241 6,805 68,046Unallocated other operating income 8,718Unallocated corporate expenses (1,830)


Profit for the period 56,146

Geographical information

The AIIL Group generates revenue from customers located in the following geographical areas asfollows:

2008 2009 2010RMB’000 RMB’000 RMB’000

Asia – – 25,515Europe 12,397 12,070 12,481Middle East 29,970 12,496 38,499

42,367 24,566 76,495

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31 DECEMBER 2008, 2009 AND 2010

Information about major customers

The revenue generated from the AIIL Group’s major group of customers are as follows:

2008 2009 2010

Service fee Management Service fee Management Service fee Managementincome service fee income service fee income service fee

RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000

Customer 1 22,178 – 12,496 – 35,038 –Customer 2 7,545 – 4,140 – 17,577 7,938Customer 3 7,792 – 4,005 – – –Customer 4 – – 3,925 – – –

Total 37,515 – 24,566 – 52,615 7,938

13. SUBSEQUENT EVENTS

Pursuant to a written resolution passed by the Shareholder on 1 July 2011, the Shareholderapproved, inter alia, the following proposals:

(a) the issue of the Consideration Shares and the Compliance Placement Shares which whenallotted, issued and fully paid, will rank pari passu in all respects with the existing issuedShares;

(b) the authorisation for the Directors to allot and issue Shares and/or convertible securities(where the maximum number of Shares to be issued upon conversion can be determined atthe time of issue of such convertible securities) from time to time (whether by way of rights,bonus or otherwise) and upon such terms and conditions and for such purposes and to suchpersons as the Directors may in their absolute discretion deem fit, provided that:

(i) the aggregate number of Shares and/or convertible securities which may be issuedpursuant to such authority shall not exceed 50% of the issued shares of the Company,excluding treasury shares, of which the aggregate number of Shares and/orconvertible securities which may be issued other than on a pro-rata basis to theexisting Shareholders of the Company shall not exceed 20% of the issued shares ofthe Company;

(ii) the percentage of issued shares being based on the post-Compliance Placementissued shares of the Company after adjusting for new Shares arising from theconversion or exercise of any convertible securities or employee share options onissue at the time such authority is given and any subsequent consolidation or sub-division of shares;

(iii) unless revoked or varied by the Company in general meeting, such authority shallcontinue in force until the conclusion of the next annual general meeting of theCompany or on the date by which the next annual general meeting is required by lawto be held, whichever is earlier; and

(c) the ratification and performance of the management agreement between AVIC Beijing andthe Company on 29 June 2011, pursuant to which AVIC Beijing engaged the Company toprovide project management and consultancy services for the outstanding projects underAVIC Beijing until all the vessels under the outstanding projects are delivered, for an annualfee of approximately RMB28.0 million (before sales taxes and surcharges of approximately5.5%).

Upon the allotment and issuance of the Compliance Placement Shares, the resultant issued andpaid-up share capital of the Company will be S$36,625,528 comprising 297,000,000 Shares.

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31 DECEMBER 2008, 2009 AND 2010

The discussion below provides a summary of the object of our Company as set out in our Memorandumof Association and certain provisions of our Articles of Association and the laws of Singapore. Thisdiscussion is only a summary and is qualified by reference to Singapore law and our Memorandum ofAssociation and Articles of Association.

Memorandum of Association and Registration Number

We are registered in Singapore with the Registrar of Companies and Businesses. Our companyregistration number is 201024137N. Our Memorandum of Association sets out the object for which ourCompany was formed, being an investment-holding company.

Summary of our Articles of Association

1. Directors

(a) Appointment and retirement of Directors

A resolution for the appointment of two or more persons as Directors by a single resolutionshall not be moved at any general meeting unless such resolution has first been agreed toby the meeting without any vote being given against it.

At each annual general meeting, one-third of the Directors for the time being (or, if theirnumber is not a multiple of three, the number nearest to but not less than one-third) shallretire from office by rotation, so that all Directors shall retire from office once at least everythree years. A retiring Director shall be eligible for re-election.

(b) Ability of interested Directors to vote

A Director shall not vote in respect of any contract, proposed contract or arrangement or anyother proposal in which he has any personal material interest, and he shall not be countedin the quorum present at the meeting except under circumstances as set out in our Articlesof Association.

(c) Remuneration

Fees payable to non-executive Directors shall be a fixed sum and shall not at any time be bycommission on or a percentage of profits or turnover of our Company, as shall from time totime be determined by our Company in general meeting. Fees payable to Directors shall notbe increased except at a general meeting convened by a notice specifying the intention topropose such increase.

Any Director who holds any executive office, or who serves on any committee of theDirectors, or who otherwise performs services which in the opinion of the Directors areoutside the scope of ordinary duties of a Director, may be paid such extra remuneration byway of salary, commission or otherwise as the Directors may determine.

The remuneration of a Managing Director shall from time to time be fixed by the Directorsand may be by way of salary or commission or participation in profits or by any or all ofthese modes but he shall not under any circumstances be remunerated by a commission onor a percentage of turnover.

Our Directors shall have power to pay and agree to pay pensions or other retirement,superannuation, death or disability benefits to (or to any person in respect of) any Directorfor the time being holding any executive office and for the purpose of providing any suchpensions or other benefits, to contribute to any scheme or fund or to pay premiums.

APPENDIX B: SUMMARY OF MEMORANDUM OF ASSOCIATION AND SELECTED ARTICLES OF ASSOCIATION OF OUR COMPANY

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(d) Borrowing

Our Directors may exercise all the powers of our Company to borrow money, to mortgage orcharge its undertaking, property and uncalled capital and to issue debentures and othersecurities, whether outright or as collateral security for any debt, liability or obligation of ourCompany or of any third party.

(e) Retirement age limit

There is no retirement age limit for Directors under our Articles of Association. Section 153of the Companies Act however, provides that no person of or over the age of 70 years shallbe appointed or act as a director of a public company, unless he is appointed or re-appointed as a director of our Company or authorised to continue in office as a director ofour Company by way of an ordinary resolution passed at an annual general meeting of ourCompany.

(f) Shareholding qualification

There is no shareholding qualification for Directors in the Memorandum of Association andArticles of Association of our Company.

2. Share rights and restrictions

Our Company currently has one class of shares, namely, ordinary shares. Only persons who areregistered on our register of Shareholders and in cases in which the person so registered is CDP,the persons named as the Depositors in the Depository Register maintained by CDP for ourShares, are recognised as our Shareholders.

