a growing integrated shipping grouplibapps2.nus.edu.sg/nus_hlc/annrep/mpmarinepros.pdf · marco...

A GrowingIntegratedShipping Group

Marco Polo is a growing integrated shipping group principally engaged in the shipchartering and shipyard businesses. The Group’s ship chartering business includesthe provision of chartering, re-chartering and transhipment services of tugboatsand barges to its customers from the mining, commodity, trading, shipping,construction, infrastructure, property development and land reclamation industries.As at September 14, 2007, the Group has a fleet of 23 vessels to carry out its shipchartering business.

The shipyard business includes the provision of building, repair and broking servicesof tugboats and barges. Its shipyard is strategically located in Batam, Indonesia,occupying a total land area of approximately 348,705 sqm, with a seafront ofapproximately 650m. The Group commenced its ship building operations inDecember 2005. Up to September 14, 2007, it has completed the construction of22 vessels, with another 11 vessels under construction. Presently the Group is inthe process of expanding its shipyard. When completed, its shipyard is expectedto be one of the larger shipyards in Batam.

about us

PROSPECTUS DATED 26 October 2007(Registered by the Monetary Authority of Singapore on 26October 2007)

This document is important. If you are in any doubt as to theaction you should take, you should consult your legal,financial, tax or other professional adviser.

We have made an application to the Singapore ExchangeSecurities Trading Limited (“SGX-ST”) for permission to dealin, and for quotation of, all the ordinary shares (the ”Shares”)in the capital of Marco Polo Marine Ltd. (the “Company”)already issued and the new shares which are the subject ofthis Invitation (as defined herein) (the “New Shares”). Suchpermission will be granted when we have been admittedto the Official List of the SGX-ST Dealing and AutomatedQuotation System (“SGX-SESDAQ”). The dealing andquotation of the Shares will be in Singapore dollars.

Acceptance of applications will be conditional upon, interalia, permission being granted by the SGX-ST to deal in, andfor quotation of, all the existing issued Shares and the NewShares. If the completion of the Invitation does not occurbecause the SGX-ST’s permission is not granted or for anyother reasons, monies paid in respect of any applicationaccepted will be returned to you at your own risk, withoutinterest or any share of revenue or other benefit arisingtherefrom and you will not have any claims against us or theManager, the Underwriter and the Placement Agent (asdefined herein).

The SGX-ST assumes no responsibility for the correctness ofany of the statements made or opinions expressed or reportscontained in this Prospectus. Admission to the Official List ofthe SGX-SESDAQ is not to be taken as an indication of themerits of the Invitation, our Company, our subsidiaries, ourShares or the New Shares.

A copy of this Prospectus has been lodged with andregistered by the Monetary Authority of Singapore (the“Authority”). The Authority assumes no responsibility for thecontents of this Prospectus. Registration of this Prospectusby the Authority does not imply that the Securities and FuturesAct (Chapter 289) of Singapore or any other legal orregulatory requirements have been complied with. TheAuthority has not, in any way, considered the merits of ourShares or the New Shares, as the case may be, being offeredor in respect of which an invitation is made, for investment.We have not lodged or registered this Prospectus in anyother jurisdiction.

Investing in our Shares involves risks which are described inthe section entitled “RISK FACTORS” of this Prospectus.

No Shares will be allotted on the basis of this Prospectus laterthan six months after the date of registration of this Prospectusby the Authority.

MARCO POLO MARINE LTD.(Company Registration No.: 200610073Z)

(Incorporated in the Republic of Singapore on 10 July 2006)

Invitation in respect of 53,550,000 new ordinary sharescomprising:-(a) 3,800,000 Offer Shares at $0.28 for each Offer Share by

way of public offer; and(b) 49,750,000 Placement Shares by way of placement,

comprising:-(i) 48,250,000 Placement Shares at $0.28 for each

Placement Share; and(ii) 1,500,000 Reserved Shares at $0.28 for each Reserved

Share reserved for Independent Directors,management, employees, business associates andthose who have contributed to the success of ourGroup,

payable in full on application.

Manager, Underwriter and Placement Agent

Primary Sub-Underwriters and Primary Sub-Placement Agents

1.4

2.6

4.5

0.9

3.6 1.70.3

1.4

6.0

2.1

3.9

FY2004 FY2005 FY2006 HY2006 HY20070

1

2

3

4

5

6

S$’m

ShipyardShip Chartering

CAGR = 81.6%

+244

%

Gross Profit

*Excludes the negative goodwill

Negative goodwill arising on company acquisition

Net profit attributable to shareholders

4.4

1.2

5.4

2.8

1.0

FY2004 FY2005 FY2006 HY2006 HY2007

2.2

3.2

0

1

2

3

4

5

6

S$’m

CAGR* = 131.0%

+264

%

Net Profit

ShipyardShip Chartering

17.0

5.7

15.9

6.64.5

FY2004 FY2005 FY2006 HY2006 HY2007

4.0

11.9

1.5

4.2

8.6

8.4

0

2

4

6

8

10

12

14

16

18

S$’m

CAGR = 86.9%

+200

%

Revenue

Order book of approx S$4.7m for ship chartering (exlcudes BRJ)and approx S$8.8m for ship building as at September 14, 2007.

Majority to be realised in FY2007 with balance in FY2008.

*Others include customers incorporated in Dubai,Hong Kong and Malaysia

FY2006 HY2007

Revenue by Geographical Regions

ShipChartering

74.9%

Shipyard25.1%

FY2006

ShipChartering

49.5%

Shipyard50.5%

HY2007

Revenue by Business Segments

financial highlights

FY = Financial year ended 30 SeptemberHY = Six-month financial period ended 31 March

Ship Chartering• Expand customer base regionally

• Focus on new third-party customers• Pursue potential contracts with new customers within Southeast Asia

• Increase ship chartering services to the coal industry• Tap on intra-Indonesian islands for ship chartering and transhipment services• Expand fleet of vessels to serve customers in the coal industry• Secure additional long-term transhipment contracts

General• To explore acquisitions, investments, joint ventures and/or strategic alliances to

expand business

Shipyard• Establish ship repair, maintenance & conversion facilities in Batam

• Constructing 2 drydocks, a jetty and related facilities• Ship building – can accommodate up to 8 vessels of 150m in length at any

one time• Ship repair – can accommodate up to 5 vessels of varying length between

50m and 130m in length at any one time• The first (bigger) drydock of 150 x 40 x 8m in dimension to be substantially

completed by end 2007• The second drydock of at least 110 x 30 x 6m in dimension to commence

construction at end 2007 or beginning 2008

• Build vessels and structures for offshore oil & gas and marine logistics industries• Expand on types of vessels and structures built

• Tankers, accommodation barges, offshore supply vessels such as AHTSs, cargoships and more sophisticated vessels of up to 150m in length

• Fabricate massive steel platforms for offshore jack-up oil rigs

future plans

artist impression

artist impressionartist impression

Indonesia78.1%

Others12.5%

Singapore5.7%

Switzerland3.7%

Indonesia54.1%

Others8.2%

Singapore14.6%

Switzerland23.1%

Integrated shipping company• Ship building capabilities to support established ship chartering operations• Achieve cost efficiencies• Further integration following addition of ship repair and vessel maintenance

capabilities

Established track record in ship chartering business• More than 15 years of experience• Singapore & Indonesia customers and end-users from diverse industries

High quality and efficient vessels• Average age of less than 5 years• Satellite surveillance systems installed in tugboats to track route and location and

to ensure timely delivery

Stable and constant business from major customers• Exclusive ship charterer to major customer, BRJ• Growing base of third-party customers

Shipyard and ship chartering operations are strategically located• Ship chartering business carried out from Singapore – one of the leading shipping

hubs in Southeast Asia• Proximity to vital regional and international shipping lanes

• Shipyard in Batam, an island in the Riau Islands of Indonesia• Free trade zone status• Low operating cost environment

Competitive cost structure• Overall low cost base with ship building activity in Batam, Indonesia

• Build vessels for ship chartering business at cost as well as repair and maintainown vessels

• Tax-exempt shipping income status for Singapore-flagged vessels

Experienced and committed management team• Executive Chairman and CEO have over 15 years and 8 years of experience

respectively in ship chartering• Extensive experience, network and contacts, as well as established relationships

with relevant Indonesian authorities• Supported by a strong and effective management team

Competitive Strengths

Ship Chartering• Impending boom in construction & property development in Singapore• Indonesia’s ban on sand export creates opportunities• Indonesia’s coal production & export to drive strong demand for ship chartering

services

Shipyard• Strategic location in Batam• Mandatory phasing out of single-hulled tankers & CPO barges by 2010• Global increase in offshore oil & gas activities

Prospects

Page

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

DEFINITIONS .................................................................................................................................... 6

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

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

SELLING RESTRICTIONS ................................................................................................................ 16

DETAILS OF THE INVITATION

– LISTING ON THE SGX-SESDAQ ............................................................................................ 17

– INDICATIVE TIMETABLE FOR LISTING ................................................................................ 21

PLAN OF DISTRIBUTION ................................................................................................................ 22

PROSPECTUS SUMMARY .............................................................................................................. 24

EXCHANGE RATES .......................................................................................................................... 29

THE INVITATION................................................................................................................................ 30

SUMMARY FINANCIAL DATA .......................................................................................................... 31

RISK FACTORS ................................................................................................................................ 33

INVITATION STATISTICS .................................................................................................................. 44

USE OF PROCEEDS AND LISTING EXPENSES ............................................................................ 46

DIVIDEND POLICY ............................................................................................................................ 48

SHARE CAPITAL .............................................................................................................................. 49

SHAREHOLDERS

– OWNERSHIP STRUCTURE .................................................................................................... 52

– MORATORIUM ........................................................................................................................ 53

CAPITALISATION AND INDEBTEDNESS ........................................................................................ 54

DILUTION .......................................................................................................................................... 56

RESTRUCTURING EXERCISE ........................................................................................................ 57

GROUP STRUCTURE ...................................................................................................................... 58

SELECTED GROUP FINANCIAL INFORMATION............................................................................ 59

MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS ANDFINANCIAL CONDITIONS

– OVERVIEW .............................................................................................................................. 61

– SEASONALITY ........................................................................................................................ 61

CONTENTS

1

Page

– OPERATING RESULTS BY BUSINESS ACTIVITIES.............................................................. 62

– REVIEW OF PAST OPERATING PERFORMANCE ................................................................ 67

– REVIEW OF PAST FINANCIAL POSITIONS .......................................................................... 73

– REVIEW OF PAST CASHFLOW POSITIONS ........................................................................ 75

LIQUIDITY AND CAPITAL RESOURCES

– MATERIAL CAPITAL EXPENDITURE AND DIVESTMENT .................................................... 79

– MATERIAL COMMITMENTS FOR CAPITAL EXPENDITURE ................................................ 80

– FOREIGN EXCHANGE EXPOSURE ...................................................................................... 80

– SIGNIFICANT ACCOUNTING POLICY CHANGES ................................................................ 81

GENERAL INFORMATION ON OUR GROUP

– OUR HISTORY ........................................................................................................................ 82

– BUSINESS OVERVIEW .......................................................................................................... 84

– QUALITY ASSURANCE .......................................................................................................... 95

– STAFF TRAINING .................................................................................................................... 97

– MAJOR CUSTOMERS ............................................................................................................ 97

– MAJOR SUPPLIERS................................................................................................................ 99

– CREDIT POLICY...................................................................................................................... 99

– INVENTORY MANAGEMENT.................................................................................................. 100

– SALES AND MARKETING ...................................................................................................... 100

– INSURANCE ............................................................................................................................ 102

– INTELLECTUAL PROPERTY .................................................................................................. 102

– GOVERNMENT REGULATIONS ............................................................................................ 103

– RESEARCH AND DEVELOPMENT ........................................................................................ 109

– COMPETITION ........................................................................................................................ 109

– COMPETITIVE STRENGTHS.................................................................................................. 110

– PROPERTIES AND FIXED ASSETS ...................................................................................... 112

– PROSPECTS .......................................................................................................................... 113

– OUR ORDER BOOKS ............................................................................................................ 115

– BUSINESS STRATEGIES........................................................................................................ 115

– FUTURE PLANS...................................................................................................................... 117

INTERESTED PERSON TRANSACTIONS ...................................................................................... 119

SHAREHOLDERS’ MANDATE .......................................................................................................... 129

GUIDELINES AND REVIEW PROCEDURES FOR FUTURE INTERESTED PERSON TRANSACTIONS OTHER THAN THOSE COVERED IN THE SHAREHOLDERS’ MANDATE........ 136

CONTENTS

2

Page

OPINION OF THE INDEPENDENT FINANCIAL ADVISER .............................................................. 137

POTENTIAL CONFLICTS OF INTERESTS ...................................................................................... 138

DIRECTORS, MANAGEMENT AND STAFF

– DIRECTORS ............................................................................................................................ 140

– EXECUTIVE OFFICERS.......................................................................................................... 143

– MANAGEMENT REPORTING STRUCTURE .......................................................................... 146

– DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION............................................ 146

– SERVICE AGREEMENTS........................................................................................................ 147

– EMPLOYEES .......................................................................................................................... 148

– SUB-CONTRACT WORK/LABOUR ........................................................................................ 148

CORPORATE GOVERNANCE .......................................................................................................... 149

DESCRIPTION OF ORDINARY SHARES ........................................................................................ 151

EXCHANGE CONTROLS .................................................................................................................. 155

TAXATION .......................................................................................................................................... 156

CLEARANCE AND SETTLEMENT .................................................................................................. 164

GENERAL AND STATUTORY INFORMATION ................................................................................ 165

APPENDIX I – INDEPENDENT AUDITORS’ REPORT ON THE AUDITED COMBINED FINANCIALSTATEMENTS OF THE GROUP FOR THE FINANCIAL YEARS ENDED 30SEPTEMBER 2004, 2005 AND 2006

APPENDIX II – INDEPENDENT AUDITORS’ REPORT ON THE REVIEW OF THE INTERIMCOMBINED FINANCIAL STATEMENTS OF THE GROUP FOR THE SIX-MONTHPERIOD ENDED 31 MARCH 2007

APPENDIX III – INDEPENDENT AUDITORS’ REPORT ON THE UNAUDITED PRO FORMACONSOLIDATED FINANCIAL INFORMATION OF THE GROUP FOR THEFINANCIAL YEAR ENDED 30 SEPTEMBER 2006

APPENDIX IV – INDEPENDENT AUDITORS’ REPORT ON THE UNAUDITED PRO FORMACONSOLIDATED INTERIM FINANCIAL INFORMATION OF THE GROUP FOR THESIX-MONTH PERIOD ENDED 31 MARCH 2007

APPENDIX V – SUMMARY OF SELECTED ARTICLES OF ASSOCIATION OF OUR COMPANY

APPENDIX VI – LETTER FROM OMEGA CAPITAL LIMITED TO THE INDEPENDENT DIRECTORSOF THE COMPANY

APPENDIX VII – TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION ANDACCEPTANCE

CONTENTS

3

BOARD OF DIRECTORS : Lee Wan Tang (Executive Chairman)Sean Lee Yun Feng (Chief Executive Officer)Liely Lee (Executive Director)Lai Qin Zhi (Non-Executive Director)Lim Han Boon (Lead Independent Director)Sim Swee Yam Peter (Independent Director)

COMPANY SECRETARY : Kwan Hon Kay @ Lawrence Kwan, FCIS, MBA, GAICD

REGISTERED OFFICE : 1 Sims Lane#04-11Singapore 387355

SHARE REGISTRAR AND SHARE : Boardroom Corporate & Advisory Services Pte. Ltd.TRANSFER OFFICE (formerly known as Lim Associates (Pte) Ltd)

3 Church Street#08-01 Samsung HubSingapore 049483

MANAGER, UNDERWRITER AND : UOB Asia LimitedPLACEMENT AGENT 80 Raffles Place

UOB Plaza Singapore 048624

PRIMARY SUB-UNDERWRITERS AND : United Overseas Bank LimitedPRIMARY SUB-PLACEMENT AGENTS 80 Raffles Place

UOB Plaza Singapore 048624

UOB Kay Hian Private Limited80 Raffles Place #30-01UOB Plaza 1Singapore 048624

AUDITORS AND REPORTING : Horwath First TrustACCOUNTANTS (formerly known as First Trust Partnership)

Certified Public Accountants7 Temasek Boulevard #11-01Suntec Tower 1Singapore 038987Partner-in-charge: Alfred Cheong Keng Chuan(a member of the Institute of Certified PublicAccountants of Singapore)

SOLICITORS TO THE INVITATION : Drew & Napier LLC20 Raffles Place #18-00 Ocean TowersSingapore 048620

SOLICITORS TO OUR COMPANY ON : Adnan Kelana Haryanto & HermantoINDONESIAN LAW Chase Plaza, 18th Floor

Jl. Jend. Sudirman Kav. 21 Jakarta 12920Indonesia

CORPORATE INFORMATION

4

SOLICITORS TO THE MANAGER, : Shook Lin & Bok LLPUNDERWRITER AND 1 Robinson RoadPLACEMENT AGENT #18-00 AIA Tower

Singapore 048542

INDEPENDENT FINANCIAL ADVISER : Omega Capital Limited101 Cecil Street #13-10Tong Eng BuildingSingapore 069533

PRINCIPAL BANKERS : United Overseas Bank Limited80 Raffles PlaceUOB Plaza Singapore 048624

DBS Bank Ltd6 Shenton Way DBS Building Tower OneSingapore 068809

RECEIVING BANKER : United Overseas Bank Limited80 Raffles PlaceUOB Plaza Singapore 048624

CORPORATE INFORMATION

5

In this Prospectus and the accompanying Application Forms, the following definitions apply where thecontext so admits:-

Group Companies

“Company” or “Marco Polo” : Marco Polo Marine Ltd. The terms “we”, “our”, “our Company”or “us” have correlative meanings

“Group” : Our Company and our subsidiaries, following the completion ofthe Restructuring Exercise, treated for the purpose of thisProspectus as if the group structure had been in existencesince 1 October 2003

“Bina Marine” : Bina Marine Pte. Ltd.

“MP Marine” : MP Marine Pte. Ltd.

“MP Shipping” : Marco Polo Shipping Co Pte Ltd

“MP Shipyard” : PT. Marcopolo Shipyard

“RMN” : PT. Rio Mahkota Nusantara

Other Corporations and Agencies

“Authority” : The Monetary Authority of Singapore

“BBR” : PT. Pelayaran Nasional Bina Buana Raya

“BRJ” : PT. Bina Riau Jaya

“CDP” : The Central Depository (Pte) Limited

“CPF” : The Central Provident Fund

“IMO” : International Maritime Organisation

“MKW” : Mount Kawi Pte Ltd

“MPA” : Marine Port Authority

“Nautical International” : Nautical International Holdings Ltd.

“OPEC” : Organisation of the Petroleum Exporting Countries

“Participating Banks” : UOB and its subsidiary, Far Eastern Bank Limited (collectivelythe “UOB Group”); DBS Bank Ltd (including POSB) (“DBSBank”) and Oversea-Chinese Banking Corporation Limited(“OCBC”)

“Primary Sub-Underwriters and : UOB and UOB Kay HianPrimary Sub-Placement Agents”

“SCCS” : Securities Clearing & Computer Services (Pte) Ltd

“SGX-ST” : Singapore Exchange Securities Trading Limited

“SGX-SESDAQ” : SGX-ST Dealing and Automated Quotation System

DEFINITIONS

6

“Share Registrar” : Boardroom Corporate & Advisory Services Pte. Ltd.(formerly known as Lim Associates (Pte) Ltd)

“SMJA” : PT. Surya Mina Jaya Abadi

“SRC” : PT. Sempurna Readymix Concrete

“UOB” : United Overseas Bank Limited

“UOB Asia”, “Manager”, : UOB Asia Limited“Underwriter” or “Placement Agent”

“UOB Kay Hian” : UOB Kay Hian Private Limited

“Winvest” : Winvest Management Pte Ltd

General

“ATM” : Automated teller machines of a Participating Bank

“Application Forms” : The printed application forms to be used for the purpose of theInvitation and which form part of this Prospectus

“Application List” : The list of applications for subscription of the New Shares

“Articles” or “Articles of Association” : Articles of Association of the Company

“Associate” : (a) in relation to any director, chief executive officer,substantial shareholder or controlling shareholder (beingan individual) means:-

(i) his immediate family;

(ii) the trustees, acting in their capacity as suchtrustees, 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 per cent. or more of the aggregate of thenominal amount of all the voting shares;

(b) in relation to a substantial shareholder or a controllingshareholder (being a company) means any othercompany which is its subsidiary or holding company or isa fellow subsidiary of any such holding company or onein the equity of which it and/or such other company orcompanies taken together (directly or indirectly) have aninterest of 30 per cent. or more

“associated company” : In relation to a corporation, means:-

(a) any corporation in which the corporation or its subsidiaryhas, or the corporation and its subsidiary together have,a direct interest of not less than 20 per cent. but notmore than 50 per cent. of the aggregate of the nominalamount of all the voting shares; or

DEFINITIONS

7

(b) any corporation, other than a subsidiary of thecorporation or a corporation which is an associatedcompany by virtue of paragraph (a), the policies of whichthe corporation or its subsidiary, or the corporationtogether with its subsidiary, is able to control or influencematerially

“Audit Committee” : The audit committee of our Company for the time being

“Board” or “Board of Directors” : The board of Directors of our Company

“Bonus Issue” : The capitalisation of our retained earnings account by way of abonus issue of 10,657,967 ordinary shares fully paid to theshareholders of our Company

“Capitalisation Issues” : Collectively, the capitalisation of a $3,000,000 loan owing to MrLee Wan Tang, the capital injection of $3,000,000 by NauticalInternational, the issue of an aggregate of 22,027 Shares toLim Han Boon, Chan Kum Onn Roger and Ang Eng Lim (beingthe nominees of Winvest), the Bonus Issue and the Share Split

“CEO” : Chief Executive Officer

“Commissioner” : A person who sits on the Board of Commissioners of anIndonesian company. The Board of Commissioners isresponsible for ensuring that such company is being managedby its directors in the interest of such company

“Companies Act” : The Companies Act (Chapter 50) of Singapore

“Controlling Shareholder” : In relation to a corporation,

(a) a person who has an interest in the voting shares of acorporation and who exercises control over thecorporation; or

(b) a person who has an interest of 15 per cent. or more ofthe aggregate of the nominal amount of all the votingshares in a corporation, unless he does not exercisecontrol over the corporation

“Directors” : The Directors of our Company as at the date of thisProspectus, unless otherwise stated

“Electronic Applications” : Applications for the Offer Shares made through an ATM orthrough Internet Banking websites of one of the ParticipatingBanks in accordance with the terms and conditions of thisProspectus

“EPS” : Earnings per Share

“Executive Officers” : The executive officers of our Group as at the date of thisProspectus, unless otherwise stated

“FY” : Financial year ended or, as the case may be, ending 30September

“HY” : Six-month financial period ended 31 March

DEFINITIONS

8

“IB” : Internet Banking

“Independent Directors” : The Independent Directors of our Company as at the date ofthis Prospectus, unless otherwise stated

“Invitation” : Our invitation to the public in Singapore to subscribe for theNew Shares at the Issue Price, subject to and on the terms andconditions of this Prospectus

“Issue Price” : $0.28 for each New Share

“Latest Practicable Date” : 14 September 2007, being the latest practicable date for thepurposes of lodgement of this Prospectus

“Lai Qin Zhi” : Mdm Sally @ Lai Qin Zhi

“Lee Family” : For the purposes of this Prospectus, “Lee Family” means LeeWan Tang, Lai Qin Zhi, Sean Lee Yun Feng, Liely Lee and LinaLee collectively

“Liely Lee” : Ms Lie Ly @ Liely Lee

“Lina Lee” : Ms Lina @ Lee Zhen Zhen

“Listing Manual” : The Listing Manual of the SGX-ST

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

“MRT” : Mass Rapid Transport

“NAV” : Net asset value

“New Shares” : The 53,550,000 new Shares for which we invite applications tosubscribe pursuant to the Invitation, subject to and on theterms and conditions of this Prospectus

“NTA” : Net tangible assets

“Offer” : The offer by our Company of the Offer Shares to the public inSingapore for subscription at the Issue Price subject to and onthe terms and conditions of this Prospectus

“Offer Shares” : 3,800,000 of the New Shares which are the subject of the Offer

“PER” : Price earnings ratio

“Placement” : The placement of the Placement Shares by the placementagent(s) on behalf of our Company for subscription at the IssuePrice subject to and on the terms and conditions of thisProspectus

“Placement Shares” : 49,750,000 of the New Shares (including the ReservedShares), which are the subject of the Placement

“PRC” or “China” : People’s Republic of China, excluding the Macau SpecialAdministrative Region, the Hong Kong Special AdministrativeRegion and Taiwan for the purposes of this Prospectus and forgeographical reference only

DEFINITIONS

9

“Prospectus” : This prospectus dated 26 October 2007 issued by ourCompany in respect of the Invitation

“Reserved Shares” : The 1,500,000 Placement Shares reserved for IndependentDirectors, management, employees, business associates andthose who have contributed to the success of our Group

“Restructuring Exercise” : The corporate restructuring exercise undertaken in connectionwith the Invitation as described in the section entitled“Restructuring Exercise” of this Prospectus

“Sean Lee Yun Feng” : Mr Sean Latip @ Sean Lee Yun Feng

“Securities Account” : The securities account maintained by a depositor with CDP

“Service Agreements” : The service agreements entered into between our Companyand each of our Executive Chairman, Mr Lee Wan Tang, andour CEO, Mr Sean Lee Yun Feng as described in the sectionentitled “Service Agreements” of this Prospectus

“SFA” or “Securities & Futures Act” : The Securities and Futures Act (Chapter 289) of Singapore

“Share Split” : The sub-division of each ordinary share in our issued sharecapital into 11.9 Shares

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

“Shareholder(s)” : Shareholders of our Company

“Substantial Shareholders” : Persons who have an interest in the Shares, the nominalamount of which is not less than five per cent. of the aggregateof the nominal amount of all the voting shares of our Company

Currencies, Units and Others

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

“%” or “per cent.” : Per centum

“ft” : Feet

“GT” : Gross tonnage

“IDR” : Indonesian rupiah

“kw” : Kilowatt

“m” : Metre

“sq m” : Square metre

“tonne” : Metric tonne

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

DEFINITIONS

10

The expressions “Depositor”, “Depository Agent” and “Depository Register” shall have the meaningsascribed to them respectively in Section 130A of the Companies Act.

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 reference in this Prospectus, the Application Forms and Electronic Applications to any statute orenactment is a reference to that statute or enactment as for the time being amended or re-enacted. Anyword defined under the Companies Act, the SFA or any statutory modification thereof and used in thisProspectus, the Application Forms and Electronic Applications shall, where applicable, have the meaningassigned to it under the Companies Act, the SFA or any statutory modification thereof, as the case maybe.

Any reference in this Prospectus, the Application Forms and Electronic Applications to Shares beingallotted to an applicant includes allotment to CDP for the account of that Applicant.

Any reference to a time of day in this Prospectus shall be a reference to Singapore time unless otherwisestated.

References in this Prospectus to “the Group”, “we”, “our”, and “us” refer to our Group.

Any discrepancies in the tables included herein between the listed amounts and the totals thereof are dueto rounding. Accordingly, figures shown as totals in certain tables may not be an arithmetic aggregation ofthe figures that precede them.

DEFINITIONS

11

The glossary contains explanations of certain technical terms and abbreviations used in this Prospectusin connection with our Group and our business. The terms and abbreviations and the assigned meaningsmay not correspond to standard industry meanings and usage of these terms.

“accommodation barge” : A barge used for accommodation of crew and/or workers, for examplein the marine offshore industry such as for oil rigs

“AHTS” : An anchor handling, towing and supply vessel which is equipped withpowerful engines and winches and is used primarily to handle and setanchors for positioning, mooring drilling rigs, towing mobile drillingrigs and transporting other equipment to and from offshore oil andnatural gas fields

“barge” : A flat bottomed non-motorised steel vessel used for the transportationof cargo

“berth” or “jetty” : A place alongside a quay where a vessel may load or discharge itscargo

“bhp” or “brake horse power” : A measure of engine power

“bunker” : Fuel, consisting of heavy fuel oil and diesel oil burned in the vessel’sengine

“charter” : A contract between a shipowner and a charterer

“charterer” : A person or firm hiring a vessel for the carriage of goods or otherpurposes

“classification societies” : Worldwide experienced and reputable societies which undertake toarrange inspections and advise on the hull and machinery of vesselsand are responsible to ensure that the vessels are built or maintainedaccording to the relevant statutory requirements

“CPO barge” : A barge used for transporting crude palm oil

“crane barge” : A barge on which a crane is mounted for lifting equipment andmaterials and for dredging purposes

“dock” : An enclosed basin surrounded by quays used for berthing andunberthing vessels

“drydock” : A drydock is a narrow dock that can be flooded to allow a vessel tobe floated in, then drained to allow the vessel to come to rest on adry platform. Drydocks are used for the construction, maintenance,and repair of ships, boats, and other watercraft

“drydocking” : Refers to the process by which a vessel manoeuvres into and comesto rest in the drydock

“dwt” or “deadweight tonnes” : One dwt equals 1,000 kilogrammes and is a measure of the total loadwhich a ship can carry, including its cargo, provisions, fuel, stores,bunker, crew and spares

“flag state” : The country in which a vessel is registered. A vessel is generallyrequired to fly the sole flag of a registered country

GLOSSARY OF TECHNICAL TERMS

12

“ISM Code” : International Safety Management Code for the Safe Operation ofShips and for Pollution Prevention

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

“new building” : A vessel which is under construction

“ship building” : The business activity of building ships and vessels, including repairand maintenance

“ship chartering” : The business activity of shipowners or firms leasing vessels tocharterers for the carriage of goods or other purposes

“SOLAS” : International Convention for the Safety of Life at Sea

“special survey” : The enhanced inspections of a vessel required by classificationsocieties’ rules

“spot charter” : Immediate or ad hoc charter, when a ship happens to be at or in thevicinity of the port of loading. Normally for short duration to cover theintended voyage

“spot market” : The market for immediate chartering of a vessel, usually for a singlecargo or short-term trading

“tanker” : A vessel designed for the carriage of liquid cargo in bulk such ascrude oil, refined products or marine fuel for ships

“transhipment” : Refers to the shipment of goods to an intermediate destination beforeonward shipping from such intermediate destination to anotherdestination. Transhipment allows goods to be transferred from smallervessels to larger vessels further out in the sea where such largervessels may have difficulty manoeuvring to reach in-land locationswith shallow waters

“tugboat” : A vessel with powerful engines designed for towing and easymanoeuvrability

GLOSSARY OF TECHNICAL TERMS

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All statements contained in this Prospectus, statements made in press releases and oral statements thatmay be made by us or our Directors, Executive Officers or employees acting on our behalf, that are notstatements of historical fact, constitute “forward-looking statements”. You can identify some of theseforward-looking statements by terms such as “expects”, “believes”, “plans”, “intends”, “estimates”,“anticipates”, “may”, “will”, “would” and “could” or similar words. However, you should note that thesewords are not the exclusive means of identifying forward-looking statements. All statements regarding ourexpected financial position, business strategies, plans and prospects are forward-looking statements.

These forward-looking statements, including without limitation, statements 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 Prospectus regarding matters that are not historical fact,

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 expected, expressed or implied by theseforward-looking statements. These risks, uncertainties and other factors include, among others:-

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

(b) changes in currency exchange rates;

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

(d) changes in the availability and prices of raw materials and goods which we require to operate ourbusiness;

(e) changes in customer preferences;

(f) changes in competitive conditions and our ability to compete under such conditions;

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

(h) other factors beyond our control.

Some of these risk factors are discussed in more detail under the section entitled “Risk Factors” of thisProspectus.

Given the risks and uncertainties that may cause our actual future results, performance or achievementsto be materially different from that expected, expressed or implied by the forward-looking statements inthis Prospectus, undue reliance must not be placed on these statements which apply only as at the dateof this Prospectus. Neither our Company, the Manager, Underwriter and Placement Agent, the PrimarySub-Underwriters and Primary Sub-Placement Agents, nor any other person represents or warrants thatour Group’s actual future results, performance or achievements will be as discussed in those statements.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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Our actual results may differ materially from those anticipated in these forward-looking statements as aresult of the risks faced by us. We, the Manager, Underwriter and Placement agent, the Primary Sub-Underwriters and Primary Sub-Placement Agents, disclaim any responsibility to update any of thoseforward-looking statements or publicly announce any revisions to those forward-looking statements toreflect future developments, events or circumstances. We are, however, subject to the provisions of theSFA and the Listing Manual regarding corporate disclosure. In particular, pursuant to Section 241 of theSFA, if after the Prospectus is registered but before the close of the Invitation, our Company becomesaware of (a) a false or misleading statement or matter in the Prospectus; (b) an omission from theProspectus of any information that should have been included in it under Section 243 of the SFA; or (c) anew circumstance that has arisen since the Prospectus was lodged with the Authority and would havebeen required by Section 243 of the SFA to be included in the Prospectus, if it had arisen before theProspectus was lodged and that is materially adverse from the point of view of an investor, our Companymay lodge a supplementary or replacement prospectus with the Authority.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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This Prospectus does not constitute an offer, solicitation or invitation to subscribe for the New Shares inany jurisdiction in which such offer, solicitation or invitation is unlawful or is not authorised or to anyperson to whom it is unlawful to make such offer, solicitation or invitation. No action has been or will betaken under the requirements of the legislation or regulations of, or of the legal or regulatory requirementsof any jurisdiction, except for the filing and/or registration of this Prospectus in Singapore in order topermit a public offering of the New Shares and the public distribution of this Prospectus in Singapore. Thedistribution of this Prospectus and the offering of the New Shares in certain jurisdictions may be restrictedby the relevant laws in such jurisdictions. Persons who may come into possession of this Prospectus arerequired by the Company, the Manager, Underwriter and Placement Agent, the Primary Sub-Underwritersand Primary Sub-Placement Agents to inform themselves about, and to observe and comply with, anysuch restrictions.

SELLING RESTRICTIONS

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LISTING ON THE SGX-SESDAQ

We have applied to the SGX-ST for permission to deal in and for quotation of, all our existing issuedShares and the New Shares. Such permission will be granted when our Company has been admitted tothe Official List of the SGX-SESDAQ. Acceptance of applications will be conditional upon, inter alia,permission being granted by the SGX-ST to deal in, and for quotation of, all our existing issued Sharesand the New Shares. Monies paid in respect of any application accepted will be returned to you, withoutinterest or any share of revenue or other benefit arising therefrom and at your own risk, if the saidpermission is not granted or for any other reasons (including where the Authority issues a stop order) andyou will not have any claims whatsoever against us, the Manager, Underwriter and Placement Agent, thePrimary Sub-Underwriters or the Primary Sub-Placement Agents. No shares will be allotted on the basisof this Prospectus later than six months after the date of registration of this Prospectus by the Authority.

The SGX-ST assumes no responsibility for the correctness of any statements or opinions made orreports contained in this Prospectus. Admission to the Official List of the SGX-SESDAQ is not to be takenas an indication of the merits of the Invitation, our Company, our subsidiaries, our existing issued Sharesor the New Shares.

A copy of this Prospectus has been lodged with and registered by the Authority on 27 September 2007and 26 October 2007 respectively. The Authority assumes no responsibility for the contents of thisProspectus. Registration of this Prospectus by the Authority does not imply that the SFA, or any otherlegal or regulatory requirements, have been complied with. The Authority has not, in any way, consideredthe merits of our existing issued Shares or the New Shares, as the case may be, being offered or inrespect of which an invitation is made, for investment. We have not lodged or registered this Prospectusin any other jurisdiction.

We are subject to the provisions of the SFA and the Listing Manual regarding corporate disclosure. Inparticular, if after this Prospectus is registered but before the close of the Invitation, we become aware of:-

(a) a false or misleading statement or matter in the Prospectus;

(b) an omission from the Prospectus of any information that should have been included in it underSection 243 of the SFA; or

(c) a new circumstance that has arisen since the Prospectus was lodged with the Authority whichwould have been required by Section 243 of the SFA to be included in the Prospectus if it hadarisen before this Prospectus was lodged,

that is materially adverse from the point of view of an investor, we may lodge a supplementary orreplacement prospectus with the Authority pursuant to Section 241 of the SFA.

In the event that a supplementary or replacement prospectus is lodged with the Authority, the Invitationshall be kept open for at least 14 days after the lodgement of such supplementary or replacementprospectus.

Where prior to the lodgement of the supplementary or replacement prospectus, applications have beenmade under this Prospectus to subscribe for the New Shares and:-

(a) where the New Shares have not been issued to the applicants, our Company shall, either:-

(i) within two days (excluding any Saturday, Sunday or public holiday) from the date oflodgement of the supplementary or replacement prospectus, give the applicants notice inwriting of how to obtain, or arrange to receive, a copy of the supplementary or replacementprospectus, as the case may be, and provide the applicants with an option to withdraw theirapplications and take all reasonable steps to make available within a reasonable period thesupplementary or replacement prospectus, as the case may be, to the applicants if theyhave indicated that they wish to obtain, or have arranged to receive, a copy of thesupplementary or replacement prospectus;


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(ii) within seven days from the date of lodgement of the supplementary or replacementprospectus, give the applicants the supplementary or replacement prospectus, as the casemay be, and provide the applicants with an option to withdraw their applications; or

(iii) treat the applications as withdrawn and cancelled, in which case the applications shall bedeemed to have been withdrawn and cancelled, and our Company shall return all moniespaid in respect of any application, without interest or any share of revenue or other benefitarising therefrom at the applicants’ own risk; or

(b) where the New Shares have been issued to the applicants, our Company shall, either:-

(i) within two days (excluding any Saturday, Sunday or public holiday) from the date oflodgement of the supplementary or replacement prospectus, give the applicants notice inwriting of how to obtain, or arrange to receive, a copy of the supplementary or replacementprospectus, as the case may be, and provide the applicants with an option to return to ourCompany the New Shares which they do not wish to retain title in and take all reasonablesteps to make available within a reasonable period the supplementary or replacementprospectus, as the case may be, to the applicants if they have indicated that they wish toobtain, or have arranged to receive, a copy of the supplementary or replacement prospectus;

(ii) within seven days from the date of lodgement of the supplementary or replacementprospectus, give the applicants the supplementary or replacement prospectus, as the casemay be, and provide the applicants with an option to return to our Company the New Shares,which they do not wish to retain title in; or

(iii) treat the issue of the New Shares as void, in which case the issue shall be deemed void andour Company shall return all monies paid in respect of any application, without interest orany share of revenue or other benefit arising therefrom at the applicant’s own risk.

Any applicant who wishes to exercise his option under paragraph (a)(i) or (ii) to withdraw his applicationshall, within 14 days from the date of lodgement of the supplementary or replacement prospectus, notifyour Company of this, whereupon our Company shall, within seven days from the receipt of suchnotification, return the application monies without interest or any share of revenue or other benefit arisingtherefrom and at the applicant’s risk.

An applicant who wishes to exercise his option under paragraph (b)(i) or (ii) to return our New Sharesissued to him shall, within 14 days from the date of lodgement of the supplementary or replacementprospectus, notify us of this and return all documents, if any, purporting to be evidence of title to thoseNew Shares to our Company, whereupon our Company shall, within 7 days from the receipt of suchnotification and documents, if any, pay to him all monies paid by him for those Shares without interest orany share of revenue or benefit arising therefrom, at the applicant’s own risk and the issue of those NewShares shall be deemed void.

Under the SFA, the Authority may, in certain circumstances issue a stop order (the “Stop Order”) to ourCompany, directing that no Shares or no further Shares to which this Prospectus relates, be allotted orissued. Such circumstances will include a situation where this Prospectus (i) contains a statement ormatter, which in the opinion of the Authority is false or misleading, (ii) omits any information that shouldbe included in accordance with the SFA or (iii) does not, in the opinion of the Authority, comply with therequirements of the SFA or (iv) if the Authority is of the opinion that it is in the public interest to do so.


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Where the Authority issues a Stop Order pursuant to Section 242 of the SFA, and:-

(a) in the case where the New Shares have not been issued to the applicants, the applications of theNew Shares pursuant to the Invitation shall be deemed to have been withdrawn and cancelled andour Company shall, within 14 days from the date of the Stop Order, pay to the applicants all moniesthe applicants have paid on account of their applications for the New Shares; or

(b) in the case where the New Shares have been issued to the applicants, the issue of the NewShares pursuant to the Invitation is required by the SFA to be deemed void and our Company shall,within 14 days from the date of the Stop Order, pay to the applicants all monies paid by them forthe New Shares.

Such monies paid in respect of your application will be returned to you at your own risk, without interestor any share of revenue or other benefit arising therefrom, and you will not have any claim against us, theManager, Underwriter and Placement Agent, the Primary Sub-Underwriters and the Primary Sub-Placement Agents.

This Prospectus has been seen and approved by our Directors and they individually and collectivelyaccept full responsibility for the accuracy of the information given in this Prospectus and confirm, havingmade all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and allexpressions of opinion, intention and expectation in this Prospectus are fair and accurate in all materialrespects as at the date of this Prospectus and that there are no material facts the omission of whichwould make any statements in the Prospectus misleading, and that this Prospectus constitutes full andtrue disclosure of all material facts about the Invitation and our Group.

Neither our Company, the Manager, Underwriter and Placement Agent, the Primary Sub-Underwriters northe Primary Sub-Placement Agents, nor any other parties involved in the Invitation is making anyrepresentation to any person regarding the legality of an investment by such person under anyinvestment or other laws or regulations. No information in this Prospectus should be considered as beingbusiness, legal or tax advice regarding an investment in our Shares. Each prospective investor shouldconsult his own professional or other advisers for business, legal or tax advice regarding an investment inour Shares.

No person has been or is authorised to give any information or to make any representation not containedin this Prospectus in connection with the Invitation and, if given or made, such information orrepresentation must not be relied upon as having been authorised by us, the Manager, Underwriter andPlacement Agent, the Primary Sub-Underwriters or the Primary Sub-Placement Agents. Neither thedelivery of this Prospectus and the Application Forms nor any documents relating to the Invitation, nor theInvitation shall, under any circumstances, constitute a continuing representation or create any suggestionor implication that there has been no change or development reasonably likely to invoke a change in ouraffairs or in the statements of fact or information contained in this Prospectus since the date of thisProspectus. Where such changes occur and are material or are required to be disclosed by law, the SGX-ST and/or any other regulatory or supervisory body or agency, we may make an announcement of thesame to the SGX-ST and/or the Authority and the public and if required, we may lodge a supplementaryor replacement prospectus with the Authority and will comply with the requirements of the SFA and/or anyother requirements of the SGX-ST and/or the Authority. All applicants should take note of any suchannouncements and, upon the release of such an announcement, shall be deemed to have notice ofsuch changes.

Save as expressly stated in this Prospectus, nothing herein is, or may be relied upon as, a promise orrepresentation as to our future performance or policies. The New Shares are offered for subscriptionsolely on the basis of the information contained and representations made in this Prospectus.


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This Prospectus has been prepared solely for the purpose of the Invitation and may not be relied upon byany persons other than the applicants in connection with their application for the New Shares or for anyother purpose.

This Prospectus does not constitute an offer, solicitation or invitation of the New Shares in anyjurisdiction in which such offer, solicitation or invitation is unlawful or unauthorised nor does itconstitute an offer, solicitation or invitation to any person to whom it is unlawful to make suchoffer, solicitation or invitation.

Copies of this Prospectus and the Application Forms may be obtained on request, subject to availabilityduring office hours, from:-

UOB ASIA LIMITED1 Raffles Place #13-01

OUB CentreSingapore 048616

and members of the Association of Banks in Singapore, members of the SGX-ST and merchant banks inSingapore. A copy of this Prospectus is also available on the SGX-ST website at http://www.sgx.com andthe Authority’s website at http://www.mas.gov.sg.

The Invitation will be open from 27 October 2007 to 1 November 2007.

The Application List will open at 10.00 a.m. on 1 November 2007 and will remain open until 12.00noon on the same day or for such further period or periods as our Directors may, in consultationwith the Manager, in their absolute discretion decide, subject to any limitation under all applicablelaws and regulations. In the event a supplementary prospectus or replacement prospectus islodged with the Authority, the Application List will remain open for at least 14 days after thelodgement of the supplementary or replacement prospectus.

Details of the procedures for application of the New Shares are set out in Appendix VII of thisProspectus.


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INDICATIVE TIMETABLE FOR LISTING

An indicative timetable for the Invitation and trading of our Shares is set out below:-

Indicative date/time Event

1 November 2007 at 12.00 noon Close of Application List

2 November 2007 Balloting of applications, if necessary (in the event of over-subscription for the Offer Shares)

5 November 2007 at 9.00 a.m. Commence trading on a “ready” basis

9 November 2007 Settlement date for all trades done on a “ready” basis on 5November 2007

The above timetable is only indicative as it assumes that the date of closing of the Application List is 1 November 2007, the date of admission of our Company to the Official List of the SGX-SESDAQ is 5 November 2007, the shareholding spread requirement will be complied with and the New Shares will beissued and fully paid-up prior to 5 November 2007. The actual date on which our Shares will commencetrading on a “ready” basis will be announced when it is confirmed by the SGX-ST.

The above timetable and procedures may be subject to such modification as the SGX-ST may, in itsabsolute discretion, decide, including the decision to permit trading on a “ready” basis and thecommencement date of such trading.

All persons trading in our Shares before their Securities Accounts with CDP are credited with therelevant number of Shares do so at the risk of selling Shares which neither they nor theirnominees, as the case may be, have been allotted or are otherwise beneficially entitled to.

In the event of any changes in the closure of the Application List or the time period during which theInvitation is open, we will publicly announce the same:-

(a) through an SGXNET announcement to be posted on the internet at the SGX-ST websitehttp://www.sgx.com; and

(b) in a local newspaper(s).

We will publicly announce the level of subscription and the results of the distribution of the New Sharespursuant to the Invitation, as soon as it is practicable after the close of the Application List throughchannels in (a) and (b) above.

Investors should consult the SGX-ST’s announcement on “ready” trading date on the Internet (at SGX-STwebsite http://www.sgx.com) or the newspapers or check with their brokers on the date on which tradingon a “ready” basis will commence.


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SGX-SESDAQ

The Invitation is for 53,550,000 New Shares offered in Singapore by way of public offer and placementcomprising 3,800,000 Offer Shares and 49,750,000 Placement Shares (including up to 1,500,000Reserved Shares) managed and underwritten by UOB Asia and sub-underwritten by UOB and UOB KayHian.

The Issue Price is determined by us in consultation with the Manager, Underwriter and Placement Agentbased on market conditions and estimated market demand for our Shares, determined through a book-building process. The Issue Price is the same for each New Share and is payable in full on application.

There are no arrangements whereby the number of Shares being offered pursuant to this Invitation maybe increased by the exercise of an underwriter’s over-allotment option.

Offer Shares

The Offer Shares are made available to the members of the public in Singapore for subscription at theIssue Price. Members of the public may apply for the Offer Shares by way of printed Application Forms orby Electronic Application as described under the section entitled “Terms, Conditions and Procedures forApplication and Acceptance” as set out in Appendix VII of this Prospectus.

Pursuant to the Management and Underwriting Agreement entered into between us and UOB Asia as setout in the section entitled “General and Statutory Information” of this Prospectus, we have appointed UOBAsia to manage the Invitation and to underwrite the Offer Shares. UOB Asia will receive an underwritingcommission of 2.75 per cent. of the Issue Price for the Offer Shares payable by us for subscribing orprocuring subscribers for such Offer Shares not subscribed for by the public and will pay or procurepayment to us for such Offer Shares. UOB Asia may, at its absolute discretion, appoint one or more sub-underwriters for the Offer Shares.

In the event of an under-subscription for the Offer Shares as at the close of the Application List, thatnumber of Offer Shares not subscribed for shall be made available to satisfy excess applications for thePlacement Shares to the extent there is an over-subscription for the Placement Shares as at the close ofthe Application List.

In the event of an over-subscription for the Offer Shares as at the close of the Application List and thePlacement Shares are fully subscribed as at the close of the Application List, the successful applicationsfor the Offer Shares will be determined by ballot or otherwise as determined by our Company afterconsultation with the Manager, Underwriter and Placement Agent and approved by the SGX-ST.

Brokerage will be paid by our Company at the rate of 0.25 per cent. of the Issue Price for each OfferShare to members of the SGX-ST, merchant banks and members of the Association of Banks inSingapore in respect of successful applications made on Application Forms bearing their respectivestamps, or to Participating Banks in respect of successful applications made through ElectronicApplications at their respective ATMs or their IB websites.

Placement Shares

The Placement Shares (excluding the Reserved Shares) are made available to members of the publicand institutional investors who apply through their brokers or financial institutions by way of applicationforms. Applications for Placement Shares may only be made by way of printed Application Forms asdescribed under the section entitled “Terms, Conditions and Procedures for Application and Acceptance”as set out in Appendix VII of this Prospectus.

Pursuant to the Placement Agreement entered into between us and UOB Asia as set out in the sectionentitled “General and Statutory Information” of this Prospectus, UOB Asia agreed to subscribe or procuresubscribers for the Placement Shares for a placement commission of 2.00 per cent. of the Issue Price forthe Placement Shares payable by us. UOB Asia may, at its absolute discretion, appoint one or more sub-placement agents for the Placement Shares.

PLAN OF DISTRIBUTION

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In the event of an under-subscription for the Placement Shares as at the close of the Application List, thatnumber of Placement Shares not subscribed for shall be made available to satisfy excess applications forthe Offer Shares to the extent that there is an over-subscription for the Offer Shares as at the close of theApplication List.

Brokerage will be paid by our Company at the rate of 1.0 per cent. of the Issue Price for each PlacementShare (including Reserved Shares) to the placement agents in accordance with the PlacementAgreement.

Subscribers of the Placement Shares (excluding Reserved Shares) may also be required to paybrokerage of up to 1.0 per cent. of the Issue Price to the Placement Agent or any Sub-Placement Agentthat may be appointed by the Placement Agent.

Reserved Shares

Up to 1,500,000 Placement Shares shall be reserved for our Independent Directors, management,employees, business associates and those who have contributed to the success of our Group. However,none of them will be offered more than five per cent. of the total Invitation size.

In the event that any of the Reserved Shares are not taken up as at the close of the Application List, theywill be made available to satisfy excess applications for the Placement Shares to the extent there is anover-subscription for the Placement Shares as at the close of the Application List or, in the event of anunder-subscription for the Placement Shares as at the close of the Application List, to satisfy excessapplications made by members of the public for the Offer Shares to the extent there is an over-subscription for the Offer Shares as at the close of the Application List.

The terms, conditions and procedures for application are described in Appendix VII of this Prospectus.

Persons intending to subscribe for the Offering

None of our Directors (save for our Independent Directors who will be offered an aggregate of 300,000Reserved Shares) or Substantial Shareholders intends to subscribe for the New Shares in the Invitation.

None of our Independent Directors, members of our management or employees intends to subscribe formore than five per cent. of the New Shares in the Invitation.

To the best of our knowledge and belief, we are not aware of any person who intends to subscribe formore than five per cent. of the New Shares. However, through a book-building process to assess marketdemand for our Shares, there may be persons who may indicate an interest to subscribe for Sharesamounting to more than five per cent. of the New Shares. If such person(s) were to make an applicationfor Shares amounting to more than five per cent. of the New Shares and are subsequently allotted suchnumber of Shares, we will make the necessary announcements at an appropriate time. The finalallotment of Shares will be in accordance with the shareholding spread and distribution guidelines as setout in Rule 210 of the Listing Manual.

No Shares shall be issued and allotted on the basis of this Prospectus later than six months after thedate of this Prospectus.

PLAN OF DISTRIBUTION

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The following summary highlights certain information found in greater detail elsewhere in this Prospectus.Terms defined elsewhere in this Prospectus have the same meaning when used herein. In addition to thissummary, we urge you to read the entire Prospectus carefully, especially the section entitled “RiskFactors” of this Prospectus, before deciding to invest in our Shares.

OVERVIEW OF OUR GROUP

Our Company was incorporated in Singapore on 10 July 2006 under the name “Marco Polo Marine Pte.Ltd.” as a private limited company under the Companies Act. On 7 September 2007, our Company wasconverted into a public company limited by shares and our name was changed to “Marco Polo MarineLtd.”. To facilitate the listing of our Company on the SGX-SESDAQ, the Restructuring Exercise wasundertaken. Subsequent to the Restructuring Exercise, our Company became the holding company of oursubsidiaries, MP Shipping, Bina Marine, MP Marine, MP Shipyard and RMN.

We are an integrated shipping group, principally engaged in the following businesses:-

(a) ship chartering business, which includes the provision of chartering, re-chartering andtranshipment services of tugboats and barges to our customers; and

(b) shipyard business, which includes the provision of building, repair and broking services of tugboatsand barges.

Please refer to section entitled “Business Overview” of this Prospectus for further details.

Our Competitive Strengths

We believe our competitive strengths are as follows:-

�� We have an experienced and committed management team

We have an experienced and dedicated management team with many years of experience in theship chartering industry.

�� We have a fleet of high quality and efficient vessels

As part of our fleet renewal policy, we generally do not retain our vessels for more than five years.This ensures that our vessels are more cost efficient as major repair and maintenance work isminimised thus allowing us to operate our fleet more efficiently and with lower operating costs.

With the sophisticated satellite surveillance systems installed in all our tugboats (other than the twoMongolian flagged vessels which are currently deployed for dredging purposes), we are able totrack the routes and locations of our vessels and are able to respond to our customers’requirements in a flexible and timely manner and provide high quality service to secure long-termrelationships with our customers.

�� We are an integrated shipping company

We are able to deliver quality service to our customers through the integration of our shipchartering and ship building operations. Our ship building capabilities support the needs of our shipchartering operations. We believe that by building our own vessels, we are able to ensure qualityand timely delivery and achieve cost efficiencies in our ship chartering operations. In addition, weare in the midst of equipping ourselves with ship repair, maintenance and conversion capabilitieswhich will allow us to carry out ship repair and maintenance works for our vessels.

PROSPECTUS SUMMARY

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�� We have an established track record in our ship chartering operations

Since the commencement of our ship chartering operations in 1991, we have built a credible trackrecord of more than 15 years within the industry. Over the years, we have chartered our vessels forthe transportation of mainly mining products such as coal and granite mix aggregates, forSingaporean and Indonesian customers and end-users from diverse industries such as theconstruction, infrastructure, land reclamation and property development industries.

�� We receive stable and constant business from our major customers

BRJ has been a major customer of our ship chartering business since 1994. BRJ is an establishedcompany and through its subsidiaries as well as other Associates of the Lee Family, has anestablished network of Indonesian and Singaporean customers from various industries. Beingcontrolled by the Lee Family, we receive a stable and constant stream of income from BRJ for ourship chartering business. BRJ contributed 92.6 per cent., 90.0 per cent., 36.4 per cent. and 31.8per cent. of our Group’s total revenue in each of FY2004, FY2005, FY2006 and HY2007,respectively. Over the years, our customer base has also grown significantly to include othercustomers apart from BRJ.

�� Our shipyard and ship chartering operations are strategically located

Our ship chartering operations are carried out from our Singapore office as Singapore is one of theleading shipping hubs in South East Asia and is in proximity to vital regional and internationalshipping lanes such as the Straits of Malacca.

Our shipyard is located in Batam, an island in the Riau Islands of Indonesia. Batam, which enjoys afree-trade zone status and boasts a lower operating cost environment compared to Singapore andother neighbouring countries in the South East Asia region, is positioned strategically near mainregional and international shipping lanes.

With our shipyard based in Batam and expected to be one of the larger yards there when it iscompleted, we stand in good stead to benefit from the rising demand for shipyard activities.

�� Our competitive cost structure

We believe that we have a low overall cost base with our ship building activity being carried out inBatam, Indonesia. In addition, with our own shipyard, we are able to build vessels for our shipchartering business at cost as well as repair and maintain our own vessels. We also enjoy the tax-exempt shipping income status sanctioned under Section 13A of the Singapore Income Tax Act forall our Singapore-flagged vessels.

Please refer to section entitled “Competitive Strengths” of this Prospectus for further details.

Our Business Strategies

Our business strategies for our shipyard and ship chartering business segments are as follows:-

Shipyard

We have commenced, and intend to expand, our ship building business and are implementing thefollowing strategies:-

�� Expanding and improving our shipyard

We intend to continuously expand and improve our shipyard with the construction of drydocks, jettyand related facilities. These improvements will enable us to perform ship repair and maintenanceworks in future, which generally command better margins as compared to ship building works. Wewill also have better control over the costs of repairs and maintenance to vessels used in our shipchartering business, and achieve improved cost efficiency through the sharing of facilities,equipment and labour between our ship building, ship repair, maintenance and conversionbusiness. In addition, we will be able to build our vessels in-house and subsequently maintain andservice them in our own shipyard.

PROSPECTUS SUMMARY

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�� Diversifying the customer/industry base of our shipyard operations

Our shipyard currently has a track record of building tugboats and barges only. The steady hike incrude oil prices in recent years has led to an increase in oil exploration activities by oil companiesto replenish diminishing reserves. The increase in activity in the offshore oil and gas sector hasalready, and will continue to see sustained demand for the construction of larger vessels used inthe oil and gas sector, as well as the fabrication of massive steel platforms for offshore jack-up oilrigs to support exploration and production activities. When completed, our Directors believe that ourshipyard will be one of the larger shipyards in Batam equipped with the latest equipment which willallow us to tap on such business opportunities.

Ship Chartering

We are implementing the following strategies for our ship chartering business:-

�� Strengthening, expanding and diversifying our existing customer base

Our vessels are used by our customers for the transportation of mainly mining products such ascoal and granite mix aggregates. With a view to further expanding and diversifying our customerbase, we intend to source for new customers in other parts of Asia, other than Indonesia, throughintensifying our sales and marketing efforts. We also intend to broaden our end-user base byextending our ship chartering services to customers in other industries, such as commodity tradingand marine logistics. We are also making concerted efforts to procure additional long-termtranshipment contracts, in order to expand our revenue base.

�� Providing reliable quality service

With respect to our ship chartering operations, we are committed to providing quality services inaccordance with our customers’ specifications and time schedule.

�� Improving our cost efficiency

We believe that cost management is a key element in our business operations. In addition toensuring the close monitoring on the turnaround time of our vessels, the upkeep and dailymaintenance of our fleet, we aim to continue to improve our cost efficiency through maintaining ourexisting strategic operational measures, such as the installation of satellite surveillance systems inall our tugboats and the adoption of our motivational reward system for vessel crew.

We will also acquire or build additional and larger vessels with greater capacity as well as renewour fleet of vessels.

�� Continuing to leverage on sale-and-leaseback transactions

We intend to grow our fleet of vessels while prudently managing our capital structure at the sametime, so that we can achieve optimal financial flexibility. To this end, we will continue to support ourgrowth by leveraging on the sale-and-leaseback arrangement as and when the opportunity arises.Our Group would generally sell existing vessels in its fleet under this sale-and-leasebackarrangement where our Group wishes such vessels to be re-flagged as Indonesian vessels forpurposes of our operations. Such an arrangement enables our Group to reduce gearing, andimprove cash flow while expanding our fleet of vessels. We may then invest more of our cash flowin expanding our existing businesses as well as to acquire new related businesses where suitableopportunities arise.

In addition, as we are not entitled to own Indonesian flagged vessels (since such vessels may onlybe owned by Indonesians), by embarking on a sale-and-leaseback strategy, we are able to operateIndonesian flagged vessels and avail ourselves of the operational cost benefits accorded to suchvessels which ply Indonesian waters.

PROSPECTUS SUMMARY

26

FUTURE PLANS

In line with our business strategies, our future plans for the growth and expansion of our shipyard andship chartering business segments are described below:-

Shipyard

�� We intend to establish ship repair, maintenance and conversion facilities in our existingshipyard in Batam, Indonesia

We intend to expand our shipyard operations to include the provision of ship repair, maintenanceand conversion services. We will also have two drydocks, a jetty and related facilities to equip ourshipyard operations with ship repair, maintenance and conversion capabilities with the constructionof one of the drydocks and related facilities scheduled to be substantially completed by the end of2007. Construction of the second drydock and jetty is expected to commence at the end of 2007 orbeginning of 2008. Once the two drydocks, the jetty and related facilities are completed, thecombined ship building and repair capacities of our shipyard will respectively allow us toaccommodate up to eight vessels of 150 metres in length for ship building and up to five vessels ofvarying lengths of between 50 metres and 130 metres for dock and afloat ship repair at any onetime.

�� We intend to build vessels and structures for the offshore oil and gas and marine logisticsindustries

We intend to expand on the types of vessels and structures we build, particularly for the oil andgas, and marine logistic industries. In addition to tugboats and barges which we currently build, weintend to build other vessels such as tankers, landing crafts, rock barges, accommodation barges,offshore supply vessels such as AHTSs, cargo ships and other more sophisticated vessels of up to150 metres in length, which are mainly used in the offshore oil and gas and marine logisticsindustries. We are in the process of strengthening our technical team and equipping ourselves withfacilities to build such vessels and expect such building facilities to be substantially completed bythe end of 2007.

A key stage in the ship building process relates to the fabrication and assembly of steel plates inaccordance with design specifications. Our Directors believe that the steel fabrication and assemblyexpertise so acquired in the ship building process enables our Group to undertake the fabricationof the massive steel platforms for jack-up oil rigs to support offshore oil and gas exploration andproduction activities.

We are also gearing ourselves to be ISO certified which will enhance our positioning in this area.

Ship Chartering

�� We intend to expand our customer base regionally

While we historically and will continue to charter a majority of our ships to BRJ and otherIndonesian customers, we are expanding our ship chartering customer base regionally, focusing onnew third-party customers.

�� We intend to increase ship chartering services to the coal industry

Our Directors believe that the coal production and export industry will continue to provide strongdemand for our ship chartering services in transporting coal between countries or between islandswithin Indonesian as well as for our transhipment services for coal. We had in recent months,commenced transporting coal from Kalimantan, Indonesia, to Java, Indonesia, and from Sumatra,Indonesia, to the west coast regions of Western Malaysia. We have secured a one-yeartranshipment contract for coal worth approximately S$4.7 million and will continue to tap the coalproduction and export industry. To this end, we intend to expand our fleet of vessels to servecustomers in the coal industries and procure more additional long-term transhipment contracts inorder to expand our revenue base.

PROSPECTUS SUMMARY

27

General

�� We intend to explore acquisitions, investments, joint ventures and/or strategic alliances toexpand our business

We may consider acquisitions, investments, strategic alliances and/or joint ventures with oursuppliers, customers, other shipping or shipping-related companies or third parties as and whenthe opportunities arise. This would allow our Group to expand or diversify our core business,expand our network of customers, lower our operational risks or to increase our range of servicesto our customers through vertical integration.

Please refer to section entitled “Future Plans” of this Prospectus for further details.

Where you can find us

Our principal and registered office is located at 1 Sims Lane #04-11, Singapore 387355. Our telephonenumber is (65) 6741 2545 and our facsimile number is (65) 6841 5756.

PROSPECTUS SUMMARY

28

The following exchange rates are used throughout this Prospectus to translate the historical financialstatements of our foreign subsidiaries, unless otherwise stated. The following table sets out, for each ofthe financial years and half years indicated, the average and closing exchange rates between IDR and $.The average exchange rate between IDR and $ is calculated using the average of the exchange rates onthe last day of each month during each financial year.

IDR/$Average Closing

FY2004(1) N.A. N.A.FY2005 5,730.00 6,000.00FY2006 5,758.33 5,750.00HY2006 5,808.33 5,700.00HY2007 5,877.01 6,012.00

The high and low exchange rates between the IDR and $ for each of the six months preceding the LatestPracticable Date are as follows:-

IDR/$(2)

High Low

March 2007 6,076.48 5,967.55April 2007 6,053.80 5,972.12May 2007 6,031.70 5,637.96June 2007 5,951.38 5,721.10July 2007 6,124.95 5,858.68August 2007 6,248.58 6,025.80

As at the Latest Practicable Date, the exchange rate for IDR is IDR6,194.64 to $1.00. The tables aboveindicate the IDR exchange rate to one $.

Notes:-

(1) We did not have any foreign subsidiaries in 2004.

(2) The above exchange rates are quoted from Bloomberg L.P.. We have not asked Bloomberg L.P. for their consent for theinclusion of the above exchange rates and accordingly, Bloomberg L.P. is not liable for these statements under sections 253and 254 of the Securities & Futures Act. While our Directors have taken reasonable steps to ensure that the information isextracted accurately and fairly and has been included in this Prospectus in its proper form and context, they have notindependently verified the accuracy of the information set out above.

We have included the exchange rates in this Prospectus solely for information only and such exchangerates set out above should not be construed as a representation that $1.00 actually represents such IDRor could be converted into IDR at the rates indicated.

EXCHANGE RATES

29

Issue Size : 53,550,000 New Shares offered in Singapore comprising 3,800,000Offer Shares and 49,750,000 Placement Shares (including 1,500,000Reserved Shares).

The New Shares, upon issue and allotment, will rank pari passu in allrespects with the existing issued Shares.

Issue Price : $0.28 for each New Share.

The Invitation : The Invitation comprises an offering of:

� 3,800,000 Offer Shares at the Issue Price, to members of thepublic in Singapore;

� 48,250,000 Placement Shares (excluding 1,500,000 ReservedShares) at the Issue Price, reserved for placement to membersof the public and institutional investors in Singapore; and

� 1,500,000 Reserved Shares at the Issue Price, reserved for ourIndependent Directors, management, employees and businessassociates and those who have contributed to the success ofour Group.

Purpose of the Invitation : Our Directors consider that the listing of our Company and thequotation of our Shares on the SGX-SESDAQ will enhance our publicimage locally and overseas and enable us to tap the capital marketsfor the expansion of our operations. The Invitation will also providemembers of the public, our Independent Directors, management,employees and business associates as well as those who havecontributed to our success with an opportunity to participate in theequity of our Company. In addition, the proceeds of the Invitation willprovide us with additional capital to finance our business expansion.

Listing status : Prior to the Invitation, there had been no public market for ourShares. Our Shares will be quoted in Singapore dollars on the SGX-SESDAQ, subject to admission of our Company to the SGX-SESDAQand permission for dealing in and for quotation of our Shares beinggranted by the SGX-ST and the Authority not issuing a stop order.

THE INVITATION

30

You should read the following summary financial data in conjunction with the full text of the Prospectus,including the Independent Auditors’ Report on the audited combined financial statements of the Group forthe financial years ended 30 September 2004, 2005 and 2006 set out in Appendix I of this Prospectusand the Independent Auditors’ Report on the review of the interim combined financial statements of theGroup for the six-month period ended 31 March 2007 set out in Appendix II of this Prospectus.

Operating Results of our Group(1)

Audited Unaudited

$’000 FY2004 FY2005 FY2006 HY2006 HY2007

Revenue 4,546 6,642 15,887 5,650 16,953

Cost of sales (3,183) (4,008) (11,391) (3,910) (10,970)

Gross profit 1,363 2,634 4,496 1,740 5,983

Other operating income 143 1,072 663 320 1,429

Negative goodwill arising on acquisition – – 2,159 – –

Administration expenses (10) (305) (807) (376) (735)

Other operating expenses (129) (239) (781) (307) (1,740)

Finance cost (356) (334) (337) (177) (422)

Profit before tax(2) 1,011 2,828 5,393 1,200 4,515

Income tax – – n.m.(5) – (146)

Net profit attributable to the Shareholders(2) 1,011 2,828 5,393 1,200 4,369

Basic EPS (cents)(3) 0.47 1.32 2.52 0.56 2.04

Diluted EPS (cents)(4) 0.38 1.06 2.01 0.45 1.63

Notes:-

(1) The combined financial statements of our Group for the years/periods under review have been prepared on the basis that ourGroup has been in existence throughout the years/periods under review. Please refer to the Independent Auditors’ Report onthe audited combined financial statements of the Group for the financial years ended 30 September 2004, 2005 and 2006 setout in Appendix I of this Prospectus and the Independent Auditors’ Report on the review of the interim combined financialstatements of the Group for the six-month period ended 31 March 2007 set out in Appendix II of this Prospectus.

(2) Had the Service Agreements been in place throughout FY2006, our profit before tax, net profit attributable to Shareholdersand basic EPS for FY2006 would have been $5.11 million, $5.11 million and 2.38 cents respectively.

(3) For comparative purposes, basic EPS for the relevant years/periods under review is computed based on net profit attributableto Shareholders and the pre-Invitation share capital of 214,200,000 Shares.

(4) For comparative purposes, fully diluted EPS for the relevant years/periods under review is calculated using the net profitattributable to shareholders and the post-Invitation share capital of 267,750,000 Shares.

(5) Denotes an amount of less than $100.

SUMMARY FINANCIAL DATA

31

Financial Position of our Group(1)

Audited UnauditedAs at As at

$’000 30 September 2006 31 March 2007

Non-current assets

Property, plant and equipment 37,410 41,600

Current assets

Inventories 2,102 2,747Trade receivables 894 1,476Due from customers on construction contracts 833 5,481Other receivables 343 862Due from holding company – non trade n.m.(3) –Due from related parties – trade 154 –Cash and bank balances 438 1,194

4,764 11,760

Total assets 42,174 53,360

Current liabilities

Trade payables 5,643 8,508Other payables 3,134 2,418Due to related parties – trade 791 1,103Due to related parties – non-trade 464 –Due to a director – non-trade 6,179 280Interest-bearing loans (secured) 8,265 10,198Provision for tax – 146

24,476 22,653

Non-current liabilities

Interest-bearing loans (secured) 6,836 15,573

Total Liabilities 31,312 38,226

Net Assets 10,862 15,134

Capital and Reserves

Share capital 1,320 1,320Translation reserves 22 (75)Accumulated profits 9,520 13,889

10,862 15,134

NTA per Share (cents)(2) 5.07 7.07

Notes:-


(2) For comparative purposes, NTA per Share is computed based on the NTA of our Group and the pre-Invitation share capital of214,200,000 Shares.


SUMMARY FINANCIAL DATA

32

Investors should consider carefully the following risk factors and all other information contained in thisProspectus, before deciding to invest in our Shares. You should also note that certain of the statementsset forth below constitute “forward-looking statements” that involve risks and uncertainties.

If any of the following risk factors and uncertainties develops into actual events, our business, financialcondition or results of operations or cash flows may be adversely affected. In such circumstances, thetrading price of our Shares could decline and investors may lose all or part of their investment. To thebest of our Directors’ belief and knowledge, all the risk factors that are material to investors in making aninformed judgement have been set out below.

RISKS RELATING TO THE SHIPPING INDUSTRY

We operate in a competitive industry

The ship chartering industry is fragmented with many charterers, owners and operators of vessels.Hence, we face intense competition from both large and small companies in the ship chartering business.In our shipyard operations, we face increasing competition from ship-builders from South East Asia andthe PRC, who have capabilities to build a diverse range of vessels of various types and sizes and atcompetitive prices. Our competitors and potential new entrants to the ship chartering and shipyardindustries may have lower costs of operations and better access to financial, technological and/or otherresources than we do. Some of our competitors, who may have lesser resources and capabilities than us,may compete with us through aggressive pricing in order to gain market share and fulfill customerrequirements. In the event that our competitors are able to provide comparable services at a lower priceand/or better turnaround time, we may have to lower our prices significantly in order to secure thecontract, thus resulting in a lower profit margin. Furthermore, we may not be able to secure contracts thatwe are prospecting.

We expect this intense competition in the ship chartering and shipyard industries to continue, and there isno assurance that we will be able to compete successfully against these competitors in future. If we areunable to compete successfully against our existing and potential competitors, we may experience a lossof market shares, which could materially and adversely affect our financial performance.

We operate in a cyclical and volatile shipping industry

The shipping industry is highly cyclical and subject to seasonal fluctuations primarily due to changes inthe supply of and demand for shipping capacity which result in the volatility of sales, profitability andvessel values. The demand for and supply of ship chartering and shipyard services are influenced by,inter alia, global and regional economic conditions, developments in international trade, changes inseaborne and other transportation patterns, weather conditions, fuel prices, port locations, the impact ofport congestions, the number of vessels in efficient operating condition as well as strikes, armed conflicts,riots, social unrest and other political situations in the countries within the shipping routes plied by thevessels. Many of the factors influencing the supply of and demand for shipping capacity are outside ourcontrol, and the nature, timing and degree of changes in industry conditions are unpredictable.

Significant downturns in the shipping and shipyard industry may lead to significantly lower charter rates,reduced volume and/or substantial decline in the value of our vessels which could have a materialadverse effect on our financial condition and results of operations. Should such a downturn occur in thefuture, our business, financial condition and results of operations are likely to be materially and adverselyaffected.

We may also be affected by a downturn in our customers’ business. For example, in the event ofinclement weather, quarry or mining operations of our customers may be adversely affected resulting in areduction in demand for our vessels for purposes of charter and transhipment.

RISK FACTORS

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Global and regional economic, social and political conditions may reduce the demand for ourservices

The shipping industry is generally dependent on the global and regional economic, social and politicalconditions. Generally weak global economic conditions or unfavourable social and political conditionssuch as terrorist attacks, war, political and social unrests and riots, trade sanctions and embargoes mayresult in a downturn in the shipping industry. In the ship chartering industry, a general economicslowdown may affect the demand for specific goods which we transport. In the shipyard industry,shipowners may postpone the building or acquisition of new vessels and/or the execution of maintenanceand repair work on existing vessels. Hence, an occurrence of any unfavourable economic, social andpolitical events may adversely affect our financial results.

We operate in a highly regulated industry

The shipping industry is highly regulated, and our operations are affected by extensive and evolvingenvironmental protection laws and other regulations in the form of various international conventions,national, state and local laws and national and international regulations in force in the jurisdiction in whichour vessels operate, as well as in the country or countries in which such vessels are registered. Subjectto arrangements with the charterer concerned, compliance with such laws and regulations may entailsignificant expenses on our part, including expenses for ship modifications, maintenance and inspectionrequirements and changes in operating procedures. As these international conventions, laws andregulations are often revised, we are unable to predict the long-term costs of compliance. Additional lawsand regulations may be adopted which could limit our ability to do business and which could have amaterial adverse effect on our business, financial condition and results of operations.

We may also incur substantial costs in order to comply with the existing and future environmental andhealth and human safety requirements, including, among others, obligations relating to air emissions,maintenance and inspection, development and implementation of emergency procedures and insurancecoverage. We could also face substantial liability for penalties, fines, damages and remediation costsassociated with hazardous substance spills or other discharges into the environment involving ourshipping operations under such laws and regulations. These costs and penalties could have a materialadverse effect on our business, financial condition and results of operations.

Our vessels’ operating certificates and licences are renewed periodically. However, governmentregulations of vessels, particularly in the areas of safety and environmental impact, may change in thefuture and require us to incur significant capital expenditure on our vessels to keep them in compliance.In addition, we are required by various regulatory bodies to obtain permits and licenses required for theoperation of our business. These permits may become costly or difficult to obtain or renew.

In the event that any of these international conventions, laws and regulations, codes, guidelines andstandards become more stringent and/or additional regulations requiring our compliance are introduced,our costs of operations may increase further. Also, non-compliance with such regulations may result inpenalties, sanctions as well as revocation of certain business licenses and permits. This would limit ourability to do business and may have an adverse effect on our business and financial position.

We are affected by independent assessments by shipowners

Business conditions in the shipping industry are generally affected by the independent assessment ofshipowners of future demand for ship chartering services. Optimistic assessments by these shipownersmay result in surplus orders for new vessels, which may in turn result in the oversupply of vessels. Thiswill cause a depression in freight and charter rates as well as a decline in the values of vessels. In suchan event, our business and financial performance will be adversely affected.

We are exposed to the inherent risks in the shipping business

In the shipping business, we are constantly exposed to inherent risks and external factors which areoutside of our control such as pollution incidents, collisions, mechanical breakdown of our vessels,adverse weather conditions, fire or other calamity. Any of these factors may cause disruptions to ouroperations and result in loss or damage to our vessels or our cargo. We may also be liable for damages

RISK FACTORS

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or compensation payable to third parties arising from vessel collisions in cases where our negligence orcontributory negligence is proved against us. In the event that we are liable for payment of any suchcosts, damages or compensation, and our existing insurance coverage does not cover, or is insufficient topay for the total amounts incurred, our financial performance may be materially and adversely affected. Inaddition, our insurance premium costs may increase as a result, thereby leading to an increase in thecost of our operations, which may adversely affect our financial performance.

RISKS RELATING TO OUR BUSINESS

We are dependent on BRJ and our other major customers

Pursuant to a letter of undertaking dated 13 September 2007, we have been granted the right of firstrefusal to provide ship chartering services to BRJ, its subsidiaries and other companies controlled by theLee Family for a period of two years commencing on the date on which our Shares are listed on theSGX-SESDAQ. BRJ has been our major source of revenue since 1994. For FY2004, FY2005, FY2006and HY2007, BRJ accounted for approximately 92.6 per cent., 90.0 per cent., 36.4 per cent. and 31.8 percent. of our total revenue respectively. We have also relied on BRJ’s referrals in the growth of both ourship chartering and shipyard operations.

Given the current importance of BRJ to us, if the letter of undertaking is breached for any reasonswhatsoever, or if there is a reduced demand from BRJ or a material adverse change in the financialcondition of BRJ, our business, financial condition and results of operations may be adversely affected.

In addition, there is no assurance that our other major customers (as set out in the section entitled “MajorCustomers” of this Prospectus) will continue to engage us or that we will continue to sustain the generallevel of revenues that we have been securing from them periodically. In the event that any of our majorcustomers cease to have business dealings with us or materially reduce the level and/or frequency ofjobs that they engage us for, our revenue and profitability will be adversely affected. For example, PT.Citra Armada Nusantara Shipping which contributed 5.2 per cent. and 11.8 per cent. of our total revenuein FY2006 and HY2007 respectively, has made a claim against MP Shipyard in relation to, inter alia,defects in the vessels built by MP Shipyard and delivered to it. In light of such claim, PT. Citra ArmadaNusantara Shipping may not place further orders with MP Shipyard and may cease to be a customer ofMP Shipyard. Please refer to the paragraph on “Litigation” in the section entitled “General and StatutoryInformation” of this Prospectus for further details on such claim.

We have experienced and may continue to experience negative working capital position and facerisks associated with high debt financing

We had negative working capital of $3.2 million, $3.8 million, $19.7 million and $10.9 million as atFY2004, FY2005, FY2006 and HY2007 respectively. Our working capital, defined as current assets lesscurrent liabilities, at the relevant balance sheet dates were negative because our current liabilities,comprising mainly our short-term borrowings and payables, exceeded our current assets. This was due tothe nature of our business and past expansion, which required substantial investments in vessels, landand equipment. Typically, these investments in vessels, land and equipment were funded through ourinternal resources, external borrowings and Directors’ advances.

As at the Latest Practicable Date, our total outstanding external indebtedness owing to banks andfinancial institutions was $23.9 million. As such, we have significant obligations to service our loans. Ourdebt to equity ratio (defined as the ratio of total interest bearing indebtedness to banks and financialinstitutions to shareholders’ equity) and current ratio as at 31 March 2007, before and after adjusting forthe capitalisation of $3 million in respect of Directors’ advances and cash capital injection of $3 millionfrom Nautical International, are 1.7 and 0.5 respectively prior to the adjustments and 1.2 and 0.8respectively after the adjustments respectively. Notwithstanding this, we may continue to face high debtlevels in the future due to our expansion plans and requirements for additional working capital. Inparticular, funding is needed as our shipyard undergoes continual development to equip itself with shiprepair and maintenance facilities. The continual development will be financed from internal resources, theproceeds of the Invitation and bank borrowings.

RISK FACTORS

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Our obligations under these borrowings have been mainly met through the cash flow from our operationsand our financing activities. As such, we are subject to risks normally associated with debt financing,including the risk that our cash flow will be insufficient to meet required payment of principals andinterests. In addition, while in the past cash flow from our operations had been sufficient to meetpayments to the financial institutions, there is however no assurance that we are able to do so in thefuture. Also, we may underestimate our capital requirements and other expenditures or overestimate ourfuture cash flows. In such an event, additional capital, debt or other forms of financing may be required forour working capital. If any of the aforesaid events occur and we are unable for any reason to raiseadditional capital, debt or other financing to meet our working capital requirements, our business,operating results, liquidity and financial position will be adversely affected. In addition, the loans aresecured by mortgages and other securities over various assets and earnings relating to certain charteragreements of the Group, as well as joint and several guarantees by certain directors of the Group, asmore particularly set out in Note 20 of the unaudited interim combined financial statements of the Groupfor the six-month period ended 31 March 2007 set out in Appendix II of this Prospectus. In the eventthat we default on any of the loans, such securities may be enforced by the relevant financial institution.

Please refer to the section entitled “Capitalisation and Indebtedness” of this Prospectus for more details.

Our vessels are vulnerable to pirate or terrorist attacks

Our vessels are vulnerable to attacks by pirates or terrorists as we ply vital shipping lines around theregion, where the probability of such attacks occurring is high. In January 2003, two of our vessels werehijacked while they were travelling together from Pekan Baru, Indonesia to Bintan, Indonesia, resulting insome disruptions to our business operations. There is no assurance that our vessels will not be attacked,destroyed or stolen by pirates or be subject to terrorist attacks in the future. In the event of such attacks,our vessels and cargo may be damaged and/or lost and our crew may be injured. If such damagesexceed our existing insurance coverage or are not covered by the existing insurance policies we havetaken up, our business and financial conditions will be adversely affected. In addition, pirate or terroristattacks may result in substantial increases in our insurance premiums, thereby affecting our financialperformance.

We are exposed to fluctuations in freight and charter rates

Our operating results are dependent on the prevailing charter rates in a given time period, which arebased on the supply of and demand for vessels and are extremely competitive. We generally provide ourcustomers with short-term or spot charters, wherein our customers may approach us to providechartering services on an immediate or ad hoc basis. Such charters will be based on the prevailingmarket rates and are usually for a short duration ranging from three to six months. Short-term chartersgive us the flexibility in managing fleet capacity in response to the demand for our vessels. However, itmay expose our Group to short-term fluctuations in charter rates. In the event of a decline in the charterrates, this may adversely affect our financial results.

We are subject to increases in costs of materials and equipment for our shipyard operations

Some of the major cost components for our shipyard operations include steel and other materials as wellas equipment such as pumps, propellers and engines. Should there be any price increase in thematerials and equipment for our shipyard operations, especially steel or equipment such as engines, andif we are unable to pass on these increases in costs to our customers in the fulfilment of our contractualagreements or when negotiating for new contracts, our gross profit margin would be reduced and ourfinancial performance may be adversely affected. In addition, any significant increase in the costs ofmaterials and equipment will affect the price of vessels which we sell to our ship chartering operations.This will increase the costs of sales of our ship chartering operations due to higher depreciation andreduce the gain that may be realised upon the disposal of the vessel.

We may not be able to complete our contractual obligations to our customers

In our ship chartering operations, inclement weather may result in a delay in the transportation of goodsto our customers in the case of a voyage charter or a delay in our delivery of vessels to our customers fortheir use in the case of a time charter. In such an event, we may be required to pay liquidated damageswhich would adversely affect our financial performance.

RISK FACTORS

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In our shipyard operations, the delivery of vessels to our customers may be delayed due to, inter alia,delays in the delivery of materials such as steel and/or equipment such as engines on the part of oursuppliers, delays in the completion of works on the part of our sub-contractors or work stoppages in ourshipyard due to unforeseen circumstances such as riots or infectious diseases. In some of our largercontracts, there may be provisions for liquidated damages to be payable in the event of delay. Forexample, for one of our barge building contracts, we agreed with the buyer that we would compensate thebuyer at the rate of five per cent. per annum of the total contract value for each day of delay. In addition, ifthe delay continues beyond the period stipulated in the contracts, our customers may have the right torescind their ship building contracts with us. This would adversely affect our financial performance.

We may face claims for defects and warranties

Currently, we typically provide a warranty period of six months from the date of delivery for all tugboatsbuilt by us. Any defects of the tugboats which are discovered during the warranty period and which aredue to defective materials and/or bad workmanship will be remedied by us. Please refer to the paragraphon “Litigation” in the section entitled “General and Statutory Information” of this Prospectus for details ona claim by one of our customers.

While we presently do not provide any warranty in respect of the vessels built and delivered by us, otherthan for tugboats, we may do so in the future in order to remain competitive. In such event, we may faceclaims and/or rescission of contracts by our customers in respect of poor workmanship and non-conformance to vessel specifications and/or non-execution of the project. We may also be required toincur additional costs as new materials and additional labour will be needed to rectify such claims to thesatisfaction of our customers. These additional costs are generally not recoverable from our clients, and ifsuch amounts are large, it would result in a material reduction in our profit margin for the project, therebyadversely affecting our financial performance.

We are subject to sub-contracting risks

For our shipyard operations, we currently outsource works such as fabrication, assembly, machining,mechanical and electrical fittings, carpentry and hull testing to sub-contractors. Should our sub-contractors be unable to carry out their contractual obligations in accordance with the specifications andtime schedule, and we are unable to find suitable alternative sub-contractors in a timely manner and oncomparable commercial terms, we may not be able to complete the construction of the vessel within thebudget and time schedule. As a result, there may be cost overruns and we may incur liquidated damages,resulting in our financial performance being adversely affected.

In addition, our sub-contractors are required to provide insurance coverage for all workers hired by them,including workers who are deployed in our yard by them. In the event that a sub-contractor fails and/orneglects to provide such insurance or an accident which is not covered by such policies occurs or if thenumber of workers and/or the amount claimed exceeds the insurance coverage, we may have to bearliabilities arising from such accidents. In such an event, our financial performance will be adverselyaffected.

Further, should our sub-contractors fail to pay for the workers they have contracted, these workers maylook to us for compensation and/or disrupt our operations. In the event that there is a disruption to ouroperations and/or we are compelled to compensate them from our own funds, our operating results andfinancial performance will be adversely affected.

We are exposed to foreign exchange risk

Our revenue is denominated principally in $ and to a lesser extent in US$ while our purchases aredenominated in either $ or IDR. In FY2004, FY2005, FY2006 and HY2007, approximately 97.4 per cent.,96.5 per cent., 54.1 per cent. and 31.9 per cent. of our total purchases were denominated in S$respectively, while the remaining were denominated in IDR. As the currency denomination of our revenuestream and our costs differ, we have a net foreign exchange exposure. To the extent that there is amismatch between the currency of our sales and the currency of our purchases and expenses, we areexposed to any adverse fluctuation of IDR and US$ against $.

RISK FACTORS

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We are also exposed to fluctuations in foreign exchange arising from the difference in timing between ourreceipt and payment of funds. Accordingly, any significant foreign currency fluctuations will have animpact on our financial performance. We may suffer foreign exchange transaction/translation losses ifthere is a weakening of IDR against S$, and this will have an adverse impact on our financialperformance.

We have IDR and US$ denominated bank accounts. As our reporting currency is in S$, we facetranslation risk in that any significant fluctuation in the exchange rate between IDR and/or US$ against S$will have an effect on our financial statements which are presented in S$. Please see the section entitled“Foreign Exchange Exposure” of this Prospectus for more information.

In addition, given that the reporting currency of our consolidated financial statements is in S$, in order toprepare our consolidated financial statements, we translate the financial statements of our subsidiaries inIndonesia from IDR to S$ based on the relevant average exchange rates prevailing as at the relevantperiod of the respective financial statements. Any such transaction gains or losses will be recorded astranslation reserves or deficits as part of our shareholders’ equity. Movements in the exchange rates mayadversely affect our financial position.

We are exposed to the risk of increases in fuel oil price

The price and supply of fuel is unpredictable and fluctuates as a result of events which are beyond ourcontrol. An increase in fuel oil costs will affect our business. Fuel is required to operate machinery in ourshipyard and any increase in fuel prices will correspondingly increase our shipyard operational costs.Further, in a voyage charter arrangement, we generally bear the operating costs of our vessels includingfuel costs. If we are unable to pass on the higher fuel costs to our customers, our profit margin will besignificantly reduced and our financial performance will be affected. This may have a larger impact on ourlonger-term contracts, such as our long-term charter contracts for transhipment services where thecharter rates have been fixed. In such contracts, we would have to assume the risk of any increase in theprice of fuel oil. Should we increase our charter rates, the demand for our chartering services may besignificantly reduced, thereby adversely affecting our financial performance.

We are exposed to the credit risks of our customers

We may grant credit terms to our customers, and are therefore exposed to payment delays and/or defaultby our customers. For FY2004, FY2005, FY2006 and HY2007, our debtors’ turnover days for third partycustomers were 30 days, three days, 32 days and 23 days respectively. There is no assurance that wewill be able to collect such debts on time or at all. If our customers experience cash flow difficulties or adecline in their business performance, they may default in their payments to us. Further, during economicdownturns, our customers may be adversely affected financially and the possibility of defaults in paymentwill be greater. As a result, we may experience payment delays or in more severe cases, non-recovery ofdebts from our customers. We would then have to make provisions for doubtful debts, or incur debt write-offs, which will have an adverse impact on our profitability. Please refer to the section entitled “CreditPolicy” of this Prospectus for details of our credit management.

Our continued growth and success is dependent on our key management personnel

Our key management personnel, in particular our Executive Chairman, Mr Lee Wan Tang, and our CEO,Mr Sean Lee Yun Feng, have contributed significantly to the development and growth of our Group. Thecontinued growth and success of our Group is also attributable to the contributions and experience of ourother Executive Directors, Executive Officers and employees, who possess valuable experience andknowledge of our business and industry and have a good understanding of our customers’ needs andrequirements. Our Executive Chairman, Mr Lee Wan Tang, and our CEO, Mr Sean Lee Yun Feng haveentered into Service Agreements with our Group for an initial period of three years, after which theirService Agreements may be renewed on a year-to-year basis on such terms and conditions as theparties may agree mutually. However, there is no assurance that our Executive Chairman and our CEOwill renew their Service Agreements with our Group, and in such an event, there is no assurance that wemay be able to hire suitable replacements in a timely manner. In addition, the loss of any of our other key

RISK FACTORS

38

management personnel or employees, due to health or other reasons, without suitable and timelyreplacements, and the inability to attract and retain qualified personnel will adversely affect ouroperations, revenue and profits. Please refer to the section entitled “Directors, Management and Staff” ofthis Prospectus for more details on the qualifications of our Directors and Executive Officers.

We may be vulnerable in sourcing for sufficient skilled personnel

Our shipyard operations in Batam, Indonesia require skilled personnel such as engineers, mechanics andheavy equipment operators. If we are unable to source for sufficient skilled personnel to meet thecustomers’ orders, or are required to pay substantially higher salaries to procure such skilled personnel,our financial performance would be adversely affected.

We are exposed to potential liability arising from damages, injury or death due to accidents

Due to the nature of our ship chartering and shipyard operations, we are subject to the risks of ouremployees or third parties being involved with accidents while on our premises or vessels. Theseaccidents may occur as a result of fire, explosions or other incidents. Further, our vessels may beinvolved in collisions, resulting in damage to the cargo or vessel or loss of lives, for which we may beexposed to claims from third parties. Accidents and disruptions to our business operations will have amaterial adverse impact on our corporate image and financial performance. In the event that anyaccidents which are not covered by our insurance policies or workmen’s compensation taken by ourGroup, or if claims arising from such accidents which are in excess of our insurance coverage are madeagainst us, and/or any of our insurance claims are contested by the insurance companies, we will berequired to pay for such compensation and the financial performance of our Group may be adverselyaffected.

We may not be able to construct our shipyard facilities on schedule or at the budgeted cost

We are currently constructing a drydock which is 150 x 40 x 8m in dimension together with its relatedfacilities on a piece of land held by RMN while construction of a second drydock which will be at least110 x 30 x 6m in dimension and a jetty (and their related facilities) are expected to commence at the endof 2007 or beginning of 2008. The construction of the first drydock and other shipyard facilities isscheduled to be substantially completed by the end of 2007. However, such construction involvesnumerous regulatory, environmental, political and legal uncertainties beyond our control. In addition, it issubject to a number of factors outside of our control, such as availability and price of constructionmaterial, labour disputes, adverse weather conditions and unforeseen circumstances and problems. As aresult of such factors, the construction of these two drydocks, jetty and other shipyard facilities may notbe completed on schedule or at the budgeted cost. In such event, our future financial performance maybe materially and adversely affected.

We may not have sufficient insurance and may be unable to maintain existing insurance coverage

In operating our fleet, we are exposed to inherent risks and external factors which are outside of ourcontrol, such as sinking, collision and other marine disasters, environmental pollution, cargo and propertyloss or damage, piracy or terrorism attacks, and disruption of operations caused by mechanical failure,human error, political action, labour strikes, adverse weather conditions and other circumstances orevents. Any such circumstance or event could result in loss of revenue or increased costs.

We have arranged for insurance against certain of these risks. However, there can be no assurance thatall risks are insured or adequately insured against. The insurance policies that we have currently obtaineddo not cover, inter alia, the following risks: (i) cancellation of contracts; (ii) loss of hire; (iii) loss or damagefrom terrorism, radioactive and chemical contamination, or cyber attacks on any software programmes orelectronic systems; (iv) nuclear risks or blockade. We have not purchased the type of insurance coveringloss of revenue due to delay or detention caused by political unrest, labour strikes, arrest, crew desertion,crew illness, infectious diseases, stowaways, drug seizure, inability to load or discharge cargo which areconsidered as trading risks. There are applicable deductibles under the insurance policies obtained by us,where certain excess amounts of loss or damage or liability suffered or incurred by us cannot be claimedfrom the insurance companies but must be borne by us. In addition, we will not be able to maintain theexisting insurance coverage if we are in wilful breach of warranties. Please refer to the section entitled“Insurance” of this Prospectus for more detailed information on our insurance coverage.

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39

Our vessels may be detained or arrested which could interrupt our operations

Crew members, suppliers of goods and services to a vessel, shippers of cargo and other parties may beentitled to a maritime lien against that vessel (and, in some jurisdictions, any vessel owned or controlledby the same owner) for unsatisfied debts, claims or damages. In many jurisdictions, a maritime lienholdermay enforce its lien by arresting a vessel and commencing foreclosure proceedings. Our vessels mayalso be detained by authorities for investigations relating to breaches of laws or regulations. The arrest ordetention of one or more of our vessels would mean that we are unable to charter the vessel and couldrequire us to pay a substantial sum of money to have the arrest lifted, thus adversely affecting ourbusiness, financial position and results of operations.

We are dependent on our suppliers

We purchase materials and equipment such as steel, pumps, propellers and engines from our majorsuppliers (please refer to the section entitled “Major Suppliers” of this Prospectus for more details on ourmajor suppliers). There is no assurance that we will be able to continue sourcing these materials andequipment from our suppliers at prices that are favourable to us. In the event that our suppliers terminatethe supply of their materials and equipment to us, we may not be able to seek alternative sources in atimely manner and/or at reasonable prices. This will cause our production to be delayed, thereby affectingdelivery to our customers. In addition, we may face an increase in the cost of supply should we switch tonew suppliers.

We currently enjoy tax incentives that we may not enjoy in the future and we may not be able toobtain approval for any tax exempt status applied for

Currently, our Indonesian subsidiary, MP Shipyard, is exempted from customs duties, import and exporttaxes, and value-added tax up to 14 November 2007 under Government Regulation No. 60/PMK.04/2005.Should this tax incentive exemption not be extended by the Indonesian government or be cancelled forany reason, we may have to pay import duty on our imports into Indonesia, value-added tax and/or luxurytax. In the event we are unable to pass on such increased costs to our customers, our cash flow andfinancial results may be adversely affected.

Save for the two vessels which are registered in Mongolia, all the vessels owned by our Group areregistered in Singapore. We enjoy the tax-exempt shipping income status sanctioned under Section 13Aof the Singapore Income Tax Act in respect of all Singapore-flagged vessels. In respect of the two vesselsleased from BBR, though MP Shipping has not fully satisfied the unwritten criteria of the ApprovedInternational Shipping (“AIS”) incentive scheme administered by the MPA, we are still exploring thepossibility of procuring the status of tax exempt shipping income for foreign-flagged ships accorded underthe AIS incentive scheme. There can be no assurance that such an incentive will be granted to us, and inthe event that we are not granted such an exemption, the tax payable by our Group will not be reducedand correspondingly, the financial results of our Group will be affected.

The outbreak of communicable diseases, if uncontrolled, could affect our business

In recent years, the outbreak of various communicable diseases such as severe acute respiratorysyndrome and the avian influenza has resulted in global economic and social uncertainties. Although theeffects of the outbreak on our business were negligible historically, there is no assurance that we will notbe affected significantly in future outbreaks. The resurgence of such communicable diseases, ifuncontrolled, may potentially affect our business and operations. In addition, if any of the employees inour facilities or the facilities of our suppliers and/or customers is infected with communicable diseases, wemay experience disruptions to our supply chain as we, our suppliers or our customers, as the case maybe, may be required to temporarily shut down the affected facility for quarantine purposes. Accordingly,these disruptions to our business and operations may result in a negative impact on our financialperformance.

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40

We may require additional funding for our future growth

Although we have identified our future growth plans set out in the sections entitled “Prospects” and“Future Plans” of this Prospectus as the avenues to pursue growth in our business, the issue proceedsfrom the Invitation will not be sufficient to fully cover the estimated costs of implementing all these plans.We may also find opportunities to grow through acquisitions which cannot be predicted at this juncture.Under such circumstances, we may need to obtain debt or equity financing to develop these growthopportunities.

Additional equity financing may result in dilution to our Shareholders. If we fail to utilise the new equity togenerate a commensurate increase in earnings, our EPS will be diluted, and this could lead to a declinein our Share price. Additional debt financing may, apart from increasing interest expense and gearing,result in all or any of the following:-

� limit our ability to pay dividends;

� increase our vulnerability to general adverse economic and industry conditions;

� require us to dedicate a substantial portion of our cash flows from operations to payments on ourdebt, thereby reducing the availability of our cash flows to fund capital expenditure, working capitaland other requirements; and/or

� limit our flexibility in planning for, or reacting to, changes in our business and the ship charteringand shipyard industry.

We are unable to assure you that we will be able to obtain the additional debt and/or equity financing onterms that are acceptable to us or at all. Any inability to secure additional debt and/or equity financingmay adversely affect our business, implementation of our business strategy and future plans and resultsof operations.

Our shipyard has a short operating history

MP Shipyard was only established in February 2005 with our shipyard facilities only becoming operationalin December 2005. As at the Latest Practicable Date, our shipyard has not been fully completed as plansare underway to expand our shipyard operations to include the provision of ship repair, maintenance andconversion services. Accordingly, MP Shipyard’s operating history to-date may not be reflective of itsoperations and revenue in the future and there is no assurance that MP Shipyard will be able to generatethe same amount of revenue and profits in the future.

RISKS RELATING TO OUR OPERATIONS IN INDONESIA

We face risks associated with the introduction of new laws or changes or strict enforcement toexisting laws by the Indonesian government

While Indonesia has opened up its economy to foreign investors and companies, the political, regulatoryand economic outlook for investors and businesses in Indonesia remains uncertain. Also, it may bedifficult to obtain a consistent or predictable outcome for dispute resolution as compared to other moredeveloped jurisdictions and it may be difficult to obtain swift enforcement of the laws in Indonesia.Judgements by a court of another jurisdiction will not be recognised and enforced in the courts ofIndonesia while foreign arbitration awards may be recognised and enforced in Indonesia, subject tocertain requirements, which include that the subject matter of the awards must relate to commerce, donot conflict with Indonesian public policy and has been issued in a country which enforces Indonesianarbitration awards on a reciprocal basis.

Save for certain industries, 100 per cent. foreign ownership of Indonesian-incorporated companies iscurrently allowed, subject to a divestment requirement under Indonesian law. Such would be the case forboth our Indonesian-incorporated subsidiaries, namely MP Shipyard and RMN. Pursuant to thedivestment requirement, within 15 years as from the date of commercial operation of such an Indonesian-incorporated company, a percentage of the equity interest in the company, to be mutually agreed by theparties involved, must be divested to an Indonesian party. An increase in the share of profits to theminority interest would decrease the share of profits attributable to our Group. Any future changes to

RISK FACTORS

41

governmental guidelines, such as foreign ownership requirements, laws or regulations or the introductionof new regulations which would eliminate certain investment incentives for investors or businessesoperating in Batam, could affect the operations of MP Shipyard and RMN and have an adverse impact onthe profitability of our Group. Furthermore, in the event that the Indonesian government introduces newlaws or regulations or changes or strictly enforces certain existing laws or regulations which may restrictour shipping activities in Indonesia, our business and financial condition will be adversely affected.

With effect from 6 February 2007, Indonesia has banned the export of sand and soil to all countries,including Singapore. We do not currently provide chartering services for the transportation of sand andsoil to countries outside Indonesia and hence are not affected by the recent ban. However, there can beno assurance that such an export ban by the Indonesian government may not in the future be extendedto other natural commodities transported by MP Shipping, such as granite and coal. Should such risksmaterialise, our business and financial condition will be adversely affected.

In addition, in March 2007, six of our vessels were detained by the Indonesian authorities on suspicion oftransporting sand in breach of the abovementioned ban on sand exports. Although our vessels weresubsequently released in May 2007, we could not utilise such vessels during the period of their detention.In the event that any of our vessels are detained again in the future, we would not be able to utilise suchvessels while they are detained and this will adversely affect our operational results.

Labour problems may disrupt our operations in Batam

At present, our workers in Batam, Indonesia, are not unionised and we enjoy generally healthyrelationships with our workforce. There is no assurance that our workforce will continue to remain non-unionised. In the event of any concerted union actions such as work stoppages, work at our Batamshipyard may be disrupted. In such a case, our operations would be adversely affected.

We are also subject to laws governing our relationship with our employees, including minimum wagerequirements and work permit requirements. Failure to comply with these laws and regulations couldadversely affect our business and any investment in our Shares. Please refer to the section entitled“Government Regulations” of this Prospectus for further details.

In addition, should our sub-contractors fail to pay the workers they have contracted to work for our Batamshipyard, their workers may look to us for compensation and/or disrupt our operations. In the event thatthere is a disruption to our operations and/or we are compelled to compensate them from our own funds,our operating results and financial performance will be adversely affected.

We are exposed to risks associated with foreign exchange controls

Currently, remittances flowing out of Batam, Indonesia, require the provision of a notice, or approval ofBank Indonesia, Indonesia. While our operations in Batam, Indonesia, are not currently affected byforeign exchange controls in a material way, in the event that the Indonesian government tightens orotherwise adversely changes the foreign exchange rules/policies, our operations would be affected in thatour ability to convert the relevant currencies when we are required to make payments or the ability of ourBatam subsidiary to repatriate dividends and profits may be impeded. As a result, our cash flows andcorrespondingly the financial results of our Group may be adversely affected.

RISKS RELATING TO OWNERSHIP OF OUR SHARES

Our Directors, Substantial Shareholders and their Associates hold in aggregate approximately 80per cent of the issued Shares and such control may limit your ability to influence the outcome ofdecisions requiring the approval of Shareholders

Upon the completion of the Invitation, our Group’s present Directors, Substantial Shareholders and theirAssociates will beneficially own in aggregate approximately 80 per cent. of the issued Shares. As a result,these persons, if they act together, will be able to exercise significant influence over all matters requiringShareholders’ approval, including the election of directors and the approval of significant corporate

RISK FACTORS

42

transactions. They will also have veto power with respect to any shareholder action or approval requiringa majority vote, except where they are required by the rules of the Listing Manual to abstain from voting.Such concentration of ownership also may have the effect of delaying, preventing or deterring a change incontrol of our Group, which may benefit our Shareholders.

New investors will incur immediate dilution and may experience future dilution

Our Issue Price of $0.28 per Share is substantially higher than our NAV per Share based on the post-Invitation issued share capital. If we are liquidated for NAV immediately following the Invitation, eachShareholder subscribing to the Invitation would receive less than the price they paid for their Shares.Details of the immediate dilution of our Shares incurred by new investors are described under the sectionentitled “Dilution” of this Prospectus.

Any future sales of our Shares by our Substantial Shareholders could adversely affect our Shareprice

Except for Shares which are under moratorium, as described under the section entitled “Moratorium” ofthis Prospectus, there will be no restriction on the sale of our Shares on the SGX-SESDAQ or otherwise.The sale of a significant number of Shares in the public market after the Invitation, or the perception thatsuch sales may occur, could materially and adversely affect the market price of our Shares. In addition, ifour substantial Shareholders sell substantial amounts of our Shares in the public market following theexpiry of the moratorium, there may be downward pressure on the price of our Shares. These factors mayalso affect our ability to issue additional equity securities.

Our Share price may fluctuate following the Invitation

The market price of our Shares may fluctuate significantly and rapidly in response to, among others, thefollowing factors, some of which are beyond our control:-

� changes in analysts’ recommendations and projections;

� differences between our actual financial operating results and those expected by investors andsecurities analysts;

� announcements by us or our competitions of gain or loss of significant contracts, acquisitions,strategic alliances or joint ventures;

� additions or departures of key personnel;

� broad market fluctuations, including weakness of the equity market and increases in interest rates;

� changes in political regimes and policies;

� changes in licensing and taxation regimes;

� involvement in litigation;

� foreign exchange rates;

� increase in competition; and

� changes in general economic and stock market conditions.

Negative publicity, including those relating to any of our Directors, Executive Officers, SubstantialShareholders or major customers may adversely affect our Share Price

Any negative publicity or announcement relating to any of our Directors, Executive Officers, SubstantialShareholders or major customers may adversely affect the market perception or the stock performance ofour Company, whether or not this is justifiable. Examples of these include involvement in insolvencyproceedings, unsuccessful attempts in takeovers, joint ventures etc.

RISK FACTORS

43

Issue Price

NAV

NAV per Share based on the audited combined balance sheet of our Group as at30 September 2006 adjusted for the Capitalisation Issues (“Adjusted AuditedNAV”):-

(a) before adjusting for the estimated net proceeds from the Invitation and basedon the pre-Invitation share capital of 214,200,000 Shares

(b) after adjusting for the estimated net proceeds from the Invitation and basedon the post-Invitation share capital of 267,750,000 Shares

Premium of Issue Price per Share over the Adjusted Audited NAV per Share as at30 September 2006:-



NAV per Share based on the unaudited combined balance sheet of our Group asat 31 March 2007 adjusted for the Capitalisation Issues (“Adjusted UnauditedNAV”):-



Premium of Issue Price per Share over the Adjusted Unaudited NAV per Share asat 31 March 2007:-



Earnings

Historical net EPS for FY2006 based on the pre-Invitation share capital of214,200,000 Shares

Historical net EPS had the Service Agreements been in effect for FY2006 andbased on the pre-Invitation share capital of 214,200,000 Shares

Price earnings ratio

Historical PER based on the historical net EPS for FY2006 and the pre-Invitationshare capital of 214,200,000 Shares

Historical PER based on the historical net EPS had the Service Agreements beenin effect for FY2006 and the pre-Invitation share capital of 214,200,000 Shares

INVITATION STATISTICS

44

$0.28

8.0 cents

11.3 cents

251.9 %

147.6 %

10.0 cents

12.9 cents

181.4 %

117.0 %

2.5 cents

2.4 cents

11.1 times

11.8 times

Net operating cash flow(1)

Historical net operating cash flow per Share for FY2006, based on the pre-Invitation share capital of 214,200,000 Shares

Historical net operating cash flow per Share for FY2006, had the ServiceAgreements been in effect for FY2006 and based on the pre-Invitation sharecapital of 214,200,000 Shares

Price to net operating cash flow ratio(1)

Ratio of Issue Price to historical net operating cash flow per Share for FY2006,based on the pre-Invitation share capital of 214,200,000 Shares

Ratio of Issue Price to historical net operating cash flow per Share for FY2006, hadthe Service Agreements been in effect for FY2006 and based on the pre-Invitationshare capital of 214,200,000 Shares

Market capitalisation

Our market capitalisation based on the post-Invitation share capital of 267,750,000Shares and the Issue Price of $0.28

Note:-

(1) Net operating cash flow is defined as net profit attributable to Shareholders adjusted for provision for depreciation andnegative goodwill.

INVITATION STATISTICS

45

2.2 cents

2.0 cents

12.8 times

13.7 times

$74.97 million

USE OF PROCEEDS

The net proceeds to be raised by our Company from the issue of the New Shares (after deducting theestimated issue expenses) are estimated to be approximately $13.2 million.

The following table sets out the breakdown of the use of net proceeds:-

Estimated amount allocated for each dollar of the

Amount in proceeds raised from the aggregate Invitation (as a percentage

Intended use ($’million) of gross proceeds)

Development and expansion of our shipyard 5.0 33.3%

Expansion of our fleet of vessels 3.0 20.0%

Working capital 5.2 34.9%

TOTAL 13.2 88.2%

Further details of our use of proceeds may be found in the sections entitled “Business Strategies” and“Future Plans” of this Prospectus.

The foregoing discussion represents our Company’s best estimate of its allocation of the net proceeds ofthe Invitation based upon its current plans and estimates regarding its anticipated expenditures. Actualexpenditures may vary from these estimates and the Company may find it necessary or advisable toreallocate the net proceeds within the categories described above or to use portions of the net proceedsfor other purposes. In the event that the Company decides to reallocate the net proceeds of the Invitationfor other purposes, our Company will publicly announce its intention to do so through a SGXNETannouncement to be posted on the internet at the SGX-ST website http://www.sgx.com.

Pending the deployment of the net proceeds from the issue of New Shares as aforesaid, the funds will beplaced in short-term deposits or money market instruments, as our Directors may, in their absolutediscretion, deem fit.

There is no minimum amount which, in the reasonable opinion of our Directors, must be raised by theInvitation.

USE OF PROCEEDS AND LISTING EXPENSES

46

LISTING EXPENSES

The estimated expenses in connection with the Invitation to be borne by our Company are approximately$1.8 million including the underwriting commission, placement commission, brokerage, management fees,audit and legal fees, fees payable to the SGX-ST and the Authority as well as other incidental fees. Abreakdown of these estimated expenses in relation to the Invitation is as follows:-

Estimated amount allocated for each dollar of the

Estimated proceeds raised from theamount Invitation (as a percentage

Expenses ($’000) of the gross proceeds)

Listing and application fees 37 0.3%

Professional fees 960 6.4%

Underwriting commission, placement commission and brokerage 450 3.0%

Miscellaneous expenses 311 2.1%

TOTAL 1,758 11.8%

USE OF PROCEEDS AND LISTING EXPENSES

47

Our Company has not distributed any cash dividends since its incorporation in 2006. However, on 3September 2007, our Company issued an aggregate of 10,657,967 Shares (prior to the Share Split) toour existing shareholders pursuant to the Bonus Issue. Please refer to the section entitled “ShareCapital” of this Prospectus for further details. Dividends were also paid by our subsidiary, Bina Marine, inFY2004 and FY2005 of approximately $620,000 and $534,400 respectively and declared by oursubsidiary, MP Shipping, in August 2007 of $11,000,000.

We currently do not have a formal dividend policy. We may declare an annual dividend with the approvalof our Shareholders in a general meeting but the amount of such dividend shall not exceed the amountrecommended by our Directors. Our Directors may also declare an interim dividend without the approvalof our Shareholders.

The amount of our past dividends is not indicative of the amount that we will pay in the future. Futuredividends will be paid by us as and when approved by our Shareholders and Directors, as the case maybe. Any such dividend payments will be subject to the level of our retained earnings, expected futureearnings, cash flow, financial condition, projected levels of capital expenditures and investment plans,including such legal or contractual restrictions as may apply from time to time, as well as generalbusiness conditions and other factors which our Directors may deem appropriate. There can be noassurance that dividends will be paid in the future or as to the timing of any dividends that are to be paidin the future.

For information relating to taxes payable on dividends, please refer to the section entitled “Taxation” ofthis Prospectus.

DIVIDEND POLICY

48

Our Company (company registration number 200610073Z) was incorporated in Singapore on 10 July2006 under the Companies Act as a private limited company under the name of Marco Polo Marine Pte.Ltd.. On 7 September 2007, we converted into a public company and changed our name to Marco PoloMarine Ltd..

At an extraordinary general meeting held on 3 September 2007, our Shareholders approved, inter alia,the following:-

(a) the capitalisation of an amount of $3,000,000 owing by the Company to Mr Lee Wan Tang at aprice of $1.00 per share, into 3,000,000 Shares, credited as fully paid, to Nautical International inaccordance with the directions of Mr Lee Wan Tang;

(b) the capital injection of an amount of $3,000,000 in cash by Nautical International into the Company,at a price of $1.00 per share, into 3,000,000 Shares;

(c) the capitalisation of an amount of $180,000 owing by the Company to Winvest at a price of $8.17per share, into 22,027 Shares to be issued, credited as fully paid, in accordance with the directionsof Winvest as to 17,622 shares to Mr Lim Han Boon, 2,203 shares to Mr Chan Kum Onn Rogerand 2,202 shares to Mr Ang Eng Lim;

(d) the capitalisation of our retained earnings by way of a bonus issue of 10,657,967 Shares fully paidto the shareholders of our Company (the “Bonus Issue”);

(e) the sub-division of each ordinary share in our issued share capital into 11.9 Shares (the “ShareSplit”);

(f) the conversion of our Company into a public limited company and the change of our name toMarco Polo Marine Ltd.;

(g) the listing and quotation of all the issued Shares (including the New Shares to be allotted andissued) on the SGX-SESDAQ;

(h) the adoption of a new set of Articles of Association;

(i) the allotment and issue of 53,550,000 New Shares which are the subject of the Invitation, on thebasis that the New Shares, when allotted, issued and fully-paid, will rank pari passu in all respectswith the existing Shares; and

(j) the authorisation of our Directors, pursuant to Section 161 of the Companies Act, to:-

(i) allot and issue further shares whether by way of rights, bonus or otherwise (including Sharesas may be issued pursuant to any Instrument (as defined below) made or granted by ourDirectors while this resolution is in force notwithstanding that the authority conferred by thisresolution may have ceased to be in force at the time of issue of such Shares), and/or

(ii) make or grant offers, agreements or options (collectively, “Instruments”) that might or wouldrequire Shares to be issued, including but not limited to the creation and issue of warrants,debentures or other instruments convertible into Shares,

at any time and upon such terms and conditions and for such purposes and to such persons asour Directors may in their absolute discretion deem fit, provided that the aggregate number ofShares issued pursuant to such authority (including Shares to be issued pursuant to anyInstrument but excluding Shares which may be issued pursuant to any adjustments (“Adjustments”)effected under any relevant Instrument, which Adjustment shall be made in compliance with theprovisions of the Listing Manual for the time being in force (unless such compliance has beenwaived by the SGX-ST) and the Articles of Association for the time being of our Company), shallnot exceed 50 per cent. of the issued share capital of our Company immediately after the Invitation,

SHARE CAPITAL

49

and provided that the aggregate number of such Shares to be issued other than on a pro ratabasis in pursuance to such authority (including Shares to be issued pursuant to any Instrument butexcluding shares which may be issued pursuant to any Adjustment effected under any relevantInstrument) to the existing Shareholders shall not exceed 20 per cent. of the issued share capital ofour Company immediately after the Invitation, and, unless revoked or varied by our Company ingeneral meeting, such authority shall continue in force until the conclusion of the next AnnualGeneral Meeting of our Company or the date by which the next Annual General Meeting of ourCompany is required by law to be held, whichever is the earlier.

As at the Latest Practicable Date, there is only one class of shares in the capital of our Company, beingthe Shares. A summary of the Articles of Association of our Company relating to, among others, thevoting rights of our Shareholders is set out on in Appendix VI of this Prospectus. There are no founder,management, deferred or unissued Shares reserved for issuance for any purpose. No person has been,or is permitted to be, given an option to subscribe for or purchase any securities of our Company or anyof our subsidiaries. As at the Latest Practicable Date, no option to subscribe for Shares in our Companyhas been granted to, or was exercised by, any of our Directors.

As at the date of lodgement of this Prospectus, the issued and paid-up share capital of our Company is$18,157,973 comprising 214,200,000 Shares. Upon the allotment and issue of the New Shares, theresultant issued and paid-up share capital of our Company will be increased to $31,393,973 divided into267,750,000 Shares.

Details of changes in our issued and paid-up capital since our incorporation and immediately after theInvitation are as follows:-

ResultantNumber of Issued and

Shares Issued Paid-up Capital $

Issued and fully paid Shares as at 10 July 2006 3 3

Issue of new Shares pursuant to the Restructuring Exercise 1,320,003 1,320,006

Issued and fully paid Shares as at 30 September 2006 1,320,006 1,320,006

Capitalisation of loan of $3,000,000 due to Mr Lee Wan Tang(1) 3,000,000 4,320,006

Capital injection of $3,000,000 by Nautical International 3,000,000 7,320,006

Issue of 22,027 Shares to Winvest Management Pte Ltd(2) 22,027 7,500,006

Bonus Issue 10,657,967 18,157,973

Share Split 214,200,000 18,157,973

Pre-Invitation issued and paid-up share capital 214,200,000 18,157,973

New Shares issued pursuant to the Invitation 53,550,000 13,236,000(3)

Post-Invitation issued and paid-up share capital 267,750,000 31,393,973

Notes:-

(1) In accordance with Mr Lee Wan Tang’s instructions, the said 3,000,000 Shares were issued to Nautical International.

(2) Winvest Management Pte Ltd nominated Mr Lim Han Boon, Mr Chan Kum Onn Roger and Mr Ang Eng Lim to collectivelyreceive the 22,027 Shares which were issued for an aggregate consideration of $180,000. Please refer to the section entitled“Dilution” of this Prospectus for further details.

(3) The issued and paid-up share capital of $13,236,000 arising from the issue of the New Shares is derived after deductingestimated expenses of approximately $1.758 million incurred in connection with the issue of such New Shares.

SHARE CAPITAL

50

The shareholders’ funds of our Company as at 30 September 2006 and as at 31 March 2007, before andafter adjustments to reflect the capitalisation of the $3,000,000 loan owing to Mr Lee Wan Tang, thecapital injection of $3,000,000 by Nautical International, the issue of shares to Winvest Management PteLtd, the Bonus Issue, the Share Split and the subsequent significant assets acquisitions and disposals(collectively the “Pro-forma Adjustments”) and after the Invitation are set out below. This should be readin conjunction with the Independent Auditors’ Report on the unaudited pro forma consolidated financialinformation of the Group for the financial year ended 30 September 2006 set out in Appendix III of thisProspectus and the Independent Auditors’ Report on the unaudited pro forma consolidated interimfinancial information of the Group for the six-month period ended 31 March 2007 set out in Appendix IVof this Prospectus:-

As at 30 September 2006

As at After the30 September Pro-forma After the

2006 Adjustments Invitation$ $ $

Shareholders’ funds

Issued and paid-up ordinary shares 1,320,006 18,157,973 31,393,973

Translation Reserve 22,282 22,282 22,282

Accumulated Profits 9,519,830 (159,415) (159,415)

10,862,118 18,020,840 31,256,840

As at 31 March 2007

As at After the31 March Pro-forma After the

2007 Adjustments Invitation$ $ $

Shareholders’ funds

Issued and paid-up ordinary shares 1,320,006 18,157,973 31,393,973

Translation Reserve (74,797) (74,797) (74,797)

Accumulated Profits 13,888,873 4,373,334 4,373,334

15,134,082 22,456,510 35,692,510

SHARE CAPITAL

51

OWNERSHIP STRUCTURE

The Directors and Substantial Shareholders of our Company and their respective shareholdingsimmediately before and after the Invitation are set out below:-

Before the Invitation After the InvitationDirect Interest Deemed Interest Direct Interest Deemed Interest

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

Directors

Lee Wan Tang(1), (2) – – 213,557,374 99.7 – – 213,557,374 79.8Sean Lee Yun Feng(1), (2) – – – – – – – –Liely Lee(1), (2) – – – – – – – –Lai Qin Zhi(1), (2) – – – – – – – –Lim Han Boon(3), (4) 514,101 0.2 – – 514,101 0.2 – –Sim Swee Yam Peter(3) – – – – – – – –

Substantial Shareholders

Nautical International(1) 213,557,374 99.7 – – 213,557,374 79.8 – –

Others

Chan Kum Onn Roger(4) 64,263 n.m. – – 64,263 n.m. – –Ang Eng Lim(4) 64,262 n.m. – – 64,262 n.m. – –

Public (including Reserved Shares) – – – – 53,550,000 20.0 – –

Total 214,200,000 100.0 267,750,000 100.0

Notes:-

(1) Nautical International is an investment holding company incorporated in the British Virgin Islands. Mr Lee Wan Tang owns660,003 ordinary shares representing 50 per cent. of the issued share capital of Nautical International. Mr Lee Wan Tang isthus deemed to be interested in the Shares held by Nautical International. The other shareholders of Nautical Internationalare as follows:-

Percentage of Name No. of shares Nautical International

Sean Lee Yun Feng 237,600 18Lai Qin Zhi 158,401 12Liely Lee 132,001 10Lina Lee 132,001 10

The directors of Nautical International are Mr Lee Wan Tang and Mr Sean Lee Yun Feng.

(2) Mr Lee Wan Tang is the husband of Mdm Lai Qin Zhi (our Non-Executive Director) and the father of Mr Sean Lee Yun Feng(our CEO), Ms Liely Lee (our Executive Director) and Ms Lina Lee.

(3) Excluding any Reserve Shares which our Independent Directors may subscribe for. In this regard, our Independent Directors,Mr Lim Han Boon and Mr Sim Swee Yam Peter will be offered 150,000 Reserved Shares each at the Issue Price inrecognition for their future contributions to our Group. In the event that such Independent Directors accept any or all of theReserved Shares offered to them, they may dispose of or transfer any or all their Shares after the admission of the Companyto the Official List of the SGX-SESDAQ.

(4) Mr Lim Han Boon (our Independent Director), Mr Ang Eng Lim and Mr Chan Kum Onn Roger are shareholders of Winvest.Mr Lim Han Boon is also a director of Winvest. In consideration of consultancy services provided to our Group, Winvest wasentitled to be paid an aggregate of $300,000 of which $180,000 is to be satisfied by way of the issue and allotment of 22,027new Shares at $8.17 per Share with the balance $120,000 to be paid in cash. Winvest nominated Mr Lim Han Boon, Mr AngEng Lim and Mr Chan Kum Onn Roger to receive such Shares. Please refer to the section entitled “Interested PersonTransactions” of this Prospectus for further details.

SHAREHOLDERS

52

Saved as disclosed above, there are no other relationships between the Directors and SubstantialShareholders. Save as disclosed above, to the best of the knowledge of our Directors, our Company isnot directly or indirectly owned or controlled, whether severally or jointly, by any other corporation, anygovernment or other natural or legal person.

The Shares held by our Directors and Substantial Shareholders do not carry different voting rights fromthe New Shares which are the subject of the Invitation. Our Directors are not aware of any arrangementthe operation of which may, at a subsequent date, result in a change in control of our Company.

Save as disclosed above and under the section entitled “Restructuring Exercise” of this Prospectus, therewere no significant changes in the percentages of ownership of our Directors and SubstantialShareholders in our Company from its incorporation until the Latest Practicable Date.

MORATORIUM

To demonstrate their commitment to our Group, our Company’s Controlling Shareholder, namely NauticalInternational which holds 213,557,374 Shares in our Company after the Invitation (representingapproximately 79.8 per cent. of our Company’s enlarged issued and paid-up capital after the Invitation),has undertaken not to transfer, assign, dispose of or realise any part of its direct interests in ourCompany for a period of six months from the date of our Company’s admission to the Official List of SGX-SESDAQ (the “Initial Period”) and for a period of six months thereafter (the “Subsequent Period”), not toreduce its direct interests in our Company to below 50 per cent. of its direct interests in our Company asat the date of this Prospectus.

In addition, Mr Lee Wan Tang, Mdm Lai Qin Zhi, Mr Sean Lee Yun Feng, Ms Liely Lee and Ms Lina Leewho hold in aggregate 100 per cent. of the issued share capital of Nautical International respectively,have undertaken not to dispose of or transfer (save to each other) any of their direct interests in NauticalInternational for the Initial Period and the Subsequent Period and that they in aggregate shall continueduring the Initial Period and the Subsequent Period to hold 100 per cent. of the issued share capital ofNautical International.

Mr Lim Han Boon, Mr Chan Kum Onn Roger and Mr Ang Eng Lim, who hold 514,101 Shares, 64,263Shares and 64,262 Shares respectively have each undertaken not to transfer, assign, dispose of orrealise any part of their respective direct interests in our Company during the Initial Period.

SHAREHOLDERS

53

The following table shows our cash and cash equivalents and capitalisation and indebtedness as at:-

(a) 31 March 2007 on an actual basis;

(b) 31 July 2007 as adjusted to give effect to the Capitalisation Issues; and

(c) 31 July 2007 as adjusted to give effect to the Capitalisation Issues and the issue of 53,550,000New Shares pursuant to the Invitation and application of the net proceeds from the Invitation.

You should read this table in conjunction with the Independent Auditors’ Report on the audited combinedfinancial statements of the Group for the financial years ended 30 September 2004, 2005 and 2006 setout in Appendix I of this Prospectus and the Independent Auditors’ Report on the review of the interimcombined financial statements of the Group for the six-month period ended 31 March 2007 set out inAppendix II of this Prospectus and the related notes under the section entitled “Management’sDiscussion and Analysis of Results of Operations and Financial Conditions” of this Prospectus.

(b) As at

31 July 2007 (c) (a) as adjusted As at

Actual for the 31 July 2007as at Capitalisation as adjusted for

$’000 31 March 2007 Issues the Invitation

Cash and cash equivalents 1,194 5,438 18,674

Short term debt:Secured 10,198 5,374 5,374

Long term debt:Secured 15,574 17,043 17,043

Total indebtedness 25,772 22,417 22,417

Total shareholders’ equity 15,134 25,298 38,534

Total capitalisation and indebtedness 40,906 47,715 60,951

As at the Latest Practicable Date, we had total short term loans amounting to approximately $5.8 million(secured). We also had total long term loans amounting to approximately $18.1 million (secured). Theseloans are secured against certain assets of our Group, joint and several guarantees by certain Directorsof our Company, corporate guarantees from certain related parties, assignment of insurance policies,rights, earnings and benefits arising from the charter agreements of some of our vessels. For moredetails, please refer to sections on interest-bearing loans in Appendices I and II of this Prospectus.

Save as disclosed above and for the Capitalisation Issues and the $2 million drawdown of bank loansfrom a bank in August 2007 as disclosed in Appendices I and II of this Prospectus, since 31 March 2007to the Latest Practicable Date, there were no material changes in our total capitalisation andindebtedness, except for changes in our retained earnings arising from the day-to-day operations in theordinary course of our business.

CAPITALISATION AND INDEBTEDNESS

54

COMMITMENTS

As at the Latest Practicable Date, we had the following capital commitments which has been approvedand committed but not provided for in the financial statements:-

$ million

Purchase of vessels 7.7(1)

Building of vessels 2.7(1)

Shipyard development 4.5

TOTAL 14.9

Note:-

(1) Financing has been secured for certain vessels amounting to approximately $8.9 million.

We will fund these commitments using cash generated from our operations, external borrowings andproceeds from the Invitation.

Based on the above, our Directors, in their reasonable opinion, believe that the cash flow generated fromoperations, together with the existing cash and cash equivalents and our banking facilities, will besufficient to meet our present requirements.

CONTINGENT LIABILITIES

As at the Latest Practicable Date, to the best of our knowledge, information and belief, we are not awareof any material contingent liabilities which may have a material effect on the financial position andprofitability of our Group.

Save as disclosed above, our Group had no other borrowings or indebtedness and liabilities underacceptances (other than normal trading bills) or acceptance credits, mortgages, charges, obligationsunder finance leases, guarantees or other material contingent liabilities.

CAPITALISATION AND INDEBTEDNESS

55

Dilution is the amount by which the Issue Price paid by the subscribers of our Shares in this Invitationexceeds our NAV per Share after the Invitation. Our NAV per Share as at 30 September 2006 and 31March 2007, after adjusting for the Capitalisation Issues but before adjusting for the estimated netproceeds from the Invitation and based on the pre-Invitation issued and paid-up share capital of214,200,000 Shares was 8.0 cents and 10.0 cents per Share respectively.

Pursuant to the Invitation in respect of 53,550,000 New Shares at the Issue Price, our NAV per Share asat 30 September 2006 and 31 March 2007 after adjusting for the estimated net proceeds from theInvitation and based on the post-Invitation issued and paid-up share capital of 267,750,000 Shares wouldhave been 11.3 cents and 12.9 cents respectively. This represents an immediate increase in NAV perShare of 3.3 cents and 2.9 cents respectively to our existing Shareholders and an immediate dilution inNAV per Share of 16.7 cents and 15.1 cents respectively or approximately 59.6 per cent. and 53.9 percent. respectively to our new investors.

The following table illustrates the dilution per Share as at 30 September 2006 and 31 March 2007:-

As at As at30 September 31 March

2006 2007 Cents Cents

Issue Price per Share 28.0 28.0

NAV per Share based on the pre-Invitation share capital of 8.0 10.0 214,200,000 Shares

Increase in NAV per Share attributable to existing Shareholders 3.3 2.9

NAV per Share after the Invitation 11.3 12.9

Dilution in NAV per Share to new public investors 16.7 15.1

The following table summarises the total number of Shares issued by us to our existing Shareholdersduring the period from the date of incorporation of our Company to the date of this Prospectus, the totalconsideration paid to us and the average effective cost per Share by our existing Shareholders, and byour new public investors pursuant to the Invitation.

AverageNumber of Total effective cash

Shares consideration cost per Share$ $

Existing ShareholdersNautical International 213,557,374 7,320,006 0.03Others (1) 642,626 180,000 0.28

New public investors 53,550,000 14,994,000 0.28

Note:-

(1) Others refers to Mr Lim Han Boon, Mr Chan Kum Onn Roger and Mr Ang Eng Lim who in aggregate hold 642,626 Sharesrepresenting 0.3 per cent. of our pre-Invitation issued share capital.

DILUTION

56

The following was undertaken in the Restructuring Exercise in preparation for the listing of our Company:-

1. Acquisition of shares in MP Marine

By a share swap agreement dated 28 July 2006 entered into between our Company (as thepurchaser) and Mr Lee Wan Tang and Mr Sean Lee Yun Feng (as the vendors), our Companyacquired an aggregate of three ordinary shares in the capital of MP Marine, representing the entireissued share capital of MP Marine, with all rights attaching thereto, with effect from 28 July 2006, inconsideration for which our Company issued an aggregate of three ordinary shares in the capital ofour Company to Nautical International (as nominated by Mr Lee Wan Tang and Mr Sean Lee YunFeng).

2. Acquisition of shares in Bina Marine

By a share swap agreement dated 28 July 2006 entered into between the Company (as thepurchaser) and Mr Lee Wan Tang, Mdm Lai Qin Zhi and Mr Sean Lee Yun Feng (as the vendors),our Company acquired an aggregate of 320,000 ordinary shares in the capital of Bina Marine,representing the entire issued share capital of Bina Marine, with all rights attaching thereto as at 28July 2006 in consideration for which our Company issued an aggregate of 320,000 Shares toNautical International (as nominated by Mr Lee Wan Tang, Mdm Lai Qin Zhi and Mr Sean Lee YunFeng).

3. Acquisition of shares in MP Shipping

By a share swap agreement dated 28 July 2006 entered into between our Company (as thepurchaser) and Mr Lee Wan Tang, Mdm Lai Qin Zhi, Ms Liely Lee and Mr Sean Lee Yun Feng (asthe vendors), our Company acquired an aggregate of 1,000,000 ordinary shares in the capital ofMP Shipping, representing the entire issued shares of MP Shipping, with all rights attaching theretoas at 28 July 2006 in consideration for which our Company issued an aggregate of 1,000,000Shares to Nautical International (as nominated by Mr Lee Wan Tang, Mdm Lai Qin Zhi, Ms LielyLee and Mr Sean Lee Yun Feng).

4. Acquisition of shares in RMN

By a share sale and purchase agreement dated 14 August 2006 entered into between Mr YohanGunawan and Mr Yu Gie (as the vendors) and MP Shipyard (as the purchaser), MP Shipyardacquired an aggregate of 300 shares of IDR500,000 each in the capital of RMN at a considerationof IDR150,000,000, representing the entire issued shares of RMN. The purchase considerationwas determined based on the net book value of RMN as at 31 July 2006 of IDR150,000,000.

5. Acquisition of shares in MP Shipyard

On 28 September 2006, Bina Marine was allotted 500 new shares of IDR1,000,000 each in thecapital of MP Shipyard, representing 50 per cent. of the issued shares of MP Shipyard for aconsideration of IDR500,000,000.