(a) Dividends and distribution

We may, by ordinary resolution of our Shareholders, declare dividends at a general meeting,but we may not pay dividends in excess of the amount recommended by our Board ofDirectors. We must pay all dividends out of our profits; however, we may capitalise any sumstanding to the credit of any of our Company’s reserve accounts or other distributablereserve or any sum standing to the credit of profit and loss account and apply it to paydividends, if such dividends are satisfied by the issue of Shares to our Shareholders. Alldividends are paid pro-rata amongst our Shareholders in proportion to the amount paid upon each Shareholder’s ordinary shares, unless the rights attaching to an issue of anyordinary share provide otherwise. Unless otherwise directed, dividends are paid by chequeor warrant sent through the post to each Shareholder at his registered address.Notwithstanding the foregoing, the payment by us to CDP of any dividend payable to aShareholder whose name is entered in the depository register shall, to the extent of paymentmade to CDP, discharge us from any liability to that Shareholder in respect of that payment.

The payment by the Directors of any unclaimed dividends or other monies payable on or inrespect of a Share into a separate account shall not constitute our Company a trustee inrespect thereof. All dividends unclaimed after being declared may be invested or otherwisemade use of by the Directors for the benefit of our Company. Any dividend unclaimed after aperiod of six (6) years after having been declared may be forfeited and shall revert to ourCompany but the Directors may thereafter at their discretion annul any such forfeiture andpay the dividend so forfeited to the person entitled thereto prior to the forfeiture.

Our Directors may retain any dividends or other monies payable on or in respect of a Shareon which our Company has a lien, and may apply the same in or towards satisfaction of thedebts, liabilities or engagements in respect of which the lien exists.


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(b) Voting rights

A holder of our Shares is entitled to attend, speak and vote at any general meeting, inperson or by proxy. Proxies need not be a Shareholder. A person who holds Shares throughthe SGX-ST book-entry settlement system will only be entitled to vote at a general meetingas a Shareholder if his name appears on the Depository Register maintained by CDP 48hours before the general meeting. Except as otherwise provided in our Articles ofAssociation, two or more Shareholders must be present in person or by proxy to constitute aquorum at any general meeting. Under our Articles of Association, on a show of hands,every Shareholder present in person and by proxy shall have one vote (provided that in thecase of a member who is represented by two proxies, only one of the two proxies asdetermined by that member or, failing such determination, by the Chairman of the meeting(or by a person authorised by him) in his sole discretion shall be entitled to vote on a showof hands), and on a poll, every Shareholder present in person or by proxy shall have onevote for each ordinary share which he holds or represents. A poll may be demanded incertain circumstances, including by the Chairman of the meeting or by any Shareholderpresent in person or by proxy and representing not less than 10 per cent. of the total votingrights of all Shareholders having the right to attend and vote at the meeting or by any twoShareholders present in person or by proxy and entitled to vote. In the case of a tie vote,whether on a show of hands or a poll, the Chairman of the meeting shall be entitled to acasting vote.

3. Change in capital

Changes in the capital structure of our Company (for example, an increase, consolidation,cancellation, sub-division or conversion of our share capital) require Shareholders to pass anordinary resolution. Ordinary resolutions generally require at least 14 days’ notice in writing. Thenotice must be given to each of our Shareholders who have supplied us with an address inSingapore for the giving of notices and must set forth the place, the day and the hour of themeeting. However, we are required to obtain our Shareholders’ approval by way of a specialresolution for any reduction of our share capital or other undistributable reserve, subject to theconditions prescribed by law.

4. Variation of rights of existing shares or classes of shares

Subject to the Companies Act, whenever the share capital of our Company is divided into differentclasses of shares, the special rights attached to any class may be varied or abrogated either withthe consent in writing of the holders of three-quarters of the total voting rights of the issued sharesof the class or with the sanction of a special resolution passed at a separate general meeting ofthe holders of the shares of the class. To every such separate general meeting the provisions ofour Articles of Association relating to general meetings of our Company and to the proceedingsthereat shall mutatis mutandis apply, except that the necessary quorum shall be two persons atleast holding or representing by proxy at least one-third of the total voting rights of the issuedshares of the class, and that any holder of shares of the class present in person or by proxy maydemand a poll and that every such holder shall on a poll have one vote for every share of the classheld by him, provided always that where the necessary majority for such a special resolution is notobtained at such general meeting, consent in writing if obtained from the holders of three-quartersof the total voting rights of the issued shares of the class concerned within two months of suchgeneral meeting shall be as valid and effectual as a special resolution carried at such generalmeeting. These provisions shall apply to the variation or abrogation of the special rights attached tosome only of the shares of any class as if each group of shares of the class differently treatedformed a separate class the special rights whereof are to be varied or abrogated.

The relevant Article does not impose more significant conditions than the Companies Act in thisregard.

5. Limitations on foreign or non-resident Shareholders

There are no limitations imposed by Singapore law or by our Articles of Association on the rights ofour Shareholders who are regarded as non-residents of Singapore, to hold or vote on their Shares.


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1. PRC legal system

The PRC legal system is based on the PRC constitution and is made up of written laws,regulations and directives. Decided court cases do not constitute binding precedents.

The National People’s Congress of the PRC (the “NPC”) and the Standing Committee of the NPCare empowered by the PRC constitution to exercise the legislative power of the state. The NPC hasthe power to amend the PRC constitution and to enact and amend primary laws governing thestate organs and civil and criminal matters. The Standing Committee of the NPC is empowered tointerpret, enact and amend laws other than those required to be enacted by the NPC.

The State Council of the PRC is the highest organ of state administration and has the power toenact administrative rules and regulations. Ministries and commissions under the State Council ofthe PRC are also vested with the power to issue orders, directives and regulations within thejurisdiction of their respective departments. Administrative rules, regulations, directives and orderspromulgated by the State Council and its ministries and commissions must not be in conflict withthe PRC constitution or the national laws and, in the event that any conflict arises, the StandingCommittee of the NPC has the power to annul such administrative rules, regulations, directives andorders.

At the regional level, the people’s congresses of provinces and municipalities and their standingcommittees may enact local rules and regulations and the people’s government may promulgateadministrative rules and directives applicable to their own administrative area. These local laws andregulations may not be in conflict with the PRC constitution, any national laws or any administrativerules and regulations promulgated by the State Council.

Rules, regulations or directives may be enacted or issued at the provincial or municipal level or bythe State Council of the PRC or its ministries and commissions in the first instance forexperimental purposes. After sufficient experience has been gained, the State Council may submitlegislative proposals to be considered by the NPC or the Standing Committee of the NPC forenactment at the national level.

The power to interprete laws is vested by the PRC constitution in the Standing Committee of theNPC. According to the Decision of the Standing Committee of the NPC Regarding theStrengthening of Interpretation of Laws passed on 10 June 1981, the Supreme People’s Court hasthe power to give general interpretation on application of laws in judicial proceedings apart from itspower to issue specific interpretation in specific cases. The State Council and its ministries andcommissions are also vested with the power to give interpretation of the rules and regulationswhich they promulgated. At the regional level, the power to give interpretation of regional laws isvested in the regional legislative and administration organs which promulgate such laws. All suchinterpretations carry legal effect.