By a deed of share purchase dated 28 September 2006 entered into between, inter alia, Mr LeeWan Tang and Mr Sean Lee Yun Feng (as the vendors) and Bina Marine and MP Marine (as thepurchasers), Mr Lee Wan Tang and Mr Sean Lee Yun Feng sold to Bina Marine and MP Marine anaggregate of 500 shares of IDR1,000,000 each in the capital of MP Shipyard, representing 100 percent. of the issued shares of MP Shipyard, for an aggregate consideration of IDR500,000,000. Ofthe aforementioned shares, 350 shares held by Mr Lee Wan Tang and 140 shares held by Mr SeanLee Yun Feng were transferred to Bina Marine while the remaining 10 shares held by Mr Sean LeeYun Feng were transferred to MP Marine.

RESTRUCTURING EXERCISE

57

Our Group structure after the Restructuring Exercise and as at the Latest Practicable Date is as follows:-

We do not have any associated companies and the details of each subsidiary of our Company as at thedate of this Prospectus are as follows:-

Date and Principal Issued Country of place and paid-up Percentage

Name incorporation of business Principal activities share capital owned

Bina Marine 19 June 1997 / Singapore Provision of contract $3,320,000 100% Singapore services and trading

activities

MP Marine 21 April 2006 / Singapore Investment holding $3 100%Singapore

MP Shipping 17 April 1991 / Singapore Ship chartering $1,000,000 100% Singapore

MP Shipyard 22 February 2005 / Indonesia Shipyard, ship building IDR1,000,000,000 100% Indonesia and ship repair

RMN 10 October 1998 / Indonesia Investment holding and IDR2,000,000,000 100% Indonesia property management

None of our subsidiaries is listed on any stock exchange.

Our Company(Incorporated in Singapore)

MP Shipyard(Established in

Indonesia)

Bina Marine (Incorporated in

Singapore)

MP Shipping (Incorporated in

Singapore)

MP Marine (Incorporated in

Singapore)

100% 100% 100%

99%

1%

99%

RMN(Established in

Indonesia)

1%

Nautical International (Incorporated in British Virgin

Islands)

GROUP STRUCTURE

58

The following selected financial information should be read in conjunction with the full text of theProspectus, including the Independent Auditors’ Report on the audited combined financial statements ofthe Group for the financial years ended 30 September 2004, 2005 and 2006 set out in Appendix I of thisProspectus and the Independent Auditors’ Report on the review of the interim combined financialstatements of the Group for the six-month period ended 31 March 2007 set out in Appendix II of thisProspectus. Our financial statements are prepared and presented in accordance with Singapore FinancialReporting Standards.

OPERATING RESULTS OF OUR GROUP(1)

Audited Unaudited

$’000 FY2004 FY2005 FY2006 HY2006 HY2007

Revenue 4,546 6,642 15,887 5,650 16,953

Cost of sales (3,183) (4,008) (11,391) (3,910) (10,970)

Gross profit 1,363 2,634 4,496 1,740 5,983

Other operating income 143 1,072 663 320 1,429

Negative goodwill arising on acquisition – – 2,159 – –

Administration expenses (10) (305) (807) (376) (735)

Other operating expenses (129) (239) (781) (307) (1,740)

Finance cost (356) (334) (337) (177) (422)

Profit before tax(2) 1,011 2,828 5,393 1,200 4,515

Income tax – – n.m. (5) – (146)

Net profit attributable to the Shareholders(2) 1,011 2,828 5,393 1,200 4,369

Basic EPS (cents)(3) 0.47 1.32 2.52 0.56 2.04

Diluted EPS (cents)(4) 0.38 1.06 2.01 0.45 1.63

Notes:-


(2) Had the Service Agreements been in place throughout FY2006, our profit before tax, net profit attributable to Shareholdersand basic EPS for FY2006 would have been S$5.11 million, S$5.11 million and 2.38 cents respectively.

(3) For comparative purposes, basic EPS for the relevant years/periods under review is computed based on net profit attributableto Shareholders and the pre-Invitation share capital of 214,200,000 Shares.

(4) For comparative purposes, fully diluted EPS for the relevant years/periods under review is calculated using the net profitattributable to shareholders and the post-Invitation share capital of 267,750,000 Shares.


SELECTED GROUP FINANCIAL INFORMATION

59

FINANCIAL POSITION OF OUR GROUP(1)

Audited UnauditedAs at As at

$’000 30 September 2006 31 March 2007

Non-current assets

Property, plant and equipment 37,410 41,600

Current assets

Inventories 2,102 2,747Trade receivables 894 1,476Due from customers on construction contracts 833 5,481Other receivables 343 862Due from holding company – non trade n.m. (3) –Due from related parties – trade 154 –Cash and bank balances 438 1,194

4,764 11,760

Total assets 42,174 53,360

Current liabilities

Trade payables 5,643 8,508Other payables 3,134 2,418Due to related parties – trade 791 1,103Due to related parties – non-trade 464 –Due to a director – non-trade 6,179 280Interest-bearing loans (secured) 8,265 10,198Provision for tax – 146

24,476 22,653


Interest-bearing loans (secured) 6,836 15,573

Total Liabilities 31,312 38,226

Net Assets 10,862 15,134

Capital and Reserves

Share capital 1,320 1,320Translation reserves 22 (75)Accumulated profits 9,520 13,889

10,862 15,134

NTA per Share (cents)(2) 5.07 7.07

Notes:-


(2) For comparative purposes, NTA per Share is computed based on the NTA of our Group and the pre-Invitation share capital of214,200,000 Shares.


SELECTED GROUP FINANCIAL INFORMATION

60

The following discussion of our results of operations and financial positions for FY2004, FY2005 andFY2006 and the six months ended 31 March 2007 should be read in conjunction with the auditedconsolidated financial statements and the related notes set out in Independent Auditors’ Report on theaudited combined financial statements of the Group for the financial years ended 30 September 2004,2005 and 2006 set out in Appendix I of this Prospectus and the Independent Auditors’ Report on thereview of the interim combined financial statements of the Group for the six-month period ended 31March 2007 set out in Appendix II of this Prospectus.

We have also prepared the unaudited pro forma consolidated financial information of the Group for thefinancial year ended 30 September 2006 and for the six-month period ended 31 March 2007 which areset out in Appendices III and IV of this Prospectus respectively, to illustrate what the financial position ofour Group would have been had the Capitalisation Issues and the subsequent significant assetsacquisitions and disposals been completed as at 30 September 2006 and 31 March 2007 respectively.

This discussion contains forward-looking statements that involve risks and uncertainties. Our actualresults may differ significantly from those projected in these forward looking-statements. Factors thatmight cause our future results to differ significantly from those projected in the forward-looking statementsinclude, but are not limited to, those discussed below and elsewhere in this Prospectus, particularly in thesection entitled “Risk Factors” of this Prospectus.

OVERVIEW

Our Group, an integrated marine company, is principally engaged in the businesses of ship chartering,ship building, repair and maintenance.

Our ship chartering business, undertaken through our wholly-owned subsidiary, MP Shipping, includesthe provision of chartering, re-chartering and transhipment services to our customers. As part of ourstrategy of continuously renewing our fleet of vessels to minimise expenditure on major repair andmaintenance works and pursuant to our sale-and-leaseback business model (as detailed in the sub-section entitled “Business Overview – Sale-and-leaseback of Vessels” of this Prospectus), we also derivein our ordinary course of business other operating income from the gain on disposal of our vessels.

Our shipyard business includes ship building and ship broking, which are undertaken through our wholly-owned subsidiaries, MP Shipyard and Bina Marine respectively. We build vessels both for our in-houseneeds as well as in serving third-party customers. We are currently in the midst of equipping ourselveswith ship repair, maintenance and conversion capabilities.

As a whole, the revenue of our Group increased at a compound annual growth rate of approximately 86.9per cent. from FY2004 to FY2006 while the profit before tax (excluding negative goodwill arising fromacquisition) of our Group increased at a compound annual growth rate of 78.8 per cent. over the sameperiod under consideration.

For more information on our business, please refer to the section entitled “Business Overview” of thisProspectus.

SEASONALITY

MP Shipping generally performs better in the second half of a financial year compared to the first halfprincipally as a result of the seasonal monsoon, which typically occurs during the period from October toMarch. The tropical monsoon slows down the voyage of our vessels, and thereby impedes the operationalefficiency of our ship chartering operations.

61

MANAGEMENT’S DISCUSSION AND ANALYSISOF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS

The breakdown of the half yearly revenue contributions in FY2004, FY2005 and FY2006 are as follows:-

S$’000 FY2004 % FY2005 % FY2006 %

First half year (October to March) 1,990 43.8 3,303 49.7 4,169 35.1Second half year (April to September) 2,556 56.2 3,339 50.3 7,725(1) 64.9

Total chartering revenue 4,546 100.0 6,642 100.0 11,894 100.0

Note:-

(1) We commenced the provision of transhipment services in March 2006 and redeployed a number of our vessels fortranshipment services. The revenue for the second half of FY2006 includes revenue contribution from transhipment amountingto approximately S$4.1 million.

Save as disclosed above, the other business operations of our Group are not affected by any seasonalfactor.

OPERATING RESULTS BY BUSINESS ACTIVITIES

(I) REVENUE

Our revenue is derived mainly from our (i) ship chartering; and (ii) ship building revenues. Ourrevenues are denominated principally in S$ and to a lesser extent in US$. Our S$ denominatedrevenues and US$ denominated revenues accounted for approximately 92.6 per cent. and 7.4 percent. respectively of our total revenue in FY2006.

Ship Chartering

Our ship chartering revenue, derived mainly from the voyage charter contracts of vessels, hasgrown consistently from approximately S$4.6 million in FY2004 to approximately S$11.9 million inFY2006. BRJ, a company controlled by the Lee Family, has been a major customer of our Groupsince 1991. BRJ accounted for approximately 92.6 per cent., 90.0 per cent., 36.4 per cent. and31.8 per cent. of our total revenue derived in FY2004, FY2005, FY2006 and HY2007 respectively.Please refer to the sections entitled “Major Customers” and “Interested Person Transactions” of thisProspectus for more details.

For FY2004, FY2005, FY2006 and HY2007, most of our shipping customers originated fromIndonesia and the goods transported by us for our customers were largely utilized by theconstruction, infrastructure, property development and land reclamation industries in Singapore. Todate, the granite mix aggregates transported by us for these customers, with BRJ being theprincipal one, have been used in many prominent Singapore projects, such as the MRT Circle Line,Changi International Airport Terminal 3 and in various Housing Development Board estates as wellas land reclamation sites. Please refer to the sub-section entitled “Business Overview – ShipChartering” of this Prospectus for more details.

Generally, we secure charter contracts through a combination of marketing efforts and the businessnetwork of our management team. Charter contracts are negotiated directly with customers.Charter rates for our vessels are determined by prevailing market conditions at the time ofnegotiation. Charter rates generally depend on the type, size, bhp of the vessel and otherspecifications required by our customers. We generally enter into voyage charter contracts with ourcustomers, and in a typical voyage charter contract, we provide the necessary crew, supplies andfuel for the operation of our vessel. Please refer to the section entitled “Business Overview” of thisProspectus for more details on the main types of charter contracts which we undertake.

For each charter contract, we provide our customers with short-term or spot charters which rangefrom three days to six months, and long-term charters of up to two years. In respect of eachcharter service, revenue is recognised when services are rendered. Billings for charter servicesare made on a monthly basis. Actual receipts are subject to credit terms provided under the charterterms.

62


The following is a tabulation of the vessels owned by our Group as at the end of FY2004, FY2005,FY2006 and HY2007:-

As at30 September 30 September 30 September 31 March

2004 2005 2006 2007

Tugboats 8 6 12 14Barges 7 7 12 13

15 13 24 27

The key factors that can affect our revenue from ship chartering mainly include:-

(a) Competition from other barge and tugboat operators. Notwithstanding our track record, weoperate in a competitive environment and we expect to face intense competition fromexisting competitors and new market entrants;

(b) Our ability to provide quality and timely services to our customers. This may have an impacton customer loyalty, procurement of new customers and maintenance of our reputation in themarket;

(c) The general economic and/or political climate of the countries in which our clients operate;

(d) Our ability to expand our customer base through industry and geographical penetration. Ourend customers are presently largely involved in the mining, construction, infrastructure,property development and land reclamation industries;

(e) The fleet size and utilisation rate of our vessels;

(f) The charter rates, which are determined by the demand for and supply of shipping capacityin the regional coastal shipping industry; and

(g) The fluctuations in US$/S$ exchange rates as our transhipment revenues are principallydenominated in US$.

The above should be read in conjunction with the section entitled “Risk Factors” of this Prospectus.

Shipyard

Recognising that cost management is essential in the competitive shipping industry, we decide tobuild our own tugboats and barges. We commenced our ship building business in Batam,Indonesia, in 2005 mainly to capitalise on the lower overall operational costs in Indonesia.

We undertake ship building projects and build to orders for both our own needs as well as inmeeting external demands. Up to the Latest Practicable Date, we have completed the constructionof 22 vessels, including two tugboats and ten barges for external customers and three tugboatsand seven barges to meet our in-house needs.

Most of our ship building contracts from external customers are usually secured through directnegotiations based mainly on pricing, as well as on payment terms, technical/productspecifications. We usually price a ship building contract based on a certain mark-up on the totaldirect costs estimated to be incurred for the project.

Revenue and gross profit from ship building are recognised only for third-party customers using thepercentage-of-completion method. The stage of completion of each ship building contract isdetermined with reference to the percentage of building costs incurred compared to the estimatedtotal construction cost of the project upon completion. Revenue recognition is computed based on

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the percentage of completion of the project multiplied by the contract price of the project, aftermaking appropriate allowance for foreseeable losses and estimated costs to complete. When theoutcome of a construction contract cannot be estimated reliably, contract revenue and contractcosts are recognised as revenue and expenses respectively by reference to the stage ofcompletion of the contract activity at the balance sheet date.

As our shipyard commenced ship building operations only in December 2005, there was norevenue generated from our ship building business in FY2004 and FY2005. In FY2006 andHY2007, our ship building business accounted for approximately 25.1 per cent. and 50.5 per cent.of our total revenue respectively.

The progress milestones for each of our ship building projects for FY2006 and HY2007 wereusually spread over not more than eight months and twelve months for barges and tugboatsrespectively. As these progress milestones may not be evenly spread over the entire projectduration, our revenue recognition may be subject to fluctuation from year to year.

The key factors that can affect our revenue from shipyard operations mainly include:-

(a) Our ability to remain competitive. We face keen competition from existing and newcompetitors, which may also exert downward pressure on pricing;

(b) Our ability to provide quality and timely delivery of vessels to our customers. This may havean impact on customer loyalty, attraction of new customers and our reputation in the market;

(c) Our ability to secure new contracts may be affected by the general economic and/or politicalclimate of the region/countries in which our clients operate;

(d) Our ability to expand our customer base; and

(e) The capacity of our shipyard.


(II) COST OF SALES

Our cost of sales comprise direct costs attributable to our ship chartering and shipyard businesses.

Ship Chartering

Our cost of sales for ship chartering are principally denominated in S$. The major components ofwhich include direct costs, such as prime costs (comprising fuel oil costs, contract crew expensesand related costs, port and docking charges), cost of hiring vessels from third parties andoverheads such as depreciation, maintenance of vessels and insurance premiums.

Breakdown of our cost of sales are as follows:-

FY2004 FY2005 FY2006 HY2007S$’000 % S$’000 % S$’000 % S$’000 %

Prime costs(1) 1,658 52.1 2,315 57.8 3,553 42.7 2,240 50.1Repair and 278 8.8 203 5.0 462 5.5 423 9.5maintenanceDepreciation 968 30.4 1,076 26.8 1,228 14.8 996 22.3Insurance 211 6.6 195 4.9 364 4.4 229 5.1Re-charter – – 159 4.0 2,634 31.7 526 11.8expense(2)

Others(3) 68 2.1 60 1.5 76 0.9 54 1.2

Total 3,183 100.0 4,008 100.0 8,317 100.0 4,468 100.0

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Notes:-

(1) Comprised fuel oil costs, contract crew expenses and related costs, port and docking charges.

(2) Re-chartering refers to the chartering of vessels from others in meeting occasional excessive demands for charteringservices, especially in our provision of transhipment services. The decrease in re-charter expenses from S$2.6 millionin FY2006 to S$0.5 million in HY2007 was mainly due to the decrease in transhipment revenue from S$4.6 million inFY2006 to S$2.0 million in HY2007 and a decrease in the re-chartering of third party vessels for transhipment forHY2007.

(3) These mainly include supply of refreshment and fresh water for consumption on board by the vessel crew.

Key factors affecting our cost of sales mainly include:-

(a) Fluctuations in fuel oil costs, which accounted for the main bulk of our prime costs;

(b) Cost of our vessels and the associated depreciation;

(c) Age and physical condition of our fleet. An ageing fleet may require a higher level ofmaintenance, thereby affecting our upkeep and maintenance costs;

(d) Wage levels, labour market conditions and changes in labour policies and regulations by theIndonesian government, where we usually source our crew from BBR (please refer to thesection entitled “Interested Person Transactions” of this Prospectus for further details on thetransactions between BBR and our Group); and

(e) All the other cost components, including insurance premiums and other charter expensewhich relates to the charter of vessels from third parties in the event that the demand of ourvessels exceed our supply.


Shipyard

Our cost of sales for ship building comprise direct costs and overheads and are principallydenominated in S$ and IDR. Our direct costs consist mainly costs relating to materials/components(particularly steel), equipment and sub-contract labour/works. Our overheads mainly include thedepreciation of property, plant and equipment that are directly attributable to our shipyardoperations, salaries and related costs of operational staff, upkeep and maintenance of property,plant and equipment.

To improve our operating flexibility, we primarily utilise sub-contract labour/works for our shipbuilding contracts. We incurred costs of approximately S$0.2 million and S$0.4 million on sub-contract labour/works in FY2006 and HY2007 respectively, and such costs accounted forapproximately 5.9 per cent. and 6.7 per cent. of our Group’s cost of sales for ship building inFY2006 and HY2007 respectively. The use of sub-contract labour/works accords our Group theflexibility in managing costs to match variations in the number of ship building projects in progress.

Sub-contractors in Batam, Indonesia, provide our supply of sub-contract labour/works. The costscharged by sub-contractors are usually dependent on the materials, prevalent wage rates, theavailability of skilled workers and the complexity of the job outsourced.

Delays in the completion of projects may lead to delayed payments from customers and/orimposition of liquidated damages by them. Where the delay is due primarily to factors attributed toour Group, we may be liable for liquidated damages within a stipulated period of time. We have notincurred any liquidated damages in respect of completed projects for the periods under review.

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Key factors affecting the cost of sales mainly include:-

(a) Cost of steel which is the main raw material used for our ship building projects. It accountedfor approximately 80.8 per cent. and 85.4 per cent. of our Group’s cost of sales for shipbuilding in FY2006 and HY2007 respectively;

(b) Our ability to manage and control direct costs within budget and to minimise wastage anddamage to equipment;

(c) Wage levels, labour market conditions and changes in labour policies and regulations by theIndonesian government, where we usually source our labour from sub-contractors;

(d) Our ability to maintain and contract at competitive rates with our pool of sub-contractors;

(e) Our ability to manage vessels’ construction in compliance with customers’ specifications andquality requirements; and

(f) The fluctuations in IDR/S$ exchange rates as our cost of sales sourced in Indonesia aredenominated in IDR.


(III) OTHER OPERATING INCOME

Our other operating income relates mainly to:-

(a) gain on disposal of vessels as we continuously renew our fleet to minimise expenditure onmajor repair and maintenance works or for reasons of operational efficiency or capacityimprovement or as part of our sale-and-leaseback business model (as detailed in the sectionentitled “Business Overview” of this Prospectus);

(b) insurance claims for damaged or hijacked vessels; and

(c) broking income in connection with our buying and selling of vessels or for our middlemanrole in broking a vessel trading transaction.

Other operating income represented approximately 3.1 per cent., 16.1 per cent., 4.2 per cent. and8.4 per cent. of our revenue for FY2004, FY2005, FY2006 and HY2007 respectively.

(IV) ADMINISTRATION EXPENSES

Our administration expenses comprise mainly directors’ remuneration; other staff costs (such assalaries, benefits and related costs); printing and stationary cost; rental of office premises; utilitycharges; telephone expenses; and others.

(V) OTHER OPERATING EXPENSES

Our operating expenses comprise mainly depreciation of land and land improvements as well asproperty, plant and equipment, maintenance of vehicles, equipment, buildings and yard,professional fees, entertainment expenses, travelling and transport expenses and others.

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(VI) FINANCE COST

Our finance cost comprise mainly interest paid on both short and long-term loans as well as bankoverdraft and trade financing facilities from financial institution used for our purchase of vessels andoffice premises, building of vessels, infrastructure development of our shipyard and working capitalpurposes. For the periods under review, the weighted average effective interest rates charged bythe financial institutions on our borrowings ranged from 5.25 per cent. to 9.37 per cent. per annumfor borrowings procured in Singapore and ranged from 6.5 per cent. to 13.875 per cent. per annumfor borrowings procured in Indonesia.

(VII) TAX INCENTIVES

We enjoy tax exemption under S13A of the Singapore Income Tax Act in respect of our shipchartering income derived from our Singapore registered vessels.

By a series of presidential decrees, the classification of Batam, Indonesia, as a bonded zone wasestablished with exemptions from customs duties, import/export taxes and value-added tax. As MPShipyard is based in the bonded zone of Batam, Indonesia, and given that it had yet to develop theyard at the time of application for such incentives, it is exempted from custom duties, import andexport taxes and value-added tax in Indonesia up till 14 November 2007. Thereafter and with thepresent substantial amount of development expended at the yard by MP Shipyard, the taxexemption incentives are expected to be renewed by the relevant authorities on a permanent basis.Our Directors are of the view that such a renewal on a permanent basis is not likely to face anyimpediment.

REVIEW OF PAST OPERATING PEFORMANCE

For the purpose of this discussion, we have segmented our revenue, gross profit and gross profit marginfor FY2004, FY2005, FY2006, HY2006 and HY2007 as follows:-

(a) by business activities; and

(b) by countries, being the respective countries of origin of our customers.

By business activities

Revenue FY2004 FY2005 FY2006 HY2006 HY2007S$’000 % S$’000 % S$’000 % S$’000 % S$’000 %

Ship Chartering 4,546 100.0 6,642 100.0 11,894 74.9 4,169 73.8 8,385 49.5

Shipyard – – – – 3,992 25.1 1,481 26.2 8,568 50.5

Total 4,546 100.0 6,642 100.0 15,886 100.0 5,650 100.0 16,953 100.0

Gross Profit FY2004 FY2005 FY2006 HY2006 HY2007S$’000 % S$’000 % S$’000 % S$’000 % S$’000 %

Ship Chartering 1,363 100.0 2,634 100.0 3,577 79.6 1,445 83.0 3,917 65.5

Shipyard – – – – 919 20.4 295 17.0 2,066 34.5

Total 1,363 100.0 2,634 100.0 4,496 100.0 1,740 100.0 5,983 100.0

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Gross Profit Margin FY2004 FY2005 FY2006 HY2006 HY2007% % % % %

Ship Chartering 30.0 39.7 30.1 34.7 46.7

Shipyard N.A. N.A. 23.0 19.9 24.1

By countries(1)

Revenue FY2004 FY2005 FY2006 HY2006 HY2007% % % % %

Indonesia 96.3 97.7 54.1 60.0 78.1Singapore 3.7 2.3 14.6 26.3 5.7Switzerland – – 23.1 5.6 3.7Others(2) – – 8.2 8.1 12.5

Total 100.0 100.0 100.0 100.0 100.0

The revenue derived from regions other than Singapore and Indonesia in FY2006 and HY2007 wereattributed mainly to our provision of transhipment services. As transhipment accounted for approximately28.9 per cent. and 11.8 per cent. of our total revenue in FY2006 and HY2007 respectively, the revenuecontributions from regions other than Singapore and Indonesia accordingly accounted for approximately31.3 per cent. and 16.2 per cent. of our total revenue for FY2006 and HY2007 respectively.

With regard to the increase in revenue contribution from Indonesia from approximately 54.1 per cent inFY2006 to approximately 78.1 per cent. in HY2007 and the decrease in revenue contribution fromSingapore from approximately 14.6 per cent. in FY2006 to approximately 5.7 per cent. in HY2007, thiswas attributed mainly to proportionately more ship building projects being undertaken for Indonesiancustomers (relative to Singapore customers) in HY2007 compared to FY2006.

Revenue from Switzerland represents revenue derived from transhipment services provided to one of ourcustomers, a coal producer in Indonesia. Pursuant to arrangements with such customer, we invoice itsend customers who are from Switzerland. Accordingly, there is no assurance that we will continue toderive revenue from Switzerland. The decrease in revenue contribution from Switzerland fromapproximately 23.1 per cent. in FY2006 to approximately 3.7 per cent. in HY2007 was attributed to adecrease in transhipment sales to one of the end customers as a result of the unusual torrential weatherexperienced in HY2007 in areas where the coal mines in Indonesia are located and another endcustomer which ceased buying coal from a coal producer whom we transship the coal from.

Notes:-

(1) Such countries represent the respective countries of origin of our customers and not the destinations for the delivery of ourchartering services or built vessels.

(2) Namely Dubai, Hong Kong and Malaysia.

An analysis of our past performance based on our results for FY2004, FY2005, FY2006 and HY2007 isset out below:-

FY2004 vs FY2005

Revenue

Our revenue increased by approximately S$2.1 million or 46.1 per cent. from approximately S$4.5 millionin FY2004 to approximately S$6.6 million in FY2005. The increase was attributed mainly to the increasedrevenue registered by MP Shipping, by approximately S$2.9 million or 82.1 per cent. from approximatelyS$3.5 million in FY2004 to approximately S$6.4 million in FY2005, as a result of improved charter ratesand higher operating activities. As a result of shipping demands exceeding the supply of vessels, ourcharter rates increased between 23.5 per cent. and 36.0 per cent., depending on the relative distance

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between the destination of the mining site in Indonesia to the location where the cargoes are unloaded.MP Shipping operated a maximum fleet size of seven tugboats and seven barges during FY2005(compared to a maximum fleet size of six tugboats and six barges during FY2004), in catering to theincrease in shipping demand from our customers for the transport of construction materials as a result ofincreased economic activities generated particularly by the rise in public infrastructure projectsundertaken by the Singapore and Indonesian governments. Besides, our fleet of vessels for FY2005 wasof a higher average capacity relative to that of FY2004. The marked increase in revenue attained by MPShipping, however, was moderated by a modest decrease in revenue from Bina Marine of approximatelyS$0.2 million or 19.3 per cent. from approximately S$1.0 million in FY2004 to approximately S$0.8 millionin FY2005 as Bina Marine gradually wound down its ship chartering operations. Please refer to thesection entitled “Our History” of this Prospectus for the background relating to the transformation of BinaMarine from a ship chartering operator to a ship broker cum ship building project manager for MPShipyard.

Gross profit and gross profit margin

Our gross profit, attributed entirely to our ship chartering business, increased in tandem with the risingrevenue by approximately 93.3 per cent. from approximately S$1.4 million in FY2004 to approximatelyS$2.6 million in FY2005, with the overall ship chartering gross profit margin increased from approximately30.0 per cent. in FY2004 to approximately 39.7 per cent. in FY2005. The increase in gross profit marginwas mainly due to improved charter rates as explained above.

Other operating income

Though there were no insurance claims in FY2005 as compared to insurance claims aggregatingapproximately S$75,000 in FY2004 for damaged vessels and residual claims for hijacked vessels (pleaserefer to the section entitled “Insurance” of this Prospectus for further details), our other operating incomeincreased from approximately S$0.1 million in FY2004 to approximately S$1.1 million in FY2005. Theincrease relates mainly to the gain on disposal of three tugboats and one barge in FY2005 as comparedto only one barge in FY2004.

Administration expenses

We incurred higher administration expenses of approximately S$0.3 million in FY2005 relative to FY2004as the directors of MP Shipping began to draw directors’ remuneration with effect from FY2005.

Other operating expenses

With increased business activities, we incurred moderately higher operating expenses of approximatelyS$0.2 million in FY2005 as compared to that of approximately S$0.1 million in FY2004. The increase wassubstantially due to commission paid to third-party brokers for sale of more vessels in FY2005.

Finance cost

Our finance costs in FY2004 and FY2005 relate mainly to the financing of five tugboats and six barges inFY2004 and five tugboats and five barges in FY2005.

Profit before tax

Our profit before tax nearly tripled by approximately S$1.8 million or 179.6 per cent. from approximatelyS$1.0 million in FY2004 to approximately S$2.8 million in FY2005. The increase was in tandem with theincreased gross profit earned on our ship chartering operations and the increased gain on our disposal ofvessels.

Income tax

In respect of our ship chartering income, there was no taxation charged as all our vessels wereSingapore registered and were exempted from taxation under S13A of the Singapore Income Tax Act.

With regard to our gain derived from the disposal of our vessels, no taxation was charged as no priorcapital allowances had been claimed for these vessels.

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FY2005 vs FY2006

Revenue

We achieved an overall revenue of approximately S$15.9 million for FY2006, of which approximatelyS$11.9 million or 74.9 per cent. was attributed to ship chartering revenue and S$4.0 million or 25.1 percent. to ship building revenue.

Our overall revenue was more than doubled in FY2006 by approximately S$9.2 million fromapproximately S$6.6 million in FY2005 principally as a result of the following factors:-

(a) maiden ship building revenue of approximately S$4.0 million contributed by MP Shipyard, whichcommenced business in December 2005. Despite its brief operating record, MP Shipping deliveredwithin nine months three barges to third-party customers during FY2006;

(b) maiden contribution from the provision of transhipment services, a new revenue stream for shipchartering which made its debut in March 2006 contributing approximately S$4.6 million in FY2006;and

(c) increased ship chartering revenue due to increased charter rates of approximately 19.0 per cent.as well as a larger maximum fleet size of twelve tugboats and twelve barges during FY2006compared to a maximum fleet size of seven tugboats and seven barges during FY2005, in cateringto increased shipping demand from our customers as a result of the continued increase intransport demand for building construction materials and commodities fuelled by sustainingeconomic activities in Singapore and Indonesia.


We attained an overall gross profit of approximately S$4.5 million for FY2006, of which approximatelyS$3.6 million or 79.6 per cent. was attributed to ship chartering revenue and approximately S$0.9 millionor 20.4 per cent. to ship building revenue. In tandem with the escalated revenue, our overall gross profitincreased by approximately S$1.9 million or 70.7 per cent. from approximately S$2.6 million in FY2005.

Our ship chartering and shipyard operations registered gross profit margins of approximately 30.1 percent. and 23.0 per cent. respectively in FY2006.

The decrease in our gross profit margin for ship chartering, from approximately 39.7 per cent. in FY2005to approximately 30.1 per cent. in FY2006, was attributed mainly to the inordinate increase in diesel costsof approximately S$1.1 million fuelled by the global energy crisis, higher depreciation charges andinsurance costs totalling approximately S$0.3 million as a result of our increased fleet size being acquiredat higher costs and a high proportion amount of lower margin transhipment income derived from theprovision of transhipment services via vessels re-chartered from others, which collectively more thanoutstripped the higher margin transhipment business utilizing our own vessels and the increase in charterrates during FY2006.


Our other operating income decreased from approximately S$1.1 million in FY2005 to approximatelyS$0.7 million in FY2006. The decrease was mainly due to a lower number of vessels, comprising twobarges, being disposed in FY2006 as compared to that of three tugboats and one barge in FY2005. Wedisposed fewer vessels in FY2006 relative to FY2005 as more vessels were needed in FY2006 inmeeting the high demand for ship chartering services from our customers.

Negative goodwill arising on acquisition

Negative goodwill arising on acquisition in FY2006 relates to the negative goodwill from the acquisition ofthe subsidiary, RMN, which owns part of the land at our shipyard. The negative goodwill was credited tothe income statement in accordance with Singapore Financial Reporting Standard 103.

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The negative goodwill represents the excess of our Group’s interest in the fair value of RMN’s identifiableassets, liabilities and contingent liabilities over cost. The market value of the properties as at 3 August2006 was S$4.8 million (with exchange rate of S$1 = Rp. 5,750). The value had been determined basedon a separate valuation done by an independent professional valuer.


With the commencement of our shipyard operations in December 2005, we incurred higher administrationexpenses of approximately S$0.8 million in FY2006 as compared to approximately S$0.3 million inFY2005. The increase was substantially due to the increase in staff and related costs at Bina Marine ofapproximately S$0.3 million and at MP Shipyard of approximately S$0.2 million as we put in place a newmanagement team, including our Executive Officer, Mr Andy Ng, and several senior management staff,and beefed up our staff strength at these companies in FY2006. Please refer to the section entitled “OurHistory” of this Prospectus for the background relating to the transformation of Bina Marine from a shipchartering operator to a ship broker cum ship building project manager for MP Shipyard.


We incurred higher operating expenses of approximately S$0.8 million in FY2006 as compared toapproximately S$0.2 million in FY2005 with the commissioning of our shipyard operations. The increasewas substantially due to operating costs at MP Shipyard, which were aggravated by the escalating highrunning cost of diesel fueled by the global energy crisis, and the set up costs incurred, particularly for theprocurement of the necessary approvals, licenses and permits for MP Shipyard to operate as a whollyforeign-owned shipyard.

Finance cost

Our finance costs increased marginally by less than S$3,000 in FY2006 from approximately S$0.3 millionin FY2005. The increase was attributed mainly to more new vessels, comprising six new tugboats and sixnew barges being financed towards the end of FY2006, at lower effective interest rates than those of theexisting loans.

Profit before tax

Following the marked increase in our overall gross profit and the negative goodwill arising on acquisitionof S$2.1 million recognised in FY2006, partially offset by the higher administration and operatingexpenses incurred at Bina Marine and MP Shipyard for reasons as explained above, our profit before taxincreased by approximately S$2.6 million or 90.7 per cent. from approximately S$2.8 million in FY2005 toapproximately S$5.4 million in FY2006.

Income tax

We continued to be tax-exempted under S13A of the Singapore Income Tax Act for our ship charteringincome and were not liable to tax in respect of our gain derived from the disposal of our vessels as noprior capital allowances had been claimed for these vessels.

With regard to transhipment income derived from utilising vessels not owned by MP Shipping, theseincomes will be subject to Singapore corporate income tax but are expected to be offset against thecarried forward unabsorbed tax losses and capital allowances of MP Shipping.

HY2006 vs HY2007

Revenue

Our overall revenue increased by approximately 200.1 per cent. or S$11.3 million from approximatelyS$5.6 million in HY2006 to approximately S$17.0 million in HY2007. Approximately S$8.4 million or 49.5per cent. of the overall revenue in HY2007 was attributed to ship chartering revenue and approximatelyS$8.6 million or 50.5 per cent. to ship building revenue. In contrast, approximately S$4.2 million or 73.8per cent. of the overall revenue in HY2006 was attributed to ship chartering revenue and approximatelyS$1.5 million or 26.2 per cent. to ship building revenue as our shipyard commenced its ship buildingoperations in December 2005.

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The more than two-fold increase in our ship chartering revenue in HY2007 over that of HY2006 wasattributed mainly to hikes in voyage charter rates of approximately 380.0 per cent. in respect of shipmentplying between the Riau Province of Indonesia and Singapore and the transhipment revenue whichcontributed approximately S$2.0 million in HY2007. The hike was particularly pronounced for trips fromBintan, Indonesia, to Singapore brought about as a result of stepped-up border patrol by the IndonesianNavy. Sea patrols between the Indonesia and Singapore borders were intensified following the Indonesiangovernment’s ban on the export of sand, which officially took effect from 6 February 2007. The rate hikeswere to compensate shipping risks (and the possible loss of income which may last for weeks) associatedwith possible seizure of vessels suspected of hiding contraband sand beneath the granite cargo or forbreaching shipping regulations by the Indonesian Navy. Six of our vessels were detained by theIndonesian Navy for investigation in March 2007 but were released in May 2007. Aided by the prevailingtight supply of coastal vessels in meeting excessive demands due to the bolstering economy inSingapore, the voyage charter rates for trips to Singapore have presently stabilized (following the easingof the border patrol by the Indonesian Navy) at rates higher than those prior to which in December 2006.

Our ship building revenue increased markedly by approximately S$7.1 million from HY2006 to HY2007 asour shipyard progressed from handling one ship building project in HY2006 to 12 ship building projects atdifferent stages of construction in HY2007.


Our overall gross profit also increased by approximately S$4.2 million or 243.8 per cent. fromapproximately S$1.7 million in HY2006 to approximately S$6.0 million in HY2007. Approximately S$3.9million or 65.5 per cent. of the overall gross profit in HY2007 was attributed to ship chartering revenueand approximately S$2.1 million or 34.5 per cent. was attributed to ship building revenue. Due to thepioneering stage of our ship building operations in HY2006, approximately 83.0 per cent. of our overallgross profit in HY2006 was attributed to ship chartering revenue.

Our ship chartering and shipyard operations registered gross profit margins of approximately 46.7 percent. and 24.1 per cent. respectively in HY2007 compared respectively to that of 34.7 per cent. and 19.9per cent. attained in HY2006. The sharp increase in our gross profit margin for ship chartering wasattributed mainly to the hikes in voyage charter rates as explained above. The comparatively low grossprofit margin of our ship building operations in HY2006 was attributed to a high budgeted cost set at theonset due to the initial teething problems associated with the setting up of our shipyard as it undertookthe maiden project.


Our other operating income increased by more than four-fold from approximately S$0.3 million in HY2006to approximately S$1.4 million in HY2007. The increase was attributed mainly to higher gain on disposalof vessels of approximately S$1.1 million for six vessels in HY2007 compared to that of approximatelyS$0.3 million for one vessel in HY2006. Additionally, new income streams, comprising broking income forvessel sale of approximately S$50,000 and income from the sales of steel scraps of approximately S$0.1million, were recognised in HY2007.


Our administration expenses increased by approximately S$0.3 million or 95.5 per cent. fromapproximately S$0.4 million in HY2006 to approximately S$0.7 million in HY2007. The increase was inline with our on-going efforts to increase our staff and related costs at Bina Marine and MP Shipyard aswe continually beefed up our management team and staff strength at these companies.


Our operating expenses increased by approximately S$1.4 million or 466.4 per cent. from approximatelyS$0.3 million in HY2006 to approximately S$1.7million in HY2007. The increase was in part in line withthe increase in shipping and shipyard business activities and in part due to the on-going ramped up ofinfrastructure development at the shipyard as it equips itself to undertake ship repair, maintenance andconversion projects in FY2008.

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Finance cost

Our finance expenses increased by approximately S$0.2 million or 138.4 per cent. from approximatelyS$0.2 million in HY2006 to approximately S$0.4 million in HY2007. We increased our fleet size (both interms of quantities and capacities) from 15 vessels in HY2006 to 27 vessels in HY2007 to cope with theincrease in shipping business activities. In funding the increased acquisitions, our finance expensesincreased in tandem. Financing the substantial development at the yard to equip itself ready for shiprepair, maintenance and conversion projects in FY2008 also increased our finance expenses in HY2007.

Profit before tax

Following the marked increase in our overall gross profit, partially offset by the higher administration andoperating expenses for reasons explained above, our profit before taxation increased by approximatelyS$3.3 million or 276.3 per cent. from approximately S$1.2 million in HY2006 to approximately S$4.5million in HY2007.

Income tax

We continued to be tax-exempted under S13A of the Singapore Income Tax Act for our ship charteringincome in respect of our Singapore-flagged vessels and were not liable to tax in respect of our gainderived from the disposal of our vessels as no prior capital allowances had been claimed for thesevessels.

Our transhipment incomes derived from utilising vessels not owned by us in HY2007 will be subject toSingapore corporate income tax at the rate of 18 per cent.

REVIEW OF PAST FINANCIAL POSITIONS

As at 30 September 2006

Current assets

Our current assets comprised mainly inventories, amounts due from customers on construction contracts,trade receivables, other receivables, amounts due from related parties as well as cash and bankbalances. Amounts due from customers for construction contracts relate to the percentage of work donefor the construction of vessels but have yet been billed to the customers, who shall only be billedaccording to the milestones achieved and as stated in the ship building agreements.

As at 30 September 2006, our current assets amounted to approximately S$4.8 million.

Inventories, comprising mainly raw materials for our ship building business, and amounts due fromcustomers for construction contracts in respect of vessels under construction amounted to approximatelyS$2.1 million or 44.1 per cent. and S$0.8 million or 17.5 per cent. respectively of our current assets as at30 September 2006. Trade receivables and other receivables collectively accounted for approximatelyS$1.4 million or 29.2 per cent. of our current assets as at 30 September 2006, of which approximatelyS$0.2 million was attributed to related parties on a trade basis.

Cash and bank balances amounted to approximately S$0.4 million or 9.2 per cent. of our current assetsas at 30 September 2006.

Non-current assets

Our non-current assets comprised mainly office premises, land and land improvements as well as plantand equipment stated at cost less depreciation, amortization and impairment loss, if applicable.

As at 30 September 2006, our non-current assets amounted to approximately S$37.4 million.

The two pieces of leasehold land and land improvements at MP Shipyard and RMN collectivelyaccounted for approximately S$6.8 million or 18.2 per cent. of our non-current assets as at 30 September2006.

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Plant and equipment, accounting for approximately S$30.6 million or 81.8 per cent. of our non-currentassets as at 30 September 2006, comprised mainly our office premises, vessels under construction,vessels for ship chartering operations, machinery and equipment, office equipment, furniture and fittingsand motor vehicles.

Current liabilities

Our current liabilities comprised mainly trade payables, other payables, amounts due to related partiesand a Director as well as the current portions of interest-bearing loans and short term loans.

As at 30 September 2006, our current liabilities amounted to approximately S$24.5 million.

Trade payables accounted for approximately S$6.4 million or 26.3 per cent. of our current liabilities as at30 September 2006, of which approximately S$0.8 million was attributed to related parties.

Other payables accounted for approximately S$3.1 million or 12.8 per cent. of our current liabilities as at30 September 2006.

Amounts due to related parties and a Director, arising from payments made by them on our behalf mainlyfor the purchase of land, vessels and property, accounted for approximately S$6.6 million or 27.1 percent. of our current liabilities as at 30 September 2006.

The current portions of our secured interest-bearing term loans and short-term loans amounted toapproximately S$8.3 million or 33.8 per cent. of our current liabilities as at 30 September 2006. Theseinterest-bearing liabilities were used to finance the purchase of our office in Singapore, the acquisition ofnew vessels to increase our fleet capacity (as in line with our business growth) and for our working capitalpurposes.


Our non-current liabilities of approximately S$6.8 million as at 30 September 2006 relate to the non-current portions of our secured interest-bearing loans from financial institutions.

Shareholders’ equity

As at 30 September 2006, our shareholders’ equity amounted to approximately S$10.9 million.

As at 31 March 2007

Current assets

As at 31 March 2007, our current assets amounted to approximately S$11.8 million.

Inventories and amounts due from customers for construction contracts in respect of vessels underconstruction amounted to approximately S$2.7 million or 23.4 per cent. and S$5.5 million or 46.6 percent. respectively of our current assets as at 31 March 2007. Trade receivables and other receivablescollectively accounted for approximately S$2.3 million or 19.9 per cent. of our current assets as at 31March 2007.

The remaining balance of our current assets as at 31 March 2007 comprised cash and bank balances ofapproximately S$1.2 million.

Non-current assets

Our non-current assets amounted to approximately S$41.6 million as at 31 March 2007, representing anincrease of approximately S$4.2 million or 11.2 per cent. from that of approximately S$37.4 million as at30 September 2006. The increase was attributed mainly to the increase in our vessel fleet size as well asvessels under construction.

Current liabilities

Our current liabilities amounted to approximately S$22.7 million as at 31 March 2007.

Trade payables accounted for approximately S$9.6 million or 42.4 per cent. of our current liabilities as at31 March 2007. Approximately S$1.1 million was due to related parties for trade purposes.

Other payables accounted for approximately S$2.4 million or 10.7 per cent. of our current liabilities as at31 March 2007.

Amounts due to a Director stood at approximately S$0.3 million as at 31 March 2007, which accountedfor approximately 1.2 per cent. of our current liabilities as at 31 March 2007. As at 30 September 2006,amounts due to related parties and a Director were approximately S$0.5 million and S$6.2 millionrespectively. .

The current portions of our secured interest-bearing term loans and short-term loans amounted toapproximately S$10.2 million or 45.0 per cent. of our current liabilities as at 31 March 2007. Theseinterest-bearing liabilities were used to finance the continual expansion of our fleet size, the infrastructuredevelopment at our shipyard and working capital, in addition to the previously accounted for financing forthe purchase of our office in Singapore and the acquisition of new vessels as at 30 September 2006.


The non-current portions of our secured interest-bearing loans stood at approximately S$15.6 million asat 31 March 2007, representing an increase of approximately S$8.7 million or 127.8 per cent. from that ofapproximately S$6.8 million as at 30 September 2006. The increase was attributed mainly to morefinancing procured from financial institutions for the expansion of our fleet size (including vessels underconstruction) and infrastructure development at our shipyard.


Our shareholders’ equity amounted to approximately S$15.1 million as at 31 March 2007, representing anincrease of approximately S$4.3 million or 39.3 per cent. from that of approximately S$10.9 millionregistered as at 30 September 2006.

REVIEW OF PAST CASHFLOW POSITIONS

Our Group’s cash flow summaries for FY2004, FY2005, FY2006 and HY2007 are as follows:-

FY2004 FY2005 FY2006 HY2007$’000 $’000 $’000 $’000

Net cash inflow from operating activities 3,343 2,563 7,329 1,222

Net cash outflow used in investing activities (3,140) (2,386) (22,281) (4,569)

Net cash (outflow)/inflow from financing activities (217) (148) 15,361 4,200

Net (decrease)/increase in cash and cash equivalents (14) 29 409 853

Effect of changes in currency translation – 1 (33) (97)

Cash and cash equivalents at beginning of the financial year/period 46 32 62 438

Cash and cash equivalents at end of the financial year/period 32 62 438 1,194

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FY2004

Net cash from operating activities

In FY2004, net cash flow from operating activities before changes in working capital was approximatelyS$2.3 million. The inflow of cash after changes in working capital amounted to approximately S$3.7million. The changes in working capital comprised mainly a decrease in trade and other receivablesaggregating approximately S$1.3 million; and an increase in trade and other payables aggregatingapproximately S$0.1 million. Net cashflow from operating activities after changes in working capital andinterest payment of S$0.4 million amounted to approximately S$3.3 million in FY2004.

Net cash used in investing activities

Net cash outflow from investing activities in FY2004 amounted to approximately S$3.1 million and wasmainly for the purchase of plant and equipment comprising mainly vessels amounting to approximatelyS$3.4 million offset by proceeds from the disposal of plant and equipment of approximately S$0.3 million.

Net cash from financing activities

We recorded a net cash used in financing activities of approximately S$0.2 million due mainly to thedividends paid in FY2004 of approximately S$0.6 million, offset by loans of approximately S$0.4 millionduring the year.

FY2005


In FY2005, net cash flow from operating activities before changes in working capital was approximatelyS$3.2 million. The inflow of cash after changes in working capital amounted to approximately $2.9 million.The changes in working capital comprised mainly an increase in trade and other receivables aggregatingapproximately S$2.6 million, offset by an increase in trade and other payables aggregating approximatelyS$2.4 million. Net cashflow from operating activities after changes in working capital and interest paymentof approximately S$0.3 million amounted to approximately S$2.6 million in FY2005.


Net cash outflow from investing activities in FY2005 amounted to approximately S$2.4 million, and wasmainly for the purchase of plant and equipment comprising mainly vessels aggregating approximatelyS$5.5 million and other assets aggregating approximately S$0.1 million, offset by proceeds from thedisposal of vessels amounted to approximately S$3.3 million.


We recorded a net cash used in financing activities of approximately S$0.1 million due mainly to thedividends paid in FY2005 of approximately S$0.5 million and net repayment of loans amounting toapproximately S$0.7 million, offset by an advance from a director amounting to approximately S$1.0million.

FY2006


In FY2006, net cash flow from operating activities before changes in working capital was approximatelyS$4.4 million. The inflow of cash after changes in working capital amounted to approximately S$7.7million. The changes in working capital comprised mainly a decrease in trade receivables and otherreceivables aggregating approximately S$1.9 million; and an increase in trade payables and otherpayables aggregating approximately S$4.3 million, which were partially offset by an increase ininventories of approximately S$2.1 million and an increase in amounts due from customers forconstruction contracts of approximately S$0.8 million. Net cash flow from operating activities afterchanges in working capital amounted to approximately S$7.3 million in FY2006.

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In FY2006, net cash outflow from investing activities, partially offset by the proceeds from the disposal ofproperty, plant and equipment aggregating approximately S$1.1 million, amounted to approximatelyS$22.3 million. The cash outflow from investing activities was utilised mainly for investment in RMN andthe acquisition of property, plant and equipment such as land, machinery and equipment for our shipyard,office premises in Singapore and vessels.


We recorded a net cash inflow from financing activities of approximately S$15.4 million in FY2006. Thiswas mainly attributed to drawdown from loans aggregating approximately S$11.2 million, proceeds fromthe issuance of shares by a subsidiary of approximately S$0.5 million and amounts due to related partiesand a Director net of deferred expenses incurred aggregating approximately S$3.7 million.

HY2007


In HY2007, net cash flow from operating activities before changes in working capital was approximatelyS$5.3 million. The inflow of cash after changes in working capital amounted to approximately S$1.6million. The changes in working capital comprised mainly an increase in inventories of approximatelyS$0.6 million; an increase in trade receivables and other receivables, deposits and prepaymentsaggregating approximately S$0.8 million; an increase in amounts due from customers for constructionworks of approximately S$4.6 million; a decrease in accruals of approximately S$0.7 million, which werepartially offset by an increase in trade payables of approximately S$3.2 million. We generated a netcashflow from operating activities of approximately S$1.2 million.


Net cash used in investing activities amounted to approximately S$4.6 million in HY2007, and was mainlyfor the purchase of plant and equipment after netting off the proceeds from the disposal of plant andequipment of approximately S$4.2 million.


Due mainly to the increased utilisation of term loans of approximately S$10.7 million, partially offsetagainst a decrease in amounts due to related parties and a Director on a non-trade basis net of deferredexpenses incurred of approximately S$6.5 million, we generated net cash from financing activitiesamounting to approximately S$4.2 million in HY2007.

As a result of the above and after adjusting for exchange rate changes in combining the financial resultsand financial positions of our foreign subsidiaries, we recorded an increase in cash and cash equivalentsamounting to approximately S$0.4 million and S$0.9 million in FY2006 and HY2007 respectively.

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The growth of our Group has been financed through a combination of shareholders’ equity, retainedearnings, borrowings from financial institutions and loans from Directors and our Controlling Shareholder.

Our principal uses of cash include payments for cost of goods sold, administration and operatingexpenses, capital expenditures, repayment of borrowings due to financial institutions, finance costs anddividend payments to shareholders.

Albeit an improved position, as at 30 September 2006 and 31 March 2007, we had negative workingcapital with our current liabilities exceeding our current assets by approximately S$19.7 million andS$10.9 million respectively, and our current ratio (defined as the ratio of current assets to currentliabilities) standing at 0.2 times and 0.5 times respectively.

The main reason for the negative working capital positions was that, in addition to the gross cash inflowfrom operating activities, we funded a substantial portion of our fleet expansion and yard developmentusing short-term financing facilities as well as interest-free advances received from Mr Lee Wan Tang, ourExecutive Chairman and a Controlling Shareholder of our Company. As it is our operating strategy tocontinuously renew our fleet to minimise expenditure on major repair and maintenance works, we soughtto have lower financing costs by tapping on the above sources of funds in lieu of long-term loans.Typically, we would borrow from these financial institutions at 70 to 80 per cent. of the cost of thepurchases or new ship buildings over a four-year tenure period. These financial institutions generallyextended financing facilities to us based on, inter alia, the strength of the security pledged, the estimatedcash flow to be generated from the relevant assets to be funded and our credit worthiness. In addition,with each new term loan (be it for a new purchase, new ship building or otherwise), the effect is that,apart from our debt quantum being increased, our current ratio would decrease as each term loan has acertain amount repayable within one year.

Subsequent to 31 March 2007, our working capital position has improved pursuant to the following:-

� restructured part of our existing short-term credit facilities, such that repayment of a revolving loanamount of S$1.5 million due to a bank on 28 December 2007 has been deferred till 28 December2009, a revolving loan of approximately S$0.9 million with another bank has been restructured as atwo-year term loan with a single lump sum principal repayment to be made in July 2009 and a non-revolving loan of S$1.18 million with another bank has been restructured to a four-year term loanwith effect from July 2007;

� capitalised the advances from Mr Lee Wan Tang amounting to approximately S$3.0 million asshare capital; and

� received cash capital contribution aggregating S$3.0 million from Nautical International, our parentcompany, through the issuance of 3,000,000 new Shares (before the Bonus Issue and Share Split),

(collectively the “Working Capital Enhancement Measures”).

We manage our liquidity needs by matching the cash requirements for loan repayment with cash flowfrom our operations, including the proceeds from the disposal of vessels. Taking into account, inter alia,the Working Capital Enhancement Measures, long-term loan facility scheduled to be drawn down inOctober 2007 and the estimated net proceeds of approximately S$2.4 million from the recent disposal offour vessels (with an average vessel age of approximately six years) concluded in May 2007 as part ofour fleet renewal policy, our Directors expect our working capital position to be positive and our Group tohave adequate working capital for our present requirements. Of the four disposed vessels, two wereacquired from Trans-Bina Pte Ltd (“Trans-Bina”) in July 2006 and the other two were previously hijackedand recovered recently in September 2006. Please refer to the section entitled “Past Interested PersonTransactions – Transactions with Trans-Bina by MP Shipping – Purchase of two vessels from Trans-Binaby MP Shipping” of this Prospectus for more details on the acquisition of the two vessels from Trans-Binaby MP Shipping and the section entitled “Past Interested Person Transactions – “Vessel recovery servicesrendered by BBR to MP Shipping” of this Prospectus for more details on the two previously hijackedvessels.

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As at the Latest Practicable Date, our material sources of unused liquidity are unutilised revolving creditfacilities amounting to $0.5 million. Further, with the net proceeds from the issue of the Invitation Shares(part of which would be used to finance the expansion and development at our shipyard as well as for ourintended acquisition of new vessels), our Directors expect our Group to be in a stronger position to meetthe needs of our operations, including our working capital. Please refer to the section entitled “RiskFactors – We have experienced and may continue to experience negative working capital position andface risks associated with high debt financing” of this Prospectus for more details.

Based on our Group’s shareholders’ equity of approximately S$10.9 million and total interest-bearingborrowings of approximately S$15.1 million as at 30 September 2006 and our Group’s shareholders’equity of approximately S$15.1 million and total interest-bearing borrowings of approximately S$25.8million as at 31 March 2007, our gearing (defined as the ratio of total interest bearing indebtedness tobanks and financial institutions to shareholders’ equity) stood at 1.4 times and 1.7 times respectively. Asat the Latest Practicable Date, our gearing as at 31 March 2007 improved to 1.2 times after adjusting forthe Working Capital Enhancement Measures implemented subsequent to 31 March 2007.

We have been able to service our interest commitment due to the financial institutions.

We have not provided any guarantees to any other party and have no material contingent liabilities.

MATERIAL CAPITAL EXPENDITURE AND DIVESTMENT

Capital expenditure

Our material capital expenditures in FY2004, FY2005, FY2006 and for the period from 1 October 2006 tothe Latest Practicable Date were as follows:-

Capital Expenditure ($’000) FY2004 FY2005 FY2006 1 October 2006 to the Latest

Practicable Date

Acquisition of vessels 3,440 5,526 10,775 13,008

Vessels-in-construction – – 6,665 4,142

Purchase of land and property – – 7,446 –

Purchase of equipment, machines and vehicles – 56 2,887 1,101

Development at shipyard – 65 366 4,160

Capital divestment

Our material capital divestments in FY2004, FY2005, FY2006 and for the period from 1 October 2006 tothe Latest Practicable Date are as follows:-

Capital Divestment (S$’000) FY2004 FY2005 FY2006 1 October 2006to the Latest

Practicable Date

Disposal of vessels 239 2,187 453 5,603

Save as disclosed above and in the sections entitled “Prospects”, “Future Plans” and “MaterialCommitments for Capital Expenditure” of this Prospectus respectively, we have no other material plans oncapital expenditures and divestments as at the Latest Practicable Date.


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MATERIAL COMMITMENTS FOR CAPITAL EXPENDITURE

As at the Latest Practicable Date, our material commitments for capital expenditure are as follows:-

S$ millionShip Chartering – Expansion of fleet

Acquisition of ten tugboats 7.7(1)

Building of four barges 2.7(1)

Total 10.4

Shipyard – Expansion and development in preparation for the provision of ship repair and maintenanceservices

Construction of one drydock 1.8

Construction of office block, six workshops and two warehouses 0.7

General infrastructure development(2) 0.8

Purchase of equipment and machines(3) 1.2

Total 4.5

Notes:-

(1) Financing arrangement had been secured for six tugboats and four barges amounting to approximately $8.9 million.

(2) Including the backfilling of mangrove areas and ponds; improvement to roads; installation of a drainage system; andconstruction of security post, main gate and boundary walls.

(3) Including a CNC cutting machine, two gantry cranes and 12 overhead cranes.

We intend to fund the above capital commitments through a combination of internal funds generated fromoperations, bank borrowings and part of the proceeds from the Invitation.

We aim to substantially complete the infrastructure development at our shipyard by end 2007 in order toequip itself to undertake ship repair, maintenance and conversion projects and realise the higher marginship repair and maintenance incomes (relative to that of ship building incomes) in FY2008.

As at the Latest Practicable Date, save for the charter of a tugboat and a barge from BBR by MPShipping pursuant to a sale-and-leaseback arrangement as detailed in the section entitled “InterestedPerson Transactions” of this Prospectus, we do not have any operating lease commitments.

FOREIGN EXCHANGE EXPOSURE

Our sales are mainly denominated in S$ and to a lesser extent in US$, while our costs are mainlydenominated in S$ and IDR. In FY2006, 92.6 per cent. and 7.4 per cent. of our sales were denominatedin S$ and US$ respectively while 41.2 per cent. of our Group’s total costs was denominated in IDR. InHY2007, 84.5 per cent. and 15.5 per cent. of our sales were denominated in S$ and US$ respectivelywhile 65.5 per cent. of our Group’s total costs was denominated in IDR. Our management considers thatthe S$ is the primary currency of the economic environment in which we operate. Thus, the functionaland reporting currency of our Group is the S$.

To the extent that our sales and costs are not naturally matched in the same currency, our Group will beexposed to adverse fluctuations in foreign exchange rates. In addition, due to the timing differencesbetween invoicing and collection or payment, our Group may be exposed to fluctuations in the exchangerates between the S$ and the US$ and IDR, which may have an adverse impact on our Group’s results.


Presently, we do not have any formal hedging policy with respect to our foreign exchange exposures. Inthe future, we may hedge our material foreign exchange transactions after considering the foreigncurrency amount, exposure period and transaction costs.

The impact of foreign exchange fluctuations on our financial performance over the past three financialyears were as follows:-

FY2004 FY2005 FY2006 HY2007

Foreign exchange gain/(loss) (S$’000) – n.m. 20 79

As a percentage of profit before tax n.m. n.m. 0.4% 1.7%

SIGNIFICANT ACCOUNTING POLICY CHANGES

Other than the adoption of new financial reporting standards as disclosed in the Independent Auditors’Report on the audited combined financial statements of the Group for the financial years ended 30September 2004, 2005 and 2006 set out in Appendix I of this Prospectus and the Independent Auditors’Report on the review of the interim combined financial statements of the Group for the six-month periodended 31 March 2007 set out in Appendix II of this Prospectus, our Group has adopted the sameaccounting policies and methods of computation in the financial statements of FY2004, FY2005 andFY2006 and for HY2007.

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OUR HISTORY

Our Company was incorporated in Singapore on 10 July 2006 under the name “Marco Polo Marine Pte.Ltd.” as a private limited company under the Companies Act. On 7 September 2007, our Company wasconverted into a public company limited by shares and our name was changed to “Marco Polo MarineLtd.”. To facilitate the listing of our Company on the SGX-SESDAQ, the Restructuring Exercise wasundertaken. Subsequent to the Restructuring Exercise, our Company became the holding company of oursubsidiaries, MP Shipping, Bina Marine, MP Marine, MP Shipyard and RMN.

Ship Chartering

Our history dates back to April 1991 when our Executive Chairman, Mr Lee Wan Tang, and two unrelatedparties, having identified the potential for growth in the ship chartering business in Singapore andIndonesia, set up MP Shipping to engage in the ship chartering business. Since July 1995, the LeeFamily had been increasing their stakes in MP Shipping by acquiring the shares held by the unrelatedparties and by May 2000, MP Shipping became wholly-owned by the Lee Family.

MP Shipping commenced operations with a tugboat and a barge and provided ship chartering services tocustomers in Indonesia. MP Shipping’s main customer was BRJ, a company controlled by the Lee Family.BRJ, a company incorporated in Indonesia, is principally engaged in the business of mining andinfrastructure development while certain Associates of the Lee Family are collectively engaged in thebusinesses of construction and property development in Indonesia. Due to the diverse nature of itsbusiness, BRJ, together with its subsidiaries and certain Associates of the Lee Family, had established awide network of Indonesian and Singaporean customers from these various industries. In order to servicethese customers, BRJ required ship chartering services on a continuous basis to transport miningproducts and MP Shipping was engaged to provide such chartering services, thereby giving us a steadystream of income from our ship chartering business.

As the demand for our ship chartering services from BRJ continued to increase, Mr Lee Wan Tangentered into a 50:50 joint venture with an unrelated party to establish Bina Marine in June 1997 to furtherthe growth of the ship chartering business. The joint venture was a strategic business alliance as theunrelated party had substantial experience and expertise in the shipping industry.

In 1998, our CEO, Mr Sean Lee Yun Feng, the son of our Executive Chairman, Mr Lee Wan Tang,became involved in certain businesses of BRJ and MP Shipping, and gradually assumed a moreprominent role in the management of the mining and marine divisions. In 2001, he began to play a majorrole in garnering the business and in setting the overall corporate direction and strategies of MPShipping. Building and capitalising on the foundations laid by Mr Lee Wan Tang, Mr Sean Lee Yun Fengintroduced various strategic operational measures, which greatly improved the efficiency of our fleet ofvessels. Please refer to the section entitled “Business Overview – Our Fleet” of this Prospectus for moredetails on the measures introduced by Mr Sean Lee Yun Feng.

In March 2006, MP Shipping began transporting coal, following the Lee Family’s entry into the coalmining business. Their entry into this business was a move prompted by the growing demand for suchproduct primarily due to rising oil prices. At or around the same time, MP Shipping, through BBR (acompany controlled by the Lee Family), secured its first long-term charter contract with an unrelatedregional coal distributor to tranship coal. The contract, which is renewable on a yearly basis, also markedMP Shipping’s maiden foray into the transhipment market, which is relatively more lucrative as comparedto the ship chartering business.

In April 2006, in an effort to rationalise and streamline the Group’s business, the Lee Family acquired theentire share capital of Bina Marine held by the unrelated party and transferred all ship charteringactivities of Bina Marine to MP Shipping.


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On 13 September 2007, MP Shipping was granted the right of first refusal to provide ship charteringservices to BRJ, its subsidiaries and other companies controlled by the Lee Family for a period of twoyears commencing on the date on which our Shares are listed on the SGX-SESDAQ.

As at the Latest Practicable Date, MP Shipping operates a fleet of 25 vessels, consisting of 12 tugboatsand 13 barges, which mainly ply Singaporean, Indonesian and Malaysian waters.

Shipyard

With plans to seize emerging business opportunities in shipyard business in the South East Asia regionsand to support our ship chartering operations at the same time, MP Shipyard was established in February2005. MP Shipyard operates on a 30-year leasehold yard with an estimated land area of approximately18.5 hectares located in Batam, Indonesia, which was leased at no cost from SMJA, a companycontrolled by the Lee Family.

Bina Marine acts as the project manager for MP Shipyard and the ship broking arm of our Group,providing services to our subsidiaries as well as to third party customers. It also functions as the trading,sourcing and procurement arm of our Group, trading mainly in ship building materials, and sourcing andprocuring ship building materials and equipment for use in our ship building operations.

In December 2005, we successfully equipped ourselves with ship building capabilities at these premisesand commenced our ship building operations.

We celebrated another significant milestone in our history when we successfully completed theconstruction of our first vessel, a 240-ft barge, in April 2006. The barge, certified by Germanischer LloydAG, was delivered to our customer within a relatively short time frame of approximately three and halfmonths, compared to the industry standard of approximately four months for the delivery of a barge ofsimilar size and specifications.

Plans are underway to expand our shipyard operations to include the provision of ship repair,maintenance and conversion services. We acquired RMN from two unrelated third parties in August 2006for a cash consideration of IDR150,000,000, which was arrived at based on a willing-buyer-willing-sellerbasis. RMN holds a 30-year leasehold yard with an estimated land area of approximately 16.4 hectareslocated directly next to our existing yard. We are currently constructing a drydock which is 150 x 40 x 8min dimension and plan to construct a further drydock which will be at least 110 x 30 x 6m in dimension aswell as a jetty and related facilities at this new site to equip it with ship repair, maintenance andconversion capabilities (please refer to the sections entitled “Prospects” and “Future Plans” of thisProspectus for more details). The construction of the first drydock and related facilities is scheduled to besubstantially completed by the end of 2007. The combined ship building and repair capacities at the twosites, upon completion, will respectively allow MP Shipyard to accommodate up to eight vessels of 150metres in length for ship building and up to five vessels of varying lengths of between 50 metres and 130metres for ship repair at any one time. Our Directors believe that with such capacity, we will be one of thelarger shipyards in Batam.

In April 2006, MP Marine was incorporated as an investment holding company mainly to address theIndonesian law requirement which stipulates that a company incorporated in Indonesia must have at leasttwo shareholders. It currently owns a one per cent. equity interest in MP Shipyard, with the balance 99per cent. equity interest being owned by Bina Marine. MP Marine also holds a one per cent. equityinterest in RMN, with the balance 99 per cent. equity interest being held by MP Shipyard.

In August 2006, SMJA transferred its leasehold land to MP Shipyard at cost (please refer to the sectionentitled “Interested Person Transactions” of this Prospectus for further details on the transaction betweenSMJA and MP Shipyard).


BUSINESS OVERVIEW

We are an integrated shipping group, principally engaged in the following businesses:-

(a) ship chartering business, which includes the provision of chartering, re-chartering andtranshipment services of tugboats and barges to our customers; and

(b) shipyard business, which includes the provision of building, repair and broking services of tugboatsand barges.

SHIP CHARTERING

Our ship chartering business is carried out through our subsidiary, MP Shipping, and principallycomprises the provision of the following services:-

(a) Chartering services

We presently charter our tugboats and barges mainly to BRJ, a company controlled by the LeeFamily. BRJ is principally engaged in the business of mining while its other subsidiaries and certainAssociates of the Lee Family are collectively engaged in the business of construction, propertydevelopment and infrastructure development in Indonesia. Our other customers and end-usersconsist of other unrelated companies involved in the mining, commodity trading, shipping,construction, infrastructure, property development and land reclamation industries. Our customersapproach us to provide transportation services on an ad-hoc basis as and when they need to shipcargo and our acceptance of such services is dependent on, inter alia, vessel availability andpricing. In FY2004, FY2005, FY2006 and HY2007, the aggregate revenue contribution from BRJ asa percentage of our total revenue was approximately 92.6 per cent., 90.0 per cent., 36.4 per cent.and 31.8 per cent. respectively.

We may also charter-in vessels from other ship-owners for re-charter to our customers where thereis an excessive demand for our vessels.

We charter our vessels to customers under the following types of charter arrangements:-

(i) Voyage charter

Under this arrangement, we transport a specific amount and type of cargo from one place toa destination designated by our customers for a fee which may be calculated by reference tothe quantity and type of cargo carried and the distance of voyage covered. Our customerswill determine the dates for the ship's arrival at the loading port, the estimated time forloading and discharge, and the duration of the voyage. With this arrangement, unless agreedotherwise, the chartering party typically pays only the charter fee, while we generally bear allexpenses including voyage, fuel costs and port charges, crew expenses and other operatingcosts. As at the Latest Practicable Date, the bulk of our chartering arrangements are throughvoyage charters.

(ii) Time charter

Under time charter contracts, our vessels are chartered to our customers for fixed periods oftime at a negotiated charter fee that is generally also fixed. During the time charter period,the chartering party is directly responsible for paying any voyage expenses including the fueland port charges, as well as any agency fees. On the other hand, as the shipowner, wewould typically be responsible for our operational crews, along with all maintenance services,supplies, spare parts, crew meals and other operational costs, all of which are factored intothe negotiated charter fee. However, these items may sometimes be passed to the chartererunder the terms of the contract. Essentially, under a time charter, a customer rents a fullyoperational vessel and crew for a period of time during which he can direct where the vesselwill go and what cargo it will carry, while he pays for the fuel and port charges during thattime.

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For each type of charter contract, we provide our customers with short-term or spot charterswhich range from three days to six months, and long-term charters of up to two years. Ingeneral terms, the longer-term charters are less volatile as they reflect the fact that thevessel is fixed for a longer period of time. In the spot market, rates will reflect the immediateunderlying conditions in vessel supply and demand and are thus more volatile. The longer-term charter contracts allow us to better manage our cash flow and protect us against short-term industry downturns. While spot charter contracts may increase our risks in relation toshort-term market fluctuations, they also allow us to take advantage of short-term increasesin charter rates from market fluctuations to grow our revenue. For example, in FY2005,FY2006 and HY2007, largely in response to higher charter rates in the spot market, ourshort-term charter rates had been revised upwards several times.

For administrative and cost efficiency, we engaged the ship agency services of BBR, acompany controlled by the Lee Family, to assist in handling various shipping administration,immigration, licensing as well as customs and clearance matters in Indonesia. In addition,BBR also provided our ship chartering services with vessel crew prior to the Invitation(please refer to the section entitled “Interested Person Transactions” of this Prospectus forfurther details on the transactions between BBR and our Group).

We transport mainly mining products for BRJ and other Indonesian customers, such asgranite mix aggregates quarried and mined in Indonesia, for use by the construction,infrastructure, property development and land reclamation industries mainly in Singaporeand, to a lesser extent, in Indonesia. To date, the granite mix aggregates transported for BRJhave been used in many prominent Singapore projects, such as the MRT Circle Line, ChangiInternational Airport Terminal 3 and in Housing Development Board estates as well as landreclamation sites. From time to time, we also transport heavy equipment, machineries andfinished goods for our customers. Serving mainly Singaporean and Indonesian customers,our vessels mainly ply Singaporean, Indonesian, Malaysian and Vietnamese waters.

(b) Transhipment services

Since March 2006, we have been providing transhipment services to third party customers. Wetransport coal mined in Indonesia to unrelated third party coal operators for their onwardtransportation to energy power plants in the South East Asia regions. There is a demand for suchservices as some waters are too narrow or shallow for bigger bulk carriers to manoeuvre.

In providing such services, BBR enters into long-term charter contracts with the third party coaloperators for and on our behalf. To formalise such an arrangement, we have on 13 September2007 appointed BBR as our agent in procuring long-term charter contracts with our customers.

Transhipment, with its faster turnaround due to shorter distance in the delivery of its service, booststhe Group’s revenue. In addition, the rates for transhipments are higher than charter rates as thescope of service provided extends beyond shipment to cover commitment of load to be shippedwithin a stipulated time.

Transhipment accounted for approximately 38.5 per cent. and 23.9 per cent. of our revenue fromour ship chartering business in FY2006 and HY2007 respectively.

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Ship Chartering Process

A schematic representation of the ship chartering process is illustrated below:-

�� Receipt of Customer Orders

Our Sales and Marketing Team receives and attends to enquiries from prospective customers.Upon receipt of customer orders, this Team will establish an understanding of the customers’requirements and budget. Thereafter, such orders will be forwarded to our Operations Team forassessment.

�� Assessment and Quotation

Our Operations Team will assess customer orders based on factors such as the level of risks facedby our vessels when plying the requested routes, the distance of the plying routes, the size ofvessels required, the cargo loading and discharging time, as well as the types of vessels andmaterials to be transported. For routes where the probability of facing rough sea conditions arehigh, we may refrain from providing our vessels for charter altogether. After careful assessment byour Operations Team that we are able to provide our vessels for charter based on the routesindicated by our customers, our Sales and Marketing Team will proceed with providing a pricequotation.

�� Confirmation of Contract

Once our customers have confirmed that our quotations are acceptable to them, we will enter intoa charter contract with them. The types of charter contract entered into will depend on ourcustomers’ preferences and needs. Please refer to the section entitled “Business Overview” of thisProspectus for more information on the types of charters provided by our Group.

�� Scheduling

Our Operations Team is responsible for overseeing the overall vessel scheduling for our fleet andcrew placement. Schedules are carefully planned in accordance with our customers and regulatoryrequirements, in order to achieve optimal utilisation rates for each of our vessels and to maximisetime and cost savings for each voyage undertaken by our vessels.

Receipt of Customer Orders

Assessment and Quotation

Confirmation of Contract

Commencement of Charter

Scheduling


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�� Commencement of Charter

Upon execution of the charter contract, we will commence the deployment of our vessels or haveour vessels delivered to our customers at the specified time and to the designated destination fortheir use, based on the terms and conditions stipulated in the charter contract.

For time charter contracts, prior to handing over of vessels to our customers, we conduct an “on-hire” survey jointly with our customers to document the condition of the vessels. This is to ensurethat these vessels are returned to us in similar conditions as they were in before thecommencement of the charter and to minimise any disputes arising therefrom.

Our Fleet

Over the years, we have expanded our fleet through the acquisition of tugboats and barges with greatercapacity and tailored for specific purposes. As at the Latest Practicable Date, we own 23 vessels,consisting of 11 tugboats and 12 barges to carry out our ship chartering business. In addition, we havealso chartered one tugboat and one barge from BBR. The power of our tugboats ranges from 1,000 bhpto 2,200 bhp and the size of our barges ranges from 210 ft to 300 ft. Save for a floating crane barge anda tugboat which are registered in Mongolia, all vessels owned by us are registered in Singapore. Weenjoy the tax-exempt shipping income status sanctioned under Section 13A of the Singapore Income TaxAct in respect of all our Singapore-flagged vessels.

The table below provides a brief description of the types of vessels we own:-

Tugboats(1)

Name of vessel Year Built/ Flag kw GT Classification or certification/Expiry Date

Bina Marine I 1997 2 x 395 kw 123 Germanischer Lloyd/Singapore 31 December 2007

Bina Ocean 8A 2005 2 x 480 kw 120 Germanischer Lloyd/Singapore 4 January 2012

Bina Ocean 9 2004 2 x 456 kw 120 Germanischer Lloyd/Singapore 31 July 2010

Bina Ocean 10 2005 2 x 471 kw 146 Germanischer Lloyd/Singapore 20 December 2010

Bina Ocean 11 2005 2 x 471 kw 142 Germanischer Lloyd/Singapore 15 November 2010

Bina Ocean 12 2005 2 x 480 kw 120 Germanischer Lloyd/Singapore 23 November 2011

Bina Ocean 15 2005 2 x 480 kw 120 Germanischer Lloyd/Singapore 6 December 2011

Bina Ocean 16 2005 2 x 758 kw 190 Germanischer Lloyd/Singapore 3 February 2008

Bina Ocean 17 2005 2 x 809 kw 270 Germanischer Lloyd/Singapore 12 January 2008

Bina Ocean 19 2006 2 x 470 kw 161 Nippon Kaiji Kyokai/Singapore 28 December 2011

Rikimaru No. 1 1977 1 x 551.65 kw 19.09 Mongolia Ministry of Road,Mongolia Transport and Tourism(2)/

12 December 2007


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Barges(1)

Name of vessel Year Built/Flag Size Classification orCertification/Expiry Date

Bina 88A 2006 240ft x 70ft x 16ft Germanischer Lloyd/Singapore 15 February 2012

Bina 89 2005 240ft x 66ft x 16ft Germanischer Lloyd/Singapore 12 July 2010

Bina 90 2005 240ft x 66ft x 16ft Germanischer Lloyd/Singapore 25 September 2010

Bina 91 2005 240ft x 66ft x 16ft Germanischer Lloyd/Singapore 21 August 2010

Bina 92 2006 240ft x 70ft x 16ft Germanischer Lloyd/Singapore 28 December 2011

Bina 95 2006 240ft x 70ft x 16ft Germanischer Lloyd/Singapore 10 January 2012

Bina 96 2006 300ft x 80ft x 18ft Germanischer Lloyd/Singapore 29 August 2011

Bina 97 2006 300ft x 80ft x 18ft Germanischer Lloyd/Singapore 30 November 2011

Bina 98 2005 230ft x 64ft x 14ft Germanischer Lloyd/Singapore 6 February 2008

Bina Marine 6 2007 240ft x 70ft x 16ft Germanischer Lloyd/Singapore 12 January 2008

Bina Marine 8 2007 240ft x 70ft x 16ft Germanischer Lloyd/Singapore 16 January 2008

Hayasaka No. 6 1990 40m x 18m x 3m Mongolia Ministry of Road,Mongolia Transport and Tourism(2)/

12 December 2007

Notes:-

(1) All these vessels are mortgaged to the relevant lenders providing the financing.

(2) Issued under the provisions of Chapter 3 of the Regulations for Registration of Ships 2003.

To the best of our Directors’ knowledge, save as disclosed under the section entitled “GovernmentRegulations” of this Prospectus, there are no regulatory requirements or environmental issues that maymaterially affect our utilisation of the above vessels.

Other than the two Mongolian-flagged vessels which are deployed for dredging purposes, all our tugboatsare installed with satellite surveillance systems, which enable us to track the routes and locations of ourvessels as well as monitor their speeds at all times for operational efficiency purposes and in keeping tothe expected time of arrival. The systems also enable us to locate our vessels in the event of piracy, serveas deterrence against any potential attacks on our vessels as well as to prevent fuel pilfering from ourvessels. We believe that this practice of installing surveillance systems on tugboats is not prevalent in theshipping industry and therefore distinguishes us from other ship owners and charterers of tugboats andbarges.


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Since coming on board in 2001, our CEO, Mr Sean Lee Yun Feng, had introduced various strategicoperational measures which have greatly improved the efficiency of our fleet of vessels. The measuresundertaken by him include the installation of surveillance systems in all our tugboats as mentioned in thepreceding paragraph, the acquisition of vessels with greater capacity, the adoption of fleet renewal policyand the implementation of a motivational reward system for our vessel crew. As a consequence of which,the frequency of the trips made by our vessels to their ports of destination had increased and our vesselswere consistently utilised at close to 100 per cent. for FY2004, FY2005 and FY2006 (please refer to thesection entitled “Fleet Utilisation” of this Prospectus for details on the utilisation of our vessels). BetweenFY2001 and FY2006, the combined ship chartering revenue of MP Shipping and Bina Marine increasedfrom approximately S$1.9 million to S$11.9 million.

New Vessels under Construction

The table below provides a brief description of the new tugboats and barges under construction for ourfleet as at the Latest Practicable Date. We expect to finance these vessels through cash flow fromoperations and external financing.

Year ofCommencement Expected

Name Shipyard of Construction Delivery Type

Bina Ocean 18 Far East Shipyard Co. Sdn Bhd 2006 Sep 2007 Tugboat

Bina Marine 5 Yong Choo Kui Shipyard Sdn Bhd 2006 Sep 2007 Tugboat

Bina Marine 7 Yong Choo Kui Shipyard Sdn Bhd 2006 Oct 2007 Tugboat

Bina Marine 9 Yong Choo Kui Shipyard Sdn Bhd 2007 Jan 2008 Tugboat

Bina Marine 11 Yong Choo Kui Shipyard Sdn Bhd 2007 Jan 2008 Tugboat

Bina Ocean 20 Forward Marine Enterprise Sdn Bhd 2007 Sep 2007 Tugboat

To be named Tuong Aik Shipyard Sdn Bhd 2007 May 2008 Tugboat

To be named Tuong Aik Shipyard Sdn Bhd 2007 May 2008 Tugboat

To be named Kaibuok Shipyard (M) Sdn Bhd 2007 Jun 2008 Tugboat

To be named Kaibuok Shipyard (M) Sdn Bhd 2007 Jun 2008 Tugboat

Bina 99 MP Shipyard 2007 Sep 2007 Barge

Bina Marine 10 MP Shipyard 2007 Oct 2007 Barge

Bina Marine 12 MP Shipyard 2007 Jan 2008 Barge

Bina 100 MP Shipyard 2007 Nov 2007 Barge

Vessel Acquisition

We continuously monitor the markets in which we operate to assess any acquisition opportunities. Beforeacquiring any vessels, we will assess the development and outlook of the market in which we operateand analyse, among other things, the value and earning potential of the vessels and the time required torecoup our capital investment.


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Prior to the establishment of MP Shipyard, we generally purchased our new vessels from independentthird parties. After the establishment of MP Shipyard, our vessels are generally built by MP Shipyard. Thepayment terms vary depending on the negotiated contract. Generally, periodic payments are made eachtime certain milestones in connection with the construction of the vessels are met, including the signing ofthe construction contract and the delivery of the vessel.

The purchase of our vessels is typically financed through bank loans that cover approximately 70 to 80per cent. of the purchase price of the vessels, with the balance paid from our internal resources. Thesepurchase loans are usually secured by way of, among other things, a mortgage over the relevant vessel,together with a charge or assignment over the earnings and insurances in relation to the relevant vessel,in favour of the lenders.

Sale-and-leaseback of vessels

In line with our objective to expand and diversify our fleet in a cost-effective manner, we have adopted thearrangement of sale-and-leaseback of vessels as part of our business model. Our Group would generallyonly sell existing vessels in its fleet under this sale-and-leaseback arrangement for those vessels that ourGroup wishes to be re-flagged as Indonesian vessels for purposes of its operations. This arrangementserves a two-pronged purpose. Firstly, it allows us to reduce our gearing and improve our cash flow, whileexpanding the fleet size that we are currently operating since we will continue to have the full commercialand operational control of our vessels. In this way, we are able to deploy capital more efficiently towardsdeveloping our existing businesses and acquiring new related businesses. Secondly, as we are notentitled to own Indonesian flagged vessels (since such vessels may only be owned by Indonesians), byembarking on a sale-and-leaseback strategy, we are able to operate Indonesian flagged vessels and availourselves of the operational cost benefits accorded to such vessels which ply Indonesian waters. To thisend, MP Shipping had in October 2006 sold to BBR, a company established in Indonesia and controlledby the Lee Family, a tugboat named “Bina Ocean 3” and a barge named “Bina 83” at prevailing marketrates. The sale was completed in March 2007 and the vessels were subsequently leased back to MPShipping from April 2007. Please refer to the section entitled “Interested Person Transactions” of thisProspectus for further details on the transactions between BBR and our Group.

Vessel Disposal

We review our fleet on an annual basis, so as to monitor our operational needs against maintenancecosts. In order to maintain a quality fleet and to minimise expenditure on major repair and maintenanceworks, we constantly dispose of older vessels from our fleet and replace them with new vessels. Our fleetis relatively young with the majority of our vessels being less than five years old. With our vessels wellmaintained, we are generally able to sell them at a profit. In FY2004, FY2005, FY2006 and HY2007, thegain from such vessel disposal as a percentage of our total profit before tax was approximately 6.0 percent., 37.9 per cent., 11.6 per cent. and 25.3 per cent. respectively. With this fleet renewal strategy, weown a more efficient fleet of young vessels that are able to consistently deliver reliable services to ourcustomers.

Fleet Utilisation

As at the Latest Practicable Date, we operate 25 vessels comprising 12 tugboats and 13 barges. Theutilisation rates for our vessels for each of FY2004, FY2005, FY2006 and HY2007 are as follows:-

FY2004 FY2005 FY2006 HY2007

Fleet utilisation rate (approximately) 99% 99% 99% 99%

Our fleet utilisation is calculated based on the number of days in which our operating vessels are inoperation over the number of actual calendar days. During the days when our operating vessels are not inoperation, they mainly undergo maintenance and repair works or statutory audit by the classificationsocieties as required by the International Management Code for the Safe Operation of Ships and forPollution Prevention, promulgated by the International Maritime Organisation. Please refer to the sectionentitled “Government Regulations” of this Prospectus for further details on the regulations affecting ouroperations.


Our ship chartering business accounted for approximately 100 per cent. of our total revenue respectivelyin each of FY2004 and FY2005 and 74.9 per cent. and 49.5 per cent of our total revenue in FY2006 andHY2007 respectively.

SHIPYARD

Our shipyard activities are carried out through our subsidiary, MP Shipyard, in our shipyard located inBatam, Indonesia. Though incorporated only in February 2005, MP Shipyard has successfully equippeditself with ship building capabilities at its premises and commenced ship building operations in December2005. Apart from building vessels to support the needs of our ship chartering operations, MP Shipyardalso receives ship building orders from third party customers through Bina Marine. MP Shipyard currentlybuilds tugboats and barges.

While construction of the shipyard has yet to be fully completed, facilities, such as ship plates bendingmachines, shearing machines, welding amenities, as well as overhead and mobile cranes of up to 80tonne lifting capacity have already been installed on the site and ship building operations havecommenced. While we carry out the planning, preparation, procurement, supervisory and quality controlaspects of a ship building job in-house, we generally outsource the tasks of design and construction ofour vessels to our sub-contractors, which include fabrication, assembly, machining, mechanical, pipingand electrical outfitting, carpentry and hull testing. MP Shipyard generally obtains key ship buildingmaterials and equipment for use in its ship building operations through Bina Marine.

We sell our vessels to external customers as well as build vessels to support our ship charteringoperations. We may also from time to time, sell vessels which we had originally built for our shipchartering operations to third parties. This enables us to improve our cash flow management.

Since the shipyard commenced operations in December 2005 up to the Latest Practicable Date, we havecompleted the construction of 22 vessels comprising five tugboats and 17 barges of different types andvarious sizes, of which two tugboats and ten barges were sold to third parties with the remaining vesselsdelivered to our subsidiary, MP Shipping.

As at the Latest Practicable Date, we have eleven vessels under construction at our shipyard.

MP Shipyard is in the process of equipping itself with the requisite facilities to build vessels of highervalues that can reap better profit margins. Barring unforeseen circumstances, it is intended that by end2007, the shipyard will be fitted with workshops equipped with CNC plasma cutting machines, overheadand modern gantry cranes and the necessary modern equipment to enable it to carry out steel panelassembly and fabrication inside the workshops. Such workshops will enable works to be carried out undermore stringent and controlled working environments, thereby enhancing the quality of the end products.At such time, our shipyard will also be equipped to carry out the fabrication of massive steel platforms forjack-up oil rigs in supporting offshore oil and gas exploration and production activities.

As our shipyard commenced operations in December 2005, there was no revenue generated from ourshipyard business in FY2004 and FY2005. In FY2006 and HY2007, our shipyard business accounted forapproximately 25.1 per cent. and 50.5 per cent. of our total revenue respectively.

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Ship Building Process

A schematic representation of the ship building process is illustrated below:-

Receipt of Customer Enquiries

Fabrication and Assembly

Hull Testing, Blasting and Painting

Launching

Outfitting and Commissioning

Testing and Trial

Vessel Delivery

Quality Inspection and

Testing

Project Planning and Preparation

Design

Procurement

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�� Receipt of Customer Enquiries

Upon receipt of enquiries from prospective customers by our Sales and Marketing Team, our Salesand Marketing Team will forward such enquiries to our Engineering Team, which will then holdmeetings with such customers to establish an understanding of their requirements and budget.Based on information provided by our customers such as the type of cargo to be transported bythe vessel, the deadweight capacity required, the distance the vessel is expected to ply without re-fuelling and the speed at which the vessel is expected to travel, our Engineering Team willdetermine the dimensional and design specifications of the vessels to be built.

�� Design

In most instances, our customers will provide us with the vessel designs, and we will, whereapplicable, recommend changes to the drawings so as to improve on the functionality of the designas well as to achieve optimal production efficiency. In certain instances, our Engineering Teamtogether with an appointed naval architect, undertake the actual conceptualisation and design ofvessels. In such an event, our naval architect will produce detailed drawings of the vessel inaccordance with the agreed dimensional and design specifications, taking into account themachinery, equipment, parts and materials to be fitted in the vessel.

After reviewing the technical aspects of the design to ensure that it is consistent with ourcustomers’ requirements, our Engineering Team will submit the drawings to our customers for pre-approval. Thereafter, the drawings will be submitted to the relevant classification societies for finalapproval.

�� Project Planning and Preparation

Upon approval of the designs by our customers and the relevant classification societies, we willenter into formal contracts with our customers, upon which project planning and preparation workswill commence.

The project planning and preparation function of our ship building process is overseen by ourEngineering Team. The Engineering Team will develop a ship building schedule which will indicatea timetable for each stage of the ship building process. This schedule is strictly adhered to, in orderto ensure that the vessel may be delivered to our customers on time. Depending on the complexityof the ship building requirements, we may appoint an external consultant to assist us in ourprojects.

�� Procurement

Upon receiving the schedule of works for the project, our Procurement Team obtains from ourEngineering Team the list of machinery, equipment, parts and materials required and makes thenecessary arrangements for their procurement. Upon receipt of the machinery, equipment, partsand materials, such as steel, cables and engines, we commence the construction of the vesselthrough the appointed sub-contractors to fabricate and assemble the steel structures of the vesseland to undertake the electrical, mechanical and piping installation as well as joinery works.

�� Fabrication and Assembly

Steel plates are cut into different shapes and sizes, in accordance with design specifications. Thesepieces of steel are then fitted and welded together to form panels, and strengthened by angle bars.These panels are then assembled into major block structures, which are then welded together toform the hull of the vessel. Thereafter, for the self propelled vessels such as tugboats, thepropulsion systems, engine machinery as well as electrical and piping systems are installed in thehull of the vessel. The vessel is then fitted with ancillary equipment such as navigational,surveillance and communications systems, purifiers and air-conditioning. The living quarters of thevessel is then fitted with carpentry works, furnishing and fixtures.


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�� Hull Testing, Blasting and Painting

Various tests, such as x-rays, ultrasonic and magnetic particle inspection, air and hydro tests, areundertaken to assess the structural integrity of the hull. After the tests are completed, high-pressure blasting equipment is used to prepare the hull for blasting and painting. Thereafter, thevessel is prepared for launching.

�� Launching

The vessel is launched from dryland to water using either steel launching beams or air bags. Afterlaunching, the vessel is brought to the berth for outfitting and for commissioning.

�� Outfitting and Commissioning

The vessel is then outfitted with other ancillaries such as mooring machines, steering gear, anchorchains and towing hooks. The vessel, together with its various systems, is then commissioned. Adock trial is also undertaken to ensure that the vessel conforms to the contractual designspecifications and requirements, as well as the design specifications and requirements of therelevant classification society.

�� Testing and Trial

Two separate trials are carried out on the newly constructed vessel.

The first trial, conducted by the shipyard, is to ensure that the vessel’s speed and maneuverabilityis in accordance with specifications. It also tests the workability of the various systems in thevessel.

An official trial is then conducted on the vessel at sea, in the presence of our customers’representatives and a surveyor from the relevant classification society. The purpose of the officialtrial is to ascertain the seaworthiness and performance of the vessel, its machinery and equipmentand to determine if the vessel was built in accordance with our customers’ specifications.

If the results of the trials show that the vessels deviate from our customers’ specifications, we willcarry out the necessary works to rectify such non-conformities. Upon the completion of the works,a re-trial is conducted to ensure that the vessel fully conforms to all relevant requirements. Upon asuccessful trial, statutory certificates are issued by the relevant classification societies, certifyingthat the vessel conforms to specifications and the standards and requirements set out in thevarious international conventions governing the maritime industry.

�� Vessel delivery

After the issuance of the certificates by the classification societies, the vessel is delivered to ourcustomers.

�� Quality Inspection and Testing

Quality control is monitored at all stages of the ship building process. Please refer to the sectionentitled “Quality Assurance” of this Prospectus for more details on the quality control measuresundertaken by our Group in the ship building process.

Production Facilities

Our shipyard is located in Batam, Indonesia with a total land area of approximately 348,705 sq m and aseafront of approximately 650 m. By the end of 2007 one drydock and related facilities are expected to besubstantially completed. Construction of a second drydock, jetty and related facilities is expected tocommence at the end of 2007 or beginning of 2008. On full completion, our shipyard operations willinclude the provision of ship repair, maintenance and conversion services as well as two drydocks of


150 x 40 x 8m and at least 110 x 30 x 6m in dimension respectively, a jetty and related facilities. Ourcurrent facilities allow us to accommodate up to ten vessels of 150 metres in length for ship building withno facilities for ship repair. However, once completed, our shipyard will be able to accommodate up toeight vessels of 150 metres in length for ship building and up to five vessels of varying lengths ofbetween 50 metres and 130 metres for ship repair at any one time and will be one of the larger shipyardsin Batam, Indonesia. Please refer to the section entitled “Future Plans” of this Prospectus for additionaldetails.

Based on our shipyard currently being able to accommodate up to ten vessels of 150 metres in length forship building at any one time, we estimate that our shipyard facilities were utilized on average at a rate of95 per cent. during HY2007.

QUALITY ASSURANCE

We believe quality control is important to our business and we place strong emphasis on all aspects ofquality. We observe quality control at all stages of the ship chartering and ship building processes andhave implemented stringent quality control procedures in order to provide quality service to our customersand achieve maximum customer satisfaction. For our ship chartering operations, we have been certifiedto be in compliance with ISO 9001:2000 in February 2007.

Ship Chartering

In our ship chartering operations, we have stringent quality controls in place which emphasise on theproper maintenance of our vessels, as required by the Merchant Shipping Act (Chapter 179 ofSingapore), and improving efficiency in the use of our vessels.

Regular inspection and maintenance of our vessels

A log book is maintained for each and every of the vessels operated by us by our Operations Team torecord the movement of our vessels. The Master and Chief Engineer of our vessels are responsible forensuring that our vessels are in operational condition at all times. Regular inspection and maintenance iscarried out onboard our vessels by our personnel, to ensure that they are in good working condition. TheChief Engineer is responsible for monitoring and updating our Operations Team on the condition of thevessels. This is achieved through keeping records and, if requested, submitting status reports to ourOperations Team, setting out any repair or maintenance work that might be required for the vessels.Routine maintenance and repair works on hull machinery and equipment are performed by our ChiefEngineer and vessel crew. For more complex or major repairs, the Chief Engineer will, in consultation withthe Operations Team, assess the condition of the vessel and decide on the relevant follow-up or remedialactions to be undertaken when the vessel returns to port.

In addition, our engineers inspect the vessels when they return to port. Thereafter, the engineers willmake a recommendation and seek approval for any repairs from our Operations Team. All substantialmodifications, repairs or additions to our fleet are properly documented for future reference.

Classification of our vessels

All our vessels are subject to classification by a member of the International Association of ClassificationSocieties (“IACS”). These classification societies certify that the vessels have been built and maintained inaccordance with the rules of the classification society. In addition, they also certify that the vesselscomply with all applicable rules and regulations of the flag state as well as with international conventionsof which that state is a member. Such certifications are required as evidence that the vessels are classmaintained and in seaworthy condition.

Annual inspections are conducted on our vessels by the classification societies to fulfill the requirementsof these classification societies and the MPA. In addition to these annual inspections, our vessels aredrydocked for inspections every two and half years and are subject to special inspections every fiveyears. Details of these inspections are as follows:-

(a) An annual inspection of the vessel is required. This involves a general inspection of the hull as wellas the safety equipment on the vessel.

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(b) An intermediate inspection is also required of a vessel every two and half years. For example, thismay involve the physical inspection of ballast tanks and void spaces. Drydocking may beundertaken at this time as two drydocking inspections are required for each five year period.

(c) Every five years, a drydocking inspection is required on the hull and machinery. This has to becompleted before the International Load Line survey is conducted, which is also required every fiveyears to attest to the vessel’s general seaworthiness. Please refer to the section entitled“Government Regulations” of this Prospectus for further details on the International Load Linecompliance.

We are required to undergo the above inspections in order to maintain the class certificates for ourvessels, which in turn are required for submission to the MPA if the certificates of registration of ourvessels are to be maintained. Without the inspections, we will not be able to maintain the relevant classcertificates and our vessels will be de-registered and prohibited from operating. Please refer to thesection entitled “Government Regulations” of this Prospectus for more details on the certificates ofregistration.

Fleet renewal policy

We have adopted a policy of continuously renewing our fleet of vessels, with the majority of our vesselsbeing less than five years old. This fleet renewal policy has allowed us to minimise expenditure on majorrepair and maintenance work, and as such, our vessels are more cost efficient and are less prone tobreakdowns, thereby ensuring reliable quality services to our clients. The policy would also allow us todispose of any vessels which are in excess of our requirements.

Shipyard

Ship building process

Quality control is observed at all stages of the ship building process. At each stage of construction, ourproject manager will liaise with our customers’ representatives, contractors, the naval architect andsurveyors of the classification societies on the finalisation of the design of the vessel as well as to updatethem on the progress of all the works in the yard and workshops, including those undertaken by our sub-contractors as well as the engineering aspects of the project. Our project manager as well as ourcustomers’ representatives, contractors, the naval architect and surveyors of the classification societiesare frequently present on-site to supervise the ship building process to ensure that the works are carriedout in accordance with relevant standards and approved specifications and drawings. Mindful in keepingcustomers’ dissatisfaction to a minimum, we will rectify any non-conformity in construction, material orworkmanship to our customers’ specifications, when notified by our customers’ representatives andensure that such rectifications are incorporated in a safe and cost-effective manner. Throughout theperiod of construction, the necessary inspections of the vessel, its machinery, equipment and outfittingsare carried out by classification societies to ensure that the construction of the vessel is constructed inaccordance with the contract and is fit for the purpose intended. Further, to ensure the upkeep andoptimum usage of our equipment and machinery, periodic inspections are carried out to ensure that ourequipment and machinery are in good working condition as well as operated safely.

As a result of our quality control measures, none of the vessels built by us was rejected by our customersin FY2006 and HY2007.

After-sales service and customer support

As part of our quality assurance, we also provide after-sales service and customer support. After thedelivery of a newly constructed vessel to our customers, we will assist our customers should they haveany queries or encounter any problems with the vessel.


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STAFF TRAINING

We strongly believe our employees are one of our important resources and key assets significant to thesuccess of our business. Hence, we place great emphasis on constant training and retraining of our staffto ensure that they are equipped with the necessary skills and knowledge to serve our customers.

Our training programmes can be classified into the following main categories:-

(a) Orientation training

All new employees are subject to a probation period, where they undergo orientation programmesto familiarise themselves with our general working environment, corporate culture, product andservice knowledge as well as quality requirements. These programs are conducted in-house withemphasis on matters relating to employee conduct and discipline, housekeeping, quality and safetyawareness. Thereafter, the employees are directed to their respective supervisors for more specificon-the-job training.

(b) On-the-job training

On-the-job training is managed by the employees’ immediate supervisors. Immediate supervisorswill closely monitor individual staff and impart skills and knowledge that are necessary for them toperform their job responsibilities. Our employees are also regularly taught to ensure that they areequipped with the necessary skills and knowledge for their respective job functions and theirperformance attain our desired standards.

For our ship building operations, as and when the need arises, we may invite the suppliers of ourmachinery and equipment to our premises to train our staff on the operation of such machinery andequipment. This is to ensure that all our personnel are qualified to operate these machinery andequipment and are capable of adhering to stringent safety standards.

Our staff training costs for FY2004, FY2005, FY2006 and HY2007 were insignificant.

MAJOR CUSTOMERS

For our ship chartering business, our customers and end-users are mainly companies involved in themining, commodity trading, shipping, construction, infrastructure, property development and landreclamation industries.

For our ship building business, our customers are mainly companies involved in the shipping industry.

The table below sets forth our customers which accounted for five per cent. or more of our total revenuefor each of FY2004, FY2005, FY2006 and HY2007:-

Customer Percentage of total revenue (%)FY2004 FY2005 FY2006 HY2007

Ship Chartering

BRJ(1) 92.6 90.0 36.4 31.8

PT. Mitra Bahtera Segarasejati 3.7 7.7 3.2 0.7

Golden Light Pacific Limited – – 5.9 2.8

Flame SA(2) – – 13.4 –

Glencore International AG(2) – – 9.7 3.7


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Customer Percentage of total revenue (%)FY2004 FY2005 FY2006 HY2007

Shipyard

Chong Ang Shipping & Trading Pte Ltd N.A. N.A. 7.1 –

Lim Chye Heng Pte Ltd N.A. N.A. 7.3 –

PT. Citra Armada Nusantara Shipping N.A. N.A. 5.2 11.8

PT. Pei Sherin Kapuas Raya N.A. N.A. 5.5 –

Hamco Marine Pte Ltd N.A. N.A. – 5.4

PT. Perusahaan Pelayaran Rusianto Bersaudara N.A. N.A. – 14.3

PT. Pelayaran Kapuas Jaya Samudera N.A. N.A. – 15.7

Notes:-

(1) The decrease in BRJ’s percentage contribution to our total revenue from 92.6 per cent. in FY2004 to 90.0 per cent. in FY2005was due to the diversification of the Group’s customer base to unrelated third parties. Whereas the decrease in BRJ’spercentage contribution to our total revenue from 90.0 per cent. in FY2005 to 36.4 per cent. in FY2006 was mainly due tocontributions from transhipment and ship building businesses which commenced in FY2006 and increased contribution fromunrelated third party customers.

(2) Flame SA and Glencore International AG are customers of PT Riau Baraharum, a coal producer in Indonesia. BBR, as ourGroup’s agent, entered into a transhipment contract with PT Riau Baraharum with a back-to-back arrangement with MPShipping. Our Group provides transhipment services to tranship the coal of PT Riau Baraharum from the loading port atMumpa in Riau to Riau Anchorage, where the coal is loaded onto Flame SA and Glencore International AG’s respective bulkcarriers. Pursuant to arrangements between the parties, we would invoice Flame SA and Glencore International AG directlyupon completion of the respective transhipment jobs.

Without any curtailment in chartering demand from BRJ, a company controlled by the Lee Family, wemade great stride in significantly diversifying our customer base over the years to include othercustomers, with their combined contribution to our total revenue increased from approximately 7.4 percent. in FY2004 to approximately 63.6 per cent. in FY2006 and 68.2 per cent. in HY2007. For moredetails on our transactions with BRJ, please refer to the section entitled “Interested Person Transactions”of this Prospectus.

Save as disclosed above, none of our Directors or Controlling Shareholder or their respective Associateshas any interest, direct or indirect, in any of the above major customers.


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MAJOR SUPPLIERS

We select our trade suppliers based on their reputation, reliability, price, purchase terms, timely deliveryof their products and the quality of their products and services. We do not enter into long-term writtencontracts with any trade supplier.

The table below sets forth our trade suppliers which accounted for five per cent. or more of our total tradepurchases for each of FY2004, FY2005, FY2006 and HY2007:-

Supplier Services/Products Percentage of our total purchases (%)Supplied FY2004 FY2005 FY2006 HY2007

Ship Chartering

Inter Terminal Services Diesel fuel 9.5 2.2 1.3 1.1

Kim Tiong Enterprises Pte Ltd Diesel fuel 52.3 23.7 10.2 6.1

Otto Industrial Co Pte Ltd Ship repair 9.8 – – –

Ship Building

Asia Enterprises (Private) Ltd Steel N.A. N.A. 13.4 37.0

HG Metal Manufacturing Ltd Steel N.A. N.A. 33.6 23.3

Our Directors believe that our Group is not dependent on any single supplier as the materials andequipment supplied by the above major suppliers can be easily sourced from other alternative suppliersin the market.

Save as disclosed above, none of our Directors or Controlling Shareholder or their respective Associateshas any interest, direct or indirect, in any of the above major suppliers.

CREDIT POLICY

Credit terms from our suppliers

The payment terms granted by our major suppliers are generally between 60 to 90 days, varying fromsupplier to supplier and are also dependent, inter alia, on our relationship with the suppliers and the sizeof the transactions.

Our average trade payables turnover days for each of FY2004, FY2005, FY2006 and HY2007 were asfollows:-

FY2004 FY2005 FY2006 HY2007

Average trade payables turnover days 75 108 122 114

Credit terms to our customers

For our ship chartering business, we typically grant credit terms of about 14 days to our existing thirdparty customers and on demand to BRJ. The length of the credit terms extended to our existing thirdparty customers is dependent on the reputation, reliability and payment history of such customers. Fornew customers, we will conduct background checks and assessment of their creditworthiness andfinancial position before extending any credit to them. Charter fees will normally be collected up front fromthe new customers. Occasionally and upon satisfactory background checks, we may grant credit terms of30 days to a customer.

For our ship building business, the payment terms vary depending on the negotiated contract. Generally,our customers are required to pay twenty per cent. of the contract value upon signing of the contract andthe balance upon delivery of the vessel. In most cases, we would require our customers to make paymentbefore we commence work.


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Outstanding payments will be closely monitored by our Finance and Sales and Marketing personnel. Ourpolicy of making provisions for doubtful debts is based on the age and our assessment on the collectibilityof the outstanding debts. Specific provisions for writing-off of bad debts may be made if we fail to collectpayment despite efforts and follow-ups with the customers on overdue payments or when we are certainthat our customers are unable to meet their financial obligations and we consider the amounts to be non-recoverable. In practice, we liaise with customers with outstanding receivables to understand theirsituation and propose various options that may facilitate the payments. If the outstanding receivablescannot be resolved amicably, we may then take legal action to collect the outstanding receivables.

We did not make any provision for doubtful debts in each of FY2004, FY2005, FY2006 and HY2007although in FY2004, we wrote-off a bad debt of S$17,500 for which provision had been made in FY2002.Our average debtors turnover days for each of FY2004, FY2005, FY2006 and HY2007 in respect of thirdparty customers were as follows:-

FY2004 FY2005 FY2006 HY2007

Average trade receivables turnover days 30 3(1) 32 23

Notes:-

(1) The low trade receivables turnover of three days in FY2005 was attributed to the prompt payment of charter fees from ourcustomer who was given only 14 days’ credit term.

INVENTORY MANAGEMENT

Shipyard

Our inventory comprises mainly ship building materials such as steel plates, consumables and spareparts.

For FY2006 and up to the Latest Practicable Date, we had not experienced any major incidents ofpilferage, loss of inventory or damaged or obsolete inventory.

Our inventories are stated at the lower of cost and net realisable value. Cost is determined on a first infirst out basis and comprises all costs of purchases and other costs incurred in bringing the inventories totheir present location and condition. Net realisable value is the estimated selling price in the ordinarycourse of business less the estimated cost of completion and the estimated cost necessary to make thesale.

We generally do not hold stock and purchase stock based on project requirements. Our project teamwould estimate the stock required for a project and we would procure such stock as and when requiredaccording to the production schedule and requirements. Further, balance of stock at the end of a project,if any, could be utilised for other projects. As a result of such policy, we do not generally have to makeprovisions for stock obsolescence. For FY2006 and HY2007, there were no provisions for stockobsolescence or stock write-off.

Our average inventory turnover days for FY2006 and HY2007 was 39 days and 37 days respectively.

We conduct monthly internal stock takes as part of our review and preparation for our monthly stockreport. We also perform annual stock takes in the presence of our external auditors.

SALES AND MARKETING

Our Directors believe that our Group has a dedicated Sales and Marketing Team which is responsive tomarket developments and the needs of our customers. Our Sales and Marketing Team is led by our CEO,Mr Sean Lee Yun Feng, who is supported by our Director (Shipping, Marketing and Operations) andDirector (Shipyard Administration), Mr Irryanto, and two staff.


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Our Sales and Marketing Team receives and attends to enquiries from prospective customers and seeksto establish an understanding of their budget and requirements. It is also responsible for solicitingfeedback from our existing customers of the services rendered and/or vessels delivered by us andmaintaining and building relationships with such customers. To ensure customer satisfaction, our Salesand Marketing Team also follows up with our customers for the entire duration of their ship chartering orship building contracts and addresses any queries, complaints or difficulties that they may face duringthat period of time.

As we constantly provide quality and reliable services at competitive price and maintain goodrelationships with our customers, we are able to secure new contracts through referrals from our existingcustomers. In addition, our Group also establishes new contacts through international ship brokers suchas Simpson Spence and Young (based in Indonesia) and Clarkson Asia (based in Singapore).

Ship Chartering

For our ship chartering operations, marketing efforts expended in the past had been minimal as thedemand for our ship chartering services has been continually high. This is mainly attributable to the factthat a large proportion of our ship chartering revenue came from servicing the needs of BRJ, a companycontrolled by the Lee Family and which, together with its subsidiaries and certain Associates of the LeeFamily, has an established network of Indonesian and Singaporean customers from various industries.We have been and, in light of the first right of refusal in transporting its cargoes for a period of two yearsgranted to us by BRJ on 13 September 2007, are expected to continue receiving a stable and constantstream of income from BRJ for our ship chartering business.

Notwithstanding the captive chartering business to be procured from BRJ, we have stepped up our salesand marketing efforts in recent months to further expand and diversify our customer base. We intend tosource for new customers in other parts of Asia other than Indonesia and broaden our end-user base byextending our ship chartering services to customers in the commodity trading and marine logisticsindustries. We are also making concerted efforts to procure additional long-term transhipment contracts,in order to further expand our revenue base.

Over the years, we have diversified our customer base to include customers other than BRJ. We maintaingood relationships with such third party customers. Our third party customers (excluding BRJ) accountedfor approximately 7.4 per cent., 10.0 per cent., 51.4 per cent. and 35.7 per cent. of our ship charteringrevenue for FY2004, FY2005, FY2006 and HY2007 respectively. BRJ accounted for 92.6 per cent., 90.0per cent., 48.6 per cent. and 64.3 per cent. of our Group’s ship chartering revenue for FY2004, FY2005,FY2006 and HY2007 respectively.

Shipyard

For our ship building operations, we market our services mainly to local and overseas customers involvedin the shipping industry. We constantly make inquiries with our existing or prospective customers as towhether they have plans to expand their fleet through the construction of additional vessels. We also usethese opportunities to update our customers on our expanding capabilities.

As part of our sales and marketing strategy, we participate in exhibitions such as Asia Pacific Maritime2006 held in Singapore in order to promote our ship building capabilities and to increase our exposureand awareness of the development in the industry. Such exhibitions provide us with a platform to collaterelevant market information and further provide us with an opportunity to meet potential customers andsuppliers, to increase our profile as well as to gain publicity. We plan to participate in more of suchexhibitions to be held in Singapore or in the region in the future.


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INSURANCE

We have obtained insurance coverage for all our vessels in respect of hull and machinery, war risks andloss of vessel as well as Protection & Indemnity (“P & I”) insurance. Our Group’s Marine Hull policycovers, inter alia, physical damage to the vessel and its machinery and equipment. Our War Risks policycovers, inter alia, damage to the vessel caused by wars, strikes and riots. Our P & I policy coverspersonal injury and illness, cargo claims, collision, third parties’ liabilities and oil pollution.

We have also obtained workmen’s compensation insurance to provide coverage for our direct hiredworkers and employees working in Singapore (as stipulated under the Workmen Compensation Act(Chapter 354) of Singapore). As our shipyard has more than ten employees, MP Shipyard is coveredunder JAMSOSTEK, a protection scheme for employees under which employees receive compensation incash or remuneration for a portion of income which was lost or reduced due to work accident, illness,pregnancy, giving birth, old age or death.

Our Group maintains insurance against fire for the office premises in Singapore. We also maintainproperty all-risk insurance plus civil commotion but excluding earthquake, volcanic eruption and tsunami,for our shipyard in Batam, Indonesia.

We do not separately obtain insurance for all workers hired by MP Shipyard’s sub-contractors in Batam,Indonesia as the sub-contractors are required to provide insurance for such workers. We would ask suchsub-contractors for verification of their insurance coverage.

We perform an annual review on the insurance coverage to ensure that it adequately satisfies both theregulatory and business requirements, and may increase the coverage if we deem it necessary andappropriate.

We have not experienced any difficulties obtaining or renewing our insurance policies. We have not as atthe Latest Practicable Date made any material claims under our insurance policies save for claims madein respect of two of our vessels which were hijacked. In January 2003, two of our vessels were hijackedwhile traveling from Pekan Baru, Indonesia to Bintan, Indonesia. We claimed against our insurance for anaggregate amount of S$1,600,000. We subsequently recovered the two vessels and paid an aggregateof approximately S$300,000 to the insurance company to have ownership of the two vessels transferredback to us.

As at the Latest Practicable Date, our Directors believe that the policy specifications and insured limits ofthe abovementioned insurances are in line with normal commercial practice. Our Directors believe thatthe coverage from these insurance policies is adequate for our present operations. However, significantdamage to our operations or any of our properties, whether as a result of fire and/or other causes, maystill have a material adverse impact on our results of operations or financial condition.

INTELLECTUAL PROPERTY

We do not have any patents, licences or trademarks on which our business or profitability is materiallydependent. We have not paid or received any royalties for any licence or use of any intellectual property.

As at the Latest Practicable Date, we have not and have no intention of registering our Group’s logo asfeatured on the cover of this Prospectus as a trade mark.


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GOVERNMENT REGULATIONS

Our business is subject to various government laws and regulations in Singapore as well as internationalconventions which apply to ships registered under the Singapore flag such as:-

(a) Merchant Shipping Act (Chapter 179) of Singapore (“MSA”)

Our fleet of vessels are subject to the provisions of the MSA. They are registered with the MPA inaccordance with the MSA in order for them to operate under the Singapore flag. The MSAregulates the various aspects of merchant shipping such as:-

� registration of ships;

� manning and certification of qualified persons;

� crew matters;

� survey and safety of ships;

� inquiries and investigations of ship officers and shipping casualties;

� delivery of goods;

� liability of shipowners;

� wreck and salvage of ships; and

� legal proceedings governing ships subject to the MSA.

Save for the two Mongolian-flagged vessels, our fleet of vessels are registered under theSingapore flag and have been issued with certificates of registration by the MPA. These certificatesare only issued to vessels which have met the requirements specified in the MSA for registration.

(b) Prevention of Pollution of the Sea Act (Chapter 243) of Singapore (“PPSA”)

The PPSA gives effect to the International Convention for the Prevention of Pollution from Ships,1973 (“MARPOL”), as added to by the protocol of 1978. MARPOL is one of the conventionsadopted by the International Maritime Organisation (“IMO”). The provisions of the PPSA seek toprevent and minimise pollution from vessels through the discharge of oil, refuse, waste matter,plastics, trade effluent and other marine pollutants. Pollution from these sources may arise fromaccidents or even routine marine operations. The PPSA provides that vessels are to keep record ofall discharges of oily mixtures and other discharges and to report any discharge of harmfulsubstances. In the event of such a discharge in Singapore waters, the owners would be liable topay the costs as prescribed by the MPA to remove or reduce the contamination caused. MARPOLalso prescribes the regulations relating to the emission of gases from ship exhausts and ozonedepleting substances. Where applicable, our vessels are in compliance with the PPSA.

(c) Merchant Shipping (Civil Liability and Compensation for Oil Pollution) Act (Chapter 180) ofSingapore (the “CLCA”).

Our vessels are subject to the CLCA, which gives effect to the International Convention on CivilLiability for Oil Pollution Damage 1992 (the “CLC”) and to the International Convention on theEstablishment of an International Fund for Compensation for Oil Pollution Damage 1992.

The CLCA provides that owners of vessels which cause damage in the territory of Singapore bycontamination resulting from the discharge or escape of oil shall be liable for such damage, thecost of any measures taken after such discharge or escape for the purpose of preventing orreducing such damage and for damage caused in the territory of Singapore by the measures sotaken. The CLCA also provides for the limitation of liability for damage caused by the discharge orescape of oil and for the availability of an international fund for compensation to the personsuffering the damage caused. Such international fund is contributed to by importers as well asreceivers of oil.


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Singapore is a council member of IMO, an international organisation which aims to encourage andfacilitate the general adoption of the highest practicable standards in matters concerning maritime safety,efficiency of navigation and prevention and control of marine pollution from ships. As such, Singaporehas acceded to various international conventions made under the auspices of the IMO, such as:-

(a) International Convention for the Safety of Life at Sea 1974 (“SOLAS 1974”)

The IMO also adopted the SOLAS 1974, which specifies the minimum standards for the building,equipping and operations of vessels. Some standards include the requirement for the installation ofthe fire-fighting systems, machinery and electrical equipment on board a vessel which are essentialfor its safe operation under various emergency conditions. It is mandatory for vessels of 500 tonnesGT and above flying under the countries which are signatories to SOLAS 1974 to comply with itsrequirements. The compliance of vessels over 500 tonnes GT with SOLAS 1974 is assessed byvarious accredited classification societies which are members of the IACS. The certificates issuedto our vessels by our classification societies are:-

� safety equipment and safety radio certificates which certify that our vessels have met thestandards under SOLAS 1974 in respect of safety; and

� safety construction certificates which certify that our vessels are designed, constructed andmaintained in compliance with the requirements of an accredited classification society.

Our barges, which are non-equipped vessels, are not required to obtain the above certificatesunder SOLAS 1974.

In addition, an amendment to SOLAS 1974 which will be applicable to vessels requiring the firstsafety equipment survey after 1 July 2004 or by 31 December 2004, whichever is earlier, requiresthat automatic identification systems that are capable of providing information about a vessel toother vessels and to coastal authorities be fitted on board vessels. All vessels of 300 tonnes GTand above but less than 50,000 tonnes GT are to be fitted with these systems on internationalvoyages. We are in compliance with this amendment to SOLAS 1974.

(b) Global Maritime Distress Safety System (“GMDSS”) Regulations

The GMDSS Regulations constitute part of SOLAS 1974. It applies to all equipped vessels of 300tonnes GT and above from 1 February 1999. Vessels of such tonnage must be able to transmitship-to-shore distress alerts in at least two separate and independent manners under the GMDSSregulations. Each manner of transmission must be made using different radio communicationservice. The vessels must also be able to transmit and receive ship-to-ship distress alerts. We havecomplied with the GMDSS Regulations where applicable.

(c) ISM Code

The ISM Code, adopted by the IMO, applies to all vessels over 500 tonnes GT which areregistered in Singapore. The purpose of the ISM Code is to provide an international standard forthe safe management and operation of ships and for pollution prevention. Our vessels which areover 500 tonnes GT are required to be audited on a regular basis to ensure compliance with therequirements of the ISM Code in order to continue operations internationally.

The ISM Code requires the establishment of procedures for the maintenance and safety of vesselsand environmental protection, among others. We have established a set of internal guidelines tomeet the requirements of the ISM Code. Our quality and safety management systems cover, interalia, areas such as safety, health and environment management, fleet operation, recruitment andtraining of crew, vessel maintenance and repairs. Our barges, which are not self-propelled, are notrequired to obtain the Safety Management Certificate under the ISM Code. Failure to comply withthe ISM Code may result in the de-registration of the relevant vessel by the flag state. We have notexperienced any incidents of failure to comply with the ISM Code which led to the de-registration ofany of our vessels in the past.


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(d) International Ship and Port Facility Security Code, 2004 (“ISPS Code”)

On 1 July 2004, amendments to the 1974 SOLAS Convention were adopted by a DiplomaticConference on Maritime Security and are aimed at enhancing maritime security on board shipsand at ship/port interface areas. The ISPS Code which was adopted pursuant to this conference,contains detailed security-related requirements for Governments, port authorities and shippingcompanies in a mandatory section (Part A), together with a series of guidelines about how to meetthese requirements in a second, non-mandatory section (Part B). We are in compliance with theISPS Code.

(e) International Convention on Load Line, 1966

The main objective of this convention is to set out limitations on the draught to which a ship may beloaded, external weathertight and watertight integrity, so as to ensure safety. Save for the twovessels registered in Mongolia, all our vessels have obtained the load line certificates under theInternational Convention on Load Line 1966. These certify that the maximum weight that ourvessels and barges may be loaded with cargo and/or equipment within the permissible limitsstipulated by the International Convention on Load Line 1966.

(f) International Convention on Tonnage Measurement of Ships, 1969

The International Convention on Tonnage Measurement of Ships was adopted by IMO in 1969 tointroduce a universal tonnage measurement system. This convention provides for gross and nettonnages, both of which are calculated independently. The rules apply to all ships built on or after18 July 1982, the date of entry into force, while ships built before that date were allowed to retaintheir existing tonnage for 12 years after entry into force, or until 18 July 1994.

Each of our vessels has obtained international tonnage certificates as issued under the provisionsof this convention, save for the two vessels registered in Mongolia.

Our Indonesian operations are subject to the following regulations:-

(a) Law No. 21/1992 on Shipping and Government Regulation No. 82/1999 on Sea Transportation

In 1992, the Indonesian Government issued Law No. 21/1992 on Shipping (the ‘‘Shipping Law’’) tofoster the development of the maritime industry in Indonesia. The Shipping Law covers, amongother matters, the implementation of the cabotage principle, minimum navigation requirements,good port governance, port tariffs and port status (e.g. designation of ports for internationalseaborne trade), ship registration, standard requirements for crew members and maritimemanagement and environmental safety requirements.

The Shipping Law’s implementing regulation, Government Regulation No. 82/1999 on SeaTransportation, was issued in 1999. Subsequently, in November 2005, the Indonesian Governmentissued the Minister of Communication Regulation No. 71/2005 (‘‘MoC 71/2005’’) which sets out atimetable for implementation of the cabotage principle by reference to the categories of goods to beshipped domestically.

(b) Presidential Instruction No. 5/2005

The President of Indonesia issued Presidential Instruction No. 5/2005 (the ‘‘PresidentialInstruction’’) to thirteen ministers, as well as governors, regents and mayors in Indonesia. Thesegovernment officials were instructed to implement the cabotage principle (which prohibits foreignflagged vessels from providing domestic shipping services within Indonesia) and to formulatepolicies in accordance with the Presidential Instruction, in order to foster the development of theshipping industry in Indonesia. The key proposals contained in the Presidential Instruction included(a) fully implementing the cabotage principle, allowing domestic seaborne transportation to be


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carried out by Indonesian flagged vessels operated by Indonesian shipping companies; (b)encouraging banks to be actively involved in the development of the national shipping industry anddeveloping non-bank financial institutions to provide financing for national shipping companies; (c)expediting the ratification of the 1993 International Convention on Maritime Liens and Mortgagesand preparing a draft law on maritime liens and mortgages and expediting the ratification of the1999 International Convention on Arrest of Ships and preparing a draft law on arrest of ships inaccordance with national practices; (d) developing a national ship building industry through variousincentives; and (e) encouraging municipal governments and the private sector to develop trainingand education centres for seamen which comply with IMO standards.

(c) Implementation of Cabotage Principle

MoC 71/2005 sets out a timetable for shipping goods domestically using Indonesian-flaggedvessels. MoC 71/2005 defines various categories of goods and provides that the timetable forshipping the various categories of goods to be shipped domestically using Indonesian-flaggedvessels as follows:-

(1) transportation of goods using containers — 18 November 2005;

(2) transportation of general cargo without using containers — 18 November 2005;

(3) transportation of wood and primary products, cement, fertiliser and rice — 18 November2005;

(4) transportation of crude palm oil, mining and quarrying products, other grains, vegetables,fruits and fresh fish — latest by 1 January 2008;

(5) transportation of liquid cargo and chemicals and agricultural grains — latest by 1 January2009;

(6) transportation of oil and natural gas — by, latest, January 1, 2010;

(7) transportation of coal — as of the date of expiration of current contracts and latest by 1January 2010.

MoC 71/2005 also provides that transportation supporting upstream and downstream oil andnatural gas activities should be carried out using Indonesian-flagged vessels by, latest, January 1,2011.

(d) Ratification of 1993 International Convention on Maritime Liens and Mortgages

Pursuant to Presidential Regulation No. 44 of 2005 dated 8 July 2005, the Republic of Indonesiaratified the 1993 International Convention on Maritime Liens and Mortgages. The Department ofCommunication has submitted to the Department of Law and Human Rights a draft of a new lawconcerning maritime liens and ship mortgages to amend the relevant provisions of Indonesia’sdomestic laws, following the ratification of the Convention by the Republic of Indonesia, but there iscurrently no timeframe for the promulgation of the new law.

(e) Foreign Investment in Indonesian Shipping Industry

The Indonesian Government periodically issues what is known as the Negative List of Investments(commonly referred to in Indonesian as the ‘‘DNI’’). The DNI lists those areas in which foreign anddomestic investments are prohibited or restricted and, in principle, any area not listed in the DNI isopen for foreign and domestic investments. The current DNI provides that ‘‘Pelayaran Rakyat’’ (or‘‘Small-Scale Shipping Industries’’ i.e. companies engaged in cabotage using traditional localvessels) are closed for foreign investments. Other shipping companies are, generally, open forforeign investments and, prior to August 2005, foreigners were permitted to own up to 95 per cent.of a foreign investment law shipping company with no subsequent divestment required.


However, in August, 2005, the Directorate General of Sea Communication of the Department ofCommunication (‘‘Seacom’’) notified the Capital Investment Coordinating Board (or BKPM) that, infuture, Seacom would not issue the requisite shipping licence (or SIUPAL) to a foreign investmentlaw shipping company if more than 49 per cent. of the company’s shares are held by foreigners.

Accordingly, pursuant to current policy, foreigners may not own more than 49 per cent. of a foreigninvestment law shipping company.

(f) Minister of Communication Regulation No. KM.26 of 2006

On May 30, 2006, the Minister of Communication issued Regulation No. KM.26 of 2006 (‘‘MoC26/2006’’) on Simplification of System and Procedures for Procurement of Vessels andUse/Change of Vessel Flag. MoC 26/2006 revokes Minister of Communication Decree No. KM.14 of1996 on Simplification of Procedures for Procurement and Registration of Vessels as subsequentlyamended.

Pursuant to MoC 26/2006, vessels which may be registered under Indonesian flag are those (i)having a volume of GT7 or more; and (ii) whose shares are owned by Indonesian citizens or legalentities. The application for registration may be made through the Directorate General of SeaCommunication or through the office of the harbour master at certain seaports throughoutIndonesia, including Jakarta, Surabaya and Batam.

(g) Safety and Maintenance requirements under Indonesian Law

Any seagoing vessel operating within Indonesian waters shall be subject to Indonesian safetyregulations. Three primary certificates are mandatory under the Indonesian Shipping Law to enablea vessel to operate in Indonesian waters: (i) certificate of vessel safety; (ii) certificate of radiosafety; and (iii) certificate of load line. In connection with the enforcement of safety andmaintenance requirements, Indonesian marine inspectors are authorised to carry out thenecessary surveys or inspections on board vessels, including the following:-

(a) Initial surveys are carried out for a new vessel built at a shipyard or for the reflagging of aforeign-flagged vessel to an Indonesian-flagged vessel;

(b) Annual surveys;

(c) Renewal surveys are conducted once every five years;

(d) Interim surveys are conducted annually to every five years;

(e) Outside the regular surveys, there are on the spot inspections; and

(f) Surveys due to vessel damage or repair.

Indonesia is a signatory to numerous International Conventions, including MARPOL and SOLASand, accordingly in addition to the safety requirements provided in the Indonesian ShippingOrdinance of 1935, the requirements set out in the relevant International Conventions are alsoapplicable to seagoing vessels operating within Indonesian waters.

(h) Applicable Environmental Laws

Indonesia has, by virtue of Presidential Decree No. 46 of 1986, ratified MARPOL and has, by virtueof Presidential Decree No. 52 of 1999, ratified the International Convention on Civil Liability for OilPollution Damage, 1969 Protocol. By way of further implementing regulations for the Conventions,the Minister of Communication has issued Regulations No. KM4 of 2005 on the Prevention ofPollution from Ships and Regulation No. KM66 of 2005 on the Operation of Single-Hulled Tankers.In addition to these regulations issued by the Minister of Communication, there are numerous other relevant environmental regulations issued by the Minister of the Environment including thefollowing:-

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1. Government Regulation No. 19 of 1999 on the Prevention of Sea Pollution and/or Damage;

2. Decree of the Minister of the Environment No. 45/MENLH/11/1996 on the Program to ProtectBeaches;

3. Decree of the Minister of the Environment No. 04 of 2001 on the Criteria of the QualityStandard of the Damage on the Coral Reef;

4. Decree of the Chairman of the Environmental Controlling Agency No. 47 of 2001 on theGuidelines on Measurements of Conditions of Coral Reef;

5. Decree of the Minister of the Environment No. 51 of 2005 on the Criteria of the QualityStandard of Sea Water;

6. Decree of the Minister of Environment No. 200 of 2004 on the Criteria of the QualityStandard of Environmental Damage and on the Guidelines on Measurements of SeagrassStatus; and

7. Decree of the Minister of the Environment No. 201 of 2004 on the Criteria of the QualityStandard and the Guidelines to Determine Damage on Mangroves.

Compliance with the regulations set out in the paragraphs above is necessary for our vessels and bargesto be certified as seaworthy and to satisfy the requirements of and be classed by the classificationsocieties. Without the necessary classification, we will not be able to charter our vessels and barges toour customers.

We have obtained the requisite certifications and licences for our operations and have complied with allrelevant laws and regulations.

Employment Laws in Indonesia

Under Article 108 of Law No. 13/2003 dated 25 March 2003, save for companies in respect of which acollective labour agreement is in force, a company with ten or more employees is required to maintaincompany regulations, approved by the Minister of Manpower or other authorised officials, setting out itsemployment policies and benefits (“Company Regulations”). Under Article 111 paragraph 3 of Law No.13/2003, the Company Regulations are valid for a period of two years, whereupon they must be renewed.Failure to do so may subject the company to a fine of between IDR5,000,000 to IDR50,000,000. TheCompany Regulations of MP Shipyard are currently being processed for approval by the Minister ofManpower while RMN, with its present staff strength of less than ten employees, is exempted from suchrequirements.

Under Law No. 7/1981, a company is also required to submit annual manpower reports to the Ministry ofManpower. In the event that the company fails to submit such a report, the board of directors of suchcompany may be subject to three months’ imprisonment or a maximum fine of IDR1,000,000. MPShipyard is obliged to re-submit their respective annual manpower reports in March 2006. MP Shipyardhas submitted its manpower report as at April 2007 to the Minister of Manpower while RMN, with no staffpresently, is exempted from such requirements.

In addition, a company which employs ten persons or more or pays employee salaries exceedingIDR1,000,000 per month is required to participate in a manpower social security program known inIndonesian as Jaminan Sosial Ketenagakerjaan or JAMSOSTEK. JAMSOSTEK is a protection schemefor employees under which employees receive compensation in cash or remuneration for a portion ofincome which was lost or reduced due to work accident, illness, pregnancy, giving birth, old age or death.The JAMSOSTEK benefits, which may be received by an employee due to work accident, death, old ageor illness, also cover the family of the respective employee. Contribution for causes of work accident,


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death and illness is borne by the employer, while for old age is payable jointly by the employer and theemployee. JAMSOSTEK includes compulsory programs for occupational accident insurance, lifeinsurance and retirement benefits. Employers are responsible for the entire amount of contributions to theoccupational accident insurance and life insurance programs. Contributions for accident insurance rangefrom 0.24 per cent. to 1.74 per cent. of an employee’s wage, depending on the employer’s business. Thecontribution for life insurance is 0.3 per cent. of the employee’s wage. The contributions for retirementbenefits are jointly borne by the employer and employee: the employer’s share is 3.7 per cent. of wagesand the employee’s share is 2 per cent. of wages. Employee contributions to JAMSOSTEK are collectedby the employer through payroll deductions. JAMSOSTEK also includes a health care benefits program.The contribution is six per cent. for a married employee and three per cent. for a single employee. Anemployer who provides better company health insurance to its employees can elect not to join the healthcare program under JAMSOSTEK.

Under Indonesian laws, companies are required to have work permits to employ expatriates. Failure to doso may result in sanctions of imprisonment for a term of between one year to four years and a penalty ofbetween IDR100,000,000 to IDR400,000,000 being imposed.

RESEARCH AND DEVELOPMENT

We do not undertake any research and development activity.

COMPETITION

Ship Chartering

The ship chartering industry is fragmented with many charterers, owners and operators of vessels ofvarying size of operations. We generally compete with these companies on key attributes such as ourability to retain customer loyalty and patronage, capabilities of our vessels in terms of age, size andefficiency, types of materials and equipment we are able to transport, quality of our services, our reliabledelivery time and our competitive pricing.

Of the players in the ship chartering business, we have identified the following to be our closestcompetitors:-

� ASL Marine Holdings Ltd(1)

� Eng Lee Shipping Co Pte Ltd(2)

� Labroy Marine Limited(1)

Notes:-

(1) These companies are listed on the SGX-ST.

(2) Certain vessels of this company are named under a numbering series deploying the words “Marco Polo”. Neither our Groupnor any of our Directors or Substantial Shareholders or any of their respective Associates are related, directly or indirectly, tothis company.

Shipyard

In our ship building operations, we face increasing competition from ship-builders from South East Asiaand the PRC, who have the capabilities to build a diverse range of vessels of various types and sizes andare able to provide a wide range of services. We generally compete with these companies on keyattributes, such as our ability to retain customer loyalty and patronage, quality of our final products andservices, our reliable delivery time and our competitive pricing.