2. Judicial system

The People’s Courts are the judicial organs of the PRC. Under the PRC constitution and the Law ofOrganisation of the People’s Courts of the People’s Republic of China, the People’s Courtscomprise the Supreme People’s Court, the local people’s courts, military courts and other specialpeople’s courts. The local people’s courts are divided into three levels, namely, the basic people’scourts, intermediate people’s courts and higher people’s courts. The basic people’s courts aredivided into civil, criminal and administrative divisions. The intermediate people’s courts havedivisions similar to those of the basic people’s courts and, where the circumstances so warrant,may have other special divisions (such as intellectual property divisions). The judicial functions ofpeople’s courts at lower levels are subject to supervision of people’s courts at higher levels. Thepeople’s procuratorates also have the right to exercise legal supervision over the proceedings ofpeople’s courts of the same and lower levels. The Supreme People’s Court is the highest judicialorgan of the PRC. It supervises the administration of justice by the people’s courts of all levels.

APPENDIX C: SUMMARY OF RELEVANT PRC LAWS AND REGULATIONS

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The People’s Courts adopt a two-tier final appeal system. A party may before the taking effect of ajudgment or order appeal against the judgment or order of the first instance of a local people’scourt to the people’s court at the next higher level. Judgments or orders of the second instance ofthe same level and at the next higher level are final and binding. Judgments or orders of the firstinstance of the Supreme People’s Court are also final and binding if no appeals are made beforethey take effect. If, however, the Supreme People’s Court or a people’s court at a higher level findsan error in a final and binding judgment which has taken effect in any people’s court at a lowerlevel, or the presiding judge of a people’s court finds an error in a final and binding judgment whichhas taken effect in the court over which he presides, a retrial of the case may be conductedaccording to the judicial supervision procedures. The PRC civil procedures are governed by theCivil Procedure Law of the People’s Republic of China (the “Civil Procedure Law”) adopted on 9April 1991 and amended on 28 October 2007. The Civil Procedure Law contains regulations on theinstitution of a civil action, the jurisdiction of the people’s courts, the procedures in conducting acivil action, trial procedures and procedures for the enforcement of a civil judgment or order. Allparties to a civil action conducted within the territory of the PRC must comply with the CivilProcedure Law. A civil case is generally heard by a court located in the defendant’s place ofdomicile. The jurisdiction may also be selected by express agreement by the parties to a contractprovided that the jurisdiction of the people’s court selected has some actual connection with thedispute, that is to say, the plaintiff or the defendant is located or domiciled, or the contract wasexecuted or implemented in the jurisdiction selected, or the subject-matter of the proceedings islocated in the jurisdiction selected. A foreign national or foreign enterprise is accorded the samelitigation rights and obligations as a citizen or legal person of the PRC. If any party to a civil actionrefuses to comply with a judgment or order made by a people’s court or an award made by anarbitration body in the PRC, the aggrieved party may apply to the people’s court to enforce thejudgment, order or award. The time limit on the right to apply for such enforcement is two years.

A party seeking to enforce a judgment or order of a people’s court against a party who or whoseproperty is not within the PRC may apply to a foreign court with jurisdiction over the case forrecognition and enforcement of such judgment or order. A foreign judgment or ruling may also berecognised and enforced according to PRC enforcement procedures by the people’s courts inaccordance with the principle of reciprocity or if there exists an international or bilateral treaty withor acceded to by the foreign country that provides for such recognition and enforcement, unlessthe people’s court considers that the recognition or enforcement of the judgment or ruling willviolate fundamental legal principles of the PRC or its sovereignty, security or social or publicinterest.

3. Arbitration and enforcement of arbitral awards

The Arbitration Law of the PRC (the “Arbitration Law”) was promulgated by the StandingCommittee of the NPC on 31 August 1994 and came into effect on 1 September 1995. It isapplicable to, among other matters, trade disputes involving foreign parties where the parties haveentered into a written agreement to refer the matter to arbitration before an arbitration committeeconstituted in accordance with the Arbitration Law. Under the Arbitration Law, an arbitrationcommittee may, before the promulgation by the PRC Arbitration Association of arbitrationregulations, formulate interim arbitration rules in accordance with the Arbitration Law and the PRCCivil Procedure Law. Where the parties have by an agreement provided arbitration as a method fordispute resolution, the parties are not permitted to institute legal proceedings in a people’s court.

Under the Arbitration Law, an arbitral award is final and binding on the parties and if a party fails tocomply with an award, the other party to the award may apply to the people’s court forenforcement. A people’s court may refuse to enforce an arbitral award made by an arbitrationcommittee if there were mistakes, an absence of material evidence or irregularities over thearbitration proceedings, or the jurisdiction or constitution of the arbitration committee.

A party seeking to enforce an arbitral award of a foreign affairs arbitration body of the PRC againsta party who or whose property is not within the PRC may apply to a foreign court with jurisdictionover the case for enforcement. Similarly, an arbitral award made by a foreign arbitration body maybe recognised and enforced by the PRC courts in accordance with the principles of reciprocity orany international treaty concluded or acceded to by the PRC.


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In respect of contractual and non-contractual commercial law-related disputes which arerecognised as such for the purposes of PRC law, the PRC has acceded to the Convention on theRecognition and Enforcement of Foreign Arbitral Award (the “New York Convention”) adopted on10 June 1958 pursuant to a resolution of the Standing Committee of the NPC passed on 2December 1986. The New York Convention provides that all arbitral awards made by a state whichis a party to the New York Convention shall be recognised and enforced by other parties to theNew York Convention subject to their right to refuse enforcement under certain circumstancesincluding where the enforcement of the arbitral award is against the public policy of the state towhich the application for enforcement is made. It was declared by the Standing Committee of theNPC at the time of the accession of the PRC that (1) the PRC would only recognise and enforceforeign arbitral awards on the principle of reciprocity; and (2) the PRC would only apply the NewYork Convention in disputes considered under PRC laws to be arising from contractual and non-contractual mercantile legal relations.

4. Company Law

On 29 December 1993, the Standing Committee of the Eighth National People’s Congress of thePRC promulgated the Company Law of the PRC which came into effect on 1 July 1994 and wasamended on 25 December 1999, 28 August 2004 and 27 October 2005. Companies establishedunder laws, administrative regulations, local laws and the Standard Opinion for Companies Limitedby Shares and Limited Liability Companies formulated by the relevant departments of the StateCouncil before the implementation of the Company Law will not be affected by the Company Lawand shall continue to be recognised. Those companies which have not totally complied with theprovisions of the Company Law shall comply with the relevant requirements within a specifiedperiod of time. The State Council may separately promulgate detailed implementing measures.