Of all the players in the ship-building business, we have identified the following as our closest competitors:-

� ASL Marine Holdings Ltd(1)

� Labroy Marine Ltd(1)

� President Marine Pte Ltd

� PT. Batamec Shipyard

� PT. Batam Expresindo Shipyard

� PT. Bandar Victory Shipyard

� PT. Karya Tekhnik Utama

Note:-

(1) These companies are listed on the SGX-ST.

In view of the size and diversity of our industry, it is not possible to obtain independent statistics on themarket share captured by individual companies in our industry. To the best of our Directors’ knowledgeand belief, there is no official published statistics that can be used to accurately measure our marketshare.

None of our Directors, Controlling Shareholder or any of their respective Associates has any interest,direct or indirect, in any of the above competitors.

COMPETITIVE STRENGTHS

Our competitive strengths are as follows:-

� We have an experienced and committed management team

We have an experienced and dedicated management team with many years of experience in theship chartering industry. Mr Lee Wan Tang, our Executive Chairman and Mr Sean Lee Yun Feng,our CEO, have more than 15 years and eight years of experience respectively in the shipchartering industry. They have also built up a strong and effective management team for our Group.

In addition, we are able to tap on their extensive experience, network and contacts as well asestablished relationships with the relevant Indonesian authorities to further the growth of our shipchartering and shipyard operations.

� We have a fleet of high quality and efficient vessels

In line with our fleet renewal policy, we generally do not retain our vessels for more than five years.Such policy ensures that our vessels are more cost efficient as major repair and maintenance workis minimised. Income is also generated from the disposal of old vessels. In addition, as youngvessels are less prone to breakdowns, we are able to deliver reliable quality services to our clients.This focus enables us to operate our fleet more efficiently and with lower operating costs.

With the sophisticated satellite surveillance systems that we installed in all our tugboats (other thanthe two Mongolian flagged vessels which are deployed for dredging purposes), we are able to trackthe routes and locations of our vessels, monitor their speeds at all times and to ensure that thescheduled arrival time is adhered to. Such systems also allow us to optimise the utilisation of ourvessels and respond to our customers’ requirements in a flexible and timely manner which in turnenables us to our secure long-term relationships with our customers. The surveillance systems alsoenable us to locate our vessels in the event of piracy and may deter any potential attacks on ourvessels as well as prevent fuel pilfering from our vessels. We believe that such practice of installingsatellite surveillance systems on tugboats is not prevalent in the shipping industry, and thereforedistinguishes us from other ship owners and charterers of tugboats and barges.

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� We are an integrated shipping company

We are able to deliver quality service to our customers through the integration of our shipchartering and ship building operations.

We have ship building capabilities to support the needs of our ship chartering operations thatprovide chartering and transhipment services to our customers. We believe that by building our ownvessels, we are able to ensure quality and timely delivery and achieve cost efficiencies in our shipchartering operations. At the same time, we will have better control over the time frame withinwhich a vessel is to be delivered to adjust to changes in the demand and supply conditions of theshipping cycle and hence enjoy a competitive edge as we are able to take advantage of theprevailing market conditions to reap maximum profits from the sale and supply of vessels.

In addition, we are in the midst of equipping ourselves with ship repair, maintenance andconversion capabilities (please refer to the sections entitled “Prospects” and “Future Plans” forfurther details). Upon completion of these facilities, there will be further integration between ourship chartering and shipyard operations. We will then be able to carry out ship repair andmaintenance works for our vessels, and will therefore have better control over the costs of suchrepairs and maintenance and the time frame in which such works are completed. In addition, wewill be better able to manage the growth of our fleet and optimise the use and allocation of ouravailable resources through sharing of facilities, equipment and labour between our ship building,ship repair, maintenance and conversion business, thereby reducing costs and improvingproductivity and efficiency.

� We have an established track record in our ship chartering operations

Since the commencement of our ship chartering operations in 1991, we have built a credible trackrecord of more than 15 years within the industry. Over the years, we have chartered our vessels forthe transportation of mainly mining products such as coal and granite mix aggregates, forSingaporean and Indonesian customers and end-users from diverse industries such asconstruction, infrastructure, land reclamation and property development industries. From time totime, we also chartered our vessels for the transportation of heavy equipment and machineries forthese customers. We believe that our commitment to provide quality service, competitive pricing,reliable turnaround time and our consistent ability to meet our customers’ needs have earned us astrong reputation in Singapore and Indonesia. As a testimony of our quality and efficient service,our vessels were consistently utilised at close to 100 per cent. in each of FY2004, FY2005,FY2006 and HY2007. Please refer to the section entitled “Fleet Utilisation” of this Prospectus formore information on the utilisation rates of our vessels.

� We receive stable and constant business from our major customers

BRJ has been a major customer of our ship chartering business since 1994 (please refer to thesection entitled “Interested Persons Transactions” of this Prospectus for more details). BRJcontributed 92.6 per cent., 90.0 per cent., 36.4 per cent. and 31.8 per cent. of our Group’s totalrevenue in each of FY2004, FY2005, FY2006 and HY2007, respectively. BRJ is an establishedcompany and, together through its subsidiaries and certain Associates of the Lee Family, has anestablished network of Indonesian and Singaporean customers from various industries. We receivea stable and constant stream of income from BRJ for our ship chartering business as we are theexclusive supplier of ship chartering services to BRJ. Such an arrangement has been formalised on13 September 2007 such that BRJ shall accord MP Shipping with a first right of refusal intransporting its cargoes for a period of two years. Several of our ship building contracts had alsobeen secured through referrals from BRJ.

Over the years, our customer base has also grown significantly to include other customers apartfrom BRJ. Our customers other than BRJ accounted for approximately 51.4 per cent. of our shipchartering revenue in FY2006 compared to that of approximately 7.4 per cent. in FY2004. Wemaintain good relationships with such third party customers. We believe that these strong customerrelationships stem from our ability to provide competitive pricing and dependable, safe and efficienttransportation services.


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� Our shipyard and ship chartering operations are strategically located

Our ship chartering operations are carried out from our Singapore office as Singapore is one of theleading shipping hubs in South East Asia and is in proximity to vital regional and internationalshipping lanes such as the Straits of Malacca.

Our shipyard is located in Batam, an island in the Riau Islands of Indonesia. Batam, which enjoys afree-trade zone status and boasts a lower operating cost environment compared to Singapore andother neighbouring countries in the South East Asia region, is positioned strategically near mainregional and international shipping lanes. Together with Bintan and Karimun, it has been declared aSpecial Economic Zone following the government-to-government pact forged between Singaporeand Indonesia in June 2006. More foreign investments are expected to flow into Batam as aconsequence.

With Singapore as a regional shipping and transhipment hub and with the proximity of Batam tomain regional and international shipping lanes, we believe that the location of our operations givesus a competitive edge over other companies engaged in the ship chartering and ship buildingbusiness in other parts of South East Asia.


� Our competitive cost structure

We believe that we have a low overall cost base with our ship building activity being carried out inBatam, Indonesia. In addition, with our own shipyard, we are able to build vessels for our shipchartering business at cost as well as repair and maintain our own vessels. We also enjoy the tax-exempt shipping income status sanctioned under Section 13A of the Singapore Income Tax Act forall our Singapore-flagged vessels.

PROPERTIES AND FIXED ASSETS

We own the following properties:-

Location Estimated Area Primary Usage Land Tenure Encumbrances(sq m)

1 Sims Lane, #04-11 232 (Built-in) Head office Freehold Mortgaged toSingapore 387355 Hong Leong

Finance Limited,Singapore

Telok Bayur, Tanjung 163,750 (Land) Shipyard 30-year leasehold NilUncang/Sagulung, operations as of 19 July 1999 Sekupang, Batam, up to 18 July 2029Indonesia

Sei Cantik, Tanjung 184,955 (Land) Shipyard 30-year leasehold NilUncang/Sagulung, operations as of 19 July 1999Sekupang, Batam, up to 18 July 2029Indonesia

Our other fixed assets consist mainly of tugboats, barges, yard development in progress, officeequipment, computers and furniture and fittings. Our total fixed assets had a net book value ofapproximately $37.4 million as at 30 September 2006.

Save as disclosed above, as at the Latest Practicable Date, none of our land and buildings is subject toany mortgage, pledge or any other encumbrances or otherwise used as security for any bank borrowings.


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As at the Latest Practicable Date, our Directors are not aware of any breach of any obligations under theabovementioned leases that would result in their termination by the lessor, or non-renewal, if required,when it expires.

PROSPECTS

Our Directors believe that our ship chartering and shipyard businesses will continue to enjoy growth in thecoming years based on the following factors:-

Ship Chartering

� Impending boom in construction and property developments expected in Singaporefollowing the commissioning of the two integrated resorts (“IRs”)

Our Directors are of the view that Singapore’s property sector, be it residential, commercial orretail, as well as infrastructure development, are expected to experience a boost from the twoupcoming IRs. They believe that Singapore’s experience will mirror that of Macau, which saw aflurry of construction activities, increasing property prices, higher tourist arrivals, tourism receiptsand GDP figures after the gaming industry there was liberalised in 2001.

The impending boost in construction and property developments in Singapore augurs well for ourship chartering business, since we have been transporting for BRJ construction materials such asgranite mix aggregates (including granite fines) mined from the quarries of BRJ to Singapore.Further, following the recent ban on the export of sand by the Indonesian government, BRJ is alsowell-placed to reap the increase in demand for granite fines produced by the crushing of granitesinto sand-like bits. Granite fines, which are not covered by the ban, constitute a good substitute forthe banned sand. As a result, BRJ may require more chartering services to transport granite mixaggregates (including granite fines) to Singapore, thereby benefiting MP Shipping.

The monthly shipment volume of granite mix aggregate to Singapore required by BRJ prior to thebanning of sand exports in February 2007 averaged approximately 84,000 tonnes betweenOctober 2006 and January 2007. From June to September 2007, subsequent to theimplementation of the sand ban, the monthly shipment volume of granite mix aggregate toSingapore required by BRJ increased to an average of approximately 137,000 tonnes. (The periodfrom February to May 2007 is not taken into account as our Directors believe this to be anadjustment period following the implementation of the sand ban in Febuary 2007.)

� Opportunities created as a result of the banning of sand export by the Indonesiangovernment

Indonesia has recently banned the export of sand and soil products in an effort to prevent damageto its environment and protect its boundaries. The ban, which took effect from 6 February 2007,applies to all countries, including Singapore. Singapore’s construction industry has been importingabout six to eight million tonnes of sand a year, almost all of which has been from Indonesia sinceMalaysia banned sand exports to Singapore in 1997. As such, it is expected that to counter theexpected shortfall from the Indonesian ban, Singapore will tap on other supply sources in theregion. As Singapore taps on alternative sources of sand in the region which may be further away,demand for ship chartering services to ply longer distances are expected to increase, therebyaccording ship chartering operators like MP Shipping new business opportunities and at highercharter rates.

We have since April 2007 commenced transporting granite mix aggregates (including granite fineswhich is an alternative to sand) from Malaysia to Singapore and since June 2007, we have beentransporting sand from Vietnam to Singapore for our customers. Our Directors believe that this(together with general feedback from the industry) is reflective of the general trend in Singapore toseek alternative sources of sand in the region.


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� Indonesia’s coal production and export will continue to provide strong demand for our shipchartering services

Based on our Directors’ observation, coal production and export is a major industry in Indonesia.Our Directors believe that as coal will continue to remain an important and a major source ofenergy globally, the coal production and export industry will continue to provide strong demand forour ship chartering services in transporting coal between countries or between islands withinIndonesian as well as for our transhipment services for coal. Please refer to the section entitled“Transhipment Services” of this Prospectus for further details on our provision of transhipmentservices for coal.

Shipyard

� Batam’s strategic location and its low operating cost environment

Batam, which enjoys a free-trade zone status and boasts a lower operating cost environmentcompared to Singapore and other neighbouring countries in the South East Asia region, isstrategically located near main regional and international shipping lanes. Together with Bintan andKarimun, it has been declared a Special Economic Zone following the government-to-governmentpact forged between Singapore and Indonesia in June 2006. As a result, more foreign investmentsare expected to flow into Batam.

With its close proximity to Singapore, a regional shipping and transhipment hub, Batam is also ableto tap on the heavy volume of mercantile traffic passing through Singapore which usually requiresmarine logistics support in the form of tugboats and barges. The offshore oil and gas industry inthis region adds to the demand for offshore support vessels to supply and support their operations.These support vessels need to be regularly maintained and repaired to maintain theirseaworthiness and to meet certification requirements, and consequently, there is an increaseddemand for ship repair services in Batam to cater to different types of vessels of various sizes.


� The mandatory phasing out of single-hulled tankers and CPO barges by 2010

Based on the regulation implemented by the IMO, it is mandatory that all tankers and CPO bargesbe fitted with double-hulls by 2010. This is an accelerated phase-out date as the IMO had in April2005 revised the regulation and brought forward the final phase-out date from 2015 to 2010. Therevised regulation permits certain categories of single-hull tankers to operate beyond 2010 but notlater than 2015, depending on the vessel’s age and subject to satisfactory results from aconditional assessment scheme.

Our Directors believe that the measure is being phased in over a number of years as shipyardsworldwide are presently operating close to maximum capacity, and it would not be possible toimmediately phase out or convert all single-hulled tankers to double-hulls without causing immensedisruption to world trade. Our Directors are also of the view that there will be a strong globaldemand for ship building or conversion services following the regulation set by the IMO, as thereare currently still many tankers and CPO barges that are yet to be phased out or have undergoneconversion. On the one hand, demand for the building of new double-hulled tankers and CPObarges is expected to increase as demolition of older tankers and CPO barges are likely to pick-upsince it will be uneconomical to convert an old vessel and operate it over the remaining short usefultrading life. On the other hand, faced with the present capacity constraints in ship building, weforesee a pick-up of single-hull to double-hull conversions in the world’s fleet of young tankers andCPO barges. We are therefore of the view that our shipyard operations will stand to benefit fromsuch global demands, be it for new ship building or ship conversion jobs.


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� The global increase in offshore oil and gas activities

The steady hike in crude oil prices in recent years has led to an increase in oil exploration activitiesby oil companies to replenish diminishing reserves. Oil prices at current level also encouragedrilling and production activities for marginal wells that were formally uneconomical to operate.

Such activities in the offshore oil and gas sector would augur well for MP Shipyard as orders rushin for the fabrication of massive steel platforms for offshore jack-up oil rigs to support explorationand production activities. Such fabrication jobs are best carried out in yards with vast open groundand well-equipped workshops, and with good working environment. Our Directors believe that, MPShipyard, as one of the larger and better equipped yards in Batam in terms of ground space andfacilities and given its expertise in steel fabrication works, stands in good stead to reap suchopportunities.

OUR ORDER BOOKS

As at the Latest Practicable Date, our Group has secured orders from third-party customers amounting toapproximately $4.7 million for our ship chartering business (not taking into account the orders from BRJ)and approximately $8.8 million for our shipyard business, the majority of the aggregate amount ofapproximately S$13.5 million is expected to be realised in FY2007 with the balance in FY2008. We havealso on 13 September 2007 been granted a first right of refusal by BRJ in transporting its cargoes for aperiod of two years.

BUSINESS STRATEGIES

Our business strategies for our shipyard and ship chartering business segments are as follows:-

Shipyard

Singapore continues to be one of the world’s busiest ports. Its strategic location along the internationalsea lanes ensures a heavy volume of mercantile traffic passing through it. Such high sea traffic requiresmarine logistic support in the form of tugboats and barges, thereby augmenting demand for ship building.We have commenced, and intend to expand, our shipbuilding business to tap on this growing industryand are implementing the following strategies:-

� Expanding and improving our shipyard

Our shipyard in Batam commenced ship building operations in December 2005 and has up to theLatest Practicable Date completed the construction of 22 vessels, including two tugboats and tenbarges for external customers and three tugboats and seven barges to meet our in-house needs.We intend to continuously expand and improve our shipyard with the construction of drydocks, jettyand related facilities. These improvements will enable us to perform ship repair and maintenancework in the future, which generally command better margins as compared to ship building works.With these facilities in place, we will have better control over the costs of repairs and maintenanceto vessels used in our ship chartering business, and achieve improved cost efficiency through thesharing of facilities, equipment and labour between our ship building, ship repair, maintenance andconversion business. In addition, we will be able to build our vessels in-house and subsequentlymaintain and service them using our own shipyard. This will help us to reduce our costs ofoperations and have better control over the time frame in which such works are to be completed totake advantage of changes in the shipping cycles.

� Diversifying the customer/industry base of our shipyard operations

Our shipyard currently has a track record of building tugboats and barges only. The steady hike incrude oil prices in recent years has led to an increase in oil exploration activities by oil companiesto replenish diminishing reserves. This increase in activity in the offshore oil and gas sector hasalready, and will continue to see sustained demand for the construction of larger and moresophisticated vessels used in the oil and gas sector, as well as the fabrication of massive steelplatforms for offshore jack-up oil rigs to support exploration and production activities. Whencompleted, our shipyard will be one of the larger shipyards in Batam equipped with the latestequipment which will allow us to tap on such new business opportunities.


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Ship Chartering

We have been operating in the ship chartering industry principally in the South East Asia region for morethan 15 years. Chartering of ships in this region is dominated by comparatively smaller vessels, such astugboats and barges plying coastal routes, wherein we believe we have grown to be an establishedplayer, especially in Indonesia and Singapore. Recognising the future potential of ship chartering in theregion, we intend to continue focusing on, and growing this business to service the sea trades among theSouth East Asian countries which are expected to continue to be strong in tandem with the increase inconstruction and property developments in the region, particularly in Singapore. To this end, we areimplementing the following strategies:-

� Strengthening, expanding and diversifying our existing customer base

We presently charter our tugboats and barges mainly to BRJ as well as to other Indonesian andSingaporean companies and end-users involved in the mining, shipping, construction, infrastructureand land reclamation industries. Our vessels are used by our customers for the transportation ofmainly mining products such as coal and granite mix aggregates. With a view to further expandingand diversifying our customer base, we have started to source for new customers in other parts ofAsia, other than Indonesia, through intensifying our sales and marketing efforts. We also intend tobroaden our end-user base by extending our ship chartering services to customers in otherindustries, such as commodity trading and marine logistics. We are also making concerted effortsto procure additional long-term transhipment contracts, in order to expand our revenue base.

Further, we plan to strengthen relationships with our existing third party customers, with the aim tocontinue to build long-term recurring business opportunities with them and network for potentialnew third-party customers.

� Providing reliable quality service

With respect to our ship chartering operations, we are committed to continue providing qualityservice in accordance with our customers’ specifications and time schedule. We believe that ourcommitment to quality service, competitive pricing, reliable turnaround time and consistent ability tomeet our customers’ needs have earned us a strong reputation in Singapore and Indonesia. As atestimony of our quality and efficient service, our vessels were consistently utilised at close to 100per cent. in FY2004, FY2005, FY2006 and HY2007 (please refer to the section entitled “FleetUtilisation” of this Prospectus for more information on the utilisation rates of our vessels).

� Improving our cost efficiency

In order to offset any increase in costs and the downward pressure on chartering rates as a resultof competition, we believe that cost management is a key element in our business operations. Inaddition to ensuring the close monitoring on the turnaround time of our vessels, the upkeep anddaily maintenance of our fleet, we aim to continue to improve our cost efficiency throughmaintaining our existing strategic operational measures, such as the installation of satellitesurveillance systems in our tugboats and the adoption of our motivational reward system for vesselcrew.

We will also acquire or build additional and larger vessels with greater capacity as well ascontinuously renew our fleet of vessels. We believe that improving our cost efficiency will providethe dual-benefits of improving our profitability, as well as providing our customers with competitiveprices for high quality chartering services.

� Continuing to leverage on sale-and-leaseback transactions

We intend to grow our fleet while prudently managing our capital structure at the same time, sothat we can achieve optimal financial flexibility. To this end, we will continue to support our growthby leveraging on the sale-and-leaseback arrangement as and when the opportunity arises. OurGroup would generally sell existing vessels in its fleet under this sale-and-leaseback arrangement


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where our Group wishes such vessels to be re-flagged as Indonesian vessels for purposes of ouroperations. Such an arrangement enables our Group to reduce gearing, and improve cash flowwhile expanding our fleet. We may then invest more of our cash flow in expanding our existingbusinesses as well as to acquire new related businesses where suitable opportunities arise.

In addition, as we are not entitled to own Indonesian flagged vessels (since such vessels may onlybe owned by Indonesians), by embarking on a sale-and-leaseback strategy, we are able to operateIndonesian flagged vessels and avail ourselves of the operational cost benefits accorded to suchvessels which ply Indonesian waters.

FUTURE PLANS

In line with our business strategies, our future plans for the growth and expansion of our shipyard andship chartering business segments are described below:-

Shipyard

� We intend to establish ship repair, maintenance and conversion facilities in our existingshipyard in Batam, Indonesia

We intend to expand our shipyard operations to include the provision of ship repair, maintenanceand conversion services. To this end, we acquired RMN in August 2006, a company holding a 30-year leasehold yard with an estimated land area of approximately 16.4 hectares located directlynext to our existing yard. We are currently constructing a drydock which is 150 x 40 x 8m indimension which is expected to be substantially completed by end 2007. Construction of a seconddrydock which will be at least 110 x 30 x 6m in dimension, a jetty and related facilities is expectedto commence at the end of 2007 or beginning of 2008. The two drydocks, jetty and relatedfacilities will equip our shipyard operations with ship repair, maintenance and conversioncapabilities. Once completed, the combined ship building and repair capacities of our shipyard willrespectively allow us to accommodate up to eight vessels of 150 metres in length for ship buildingand up to five vessels of varying lengths of between 50 metres and 130 metres in length for dockand afloat ship repair at any one time. At such time, we will be able to leverage on our existingnetwork of customers to provide ship repair, maintenance and conversion services to ourcustomers as well as to support our ship chartering business.

The costs for such expansion and development at our shipyard are estimated at approximatelyS$12.7 million, of which approximately S$4.2 million had been invested as at the Latest PracticableDate and the balance of approximately S$8.5 million will be funded from internal resources,external borrowings and approximately S$5.0 million of the Invitation proceeds.

� We intend to build vessels and structures for the offshore oil and gas and marine logisticsindustries

We intend to expand on the types of vessels and structures we build, particularly for the oil and gasand marine logistic industries. In addition to tugboats and barges which we currently build, weintend to build other vessels such as tankers, accommodation barges, offshore supply vessels suchas AHTSs, cargo ships and other more sophisticated vessels of up to 150 metres in length, whichare mainly used in the offshore oil and gas and marine logistics industries. We are in the processof strengthening our technical team and equipping ourselves with facilities to build such vesselsand expect such building facilities to be substantially completed by the end of 2007.

A key stage in the ship building process relates to the fabrication and assembly of steel plates inaccordance with design specifications. Our Directors believe that the steel fabrication and assemblyexpertise so acquired in the ship building process enables our Group to undertake the fabricationof the massive steel platforms for jack-up oil rigs to support offshore oil and gas exploration andproduction activities.


We are also gearing ourselves to be ISO certified which will enhance our position in this area. Inthis regard, we are currently in close discussion with a prospective customer to secure such afabrication job. While we are confident about clinching the job, there can be no assurance that sucha job will eventually be awarded to us.

Ship Chartering

� We intend to expand our customer base regionally

While we historically and will continue to charter a majority of our ships to BRJ and otherIndonesian and Singapore customers, we are expanding our ship chartering customer baseregionally, focusing on new third-party customers.

Singapore’s property sector, be it residential, commercial or retail, as well as infrastructuredevelopment, is expected to experience a boost from the two upcoming IRs. The impending boostin construction and property developments in Singapore augurs well for our ship charteringbusiness as we will be able to offer services to new customers to transport the various mining,construction, infrastructure and land reclamation related raw materials. The recent ban on theexport of sand and soil products by the Indonesian government has forced the constructionindustry in Singapore to look further afar for such raw materials needed for the impendingconstruction growth. A two-pronged strategy has been adopted to counter this expected shortfall -whilst the Government releases its stock-pile to meet critical shortfall, many companies are tappingon other supply sources in the region. We are therefore actively pursuing potential new shipchartering contracts with these new customers and suppliers of construction-related raw materialsfrom within the South East Asian region. As at the Latest Practicable Date, we have establishednew contacts in Malaysia, Vietnam, Thailand, Cambodia and Brunei, and have since April 2007commenced the transportation of granite mix aggregate from Malaysia to Singapore. Further, wehave since June 2007 commenced transporting sand from Vietnam to Singapore.

� We intend to increase ship chartering services to the coal industry

Our Directors believe that the coal production and export industry will continue to provide strongdemand for our ship chartering services in transporting coal between countries or between islandswithin Indonesian as well as for our transhipment services for coal. We had in recent monthscommenced transporting coal from Kalimantan, Indonesia, to Java, Indonesia, and from Sumatra,Indonesia, to the west coast regions of Western Malaysia. We have secured a one-yeartranshipment contract for coal worth a net amount of approximately S$4.7 million and will continueto tap the coal production and export industry. To this end, we intend to expand our fleet of vesselsto serve customers in the coal industries and procure more additional long-term transhipmentcontracts in order to expand our revenue base.

We have budgeted approximately S$3.0 million for our fleet expansion from the Invitation proceeds.

General

� We intend to explore acquisitions, investments, joint ventures and/or strategic alliances toexpand our business

We may consider acquisitions, investments, strategic alliances and/or joint ventures with oursuppliers, customers, other shipping or shipping-related companies or third parties as and whenthe opportunities arise. This would allow our Group to expand or diversify our core business,expand our network of customers, lower our operational risks or to increase our range of servicesto our customers through vertical integration. As at the Latest Practicable Date, we are inpreliminary discussions with a few potential parties to form joint ventures or strategic alliances with.We believe that our status as a listed company will position us to take advantage of such otheropportunities as and when they arise. Should we decide to enter into an acquisition, joint venture orstrategic alliance, we will seek approval, where necessary, from our Shareholders and the relevantauthorities as required by the relevant laws and regulations.

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In general, transactions between our Group and any of its interested persons (namely, our Directors,Executive Chairman, CEO or Controlling Shareholder or the Associates of such Directors, ExecutiveChairman, CEO or Controlling Shareholder) would constitute interested person transactions for thepurpose of Chapter 9 of the Listing Manual. Details of interested person transactions for the last threefinancial years ended FY2006 and the period from 1 October 2006 to the Latest Practicable Date (the“Relevant Period”) are discussed below.

Save as disclosed below and in the sections entitled “Restructuring Exercise” and “Our History” and”Major Customers” of this Prospectus, our Group does not have any other material transactions with anyof its interested persons during the Relevant Period.

Past Interested Person Transactions

(1) Transactions with SMJA by MP Shipyard

SMJA, a company incorporated in Indonesia, is principally an investment holding company. OurExecutive Chairman, Mr Lee Wan Tang, and our CEO, Mr Sean Lee Yun Feng, are shareholders ofSMJA, holding 70 per cent. and 30 per cent. of its share capital respectively. Mr Lee Wan Tang isalso a Commissioner of SMJA while Mr Sean Lee Yun Feng is a director.

(a) Lease of land from SMJA by MP Shipyard

From February 2005 to August 2006, MP Shipyard leased a 30-year leasehold land locatedat Batu Aji Kav Lama, Dapur 12, Batam, Indonesia from SMJA for its shipyard operations ona rent-free basis. MP Shipyard ceased such lease arrangement with SMJA in August 2006following the purchase of such land by MP Shipyard. The lease arrangement was not enteredinto on an arm’s length basis.

(b) Transfer of land from SMJA to MP Shipyard

On 1 August 2006, MP Shipyard entered into a land transfer contract with SMJA pursuant towhich a 30-year leasehold land located at Batu Aji Kav Lama, Dapur 12, Batam, Indonesiawas transferred from SMJA to MP Shipyard (the “Land Transfer Contract”). The land wastransferred at cost for a consideration of approximately $1.54 million, which was substantiallylower than the open market value of the land of $5.27 million based on an independent thirdparty valuation. Save for the purchase price, the transaction was entered into on an arm’slength basis. The transfer of the land was completed in August 2006.

We do not intend to enter into any further transactions with SMJA in the future.

(2) Transactions with Trans-Bina Pte Ltd (“Trans-Bina”) by MP Shipping

Trans-Bina, a company incorporated in Singapore, is principally engaged in the business ofproviding stevedoring, lighterage and ship chartering services. Our Executive Chairman, Mr LeeWan Tang, was formerly a director and shareholder of approximately 48 per cent. of the sharecapital of Trans-Bina. Mr Lee Wan Tang ceased to be a director and shareholder of Trans-Bina on19 October 2006. The entire share capital of Trans-Bina is currently owned by an unrelated thirdparty.

(a) Purchase of two vessels from Trans-Bina by MP Shipping

In July 2006, MP Shipping entered into a contract with Trans-Bina to purchase a tugboatnamed “Transbina II” and a used barge named “Bina Progress” for an aggregateconsideration of $1.2 million. The purchase price for the tugboat and barge was arrived atbased on an independent third party valuation. The purchase price has been fully paid up byMP Shipping. Our Directors believe that this transaction was entered into on an arm’s lengthbasis and on normal commercial terms.

INTERESTED PERSON TRANSACTIONS

(b) Provision of re-chartering services by Trans-Bina to MP Shipping

During the Relevant Period, MP Shipping, in meeting occasional excessive demands forchartering services, re-chartered vessels from Trans-Bina.

The total values of the re-chartering services provided by Trans-Bina to MP Shipping for theprovision of ship chartering services during the Relevant Period were as follows:-

1 October 2006to the Latest

($’000) FY2004 FY2005 FY2006 Practicable Date

Fees paid to Trans- – 159 – –Bina for the provisionof ship charteringservices

The above transactions were conducted on an arm’s length basis and based on normalcommercial terms and market prices which Trans-Bina offers to other unrelated third parties.

We do not intend to enter into any further transactions with Trans-Bina in the future.

(3) Transactions with BRJ by MP Shipping, MP Shipyard and Bina Marine

BRJ, a company incorporated in Indonesia, is principally engaged in the business of mining andinfrastructure development. Our Executive Chairman, Mr Lee Wan Tang, our Non-ExecutiveDirector, Mdm Lai Qin Zhi and our CEO, Mr Sean Lee Yun Feng, are shareholders of BRJ, holding55 per cent., 30 per cent. and 15 per cent. of the share capital of BRJ respectively. Mr Lee WanTang, Mdm Lai Qin Zhi and Mr Sean Lee Yun Feng are also the president commissioner,commissioner and director of BRJ respectively.

(a) Procurement Services by BRJ for MP Shipping

During the Relevant Period, MP Shipping engaged the services of BRJ to purchase vesselspare parts. Such services include the provision of storage space for the vessel spare partspurchased and payment settlement services for such purchases made. In providing suchservices, in the interest of expediency, BRJ charged an administrative fee of 15 per cent. ofthe purchase price of such vessel spare parts to cover for all out-of-pocket expenses,storage and logistics expenses incurred.

The aggregate amounts paid by MP Shipping to BRJ for the procurement of vessel spareparts during the Relevant Period were as follows:-

1 October 2006 to the Latest


Amounts paid to BRJ 15 31 84 19pursuant to the procurement services

The above transactions were not conducted on an arm’s length basis nor based on normalcommercial terms.


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(b) Purchase of BRJ’s used equipment and machinery by MP Shipyard

During the Relevant Period, BRJ sold used equipment and machinery to MP Shipyard atmarket values as follows:-



Aggregate market – 15 64 296value of used equipment and machinery sold toMP Shipyard

Our Directors believe that the transactions were carried out on an arm’s length basis andbased on normal commercial terms.

(c) Provision of administrative services by BRJ to Bina Marine

During the Relevant Period, BRJ provided administrative services to Bina Marine. The totalvalues of administrative services provided by BRJ to Bina Marine during the Relevant Periodwere as follows:-



Fees paid to BRJ 6 6 2 –for the provision ofadministrativeservices

The above transactions were conducted on an arm’s length basis.

(d) Provision of ship chartering services by Bina Marine to BRJ

During the Relevant Period, Bina Marine provided ship chartering services to BRJ totransport mining products such as granite mix aggregates.

The total values of services provided by Bina Marine to BRJ for the provision of shipchartering services during the Relevant Period were as follows:-



Provision of ship 923 181 – –chartering servicesto BRJ

Note:-

(1) Ship chartering services by Bina Marine to BRJ represented respectively 20.4 and 2.8 per cent. of shipchartering revenue for FY2004 and FY2005 and 20.4 and 2.8 per cent. of total revenue of the Group forFY2004 and FY2005. Bina Marine did not provide any ship chartering services to BRJ during FY2006 andthe period 1 October 2006 to the Latest Practicable Date.

The above transactions were conducted on an arm’s length basis and based on normalcommercial terms and at market prices which Bina Marine offers to other unrelated thirdparties.


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After the admission of our Company to the Official List of the SGX-SESDAQ, should any of oursubsidiaries enter into any arrangement with BRJ relating to the purchase of vessel spare parts orused equipment, we will comply with the “Guidelines and Review Procedures for Future InterestedPerson Transactions Other Than Those Covered in the Shareholders’ Mandate” as set out in thisProspectus and all relevant rules in Chapter 9 of the Listing Manual with respect to obtainingshareholders’ approval.

(4) Transactions with MKW by MP Shipping, MP Shipyard and Bina Marine

MKW, a company incorporated in Singapore, is principally engaged in the business of generalwholesale trade. Our Executive Chairman, Mr Lee Wan Tang, our CEO, Mr Sean Lee Yun Feng,and our Executive Director, Ms Liely Lee, are directors and shareholders of MKW, holding 76 percent., 14 per cent. and 10 per cent. of the share capital of MKW respectively.

(a) Procurement Services by MKW for MP Shipyard

During the Relevant Period, MP Shipyard engaged the services of MKW to purchase spareparts and new equipment. In the interest of expediency, MKW charged an administrative feeof 15 per cent. of the purchase price of such new equipment purchased to cover for all out-of-pocket expenses, storage and logistics expenses incurred.

The aggregate amounts paid by MP Shipyard to MKW for the procurement of new equipmentduring the Relevant Period were as follows:-



Amounts paid to MKW – – 1,238 –pursuant to the procurement services

The above transactions were not conducted on an arm’s length basis nor based on normalcommercial terms.

After the admission of our Company to the Official List of the SGX-SESDAQ, should any ofour subsidiaries engage the services of MKW in the provision of procurement services, wewill comply with the “Guidelines and Review Procedures for Future Interested PersonTransactions Other Than Those Covered in the Shareholders’ Mandate” as set out in thisProspectus and all relevant rules in Chapter 9 of the Listing Manual with respect to obtainingshareholders’ approval.

(b) Rental payment to MKW by MP Shipping

During the period from April 2000 to June 2006, MP Shipping was sharing an office space at1 Sims Lane #03-11, Singapore 387355 with MKW. Such premises were owned by MKWand no rent was charged by MKW to MP Shipping until April 2005. From April 2005 to June2006, MP Shipping paid MKW rental charges of $3,000 per month. The rental was based onthe prevailing market rental rates for comparable office units within the same building. OurDirectors believe that such arrangement was entered into on an arm’s length basis and onnormal commercial terms. We ceased such lease arrangement with MKW in June 2006,following MP Shipping’s purchase of its own office premises located at 1 Sims Lane #04-11,Singapore 387355 in May 2006 from an unrelated third party.


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(c) Letter of credit (“LC”) Facilities provided by MKW on behalf of Bina Marine

In May 2007, Bina Marine engaged a new supplier, Regency Steel Asia Pte Ltd (“Regency”),in relation to the supply of steel. As Bina Marine was a new customer for Regency, Regencyrequired that Bina Marine issued an irrevocable letter of credit for its purchases. As BinaMarine’s LC and trust receipt facilities had not been finalised with its banker, MKW assistedBina Marine in this respect and provided the LC facilities for purposes of the purchases fromRegency with a back-to-back arrangement between MKW and Bina Marine. Regency thendrew down on MKW’s LC facilities upon delivery of goods to Bina Marine during the periodfrom June 2007 to August 2007. The total amount drawndown from MKW’s facilities for BinaMarine’s purchases from Regency is approximately $3.84 million. Two of these drawndownLC facilities which were due for payment in September 2007 amounting to approximatelyS$2.4 million have since been converted into trust receipts with MKW’s banker. Interestincurred by MKW at a rate of 6.5 per cent. per annum on these trust receipts will bereimbursed by Bina Marine accordingly. Regency has since extended credit terms to BinaMarine in respect of its purchases and it is not anticipated that Bina Marine will need to useMKW’s LC or trust facilities in the future. Such arrangement with MKW was not conductedon an arm’s length basis nor based on normal commercial terms.

(5) Vessel recovery services rendered by BBR to MP Shipping

BBR, a company incorporated in Indonesia, is principally engaged in ship agency functions, suchas the clearing of customs, and investments in connection with its ownership of vessels acquiredfrom our Group. Our Non-Executive Director, Mdm Lai Qin Zhi, and our CEO, Mr Sean Lee YunFeng, are shareholders of BBR, each holding 50 per cent. of the share capital of BBR respectively.Mr Sean Lee Yun Feng is also a commissioner of BBR.

In January 2003, a tugboat and a barge owned by MP Shipping were hijacked while they weretravelling from Pekan Baru, Indonesia to Bintan, Indonesia. We engaged the services of BBR toassist in the recovery of such vessels. With BBR’s established relationship with the Indonesianauthorities, BBR assisted MP Shipping in handling various administrative, customs, insurance andclearance matters which led to the successful recovery of these vessels. MP Shipping paid BBR$300,000, being reimbursement for all out-of-pocket expenses incurred in the provision of suchservices. Such a transaction would not normally be regarded as entered into on an arm’s lengthbasis as BBR did not receive any fee in providing such services.

We do not expect to obtain such services from BBR in the future. However, in the event that suchservices are obtained in the future, we will comply with the “Guidelines and Review Procedures forFuture Interested Person Transactions Other Than Those Covered in the Shareholders’ Mandate”as set out in this Prospectus and all relevant rules in Chapter 9 of the Listing Manual with respectto obtaining shareholders’ approval.

(6) Advances from our Executive Chairman

Our Group had in the past received advances from our Executive Chairman, Mr Lee Wan Tang, forworking capital purposes. These advances were not made on an arm’s length basis as they wereinterest-free, unsecured, repayable on demand and had no fixed terms of repayment. The amountsdue to Mr Lee Wan Tang as at the end of FY2004, FY2005, FY2006 and HY2007 and as at theLatest Practicable Date are set out below:-

As at theAs at 30 September As at 31 Latest

($’000) 2004 2005 2006 March 2007 Practicable Date

Amount due to 1,824 2,744 6,179 280 –Mr Lee Wan Tang


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During the last three financial years ended FY2006 and HY2007, based on month-end balances,the largest outstanding amount due to Mr Lee Wan Tang was $6,179,042. On 3 September 2007, aportion of the outstanding loan amounting to $3,000,000 was capitalised into 3,000,000 Shareswith such shares issued to Nautical International at the instruction of Mr Lee Wan Tang. As at theLatest Practicable Date, all advances from Mr Lee Wan Tang have been fully repaid by our Group.

(7) Professional services by Winvest

Our Lead Independent Director, Mr Lim Han Boon, is a director and shareholder of Winvest,holding 50 per cent. of the share capital of Winvest. The other two shareholders of Winvest are MrChan Kum Onn Roger and Mr Ang Eng Lim who each hold 25 per cent of Winvest. Winvest, acompany incorporated in Singapore, is principally engaged in the provision of consultancy services.It was engaged by our Group in March 2006 to assist and prepare our Group for the Invitation.

The amount of consultancy fees paid to Winvest in cash during the Relevant Period was as follows:



Consultancy fees – – 25 85

Under the terms of Winvest’s appointment, in consideration of services provided by Winvest,Winvest is entitled to be paid an aggregate of S$300,000 of which S$180,000 was satisfied by wayof the issue and allotment of 22,027 new Shares upon our Company obtaining the eligibility-to-listfrom the SGX-ST (but prior to the Bonues Issue and Share Split). The balance (taking into accountamounts already paid) will be paid to Winvest in cash. Winvest nominated Mr Lim Han Boon, MrChan Kum Onn Roger and Mr Ang Eng Lim to receive the 22,027 Shares. On 3 September 2007,17,622 Shares, 2,203 Shares and 2,202 Shares were issued to Mr Lim Han Boon, Mr Chan KumOnn Roger and Mr Ang Eng Lim respectively. Pursuant to the Bonus Issue, Mr Lim Han Boon, MrChan Kum Onn Roger and Mr Ang Eng Lim were issued an additional 25,580 Shares, 3,197Shares and 3,198 Shares respectively.

The consultancy arrangement with Winvest will terminate following our admission to the Official Listof the SGX-SESDAQ. Our Directors are of the view that this consultancy arrangement was enteredinto on an arm’s length basis, based on normal commercial terms which Winvest offers to otherparties, and is not prejudicial to the interests of our Company and our minority shareholders.

We do not intend to engage the services of Winvest after the admission of our Company to theOfficial List of the SGX-SESDAQ. Our Directors are of the view that the one-off services renderedand the non-recurring fees paid to Winvest will not interfere with the independent judgement of MrLim Han Boon in his role as Lead Independent Director.

Present and On-going Interested Person Transactions

(8) Ship chartering services to BRJ by MP Shipping

Since 1991, MP Shipping has been providing ship chartering services to BRJ to transport miningproducts such as granite mix aggregates and coal. The total values of services provided by MPShipping to BRJ during the Relevant Period were as follows:-



Provision of ship 3,282 5,783 5,795 8,537chartering servicesto BRJ


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Note:-

(1) Ship chartering services by MP Shipping to BRJ represented respectively 72.2, 87.2, 48.6 and 50.0 per cent. of shipchartering revenue for FY2004, FY2005, FY2006 and the period 1 October 2006 to the Latest Practicable Date and72.2, 87.2, 36.4 and 23.3 per cent. of total revenue of the Group for FY2004, FY2005, FY2006 and the period 1 October 2006 to the Latest Practicable Date.

The charter rates at which we provided our ship chartering services were determined at arm’slength and based on normal commercial terms after taking into account the prevailing marketprices for such services. On 13 September 2007, MP Shipping was granted the right of first refusalto provide ship chartering services to BRJ, its subsidiaries and other companies controlled by theLee Family for a period of two years commencing on the date on which our Shares are listed onthe SGX-SESDAQ.

After the admission of our Company to the Official List of the SGX-SESDAQ, all such transactionswill be made pursuant to the Shareholders’ Mandate, as described in the section entitled“Shareholders’ Mandates” and conducted in accordance with the guidelines described under thesection entitled “Guidelines and Review Procedures under Shareholders’ Mandate” to ensure thatthey are carried out on normal commercial terms and are not prejudicial to the interests of ourCompany and our minority Shareholders.

(9) Vessel crew sourced by BBR for MP Shipping

BBR, a company incorporated in Indonesia, is principally engaged in ship agency functions suchas the clearing of customs, and investments in connection with its ownership of vessels acquiredfrom the Group. Our Non-Executive Director, Mdm Lai Qin Zhi, and our CEO, Mr Sean Lee YunFeng, are the shareholders of BBR, each holding 50 per cent. of the share capital of BBRrespectively. Mr Sean Lee Yun Feng is also a commissioner of BBR.

During the Relevant Period, BBR sourced vessel crew to MP Shipping and Bina Marine for its shipchartering operations. The total amount paid to BBR for the sourcing of vessel crew during theRelevant Period were as follows:-



Sourcing of vessel crew 255 247 268 398

Such amount comprises reimbursement to BBR for the vessel crew’s wages (which were paid byBBR to the vessel crew) and expenses incurred by the vessel crew and paid by BBR. No feeswere paid to BBR for the sourcing of the vessel crew.

The above transactions were not conducted on an arm’s length basis nor entered into between theparties on normal commercial terms.

It is envisaged that we may continue to transact with BBR in the future where such transactions arebeneficial to and in the interests of the Group. After the admission of our Company to the OfficialList of the SGX-SESDAQ, all such transactions will be made pursuant to the Shareholders’Mandate, as described in the section entitled “Shareholders’ Mandates” and conducted inaccordance with the guidelines described under the section entitled “Guidelines and ReviewProcedures under Shareholders’ Mandate” to ensure that they are carried out on normalcommercial terms and are not prejudicial to the interests of our Company and our minorityShareholders.

(10) Purchase of building materials from SRC by MP Shipyard

SRC, a company incorporated in Indonesia, is principally engaged in the processing and trading ofready-mix concrete. SRC is held in equal proportions by our CEO, Mr Sean Lee Yun Feng and anunrelated third party. Mr Sean Lee Yun Feng is also a commissioner of SRC.


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From time to time, MP Shipyard purchases from SRC building materials such as concrete andpilings for use by MP Shipyard in the construction of facilities at its yard. The total values of thebuilding materials provided by SRC to MP Shipyard during the Relevant Period were as follows:-

($’000) FY2004 FY2005 FY2006 1 October 2006to the Latest

Practicable Date

Supply of building – – 104 697materials by SRC

The above transactions were conducted on an arm’s length basis and were entered into based onnormal commercial terms and market prices which SRC offers to other unrelated third parties.

We intend to continue to transact with SRC in the future where such transactions are beneficial toand in the interests of our Group. After the admission of our Company to the Official List of theSGX-SESDAQ, all such transactions will be made pursuant to the Shareholders’ Mandate, asdescribed in the section entitled “Shareholders’ Mandates” and conducted in accordance with theguidelines described under the section entitled “Guidelines and Review Procedures underShareholders’ Mandate” to ensure that they are carried out on normal commercial terms and arenot prejudicial to the interests of our Company and our minority Shareholders.

(11) Purchase of granite from BRJ by MP Shipyard

From time to time, MP Shipyard purchases granite from BRJ for the construction of facilities at itsyard. The total values of the building materials provided by BRJ to MP Shipyard during theRelevant Period were as follows:-



Supply of granite by BRJ – – – 262

The above transactions were conducted on an arm’s length basis and were entered into based onnormal commercial terms and at market prices which BRJ offers to other unrelated third parties.

We intend to continue to transact with BRJ in the future where such transactions are beneficial toand in the interests of our Group. After the admission of our Company to the Official List of theSGX-SESDAQ, all such transactions will be made pursuant to the Shareholders’ Mandate, asdescribed in the section entitled “Shareholders’ Mandate” and conducted in accordance with theguidelines described under the section entitled “Guidelines and Review Procedures underShareholders’ Mandate” to ensure that they are carried out on normal commercial terms and arenot prejudicial to the interests of our Company and our minority Shareholders.

(12) Trade transactions with BBR by MP Shipping

(a) BBR as our agent for transhipment services

Since March 2006, MP Shipping has been providing transhipment services to third partycustomers. As transhipment services were carried out in Indonesian waters, customerswould prefer to deal with an Indonesian entity. In the past, BBR, being an Indonesian entity,has assisted our Group in respect of transhipment services by entering into the long-termcharter contracts with the unrelated third party customers with a back-to-back arrangementswith MP Shipping. At the instructions of BBR, such unrelated third party customers wouldmake payments directly to the account of MP Shipping. BBR has not previously received anycommission or fee for acting as our agent in such respect.


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(b) Ship agency services by BBR

BBR is principally involved in ship agency functions (such as handling various shippingadministration, immigration, licensing as well as customs clearance) and investment inconnection with its ownership of vessels acquired from our Group. BBR does not maintainvessel crew but has in the past assisted MP Shipping in sourcing for the required crewwithout any charges. During the Relevant Period, BBR provided MP Shipping with shipagency services, including assisting our Group in handling various shipping administration,immigration, licensing as well as customs and clearance matters in Indonesia. The totalvalues of ship agency services provided by BBR during the Relevant Period were asfollows:-

($’000) FY2004 FY2005 FY2006 1 October 2006to the Latest

Practicable Date

Total amount paid to – 8 91 118BBR for ship agencyservices

The above transactions were conducted on an arm’s length basis and were entered intobased on normal commercial terms, after taking into account the prevailing market prices forsuch services.

To formalise the above arrangements set out in the above paragraphs (a) and (b), we had by aletter of appointment dated 13 September 2007 (the “Agency Agreement”), appointed BBR as ouragent in relation to our Group’s transhipment services as well as to provide ship agency servicessuch as handling various shipping administration, immigration, licensing as well as customsclearance. In relation to acting as our agent and entering into transhipment contracts on ourGroup’s behalf, no fee is payable by our Group to BBR. In relation to the provision of ship agencyservices, our Group will pay BBR a fee of between S$300 and S$500 (inclusive of any applicablegoods and services tax) per trip (whether a transhipment or charter trip) depending on the distanceto be covered by the trip under the relevant charter contract provided that the aggregate fees forany particular contract does not exceed three per cent. of the value of that contract. Our Directorsbelieve that the Agency Agreement was entered into on an arms’ length basis and based onnormal commercial terms. The renewal of the Agency Agreement will be subject to the review ofour Audit Committee.

(c) Charter of a tugboat and a barge from BBR pursuant to a sale-and-leasebackarrangement

In line with our sale-and-leaseback strategy, MP Shipping had on 1 October 2006 enteredinto a sale and purchase agreement with BBR to sell a tugboat named “Bina Ocean 3” and abarge named “Bina 83” for an aggregate consideration of $1.5 million, which was arrived atbased on the valuation by an independent third party. Our Directors believe that thetransaction was on an arm’s length basis and was entered into on normal commercial terms.

Pursuant to a time charter agreement dated 1 April 2007 (and supplemented by asupplemental agreement dated 13 September 2007) entered into between MP Shipping andBBR, MP Shipping chartered the said tugboat and barge from BBR for use in its operations,for a minimum period of 12 months commencing from 1 April 2007. The monthly charter ratefor both the tugboat and barge is $40,000. The charter rates for the tugboat and barge arecomparable to the prevailing market charter rates for such vessels. Our Directors believe thatthe time charter agreement was entered into on an arm’s length basis and on normalcommercial terms save that the charter may only be terminated by MP Shipping uponproviding seven days prior notice.


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After the admission of our Company to the Official List of the SGX-SESDAQ, should werenew the time charter agreement, such renewal will be subject to the review of our AuditCommittee.

We will continue to conduct similar transactions with BBR in the future where we benefitcommercially from the transactions. After the admission of our Company to the Official List ofthe SGX-SESDAQ, all such transactions will be made pursuant to the Shareholders’Mandate, as described in the section entitled “Shareholders’ Mandate” and conducted inaccordance with the guidelines described under the section entitled “Guidelines and ReviewProcedures under Shareholders’ Mandate” to ensure that they are carried out on normalcommercial terms and are not prejudicial to the interests of our Company and our minorityShareholders.

(13) Guarantees and other security provided by our Directors and their Associates

Our Executive Chairman, Mr Lee Wan Tang, our Non-Executive Director, Mdm Lai Qin Zhi, ourCEO, Mr Sean Lee Yun Feng, and our Executive Director, Ms Liely Lee, have during the RelevantPeriod provided personal guarantees to secure certain banking facilities granted by several banksto our Group. Mr Lee Wan Tang, Mr Sean Lee Yun Feng, Mdm Lai Qin Zhi and Ms Liely Lee did notreceive any fee or other benefits from providing these guarantees. In addition, a facility forapproximately S$0.9 million extended by a bank to MP Shipyard is, inter alia, secured by a lienover a fixed deposit of Australian $1,000,000 provided Mr Lee Wan Tang, our Executive Chairman.Another facility extended by another bank to MP Shipyard for S$6,000,000 is, inter alia, secured by(i) a pledge over certain moveable assets owned by BRJ, (ii) a corporate guarantee from BRJ, (iii)personal guarantees by Mr Lee Wan Tang and Mr Sean Lee Yun Feng, (iv) a mortgage over certainimmoveable assets owned by certain members of the Lee Family as well as Mr Irryanto (ourExecutive Officer) and (v) assignment of insurance policies relating to the aforementioned assetscharged or pledged to the bank.

The largest outstanding amount guaranteed by the above guarantors during the Relevant Period,based on amounts as at the end of each calendar month, was approximately $24.9 million. As atthe Latest Practicable Date, the aggregate outstanding amount guaranteed by the aboveguarantors was approximately $23.1 million.

The nature of the above facilities are described under the sections entitled “Liquidity and CapitalResources” and “Capitalisation and Indebtedness” of this Prospectus.

Subsequent to the Invitation, we intend to obtain a release and discharge of the above personalguarantees provided by our Directors and their Associates from the respective banks and financialinstitutions by substituting the same with other securities to be provided by our Group which maybe acceptable to the banks, subject to their consent. Our Directors are confident that with ourlisting status and strengthened financial position due to the expected proceeds arising from theInvitation, we should be able to secure alternative bank facilities on terms similar to thoseapplicable to the current facilities. Should the banks or any of the financial institutions not agree tothe release, our Directors and their Associates will continue to guarantee the banking facilities.


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We anticipate that our Group would, in the ordinary course of business, enter into transactions includingbut not limited to the transactions set out in this section with persons which are considered “interestedpersons” as defined in Chapter 9 of the Listing Manual. It is likely that such transactions will occur withsome degree of frequency and could arise at any time and from time to time.

Chapter 9 of the Listing Manual allows a listed company to obtain a mandate from its shareholders forrecurrent interested person transactions which are of a revenue or trading nature or for those necessaryfor its day-to-day operations. These transactions may not include the purchase or sale of assets,undertakings or businesses.

In view of the time-sensitive nature of commercial transactions, it would be advantageous for our Groupto obtain a Shareholders’ Mandate to enter into certain interested person transactions in our normalcourse of business, provided that all such transactions are carried out on normal commercial terms andare not prejudicial to the interests of our Company and our minority shareholders. The Mandate willeliminate, among other things, the need for our Group to convene a separate general meeting to seekshareholders’ approval on each occasion a potential transaction with an interested person arises. This willsubstantially reduce the administrative time, inconvenience and expenses associated with the conveningof such meetings, without compromising our Group’s corporate objectives and adversely affectingbusiness opportunities available to our Group.

On 3 September 2007, our Shareholders approved a mandate (the “Shareholders’ Mandate”) for us toenter into the following categories of interested person transactions with the following categories ofinterested persons. As the sole shareholder of our Company, Nautical International had not abstainedfrom voting on the resolutions for the adoption of the Shareholders’ Mandate. Pursuant to Rule 920(2) ofthe Listing Manual, our new Shareholders who subscribe for the New Shares in the Invitation are deemedto have approved the Shareholders’ Mandate.

The Shareholders’ Mandate will take effect from our admission to the Official List of the SGX-SESDAQand will be effective until the earlier of the following: (a) our first annual general meeting following ouradmission to the Official List of the SGX-SESDAQ, or (b) the first anniversary of our date of admission tothe Official List of the SGX-SESDAQ. Thereafter, approval from our Shareholders for a renewal of theShareholders’ Mandate will be sought at each subsequent annual general meeting. In accordance withRule 920(1)(b)(viii) of the Listing Manual, interested persons and their associates shall abstain fromvoting on resolutions approving interested person transactions involving themselves and our Group.Furthermore, such interested persons shall not act as proxies in relation to such resolutions unless votinginstructions have been given by a shareholder.

The Shareholders’ Mandate does not cover any interested person transaction which has a value of below$100,000 as the threshold and aggregation requirements of Chapter 9 of the Listing Manual do not applyto transactions below $100,000 each.

Categories of Interested Persons

The Shareholders’ Mandate will apply to our Group’s interested person transactions with companiescontrolled by the Lee Family such as BRJ, BBR, MKW, SRC and their respective subsidiaries andAssociates.

Transactions with the interested persons which do not fall within the ambit of the Shareholders’ Mandateshall be subject to the relevant provisions of Chapter 9 of the Listing Manual.

SHAREHOLDERS’ MANDATE

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Categories of the Interested Person Transactions

The transactions with the interested persons which will be covered by the Shareholders’ Mandate are setout below:-

Services provided by our Group to interested persons

(a) Ship chartering services

MP Shipping has been providing ship chartering services to BRJ to transport mining products suchas granite mix aggregates and coal since 1991. It is intended that MP Shipping will continue toprovide such ship chartering services to BRJ in the future. In addition, MP Shipping may provideship chartering services to other companies controlled by the Lee Family if required by suchcompanies.

(b) Ship repair and maintenance services

In the event that any company owned by the Lee Family acquires any vessels pursuant to the saleand lease back arrangement with our Group, such companies may look to our Group to provideship repair and maintenance services.

Services provided by interested persons to our Group

(a) Ship agency services for transhipment services and other functions (including handling variousshipping administration, immigration, licensing as well as customs and clearance matters inIndonesia)

In the past, BBR provided MP Shipping with ship agency services in relation to our Group’sprovision of ship chartering and transhipment services, including assisting our Group in handlingvarious shipping administration, immigration, licensing as well as customs and clearance matters inIndonesia. It is intended that our Group will continue to utilise such services in the future.

(b) Procurement or the sale of building materials such as concrete, pre-cast products, asphalt, granitemix aggregates and pilings

SRC is principally engaged in the processing and trading of ready-mix concrete while BRJ isprincipally engaged in the quarrying of granites. From time to time, MP Shipyard purchases fromSRC and BRJ building materials such as concrete, pilings and granite for the construction offacilities at its yard.

(c) Sourcing of vessel crew

BBR has in the past sourced vessel crew for our vessels. Where such transactions are in theinterests of our Group, we may seek such services from BBR in the future.

Other transactions

(a) Sale and lease back of vessels

It is envisaged that in the future, our Group may sell vessels to BBR and thereafter lease suchvessels back from BBR for an agreed period of time.


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Disclosure in annual report

We are required, under Rule 920(1)(a)(i) of the Listing Manual, to disclose in our annual report theaggregate value of transactions conducted pursuant to the Shareholders’ Mandate during the currentfinancial year, as well as in the annual reports for the subsequent financial years during which theShareholders’ Mandate is in force. The name of the interested person and the corresponding aggregatevalue of the interested person transactions will be presented in the following format:-

Name of interested person Aggregate value of all interestedperson transactions during thefinancial year under review (excludingtransactions less than $100,000 andtransactions conducted underShareholders’ Mandate pursuant toRule 920)

Rationale for and benefits of the Shareholders’ Mandate

The transactions with the interested persons are entered into or will be entered into by our Group in theordinary course of business. They are recurring transactions that are likely to occur with some degree offrequency and may arise at any time and from time to time. Our Directors are of the view that it will bebeneficial to our Group to transact or continue to transact with the interested persons in relation to theaforementioned categories of transactions for the following reasons:-

Services provided by our Group to interested persons

(a) Ship chartering services

Our Group has been chartering vessels to BRJ which requires such vessels to transport miningproducts such as granite mix aggregates and coal. Such chartering services comprise a substantialportion of our Group’s ship chartering business. We believe that it is in the best interests of ourGroup to continue to provide such services to BRJ.

(b) Ship repair and maintenance services

In addition to building ships, we carry on the business of ship repair and maintenance at ourshipyard. In the event that any company controlled by the Lee Family acquires any vesselspursuant to the sale-and-leaseback arrangement with our Group, it would be to the benefit of ourGroup to provide ship repair and maintenance services for such vessels.

Services provided by interested persons to our Group

(a) Ship agency services for transhipment services and other functions (including handling variousshipping administration, immigration, licensing as well as customs and clearance matters inIndonesia)

Over the years, we believe that our Group has developed a good relationship with BBR whichprovides ship agency services to our Group in relation to our provision of ship chartering andtranshipment services. In the event that our Group is required to obtain such ship agency services(including procuring another party to enter into transhipment contracts on our behalf) from anunrelated third party, we would have to develop a new relationship with such unrelated third partyand may not be able to obtain comparable rates or quality of service from such unrelated thirdparty.


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Aggregate value of all interestedperson transactions, conductedunder the Shareholders’ Mandate(excluding transactions less than$100,000) pursuant to Rule 920 ofthe Listing Manual

(b) Procurement or the sale of building materials such as concrete, pre-cast products, asphalt, granitemix aggregates and pilings

MP Shipyard purchases building materials such as concrete, pilings and granite from SRC andBRJ for the construction of facilities at our shipyard, which is currently underway. If MP Shipyard isrequired to obtain such materials from another party, we may not be able to obtain comparableprices as those provided by SRC and BRJ without a substantial bulk purchase. Further, sourcingfor new suppliers may result in delay in the completion of the shipyard.

(c) Sourcing of vessel crew

BBR has in the past sourced vessel crew for our vessels. We believe that it is beneficial to ourGroup to have the option of having BBR source vessel crew for our vessels.

Other transaction

(a) Sale-and-leaseback of vessels

MP Shipping has in the past entered into sale-and-leaseback of vessels arrangement with BBR.This arrangement serves a two-pronged purpose. Firstly, it allows us to reduce our gearing andimprove our cash flow, while expanding the fleet size that we are currently operating since we willcontinue to have the full commercial and operational control of our vessels. In this way, we are ableto deploy capital more efficiently towards developing our existing businesses and acquiring newrelated businesses. Secondly, by adopting the sale-and-leaseback strategy, we are able to operateon Indonesian flagged vessels and avail ourselves of the cost benefits (such as reduced tax andduties) accorded to such vessels. We believe that it is beneficial to our Group to embark on suchstrategy.

Our Directors believe that our Group will be able to benefit from its transactions with the interestedpersons. The Shareholders’ Mandate and the renewal of the Shareholders’ Mandate on an annual basiswill eliminate the need to convene separate general meetings from time to time to seek Shareholders’approval as and when potential interested person transactions with the interested persons arise, therebyreducing substantially the administrative time and expenses in convening such meetings, withoutcompromising the corporate objectives or adversely affecting the business opportunities available to ourGroup.

The Shareholders’ Mandate is intended to facilitate transactions in our normal course of business whichare transacted from time to time with the interested person, provided that they are carried out on an arm’slength basis and on normal commercial terms and are not prejudicial to the interests of our Company andour minority Shareholders.

Disclosure will be made in our annual report of the aggregate value of interested person transactionsconducted pursuant to the Shareholders’ Mandate during the current financial year, and in the annualreports for the subsequent financial years during which a Shareholders’ Mandate is in force.

Guidelines and Review Procedures under Shareholders’ Mandate

We have implemented the following procedures to supplement existing internal control procedures toensure that interested person transactions are undertaken on an arm’s length basis and on normalcommercial terms and are not prejudicial to the interests of our Company and our minority Shareholdersand are consistent with our usual business practice and policies, which are generally no more favourableto the interested persons than those extended to unrelated third parties.


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The following procedures have been put in place:-

(a) When selling items or supplying services to an interested person, the price and terms of othersuccessful sales of a similar nature to non-interested person will be used in comparison to ensurethat the interests of our minority shareholders are not disadvantaged. The sale or fee for the supplyof services shall not be lower than the lowest sale or fee of the latest two successful transactionswith non-interested persons. In the case of the provision of ship repair and maintenance services,the required amount of repairs shall be guided by an independent class surveyor;

(b) Save for the engagement of BBR in relation to acting on our Group’s behalf in transhipmentcontracts and providing ship agency services, in which case compliance with the AgencyAgreement shall be observed, when purchasing items from or engaging the services of aninterested person, two other quotations from non-interested persons will be obtained (whereavailable or feasible) for comparison to ensure that the interest of minority shareholders are notdisadvantaged. The purchase price or fee for services shall not be higher than the most competitiveprice or fee of the other two quotations from non-interested persons. In determining the mostcompetitive price or fee, all pertinent factors, including but not limited to quality, delivery time,standard of services, specification compliance, track record, experience and expertise, and whereapplicable, preferential rates, rebates or discounts accorded for bulk purchase will be taken intoconsideration;

(c) When chartering vessels or providing transhipment services to an interested person, our FinancialController shall take appropriate steps to ensure that the charter rates and transhipment rates willbe commensurate with the prevailing market rates, including adopting measures such as makingrelevant enquiries with owners of similar vessels. The charter rates and transhipment rates payableshall be based on the most competitive market rental rate of similar vessel in terms of capacity andsize, based on the results of the relevant enquiries; and

(d) When selling vessels to an interested person pursuant to the sale-and-leaseback arrangement, theprice of the vessels shall be based on the valuation report provided by an independent third partyto ensure that the interests of our minority shareholders are not disadvantaged. When leasing backsuch vessels, our Financial Controller shall take appropriate steps to ensure that the charter ratewill commensurate with the prevailing market rates, including adopting measures such as makingrelevant enquiries with owners of similar vessels. The charter rates payable shall be based on themost competitive market rental rate of similar vessel in terms of capacity and size, based on theresults of the relevant enquiries.

In cases where it is not possible to obtain comparables from other unrelated third parties, our AuditCommittee will consider whether the pricing of the transaction is in accordance with usual businesspractices and pricing policies and consistent with the usual margins to be obtained for the same orsubstantially similar types of transactions to determine whether the relevant transaction is undertaken onan arm’s length basis and on normal commercial terms. The Audit Committee will also weigh the benefitsof, and rationale for, transacting with the interested person to determine whether the price and termsoffered are fair and reasonable.


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Threshold Limits

In addition, to supplement our internal procedures to ensure that all interested person transactionscovered by the Shareholders’ Mandate will be carried out on normal commercial terms and will not beprejudicial to the interests of our Group and our minority Shareholders, the following limits for allinterested person transactions will be applied:-

In respect of any interested person transaction,

(a) Where an individual transaction, in connection with the provision of ship repair and maintenanceservices or the sale-and-leaseback of vessels (the “Big Ticket Transaction”), is below 1.5 per cent.of our Group’s latest audited NTA or in connection with any individual transaction other than a BigTicket Transaction is below $200,000, such a transaction shall be reviewed by our Audit Committeewithin one month from the end of the month in which the transaction was entered into. However,prior to entering into such a transaction, the Financial Controller, being the person designated tomonitor all interested person transactions, provided he is not an interested person or an associateof an interested person, will ensure that all relevant documents in connection with the transactionare in order;

(b) Where an individual transaction, in connection with the Big Ticket Transaction, is equal to orexceeds 1.5 per cent. of our Group’s latest audited NTA or in connection with any individualtransaction other than a Big Ticket Transaction is $200,000 or above, such a transaction will besubject to approval by our Audit Committee prior to such transaction being entered into.

(c) In the absence of comparable quotes from other unrelated third parties, the Audit Committee wouldreview each transaction in connection with a Big Ticket Transaction that is below 1.5 per cent. ofour Group’s latest audited NTA or in connection with any individual transaction other than a BigTicket Transaction that is below S$200,000 within one month from the end of the month in whichthe transaction was entered into. However, prior to entering into such a transaction, the FinancialController, being the person designated to monitor all interested person transactions, provided heis not an interested person or an associate of an interested person, will, in consultation with theAudit Committee, ensure that the pricing of the transaction is in accordance with the usualbusiness practices and pricing policies and consistent with the usual margins to be obtained for thesame or substantially similar types of transactions. In the absence of comparable quotes fromother unrelated third parties for an individual transaction in connection with a Big TicketTransaction, with value equals to or exceeds 1.5 per cent. of our Group’s latest audited NTA, or inconnection with any individual transaction other than a Big Ticket Transaction with value equals toS$200,00 or more, such a transaction will be subject to prior approval by our Audit Committee priorto such transaction being entered into.

In the event that a member of the Audit Committee is interested in any interested person transaction, hewill declare his interest and abstain from any review, deliberation or decision making in respect of thatparticular transaction.

Designated persons of the respective companies are required to submit details of all interested persontransactions entered into immediately to the Financial Controller, including the value of the transactions.As a minimum, a report is to be submitted every half-yearly. A “nil” return is expected if there is nointerested person transaction for a previous half-year. For monitoring purposes, the Financial Controllerwill maintain a register of interested person transactions (the “IPT Register”). This IPT Register will beupdated half-yearly based on submissions by the designated persons. It will record all interested persontransactions which are entered into pursuant to the Shareholders’ Mandate (including the basis on whichthey are entered into) and the approval or review by the Audit Committee.


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The Audit Committee will review all interested person transactions recorded in the IPT Register at leasthalf-yearly 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 otherinformation deemed necessary by our Audit Committee. Our Audit Committee may request for anyadditional information pertaining to the transaction under review from independent sources, advisers orvaluers as they deem fit.

Further, our Audit Committee will review the threshold limits (be it in absolute dollar amount or as apercentage of the latest prevailing audited consolidated NTA of the Group) annually to assure that theyare not prejudicial to the interests of the Group and the minority Shareholders. Our Audit Committee willalso review the reports submitted by the Financial Controller on a half-yearly basis to ascertain that theguidelines and procedures established to monitor interested person transactions have been complied withand the relevant approvals obtained. In addition, our Audit Committee shall also review from time to timesuch guidelines and procedures to determine if they are adequate and/or commercially practicable inensuring that transactions between us and our interested persons are conducted on normal commercialterms. Pursuant to Rule 920(1)(b)(iv) and (vii) of the Listing Manual, if during its periodic reviews, theAudit Committee believes that the guidelines and procedures as stated above are inappropriate or notsufficient to ensure that interested person transactions will be carried out on an arm’s length basis and onnormal commercial terms and will not be prejudicial to the interests of our Company and our minorityShareholders, we will seek a fresh mandate from our Shareholders based on new guidelines andprocedures. During the period prior to obtaining a fresh mandate from our Shareholders, all transactionswith interested persons will be subject to prior review and approval by our Audit Committee.

Our Audit Committee believes that the above guidelines and procedures are sufficient to ensure thatthese interested person transactions will be on an arm’s length basis and on normal commercial termsand will not be prejudicial to the interests of our Company and our minority Shareholders.


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To ensure that interested person transactions not covered by the Shareholders’ Mandate are undertakenon an arm’s length’s basis, on normal commercial terms and will not be prejudicial to our Company andminority Shareholders, our Audit Committee will adopt the following procedures when reviewing suchinterested person transactions:-

(i) When selling items or supplying services to an interested person, the price and terms of othersuccessful sales of a similar nature to non-interested person will be used in comparison to ensurethat the interests of our minority shareholders are not disadvantaged. The sale or fee for the supplyof services shall not be lower than the lowest sale or fee of the latest two successful transactionswith non-interested persons; and

(ii) When purchasing items from or engaging the services of an interested person, two otherquotations from non-interested persons will be obtained (where available or feasible) forcomparison to ensure that the interest of minority shareholders are not disadvantaged. Thepurchase price or fee for services shall not be higher than the most competitive price or fee of theother two quotations from non-interested persons. In determining the most competitive price or fee,all pertinent factors, including but not limited to quality, delivery time, standard of services,specification compliance, track record, experience and expertise, and where applicable, preferentialrates, rebates or discounts accorded for bulk purchase will be taken into consideration.

In the event that it is not possible for such quotations to be obtained, our Audit Committee will determinewhether the prices and terms offered by or to the interested persons are fair and reasonable and theterms of supply from or to the interested persons are made on normal commercial terms and are notprejudicial to the interests of our Company and our minority Shareholders.

In addition, any interested person transaction of a value equal to or exceeding three per cent. of ourGroup’s latest audited NTA must be approved by our Audit Committee prior to its entry and any interestedperson transaction of a value equal to or exceeding five per cent. of our Group’s latest audited NTA issubject to the approval of Shareholders in general meeting prior to its entry.

The designated persons of the respective companies, who are required to submit details of all interestedperson transactions to the Financial Controller, are to submit similar details to the Financial Controller inrespect of all interested person transactions not covered under the Shareholders’ Mandate. The FinancialController will similarly maintain a register similar to the IPT Register in respect of all interested persontransactions other than those covered under the Shareholders’ Mandate.

Our Audit Committee will review all such interested person transactions, if any, on a half-yearly basisthrough reporting by the Financial Controller to ensure that they are carried out at arm’s length and inaccordance with the procedures outlined above. It will take into account all relevant non-quantitativefactors. In the event that a member of the Audit Committee is interested in any such interested persontransaction, he will abstain from reviewing that particular transaction. Furthermore, if during these periodicreviews, the Audit Committee believes that the guidelines and procedures as stated above are notsufficient to ensure that interests of minority Shareholders are not prejudiced, we will adopt newguidelines and procedures.

In addition, our Audit Committee will include the review of such interested person transactions as part ofits standard procedures while examining the adequacy of our internal controls. Our Board will also ensurethat all disclosure, approval and other requirements on interested person transactions, including thoserequired by prevailing legislation, the Listing Manual and accounting standards, are complied with. Inaddition, such transactions will also be subject to Shareholders’ approval if deemed necessary by theListing Manual.

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GUIDELINES AND REVIEW PROCEDURES FORFUTURE INTERESTED PERSON TRANSACTIONS OTHER THAN THOSE

COVERED IN THE SHAREHOLDERS’ MANDATE

Omega Capital Limited has been appointed as the independent financial adviser to the Audit Committeeto opine on whether the methods and procedures for determining the transaction prices of the interestedperson transactions under the Shareholders’ Mandate are sufficient to ensure that our Group’stransactions with the interested persons will be carried out on normal commercial terms and will not beprejudicial to the interests of our Company and its minority Shareholders.

Having considered, inter alia, the guidelines and review procedures for the interested person transactionsset up by our Company, the rationale for the Shareholders’ Mandate and the benefits accruing to theShareholders arising from the Shareholders’ Mandate, Omega Capital Limited is of the opinion that thecurrent methods and procedures set up by our Company for determining the transaction prices ofinterested person transactions, if always and strictly adhered to at all times, are sufficient to ensure thatsuch transactions will be carried out on normal commercial terms and will not be prejudicial to theinterests of our Company and our minority Shareholders. Their letter to the Audit Committee dated 27September 2007 is reproduced and attached as Appendix VI to this Prospectus.

OPINION OF THE INDEPENDENT FINANCIAL ADVISER

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Save as disclosed below and in the section entitled “Interested Person Transactions” of this Prospectus,none of our Directors, Executive Officers, Substantial Shareholders or any of their Associates has hadany interest, direct or indirect in the following:-

(a) any transactions to which our Company was or is to be a party;

(b) any company carrying on the same business or a similar trade which competes materially anddirectly with the existing business of our Group; and

(c) any company that is our customer or supplier of goods and services.

Great Wall Marine Pte Ltd (“Great Wall”)

Great Wall, a company incorporated in Singapore, is principally engaged in the business of stevedoringand lighterage services. Our Executive Chairman, Mr Lee Wan Tang, is a director and shareholder ofGreat Wall, holding 50 per cent. of the share capital of Great Wall. The remainder of the share capital isheld by unrelated parties.

Great Wall has been dormant since 2001. The shareholders of Great Wall have submitted theirapplication to the Accounting and Corporate Regulatory Authority of Singapore to strike off the companyon 13 July 2007.

BBR

BBR, a company incorporated in Indonesia, is principally involved in ship agency functions such ascustoms clearance and investments in connection with its ownership of vessels acquired from our Group.BBR currently owns and has leased to our Group two Indonesian flagged vessels. Our Non-ExecutiveDirector, Mdm Lai Qin Zhi and our CEO, Mr Sean Lee Yun Feng are shareholders of BBR, each holding50 per cent. of the share capital of BBR respectively. Mr Sean Lee Yun Feng is also a commissioner ofBBR.

As a result of the sale-and-leaseback arrangement with BBR, BBR charters to us for our operations thevessels it bought from us. Notwithstanding that BBR is involved in the similar ship chartering business,our Directors are of the view that there are no existing significant conflicts of interests in view of thefollowing:-

(i) BBR’s ship chartering operations are carried out solely for the purposes of the sale-and-leasebackarrangement with our Group. All sale agreements with BBR will contain a clause for a perpetualleaseback of the vessel and the said lease can only be terminated by our Group, so long as theLee Family continues to have controlling interest in BBR and our Group;

(ii) BBR has undertaken to our Company that:

(a) save for the sale and lease back arrangement with our Group, it will not (whether present orfuture) carry on any business that is directly or indirectly in competition with the business ofour Group;

(b) it will not solicit, market to or entice away, whether directly or indirectly, from our Group anycustomer;

(c) it will not solicit the employees of our Group;

(d) it will ensure that any vessel purchased from our Group is immediately chartered back to ourGroup, save where the vessel is no longer fit for its purpose;

(e) it will not engage in sale-and-leaseback of vessels arrangements with any party other thanwith our Group; and

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(f) save for the purpose of or in connection with the sale-and-leaseback arrangement with ourGroup, it will not own any vessel nor provide any ship chartering service.

(iii) Each of Mr Lee Wan Tang, Mdm Lai Qin Zhi, Mr Sean Lee Yun Feng and Ms Liely Lee hasundertaken to our Company that for so long as (i) he/she remains a Director of our Company orany of our subsidiaries; and/or (ii) Mr Lee Wan Tang, Mdm Lai Qin Zhi, Mr Sean Lee Yun Feng andMs Liely Lee individually or collectively are interested in 15 per cent. or more (whether direct orindirect) in the voting shares of our Company, each of them will not without the consent of ourCompany, inter alia, directly or indirectly carry on or be engaged or interested in any capacity in abusiness, trade or occupation which competes with any shipping or shipyard business carried on orproposed to be carried on by our Group.

Interests of Experts

No expert is interested, directly or indirectly, in the promotion of, or in any property or assets which have,within the two years preceding the date of this Prospectus, been acquired or disposed of by or leased toour Company or any of its subsidiaries or are proposed to be acquired or disposed of by or leased to ourCompany or any of its subsidiaries.

Save for Winvest (please refer to the section entitled “Interested Person Transactions” of this Prospectusfor additional details), no expert is employed on a contingent basis by our Company or any of oursubsidiaries, or has a material interest, whether direct or indirect, in our Shares or the shares of oursubsidiaries, or has a material economic interest, whether direct or indirect, in our Company, including aninterest in the success of the Invitation.

Interests of Underwriters or Financial Advisers

In the reasonable opinion of our Directors, the Underwriter, UOB Asia, does not have a materialrelationship with our Company save as below:-

(a) the Invitation is underwritten by UOB Asia;

(b) UOB Asia is the Manager, Underwriter and Placement Agent of the Invitation;

(c) UOB and UOB Kay Hian, an associated company of UOB, are the Primary Sub-Underwriters andPrimary Sub-Placement Agents;

(d) UOB Asia is a wholly-owned subsidiary of UOB which has provided loans and trade financingfacilities as well as credit card facilities to our Group; and

(e) UOB is the Receiving Banker of the Invitation.

In the reasonable opinion of our Directors, Omega Capital Limited does not have a material relationshipwith our Company save for its appointment as independent financial adviser to the Audit Committee inrelation to the Shareholders’ Mandate.

POTENTIAL CONFLICTS OF INTERESTS

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DIRECTORS

The Board is entrusted with the responsibility for the overall management of our Group. Our Directors’particulars are listed below:-

Country of Name Age Address Principal Principal

Occupation Residence

Lee Wan Tang 58 35 Kingsmead Road Executive Chairman SingaporeSingapore 267986

Sean Lee Yun Feng 30 35 Kingsmead Road CEO SingaporeSingapore 267986

Liely Lee 33 1 Amber Road Executive Director Singapore#10-04Singapore 349845

Lai Qin Zhi 59 35 Kingsmead Road Non-Executive Director SingaporeSingapore 267986

Lim Han Boon 44 15 Sandilands Road Lead Independent Director Singapore #-01-03

Singapore 546079

Sim Swee Yam Peter 52 21 Sundridge Park Road Independent Director SingaporeSingapore 358148

The working, business experience and areas of responsibility of our Directors are set out below:-

Mr Lee Wan Tang is the Executive Chairman of our Group and was appointed to the Board in July 2006.He is responsible for the strategic positioning and business expansion of our Group. Mr Lee has beeninstrumental in the development of our ship chartering operations and the initial planning and setting upof MP Shipyard. In 1991, he established MP Shipping originally to transport BRJ’s products from Bintan,Indonesia to Singapore. Under Mr Lee’s leadership, our shipping business now services customers otherthan BRJ. BRJ is a company he founded which is principally engaged in the business of mining while itsother subsidiaries and certain Associates of the Lee Family are collectively engaged in the business ofconstruction, property development and infrastructure development in Indonesia and Singapore. Mr Lee isconcurrently the president commissioner of BRJ. In 2005, having recognised the region’s demand for shipbuilding and ship repair and maintenance services, he established our shipyard business. Prior to hisinvolvement with our Group, from 1979 to 1990, he was principally involved in the formulation of thebusiness directions and strategies of BRJ and other companies controlled by the Lee Family.

Mr Sean Lee Yun Feng is our Group CEO and was appointed to the Board in July 2006. He isresponsible for the overall management and day-to-day operations of our Group as well as theformulation of the business directions, strategies and policies of our Group. Mr Sean Lee Yun Feng isinstrumental in initiating and penetrating new markets for both our shipping and shipyard operations. Onthe operational front, he introduced a slew of strategic operational measures (as detailed in the sectionentitled “Business Overview” of this Prospectus), which greatly improved the efficiency of our fleet ofvessels. He also spearheads our shipyard operations since it commenced operations in December 2005.Prior to his involvement with our Group, he oversaw the mining operations of BRJ as well as theoperations of MKW and SRC at separate times. He graduated with a Bachelor of Commerce degree fromthe Murdoch University (Western Australia) in 1999.


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Ms Liely Lee is our Executive Director and was appointed to the Board on 10 July 2007. She joined ourGroup as the Director (Finance) of our Group in 2006. Presently Ms Lee oversees treasury, humanresource and administration matters of our Group. Prior to joining us, she was a co-owner of Gelare, afood and beverage chain in Singapore with 13 outlets where she oversaw the finance, accounting, legal,taxation and human resource matters of the Gelare chain for seven years. Ms Lee graduated with aBachelor of Commerce degree from the Murdoch University (Western Australia) in 1995. She is currentlypursuing a Masters degree (Accounting) with Curtin University (Western Australia).

Mdm Lai Qin Zhi is our Non-Executive Director and was appointed to the Board in July 2006. She is aco-founder of BRJ. Mdm Lai has been a director of MP Shipping since 2001, where she oversaw thefinancial and taxation matters of MP Shipping. Prior to her involvement with MP Shipping, she was theFinance Director of BRJ and other companies controlled by the Lee Family and was responsible for thefinancial and taxation matters of BRJ and other companies controlled by the Lee Family, a role shepresently assumes.

Mr Lim Han Boon is our Lead Independent Director and was appointed to the Board on 1 September2007. He is concurrently an independent director of Addvalue Technologies Ltd and Sunshine HoldingsLimited. Mr Lim is presently a director of Winvest Management Pte Ltd, which is principally engaged inthe provision of consultancy services. From 1997 to 2002, he was the General Manager of SolidResources Group, which is principally engaged in property development in China. Prior to joining SolidResources Group, Mr Lim worked with NIF Management Singapore Pte Ltd and Murray Johnstone AsiaLimited from 1994 to 1997. Mr Lim was with the capital market group of DBS Bank from 1990 to 1993. MrLim obtained a Bachelor of Accountancy Degree from the National University of Singapore in 1987 and aMaster of Business Administration (Finance) degree from the City University, U.K. in 1992. He is also aFellow Member of the Institute of Certified Public Accountants of Singapore and a Full Member of theSingapore Institute of Directors since 2001.

Mr Sim Swee Yam Peter is our Independent Director and was appointed to the Board on 1 September2007. Mr Sim is a practising lawyer and a director of his own law corporation, Sim & Wong LLC. Hegraduated from the University of Singapore (now known as the National University of Singapore) in 1980with a degree in law and was admitted to the Singapore Bar in 1981. He has been a Commissioner forOaths since 1990 and a Notary Public since 1996. Mr Sim is presently an independent director of Britishand Malayan Trustees Ltd, Lum Chang Holdings Ltd and Pacific Healthcare Holdings Ltd where he is alsothe Chairman of the Board. He is also a director of PowerSeraya Ltd. He was awarded the Pingkat BaktiMasyarakat in August 2000.

Each of Mr Lee Wan Tang, Mr Sean Lee Yun Feng. Mdm Lai Qin Zhi and Ms Liely Lee has in August2007 completed a course on “Directors Responsibilities and Corporate Governance of Listed Companies”conducted by the Singapore Chinese Chamber Institute of Business.

Mr Lee Wan Tang (our Executive Chairman) is the husband of Mdm Lai Qin Zhi (our Non-ExecutiveDirector). Mr Sean Lee Yun Feng (our CEO) and Ms Liely Lee (our Executive Director) are the children ofMr Lee Wan Tang and Mdm Lai Qin Zhi. Mr Andy Ng (our Executive Officer) is the son-in-law of Mr LeeWan Tang and Mdm Lai Qin Zhi, being married to their daughter Ms Lina Lee. Mr Irryanto (our ExecutiveOfficer) is the brother of Mdm Lai Qin Zhi. Our Controlling Shareholder, Nautical International, is ownedby the Lee Family as follows:-

Name Percentage of Nautical International

Lee Wan Tang 50

Sean Lee Yun Feng 18

Lai Qin Zhi 12

Liely Lee 10

Lina Lee(1) 10

Note:-

(1) Ms Lina Lee is the daughter of Mr Lee Wan Tang and Mdm Lai Qin Zhi, the sister of Mr Sean Lee Yun Feng and Ms Liely Leeand the wife of Mr Andy Ng.


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Save as disclosed above, none of our Directors, Executive Officers and Controlling Shareholder is relatedto one another by blood or marriage. There is no arrangement or understanding with our ControllingShareholder or any customer or supplier of our Group pursuant to which any of our Directors or ExecutiveOfficers was appointed as a Director or Executive Officer.

The list of present and past directorships of each Director over the last five years other than in ourCompany, is set out below:-

Name Present Directorships Past Directorships

Lee Wan Tang Group corporations Group corporationsMarco Polo Shipping Co Pte Ltd Bina Marine Pte. Ltd.

MP Marine Pte. Ltd.

Other corporations Other corporationsAlliance Mining Corporation Pte Ltd Bina Industries Pte Ltd (struck off)Alliance Mining Investments Pte Ltd Bina Investment Pte LtdEurostone (Singapore) Pte. Ltd. Mount Kawi Logistics Pte Ltd (struck off)Gold Park Pty Ltd Trans-Bina Pte LtdGreat Wall Marine Pte LtdMount Kawi Pte LtdNautical International Holdings LtdSinlong Optics International Co LtdTransbina Resources Pte Ltd

Sean Lee Yun Feng Group corporations Group corporationsMarco Polo Shipping Co Pte Ltd Bina Marine Pte. Ltd.

MP Marine Pte. Ltd.

Other corporations Other corporationsAlliance Mining Corporation Pte Ltd Kawi Sand Trading Pte Ltd (struck off)Alliance Mining Investments Pte Ltd Mount Kawi Logistics Pte Ltd (struck off)Gold Park Pty LtdMount Kawi Pte LtdNautical International Holdings LtdPT. Bina Riau JayaPT. Surya Mina Jaya Abadi PT. Swee Batam Granit KarimunSuede Pte Ltd

Liely Lee Group corporations Group corporations– –

Other corporations Other corporationsCV Usaha Abadi Bina Investment Pte LtdGold Park Pty Ltd Kawi Sand Trading Pte Ltd (struck off)Mount Kawi Pte Ltd

Lai Qin Zhi Group corporations Group corporationsMarco Polo Shipping Co Pte Ltd Bina Marine Pte. Ltd.

Other corporations Other corporations– Bina Industries Pte Ltd (struck off)

Transbina Resources Pte Ltd


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Lim Han Boon Group corporations Group corporations– –

Other corporations Other corporationsAddvalue Technologies Ltd –Sunshine Holdings LimitedWinvest Management Pte Ltd

Sim Swee Yam Peter Group corporations Group corporations– –

Other corporations Other corporationsThe British and Malayan Trustees Ltd NERA Electronics LtdGravitas Alliance International Pte LtdInfinity Capital Partners (S) Pte LtdLum Chang Holdings LtdPacific Healthcare Holdings LtdPowerSeraya LtdSim & Wong LLC

EXECUTIVE OFFICERS

The day-to-day operations are entrusted to our Executive Directors who are assisted by an experiencedand qualified team of Executive Officers. The particulars of our Executive Officers are set out below:-

Name Age Address Principal Occupation

Chow Choi Fun 45 31 Tanah Merah Kechil Rise Financial ControllerSingapore 465615

Irryanto 52 Jalan Kenanga, No. 45 Director (Shipping, Marketing & Operations) Pekan Baru, Indonesia and Director (Shipyard Aministration)

Andy Ng 34 35 Kingsmead Road Director (Shipyard Operations)Singapore 267986

The working, business experience and areas of responsibility of our Executive Officers are set out below:-

Ms Chow Choi Fun is the Financial Controller of our Group. She joined our Group in April 2007. She isresponsible for the accounting, financial, secretarial and tax related matters of our Group. Prior to joiningus, she was the General Manager- Finance of Radiance Electronics Limited from February 2006 toMarch 2007 and the Corporate Finance Manager of Goldtron Ltd from July 2002 to January 2006. MsChow was in charge of each group’s consolidation and financial reporting functions, which includesensuring compliance with accounting requirements and requirements of the SGX-ST. Ms Chow was alsoresponsible for announcements involving financial information as well as the preparation and publicationof annual reports as the head of the finance department of these companies for the past five years.Having begun her career with an audit firm in 1983 where she spent eight years, Ms Chow has sinceaccumulated more than ten years experience in various managerial positions in the finance andaccounting departments of several companies principally involved in the manufacturing, insurance andtourism businesses in Singapore and Malaysia. Ms Chow is a Chartered Accountant registered with theMalaysian Institute of Accountants and Fellow Member of the Chartered Association of CertifiedAccountants since 1990 and 1995 respectively.


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Mr Irryanto is the Director (Shipping, Marketing and Operations) of our ship chartering division as well asthe Director (Shipyard Administration) of our shipyard division. He has been with our Group since 2004.He is responsible for marketing and managing the shipping operations of our Group, including overallfleet scheduling and maintenance. He has been instrumental in securing and expanding the transhipmentbusiness of our Group in Indonesia. He is also responsible for overseeing the administrative functions ofour shipyard division and for liaising with the various Indonesian government authorities. Prior to joiningour Group, Mr Irryanto held various positions in BRJ, including Director (Mining) and Director (Roads andBridges Construction), where he was tasked in marketing the quarried products as well as in managingand overseeing the budgetary control functions from 1985 to 2004.

Mr Andy Ng is the Director (Shipyard Operations) of our shipyard division. He has been with us since2005. Mr Ng is responsible for our Group’s shipbuilding, ship repairs and other marine engineeringservices, including production scheduling, facilities planning and operational matters. He is also tasked tooversee the continuous infrastructure development at the yard. Mr Ng spent the first nine years of hiscareer spanning across Australia, Hong Kong and Singapore with Slattery Australia Pty Ltd, D.G. Jones &Partners (HK) Limited, PWD Consultants Pte Ltd, Gammon Construction Ltd, where he held the positionas a Project Quantity Surveyor, before joining our Group. He graduated with a Bachelor of ConstructionManagement Degree from the Royal Melbourne Institute of Technology, Australia in 1995.

The list of present and past directorships of each Executive Officers over the last five years excludingthose held in our Company, is set out below:-


Chow Choi Fun Group corporations Group corporations– –

Other corporations Other corporations– CET Components Pte Ltd

CETCOMP (M) Sdn BhdDenfort Holdings Pte Ltd (struck off)Dynamar Computer Products Pte LtdDCP (M) Sdn BhdFormula Networks Sdn BhdGoldtron Intrade Pte Ltd (struck off)Goldtron Network Services Pte Ltd (struck off)Goldtron Trading Pte LtdNacomat Buildtrend Sdn BhdNacostone Sdn Bhd (struck off)Radiance Manufacturing Pte LtdRadiance Cayman LimitedXiptech Holdings Pte Ltd


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Irryanto Group corporations Group corporationsBina Marine Pte. Ltd. – MP Marine Pte. Ltd.PT. Marcopolo ShipyardPT. Rio Mahkota Nusantara

Other corporations Other corporationsPT. Bina Riau Jaya –PT. Bina Pembangunan Adi JayaPT. Indori UtamaPT. Swee Batam Granit Karimun

Andy Ng Group corporations Group corporationsBina Marine Pte. Ltd. – MP Marine Pte. Ltd.

Other corporations Other corporations– –

There is no arrangement or understanding with our Controlling Shareholder or any customer or supplierof our Company or other person, pursuant to which any of our Directors or Executive Officers wasselected as a Director or Executive Officer of our Company.


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MANAGEMENT REPORTING STRUCTURE

The following chart shows our management reporting structure as at the Latest Practicable Date:-

DIRECTORS’ AND EXECUTIVE OFFICERS’ REMUNERATION

The remuneration (including salary, bonus, contributions to CPF, directors’ fees and benefits-in-kind) paidor payable to our Directors and Executive Officers on a pro forma basis and in remuneration bands forFY2005 and FY2006, and the estimated remuneration payable to them on a pro forma basis and inremuneration bands for FY2007 are as follows:-

FY2005 FY2006 Estimatedfor FY2007(2)

Directors

Lee Wan Tang A A ASean Lee Yun Feng A A ALiely Lee N.A. A ALai Qin Zhi A A ALim Han Boon N.A. N.A. N.A.Sim Swee Yam Peter N.A. N.A. N.A.

Executive Officers

Chow Choi Fun N.A. N.A. AIrryanto A A AAndy Ng A A A

Notes:-

(1) Remuneration bands:-

“Band A” refers to remuneration of up to $250,000.“Band B” refers to remuneration from $250,001 and $500,000.“Band C” refers to remuneration from $500,001 to $750,000.

(2) The estimated remuneration for FY2007 does not include any incentive bonus payable under the Service Agreements of ourExecutive Directors.

Other than amounts set aside or accrued in respect of the relevant laws, no amounts have been set asideor accrued by our Group to provide for pension, retirement or similar benefits for any of our employees.

BOARD OF DIRECTORS

Director (Shipping, Marketing & Operations) & Director (Shipyard

Administration)Irryanto

Executive ChairmanLee Wan Tang

Chief Executive OfficerSean Lee Yun Feng

Executive DirectorLiely Lee

Director (Shipyard Operations)

Andy Ng

Financial ControllerChow Choi Fun


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SERVICE AGREEMENTS

On 13 September 2007, our Company entered into the Service Agreements with Mr Lee Wan Tang andMr Sean Lee Yun Feng (each an “Appointee”) under which Mr Lee Wan Tang was appointed as ExecutiveChairman and Mr Sean Lee Yun Feng as CEO.

The Service Agreements shall come into force from the first day of the month on which the listing andquotation of our Company on the SGX-SESDAQ takes effect and shall continue for an initial period ofthree years thereafter (the “Initial Term”). Subsequently, the Service Agreements are automaticallyrenewed annually unless either party gives notice of its intention to terminate in the manner set outbelow. After the Initial Term, each of the respective Service Agreements may be terminated by eitherparty giving the other party not less than three months’ notice in writing or an amount equal to threemonths’ salary in lieu of notice. Neither party shall be entitled to terminate the Service Agreement duringthe Initial Period save in the event of breach.

The Service Agreements provided for, inter alia, the salary payable to the Appointees, annual leave,medical benefits, grounds of termination and certain restrictive covenants. Under the ServiceAgreements, the monthly salaries of the Appointees are as follows:-

(a) in relation to Mr Lee Wan Tang, his basic monthly salary is S$22,000; and

(b) in relation to Mr Sean Lee Yun Feng, his basic monthly salary is S$18,000.

During the continuance of their employment hereunder, each Appointee’s basic monthly salary shall bepayable in arrears not later than the last working day of each month. The Company shall be entitled toarrange for such base salary to be paid to the Appointee by another company in our Group. In addition,each of the Appointees may be paid at the Company’s absolute discretion an annual incentive bonusbased on the Appointee’s and the Company’s performance in respect of the relevant calendar year underreview. The quantum of such incentive bonus shall be determined by our Remuneration Committee. Thetotal remuneration paid to the Appointees in each financial year will be disclosed by our Company in itsannual report in respect of such financial year.

Each of the Service Agreements may be terminated by our Company by summary notice upon theoccurrence of certain events, such as criminal conviction, grave misconduct or bankruptcy involving therelevant Appointee. None of the Appointees will be entitled to any benefit upon termination of his ServiceAgreement.

The Appointees shall be entitled to be reimbursed by our Company (or such other company within ourGroup, where appropriate) all travelling, hotel, entertainment and such other out-of-pocket expensesreasonably incurred by him in the discharge of his duties based on our Company’s policies from time totime.

There are no bonus or profit-sharing plans or any other profit-linked agreements or arrangementsbetween our Company and any of our Directors, Executive Officers or employees.

Subject to the approvals of our Shareholders, the SGX-ST and other regulatory authorities, wherenecessary, each Appointee shall be eligible to participate in any employee share option schemeimplemented by our Company on such terms as may be determined by our Remuneration Committee atits sole and absolute discretion.

Had the Service Agreements mentioned above been in place for FY2006, the aggregate remuneration(including contributions to the CPF and other benefits if any) paid or provided to our Executive Directorswould have been approximately $531,414 instead of $245,254 and the consolidated profit before incometax and minority interest would be approximately $5.1 million instead of $5.4 million.

Save as disclosed above, there are no other existing or proposed service contracts entered into or to beentered into between our Company and our subsidiaries with any of our Directors or Executive Officers.


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EMPLOYEES

A breakdown of our full-time staff by function is as follows:-

As at 30 September As at Latest

Function 2004 2005 2006 Practicable Date

Finance & Administration 1 1 8 19

Sales, Marketing and Operations – 2 38 53

Management – 3 12 8

Technical, Safety and Systems Department – – 16 31

The geographical breakdown of our full-time employees is as follows:-

As at 30 September As at Latest

Location 2004 2005 2006 Practicable Date

Singapore 1 6 16 20

Indonesia – – 58(1) 91(1)

Note:-

(1) The increase in the number of our employees in Indonesia for FY2006 and FY2007 was due to the increase in the number ofemployees at our shipyard.

We do not employ a significant number of temporary employees.

None of our employees is unionised. The relationship and co-operation between our management andstaff is good and this is expected to remain so in the future. There has not been any incidence of workstoppages or labour disputes which affected our operations.

We have implemented a motivational reward system to reward our vessel crew based on the quality ofservice they provide as well as their performance and efficiency. This encourages the crew to excel intheir performance and directly enables us to deliver quality service to our customers.

SUB-CONTRACT WORK/LABOUR

To improve our operating flexibility, we utilise sub-contract labour/workers for our ship building contracts.While we carry out the planning, preparation, procurement, supervisory and quality control aspects of aship building jobs in-house, we generally outsource the tasks of design and construction of vessels to oursub-contractors, which include fabrication, assembly, machining, mechanical and electrical outfitting,carpentry and hull testing. For FY2006 and HY2007, our sub-contracting costs accounted forapproximately 5.9 per cent. and 6.7 per cent. of our Group’s cost of sales for our shipyard business.


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Corporate governance refers to the processes and structure by which the business and affairs of acompany are directed and managed, in order to enhance long term shareholder value through enhancingcorporate performance and accountability. The Directors recognize the importance of corporategovernance and the offering of high standards of accountability to our Shareholders.

With a view towards good corporate governance, our Board has formed three committees: (i) theNominating Committee; (ii) the Remuneration Committee; and (iii) the Audit Committee. In addition, ourLead Independent Director, Mr Lim Han Boon, will be available to any Shareholders who may haveconcerns which contact through the normal channels of our Executive Chairman or CEO has failed toresolve or for which such contact is inappropriate.

Nominating Committee

Our Nominating Committee comprises Messrs Sim Swee Yam Peter and Lim Han Boon and Mdm Lai QinZhi. The Chairman of the Nominating Committee is Mr Sim Swee Yam Peter.

Our Nominating Committee will be responsible for:-

(a) re-nomination of our Directors having regard to our Director’s contribution and performance;

(b) determining annually whether or not a Director is independent; and

(c) deciding whether or not a Director is able to and has been adequately carrying out his duties as aDirector.

The Nominating Committee will decide how the Board’s performance is to be evaluated and proposeobjective performance criteria, subject to the approval of the Board, which address how the Board hasenhanced long-term shareholders’ value. The Board will also implement a process to be carried out bythe Nominating Committee for assessing the effectiveness of the Board as a whole and for assessing thecontribution of each individual Director to the effectiveness of the Board. Each member of the NominatingCommittee shall abstain from voting any resolutions in respect of the assessment of his performance orre-nomination as Director.

Remuneration Committee

Our Remuneration Committee comprises Messrs Lim Han Boon and Sim Swee Yam Peter and Mdm LaiQin Zhi. The Chairman of the Remuneration Committee is Mr Lim Han Boon.

Our Remuneration Committee will recommend to our Board a framework of remuneration for ourDirectors and key executives, and determine specific remuneration packages for each Executive Director.

The recommendations of our Remuneration Committee should be submitted for endorsement by theentire Board. All aspects of remuneration, including but not limited to Directors’ fees, salaries, allowances,bonuses and benefits-in-kind shall be covered by our Remuneration Committee. Each member of theRemuneration Committee shall abstain from voting on any resolutions in respect of his remunerationpackage.

Audit Committee

Our Audit Committee comprises Messrs Lim Han Boon and Sim Swee Yam Peter and Mdm Lai Qin Zhi.The Chairman of the Audit Committee is Mr Lim Han Boon.

Save as disclosed in the section entitled “Interested Person Transactions” of this Prospectus, ourIndependent Directors do not have any existing business or professional relationship of a material naturewith our Group, our Directors or Substantial Shareholders.

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Our Audit Committee shall meet periodically to perform the following functions:-

(a) review with the external auditors the audit plan, their evaluation of the system of internal controls,their audit report, their management letter and our management’s response;

(b) review the financial statements before submission to our Board for approval, focusing in particular,on changes in accounting policies and practices, major risk areas, significant adjustments resultingfrom the audit, the going concern statement, compliance with accounting standards as well ascompliance with any stock exchange and statutory/regulatory requirements;

(c) review the internal control and procedures and ensure co-ordination between the external auditorsand our management, reviewing the assistance given by our management to the auditors, anddiscuss problems and concerns, if any, arising from the interim and final audits, and any matterswhich the auditors may wish to discuss (in the absence of our management where necessary);

(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 the appointment or re-appointment of the external auditors and matters relating toresignation or dismissal of the auditors;

(f) review transactions falling within the scope of Chapter 9 and Chapter 10 of the Listing Manual;

(g) review the Group’s foreign exchange exposure and the procedures to manage its foreign currencyrisk;

(h) 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; and

(i) generally to undertake such other functions and duties as may be required by statute or the ListingManual, and by such amendments made thereto from time to time.

Apart from the duties listed above, our Audit Committee shall commission and review the findings ofinternal investigations into matters where there is any suspected fraud or irregularity, or failure of internalcontrols or infringement of any Singapore law, rule or regulation which has or is likely to have a materialimpact on our Company’s operating results and/or financial position.

In the event that a member of our Audit Committee is interested in any matter being considered by ourAudit Committee, he will abstain from reviewing that particular transaction or voting on that particulartransaction.

BOARD PRACTICES

Our Directors are appointed by our Shareholders at a general meeting, and an election of Directors takesplace annually. One third (or the number nearest one third) of our Directors, are required to retire fromoffice at each annual general meeting. Further all our Directors are required to retire from office at leastonce in every three years. However, a retiring Director is eligible for re-election at the meeting at which heretires. Further details on the appointment and retirement of Directors can be found in Appendix V of thisProspectus.

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The following statements are brief summaries of our capital structure and the more important rights andprivileges of our Shareholders as conferred by the laws of Singapore and our Articles of Association.These statements summarise the material provisions of our Articles but are qualified in entirety byreference to our Articles, a copy of which will be available for inspection at our offices during normalbusiness hours for a period of six months from the date of registration of this Prospectus.

Shares

Our issued share capital, excluding the New Shares to be issued pursuant to the Invitation, is$18,157,973 consisting of 214,200,000 ordinary shares (“Shares”). We have only one class of shares,namely, our Shares, which have identical rights in all respects and rank equally with one another. OurArticles provide that we may issue shares of a different class with preferential, deferred, qualified orspecial rights, privileges or conditions as our Directors may think fit and may issue preference shareswhich are, or at our option are, redeemable, subject to certain limitations. Our ordinary Shares do nothave a par value.

As at the date of this Prospectus, 214,200,000 Shares have been issued and fully paid. All of our Sharesare in registered form. We may, subject to the provisions of the Companies Act and the listing rules of theSGX-ST, purchase our own Shares. However, we may not, except in circumstances permitted by theCompanies Act, grant any financial assistance for the acquisition or proposed acquisition of our Shares.

New Shares

New Shares may only be issued with the prior approval of our shareholders in a general meeting. Theaggregate number of Shares to be issued pursuant to such approval may not exceed 50 per cent. (orsuch other limit as may be prescribed by the SGX-ST) of our issued share capital for the time being, ofwhich the aggregate number of Shares to be issued other than on a pro-rata basis to the then existingshareholders of our Company shall not exceed 20 per cent. (or such other limit as may be prescribed bythe SGX-ST) of our issued share capital for the time being. The approval, if granted, will lapse at theconclusion of the annual general meeting following the date on which the approval was granted unlessotherwise revoked or varied by shareholders in a general meeting. Subject to the foregoing, the provisionsof the Companies Act and any special rights attached to any class of shares currently issued, all newShares are under the control of our Directors who may allot and issue the same with such rights andrestrictions as they may think fit.

Shareholders

Only persons who are registered on our register of shareholders and, in cases in which the person soregistered is CDP, the persons named as the depositors in the depository register maintained by CDP forour Shares, are recognised as our shareholders. We will not, except as required by law, recognize anyequitable, contingent, future or partial interest in any Share or other rights for any Share other than theabsolute right thereto of the registered holder of that Share or of the person whose name is entered inthe depository register for that Share. We may close our register of shareholders for any time or times ifwe provide the Accounting and Corporate Regulatory Authority of Singapore with at least 14 days’ noticeand the SGX-ST at least ten clear market days’ notice. However, the register may not be closed for morethan 30 days in aggregate in any calendar year. We typically close the register to determine ourshareholders’ entitlement to receive dividends and other distributions.

Transfer of Shares

There is no restriction on the transfer of fully paid Shares except where required by law or the listing rulesor the rules or by-laws of the SGX-ST. Our Directors may decline to register any transfer of Shares whichare not fully paid or Shares on which we have a lien. Shares may be transferred by a duly signedinstrument of transfer in a form approved by the SGX-ST. Our Directors may also decline to register anyinstrument of transfer unless, among other things, it has been duly stamped and is presented forregistration together with the share certificate and such other evidence of title as they may require. Wewill replace lost or destroyed certificates for Shares if we are properly notified and the applicant pays afee which will not exceed $2 and furnishes any evidence and indemnity that our Directors may require.

DESCRIPTION OF ORDINARY SHARES

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General Meetings of Shareholders

We are required to hold an annual general meeting every year. Our Directors may convene anextraordinary general meeting whenever it thinks fit and must do so if our shareholders representing notless than ten per cent. of the total voting rights of all our shareholders, request in writing that such ameeting be held. In addition, two or more of our shareholders holding not less than ten per cent. of ourissued share capital may call a meeting. Unless otherwise required by law or by our Articles, voting atgeneral meetings is by ordinary resolution, requiring an affirmative vote of a simple majority of the votescast at that meeting. An ordinary resolution suffices, for example, for the appointment of Directors. Aspecial resolution, requiring the affirmative vote of at least 75 per cent. of the votes cast at the meeting, isnecessary for certain matters under Singapore law, including voluntary winding up, amendments to ourMemorandum of Association and our Articles, a change of our corporate name and a reduction in ourshare capital or capital redemption reserve fund. We must give at least 21 days’ notice in writing for everygeneral meeting convened for the purpose of passing a special resolution. Ordinary resolutions generallyrequire at least 14 days’ notice in writing. The notice must be given to each of our shareholders who havesupplied us with an address in Singapore for the giving of notices and must set forth the place, the dayand the hour of the meeting and, in the case of special business, the general nature of that business.

Voting Rights

A holder of our ordinary Shares is entitled to attend, speak and vote at any general meeting, in person orby proxy. A proxy does not need to be a shareholder. A person who holds ordinary Shares through theSGX-ST book-entry settlement system will only be entitled to vote at a general meeting as a shareholderif his name appears on the depository register maintained by CDP 48 hours before the general meeting.Except as otherwise provided in our Articles, two or more shareholders must be present in person or byproxy to constitute a quorum at any general meeting. Under our Articles, on a show of hands, everyshareholder present in person and by proxy shall have one vote (provided that in the case of ashareholder who is represented by two proxies, only one of the two proxies as determined by thatshareholder or, failing such determination, by the Chairman of the meeting in his sole discretion shall beentitled to vote on a show of hands), and on a poll, every shareholder present in person or by proxy shallhave one vote for each Share which he holds or represents. A poll may be demanded in certaincircumstances, including by the Chairman of the meeting or by any shareholder present in person or byproxy and representing not less than 10 per cent. of the total voting rights of all shareholders having theright to attend and vote at the meeting or by any two shareholders present in person or by proxy andentitled to vote. In the case of a tie vote, whether on a show of hands or a poll, the Chairman of themeeting shall be entitled to a casting vote.

Dividends

We may, by ordinary resolution of our shareholders, declare dividends at a general meeting, but we maynot pay dividends in excess of the amount recommended by our Board. We must pay all dividends out ofour profits. We may satisfy dividends by the issue of Shares to our Shareholders. Please refer to thesection entitled “Bonus and Rights Issue” below. All dividends are paid pro-rata amongst our shareholdersin proportion to the amount paid-up on each Shareholder’s Shares, unless the rights attaching to an issueof any Share provide otherwise. Unless otherwise directed, dividends are paid by cheque or warrant sentthrough the post to each Shareholder at his registered address. Notwithstanding the foregoing, thepayment by us to CDP of any dividend payable to a shareholder whose name is entered in the depositoryregister shall, to the extent of payment made to CDP, discharge us from any liability to that Shareholder inrespect of that payment.

Bonus and Rights Issue

Our Board may, with the approval of our Shareholders at a general meeting, capitalise any reserves orprofits (including profits or monies carried and standing to any reserve) and distribute the same as bonusshares credited as paid-up to our shareholders in proportion to their shareholdings. Our Board may alsoissue rights to take up additional Shares to other shareholders in proportion to their shareholdings. Suchrights are subject to any conditions attached to such issue and the regulations of any stock exchange onwhich we are listed.


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Takeovers

Under the Singapore Code on Take-overs and Mergers (the “Take-over Code’’) issued by the Authoritypursuant to Section 321 of the Securities and Futures Act, any person acquiring an interest, either on hisown or together with persons acting in concert with him, in 30 per cent. or more of our voting shares mustextend a takeover offer for the remaining voting shares in accordance with the provisions of the Take-overCode. In addition, a mandatory takeover offer is also required to be made if a person holding, either onhis own or together with persons acting or presumed to be acting in concert with him, between 30 percent. and 50 per cent. of the voting shares acquires additional voting shares representing more than oneper cent. of the voting shares in any six-month period.

Liquidation or Other Return of Capital

If we are liquidated or in the event of any other return of capital, holders of our Shares will be entitled toparticipate in any surplus assets in proportion to their shareholdings, subject to any special rightsattaching to any other class of shares.

Indemnity

As permitted by Singapore law, our Articles provide that, subject to the Companies Act, our Board andofficers shall be entitled to be indemnified by us against any liability incurred in defending anyproceedings, whether civil or criminal, which relate to anything done or omitted to have been done as anofficer, director or employee and in which judgement is given in their favour or in which they are acquittedor in connection with any application under any statute for relief from liability in respect thereof in whichrelief is granted by the court. We may not indemnify our Directors and officers against any liability whichby law would otherwise attach to them in respect of any negligence, default, breach of duty or breach oftrust of which they may be guilty in relation to us.

Limitations on Rights to Hold or Vote Shares

Except as described in “Voting Rights” and “Takeovers” above, there are no limitations imposed bySingapore law or by our Articles on the rights of non-resident Shareholders to hold or vote ordinaryShares.

Minority Rights

The rights of minority shareholders of Singapore-incorporated companies are protected under Section 216 of the Companies Act, which gives the Singapore courts a general power to make any order,upon application by any of our Shareholders, as they think fit to remedy any of the following situationswhere:-

(a) our affairs are being conducted or the powers of our Directors are being exercised in a manneroppressive to, or in disregard of the interests of, one or more of the Shareholders; or

(b) we take an action, or threaten to take an action, or our Shareholders pass a resolution, or proposeto pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to, one or moreof our Shareholders, including the applicant.

Singapore courts have a wide discretion as to the reliefs they may grant and those reliefs are in no waylimited to those listed in the Companies Act itself. Without prejudice to the foregoing, the Singaporecourts may:-

(a) direct or prohibit any act or cancel or vary any transaction or resolution;

(b) regulate the conduct of our affairs in the future;

(c) authorise civil proceedings to be brought in our name, or on our behalf, by a person or personsand on such terms as the court may direct;


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(d) provide for the purchase of a minority shareholder’s Shares by our other Shareholders or by usand, in the case of a purchase of Shares by us, a corresponding reduction of our share capital;

(e) in the case of a purchase of Shares by the company, provide for a reduction accordingly of thecompany’s capital; or

(f) provide that we be wound up.

Treasury Shares

Our Articles of Association expressly permits our Compay to purchase or acquire Shares or stocks of ourCompany and to hold such shares or stocks (or any of them) as treasury shares in accordance withrequirements of Section 76 of the Companies Act. Our Company may make a purchase or acquisition ofour own shares (i) on a securities exchange if the purchase or acquisition has been authorised inadvance by our Company in general meeting; or otherwise than on a securities exchange if the purchaseor acquisition is made in accordance with an equal access scheme authorised in advance by ourCompany in general meeting. The aggregate number of ordinary Shares held as treasury shares shall notat any time exceed ten per cent. of the total number of Shares of our Company at that time. Any excessshares shall be disposed or cancelled before the end of a period of six months beginning with the day onwhich that contravention of limit occurs, or such further period as the Registrar of Companies may allow.Where ordinary Shares or stocks are held as treasury shares by our Company through purchase oracquisition by our Company, our Company shall be entered in the register as the member holding thoseshares or stocks.

Our Company shall not exercise any right in respect of the treasury shares and any purported exercise ofsuch a right is void. Such rights include any right to attend or vote at meetings and our Company shall betreated as having no right to vote and the treasury shares shall be treated as having no voting rights.

In addition, no dividend may be paid, and no other distribution (whether in cash or otherwise) of ourCompany’s assets (including any distribution of assets to members on a winding up) may be made, to ourCompany in respect of the treasury shares. However, this would not prevent an allotment of shares asfully paid bonus shares in respect of the treasury shares or the subdivision or consolidation of anytreasury share into treasury share of a smaller amount, if the total value of the treasury shares after thesubdivision or consolidation is the same as the total value of the treasury share before the subdivision orconsolidation, as the case may be.

Where shares are held as treasury shares, our Company may at any time (i) sell the shares (or any ofthem) for cash; (ii) transfer the shares (or any of them) for the purposes of or pursuant to an employees’share scheme; (iii) transfer the shares (or any of them) as consideration for the acquisition of shares in orassets of another company or assets of a person; or (iv) cancel the shares (or any of them).


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The following is a description of the exchange controls that exist in the jurisdictions which our Groupoperates in.

Indonesia

Currently, no foreign exchange control restrictions exist in Indonesia. The Rupiah and foreign currencyhave been, and in general are, freely convertible. Accordingly, remittances of capital, profits, dividends,interest and royalties (subject to payment of withholding tax) in foreign currencies from Indonesia to ourCompany are not subject to any exchange controls. However, pursuant to the Foreign Exchange FlowLaw (Law No. 24 of 1999), there is a reporting system administered by Bank Indonesia (the central bank)on foreign currency remittances conducted by banks on behalf of residents. Bank Indonesia controls theIndonesian currency and oversees the conversion of the Indonesian Rupiah to foreign currencies, whichmay be effected at the foreign exchange licenced banks and licenced money changers. Monitoring byBank Indonesia is carried out by requiring all banks in Indonesia to report (i) foreign exchangeremittances through the bank either for its own account or the account of its customers, and (ii) changesin the position of the banks’ foreign assets and liabilities.

For transactions which are not carried out through the Indonesian banking system, pursuant to BankIndonesia Regulation No. 4/2/PB1/2002 on Monitoring of Foreign Exchange Activities by Non-FinancialInstitutions (as amended by Bank Indonesia Regulation No. 5/1/PBI/2003 on Amendments to BankIndonesia Regulation No. 4/2/PB1/2002 on Monitoring of Foreign Exchange Activities by Non-FinancialInstitutions), as of 1 June 2002, companies (non-banks and non-financial institutions) having total assetsor a total annual gross revenue of at least IDR 100 billion are also required to report to Bank Indonesiaon (i) transactions affecting their offshore assets and liabilities, and (ii) changes in position of their foreignassets and liabilities. Individual persons are, however, not subject to any direct reporting obligation toBank Indonesia.

Regarding the remittance of Indonesian Rupiah, pursuant to Bank Indonesia Regulation No. 3/7/14/PBI2005 dated 14 June 2005 and Circular No. 7/23/DPD dated 8 July 2005 on Restrictions on RupiahTransactions and Foreign Currency Credits Offered by Banks, cross border remittances of Rupiah fundsthrough the Indonesian banking system is prohibited. Pursuant to Bank Indonesia Regulation No.4/8/PBI/2002 on Requirements and Procedures for Carrying Rupiah out of or into the Customs Areas ofthe Republic of Indonesia, Indonesian Rupiah notes or coins amounting to IDR 100 million and above,may only be taken out of Indonesia with prior approval of Bank Indonesia.

Singapore

Currently, no foreign exchange control restrictions exist in Singapore.

EXCHANGE CONTROLS

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SUMMARY OF TAXATION

The discussion below is not intended to constitute a complete analysis of all tax consequencesrelating to purchase, ownership or disposal of our Shares. Prospective purchasers of our Sharesshould consult their own tax advisors concerning the tax consequences of their particularsituations. This description is based on laws, regulations and interpretations now in effect andavailable as at the Latest Practicable Date. The laws, regulations and interpretations, however, maychange at any time, and any change could be retroactive. These laws and regulations are alsosubject to various interpretations and the relevant tax authorities or the courts could laterdisagree with the explanations or conclusions set out below.

The statements made herein do not purport to be a comprehensive or exhaustive description ofall tax considerations that may be relevant to a decision to purchase, hold or dispose of ourShares and do not address the tax treatment of investors subject to specific rules. Prospectiveinvestors should consult their tax advisers regarding Singapore tax and other tax consequencesof owning and disposing our Shares. It is emphasised that neither our Company, our Directors northe Manager, Underwriter and Placement Agent accepts responsibility for any tax effects orliabilities resulting from the subscription for, holding or disposal of our Shares.

TAXATION IN SINGAPORE

Singapore income tax – general

The following discussion describes the material Singapore income tax, capital gains tax, stamp duty,estate duty and GST consequences of the subscription for, ownership, and disposal of the Shares.

Individual income tax

An individual is a tax resident in Singapore in a year of assessment if, in the preceding year, he wasphysically present in Singapore or exercised an employment in Singapore (other than as director of acompany) for 183 days or more, or if he resides in Singapore.

The following income received in Singapore by non-resident individuals is exempt from Singapore incometax:-

(i) all foreign-sourced income; and

(ii) certain Singapore-sourced investment income from financial instruments.

For individual tax residents of Singapore, the income specified in (i) and (ii) above is exempt from taxexcept where such income is derived through a partnership in Singapore or is derived through carryingon of a trade, business or profession.

Thus, an individual taxpayer is only subject to Singapore income tax on income (other than certaininvestment income and one-tier dividends which are exempt from tax) accrued in or derived fromSingapore, irrespective of whether that person is a resident or non-resident of Singapore. The tax rate fora resident individual varies according to the individual’s circumstances, but is subject to a maximum rateof 20.0 per cent.. A non-resident individual is taxed at the rate of 20.0 per cent., except that Singaporeemployment income is taxed at a flat rate of 15.0 per cent. or at resident rates, whichever yields a higherrate.

Corporate income tax

General

A corporate taxpayer is regarded as resident for Singapore tax purposes if its business is controlled andmanaged in Singapore (for example, if the board of directors meets and conducts the company’sbusiness in Singapore).

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A Singapore resident corporate taxpayer is subject to Singapore income tax on income accrued in orderived from Singapore, and on foreign-sourced income received or deemed received into Singapore.However, foreign sourced dividends, branch profits and foreign sourced service income received inSingapore by a Singapore resident company are exempt from Singapore tax if certain conditions are met.In addition, one-tier tax exempt dividends received by a resident company are also exempt fromSingapore income tax.

A non-resident corporate taxpayer, with certain exceptions, is subject to income tax only on income that isaccrued in or derived from Singapore, and on foreign sourced income received in Singapore. One-tier taxexempt dividends received by a non-resident Singapore company are also exempt from Singaporeincome tax. There is no withholding tax on dividends paid by a Singapore resident company to non-resident shareholders.

The corporate tax rate is 18.0 per cent. with effect from year of assessment 2008 as announced in the2007 Budget. In arriving at a company’s chargeable income, 75.0 per cent. of the first S$10,000 ofchargeable income (excluding Singapore franked dividends) and 50.0 per cent. of up to the nextS$290,000 (as announced in the 2007 Budget) are exempt from corporate tax. The remainingchargeable income will be fully taxable at the corporate tax rate of 18.0 per cent..

Shipping income

Under Section 13A of the Income Tax Act (Chapter 134) of Singapore, the following types of income ofshipping companies in Singapore relating to their Singapore-registered ships or vessels will qualify for taxexemption:-

(i) income derived from the carriage of passengers, mails, livestock or goods outside the limits of theport of Singapore;

(ii) income derived from towing or salvage operations outside the limits of the port of Singapore;

(iii) income derived from the charter of the ship for use outside the limits of the port of Singapore; and

(iv) with effect from year of assessment 2007, income derived from the use outside the limits of theport of Singapore of the ship as a dredger, seismic ship or vessel used for offshore oil or gasactivity.

In addition, income derived by shipping companies in Singapore from the carriage of passengers, mails,livestock or goods shipped in Singapore relating to their non-Singapore registered sea-going ships willalso qualify for tax exemption unless such carriage arises solely from transhipment from Singapore.

A shipping company does not need to be resident in Singapore to qualify for the above mentioned taxexemption under Section 13A.

Dividend distributions

Singapore has replaced its imputation tax system with a one-tier corporate tax system with effect from 1January 2003, subject to certain transitional rules. The transitional period will end on 31 December 2007and with effect from 1 January 2008, all companies will be on the one-tier corporate tax system. Underthe one-tier corporate tax system, the tax paid by a company is a final tax and the after-tax profits of thecompany can be distributed to shareholders as one-tier tax exempt dividends.

If the Company is under the one-tier corporate tax system, the Company may distribute one-tier taxexempt dividends to shareholders. The dividends will be exempt from Singapore income tax in the handsof the shareholders.

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In addition, where a company distributes dividends out of income that is taxed at a concessionary rate oris exempt from tax, such dividends are allowed to flow as exempt dividends to all tiers of shareholders,regardless of the shareholding level. However, this shall not apply to any such dividend paid on any shareof a preferential nature.

Gains on disposal of Share

Singapore does not impose tax on capital gains. However, gains may be construed to be of an incomenature and subject to Singapore income tax if they arise from activities which the Inland RevenueAuthority of Singapore (the “IRAS”) regards as the carrying on of a trade or business in Singapore.

As such, any profits from the disposal of the Shares, if regarded as capital profits, are not taxable inSingapore unless the seller is regarded by the IRAS as having derived these profits from carrying on atrade or business of dealing in shares in Singapore, in which case, the disposal profits would be taxableas trading profits.

Stamp duty

There is no stamp duty payable on the subscription of the Shares.

In the event that a register of shares is kept in Singapore and where an instrument of transfer is executedin respect of shares registered in such register, stamp duty may be payable on such instrument oftransfer at the rate of S$2.00 for every S$1,000 or any part thereof, computed on the consideration ormarket value of the shares, whichever is higher.

The purchaser is liable for stamp duty, unless there is an agreement to the contrary. No stamp duty ispayable if no instrument of transfer is executed or the instrument of transfer is executed outsideSingapore. However, stamp duty may be payable if the instrument of transfer which is executed outsideSingapore is received in Singapore.

The above stamp duty is not applicable to electronic transfers of our Shares through the CentralDepository system.

Estate duty

Singapore estate duty is imposed on the value of immovable property situated in Singapore and onmovable property, wherever it may be, owned by individuals who are domiciled in Singapore, subject tospecific exemption limits. Singapore estate duty is imposed on the value of most immovable propertysituated in Singapore owned by individuals who at the time of death (on or after 1 January 2002) werenot domiciled in Singapore, subject to specific exemption limits. This means that all Singapore movableassets of such persons will be exempt from Singapore estate duty.

Singapore estate duty is payable to the extent that the value of the Shares aggregated with any otherdutiable assets exceeds S$600,000. Unless other exemptions apply to the others assets, for example,the separate exemption limit for residential properties, any excess beyond S$600,000 will be taxed asfollows:-

First S$12,000,000 5.0%Excess over S$12,000,000 10.0%

Individuals, whether or not domiciled in Singapore, should consult their own tax advisers regarding theSingapore estate duty consequences of their ownership of our Shares.

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Goods and services tax (“GST”)

The sale of shares to Singapore investors or through SGX-ST is exempt from GST. However, thisexemption does not apply to related share transaction costs such as brokerage commissions and clearingfees. Brokerage commissions charged by a GST-registered broker and clearing fees arising from sharestraded through SGX-ST will be subject to 7.0 per cent. GST in respect of transactions undertaken bySingapore investors and is subject to GST at zero rate in respect of transactions undertaken by overseasinvestors.

TAXATION IN INDONESIA

The following discussion is limited to a general description of certain taxation in Indonesia applicable toour Indonesian subsidiaries.

Corporate tax

(a) Tax residency

A corporation is classified as “resident” or “non-resident” for tax purposes under Indonesian lawaccording to the place of incorporation of the corporation.

In Indonesia, resident corporations are taxed on their worldwide income; however, tax credits areallowed for income that is taxed outside the country. Non-residents are taxed only on incomederived from Indonesian sources, subject to any relief available under double taxation agreements.

However, a non-resident entity with a permanent establishment in Indonesia (“PE”) (such as abranch office) is taxed on (i) the PE’s income from its business activities, (ii) the income officearising from business activities, or sales of goods and services in Indonesia of the same type asthose sold by the PE in Indonesia, and (iii) all other income, either received or accrued by the headoffice such as dividends, interest, royalties, rent and other income connected with the use ofproperty, fees for services, etc., provided that the property or activities producing the income iseffectively connected with the PE in Indonesia. In Indonesia a PE is generally defined as anoperation in which a non-resident establishes a fixed place of business in Indonesia. This wouldinclude a management location, a branch office and an office building. A PE may also beestablished as a result of the non-resident entity’s employees providing services in Indonesia formore than 90 days in any 12-month period.

(b) Income subject to tax

Taxable income is defined as any increase in economic prosperity received or accrued by ataxpayer, whether originating from within or outside Indonesia, that may be used for consumptionor to increase the recipient’s wealth in whatever name and form. It includes any remuneration inconnection with work and services, business profits (for this purpose, there is no distinctionbetween operating and capital income), dividends, interest, rent, royalties and other income relatedto the use of property.

Dividend tax must be deducted by the company declaring the dividend. Such dividend tax has tobe paid by the company to the State Treasurer (or Kas Negara) not later than the tenth of thefollowing month after the dividend is declared by the shareholders of the company at theshareholders’ meeting of the company. The applicable tax rate for dividends paid to residenttaxpayers is 15 per cent. However dividends received from Indonesian companies by limited liabilitycompanies incorporated in Indonesia, co-operatives and state or region-owned entities are exemptfrom tax if:-

(i) the dividends are paid out of retained earnings;

(ii) the shareholder holds at least 25 per cent. of the company’s paid-up capital; and

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(iii) the shareholder has other active businesses.

The applicable tax rate for non-resident shareholders is 20 per cent. (or the relevant tax rateapplicable under any tax treaty which may be in force between Indonesia and the relevantjurisdiction.

(c) Corporate tax rates

As at the Latest Practicable Date, the corporate tax rates are as follows:-

Tax rateAmount of taxable income for the tax year %Up to IDR50 million 10Between IDR50 million to IDR100 million 15Above IDR100 million 30

Withholding tax

Indonesia has two types of withholding tax, namely, prepayment tax and final tax. Expenses incurred inderiving income subject to final tax are not deductible.

Payments made to resident taxpayers and permanent establishments by resident corporate taxpayers,government bodies, activity organizers, permanent establishments, representative offices and certainappointed individuals are subject to withholding tax at the rates specified in the following table:

Tax rate (%) Transaction

10 � Land and building rental payments to companies and permanent establishments (final tax)

4.5 � Rental and other payments for the use of property other than land and buildings

6 � Compensation related to management services, and technical services

4.5 � Compensation related to professional services, including legal and tax services

10 � Land and building rental paid to individuals (final tax)

15 � Dividends payable to individuals

15 � Interest, including premiums, discounts and guarantee fees

15 � Royalties

On the other hand, the following payments made by a government body, resident taxpayer, activityorganizer, permanent establishment and representative office to a non-resident taxpayer are subject towithholding tax at 20 per cent. (or applicable reduced treaty rate) of the gross amount:

� After-tax profits of permanent establishments.

� Compensation for technical, management and other services.

� Income derived from the disposal of assets (withholding on estimated net income).

� Insurance premiums (withholding on estimated net income).

� Interest including premiums, discounts, guarantee fees and interest rate swap premiums.

� Royalties, rent and other income with respect to the use of property.

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Individuals and organisations resident in Indonesia that derive income from the following business linesare subject to withholding tax at the rates listed below:

For small businesses Others (Individuals(final tax) and other businesses)

Construction Services 2% 2%

Planning Construction services 4% 4%

Supervisory Construction services 4% 4%

As at the Latest Practicable Date, the business of our subsidiaries in Indonesia does not include theabove business lines.

In order to satisfy the definition of small business, one will have to meet certain income requirements andobtain a certificate issued by the authorised government agency.

Value added tax (VAT) and sales tax

(a) General on VAT

VAT is imposed on most goods and services at a rate of ten per cent. Government regulations canadjust the rate to as low as five per cent. and as high as 15 per cent. The tax is generally collectedby “VAT-able firms” (entities which deliver taxable goods or services). These firms are required tosubmit monthly VAT returns. Certain goods and services, however, are exempt from VAT, and as atthe Latest Practicable Date include, inter alia:

� Food and beverages served at a hotel, restaurant, food stall and the like

� Healthcare services

� Banking, insurance and financial leasing

� Education services

� Public transportation services

� Manpower services

� Hotels

Hotels and food and beverages served at hotels, restaurants, food stalls are subject to ten percent. development tax.

Aside from the above, primary production companies and small businesses (corporations orindividuals) with annual sales of less than IDR600 million for goods and services have the option tobe exempted from imposing VAT.

Exported goods are subject to zero per cent. of VAT; exporters can claim a refund of the input tax(VAT incurred in producing goods for export).

The local purchaser of imported goods and services, including intangible goods, is responsible forall payments of VAT on goods and services and customs duty on goods. VAT and customs duty arecollected at the port of entry for imported goods. A self-assessed VAT payment mechanism isapplied in connection with the following:-

(i) the utilisation of intangible VAT-able goods obtained from outside the Indonesian customsarea and utilised within the Indonesian customs area; and

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(ii) the utilisation of VAT-able services obtained from outside the Indonesian customs area andutilised within the Indonesian customs area.

(b) VAT relief

The BKPM is given authority to approve deferral of VAT on the importation of equipment used bycompanies incorporated under the domestic or foreign investment law (known as PMA companiesand PMDN companies).

(c) Sales Tax on luxury goods

Government Regulation No. 145/2000 dated 22 December 2000 details various goods subject toSales Tax at rates ranging from ten per cent. to 75 per cent. In addition, the rate applicable to manytypes of goods has been increased. For example:-

� Housing with floorspace over 400m2 or over or housing with selling price of IDR3,000,000per sq m or over, apartments, condominiums and town houses of 150 sq m or over orapartments, condominiums and town houses with selling price of IDR4,000,000 per sq m orover, are now subject to 20 per cent.

� Perfume is subject to 20 per cent. (previously 10 per cent.).

� Helicopters and aircraft are now subject to 50 per cent. (previously 35 per cent.).

The maximum rate of Sales Tax has increased to 75 per cent. Examples of goods subject to thismaximum rate are:-

� Sedans/ station wagons/ vans with spark or compression ignition internal combustionreciprocating piston engines exceeding 3,500 cc with seating capacity of less than tenpersons

� Certain types of liquor and wine

Indonesia has no rules for insubstantial (minor) imports of goods and services. VAT and customs duty willbe imposed on all goods irrespective of their value. Likewise VAT will be imposed on the importation ofservices irrespective of value. No changes are foreseen in this area despite the fact that the availability ofe-commerce transactions will lead to an increase in low value cross-border trade.

Indirect tax on land and buildings

Tax is imposed on individuals, companies or organisations that have certain rights to or obtain benefitsfrom land, or possess, control or obtain benefits from ownership of land and buildings. As such, tax maybe imposed on MP Shipyard and RMN, being companies in our Group which hold rights to use land inBatam.