A “limited liability company” refers to a company whose shareholders are responsible for the debtsof the company in the amount equivalent to the amount of capital they contribute to the registeredcapital of the company. The company bears responsibility for its debts equivalent to the value of itstotal assets.

A “company limited by shares” refers to a company whose total capital is divided equally amongstshares of equivalent value. The liability of the shareholders is limited to the extent of the sharesheld by them, and the liability of the company is limited to the full amount of all the assets ownedby it.

Establishment of limited liability companies and companies limited by shares must be incompliance with the requirements stipulated in the Company Law. The following conditions must befulfilled in order to establish a limited liability company:

(a) joint capital contribution by not more than 50 shareholders;

(b) the minimum amount of registered capital of RMB30,000 must be met;

(c) the company’s articles of association is to be formulated jointly by the shareholders;

(d) the company shall have a name and organisational structure commensurate with thedemands for a limited liability company; and

(e) the company shall have a domicile.

A company limited by shares may be established if the following conditions are fulfilled:

(a) there shall be two to 200 promoters with a majority domiciled in the PRC;

(b) the minimum registered capital requirement of RMB5.0 million must be met;

(c) share issue arrangements are in compliance with the provisions of PRC Law;


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(d) the company’s articles of association shall be formulated by the promoters and adopted bythe founding meeting;

(e) the company shall have a name and organisational structure commensurate with that of acompany limited by shares; and

(f) the company shall have a domicile.

The company may invest in other limited liability companies and companies limited by shares andthe company’s liabilities with respect to such invested companies are limited to the amountinvested.

The promoters are prohibited from transferring their shares in a company limited by shares withinone year commencing from the date of incorporation of the company.

5. Importation and Exportation of Goods

Pursuant to the Foreign Trade Law of the People’s Republic of China, which was promulgated on 6April 2004 and became effective on 1 July 2004, foreign trade dealers engaged in import andexport of goods or technologies shall register with the authority responsible for foreign trade.Where foreign trade dealers fail to register as required, the customs authority shall not process theprocedures of declaration, examination and release for the imported and exported goods.

Pursuant to the Administrative Provisions for the Registration of Customs Declaration Bodies bythe PRC Customs Authorities, which was promulgated on 31 March 2005 and became effectivefrom 1 June 2005, “consignor or consignee of export or import goods” means any legal person,other organisation or individual that directly imports or exports goods within the territory of thePRC. Consignors or consignees of import and export goods are required to go through registrationformalities with the appropriate local customs authority in accordance with the applicableprovisions. After going through the registration customs formalities, consignors or consignees ofimport and export goods are permitted to handle their own declarations at any customs port or anylocality where customs supervisory affairs are concentrated within the customs territory of thePRC. The Registration Certificate for Customs Declaration by PRC Consignor/Consignee of Exportor Import Goods is valid for a period of three years.

6. Foreign exchange control

Major reforms have been introduced on the foreign exchange control system of the PRC since1993.

The PBOC, with the authorisation of the State Council, issued respectively the Notice on theFurther Reform of the Foreign Exchange Control System on 28 December 1993 and theProvisional Regulations on the Settlement, Sale and Payment of Foreign Exchange on 26 March1994, which came into effect on 1 April 1994. On 29 January 1996, the State Council promulgatedthe PRC Foreign Exchange Administration Regulations which took effect on 1 April 1996 and wasamended on 5 August 2008. On 20 June 1996, the PBOC issued the Administration Regulationson the Settlement, Sale and Payment of Foreign Exchange, which took effect on 1 July 1996. On25 October 1998, the PBOC and the SAFE issued a Joint Announcement on Abolishment ofForeign Exchange Swap Business which stated that from 1 December 1998, all foreign exchangetransactions for FIEs may only be conducted through authorised banks.

On 14 January 1997, the State Council amended and re-promulgated the PRC Foreign ExchangeAdministration Regulations by segregating international earnings into current activities and capitalactivities. Except for foreign exchange relating to capital activities, the use of foreign exchange forcurrent activities does not require the approval from the Foreign Exchange Control Department.


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These regulations contain detailed provisions regulating the holding, sale and purchase of foreignexchange by individuals, enterprises, economic bodies and social organisations in the PRC.

On 21 July 2005, the Public Announcement of the People’s Bank of China on Reforming the RMBExchange Rate Regime (the “Announcement”) was promulgated by the PBOC. In accordancewith the Announcement, the PRC government has reformed the RMB exchange rate regime into amanaged floating exchange rate regime based on market supply and demand with reference to abasket of currencies, giving more flexibility as compared with the former system in which the RMBwas pegged to the US$. Under this reformed system, the PBOC announces the closing price of aforeign currency traded against the RMB in the inter-bank foreign exchange market after theclosing of the market on each working day, and will make it the central parity for trading against theRMB on the following working day. PRC banks licensed to engage in foreign exchange transactionsuse the closing price announced by the PBOC as a basis and decide a rate of their own to enterinto foreign exchange sale and purchase transactions with customers, such rate being within aspecified floating band around the central parity which may be adjusted by the PBOC from time totime according to the economic and financial condition in the PRC.

Under the PRC Foreign Exchange Administration Regulations, international payments andtransfers were segregated into current account items and capital account items. All organisationsand individuals within the PRC, including FIEs, were required to remit their foreign exchangeearnings to the PRC. The foreign exchange earnings under the current account items of all PRCenterprises, other than those FIEs, who were allowed to retain a part of their regular foreignexchange earnings or specifically exempted under the relevant regulations, were to be sold todesignated banks. Foreign exchange earnings under the capital account items obtained fromborrowings from foreign institutions or issues of shares or bonds denominated in foreign currencyneed not be sold to designated banks, but must be kept in foreign exchange bank accounts ofdesignated banks unless specifically approved otherwise. On 1 August 2008, the State Councilfurther amended the PRC Foreign Exchange Administration Regulations (the “New ForeignExchange Administration Regulations”) which became effective from 5 August 2008. Accordingto the New Foreign Exchange Administration Regulations, foreign exchange earnings of domesticinstitutions and individuals could be repatriated into the PRC as well as deposited overseas. Theconditions and time limitation for repatriation into the PRC or deposit overseas shall be specifiedby the State Council foreign exchange management departments in accordance with theinternational balance payments situations and the needs of foreign exchange managements.Furthermore, foreign exchange earnings under the current account items could be retained or soldto financial institutions which conduct business of settlement, sale and payment of foreignexchange.

At present, control on the purchase of foreign exchange is being relaxed. Enterprises which requireforeign exchange for their current activities such as trading activities and payment of staffremuneration may purchase foreign exchange from designated banks, subject to the production ofrelevant supporting documents without the need for any prior approvals of the SAFE.