The tax is based on the sales value of the land and buildings as determined by the Ministry of Finance.Land value is reassessed every three years in most areas and every year in rapidly developing areas.The current effective tax rate on land and buildings is 0.1 per cent. of the sales value. One exception isindividual housing worth more than IDR1 billion, which incurs a rate of 0.2 per cent. Buildings whoseassessed sales value is not more than IDR12 million are tax-exempt.

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Double tax treaties between Indonesia and Singapore

Indonesia has concluded tax treaties with certain countries, including Singapore. Under the relevant taxtreaty, the rates of withholding tax applicable to payments to recipients and Singapore are as follows:-

Withholding tax rate(%)

Dividends

Substantial BranchCountry Portfolio holdings Interest Royalties Profit tax

Singapore 15 10 10* 15 15

Note:-

* The applicable withholding tax rate is zero per cent of interest payments if such interest payments were made in respect ofbonds (or other similar instruments) issued by the Indonesian government.

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Upon listing and quotation on SGX-SESDAQ, our Shares will be traded under the book-entry settlementsystem of the CDP, and all dealings in and transactions of the Shares through SGX-SESDAQ will beeffected in accordance with the terms and conditions for the operation of securities accounts with theCDP, as amended form 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 the CDP, rather than CDP itself, will be treated, under our Articles of Association and theCompanies Act, as members of the Company in respect of the number of Shares credited to theirrespective securities accounts.

Persons holding the Shares in securities account with CDP may withdraw the number of Shares they ownfrom the book-entry settlement system in the form of physical share certificates. Such share certificateswill, however, not be valid for delivery pursuant to trades transacted on SGX-SESDAQ, although they willbe prima facie evidence of title and may be transferred in accordance with our Articles of Association. Afee of $10.00 for each withdrawal of 1,000 Shares or less and a fee of $25.00 for each withdrawal ofmore than 1,000 Shares is payable upon withdrawing the Shares from the book-entry settlement systemand obtaining physical share certificates. In addition, a fee of $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 of $10.00is also payable where our Shares are withdrawn in the name of the person withdrawing our Shares or$0.20 per $100.00 or part thereof of the last-transacted price where it is withdrawn in the name of a thirdparty. Persons holding physical share certificates who wish to trade on SGX-SESDAQ must deposit withCDP their share certificates together with the duly executed and stamped instruments of transfer in favourof CDP, and have their respective securities accounts credited with the number of Shares depositedbefore they can effect the desired trades. A fee of $20.00 is payable upon the deposit of each instrumentof transfer with CDP. A fee of $10.00 is chargeable as stamp duty on such instruments of transfer.

Transactions in the 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 account beingcredited with the number of Shares acquired. No transfer of 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-SESDAQ is payable at the rate of 0.05 percent. of the transaction value subject to a maximum of $200.00 per transaction. The clearing fee,instrument of transfer deposit fee and share withdrawal fee may be subject to Singapore goods andservices tax at the prevailing rate.

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-SESDAQ generally takesplace on the third Market Day following the transaction date, and payment for the securities is generallysettled on the following business day. CDP holds securities on behalf of investors in securities accounts.An investor may open a direct account with CDP or a sub-account with a CDP agent. The CDP agentmay be a member company of the SGX-ST, bank, merchant bank or trust company.

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INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS

1. None of our Directors, Executive Officers and Controlling Shareholder:-

(a) has, at any time during the last ten 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) has, at any time during the last ten 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 judgement against him;

(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 of anylaw or regulatory requirement that relates to the securities or futures industry in Singapore orelsewhere, or has been the subject of any criminal proceedings (including any pendingcriminal proceedings of which he is aware) for such breach;

(f) has, at any time during the last ten years, had judgement 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, nor has he been the subject ofany civil proceedings (including any pending civil proceedings of which he is aware) involvingan allegation 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, judgement 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;

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(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.

2. The aggregate remuneration paid to our Directors for services rendered in all capacities to ourCompany and our subsidiaries for FY2006 was approximately $334,000. For FY2007, theaggregate remuneration payable to our Directors is estimated to be $520,000.

3. There is no shareholding qualification for our Directors under the Articles of Association of ourCompany.

4. No option to subscribe for shares in, or debentures of, our Company or any of our subsidiaries hasbeen granted to, or was exercised by, any of our Directors or Executive Officers within the lastfinancial year.

5. Save as disclosed in the section entitled “Interested Person Transactions” of this Prospectus, noneof our Directors is interested, directly or indirectly, in the promotion of, or in any property or assetswhich have, within the two years preceding the date of this Prospectus, been acquired or disposedof by or leased to, our Company or any of our subsidiaries, or are proposed to be acquired ordisposed of by or leased to our Company or any of our subsidiaries.

6. No sum or benefit has been paid or is agreed to be paid to any Director or expert, or to any firm inwhich such Director or expert is a partner or any corporation in which such Director or expert holdsshares or debentures, in cash or shares or otherwise, by any person to induce him to become, orto qualify him as, a Director, or otherwise for services rendered by him or by such firm orcorporation in connection with the promotion or formation of our Company.

SHARE CAPITAL

7. As at the Latest Practicable Date, there is only one class of shares in the capital of our Company.There are no founder, management or deferred shares. The rights and privileges attached to ourShares are stated in the Articles of Association of our Company.


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8. Save as disclosed below and in the sections entitled “Share Capital” and “Restructuring Exercise”of this Prospectus, there are no changes in the issued and paid-up share capital of our Companyand our subsidiaries within the last three years preceding the Latest Practicable Date.

Number of Issue Price / Purpose Resultant IssuedDate of issue Shares Issued Consideration of Issue Share Capital

Our Company

10 July 2006 3 $1 per share Incorporation $3

28 July 2006 1,320,003 In exchange for:- Restructuring $1,320,006(i) 320,000 ordinary shares in Exercise

the capital of Bina Marine;

(ii) 1,000,000 ordinary shares inthe capital of MP Shipping;and

(iii) 3 ordinary shares in the capital of MP Marine

MP Shipping

31 December 2005 500,000 S$1 per share Capitalisation $1,000,000of debt

MP Marine

10 July 2006 3 $1 per share Incorporation $3

Bina Marine

5 September 2007 3,000,000 $1 per share Capitalisation of $3,320,000amount owing to holding company

MP Shipyard

22 February 2005 500 IDR1,000,000 per share Incorporation IDR500,000,000

28 September 2006 500 IDR1,000,000 per share Increase IDR1,000,000,000in Capital

RMN

14 August 2006 300 IDR500,000 per share Incorporation IDR150,000,000

3 May 2007 3,700 IDR500,000 per share Increase IDR2,000,000,000in Capital

As stated above, more than ten per cent. of the capital of the Company has been paid for withassets other than cash within the period of three years before the date of lodgement of thisProspectus.

9. Save as disclosed above and under the section entitled “Restructuring Exercise” of this Prospectus,no shares in, or debentures of, our Company or any of our subsidiaries have been issued, or areproposed to be issued, as fully or partly paid for cash or for a consideration other than cash, duringthe last three years.

10. As at the Latest Practicable Date, no person has been, or is entitled to be, given an option tosubscribe for any shares in or debentures of our Company or any of our subsidiaries.


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MATERIAL CONTRACTS

11. The following contracts, not being contracts entered into in the ordinary course of business, havebeen entered into by our Company and our subsidiaries within the two years preceding the date oflodgement of this Prospectus and are or may be material:-

(a) share swap agreement dated 28 July 2006 entered into between our Company (as thepurchaser), Mr Lee Wan Tang and Mr Sean Lee Yun Feng (as the vendors) pursuant towhich our Company acquired an aggregate of three ordinary shares in the capital of MPMarine at a consideration which was satisfied by the allotment and issue of an aggregate ofthree ordinary shares in the capital of our Company to Nautical International (as directed byMr Lee Wan Tang and Mr Sean Lee Yun Feng);

(b) share swap agreement dated 28 July 2006 entered into between our Company (as thepurchaser), Mr Lee Wan Tang, Mdm Lai Qin Zhi and Mr Sean Lee Yun Feng (as the vendors)pursuant to which our Company acquired an aggregate of 320,000 ordinary shares in thecapital of Bina Marine at a consideration which was satisfied by the allotment and issue ofan aggregate of 320,000 ordinary shares in the capital of our Company to NauticalInternational (as directed by Mr Lee Wan Tang, Mdm Lai Qin Zhi and Mr Sean Lee YunFeng);

(c) share swap agreement dated 28 July 2006 entered into between our Company (as thepurchaser), Mr Lee Wan Tang, Mdm Lai Qin Zhi, Ms Liely Lee and Mr Sean Lee Yun Feng(as the vendors) pursuant to which our Company acquired an aggregate of 1,000,000ordinary shares in the capital of MP Shipping at a consideration which was satisfied by theallotment and issue of an aggregate of 1,000,000 ordinary shares in the capital of ourCompany to Nautical International (as directed by Mr Lee Wan Tang, Mdm Lai Qin Zhi, MsLiely Lee and Mr Sean Lee Yun Feng);

(d) agreement dated 1 August 2006 entered into between MP Shipyard and SMJA pursuant towhich a leasehold land located at Batu Aji Kav Lama, Dapur 12, Batam, Indonesia with aland area of 184,955 sq m was transferred from SMJA to MP Shipyard for a consideration ofIDR 8,880,000 (or approximately $1.54 million);

(e) option to purchase dated 4 April 2006 entered into between MP Shipping and Music StreetPte Ltd pursuant to which the Company was granted the right to purchase a property knownas 1 Sims Lane, #04-11 Singapore 387355 for a purchase consideration of S$1,102,500;

(f) share sale and purchase agreement dated 14 August 2006 entered into between Mr YohanGunawan and Mr Yu Gie (as the vendors) and MP Shipyard (as the purchaser), pursuant towhich MP Shipyard acquired an aggregate of 300 shares of IDR500,000 each in the capitalof RMN at a consideration of IDR150,000,000, representing the entire issued shares ofRMN; and

(g) deed of share purchase dated 28 September 2006 entered into between, inter alia, Mr LeeWan Tang and Mr Sean Lee Yun Feng (as the vendors) and Bina Marine and MP Marine (asthe purchasers) pursuant to which Mr Lee Wan Tang and Mr Sean Lee Yun Feng transferredan aggregate of 500 shares of IDR1,000,000 each in the capital of MP Shipyard,representing 100 per cent. of the issued shares of MP Shipyard, to Bina Marine and MPMarine for an aggregate consideration of IDR500,000,000.


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LITIGATION

12. Save as disclosed below, as at the Latest Practicable Date, neither our Company nor any of oursubsidiaries is engaged in any legal or arbitration proceedings as plaintiff or defendant includingthose which are pending or known to be contemplated which may have or have had in the lasttwelve months before the date of lodgement of this Prospectus, a material effect on the financialposition or the profitability of our Company or any of our subsidiaries.

On 3 September 2007, certain customers of MP Shipyard, namely PT. Kapuas Armada NusantaraShipping and PT. Citra Armada Nusantara Shipping (the “Customers”), made a claim against MPShipyard in relation to a tugboat and a barge which MP Shipyard built for each of the customers.As we understand, the Customers are owned by the same party. The Customers claimed anaggregate of (i) S$73,780.06 for late delivery of the four vessels and (ii) IDR193,274,010 (orapproximately S$32,000) for loss of income as a result of downtime needed for repairs to becarried out for one of the barges. MP Shipyard has been advised by our legal advisers in Batamthat the Customers’ claim for delay is without merit. Further, MP Shipyard’s legal advisers in Batamhad advised that the Customers do not have the right to claim in relation to the quality of any of thevessels as these had been certified by the relevant classification societies. An amount of S$27,056is also outstanding from PT. Citra Armada Nusantara Shipping in respect of the vessels deliveredto it. MP Shipyard intends to strongly defend its position and is currently consulting its legaladvisers as to the appropriate response to the claim, including making a counter-claim against PT.Citra Armada Nusantara Shipping in respect of the outstanding amount owed to MP Shipyard.Based on the advice of its legal advisers, no provisions have been made for the claim.

MANAGEMENT, UNDERWRITING AND PLACEMENT ARRANGEMENTS

13. Pursuant to the Management and Underwriting Agreement dated 26 October 2007 (the“Management and Underwriting Agreement”) entered into between our Company and UOB Asia asthe Manager and the Underwriter, our Company appointed UOB Asia to manage the Invitation andto subscribe for and/or procure subscribers for any Offer Shares not subscribed for pursuant to theInvitation and to pay or procure payment to our Company for such Offer Shares. UOB Asia willreceive a management fee from our Company for its services rendered in connection with theInvitation.

Pursuant to the Management and Underwriting Agreement, UOB Asia has agreed to underwrite theOffer Shares for a commission of 2.75 per cent. of the Issue Price for each Offer Share payable byour Company pursuant to the Invitation. UOB Asia may, at its absolute discretion, appoint one ormore sub-underwriters to underwrite the Offer Shares; including UOB and UOB Kay Hian.

14. Pursuant to the Placement Agreement dated 26 October 2007 (the “Placement Agreement”)entered into between our Company and UOB Asia as the Placement Agent, UOB Asia has agreedto subscribe for and/or procure subscribers for the Placement Shares for a placement commissionof 2.0 per cent. of the Issue Price for each Placement Share, to be paid by our Company. UOBAsia may, at its absolute discretion, appoint one or more sub-placement agents for the PlacementShares; including UOB and UOB Kay Hian.

15. Brokerage will be paid by our Company at the rate of 0.25 per cent. of the Issue Price for eachOffer Share and 1.0 per cent. of the Issue Price for each Placement Share. In respect of the OfferShares, the brokerage will be paid to members of the SGX-ST, merchant banks and members ofthe Association of Banks in Singapore in respect of successful applications made on ApplicationForms bearing their respective stamps, or to Participating Banks in respect of successfulapplications made through Electronic Applications at their respective ATMs or their IB websites. Inrespect of the Placement Shares, the brokerage will be paid to the Placement Agent in accordancewith the Placement Agreement. Subscribers of the Placement Shares (excluding Reserved Shares)may be required to pay brokerage of up to 1.0 per cent. of the Issue Price.


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16. The Management and Underwriting Agreement may be terminated by UOB Asia at any time on orbefore the close of the Application List, on the occurrence of certain events including, inter alia:-

(a) there shall come to the knowledge of the Manager and the Underwriter any breach of thewarranties or undertakings in the Management and Underwriting Agreement or that any ofthe warranties in the Management and Underwriting Agreement is untrue or incorrect;

(b) any event occurring on or after the date of the Management and Underwriting Agreementand prior to 12.00 noon on the date of the close of the Application List which, if it hadoccurred before the date of the Management and Underwriting Agreement, would haverendered any of the warranties in Management and Underwriting Agreement untrue orincorrect in any material respect;

(c) if there shall develop or come into force, since the date of the Management and UnderwritingAgreement:-

(i) any adverse change, or any development involving a prospective adverse change, inthe condition (financial or otherwise), performance or general affairs of our Companyand/or its subsidiaries; or

(ii) any introduction or prospective introduction of or any change or prospective change inany legislation, regulation, order, policy, rule, guideline or directive (whether or nothaving the force of law and including, without limitation, any directive or request issuedby the Authority, the Securities Industry Council of Singapore or the SGX-ST) inSingapore or elsewhere or in the interpretation or application thereof by any court,government body, regulatory authority or other competent authority;

(iii) any change, or any development involving a prospective change, in local, national,regional or international financial (including stock market, foreign exchange market,inter-bank market or interest rates or money market), political, industrial, economic,legal or monetary conditions, taxation or exchange controls (including, withoutlimitation, the imposition of any moratorium, suspension or material restriction ontrading in securities generally on the SGX-ST due to exceptional financialcircumstances or otherwise);

(iv) any imminent threat or occurrence of any local, national or international outbreak orescalation of hostilities, insurrection or armed conflict (whether or not involvingfinancial markets);

(v) any other occurrence of any nature whatsoever, which event or events shall in thereasonable opinion of UOB Asia (1) result or be likely to result in a material adversefluctuation or adverse conditions in the stock market in Singapore or overseas; or (2)be likely to materially prejudice the success of the subscription or offer of the NewShares (whether in the primary market or in respect of dealings in the secondarymarket); or (3) make it impracticable, inadvisable, inexpedient or uncommercial toproceed with any of the transactions contemplated in the Management andUnderwriting Agreement; or (4) be likely to have a material adverse effect on thebusiness, trading position, operations or prospects of our Company or of our Group asa whole; or (5) be such that no reasonable underwriter would have entered into theManagement and Underwriting Agreement; or (6) result or be likely to result in theissue of a stop order by the Authority pursuant to the SFA; or (7) make ituncommercial or otherwise contrary to or outside the usual commercial practices ofunderwriters in Singapore for UOB Asia to observe or perform or be obliged toobserve or perform the terms of the Management and Underwriting Agreement; or


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(d) The issue of a stop order by the Authority in accordance with Section 242 of the SFA(notwithstanding that a supplementary prospectus or a replacement prospectus issubsequently registered with the Authority pursuant to Section 241 of the SFA); or

(e) without limiting the generality of the foregoing, if there comes to the notice of UOB Asia (1)any statement contained in this Prospectus or Application Forms relating hereto which in thesole and absolute opinion of UOB Asia has become untrue, incorrect or misleading in anymaterial respect or (2) circumstances or matters have arisen or have been discovered, whichwould, if this Prospectus was to be issued at that time, constitute in the sole and absoluteopinion of UOB Asia, a material omission of such information, and our Company fails tolodge a supplementary or replacement prospectus or document (as the case may be) withina reasonable time after being notified of such a material misrepresentation or omission orfails to promptly take such steps as UOB Asia may reasonably require to inform investors ofthe lodgement of such supplementary prospectus or replacement prospectus or document.In such an event, UOB Asia reserves the right, at its absolute discretion to cancel theInvitation and any application monies received will be refunded (without interest or any shareof revenue or other benefit arising therefrom) to the applicants for the New Shares byordinary post at the applicant’s own risk within 14 days of the termination of the Invitation.

17. The Placement Agreement is conditional upon the Management and Underwriting Agreement nothaving been terminated or rescinded pursuant to the provisions of the Management andUnderwriting Agreement.

18. UOB Asia, our Manager, Underwriter and Placement Agent, is a wholly owned subsidiary of UOB.UOB and UOB Kay Hian, an associated company of UOB, are our Primary Sub-Underwriters andPrimary Sub-Placement Agents. Save as disclosed above and in the section entitled “PotentialConflicts of Interests – Interests of Underwriters or Financial Advisers”, we do not have anymaterial relationship with any of the Manager, Underwriter and Placement Agent or the PrimarySub-Underwriters or the Primary Sub-Placement Agents.

MISCELLANEOUS

19. The nature of the business of our Company has been stated earlier in this Prospectus. Thecorporations which by virtue of Section 6 of the Companies Act are deemed to be related to ourCompany are set out in the section entitled “Group Structure” of this Prospectus.

20. There has been no previous issue of Shares by our Company or offer for sale of our Shares to thepublic within the two years preceding the date of this Prospectus.

21. There has not been any public takeover 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 hasoccurred between 1 October 2006 and the Latest Practicable Date.

22. No amount of cash or securities or benefit has been paid or given to any promoter within the twoyears preceding the Latest Practicable Date or is proposed or intended to be paid or given to anypromoter at any time.

23. Save as disclosed in the sub-section entitled “Management, Underwriting and PlacementArrangements” under the section entitled “General and Statutory Information” of this Prospectus, nocommission, discount or brokerage has been paid or other special terms granted within the twoyears preceding the Latest Practicable Date or is payable to any Director, promoter, expert,proposed director or any other person for subscribing or agreeing to subscribe or procuring oragreeing to procure subscriptions for any shares in, or debentures of, our Company or any of oursubsidiaries.


171

24. No expert is employed on a contingent basis by our Group or has an interest, directly or indirectly,in the promotion of, or in any property or assets which have, within the two years preceding theLatest Practicable Date, been acquired or disposed of by or leased to our Company or any of oursubsidiaries or are proposed to be acquired or disposed of by or leased to our Company or any ofour subsidiaries.

25. Application monies received by our Company in respect of successful applications (includingsuccessful applications which are subsequently rejected) will be placed in a separate non-interestbearing account with UOB (the “Receiving Bank”). In the ordinary course of business, theReceiving Bank will deploy these monies in the inter-bank money market. All profits derived fromthe deployment of such monies will accrue to the Receiving Bank. Any refund of all or part of theapplication monies to unsuccessful or partially successful applicants will be made without anyinterest or any share of revenue or any other benefit arising therefrom.

26. Save as disclosed in this Prospectus, our Directors are not aware of any relevant materialinformation including trading factors or risks which are unlikely to be known or anticipated by thegeneral public and which could materially affect the profits of our Company and our subsidiaries.

27. Save as disclosed in this Prospectus, the financial condition and operations of our Group are notlikely to be affected 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.

28. Save as disclosed in this Prospectus, our Directors are not aware of any event which has occurredsince the end of HY2007 to the Latest Practicable Date which may have a material effect on thefinancial position and results of the Group or the financial information provided in this Prospectus.

CONSENTS

29. The Auditors and Reporting Accountants, Horwath First Trust, have given and have not withdrawntheir written consent to the issue of this Prospectus with the inclusion herein of:-

(a) the Independent Auditors’ Report on the audited combined financial statements of the Groupfor the financial years ended 30 September 2004, 2005 and 2006 set out in Appendix I ofthis Prospectus;

(b) the Independent Auditors’ Report on the review of the interim combined financial statementsof the Group for the six-month period ended 31 March 2007 set out in Appendix II of thisProspectus;

(c) the Independent Auditors’ Report on the unaudited pro forma consolidated financialinformation of the Group for the financial year ended 30 September 2006 set out inAppendix III of this Prospectus; and


172

(d) the Independent Auditors’ Report on the unaudited pro forma consolidated interim financialinformation of the Group for the six-month period ended 31 March 2007 set out in AppendixIV of this Prospectus,

in the form and context in which it is included and references to their name in the form and contextin which it appears in this Prospectus and to act in such capacity in relation to this Prospectus.

30. Omega Capital Limited has given and has not withdrawn its written consent to the issue of thisProspectus with the inclusion herein of its letter to the Independent Directors in relation to theShareholders Mandate on interested person transactions set out in Appendix VI of this Prospectusin the form and context in which it is included and references to its name in the form and context inwhich it appears in this Prospectus and to act in such capacity in relation to this Prospectus.

31. The Manager, Underwriter and Placement Agent, the Primary Sub-Underwriters and the PrimarySub-Placement Agents, the Solicitors to the Invitation, the Solicitors to the Manager, Underwriterand Placement Agent, the Solicitors to our Company on Indonesian Law, the Share Registrar andthe Share Transfer Office, have each given and have not withdrawn their written consents to theissue of this Prospectus with the inclusion herein of their names and references thereto in the formand context in which they respectively appear in this Prospectus and to act in such respectivecapacities in relation to this Prospectus.

RESPONSIBILITY STATEMENT BY OUR DIRECTORS

32. This Prospectus has been seen and approved by our Directors and they individually andcollectively accept full responsibility for the accuracy of the information given herein and confirm,having made all reasonable enquiries, that to the best of their knowledge and belief, the factsstated and the opinions expressed herein are fair and accurate in all material respects as of thedate hereof and there are no material facts the omission of which would make any statements inthis Prospectus misleading and that this Prospectus constitutes full and true disclosure of allmaterial facts about the Invitation and our Group. Our Directors also confirm that the unauditedcombined financial statements for the six months ended 31 March 2007 have been stated after dueand careful enquiry.

DOCUMENTS AVAILABLE FOR INSPECTION

33. The following documents or copies thereof may be inspected at our registered office at 1 SimsLane #04-11 Singapore 387355 during normal business hours for a period of six months from thedate of registration by the Authority of this Prospectus:-

(a) the Memorandum and Articles of Association of our Company;

(b) the Independent Auditors’ Report on the audited combined financial statements of the Groupfor the financial years ended 30 September 2004, 2005 and 2006 set out in Appendix I ofthis Prospectus;

(c) the Independent Auditors’ Report on the review of the interim combined financial statementsof the Group for the six-month period ended 31 March 2007 set out in Appendix II of thisProspectus;

(d) the Independent Auditors’ Report on the unaudited pro forma consolidated financialinformation of the Group for the financial year ended 30 September 2006 set out inAppendix III of this Prospectus;


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(e) the Independent Auditors’ Report on the unaudited pro forma consolidated interim financialinformation of the Group for the six-month period ended 31 March 2007 set out in AppendixIV of this Prospectus;

(f) the letter from the Omega Capital Limited to the Independent Directors in relation to theShareholders Mandate on interested person transactions set out in Appendix VI of thisProspectus;

(g) the material contracts referred to in this Prospectus;

(h) the letters of consent referred to in this Prospectus; and

(i) the Service Agreements referred to in this Prospectus.


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INDEPENDENT AUDITORS’ REPORT ON THE COMBINED FINANCIAL STATEMENTS

27 September 2007

The Board of DirectorsMarco Polo Marine Ltd.1 Sims Lane#04-11Singapore 387355

Dear Sir,

This report has been prepared for inclusion in the Prospectus in connection with the invitation by MarcoPolo Marine Ltd. (the “Company”) in respect of 53,550,000 new ordinary shares in the share capital of theCompany.

Scope

We have audited the accompanying financial statements of the Company and its subsidiaries (collectively,the “Group”) set out on pages I-3 to I-42, which comprise the combined balance sheets of the Group asat 30 September 2004, 2005 and 2006, combined profit and loss statements, combined statements ofchanges in equity and combined statements of cash flows of the Group for the financial years thenended, and a summary of significant accounting policies and other explanatory notes.

Directors’ responsibility for the financial statements

The Company’s directors are responsible for the preparation and fair presentation of these combinedfinancial statements in accordance with Singapore Financial Reporting Standards. This responsibilityincludes designing, implementing and maintaining internal controls relevant to the preparation and fairpresentation of financial statements that are free from material misstatements, whether due to fraud orerror; selecting and applying appropriate accounting policies; and making accounting estimates that arereasonable in the circumstances.

Auditors’ responsibility

Our responsibility is to express an opinion on these combined financial statements based on our audit.We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards requirethat we comply with ethical requirements and plan and perform the audit to obtain reasonable assuranceas to whether the financial statements are free from material misstatements.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal controls relevant to the entity’spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of accounting estimates made by directors, as well as evaluating the overallpresentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

I-1

APPENDIX I – INDEPENDENT AUDITORS’ REPORT ON THE AUDITED COMBINED FINANCIAL STATEMENTS OF

MARCO POLO MARINE LTD. AND ITS SUBSIDIARIES FOR THE FINANCIAL YEARS ENDED 30 SEPTEMBER 2004, 2005 AND 2006

Horwath First Trust

Certified Public Accountants

(formerly known as First Trust Partnership)

7 Temasek Boulevard

#11-01 Suntec Tower One

Singapore 038987

Tel: (65) 6221 0338

Fax: (65) 6221 1080

www.horwath.com.sg

INDEPENDENT AUDITORS’ REPORT ON THE COMBINED FINANCIAL STATEMENTS (Continued)

Opinion

In our opinion, the accompanying combined financial statements of the Group, for the purpose of thisreport and prepared on the basis set out in Note 3 to the combined financial statements, present fairly, inall material respects, the financial positions of the Group as at 30 September 2004, 2005 and 2006, andof the results, changes in equity and cash flows of the Group for the financial years ended on those datesin accordance with Singapore Financial Reporting Standards.

Yours faithfully

HORWATH FIRST TRUSTSingapore

Alfred Cheong Keng ChuanPartner-in-charge

I-2



MARCO POLO MARINE LTD.COMBINED PROFIT AND LOSS STATEMENTS FOR THE FINANCIAL YEARS ENDED 30 SEPTEMBER 2004, 2005 AND 2006

Note 2004 2005 2006

$ $ $

Revenue 4 4,545,925 6,641,854 15,886,488

Cost of sales (3,182,590) (4,007,842) (11,390,743)

Gross profit 1,363,335 2,634,012 4,495,745

Other operating income 5 143,265 1,072,633 663,254Negative goodwill arising on acquisition 3(a)(ii) – – 2,158,491Administrative expenses (10,191) (305,170) (807,072)Other operating expenses (128,948) (239,240) (781,254)Finance cost 7 (356,044) (334,436) (336,577)

Profit before tax 8 1,011,417 2,827,799 5,392,587

Income tax 9 – – (63)

Profit for the year 1,011,417 2,827,799 5,392,524

Earnings per share (cents)Basic(1) 0.47 1.32 2.52

Diluted(2) 0.38 1.06 2.01

(1) Basic earnings per share is computed based on the profit for the year and pre-invitation share capital of 214,200,000 shares.

(2) Diluted earnings per share is computed based on the profit for the year and post-invitation share capital of 267,750,000shares.

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The accompanying notes are an integral part of the combined financial statements.

MARCO POLO MARINE LTD.COMBINED BALANCE SHEETSAS AT 30 SEPTEMBER 2004, 2005 AND 2006

Note 2004 2005 2006

$ $ $

Non-current assets

Property, plant and equipment 10 8,721,114 11,104,527 37,410,549

Current assets

Inventories 12 – – 2,101,648Trade receivables 13 27,727 6,052 893,600Due from customers on construction contracts 14 – – 833,150Other receivables 15 112 682,587 342,867Due from holding company (non-trade) 16 – – 3Due from related parties (trade) 504,763 2,493,749 154,382Cash and bank balances 17 31,447 61,842 437,855

564,049 3,244,230 4,763,505

TOTAL ASSETS 9,285,163 14,348,757 42,174,054

Current liabilities

Trade payables 18 275,442 427,794 5,642,873Other payables 19 11,014 2,193,573 3,133,776Due to related parties (trade) – 47,429 791,176Due to related parties (non-trade) 16 – 79,550 464,215Due to a director (non-trade) 16 1,824,033 2,744,194 6,179,046Interest-bearing loans (secured) 20 1,663,817 1,583,906 8,264,937

3,774,306 7,076,446 24,476,023

Non-current liability

Interest-bearing loans (secured) 20 2,856,950 2,278,737 6,835,913

TOTAL LIABILITIES 6,631,256 9,355,183 31,311,936

NET ASSETS 2,653,907 4,993,574 10,862,118


Share capital 21 820,000 865,000 1,320,006Translation reserve – 1,268 22,282Accumulated profits 1,833,907 4,127,306 9,519,830

TOTAL EQUITY 2,653,907 4,993,574 10,862,118

I-4




MARCO POLO MARINE LTD.COMBINED STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL YEARS ENDED 30 SEPTEMBER 2004, 2005 AND 2006

Share Translation AccumulatedNote capital reserve profits Total

$ $ $ $

As at 1 October 2003

Paid-up capital contribution of subsidiaries 820,000 – 1,442,490 2,262,490Profit for the year – – 1,011,417 1,011,417Dividends paid 22 – – (620,000) (620,000)

Balance as at 30 September 2004 820,000 – 1,833,907 2,653,907

Balance as at 1 October 2004 820,000 – 1,833,907 2,653,907

Paid-up capital contribution of a subsidiary 45,000 – – 45,000Currency translation reserve – 1,268 – 1,268Profit for the year – – 2,827,799 2,827,799Dividends paid 22 – – (534,400) (534,400)

Balance as at 30 September 2005 865,000 1,268 4,127,306 4,993,574

Balance as at 1 October 2005 865,000 1,268 4,127,306 4,993,574

Issurance of ordinary shares of the Company 1,320,006 – – 1,320,006Effects of reorganization under common control (865,000) – – (865,000)

Currency translation reserve – 21,014 – 21,014Profit for the year – – 5,392,524 5,392,524

Balance as at 30 September 2006 1,320,006 22,282 9,519,830 10,862,118

I-5




MARCO POLO MARINE LTD.COMBINED STATEMENTS OF CASH FLOWSFOR THE FINANCIAL YEARS ENDED 30 SEPTEMBER 2004, 2005 AND 2006

2004 2005 2006

$ $ $

Cash flows from operating activitiesProfit before tax 1,011,417 2,827,799 5,392,587Adjustments for:Depreciation of property, plant and equipment 968,324 1,075,539 1,433,616Property, plant and equipment written off – – 670Interest expense 356,044 334,436 336,577Interest income – – (8,995)Gain on disposal of plant and equipment (60,909) (1,072,633) (626,990)Negative goodwill arising on acquisition of a subsidiary – – (2,158,491)

Operating profit before working capital changes 2,274,876 3,165,141 4,368,974Inventories – – (2,101,648)Trade and other receivables 1,311,100 (2,649,786) 1,943,121Due from customers on construction contracts – – (833,150)Trade and other payables 113,353 2,382,341 4,279,028

Cash generated from operating activities 3,699,329 2,897,696 7,656,325

Interest received – – 8,995Interest paid (356,044) (334,436) (336,577)Income tax paid – – (63)

Net cash generated from operating activities 3,343,285 2,563,260 7,328,680

Cash flows from investing activitiesAcquisition of a subsidiary, net of cash acquired (Note A) – – (2,249)Purchase of property, plant and equipment (3,440,400) (5,646,320) (23,358,267)Proceeds from disposal of plant and equipment 300,000 3,260,000 1,080,000

Net cash used in investing activities (3,140,400) (2,386,320) (22,280,516)

Cash flows from financing activitiesProceeds from issue of new shares – 45,000 455,006Proceeds from / (repayment of) loans, net 394,035 (658,124) 11,238,207Due from holding company (non-trade) – – (3)Deferred expenses – – (151,581)Due to related parties (non-trade) – 79,550 384,665Due to a director (non-trade) 8,750 920,161 3,434,852Dividends paid (620,000) (534,400) –

Net cash (used in) / from financing activities (217,215) (147,813) 15,361,146

Net (decrease) / increase in cash and cash equivalents (14,330) 29,127 409,310Cash and cash equivalents at beginning of year 45,777 31,447 61,842Effect of exchange rate changes on cash and cash equivalents – 1,268 (33,297)

Cash and cash equivalents at end of year 31,447 61,842 437,855

I-6



MARCO POLO MARINE LTD.COMBINED STATEMENTS OF CASH FLOWS (Continued)

Note A

The cash flow effect arising from the acquisition of a subsidiary, PT. Rio Mahkota Nusantra, by PT. MarcopoloShipyard is as follows:

2006

$

Property, plant and equipment 4,780,740Cash and bank balances 23,838Trade and other payables (2,620,000)

Identifiable net assets 2,184,578Negative goodwill arising on acquisition (2,158,491)

Total purchase consideration 26,087Less: Cash and bank balances in subsidiary acquired (23,838)

Net cash inflow arising from acquisition of subsidiary 2,249

I-7




NOTES TO THE COMBINED FINANCIAL STATEMENTS

1. THE COMPANY

Marco Polo Marine Pte. Ltd. (“the Company”) was incorporated in Singapore on 10 July 2006 underthe Singapore Companies Act (“the Act”) as a private limited company. On 7 September 2007, theCompany changed its name to “Marco Polo Marine Ltd.” in connection with its conversion into apublic company limited by shares. The Company was incorporated for the purpose of acquiring theexisting companies of the Group pursuant to a restructuring exercise as described in Note 2.

The registered office of the Company is located at 1 Sims Lane, #04-11, Singapore 387355.

The principal activity of the Company is that of investment holding. The principal activities of thesubsidiaries are disclosed in Note 11.

The combined financial statements of the Group for the financial years ended 30 September 2004,2005 and 2006 were authorised for issue by the Board of Directors on 27 September 2007.

2. RESTRUCTURING EXERCISE

The Group carried out a restructuring exercise (the “Restructuring Exercise”) in preparation of theCompany’s listing on the SGX-SESDAQ. The Group was formed through the RestructuringExercise which involved a series of acquisition and rationalisation of the corporate andshareholding structure for the purposes of the invitation. Pursuant to the Restructuring Exercise,the Company became the holding company of the Group.

The following was undertaken in the Restructuring Exercise in preparation for the listing of theCompany:

(a) Acquisition of shares in MP Marine Pte. Ltd. (“MP Marine”)

By a share swap agreement dated 28 July 2006 entered into between the Company (as thepurchaser) and Mr Lee Wan Tang and Mr Sean Lee Yun Feng (as the vendors), theCompany acquired an aggregate of 3 ordinary shares in the capital of MP Marine,representing the entire issued share capital of MP Marine, with all rights attaching thereto,with effect from 28 July 2006, in consideration for which the Company issued an aggregateof 3 ordinary shares in the capital of the Company to Nautical International Holdings Ltd. (asnominated by Mr Lee Wan Tang and Mr Sean Lee Yun Feng).

(b) Acquisition of shares in Bina Marine Pte. Ltd. (“Bina Marine”)

By a share swap agreement dated 28 July 2006 entered into between the Company (as thepurchaser) and Mr Lee Wan Tang, Mdm Lai Qin Zhi and Mr Sean Lee Yun Feng (as thevendors), the Company acquired an aggregate of 320,000 ordinary shares in the capital ofBina Marine, representing the entire issued share capital of Bina Marine, with all rightsattaching thereto as at 28 July 2006 in consideration for which the Company issued anaggregate of 320,000 Shares to Nautical International Holdings Ltd. (as nominated by MrLee Wan Tang, Mdm Lai Qin Zhi and Mr Sean Lee Yun Feng).

I-8



NOTES TO THE COMBINED FINANCIAL STATEMENTS (Continued)

2. RESTRUCTURING EXERCISE (Continued)

(c) Acquisition of shares in Marco Polo Shipping Co Pte Ltd (“MP Shipping”)

By a share swap agreement dated 28 July 2006 entered into between the Company (as thepurchaser) and Mr Lee Wan Tang, Mdm Lai Qin Zhi, Ms Liely Lee and Mr Sean Lee YunFeng (as the vendors), the Company acquired an aggregate of 1,000,000 ordinary shares inthe capital of MP Shipping, representing the entire issued shares of MP Shipping, with allrights attaching thereto as at 28 July 2006 in consideration for which the Company issued anaggregate of 1,000,000 Shares to Nautical International Holdings Ltd. (as nominated by MrLee Wan Tang, Mdm Lai Qin Zhi, Ms Liely Lee and Mr Sean Lee Yun Feng).

(d) Acquisition of shares in PT. Rio Mahkota Nusantra (“RMN”)

By a share sale and purchase agreement dated 14 August 2006 entered into between MrYohan Gunawan and Mr Yu Gie (as the vendors) and MP Shipyard (as the purchaser), MPShipyard acquired an aggregate of 300 shares of Indonesian rupiah (‘IDR’) 500,000 each inthe capital RMN at a consideration of IDR150,000,000, representing the entire issued sharesof RMN. The purchase consideration was determined based on the net book value of RMNas at 31 July 2006 of IDR 150,000,000.

(e) Acquisition of shares in PT. Marcopolo Shipyard (“MP Shipyard”)

On 28 September 2006, Bina Marine was allotted 500 new shares of IDR1,000,000 each inthe capital of MP Shipyard, representing 50 per cent. of the issued shares of MP Shipyard fora consideration of IDR500,000,000.

By a deed of share purchase dated 28 September 2006 entered into between, inter alia, MrLee Wan Tang and Mr Sean Lee Yun Feng (as the vendors) and Bina Marine and MP Marine(as the purchasers), Mr Lee Wan Tang and Mr Sean Lee Yun Feng sold to Bina Marine andMP Marine an aggregate of 500 shares of IDR1,000,000 each in the capital of MP Shipyard,representing 100 per cent. of the issued shares of MP Shipyard, to Bina Marine and MPMarine for an aggregate consideration of IDR500,000,000. Of the aforementioned shares,350 shares held by Mr Lee Wan Tang and 140 shares held by Mr Sean Lee Yun Feng weretransferred to Bina Marine while the remaining 10 shares held by Mr Sean Lee Yun Fengwere transferred to MP Marine.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The combined financial statements, which are expressed in Singapore Dollars (“$”), have beenprepared in accordance with Singapore Financial Reporting Standards (“FRS”) including relatedInterpretations (“INT FRS”) promulgated by the Council on Corporate Disclosure and Governance(“CCDG”) as required by the Singapore Companies Act.

The combined financial statements have been prepared under the historical cost convention exceptas disclosed in the accounting policies below.

In the current financial year, the Group has adopted all the new and revised FRS and INT FRSissued by the CCDG that are relevant to its operations and effective for annual periods beginningon or after 1 January 2005. The accounting policies have been consistently applied by the Groupduring the financial year ended 30 September 2004, 2005 and 2006, except for the changes in theaccounting policies discussed below.

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3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Basis of preparation (Continued)

(a) Adoption of new FRS

On 1 October 2005, the Group adopted the following FRS mandatory for annual financialperiods beginning on or after 1 January 2005.

FRS 39 Financial Instruments: Recognition and MeasurementFRS 103 Business Combinations, including amendments to FRS 36 (revised) Impairment

of Assets and FRS 38 (revised) Intangible Assets

(i) FRS 39 Financial Instruments: Recognition and Measurement

The Group adopted FRS 39 prospectively on 1 October 2005. At that date, financialassets within the scope of FRS 39 were classified as either financial assets at fairvalue through profit or loss, loans and receivables, held-to-maturity investments oravailable-for-sale financial assets, as appropriate. Financial assets that were classifiedas financial assets at fair value through profit or loss, and available-for-sale financialassets were measured at fair value while loans and receivables and held-to-maturityinvestments were measured at amortised cost using the effective interest rate method.

At 1 October 2005, the financial liabilities within the scope of FRS 39, were measuredat amortised cost using the effective interest rate method.

The adoption of FRS 39 did not result in any adjustment to the combined financialstatements as at 1 October 2005 and for the year ended 30 September 2006.

(ii) FRS 103 Business Combinations, FRS 36 (revised) Impairment of Assets and FRS 38(revised) Intangible Assets

FRS 103 has been applied for business combinations on or after 1 October 2005. Theadoption of FRS 103 and revised FRS 36 has resulted in the Group ceasing annualgoodwill amortisation and commencing testing for impairment at the cash generatingunit level annually (unless an event occurs during the year which requires the goodwillto be tested more frequently) from 1 October 2005. Negative goodwill will berecognised immediately in the profit and loss statement.

The adoption of FRS 103 resulted in the increase of $2,158,491 in the Group’s resultsfor the year ended 30 September 2006 as negative goodwill on acquisition of asubsidiary during the year was recognised immediately in the profit and lossstatement.

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(b) Adoption of revised FRS

In addition, the Group adopted the following revised FRS, relevant to the Group, mandatoryfor annual financial periods beginning on or after 1 January 2005 which did not result in anysignificant change in accounting policies:-

FRS 1 (revised) Presentation of Financial StatementsFRS 8 (revised) Accounting Policies, Changes in Accounting Estimates and ErrorsFRS 10 (revised) Events After the Balance Sheet DateFRS 11 (revised) Construction ContractsFRS 16 (revised) Property, Plant and EquipmentFRS 17 (revised) LeasesFRS 21 (revised) The Effects of Changes in Foreign Exchange RatesFRS 24 (revised) Related Party DisclosuresFRS 32 (revised) Financial Instruments: Disclosure and Presentation

(c) New accounting standards and interpretations not yet effective

The Group has not applied the following FRS and INT FRS that have been issued but notyet effective:

Effective date(Annual periods

beginning on or after)

FRS 1 Amendment to FRS 1 (revised)Presentation of financial statements (Capital Disclosures) 1 January 2007

FRS 10 Events after the Balance Sheet Date 1 January 2007FSR 19 Employees Benefits 1 January 2007FRS 32 Financial Instruments : Presentation 1 January 2007FRS 39 Financial Instruments : Recognition and

Measurement 1 January 2007FRS 107 Financial Instruments: Disclosures 1 January 2007INT FRS 107 Applying the Restatement Approach under

FRS 29Financial Reporting in Hyperinflationary Economies 1 March 2006

INT FRS 109 Reassessment of Embedded Derivatives 1 June 2006

The directors do not anticipate that the adoption of these standards and interpretations infuture periods will have a material impact on the combined financial statements of the Group.The Group has not considered the impact of accounting standards issued after balancesheet date.

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(c) New accounting standards and interpretations not yet effective (Continued)

The preparation of the combined financial statements in conformity with FRS requiresmanagement to exercise its judgement in the process of applying the Group’s accountingpolicies. It also requires the use of accounting estimates and assumptions that affect thereported amounts of assets and liabilities at the date of the financial statements, and thereported amounts of revenues and expenses during the financial year. Although theseestimates are based on management’s best knowledge of current events and actions, actualresults may ultimately differ from those estimates. The critical accounting estimates andassumptions used and area involving a high degree of judgements are described below.

Significant accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience andother factors, including expectations of future events that are believed to be reasonable under thecircumstances.

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at thebalance sheet date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below.

(a) Depreciation of property, plant and equipment

The cost of vessels is depreciated on a straight line basis over their useful lives.Management estimates the useful lives of these vessels to be within 8 to 15 years. Theseare common life expectancies applied in the shipping industry.

(b) Income tax

The Group is subject to income taxes in Singapore and Indonesia. Significant judgment isrequired in determining the provision for income taxes. There are certain transactions andcomputations for which the ultimate tax determination is uncertain during the ordinary courseof business. The Group recognises liabilities for expected tax issues based on estimates ofwhether additional taxes will be due. Where the final tax outcome of these matters is differentfrom the amounts that were initially recorded, such differences will impact the income taxand deferred income tax provisions in the period in which such determination is made.

I-12





Significant accounting estimates and judgments (Continued)

Critical judgement made in applying accounting policies

The following are the judgements make by the management in the process of applying the Group’saccounting policies that have the most significant effect on the amounts recognised in thecombined financial statements.

(a) Construction contracts and revenue recognition

The Group recognises contract revenue to the extent of contract costs incurred where it isprobable those costs will be recoverable or based on the stage of completion methoddepending on whether the outcome of the contract can be measured reliably. The stage ofcompletion is measured by reference to the contract costs incurred to date to the estimatedtotal costs for the contract. Significant judgement is required in determining the stage ofcompletion, the extent of the contract costs incurred, the estimated total contract revenueand contract costs, as well as the recoverability of the contracts.

Total contract revenue also includes an estimation of the variation works and claims that arerecoverable from the customers. In making the judgement, the Group has relied on pastexperience.

There are no other significant judgements or accounting estimates made in the preparationof the combined financial statements.

Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and operatingpolicies as to obtain benefits from its activities. The Group generally has such power when it,directly or indirectly, holds more than half of the issued share capital, or controls more than half ofthe voting power, or controls the composition of the board of directors.

Combined financial statements

The combined financial statements comprise the financial statements of the Company and itssubsidiaries as at the balance sheet date. The financial statements of the subsidiaries are preparedfor the same reporting date as the parent company. Consistent accounting policies are applied forlike transactions and events in similar circumstances.

All intra-group balances, transactions, income and expenses and profits and losses resulting fromintra-group transactions that are recognised in assets, are eliminated in full.

I-13





Combined financial statements (Continued)

The combined financial statements of the Group for the financial year ended 30 September 2004,2005 and 2006 were prepared in accordance to the principles of merger accounting for theacquisition of subsidiaries. Under this method, the Company has been treated as the holdingcompany of its subsidiaries for the financial year presented. Such manner of presentation reflectsthe economic substance of the combining entities throughout the relevant period, as a singleeconomic enterprise. Under this method, the financial statement items of the combining entities forthe financial years presented are included in the combined financial statements as if they havebeen combined from 1 October 2003. Accordingly, the combined results of the Group for the yearended 30 September 2004, 2005 and 2006 include the results of the Company and thesesubsidiaries with effect from 1 October 2003 or since their respective dates of incorporation, if later.

Pursuant to this:

– Assets and liabilities are combined at their existing carrying amounts;– No amount is recognised for goodwill; and– Any difference between the amount recorded as share capital issued and the amount

recorded for the share capital acquired will be adjusted against equity as restructuringreserve.

Apart from the above, the results of other subsidiaries acquired or disposed of during the periodsare consolidated from or to their effective dates of acquisition or disposal, respectively. These othersubsidiaries acquired are accounted for using the purchase method. Under this method, the cost ofan acquisition is measured as the fair value of the assets given, equity instruments issued andliabilities incurred or assumed at the date of exchange, plus costs directly attributable to theacquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in abusiness combination are measured initially at their fair values at the acquisition date.

Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities andcontingent liabilities over the cost of business combination is recognised in the income account onthe date of acquisition.

Consolidation of the subsidiaries in Indonesia is based on the subsidiaries financial statementsprepared in accordance with FRS.

I-14





Property, plant and equipment and depreciation

Property, plant and equipment, are stated at cost less accumulated depreciation and anyimpairment losses.

Property, plant and equipment are depreciated using the straight-line method to write-off the cost ofthe property, plant and equipment over their estimated useful lives. The estimated useful lives havebeen taken as follows:

Useful lives (Years)

Leasehold land 23Freehold office building 50Office equipment, furniture and fittings 3 - 5Renovation 5Vessels 8 - 15Machinery and equipment 4 - 8Motor vehicles 4Leasehold improvements over the remaining life of leasehold land

No depreciation is provided on vessels-in-construction until the vessels are completed and is readyfor its intended use. Cost comprises direct cost of construction and installation during the period ofconstruction and installation. Vessels-in-construction is transferred to the appropriate category offixed assets when it is completed and ready for its intended use.

The useful life and depreciation method are reviewed annually to ensure that the method andperiod of depreciation are consistent with the expected pattern of economic benefits from items ofproperty, plant and equipment. An assessment of the carrying value of property, plant andequipment is made when there are indications that the assets have been impaired or theimpairment losses recognised in prior years no longer exist.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment isdetermined as the difference between the sales proceeds and the carrying amounts of the assetand is recognised in the profit and loss statement.

For acquisitions and disposals of vessels during the financial year, depreciation is charged from themonth the asset is put into operational use and up to the month before disposal respectively.

Fully depreciated assets are retained in the financial statements until they are no longer in use.

I-15





Impairment of assets

Impairment of trade and other receivables is established when there is objective evidence that theGroup will not be able to collect all amounts due according to original terms of debts. Theimpairment charge is the difference between the asset’s carrying amount and the present value ofestimated future cash flows, discounted at the effective interest rate.

An assessment is made at each balance sheet date of whether there is any indication ofimpairment of any asset, or whether there is any indication that an impairment loss previouslyrecognised for an asset in prior years may no longer exist or may have decreased. If any suchindication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount iscalculated as the higher of the asset’s value in use or its net selling price. Value in use is thepresent value of estimated future cash flows expected to arise from the continuing use of an assetand from its disposal at the end of its useful life.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverableamount. An impairment loss is charged to profit and loss statement in the period in which it arises,unless the relevant asset is carried at a revalued amount in which case the impairment loss istreated as a revaluation decrease.

A previously recognised impairment loss is reversed only if there has been a change in theestimates used to determine the recoverable amount of an asset, however not to an amount higherthan the carrying amount that would have been determined (net of any depreciation) had noimpairment loss been recognised for the asset in prior years.

A reversal of an impairment loss is credited to profit and loss statement in the period in which itarises, unless the relevant asset is carried at a revalued amount in which case the reversal of theimpairment loss is treated as a revaluation increase.

Impairment of financial assets

The Group assesses at each balance sheet date whether there is objective evidence that afinancial asset or a group of financial assets is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisitioncost and the current fair value, less any impairment loss on that financial asset previouslyrecognised in profit or loss – is removed from the fair value reserve within equity and recognised inthe profit and loss statement. Impairment losses recognised in the profit and loss statement onequity investments are not reversed through the profit and loss statement, until the equityinvestments are disposed of.

Inventories

Inventories comprise materials, spare parts and consumables are stated at the lower of cost,determined on the first in first out basis, and net realisable value. Net realisable value is theestimated normal selling price, less estimated costs to completion and costs to be incurred forselling and distribution.

Allowance is made for deteriorated, damaged, obsolete or slow-moving inventories.

I-16





Construction contracts

Contract costs are recognised when incurred.

When the outcome of a construction contract can be estimated reliably, contract revenue andcontract costs are recognised as revenue and expenses respectively by reference to the stage ofcompletion of the contract activity at the balance sheet date (percentage of completion method).When the outcome of a construction contract cannot be estimated reliably, contract revenue isrecognised to the extent of contract costs incurred that are likely to be recoverable. When it isprobable that total contract costs will exceed total contract revenue, the expected loss isrecognised as an expense immediately.

The stage of completion is measured by reference to the contract costs incurred to date to theestimated total costs for the contract. At the balance sheet, the aggregated costs incurred plusrecognised profit (less recognised loss) on each contract is presented as due from customers onconstruction contracts.

Related parties

Parties are considered to be related party of the Group for the purpose of the combined financialstatements if one party has the ability, directly or indirectly, to control the other party, or exercisesignificant influence over the other party in making financial and operating decisions. Parties arealso considered to be related if they are subject to common control or common significantinfluence. Related parties may be individuals or corporate entities.

Trade and other receivables

Trade and other receivables including amounts due from related parties and holding company, areclassified as loan and receivables under FRS 39 “Financial Instruments: Recognition andMeasurement” and are recognised and carried at fair value and subsequently measured atamortised cost using the effective interest rate method less impairment losses on any uncollectibleamounts.

Allowance for impairment loss is made when there is objective evidence that the Group will not beable to collect the debt. Bad debts are written off when identified.

Cash and cash equivalents

Cash and cash equivalents are carried at fair value.

Cash and cash equivalents comprise of cash on hand and in banks. Cash and cash equivalentsare short term, highly liquid investments readily convertible to known amounts of cash and subjectto an insignificant risk of changes in value and have a short maturity of generally within threemonths when acquired.

Trade and other payables

Trade and other payables and amount due to related parties and a director, are initially recognisedat fair value and subsequently measured at amortised cost using the effective interest method.

I-17





Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred and subsequentlyaccounted for at amortised cost using the effective interest rate method. Any difference betweenthe proceeds (net of transaction costs) and the redemption value is taken to the profit and lossstatement over the period of the borrowings using the effective interest method.

Borrowing costs

Borrowing costs are expensed in the period in which they are incurred.

Borrowing costs incurred to finance the development of vessels-in-construction are capitalisedduring the period of time that is required to complete and prepare the asset for its intended use.Other borrowing costs are recognised on a time-proportion basis in the profit and loss statementusing the effective interest method.

The amount of borrowing cost capitalised on that asset is the actual borrowing costs incurredduring the period less any investment income on the temporary investment of those borrowings.

Provisions

A provision is recognised when the Group has a present obligation, legal or constructive, as aresult of a past event and it is probable that an outflow of resources embodying economic benefitswill be required to settle the obligation, and a reliable estimate can be made of the amount of theobligation. Provisions are reviewed regularly and adjusted to reflect the current best estimate.Where the effect of the time value of money is material, the amount of provision is the presentvalue of the expenditures expected to be required to settle the obligation.

Operating leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership ofthe leased assets are classified as operating leases. Operating lease payments are recognised asan expense in the profit and loss statement on a straight-line basis over the lease term.

Employees’ benefits

(i) Retirement benefits

The Group participates in the national schemes as defined by the laws of the countries inwhich it has operations.

Singapore

The Company makes contribution to the Central Provident Fund (CPF) Scheme inSingapore, a defined contribution pension schemes.

I-18





Employees’ benefits (Continued)

(i) Retirement benefits (Continued)

Indonesia

The subsidiaries, incorporated and operating in Indonesia, are required to provide certainretirement plan contribution to their employees under existing Indonesia regulations.Contributions are provided at rates stipulated by Indonesia regulations and are managed bygovernment agencies, which are responsible for administering these amounts for thesubsidiary’s employees.

Obligations for contributions to defined contribution retirement plans are recognised as anexpense in the profit and loss statement as and when they are incurred.

(ii) Employee leave entitlement

Employee entitlements to annual leave are recognised when they accrue to employees. Aprovision is made for the estimated liability as a result of services rendered by employees upto the balance sheet date.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to theGroup and the revenue can be reliably measured. The following specific recognition criteria mustalso be met before revenue is recognised:

Charter hire income is recognised on a time proportion basis.

Revenue from shipbuilding contracts is recognised using the percentage of completion method,measured by reference to the percentage of direct costs incurred to date to estimated total directcosts for the contract with due consideration made to include only those costs that reflect workperformed.

When the outcome of contract cannot be estimated reliably, revenue is recognised only to theextent of contract costs incurred that is probable will be recoverable.

Interest income is recognised on a time proportion basis, taking into account the principal amountsoutstanding and the effective interest rates applicable.

Dividend income is recognised when the right to receive payment is established.

Dividends

Interim dividends are recorded in the financial year in which they are declared payable. Finaldividends are recorded in the financial year in which the dividends are approved by theshareholders.

I-19





Segment information

A business segment is a group of assets and operations engaged in providing products or servicesthat are subject to risks and returns that are different from those of other business segments. Ageographical segment is engaged in providing products or services within a particular economicenvironment that is subject to risks and returns that are different from those of segments operatingin other economic environments.

Income tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit asreported in the profit and loss 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 Group’s liability for current tax is calculated using tax rates that have been enactedor substantively enacted in countries where the subsidiaries operate by the balance sheet date.

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. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than in a business combination)of other assets and liabilities in a transaction that affects neither the taxable profit nor theaccounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments insubsidiaries, except where the Group is able to control the reversal of the temporary difference andit is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced tothe extent that it is no longer probable that sufficient taxable profits will be available to allow all orpart 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. Deferred tax is charged or credited to profit and loss statement,except when it relates to items charged or credited directly to equity, in which case the deferred taxis also dealt with in equity.

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 Group intends to settle its current tax assets and liabilities on a netbasis.

I-20





Functional and foreign currency

Functional currency and presentation currency

The Group’s principal operations are conducted in Singapore and thus the financial statements areprepared in Singapore Dollars, being the measurement and presentation currency of the Group.

Foreign currency transactions and balances

Transactions in foreign currencies are measured in the respective functional currencies of theCompany and its subsidiaries and are recorded on initial recognition in the functional currencies atexchange rates approximating those ruling at transaction dates. Monetary assets and liabilitiesdenominated in foreign currencies are translated at the closing rate of exchange ruling at balancesheet date. Non monetary items that are measured in terms of historical cost in a foreign currencyare translated using exchange rates as at the dates of the initial transactions. Non-monetary itemsmeasured at fair value in foreign currencies are translated using the exchange rates at the datewhen the fair value is determined.

Exchange differences arising on the settlement of monetary items, and on retranslation ofmonetary items are included in profit and loss statement for the period. Exchange differencesarising on the retranslation of non-monetary items carried at fair value are included in profit andloss statement for the period except for differences arising on the retranslation of non-monetaryitems in respects of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

For the purpose of presenting combined financial statements, the assets and liabilities of thegroup’s foreign operations (including comparatives) are expressed in Singapore Dollars usingexchange rates prevailing on the balance sheet date. Income and expense items (includingcomparatives) are translated at the average exchange rates for the period, unless exchange ratesfluctuated significantly during that period, in which case the exchange rates at the dates of thetransactions are used. Exchange differences arising, if any, are classified as equity and transferredto the Group’s foreign currency translation reserve. Such translation differences are recognised inthe profit and loss statement in the period in which the foreign operation is disposed of.

On consolidation, exchange differences arising from the translation of the net investment in foreignentities (including monetary items that, in substance, form part of the net investment in foreignentities), and of borrowings and other currency instruments designated as hedges of suchinvestments, are taken to the foreign currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign operations on or after 1October 2005 are treated as assets and liabilities of the foreign operations and are recorded in theforeign currency of the foreign operations and translated at the closing rate at the balance sheetdate.

I-21





Financial instruments

The Group’s financial assets are cash and bank balances, trade and other receivables (includingamounts due from related parties). The accounting policies on recognition and measurement ofthese items are disclosed in the respective accounting policies found in this Note.

Financial liabilities and equity instruments are classified according to the substance of thecontractual arrangements entered into. Significant financial liabilities comprising trade and otherpayables (including amounts due to related parties) and due to director are stated at their fairvalues. Bank loans are stated at amortised costs. Equity instruments are recorded at the fair valueof the consideration received.

4. REVENUE

2004 2005 2006

$ $ $

Revenue comprises the following:Ship chartering 4,545,925 6,641,854 11,894,497Shipyard – – 3,991,991

4,545,925 6,641,854 15,886,488

5. OTHER OPERATING INCOME

2004 2005 2006

$ $ $

Gain on disposal of plant and equipment 60,909 1,072,633 626,990Insurance claims received 75,000 – –Net gain in foreign exchange – – 19,595Bank interest income – – 8,995Sundry income 7,356 – 7,674

143,265 1,072,633 663,254

I-22




6. PERSONNEL EXPENSES

2004 2005 2006

$ $ $

Wages and salaries 96,559 122,560 604,651Contributions to define contribution retirement plan 600 11,023 37,538Director’s fee- director of a subsidiary – – 12,000

Directors’ remuneration- directors’ of the Company – – 346,575- directors’ of the subsidiaries – 117,750 78,490

Other expenses – 125 2,854

97,159 251,458 1,082,108

7. FINANCE COST

2004 2005 2006

$ $ $

Interest on bank borrowings 356,044 334,436 336,577

8. PROFIT BEFORE TAX

This is determined after charging the following:

2004 2005 2006

$ $ $

Depreciation of property, plant and equipment (Note 10) 968,324 1,075,539 1,433,616Operating lease rentals – 18,000 27,000Plant and equipment written off – – 670Personnel expenses including directors’ remuneration (Note 6) 97,159 251,458 1,082,108

I-23




9. INCOME TAX

2004 2005 2006

$ $ $

Current taxation – – 63

A reconciliation of the tax expense and the product of accounting profit multiplied by the statutorytax rate is as follows:

2004 2005 2006

$ $ $

Profit before tax 1,011,417 2,827,799 5,392,587

Tax at the statutory tax rate of 20% 202,283 565,560 1,078,517Deferred tax assets not recognised 15,900 91,667 200,674Tax effect of income that are not taxable in determining taxable profits (361,938) (685,955) (1,315,422)

Tax effect of expenses that are non-deductible indetermining taxable profit 143,755 28,728 36,294

Tax expense – – 63

The Group has income derived from chartering of its Singapore registered ships. Such charterincome qualifies for tax exemption under Section 13A of the Singapore Income Tax Act, Chapter134. Accordingly, income tax liability on chartering income is not provided for.

Deferred tax asset has not been recognised in respect of the following temporary differences asthere is no reasonable certainty of its recovery in future periods. The utilisation of tax losses andcapital allowances is subject to the compliance of certain provisions of the Income Tax Act.

2004 2005 2006

$ $ $

Excess of tax base of qualified plant and equipment over net carrying amount 1,369,091 1,780,901 2,664,897

Unabsorbed tax losses 18,154 64,679 366,687Unabsorbed capital allowances 214,080 214,080 31,446

1,601,325 2,059,660 3,063,030

Deferred tax asset not recognised, at corporate taxrate of 20% 320,265 411,932 612,606

I-24



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I-25



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114

I-26




10. PROPERTY, PLANT AND EQUIPMENT (Continued)

As at 30 September 2004, 2005 and 2006, freehold office building and vessels with net carryingamount of $8,102,610, $7,403,041 and $19,269,906 respectively are pledged as security for bankborrowings (Note 20).

The Group’s property, plant and equipment include borrowing costs incurred in connection with thevessels-in-construction.

The borrowing costs capitalised as cost of vessels-in-construction during the year ended 30September 2006 amounted to $52,881 (2004 and 2005: Nil). The capitalisation rate used todetermine the amount of borrowing costs eligible for capitalisation was 5.90% (2004 and 2005: Nil).

11. INVESTMENT IN SUBSIDIARIES

Company2006

$

Unquoted equity interest, at cost 1,320,003

1,320,003

Details of the subsidiaries are as follows:

Place of Effective incorporation / equity held by Cost of

Name of Subsidiaries business Principal activities the Group investment

% $Held by the Company

Marco Polo Shipping Singapore Ship chartering 100 1,000,000Co Pte Ltd# @ (1)

Bina Marine Pte. Ltd.# @ (1) Singapore Provision of contract 100 320,000services and trading activities

MP Marine Pte. Ltd.# (1) Singapore Investment holding 100 3

Held by subsidiaries:

PT. Marcopolo Shipyard+ (2) Indonesia Shipyard, shipbuilding 100 172,174and ship repair

Held by PT Marcopolo Shipyard

PT. Rio Mahkota Indonesia Investment holding and 100 26,087Nusantra+ (3) property management

# Audited by Horwath First Trust.

@ Prior year comparatives have been audited by another firm of certified public accountants.

+ Not required to be audited in the country of incorporation. However, they were audited by Horwath First Trust for thepurpose of expressing an opinion on the combined financial statements.

I-27




11. INVESTMENT IN SUBSIDIARIES (Continued)(1) On 28 July 2006, the Company acquired the entire equity interest in the above Singapore subsidiaries from the

shareholders of the subsidiaries for a purchase consideration equivalent to the paid-up capital amount of therespective subsidiary amounting to $1,320,003.

(2) On 28 September 2006, Bina Marine and MP Marine acquired 1,000 shares of IDR1,000,000 each, representing100% of the issued share capital of MP Shipyard for a consideration of IDR1,000,000,000 (equivalent to $172,174).

(3) On 14 August 2006, MP Shipyard acquired 300 shares of IDR500,000 each, representing 100% of the issued sharecapital of RMN for a consideration of IDR150,000,000 (equivalent to $26,087).

In accordance with the Group’s accounting policy, business combinations that involve entities undercommon control are accounted for under the pooling of interest method in the preparation of thecombined financial statements. Under this method, the identifiable assets and liabilities wereaccounted for at their historical cost and the prior year comparative figure of the Group have beenprepared as if the Group had existed on 1 October 2003.

12. INVENTORIES

2004 2005 2006

$ $ $

Materials – – 1,971,300Spare parts and consumables – – 130,348

– – 2,101,648

13. TRADE RECEIVABLES

Trade receivables are denominated in the following currencies:

2004 2005 2006

$ $ $

United State Dollars – 5,400 816,429Singapore Dollars 27,727 652 77,171

27,727 6,052 893,600

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14. DUE FROM CUSTOMERS ON CONSTRUCTION CONTRACTS

2004 2005 2006

$ $ $

Project costs incurred to date – – 791,493Recognised profits less recognised losses to date – – 41,657

Amount due from customers for contract work – – 833,150

Represented by:Construction work-in-progress in excess of progress billings – – 833,150

– – 833,150

15. OTHER RECEIVABLES

2004 2005 2006

$ $ $

Prepayments – 33,087 181,627Deferred expenses – – 151,581Deposit paid for purchase of vessels – 630,000 –Staff loans 112 500 513Other deposits – 17,000 6,406Other receivable – 2,000 2,740

112 682,587 342,867

Staff loans and other receivable are non-interest bearing and are repayable on demand.