In addition, where an enterprise requires any foreign exchange for the payment of dividends thatare payable in foreign currencies under applicable regulations, such as the distribution of profits byFIEs to their foreign investors, then, subject to the due payment of tax on such dividends, theamount required may be withdrawn from funds in foreign exchange accounts maintained withdesignated banks, and when the amount of the funds in foreign exchange is insufficient, theenterprise may purchase additional foreign exchange from designated banks upon the presentationof the resolutions of the board of directors on the profit distribution plan of that enterprise.

Despite the relaxation of foreign exchange control over current account transaction, the approval ofthe foreign exchange administration authority is still required before a PRC enterprise may borrowa loan in foreign currency or provide any foreign exchange guarantee or make any investmentoutside of the PRC or to enter into any other capital account transaction involving the purchase offoreign exchange.


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When conducting actual foreign exchange transactions, the designated banks may, based on theexchange rate published by the PBOC and subject to certain limits, freely determine the applicableexchange rate.

The China Foreign Exchange Trading Centre (the “CFETC”) was formally established and cameinto operation on 1 January 1994. CFETC has set up a computerised network with sub-centres inseveral major cities, thereby forming an inter-bank market in which designated PRC banks cantrade in foreign exchange and settle their foreign currency obligations. Prior to 1 December 1998,enterprises with foreign investment may at their own choice enter into exchange transactionsthrough Swap Centre or through designated PRC banks. From 1 December 1998 onwards,exchange transactions will have to be conducted through designated banks. Swap Centres becamerestricted to conducting foreign exchange transactions between authorised banks and inter-banklending between PRC banks.

7. Taxation

The applicable income tax laws, regulations, notices and decisions (collectively referred to as the“Applicable Foreign Enterprises Tax Law”) related to FIEs and their investors include thefollowing:

(a) Income Tax Law Applicable to Individuals of the PRC promulgated by Standing Committee ofNPC on 10 September 1980 and last amended on 29 December 2007;

(b) Notice on Relevant Policies Concerning Individual Income Tax issued by Ministry of Financeand the State Tax Bureau on 13 May 1994;

(c) Enterprise Income Tax Law of the PRC promulgated by the NPC, which came into effect on1 January 2008;

(d) Implementing Rules of the Enterprise Income Tax Law of the PRC, which came into effect on1 January 2008;

(e) Notice on the Implementation of Preferential Transitional Enterprise Income Tax Policypromulgated by the State Council, which came into effect on 1 January 2008;

(f) Notice on the Implementation of Preferential Transitional Tax Treatment on Newly EstablishedHigh-tech Enterprises in Special Economic Zones and in Shanghai Pudong New Areapromulgated by the State Council, which came into effect on 1 January 2008:

(i) Income tax on FIEs

According to the Applicable Foreign Enterprises Tax Law, a uniform enterprise incometax (“EIT”) rate of 25% has been applied towards FIEs which have set up institutionsor facilities within the territory of China and domestic enterprises.

Small meagre-profit enterprises complied with certain requirements may enjoy areduced EIT rate of 20% and high-tech enterprises which needed key support fromthe State may enjoy a reduced EIT rate of 15%. Furthermore, high-tech enterpriseswhich needed key national support that established on or after 1 January 2008 inShenzhen, Zhuhai, Shantou, Xiamen, Hainan and Shanghai Pudong New Area shallbe exempted from the EIT for the first two taxable years and a 50% reduction in theEIT for the next three years.

Losses incurred in a tax year may be carried forward for not more than five years.


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Upon approvals by the people’s government of provinces, autonomous regions andmunicipalities directly under the central government, the people’s governments ofautonomous organisations in autonomous areas may grant exemptions from orreduced EIT in the part which is shared by the local governments for an enterprise inthe autonomous region.

However, some transitional preferential measures have been adopted for oldenterprises established before the promulgation of the EIT Law which enjoyed low taxrates or regular tax reduction and exemption treatment under former tax laws andadministrative regulations. The transitional EIT rate for enterprises which originallyenjoyed the rate of 15% is 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011 and25% in 2012; the EIT rate for enterprises which originally enjoyed the rate of 24% hasbeen fixed at 25% from 2008.

(ii) VAT

The Provisional Regulations of the People’s Republic of China Concerning ValueAdded Tax promulgated by the State Council came into effect on 1 January 1994 andlast amended on 5 November 2008. Under these regulations and the ImplementingRules of the Provisional Regulations of the People’s Republic of China ConcerningValue Added Tax, VAT is imposed on goods sold in or imported into the PRC and onprocessing, repair and replacement services provided within the PRC.

VAT payable in the PRC is charged on an aggregated basis at a rate of 13% or 17%(depending on the type of goods involved) on the full price collected for the goodssold or, in the case of taxable services provided, at a rate of 17% on the charges forthe taxable services provided but excluding, in respect of both goods and services,any amount paid in respect of VAT included in the price or charges, and less anydeductible VAT already paid by the taxpayer on purchases of goods and services inthe same financial year.

(iii) Business tax

With effect from 1 January 1994 and last amended on 5 November 2008, businessesthat provide services (except entertainment business), assign intangible assets or sellimmovable property became liable to business tax at a rate ranging from 3% to 5% ofthe charges of the services provided, intangible assets assigned or immovableproperty sold, as the case may be.

(iv) Tax on dividends from PRC enterprise with foreign investment

According to the Applicable Foreign Enterprises Tax Law, income such as dividendsand profits distribution from the PRC derived from a foreign enterprise which has noestablishment in the PRC is subject to a 10% withholding tax, subject to reduction asprovided by any applicable double taxation treaty, unless the relevant income isspecifically exempted from tax under the Applicable Foreign Enterprises Tax Law.Pursuant to a tax treaty between the PRC and the Republic of Singapore whichbecame effective on 1 January 2008, a company incorporated in Singapore will besubject to a withholding tax at the rate of no more than 5% on dividends it receivesfrom a company incorporated in the PRC if it holds 25% or more interests in the PRCcompany, or no more than 10% if it holds less than 25% interests in the PRCcompany. If the Singapore company is required under the New Income Tax Law to paywithholding tax for any dividends it receives from its subsidiaries, it will materially andadversely affect the amount of dividends it may pay to its shareholders.


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8. Outbound Investment

On 16 March 2009, the MOC issued the Measures for the Administration of Outbound Investment(the “Outbound Investment Measures”) which was effective on 1 May 2009. The aim of the newOutbound Investment Measures is to simplify the approval procedure of outbound investment forChinese entities under the current global economic environment.

The Outbound Investment Measures divide the approval authority of overseas investment betweenthe MOC and the commerce authorities at the provincial level. The MOC will only retain theapproval authority on the investments in certain specific countries and areas as well as those withan investment scale in excess of US$100 million, leaving other projects to the commerceauthorities at the provincial level.

The MOC is responsible for approving and reviewing outbound investments as follows:

� the investment is to take place in a country with which China has not established diplomaticrelations;

� the investment is to take place in a country or territory as set out in a list to be formulatedjointly by the MOC, the Ministry of Foreign Affairs and other relevant authorities;

� the amount to be invested by the PRC investor equals or exceeds US$100 million;

� the interests of multiple countries (territories) will be involved; or

� where a PRC investor has established an offshore special purpose vehicle for the purposeof listing overseas.

The MOC’s provincial counterparts are responsible for approving and reviewing outboundinvestments as follows:

� the investment amount is less than US$100 million;

� the investment is to be made in the area of energy or mining; or

� if an “invitation for business and investment” in China is necessary.

Generally, the approval process for the above mentioned investments will take approximately 20 to40 business days according to the Outbound Investment Measures, and the length of the processusually depends on various factors such as the size and type of the proposed projects, the type ofapplicant and whether the MOC or a commerce authority has jurisdiction.

9. Wholly Foreign-owned Enterprise Laws

WFOEs are governed by the Law of the People’s Republic of China Concerning Enterprises withSole Foreign Investments, which was promulgated on 12 April 1986 and was subsequentlyamended on 31 October 2000, and its Implementation Regulations promulgated on 12 December1990 and was subsequently amended on 12 April 2001 (together, the “Foreign Enterprises Law”).

(a) Procedures for establishment of a WFOE

The establishment of a WFOE will have to be approved by the MOC (or its delegatedauthorities). If two or more foreign investors jointly apply for the establishment of a WFOE, acopy of the contract between the parties must also be submitted to the MOC (or itsdelegated authorities) for its record. A WFOE must also obtain a business license from theState Administration of Industry and Commerce (or its delegated authorities) before it cancommence business.


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(b) Nature

A WFOE is a limited liability company under the Foreign Enterprise Law. It is a legal personwhich may independently assume civil obligations, enjoy civil rights and has the right to own,use and dispose of property. It is required to have a registered capital contributed by theforeign investor(s). The liability of the foreign investor(s) is limited to the amount of registeredcapital contributed. The foreign investor may make its contributions by instalments and theregistered capital must be contributed within the period as approved by the MOC (or itsdelegated authorities) in accordance with relevant regulations.

(c) Profit distribution

The Foreign Enterprise Law provides that after payment of taxes, a WFOE must makecontributions to a reserve fund at least 10% of the after tax profits. If the accumulativeamount of allocated reserve funds reaches 50% of an enterprise’s registered capital, theWFOE will not be required to make any additional contribution. The WFOE is prohibited fromdistributing dividends unless the losses (if any) of previous years have been made up.

10. Labour Law

According to the Labour Contract Law of the PRC, which became effective on 1 January 2008, theemployer and employee are required to execute a labour contract if a labour relationship is to beestablished between the employer and the employee. The employer cannot require the employeeto work in excess of the time limit and shall provide the wages which are not lower than localstandards on minimum wages to the employee in time. The employer shall establish and perfect itssystem for labour safety and sanitation, strictly abide by State rules and standards on labour safetyand sanitation, and educate employees in labour safety and sanitation. Labour safety andsanitation facilities shall meet State-fixed standards. The employer shall provide its employees withlabour safety and sanitation conditions meeting State stipulations and necessary articles of labourprotection.

11. Environmental Protection Regulations

In accordance with the Environmental Protection Law of the PRC adopted by the StandingCommittee of the NPC on 26 December 1989, the Administration Supervisory Department ofEnvironmental Protection of the State Council sets the national guidelines for the discharge ofpollutants. The provincial and municipal governments of provinces, autonomous regions andmunicipalities may also set their own guidelines for the discharge of pollutants within their ownprovinces or districts in the event that the national guidelines are inadequate.

A company or enterprise which causes environmental pollution and discharges other pollutingmaterials which endanger the public should implement environmental protection methods andprocedures into their business operations. This may be achieved by setting up a system ofaccountability within the company’s business structure for environmental protection and adoptingeffective procedures to prevent environmental hazards such as waste gases, water and residues,dust powder, radioactive materials and noise arising from production, construction and otheractivities from polluting and endangering the environment. The environmental protection systemand procedures should be implemented simultaneously with the commencement of and during theoperation of construction, production and other activities undertaken by the company. Anycompany or enterprise which discharges environmental pollutants should report and register suchdischarge with the Administration Supervisory Department of Environmental Protection and payany fines imposed for the discharge. A fee may also be imposed on the company for the cost ofany work required to restore the environment to its original state. Companies which have causedsevere pollution to the environment are required to restore the environment or remedy the effectsof the pollution within a prescribed time limit.


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If a company fails to report and/or register the environmental pollution caused by it, it will receive awarning or be penalised. Companies which fail to restore the environment or remedy the effects ofthe pollution within the prescribed time will be penalised, ordered to suspend operations or havetheir business licenses terminated. Companies or enterprises which have polluted and endangeredthe environment must bear the responsibility for remedying the danger or effects of the pollution,as well as to compensate any losses or damages suffered as a result of such environmentalpollution.


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SINGAPORE TAXATION

The following is a discussion of certain tax matters arising under the current tax laws in Singapore and isnot intended to be and does not constitute legal or tax advice. While this discussion is considered to be acorrect interpretation of existing laws in force as at the Latest Practicable Date, no assurance can begiven that courts or fiscal authorities responsible for the administration of such laws will agree with thisinterpretation or that changes in such laws will not occur.

The discussion is limited to a general description of certain Singapore income tax, stamp duty, estateduty and Goods and Services Tax (“GST”) consequences with respect to the subscription for and/orpurchase, ownership and disposal of our Shares, and does not purport to be a comprehensive orexhaustive description of all of the tax considerations that may be relevant to a decision to subscribe forand/or purchase, hold or dispose of our Shares. Prospective investors should consult their tax advisorsregarding Singapore tax and other tax consequences of subscribing for and/or purchasing, owning anddisposing our Shares. It is emphasised that none of our Company, our Directors or any other personsinvolved in the Compliance Placement accepts responsibility for any tax effects or liabilities resulting fromthe subscription for, purchase, ownership or disposal of our Shares.

SINGAPORE INCOME TAX

Companies

Singapore resident companies are subject to Singapore income tax on income that is accrued in orderived from Singapore and on foreign-sourced income received or deemed received in Singapore,subject to certain exceptions.

Foreign-sourced income in the form of branch profits, dividends and service income received or deemedreceived in Singapore by a Singapore resident company shall be exempt from tax provided the followingconditions are met:

(i) such income has been subject to tax of a similar character to income tax in the foreign jurisdictionfrom which such income is received;

(ii) at the time such income is received in Singapore by the Singapore resident company, the highestrate of tax of a similar character to income tax levied under the law of the foreign jurisdiction fromwhich such income is received on any gains or profits from any trade or business carried on by anycompany in that foreign jurisdiction is at least 15%; and

(iii) the Comptroller of Income Tax is satisfied that the tax exemption would be beneficial to theSingapore resident company.

Non-resident companies are subject to income tax on income that is accrued in or derived fromSingapore, and on foreign-sourced income received or deemed received in Singapore, subject to certainexceptions.

A company is resident in Singapore if the control and management of its business is exercised inSingapore.

Tax Rate

The corporate tax rate in Singapore for both resident and non-resident companies is 17% with effect fromyear of assessment 2010. In arriving at the chargeable income, there is partial exemption on threequarters of the first S$10,000 and one-half on the next S$290,000 of a company’s normal chargeableincome. The remaining chargeable income will be taxable at the corporate tax rate of 17%.

APPENDIX D: TAXATION

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In his 2011 Budget Statement delivered on 18 February 2011, the Minister for Finance proposed that aone-off support measure be given to companies for year of assessment 2011 in the form of either (a) acorporate income tax rebate of 20% of year of assessment 2011 corporate income tax payable capped atS$10,000 or (b) a cash grant for small and medium enterprises (“SME cash grant”) based on 5% of thecompany’s revenue for year of assessment 2011 capped at $5,000, whichever is the higher. The SMEcash grant will only be available to companies which have made CPF contributions in year of assessment2011.

Individuals

Individual taxpayers who are Singapore residents are subject to tax on income accruing in or derivedfrom Singapore. All foreign-sourced income received in Singapore on or after 1 January 2004 andcertain Singapore-sourced investment income from financial instruments derived by Singapore residentindividuals (except for income received through a partnership in Singapore or derived from the carryingon of a trade, business or profession) is exempt from Singapore income tax.

Non-resident individuals, subject to certain exceptions, are subject to Singapore income tax on incomeaccruing in or derived from Singapore. Non-resident individuals are not subject to tax on foreign-sourcedincome received in Singapore and certain Singapore-sourced investment income from financialinstruments.

An individual is a resident of Singapore in a year of assessment if, in the preceding year, he resides inSingapore (except for temporary absences from Singapore) or if he is physically present or exercises anemployment in Singapore (other than as a director of a company) for 183 days or more.

Tax Rate

Currently, a Singapore resident individual is subject to tax at progressive rates, ranging from 0% to 20%.Income derived by a non-Singapore resident individual is normally taxed at the rate of 20% except forSingapore employment income which is taxed at a flat rate of 15% or at resident rates, whichever yieldsa higher tax.

In his 2011 Budget Statement, the Minister for Finance proposed that a one-off personal income taxrebate of 20%, capped at S$2,000 be given to resident individual taxpayers for year of assessment 2011.For year of assessment 2012, it was proposed that the marginal tax rates for the 1st S$120,000 ofchargeable income will be reduced, with the top marginal rate remaining at 20%.

Dividend Distributions

Singapore introduced the one-tier corporate tax system on 1 January 2003. Under the one-tier corporatetax system, the tax paid by companies in Singapore, whether resident in Singapore or not, wouldconstitute a final tax. Dividends payable by Singapore resident companies under the one-tier corporatetax system would be tax exempt in Singapore in the hands of its shareholders. Such dividends arereferred to as tax exempt (one-tier) dividends.

Where our Company is considered to be resident in Singapore, it will be under the one-tier corporate taxsystem. In such a situation, when our Company distributes dividends, these dividends will be tax exempt(one-tier) dividends and such dividends are tax exempt in Singapore in the hands of our shareholders.

There is no Singapore withholding tax on dividends paid to both Singapore resident shareholders as wellas non-Singapore resident shareholders. Foreign shareholders are advised to consult their own taxadvisors in respect of the tax laws of their respective countries of residence, which are applicable onsuch dividends received by them and the applicability of any double taxation agreement that their countryof residence may have with Singapore.


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Gains on Disposal of our Shares

Singapore currently does not impose tax on capital gains. Shareholders who held our Shares on capitalaccount will not be subject to income tax on the gains arising from the disposal of the Shares. However,there are no specific laws or regulations which deal with the characterisation of capital gains. In general,gains from the disposal of shares may be construed to be revenue in nature and subject to Singaporeincome tax if they arise from activities which are regarded as the carrying on of a trade or business ofdealing in securities in Singapore.

Stamp Duty

No stamp duty is payable if an instrument of transfer is not executed or the instrument of transfer isexecuted outside Singapore and not brought into Singapore. However, stamp duty may be payable if theinstrument of transfer which is executed outside Singapore is received in Singapore.

No stamp duty is payable on the subscription for, allotment or holding of our Shares. Stamp duty ispayable on the instrument of transfer of our Shares at the rate of S$0.20 for every S$100 or any partthereof, computed based on the consideration for the transfer, or market value, of our Shares, whicheveris higher. The stamp duty is borne by the purchaser, unless otherwise agreed.

The above stamp duty is not applicable to electronic transfers of our Shares through CDP.

Estate Duty

With effect from 15 February 2008, no estate duty is leviable in respect of the estate of any personwhose death has occurred on or after 15 February 2008.

GST

The sale of our Shares by a GST-registered investor belonging in Singapore through an SGX-ST memberor to another person belonging in Singapore is an exempt supply and so would not be subject to GST. Inthis regard, generally, GST directly incurred by the GST-registered investor in making such supplies maynot be recovered from the Comptroller of GST. If our Shares are sold by a GST-registered person who isa member of the Association of Banks in Singapore, the input tax is recoverable subject to the conditionsstipulated by the Comptroller of GST.

Where our Shares are sold by a GST-registered investor to a person belonging outside Singapore andwho is outside Singapore at the time the sale is executed, the sale is generally a taxable sale subject toGST at zero-rate. Any GST incurred by a GST-registered investor in the making of this taxable supply inthe course or furtherance of a business, subject to the provision of the GST Act, Chapter 117A ofSingapore, may be recovered from the Comptroller of GST.

Services consisting of arranging, brokering, underwriting or advising on the issue, allotment or transfer ofownership of our Shares rendered by a GST-registered person to an investor belonging in Singapore inconnection with the investor’s purchase, sale or holding of our Shares will be subject to GST at thestandard rate (currently at 7%). Similar services supplied contractually to and for the direct benefit of aperson belonging outside Singapore and who is outside Singapore when the services are performedwould generally be subject to GST at zero-rate.

PRC TAXATION

The applicable income tax laws, regulations, notices and decisions related to FIEs and their investors areas follows:

1. Notice on Some Policy Questions Concerning Individual Income Tax issued by the Ministry of Finance and the State Administration of Taxation on 13 May

1994;

2. Notice on the Reduction of Income Tax on Interest and Other Income Derived by ForeignEnterprises within the PRC issued by the State Council, which came into effect on 1 January 2000;


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3. The fifth amendments to the Income Tax Law Applicable to Individuals of the PRCpromulgated by the Standing Committee on 29

December 2007, which came into effect on 1 March 2008;

4. Implementing Regulations of the Individual Income Tax Law of the People’s Republic of Chinaadopted by the State Council on 28 January 1994 and

revised on 18 February 2008;

5. Enterprise Income Tax Law of the PRC adopted by the NPC on 16March 2007, which came into effect on 1 January 2008 (the “New Income Tax Law”);

6. Implementing Regulations of Enterprise Income Tax Law of the PRC promulgated by the State Council on 6 December 2007, which came into effect on 1

January 2008 (the “Implementing Regulations of New Income Tax Law”);

7. Notice on the Implementation of Preferential Transitional Enterprise Income Tax Policypromulgated by the State Council, which came into

effect on 1 January 2008; and

8. Arrangement between the Mainland and Hong Kong Special Administrative Region on theAvoidance of Double Taxation and Prevention of Fiscal Evasion with Respect to Taxes on Income

executed on 21 August 2006which came into effect on 1 January 2007 (the “Taxation Arrangement”).

Income Tax on FIEs

According to the Income Tax Law for Foreign Investment Enterprises and Foreign Enterprises (“IncomeTax Law”), FIEs (including sino-foreign equity joint ventures, sino-foreign co-operative joint ventures andWFOEs established within the PRC) are required to pay a state corporate income tax at a rate of 30% oftheir taxable income and a local corporate income tax at a rate of 3% of their taxable income.

An FIE engaged in production having a period of operation of not less than 10 years shall be exemptedfrom the state corporate income tax for the first two profit-making years and a 50% reduction in the statecorporate income tax payable for the next three years.

FIEs established in special economic zones, foreign enterprises having an establishment in specialeconomic zones engaged in production or business operations and FIEs engaged in production ineconomic and technological zones may pay state corporate income tax at a reduced rate of 15%. FIEsengaged in production established in coastal economic open zones or in the old urban districts of citieswhere the special economic zones or the economic and technological development zones are locatedmay pay state corporate income taxes at a reduced rate of 24%. A reduced state corporate income taxrate of 15% may apply to an enterprise located in such regions which is engaged in energy,communication, harbour, wharf or other projects encouraged by the State.

Losses incurred in a tax year may be carried forward for not more than five years.

The People’s Government of provinces, autonomous regions and municipalities directly under the PRCCentral Government may grant exemptions from or reduced local income tax for an FIE engaged in anindustry or a project encouraged by the State.

Export-oriented enterprises invested in and operated by foreign businesses for which in any year theoutput value of all export products amounts to 70% or more of the output value of the products of theenterprise for that year may pay enterprise income tax at the tax rate specified in the Income Tax Lawand its Implementing Rules reduced by one half after the period of corporate income tax exemptions orreductions has expired in accordance with the provisions of the Income Tax Law and its ImplementingRules. If the corporate income tax rate for such export-oriented enterprises is 15% pursuant topreferential tax treatment as mentioned above, the rate for these enterprises shall be 10%.


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According to the New Income Tax Law, from 1 January 2008, the rate of enterprise income tax applicableto all resident enterprises , including FIEs and domestic companies in the PRC shall be at auniform rate of 25%. Enterprises established prior to 16 March 2007 shall continue to be eligible forpreferential tax treatment in accordance with the current prevailing tax laws and administrativeregulations. However, under the State Council regulations, such enterprises will gradually become subjectto the new tax regime over a 5-year transition period starting from 1 January 2008 (the “TransitionalArrangement”). In addition, enterprises which are entitled to enjoy regular tax reduction and exemptiontreatment under the current income tax laws may continue to enjoy the remaining incentives inaccordance with the requirements and period specified by the relevant income tax laws.

Some transitional preferential measures have been adopted for old enterprises established before thepromulgation of the New Income Tax Law which enjoyed low tax rates or regular tax reduction andexemption treatment under former tax laws and administrative regulations. The transitional corporateincome tax rate for enterprises which originally enjoyed the rate of 15% is 18% in 2008, 20% in 2009,22% in 2010, 24% in 2011 and 25% in 2012; the corporate income tax rate for enterprises whichoriginally enjoyed the rate of 24% has been fixed at 25% from 2008.

Tax on Income from the PRC Derived by a Non-Resident Enterprise

According to the New Income Tax Law and Implementing Regulations of New Income Tax Law, incomesuch as dividends, rental, interest and royalty from the PRC derived by a Non-Resident enterprise whichhas no establishment in the PRC or has establishment but the income has no relationship with suchestablishment is subject to a 10% withholding tax, subject to reduction as provided by any applicabledouble taxation treaty, unless the relevant income is specifically exempted from tax under the applicableincome tax laws, regulations, notices and decisions which relate to FIEs and their investors.

According to the Taxation Arrangement, the applicable income tax rate for dividends arising fromenterprises incorporated in the PRC by an enterprise incorporated in Hong Kong or a foreign enterpriseincorporated outside Hong Kong but being controlled or managed in Hong Kong is 5%, if such enterpriseholds not less than 25% equity interest in the said enterprises incorporated in the PRC.

VAT

The Provisional Regulations of the PRC concerning Value Added Tax promulgated by the State Council came into effect on 1 January, 1994 and was last amended on 5November 2008. Under these regulations and the Implementing Rules of the Provisional Regulations ofthe PRC concerning Value Added Tax , VAT is imposed ongoods sold in or imported into the PRC and on processing, repair and replacement services providedwithin the PRC.

VAT payable in the PRC is charged on an aggregated basis at a rate of 13% or 17% (depending on thetype of goods involved) on the full price collected for the goods sold or, in the case of taxable servicesprovided, at a rate of 17% on the charges for the taxable services provided but excluding, in respect ofboth goods and services, any amount paid in respect of VAT included in the price or charges, and lessany deductible VAT already paid by the taxpayer on purchases of goods and services in the samefinancial year.

Business Tax

With effect from 1 January 1994 and as such relevant regulations as last amended on 5 November 2008,businesses that provide services (except entertainment businesses), assign intangible assets or sellimmovable property became liable to business tax at a rate ranging from 3% to 5% of the charges of theservices provided, intangible assets assigned or immovable property sold, as the case may be.


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