Other receivables are denominated in the following currencies:

2004 2005 2006

$ $ $

Singapore Dollars 112 651,670 326,656Indonesia Rupiah – 2,000 16,211United States Dollars – 28,917 –

112 682,587 342,867

16. DUE FROM / (TO) SUBSIDIARY, HOLDING COMPANY, DIRECTOR AND RELATED PARTIES(NON-TRADE)

The amounts due from / (to) subsidiary, holding company, director and related parties areunsecured, interest-free and repayable on demand.

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17. CASH AND BANK BALANCES

Cash and bank balances are denominated in the following currencies:

2004 2005 2006

$ $ $

United States Dollars – 6,682 128,990Singapore Dollars 31,447 55,160 294,350Indonesia Rupiah – – 14,515

31,447 61,842 437,855

18. TRADE PAYABLES

Trade payables are denominated in the following currencies:

2004 2005 2006

$ $ $

Singapore Dollars 275,442 398,115 5,021,168United States Dollars – 1,592 354,048Japanese Yen – – 202,260Others – 28,087 65,397

275,442 427,794 5,642,873

19. OTHER PAYABLES

2004 2005 2006

$ $ $

Advances from customers – – 1,137,619Accrued operating expenses 11,014 9,968 174,478Purchase of two vessels from third party – 2,100,000 –Deposit received for sale of vessels – 67,000 –Other payables – 16,605 1,821,679

11,014 2,193,573 3,133,776

Included in other payables are as follows:

(i) Amount owing to a third party of $1,531,336 on the acquisition of a subsidiary, RMN. Theamount is interest free and is repayable on demand.

(ii) Amount owing to Indonesia Land Authority of IDR1,329,913,842 (equivalent to $231,289) forexpenses relating to the acquisition of leasehold land by a subsidiary in Indonesia wassubsequently settled in February 2007.

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19. OTHER PAYABLES (Continued)

Other payables are denominated in the following currencies:

2004 2005 2006

$ $ $

Singapore Dollars 11,014 2,193,573 2,810,235Indonesia Rupiah – – 310,516Others – – 13,025

11,014 2,193,573 3,133,776

20. INTEREST-BEARING LOANS – SECURED

Effective Number InstalmentsBank interest of commencedloans rate instalments from 2004 2005 2006

$ $ $Fixed rate

#1 9.67% 48 Jan’01 31,125 – –#2 6.87% 48 May’04 668,876 – –#3 7.81% 48 Dec’02,

May’03 and Aug’03 1,367,672 835,661 259,042#4 6.58% 48 Aug’03 and Oct’03 840,090 565,086 279,114#5 7.34% 48 Nov’03 and Mar’04 1,613,004 744,016 425,841#6 5.35% 48 Aug’05, Oct,05

Dec’05 and Feb’06 – 1,717,880 4,122,137#7 6.60% 36 May’06 – – 781,552

4,520,767 3,862,643 5,867,686

Floating rate

#8 – – 2,687,375#9 – – 400,000#10 – – 910,465#11 – – 800,000#12 – – 840,000#13 – – 2,664,000#14 – – 931,324

– – 9,233,164

Amount repayable:

Not later than one year 1,663,817 1,583,906 8,264,937Later than one year and not later than five years 2,856,950 2,278,737 6,069,912Later than five years – – 766,001

4,520,767 3,862,643 15,100,850

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20. INTEREST-BEARING LOANS – SECURED (Continued)

The loans are denominated in the following currencies:

2004 2005 2006

$ $ $

Singapore Dollars 4,520,767 3,862,643 14,169,526Indonesia Rupiah – – 931,324

4,520,767 3,862,643 15,100,850

Loans #1 to #5 and #7

The loans are secured by a first mortgage over the assets and joint and several guarantees bycertain directors of the Group and the loans #2, #5 and #7 are secured by assignment of insurancepolicies.

Loan #6

The loans are secured by a first mortgage over the assets and joint and several guarantees bycertain directors of the Group and the following:

(i) The loans are secured by assignment of rights, earnings and benefits from charteragreements, assignment of insurance policies and a corporate guarantee from a relatedparty.

(ii) The Group shall maintain a net worth of not less than $3.6 million. Net worth is defined asthe sum of paid up capital, revenue reserve and loans from directors and shareholders

(iii) The Group shall maintain a maximum loan to security ratio of 70% at all times.

Loans #8 to #9

The loans are secured by a first legal mortgage over the assets, joint and several guarantees bycertain directors of the Group and assignment of charter hire proceeds. Interest is charged at5.25% per annum for the first year and 0.25% per annum over the bank’s prime rate thereafter.

Term loans #8 are repayable over 48 monthly instalments commencing from August and October2006.

Term loan #9 is a short term loan repayable over 4 monthly instalments upon full drawdown.Interest is charged at 0.25% per annum over the bank’s prime rate on monthly rest.

Loan #10

The loan is secured by a first legal mortgage over freehold office building (Note 10) and a joint andseveral guarantee from certain directors of the Group. Interest is charged at a fixed rate of 4.5%per annum with monthly rest for the first year, 5% per annum with monthly rest for the second yearand 1.75% per annum above prevailing enterprise base rate with monthly rest thereafter. The loanis repayable over 20 years commencing from June 2006.

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Loan #10 (Continued)

In the event that the total amount outstanding under the facility exceeds 88% of the averageexternal and internal of the market value of the freehold office building, the said bank is entitled toreduce the credit limit and require repayment of such amount and additional security to befurnished.

Loan #11

The loan is secured by a second mortgage over the two vessels under loans #3. Interest ischarged at 3% per annum above the financial institution’s prevailing prime lending rate andcalculated on daily basis.

The non-revolving loan was subsequently converted to a term loan repayable over 24 monthlyinstalments commencing from December 2006. Interest is charged at an effective rate of 8.07% perannum and is calculated on a flat annual rate of 3.95%.

Loan #12

The loan is secured by a first legal mortgage over the assets and joint and several guarantees fromcertain directors of the Group. The loans are repayable on demand and non-revolving. Interest ischarged at 3% per annum above the financial institution’s prevailing prime lending rate andsubjected to a yearly review.

Loan #13

The loan (“Construction loan”) is to finance the construction of vessels to be built by a relatedcompany. It is secured by the following:

(i) security charge over all vessel materials and work in progress;

(ii) assignment of the Construction Agreement between the Company and Shipbuilder;

(iii) assignment of all insurances;

(iv) assignment of charter earnings for charter contracts greater than twelve (12) months;

(v) joint and several guarantee by certain directors; and

(vi) corporate guarantee by a related party.

Interest is charge at 2.3% per annum above One Month Singapore Offer Rate and accrued interestis payable on monthly basis. The loan will be converted to a permanent loan on completion of theconstruction and the loan is repayable over 16 quarterly instalments commencing 3 months afterdate of conversion of the construction loan to permanent loan. The Group shall maintain aminimum net worth of $4 millions and a maximum debt to equity ratio of 2.5:1.

Loan #14

The loan is a revolving loan obtained for the shipyard’s working capital. Interest is charged at 4%below the Indonesia banks’ term lending rate on daily basis and it is secured by a deposit providedby a director of the Company.

All loans granted to the Group by the directors, shareholders, holding companies, related partiesshall be subordinated under the terms of loans #1 to #3, #5, #11, #13 and #14.

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The carrying amounts of current borrowings approximate their fair value. The fair values of non-current portions of bank borrowings at fixed rates until the maturity of the instrument are as follows:

Carrying amount Fair value 2004 2005 2006 2004 2005 2006

$ $ $ $ $ $

Non current portions of bank borrowings at fixed rate 2,856,950 2,278,737 3,423,717 2,801,760 2,167,589 3,273,071

The fair value of bank term loans have been determined using discounted estimated cash flows.The discount rates are the current market incremental lending rates for similar types of lending,borrowing and leasing arrangements.

21. SHARE CAPITAL

The Company was incorporated in Singapore on 10 July 2006. The share capital as at 30September 2004 and 2005 is represented by the paid-up capital of the Company’s subsidiaries, MPShipping, Bina Marine and MP Shipyard.

Consequent to the Restructuring Exercise (Note 2), the share capital for the financial year ended30 September 2006 is as follow:

Company

Number ofshares $

Issued and fully paidAt date of incorporation, 10 July 2006- ordinary shares 3 3

Issuance of ordinary shares 1,320,003 1,320,003

At 30 September 2006 1,320,006 1,320,006

The holders of ordinary shares are entitled to receive dividends as and when declared by theCompany. All ordinary shares carry one vote per share without restriction.

Pursuant to the Companies (Amendment) Act 2005 which came into effect on 30 January 2006,the concepts of par value, authorised share capital, share premium, capital redemption reserve andshare discounts have been abolished.

22. DIVIDENDS

Dividends were paid by a subsidiary, Bina Marine, in the financial years ended 30 September 2004and 2005 amounting to $620,000 and $534,400 respectively.

No dividends have been proposed or declared for the financial year ended 30 September 2006.

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23. RELATED PARTY TRANSACTIONS

Other than those related party information disclosed elsewhere in the combined financialstatements, the following are significant related party transactions entered into by the Group withrelated parties who are not members of the Group during the period at terms agreed between theparties:

2004 2005 2006

$ $ $

Income

Charter income charged to related parties 4,210,128 5,964,855 5,795,348

Cost and expenses

Crew supply expenses charged by a related party 254,812 247,326 267,872Ship agency fees charged by a related party – 8,053 90,827Charter fees charged by a related party – 158,961 –Office rental charged by a related party (1) – 18,000 27,000Administrative fee charged by a related party 6,000 6,000 1,500Purchases from related parties (2) – – 1,342,496Procurement expenses charged by a related party (3) 15,322 31,012 84,413

OthersPurchase of vessels from a related party – – 1,200,000Purchase of equipment and machinery from a related party – 15,000 64,000Purchase of land from a related party (4) – – 1,544,348Vessels recovery fees paid to a related party capitalised as part of vessels cost (5) – – 300,000

Key management personnel remuneration (6) – 117,750 454,047

(1) During the period from October 2004 to March 2005, MP Shipping shared an office space owned by a related partyon rent free basis.

(2) Included in the transactions were $1,238,337 not conducted on an arm’s length basis nor based on normalcommercial terms.

(3) The transactions were not conducted on an arm’s length basis nor based on normal commercial terms.

(4) The purchase transaction was not conducted on an arm’s length basis nor based on normal commercial terms. Priorto the transfer of the land which was completed in August 2006, MP Shipyard leased the land from the related partyfor the period from February 2005 to August 2006 for its shipyard operations on a rent free basis.

(5) The fee relates to the reimbursement for all out-of-pocket expenses incurred in the recovery of hijacked vessel. Thetransaction would not normally be regarded as entered into on an arm’s length basis as the related party did notcharge any fee in providing such services.

(6) This includes directors’ remuneration and relates to short term employment benefits.

24. CAPITAL EXPENDITURE COMMITMENTS

Capital commitments contracted for as at the balance sheet date but not provided for in thecombined financial statement is as follows:

2004 2005 2006

$ $ $

Capital commitments in respect of contracts placed forpurchase property, plant and equipment – 2,040,000 8,169,000

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25. SEGMENT INFORMATION

For the years ended 30 September 2004 and 2005, no separate analysis of segment informationby business or geographical segment as the Group’s major business comprises the ship charteringincome. The Group’s revenue, expenses, results, assets and liabilities and capital expenditure areprincipally attributable to a single region, which is Singapore.

For the year ended 30 September 2006, the Group’s primary format for reporting segmentinformation is business segments, with each segment representing a strategic business segmentthat offers different services. The Group’s business segments are organised as follows:

(i) Ship chartering – Relates to charter hire activities.(ii) Shipyard – Relates to ship building and ship repair activities.(iii) Others – Relates to general corporate activities.

Unallocated segment assets and liabilities represent assets and liabilities which cannot be directlyattributable to individual segments and it is impractical to allocate them to the segments.

The following table present revenue and results information regarding the Group’s businesssegment for the year ended 30 September 2006:

Business Segments

Ship2006 chartering Shipyard Others Group

$ $ $ $Revenue– external sales 11,894,497 3,991,991 – 15,886,488

Segment resultsProfit / (loss) from operations 3,481,599 105,462 (16,388) 3,570,673Negative goodwill arising on acquisition 2,158,491Financial expenses, net (336,577)

Profit before tax 5,392,524Income tax (63)

Profit after tax 5,392,524

Segment assets 28,197,266 12,730,054 – 40,927,320Unallocated assets 1,246,734

Total assets 42,174,054

Segment liabilities 15,091,493 8,656,744 – 23,748,237Unallocated liabilities 7,563,699

Total liabilities 31,311,936

Other informationCapital expenditures 17,440,898 10,698,109 – 28,139,007Depreciation of property, plant andequipment 1,246,049 187,567 – 1,433,616

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25. SEGMENT INFORMATION (Continued)

Geographical segments

The following table presents revenue, capital expenditures and certain asset information regardingthe Group’s geographical segments for the year ended 30 September 2006.

2006 Singapore Indonesia Others Total

$ $ $ $

Revenue 2,327,532 8,596,382 4,962,574 15,886,488

Segment assets 30,298,161 11,875,893 – 42,174,054

Capital expenditures 18,660,243 9,478,764 – 28,139,007

26. FINANCIAL INSTRUMENTS

Financial risk management objectives and policies

The Group’s principal financial instruments comprise bank borrowings and cash and bankbalances. The main purpose of these financial instruments is to raise finance for the Group’soperation. The Group has various other financial assets and liabilities such as trade receivables,and trade payables, which arise directly from its operations.

The main risks arising from the Group’s financial instruments are interest rate risk (both fair valueand cash flow), liquidity risk, foreign currency risk and credit risk. The board reviews and agreespolicies for managing each of these risks as summarised below.

Credit risk

Credit risk or the risk of counterparties defaulting, is managed through the application of creditapprovals credit limits and debt monitoring procedures.

Financial instruments which potentially expose the Group to credit risk consist primarily of cashand cash equivalents and trade and other receivables. The cash and cash equivalents are placedwith various reputable financial institutions.

The maximum exposure to credit risk is represented by the carrying amount of the financial assetsas stated in the balance sheet. The Group has no significant concentrations of credit risk.

Interest rate risk

The Group’s exposures to movement in market interest rates relate primarily to its long term debtobligations borrowings with financial institutions. The Group does not use derivative financialinstruments to hedge its interest risk.

The Group obtains additional financing through bank borrowings. The Group’s policy is to obtainthe most favourable interest rates available. Surplus funds are placed with reputable banks togenerate interest income.

Information relating to the Group’s interest rate exposure is also disclosed in the note 20.

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26. FINANCIAL INSTRUMENTS (Continued)

Liquidity risk

The Group’s objective is to maintain a balance between continuity of funding and flexibility throughthe use of bank loans and leasing arrangements. The Group monitors and maintains a level of cashand cash equivalents deemed adequate by the management to finance the Group’s operations andto mitigate the fluctuations in cash flows.

Foreign currency risk

The Group operates in two countries and, as a result, is exposed to foreign exchange risks arisingfrom various currency exposures. In addition to transactional exposures, the Group is also exposedto foreign exchange movements on its net investment in the foreign subsidiary. It is not the Group’spolicy to enter into derivative forward foreign exchange contracts for hedging and speculativepurposes.

Fair value

The carrying amounts of the financial assets and financial liabilities with a maturity of less than oneyear are assumed to approximate their fair values.

The Group does not anticipate that the carrying amounts recorded at balance sheet dates wouldsignificantly different from the values that would eventually be received or settled except for asdisclosed in Note 20.

27. SUBSEQUENT EVENTS

Subsequent to the financial year ended 30 September 2006,

(a) The Group entered into the sale and purchase agreements with third party to purchase 10units of tugboats amounting to $8,600,000 and related parts amounting to USD537,000.

(b) The Group entered into a sale and purchase agreement with a related party to dispose of 2units of vessels for an aggregate consideration of $1,500,000.

(c) The Group entered into the following agreements with third party:

(i) Sale and purchase agreements with third parties to dispose of 7 units of vessels foran aggregate consideration of $4,825,000 of which 2 have been completed in themonth of June 2007 and 4 completed in the month of July 2007.

(ii) Agreements to purchase plant and equipments amounting to $1,178,080.

(iii) Agreements for the construction of workshops, warehouse, a drydock and shipyarddevelopment amounting to $1,627,165.

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27. SUBSEQUENT EVENTS (Continued)

(d) Borrowings

(i) During the financial year, the Group was granted a loan amounting to $1,260,000 tofinance the purchase of a vessel that was not utilised at year end. The loan wasdrawdown on 8 December 2006. The loan is repayable over 48 monthly instalments.

(ii) On 2 October 2006, the Group was granted a loan amounting to $1,610,000 to financethe purchase of a vessel. The loan was drawdown on 15 December 2006. It isrepayable over 48 monthly instalments.

Interest of 5.92% per annum fixed is charged for both loan (i) and (ii) and the loansare secured by legal mortgage over the vessel, assignment of rights, earnings andbenefits from the charter agreements, assignment of insurance policies, a joint andseveral personal guarantee from the directors of the Company, and corporateguarantee from a related party.

(iii) On 15 November 2006, the Group was granted a loan amounting to $1,180,000 forworking capital purposes which was drawdown on 8 March 2007. The loan wasrepayable on demand which bears interest of 3% per annum above the Singaporeprime lending rate. This loan was non-revolving, subject to yearly review, and securedby assets of a subsidiary and joint and several guarantees by the directors of theCompany. This loan was restructured to a 4-year term loan on 2 July 2007 and isrepayable over 48 monthly instalments which bears interest of 3.17% per annumabove the Singapore prime lending rate.

(iv) On 5 December 2006, the Company was granted loans amounting to $4,896,512 froma bank to finance the purchase of six vessels of which $628,000 was drawdown on 15February 2007 and $2,000,000 was drawdown on 15 August 2007. The loans arerepayable over 48 monthly instalments which bear interest of 1.375% per annumabove the bank’s prime rate on monthly rest. These loans are secured by legalmortgage over the vessels, assignment of insurance policies and charter earnings,and joint and several personal guarantees of the directors of the Company.

(v) On 29 December 2006, the Group was granted a loan amounting to $2,500,000 ofwhich approximately $1,500,000 was drawdown on 29 December 2006 for workingcapital purpose. Interest is charged at 6.5% per annum subject to monthly revisedinterest rate, is repayable on 28 December 2007 and secured by the assets of asubsidiary, all assets (current and future) of a subsidiary, assets of certain directors ofthe Company and related parties, guarantees of certain directors of the Company andrelated parties, and assignment of insurance policies in respect of the above assetssecured. The Group was granted an option to extend the repayment by 2 years fromthe due date.

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(d) Borrowings (Continued)

(vi) On 29 December 2006, the Group was granted a loan amounting to $3,500,000 forworking capital purpose. Interest is charge at 7% per annum subject to monthlyrevised interest rate and the loan is repayable over 20 quarterly instalments as follows:

1st to 4th quarter $100,000 each quarter5th to 8th quarter $150,000 each quarter9th to 12th quarter $175,000 each quarter13th to 20th quarter $225,000 each quarter

The loan is secured by the assets of a subsidiary, all assets (current and future),assets of certain directors of the Company and related parties, guarantees of certaindirectors of the Company and related parties, and assignment of insurance policies inrespect of the above assets secured.

(vii) On 18 April 2007, the Group was granted loans amounting to $2,887,500 to financethe purchase of two vessels. Interest is charged at 1.75% per annum above theSingapore prime lending rate. The loan is repayable over 48 monthly instalments andsecured by a legal mortgage over the vessels and joint and several personalguarantee from the directors of the Company.

(viii) On 30 April 2007, the Group was granted a loan amounting to $640,000 to finance thepurchase of a vessel. Interest is charged at effective rate of 6.75% and is calculatedat a flat rate of 3.4366% per annum, to be paid monthly in advance. The loan isrepayable over 48 monthly instalments and is secured by legal mortgage over thevessel, assignment of insurance policies, and a joint and several personal guaranteefrom the directors of the Company.

(e) On 3 May 2007, the issued shares capital of RMN was increased from IDR 150 million toIDR 2,000 million through the allotment of 3,700 shares of IDR 500,000 each. MP Shipyardand MP Marine were allotted 3,660 shares amounting to IDR 1,830 million and 40 sharesamounting to IDR 20 million, representing 99% and 1% shareholding of RMN respectively.There is no change on the effective equity interest held by the Group.

(f) Pursuant to extraordinary general meeting held on 3 September 2007, the shareholdersapproved, inter-alia, the following:

(i) an amount of $3,000,000 owing by the Company to Mr Lee Wan Tang be capitalizedat a price of $1.00 per share, into 3,000,000 ordinary shares in the capital of theCompany to be issued, credited as fully paid, to Nautical International HoldingsLimited in accordance with the directions of Mr Lee Wan Tang;

(ii) an amount of $3,000,000 injected or to be injected in cash by Nautical InternationalHoldings Limited into the Company to be credited at a price of $1.00 per share, into3,000,000 ordinary shares in the capital of the Company to be issued, credited as fullypaid, to Nautical International Holdings Limited;

I-40





(f) Pursuant to extraordinary general meeting held on 3 September 2007, the shareholdersapproved, inter-alia, the following: (Continued)

(iii) an amount of $180,000 owing by the Company to Winvest Management Pte Ltd becapitalized at a price of $8.17 per share, into 22,027 ordinary shares in the capital ofthe Company to be issued, credited as fully paid, in accordance with the directions ofWinvest Management Pte Ltd as to 17,622 shares to Mr Lim Han Boon, 2,203 sharesto Mr Chan Kum Onn Roger and 2,202 shares to Mr Ang Eng Lim;

(iv) the capitalisation of the retained earnings of the Company by way of a bonus issue of10,657,967 Shares fully paid to the Shareholders of the Company (the “Bonus Issue”);

(v) the sub-division of each Share in the existing issued share capital of the Company into11.9 Shares (the “Share Split”);

(vi) the conversion of the Company into a public limited company and the change of thename to “Marco Polo Marine Ltd.”;

(vii) the listing and quotation of all the issued Shares (including the New Shares to beallotted and issued) on the SGX-SESDAQ;

(viii) the adoption of a new set of Articles of Association;

(ix) the allotment and issue of 53,550,000 New Shares which are the subject of theInvitation, on the basis that the New Shares, when allotted, issued and fully paid, willrank pari passu in all respects with the existing Shares; and

(x) the authorisation of the Directors, pursuant to Section 161 of the Companies Act, to

(1) allot and issue shares whether by way of rights, bonus or otherwise (includingshares as may be issued pursuant to any Instrument (as defined below) madeor granted by the Directors while this resolution is in force notwithstanding thatthe authority conferred by this resolution may have ceased to be in force at thetime of issue of such shares), and / or

(2) make or grant offers, agreements or options (collectively, “Instruments”) thatmight or would require shares to be issued, including but not limited to thecreation and issue of warrants, debentures or other instruments convertible intoshares,

I-41





(f) Pursuant to extraordinary general meeting held on 3 September 2007, the shareholdersapproved, inter-alia, the following: (Continued)

at any time and upon such terms and conditions and for such purposes and to such personsas the Directors may in their absolute discretion deem fit, provided that the aggregatenumber of Shares issued pursuant to such authority (including Shares issued pursuant toany Instrument but excluding Shares which may be issued pursuant to any adjustments(“Adjustments”) effected under any relevant Instrument, which Adjustment shall be made incompliance with the provisions of the Listing Manual of the SGX-ST for the time being inforce (unless such compliance has been waived by the SGX-ST) and the Articles ofAssociation for the time being of the Company), shall not exceed 50% of the issued sharecapital of the Company immediately after the invitation by the Company to the public tosubscribe for the New Shares (the “Invitation”), and provided that the aggregate number ofsuch Shares to be issued other than on a pro rata basis in pursuance to such authority(including Shares issued pursuant to any instrument but excluding shares which may beissued pursuant to any Adjustment effected under any relevant Instrument) to the existingShareholders shall not exceed 20% of the issued share capital of the Company immediatelyafter the Invitation, and, unless revoked or varied by the Company in general meeting, suchauthority shall continue in force until the conclusion of the next Annual General Meeting ofthe Company or the date by which the next Annual General Meeting of the Company isrequired by law to be held, whichever is the earlier.

(g) On 3 September 2007, 2 customers, owned by the same party, of MP Shipyard claimed anaggregate amount of (i) $73,780 for the late delivery of 4 vessels which were deliveredsubsequent to financial year ended 30 September 2006 and (ii) IDR 193,274,010 (orapproximately $32,000) for loss of income as a result of downtime needed to repair one ofthe vessels.

Management represented that the company is currently consulting its legal advisers as tothe appropriate response to the claim. However, there is no financial impact on the currentfinancial year.

(h) Pursuant to the board resolution dated 5 September 2007, an amount owing to the Companyby one of its subsidiary amounting to $3,000,000 was capitalised at a price of $1.00 pershare into 3,000,000 ordinary shares in the share capital of this subsidiary.

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Statement by Directors

In the opinion of the directors, the accompanying combined financial statements together with notesthereto, as set out on pages I-3 to I-42, are drawn up so as to present fairly, the financial positions ofMarco Polo Marine Ltd. (the “Company”) and its subsidiaries (collectively, the “Group”) as at 30September 2004, 2005 and 2006 and of the results, changes in equity and cash flows of the Group forthe financial years ended on those dates, and at the date of this statement, there are reasonable groundsto believe that the Company will be able to pay its debts as and when they fall due.

On behalf of the Board of Directors

LIE LY @ LIELY LEE SALLY @ LAI QIN ZHIDirector Director

Singapore27 September 2007

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INDEPENDENT AUDITORS’ REPORT ON THE INTERIM COMBINED FINANCIAL STATEMENTS

27 September 2007

The Board of DirectorsMarco Polo Marine Ltd.1 Sims Lane,#04-11, Singapore 387355.

Dear Sir,

We have reviewed the accompanying interim combined financial statements of Marco Polo Marine Ltd.(the “Company”) and its subsidiaries (collectively, the “Group”), set out on pages II-2 to II-40, whichcomprise interim combined balance sheet of the Group as at 31 March 2007, interim combinedstatements of profit and loss, changes in equity and cash flows of the Group for the six-month periodended 31 March 2007. Management is responsible for the preparation and fair presentation of theseinterim combined financial statements in accordance with Singapore Financial Reporting Standards. Ourresponsibility is to express a conclusion on these interim financial statements based on our review.

We conducted our review in accordance with Singapore Standard on Review Engagements 2410,“Review of Interim Financial Information Performed by the Independent Auditor of the Entity.” A review ofinterim financial information consists of making inquiries, primarily of persons responsible for financial andaccounting matters, and applying analytical and other review procedures. A review is substantially less inscope than an audit conducted in accordance with Singapore Standards on Auditing and consequentlydoes not enable us to obtain assurance that we would become aware of all significant matters that mightbe identified in an audit. Accordingly, we do not express an audit opinion.

Based on our review, nothing has come to our attention that causes us to believe that the accompanyinginterim combined financial statements do not present fairly, in all material respects, the financial positionof the Group as at 31 March 2007 and of its financial performance, changes in equity and cash flows forthe six-month period then ended in accordance with Singapore Financial Reporting Standards.

This report has been prepared for inclusion in the Prospectus in connection with the initial public offeringof the shares of the Company.

Yours faithfully



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APPENDIX II – INDEPENDENT AUDITORS’ REPORT ON THE REVIEW OF THE INTERIM COMBINED FINANCIAL STATEMENTS OF

MARCO POLO MARINE LTD. AND ITS SUBSIDIARIES FOR THE SIX-MONTH PERIOD ENDED 31 MARCH 2007

Horwath First Trust



7 Temasek Boulevard


Singapore 038987

Tel: (65) 6221 0338

Fax: (65) 6221 1080

www.horwath.com.sg

MARCO POLO MARINE LTD.INTERIM COMBINED PROFIT AND LOSS STATEMENT FOR THE FINANCIAL PERIOD FROM 1 OCTOBER 2006 TO 31 MARCH 2007

Unaudited Unaudited1 October 2006 to 1 October 2005 to

Note 31 March 2007 31 March 2006

$ $

Revenue 4 16,953,240 5,650,012

Cost of sales (10,970,674) (3,910,495)

Gross profit 5,982,566 1,739,517

Other operating income 5 1,428,635 320,088Administrative expenses (734,474) (376,323)Other operating expenses (1,739,738) (306,778)Finance cost 7 (422,192) (176,484)

Profit before tax 8 4,514,797 1,200,020

Income tax 9 (145,754) –

Profit after tax 4,369,043 1,200,020

Earnings per share (cents)Basic(1) 2.04 0.56

Diluted(2) 1.63 0.45



II-2



The accompanying notes are an integral part of the interim combined financial statements.

MARCO POLO MARINE LTD.INTERIM COMBINED BALANCE SHEETSAS AT 31 MARCH 2007

Unaudited AuditedNote 31 March 2007 30 September 2006

$ $

Non-current assets

Property, plant and equipment 10 41,599,517 37,410,549

Current assets

Inventories 12 2,747,441 2,101,648Trade receivables 13 1,476,114 893,600Due from customers on construction contracts 14 5,480,908 833,150Other receivables 15 862,302 342,867Due from holding company (non-trade) 16 – 3Due from related parties (trade) – 154,382Cash and bank balances 17 1,194,103 437,855

11,760,868 4,763,505

TOTAL ASSETS 53,360,385 42,174,054

Current liabilities

Trade payables 18 8,508,402 5,642,873Other payables 19 2,418,373 3,133,776Due to related parties (trade) 1,102,850 791,176Due to related parties (non-trade) 16 – 464,215Due to a director (non-trade) 16 279,583 6,179,046Provision for tax 145,557 –Interest-bearing loans (secured) 20 10,198,127 8,264,937

22,652,892 24,476,023

Non-current liability

Interest-bearing loans (secured) 20 15,573,411 6,835,913

TOTAL LIABILITIES 38,226,303 31,311,936

NET ASSETS 15,134,082 10,862,118


Share capital 21 1,320,006 1,320,006Translation reserve (74,797) 22,282Accumulated profits 13,888,873 9,519,830

TOTAL EQUITY 15,134,082 10,862,118

II-3




MARCO POLO MARINE LTD.INTERIM COMBINED STATEMENT OF CHANGES IN EQUITYFOR THE FINANCIAL PERIOD FROM 1 OCTOBER 2006 TO 31 MARCH 2007

Share Translation Accumulated capital reserve profits Total

$ $ $ $

Balance as at 1 October 2005 865,000 1,268 4,127,306 4,993,574

Paid-up capital contribution of a subsidiary 455,006 – – 455,006

Currency translation reserve – 106,412 – 106,412

Profit for the period – – 1,200,020 1,200,020

Balance as at 31 March 2006 1,320,006 107,680 5,327,326 6,755,012

Balance as at 1 October 2006 1,320,006 22,282 9,519,830 10,862,118

Currency translation reserve – (97,079) – (97,079)

Profit for the period – – 4,369,043 4,369,043

Balance as at 31 March 2007 1,320,006 (74,797) 13,888,873 15,134,082

II-4




MARCO POLO MARINE LTD.INTERIM COMBINED STATEMENTS OF CASH FLOWSFOR THE FINANCIAL PERIOD FROM 1 OCTOBER 2006 TO 31 MARCH 2007


31 March 2007 31 March 2006

$ $

Cash flows from operating activitiesProfit before tax 4,514,797 1,200,020Adjustments for:Depreciation of property, plant and equipment 1,523,855 567,510Interest expenses 422,192 176,484Gain on disposal of plant and equipment (1,143,666) (316,628)

Operating profit before working capital changes 5,317,178 1,627,386Inventories (645,793) (214,285)Trade and other receivables (840,556) (467,386)Due from customers on construction contracts (4,647,758) (1,535,263)Trade and other payables 2,461,800 1,776,320

Cash generated from operating activities 1,644,871 1,186,772Interest paid (422,192) (176,484)

Net cash generated from operating activities 1,222,679 1,010,288

Cash flows from investing activitiesPurchase of property, plant and equipment (8,819,157) (4,308,762)Proceeds from disposal of plant and equipment 4,250,000 410,000

Net cash used in investing activities (4,569,157) (3,898,762)

Cash flows from financing activitiesProceeds from issue of new shares – 455,006Proceeds from loan 10,670,688 3,392,293Due from holding company (non-trade) 3 –Deferred expenses (107,011) –Due to related parties (non-trade) (464,215) (688,109)Due to a director (non-trade) (5,899,463) –

Net cash from financing activities 4,200,002 3,159,190

Net increase in cash and cash equivalents 853,524 270,716Cash and cash equivalents at beginning of period 437,855 61,842Effect of exchange rate changes on cash and cash equivalents (97,276) 106,412

Cash and cash equivalents at end of period 1,194,103 438,970

II-5




NOTES TO THE INTERIM COMBINED FINANCIAL STATEMENTS

1. THE COMPANY

Marco Polo Marine Pte. Ltd. (“the Company”) was incorporated in Singapore on 10 July 2006 underthe Singapore Companies Act (“the Act”) as a private limited company. On 7 September 2007, theCompany changed its name to “Marco Polo Marine Ltd.” in connection with its conversion into apublic company limited by shares. The Company was incorporated for the purpose of acquiring theexisting companies of the Group pursuant to a restructuring exercise as described in Note 2.

The registered office of the Company is located at 1 Sims Lane, #04-11, Singapore 387355.

The principal activity of the Company is that of investment holding. The principal activities of thesubsidiaries are disclosed in Note 11.

The interim combined financial statements of the Group for the financial period from 1 October2006 to 31 March 2007 were authorised for issue by the Board of Directors on 27 September 2007.

2. RESTRUCTURING EXERCISE

The Group carried out a restructuring exercise (the “Restructuring Exercise”) in preparation of theCompany’s listing on the SGX-SESDAQ. The Group was formed through the RestructuringExercise which involved a series of acquisition and rationalisation of the corporate andshareholding structure for the purposes of the invitation. Pursuant to the Restructuring Exercise,the Company became the holding company of the Group.

The following was undertaken in the Restructuring Exercise in preparation for the listing of theCompany:

(a) Acquisition of shares in MP Marine Pte. Ltd. (“MP Marine”)

By a share swap agreement dated 28 July 2006 entered into between the Company (as thepurchaser) and Mr Lee Wan Tang and Mr Sean Lee Yun Feng (as the vendors), theCompany acquired an aggregate of 3 ordinary shares in the capital of MP Marine,representing the entire issued share capital of MP Marine, with all rights attaching thereto,with effect from 28 July 2006, in consideration for which the Company issued an aggregateof 3 ordinary shares in the capital of the Company to Nautical International Holdings Ltd. (asnominated by Mr Lee Wan Tang and Mr Sean Lee Yun Feng).

(b) Acquisition of shares in Bina Marine Pte. Ltd. (“Bina Marine”)

By a share swap agreement dated 28 July 2006 entered into between the Company (as thepurchaser) and Mr Lee Wan Tang, Mdm Lai Qin Zhi and Mr Sean Lee Yun Feng (as thevendors), the Company acquired an aggregate of 320,000 ordinary shares in the capital ofBina Marine, representing the entire issued share capital of Bina Marine, with all rightsattaching thereto as at 28 July 2006 in consideration for which the Company issued anaggregate of 320,000 Shares to Nautical International Holdings Ltd. (as nominated by MrLee Wan Tang, Mdm Lai Qin Zhi and Mr Sean Lee Yun Feng).

II-6



NOTES TO THE INTERIM COMBINED FINANCIAL STATEMENTS (Continued)

2. RESTRUCTURING EXERCISE (Continued)

(c) Acquisition of shares in Marco Polo Shipping Co Pte Ltd (“MP Shipping”)

By a share swap agreement dated 28 July 2006 entered into between the Company (as thepurchaser) and Mr Lee Wan Tang, Mdm Lai Qin Zhi, Ms Liely Lee and Mr Sean Lee YunFeng (as the vendors), the Company acquired an aggregate of 1,000,000 ordinary shares inthe capital of MP Shipping, representing the entire issued shares of MP Shipping, with allrights attaching thereto as at 28 July 2006 in consideration for which the Company issued anaggregate of 1,000,000 Shares to Nautical International Holdings Ltd. (as nominated by MrLee Wan Tang, Mdm Lai Qin Zhi, Ms Liely Lee and Mr Sean Lee Yun Feng).

(d) Acquisition of shares in PT. Rio Mahkota Nusantra (“RMN”)

By a share sale and purchase agreement dated 14 August 2006 entered into between MrYohan Gunawan and Mr Yu Gie (as the vendors) and MP Shipyard (as the purchaser), MPShipyard acquired an aggregate of 300 shares of Indonesian rupiah (‘IDR’) 500,000 each inthe capital RMN at a consideration of IDR150,000,000, representing the entire issued sharesof RMN. The purchase consideration was determined based on the net book value of RMNas at 31 July 2006 of IDR 150,000,000.

(e) Acquisition of shares in PT. Marcopolo Shipyard (“MP Shipyard”)

On 28 September 2006, Bina Marine was allotted 500 new shares of IDR1,000,000 each inthe capital of MP Shipyard, representing 50 per cent. of the issued shares of MP Shipyard fora consideration of IDR500,000,000.

By a deed of share purchase dated 28 September 2006 entered into between, inter alia, MrLee Wan Tang and Mr Sean Lee Yun Feng (as the vendors) and Bina Marine and MP Marine(as the purchasers), Mr Lee Wan Tang and Mr Sean Lee Yun Feng sold to Bina Marine andMP Marine an aggregate of 500 shares of IDR1,000,000 each in the capital of MP Shipyard,representing 100 per cent. of the issued shares of MP Shipyard, to Bina Marine and MPMarine for an aggregate consideration of IDR500,000,000. Of the aforementioned shares,350 shares held by Mr Lee Wan Tang and 140 shares held by Mr Sean Lee Yun Feng weretransferred to Bina Marine while the remaining 10 shares held by Mr Sean Lee Yun Fengwere transferred to MP Marine.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of preparation

The interim combined financial statements, which are expressed in Singapore Dollars (“$”), havebeen prepared in accordance with Singapore Financial Reporting Standards (“FRS”) 34 InterimFinancial Reporting, promulgated by the Council on Corporate Disclosure and Governance(“CCDG”) as required by the Singapore Companies Act.

The interim combined financial statements have been prepared under the historical cost conventionexcept as disclosed in the accounting policies below.

In the current financial period, the Group has adopted all the new and revised FRS and INT FRSissued by the CCDG that are relevant to its operations and effective for annual periods beginningon or after 1 January 2006. The accounting policies have been consistently applied by the Groupand are consistent with those used in previous financial year.

II-7






(a) Adoption of revised FRS

In addition, the Group adopted the following revised FRS, relevant to the Group, mandatoryfor annual financial periods beginning on or after 1 January 2006 which did not result in anysignificant change in accounting policies:

FRS 1 (revised) Presentation of Financial StatementsFRS 16 (revised) Property, Plant and EquipmentFRS 19 (revised) Employee BenefitsFRS 21 (revised) The Effect of Changes in Foreign Exchange RatesFRS 24 (revised) Related Party DisclosuresFRS 32 (revised) Financial Instruments: Disclosure and PresentationFRS 37 (revised) Provisions, Contingent Liabilities and Contingent Assets

(b) New accounting standards and interpretations not yet effective

The Group has not applied the following FRS and INT FRS that have been issued but notyet effective:

Effective date(Annual periods

beginning on or after)

FRS 1 (revised) Presentation of Financial Statements 1 January 2007FRS 2 (revised) Inventories 1 January 2009FRS 7 (revised) Cash Flow Statements 1 January 2009FRS 10 (revised) Events after Balance Sheet Date 1 January 2007FRS 12 (revised) Income Taxes 1 January 2007FRS 14 (revised) Segment Reporting 1 January 2007FRS 17 (revised) Leases 1 January 2007FRS 19 (revised) Employee Benefits 1 January 2007FRS 27 (revised) Consolidated and Separate Financial 1 January 2009

StatementsFRS 32 (revised) Financial Instruments: Disclosure and 1 January 2007

PresentationFRS 33 (revised) Earning per Share 1 January 2007FRS 34 (revised) Interim Financial Reporting 1 January 2009FRS 36 (revised) Impairment of Assets 1 January 2009FRS 39 (revised) Financial Instruments: Recognition and 1 January 2007

MeasurementFRS 103 (revised) Business Combinations 1 January 2007FRS 107 Financial Instruments: Disclosures 1 January 2007FRS 108 Operating Segments 1 January 2009INT FRS 108 Scope of FRS 102 1 May 2006INT FRS 109 Reassessment of Embedded Derivatives 1 June 2006INT FRS 110 Interim Financial Reporting and Impairment 1 November 2006INT FRS 111 FRS 102 – Group and Treasury Share 1 March 2007

Transactions

II-8






(b) New accounting standards and interpretations not yet effective (Continued)

The directors do not anticipate that the adoption of these standards and interpretations infuture periods will have a material impact on the interim combined financial statements of theGroup. The Group has not considered the impact of accounting standards issued afterbalance sheet date.

The preparation of the interim combined financial statements in conformity with FRS requiresmanagement to exercise its judgement in the process of applying the Group’s accountingpolicies. It also requires the use of accounting estimates and assumptions that affect thereported amounts of assets and liabilities at the date of the financial statements, and thereported amounts of revenues and expenses during the financial year. Although theseestimates are based on management’s best knowledge of current events and actions, actualresults may ultimately differ from those estimates. The critical accounting estimates andassumptions used and area involving a high degree of judgements are described below.

Significant accounting estimates and judgments

Estimates and judgments are continually evaluated and are based on historical experience andother factors, including expectations of future events that are believed to be reasonable under thecircumstances.

Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at thebalance sheet date, that have a significant risk of causing a material adjustment to the carryingamounts of assets and liabilities within the next financial year are discussed below.

(a) Depreciation of property, plant and equipment

The cost of vessels is depreciated on a straight line basis over their useful lives.Management estimates the useful lives of these vessels to be within 8 to 15 years. Theseare common life expectancies applied in the shipping industry.

(b) Income tax

The Group is subject to income taxes in Singapore and Indonesia. Significant judgment isrequired in determining the provision for income taxes. There are certain transactions andcomputations for which the ultimate tax determination is uncertain during the ordinary courseof business. The Group recognises liabilities for expected tax issues based on estimates ofwhether additional taxes will be due. Where the final tax outcome of these matters is differentfrom the amounts that were initially recorded, such differences will impact the income taxand deferred income tax provisions in the period in which such determination is made.

II-9





Significant accounting estimates and judgments (Continued)

Critical judgement made in applying accounting policies

The following are the judgements make by the management in the process of applying the Group’saccounting policies that have the most significant effect on the amounts recognised in the interimcombined financial statements.

(a) Construction contracts and revenue recognition

The Group recognises contract revenue to the extent of contract costs incurred where it isprobable those costs will be recoverable or based on the stage of completion methoddepending on whether the outcome of the contract can be measured reliably. The stage ofcompletion is measured by reference to the contract costs incurred to date to the estimatedtotal costs for the contract. Significant judgement is required in determining the stage ofcompletion, the extent of the contract costs incurred, the estimated total contract revenueand contract costs, as well as the recoverability of the contracts.

Total contract revenue also includes an estimation of the variation works and claims that arerecoverable from the customers. In making the judgement, the Group has relied on pastexperience.

There are no other significant judgements or accounting estimates made in the preparationof the interim combined financial statements.

Subsidiaries

A subsidiary is an entity over which the Group has the power to govern the financial and operatingpolicies as to obtain benefits from its activities. The Group generally has such power when it,directly or indirectly, holds more than half of the issued share capital, or controls more than half ofthe voting power, or controls the composition of the board of directors.

Interim combined financial statements

The interim combined financial statements comprise the financial statements of the Company andits subsidiaries as at the balance sheet date. The financial statements of the subsidiaries areprepared for the same reporting date as the parent company. Consistent accounting policies areapplied for like transactions and events in similar circumstances.

All intra-group balances, transactions, income and expenses and profits and losses resulting fromintra-group transactions that are recognised in assets, are eliminated in full.

The interim combined financial statements of the Group for the financial period have beenprepared in accordance to the principles of merger accounting for the acquisition of subsidiaries.Under this method, the Company has been treated as the holding company of its subsidiaries forthe financial period presented. Such manner of presentation reflects the economic substance of thecombining entities throughout the relevant period, as a single economic enterprise. Accordingly, thecombined results of the Group for the respective periods include the results of the Company andthese subsidiaries for the entire periods under review.

II-10





Interim combined financial statements (Continued)

Pursuant to this:

– Assets and liabilities are combined at their existing carrying amounts;– No amount is recognised for goodwill; and– Any difference between the amount recorded as share capital issued and the amount

recorded for the share capital acquired will be adjusted against equity as restructuringreserve.

Apart from the above, the results of other subsidiaries acquired or disposed of during the periodsare consolidated from or to their effective dates of acquisition or disposal, respectively. These othersubsidiaries acquired are accounted for using the purchase method. Under this method, the cost ofan acquisition is measured as the fair value of the assets given, equity instruments issued andliabilities incurred or assumed at the date of exchange, plus costs directly attributable to theacquisition. Identifiable assets acquired and liabilities and contingent liabilities assumed in abusiness combination are measured initially at their fair values at the acquisition date.

Any excess of the Group’s interest in the net fair value of the identifiable assets, liabilities andcontinent liabilities over the cost of business combination is recognised in the income account onthe date of acquisition.

Consolidation of the subsidiaries in Indonesia is based on the subsidiaries financial statementsprepared in accordance with FRS.

Property, plant and equipment and depreciation

Property, plant and equipment, are stated at cost less accumulated depreciation and anyimpairment losses.

Property, plant and equipment are depreciated using the straight-line method to write-off the cost ofthe property, plant and equipment less over their estimated useful lives. The estimated useful liveshave been taken as follows:

Useful lives (Years)

Leasehold land 23Freehold office building 50Office equipment, furniture and fittings 3 - 5Renovation 5Vessels 8 - 15Machinery and equipment 4 - 8Motor vehicles 4Leasehold improvements over the remaining life of leasehold land

No depreciation is provided on vessels-in-construction until the vessels are completed and is readyfor its intended use. Cost comprises direct cost of construction and installation during the period ofconstruction and installation. Vessels-in-construction is transferred to the appropriate category offixed assets when it is completed and ready for its intended use.

II-11





Property, plant and equipment and depreciation (Continued)

The useful life and depreciation method are reviewed annually to ensure that the method andperiod of depreciation are consistent with the expected pattern of economic benefits from items ofproperty, plant and equipment. An assessment of the carrying value of property, plant andequipment is made when there are indications that the assets have been impaired or theimpairment losses recognised in prior years no longer exist.

The gain or loss arising on disposal or retirement of an item of property, plant and equipment isdetermined as the difference between the sales proceeds and the carrying amounts of the assetand is recognised in the profit and loss statement.

For acquisitions and disposals of vessels during the financial period, depreciation is charged fromthe month the asset is put into operational use and up to the month before disposal respectively.

Fully depreciated assets are retained in the financial statements until they are no longer in use.

Impairment of assets

Impairment of trade and other receivables is established when there is objective evidence that theGroup will not be able to collect all amounts due according to original terms of debts. Theimpairment charge is the difference between the asset’s carrying amount and the present value ofestimated future cash flows, discounted at the effective interest rate.

An assessment is made at each balance sheet date of whether there is any indication ofimpairment of any asset, or whether there is any indication that an impairment loss previouslyrecognised for an asset in prior years may no longer exist or may have decreased. If any suchindication exists, the asset’s recoverable amount is estimated. An asset’s recoverable amount iscalculated as the higher of the asset’s value in use or its net selling price. Value in use is thepresent value of estimated future cash flows expected to arise from the continuing use of an assetand from its disposal at the end of its useful life.

An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverableamount. An impairment loss is charged to profit and loss statement in the period in which it arises,unless the relevant asset is carried at a revalued amount in which case the impairment loss istreated as a revaluation decrease.

A previously recognised impairment loss is reversed only if there has been a change in theestimates used to determine the recoverable amount of an asset, however not to an amount higherthan the carrying amount that would have been determined (net of any depreciation) had noimpairment loss been recognised for the asset in prior years.

A reversal of an impairment loss is credited to profit and loss statement in the period in which itarises, unless the relevant asset is carried at a revalued amount in which case the reversal of theimpairment loss is treated as a revaluation increase.

II-12





Impairment of financial assets

The Group assesses at each balance sheet date whether there is objective evidence that afinancial asset or a group of financial assets is impaired. If any such evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference between the acquisitioncost and the current fair value, less any impairment loss on that financial asset previouslyrecognised in profit or loss – is removed from the fair value reserve within equity and recognised inthe profit and loss statement. Impairment losses recognised in the profit and loss statement onequity investments are not reversed through the profit and loss statement, until the equityinvestments are disposed of.

Inventories

Inventories comprise spare parts and consumables are stated at the lower of cost, determined onthe first in first out basis, and net realisable value. Net realisable value is the estimated normalselling price, less estimated costs to completion and costs to be incurred for selling anddistribution.

Allowance is made for deteriorated, damaged, obsolete or slow-moving inventories.

Construction contracts

Contract costs are recognised when incurred.

When the outcome of a construction contract can be estimated reliably, contract revenue andcontract costs are recognised as revenue and expenses respectively by reference to the stage ofcompletion of the contract activity at the balance sheet date (percentage of completion method).When the outcome of a construction contract cannot be estimated reliably, contract revenue isrecognised to the extent of contract costs incurred that are likely to be recoverable. When it isprobable that total contract costs will exceed total contract revenue, the expected loss isrecognised as an expense immediately.

The stage of completion is measured by reference to the contract costs incurred to date to theestimated total costs for the contract. At the balance sheet, the aggregated costs incurred plusrecognised profit (less recognised loss) on each contract is presented as due from customers onconstruction contracts.

Related parties

Parties are considered to be related party of the Group for the purpose of the interim combinedfinancial statements if one party has the ability, directly or indirectly, to control the other party, orexercise significant influence over the other party in making financial and operating decisions.Parties are also considered to be related if they are subject to common control or commonsignificant influence. Related parties may be individuals or corporate entities.

II-13





Trade and other receivables

Trade and other receivables including amounts due from related parties and holding company, areclassified as loan and receivables under FRS 39 “Financial Instruments : Recognition andMeasurement” and are recognised and carried at fair value and subsequently measured atamortised cost using the effective interest rate method less impairment losses on any uncollectibleamounts.

Allowance for impairment loss is made when there is objective evidence that the Group will not beable to collect the debt. Bad debts are written off when identified.

Cash and cash equivalents

Cash and cash equivalents are carried at fair value.

Cash and cash equivalents comprise of cash on hand and in banks. Cash and cash equivalentsare short term, highly liquid investments readily convertible to known amounts of cash and subjectto an insignificant risk of changes in value and have a short maturity of generally within threemonths when acquired.

Trade and other payables

Trade and other payables and amount due to related parties and a director, are initially recognisedat fair value and subsequently measured at amortised cost using the effective interest method.

Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred and subsequentlyaccounted for at amortised cost using the effective interest rate method. Any difference betweenthe proceeds (net of transaction costs) and the redemption value is taken to the profit and lossstatement over the period of the borrowings using the effective interest method.

Borrowing costs

Borrowing costs are expensed in the period in which they are incurred.

Borrowing costs incurred to finance the development of vessels-in-construction in progress arecapitalised during the period of time that is required to complete and prepare the asset for itsintended use. Other borrowing costs are recognised on a time-proportion basis in the profit andloss statement using the effective interest method.

The amount of borrowing cost capitalised on that asset is the actual borrowing costs incurredduring the period less any investment income on the temporary investment of those borrowings.

Provisions

A provision is recognised when the Group has a present obligation, legal or constructive, as aresult of a past event and it is probable that an outflow of resources embodying economic benefitswill be required to settle the obligation, and a reliable estimate can be made of the amount of theobligation. Provisions are reviewed regularly and adjusted to reflect the current best estimate.Where the effect of the time value of money is material, the amount of provision is the presentvalue of the expenditures expected to be required to settle the obligation.

II-14





Operating leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership ofthe leased assets are classified as operating leases. Operating lease payments are recognised asan expense in the profit and loss statement on a straight-line basis over the lease term.

Employees’ benefits

(i) Retirement benefits

The Group participates in the national schemes as defined by the laws of the countries inwhich it has operations.

Singapore

The Company makes contribution to the Central Provident Fund (CPF) Scheme inSingapore, a defined contribution pension schemes.

Indonesia

The subsidiaries, incorporated and operating in Indonesia, are required to provide certainretirement plan contribution to their employees under existing Indonesia regulations.Contributions are provided at rates stipulated by Indonesia regulations and are managed bygovernment agencies, which are responsible for administering these amounts for thesubsidiary’s employees.

Obligations for contributions to defined contribution retirement plans are recognised as anexpense in the profit and loss statement as and when they are incurred.

(ii) Employee leave entitlement

Employee entitlements to annual leave are recognised when they accrue to employees. Aprovision is made for the estimated liability as a result of services rendered by employees upto the balance sheet date.

Revenue recognition

Revenue is recognised to the extent that it is probable that the economic benefits will flow to theGroup and the revenue can be reliably measured. The following specific recognition criteria mustalso be met before revenue is recognised:

Charter hire income is recognised on a time proportion basis.

Revenue from shipbuilding contracts is recognised using the percentage of completion method,measured by reference to the percentage of direct costs incurred to date to estimated total directcosts for the contract with due consideration made to include only those costs that reflect workperformed.

When the outcome of contract cannot be estimated reliably, revenue is recognised only to theextent of contract costs incurred that is probable will be recoverable.

Interest income is recognised on a time proportion basis, taking into account the principal amountsoutstanding and the effective interest rates applicable.

II-15





Dividends

Interim dividends are recorded in the financial year in which they are declared payable. Finaldividends are recorded in the financial year in which the dividends are approved by theshareholders.

Segment information

A business segment is a group of assets and operations engaged in providing products or servicesthat are subject to risks and returns that are different from those of other business segments. Ageographical segment is engaged in providing products or services within a particular economicenvironment that is subject to risks and returns that are different from those of segments operatingin other economic environments.

Income tax

Income tax expense represents the sum of the tax currently payable and deferred tax.

The tax currently payable is based on taxable profit for the period. Taxable profit differs from profitas reported in the profit and loss statement because it excludes items of income or expense thatare taxable or deductible in other years and it further excludes items that are not taxable or taxdeductible. The Group’s liability for current tax is calculated using tax rates that have been enactedor substantively enacted in countries where the subsidiaries operate by the balance sheet date.

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. Such assets and liabilities are not recognised if the temporarydifference arises from goodwill or from the initial recognition (other than in a business combination)of other assets and liabilities in a transaction that affects neither the taxable profit nor theaccounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments insubsidiaries, except where the Group is able to control the reversal of the temporary difference andit is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced tothe extent that it is no longer probable that sufficient taxable profits will be available to allow all orpart 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. Deferred tax is charged or credited to profit and loss statement,except when it relates to items charged or credited directly to equity, in which case the deferred taxis also dealt with in equity.

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 Group intends to settle its current tax assets and liabilities on a netbasis.

II-16





Functional and foreign currency

Functional currency and presentation currency

The Group’s principal operations are conducted in Singapore and thus the interim financialstatements are prepared in Singapore Dollars, being the measurement and presentation currencyof the Group.

Foreign currency transactions and balances

Transactions in foreign currencies are measured in the respective functional currencies of theCompany and its subsidiaries and are recorded on initial recognition in the functional currencies atexchange rates approximating those ruling at transaction dates. Monetary assets and liabilitiesdenominated in foreign currencies are translated at the closing rate of exchange ruling at balancesheet date. Non monetary items that are measured in terms of historical cost in a foreign currencyare translated using exchange rates as at the dates of the initial transactions. Non-monetary itemsmeasured at fair value in foreign currencies are translated using the exchange rates at the datewhen the fair value is determined.

Exchange differences arising on the settlement of monetary items, and on retranslation ofmonetary items are included in profit and loss statement for the period. Exchange differencesarising on the retranslation of non-monetary items carried at fair value are included in profit andloss statement for the period except for differences arising on the retranslation of non-monetaryitems in respects of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

For the purpose of presenting interim combined financial statements, the assets and liabilities ofthe group’s foreign operations (including comparatives) are expressed in Singapore Dollars usingexchange rates prevailing on the balance sheet date. Income and expense items (includingcomparatives) are translated at the average exchange rates for the period, unless exchange ratesfluctuated significantly during that period, in which case the exchange rates at the dates of thetransactions are used. Exchange differences arising, if any, are classified as equity and transferredto the Group’s foreign currency translation reserve. Such translation differences are recognised inthe profit and loss statement in the period in which the foreign operation is disposed of.

On consolidation, exchange differences arising from the translation of the net investment in foreignentities (including monetary items that, in substance, form part of the net investment in foreignentities), and of borrowings and other currency instruments designated as hedges of suchinvestments, are taken to the foreign currency translation reserve.

Goodwill and fair value adjustments arising on the acquisition of a foreign operations on or after 1October 2005 are treated as assets and liabilities of the foreign operations and are recorded in theforeign currency of the foreign operations and translated at the closing rate at the balance sheetdate.

II-17





Financial instruments

The Group’s financial assets are cash and bank balances, trade and other receivables (includingamounts due from related parties). The accounting policies on recognition and measurement ofthese items are disclosed in the respective accounting policies found in this Note.

Financial liabilities and equity instruments are classified according to the substance of thecontractual arrangements entered into. Significant financial liabilities comprising trade and otherpayables (including amounts due to related parties) and due to director are stated at their fairvalues. Bank loans are stated at amortised costs. Equity instruments are recorded at the fair valueof the consideration received.

4. REVENUE


31 March 2007 31 March 2006

$ $

Revenue comprises the following:Ship chartering 8,385,369 4,169,083Shipyard 8,567,871 1,480,929

16,953,240 5,650,012

5. OTHER OPERATING INCOME


31 March 2007 31 March 2006

$ $

Gain on disposal of plant and equipment 1,143,666 316,628Net gain in foreign exchange 78,840 –Sundry income 206,129 3,460

1,428,635 320,088

II-18




6. PERSONNEL EXPENSES


31 March 2007 31 March 2006

$ $

Wages and salaries 427,928 142,978Contributions to define contribution retirement plan 31,028 9,791Directors’ remuneration- directors’ of the Company 205,142 186,000- directors’ of the subsidiaries 80,826 7,327

Other expenses 14,622 196

759,546 346,292

7. FINANCE COST


31 March 2007 31 March 2006

$ $

Interest on bank borrowings 422,192 176,484

8. PROFIT BEFORE TAX

This is determined after charging the following:


31 March 2007 31 March 2006

$ $

Depreciation of property, plant and equipment (Note 10) 1,523,855 567,510Operating lease rentals – 18,000Personnel expenses (Note 6) 759,546 346,292

II-19




9. INCOME TAX


31 March 2007 31 March 2006

$ $

Current taxation 145,754 –

A reconciliation of the tax expense and the product of accounting profit multiplied by the statutorytax rate is as follows:


31 March 2007 31 March 2006

$ $

Profit before tax 4,514,797 1,200,020

Tax at the statutory tax rate of 18% (2006: 20%) 812,663 240,004Deferred tax assets not recognised 115,728 29,280Tax effect of income that are not taxable in determining taxable profits (845,411) (271,363)

Tax effect of expenses that are non-deductible indetermining taxable profit 62,774 2,079

Tax expense 145,754 –

The Group has income derived from chartering of its Singapore registered ships. Such charterincome qualifies for tax exemption under Section 13A of the Singapore Income Tax Act, Chapter134. Accordingly, income tax liability on chartering income is not provided for.

Deferred tax asset has not been recognised in respect of the following temporary differences asthere is no reasonable certainty of its recovery in future periods. The utilisation of tax losses andcapital allowances is subject to the compliance of certain provisions of the Income Tax Act.


31 March 2007 31 March 2006

$ $

Excess of tax base of qualified plant and equipment over net carrying amount 3,648,171 1,948,089

Unabsorbed tax losses 366,687 64,679Unabsorbed capital allowances 31,446 214,080

4,046,304 2,226,848

Deferred tax asset not recognised, at corporate tax rate of 18% (2006: 20%) 728,335 445,370

II-20



NO

TE

S T

O T

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ER

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AN

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Cos

t

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at 1

.10.

2005

––

1,23

8–

13,8

23,9

4318

,350

64,5

4239

,897

–13

,947

,970

Add

ition

s1,

563,

120

1,10

2,50

071

,469

63,0

0010

,775

,476

2,72

4,84

236

5,73

526

,703

6,66

5,42

223

,358

,267

Acq

uisi

tion

of a

sub

sidi

ary

4,78

0,74

0–

––

––

––

–4,

780,

740

Dis

posa

ls–

––

–(1

,287

,699

)(3

,350

)–

––

(1,2

91,0

49)

Tran

slat

ion

diffe

renc

es52

,691

–55

––

652

–1,

734

–55

,132

Bal

ance

at 3

0.9.

2006

6,39

6,55

11,

102,

500

72,7

6263

,000

23,3

11,7

202,

740,

494

430,

277

68,3

346,

665,

422

40,8

51,0

60

Add

ition

s–

–4,

526

–2,

750,

170

1,03

3,70

114

8,26

618

,500

4,50

7,08

18,

462,

244

Dis

posa

ls–

––

–(4

,846

,550

)–

––

–(4

,846

,550

)

Tran

sfer

from

ves

sels

in

cons

truct

ion

––

––

6,84

8,90

3–

––

(6,8

48,9

03)

–

Tran

slat

ion

diffe

renc

es24

2,01

4–

709

––

102,

651

16,1

172,

560

–36

4,05

1

Bal

ance

at 3

1.3.

2007

6,63

8,56

51,

102,

500

77,9

9763

,000

28,0

64,2

433,

876,

846

594,

660

89,3

944,

323,

600

44,8

30,8

05

II-21



NO

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Acc

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dep

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n

Bal

ance

at 1

.10.

2005

––

30–

2,83

9,07

12,

680

–1,

662

–2,

843,

443

Cha

rged

for t

he y

ear

23,1

377,

350

6,49

54,

200

1,22

8,00

413

5,53

116

,373

12,5

26–

1,43

3,61

6

Dis

posa

ls–

––

–(8

34,6

89)

(2,6

80)

––

–(8

37,3

69)

Tran

slat

ion

diffe

renc

es29

–9

––

589

6612

8–

821

Bal

ance

at 3

0.9.

2006

23

,166

7,35

06,

534

4,20

03,

232,

386

136,

120

16,4

3914

,316

–3,

440,

511

Cha

rge

for t

he y

ear

144,

096

11,0

259,

797

6,30

099

6,37

032

8,64

319

,017

8,60

7–

1,52

3,85

5

Dis

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ls–

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–(1

,740

,216

)–

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–(1

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)

Tran

slat

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diffe

renc

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8–

69–

–5,

099

567

534

–7,

137

Bal

ance

at 3

1.3.

2007

168,

130

18,3

7516

,400

10,5

002,

488,

540

469,

862

36,0

2323

,457

–3,

231,

287

Net

car

ryin

g am

ount

As

at 3

1.3.

2007

6,47

0,43

51,

084,

125

61,5

9752

,500

25,5

75,7

033,

406,

984

558,

637

65,9

374,

323,

600

41,5

99,5

17

As

at 3

0.9.

2006

6,37

3,38

51,

095,

150

66,2

2858

,800

20,0

79,3

342,

604,

374

413,

838

54,0

186,

665,

422

37,4

10,5

49

II-22




10. PROPERTY, PLANT AND EQUIPMENT (Continued)

Assets with net carrying amount of $31,756,509 (2006:$19,269,906) are pledged as security forbank borrowings (Note 20).

The Group’s property, plant and equipment include borrowing costs incurred in connection with thevessels-in-construction.

The borrowing costs capitalised as cost of vessels-in-construction during the period ended 31March 2007 amounted to $125,231 (2006:$52,881). The capitalisation rate used to determine theamount of borrowing costs eligible for capitalisation was 5.92% (2006: 5.90%).

11. INVESTMENT IN SUBSIDIARIES

CompanyUnaudited

31 March 2007

$

Unquoted equity interest, at cost 1,320,003

1,320,003

Place of Effective equityincorporation / held by the Cost of

Name of Subsidiaries business Principal activities Group investment

% $Held by the Company

Marco Polo Shipping Singapore Ship chartering 100 1,000,000 Co Pte Ltd # (1)

Bina Marine Pte. Ltd. # (1) Singapore Provision of contract 100 320,000services and trading activities

MP Marine Pte. Ltd. # (1) Singapore Investment holding 100 3

Held by subsidiaries:

PT. Marcopolo Indonesia Shipyard, shipbuilding 100 172,174Shipyard + (2) and ship repair

Held by PT Marcopolo Shipyard

PT. Rio Mahkota Indonesia Investment holding and 100 26,087 Nusantra + (3) property management

# Audited by Horwath First Trust.

+ Not required to be audited in the country of incorporation. However, they were audited by Horwath First Trust for thepurpose of expressing an opinion on the combined financial statements.

II-23




11. INVESTMENT IN SUBSIDIARIES (Continued)(1) On 28 July 2006, the Company acquired the entire equity interest in the above Singapore subsidiaries from the

shareholders of the subsidiaries for a purchase consideration equivalent to the paid-up capital amount of therespective subsidiary amounting to $1,320,003.

(2) On 28 September 2006, Bina Marine and MP Marine acquired 1,000 shares of IDR1,000,000 each, representing100% of the issued share capital of MP Shipyard for a consideration of IDR1,000,000,000 (equivalent to $172,174).

(3) On 14 August 2006, MP Shipyard acquired 300 shares of IDR500,000 each, representing 100% of the issued sharecapital of RMN for a consideration of IDR150,000,000 (equivalent to $26,087).

In accordance with the Group’s accounting policy, business combinations that involve entities undercommon control are accounted for under the pooling of interest method in the preparation of theinterim combined financial statements. Under this method, the identifiable assets and liabilitieswere accounted for at their historical cost and the prior year comparative figure of the Group havebeen prepared as if the Group had existed on 1 October 2003.

12. INVENTORIES

Unaudited Audited31 March 2007 30 September 2006

$ $

Materials 2,320,193 1,971,300Spare parts and consumables 427,248 130,348

2,747,441 2,101,648

13. TRADE RECEIVABLES

Trade receivables are denominated in the following currencies:


$ $

United State Dollars 168,200 816,429Singapore Dollars 1,269,919 77,171Malaysian Ringgit 37,995 –

1,476,114 893,600

II-24




14. DUE FROM CUSTOMERS ON CONSTRUCTION CONTRACTS


$ $

Project costs incurred to date 12,843,593 791,493Recognised profits less recognised losses to date 1,857,057 41,657

14,700,650 833,150Less : Progress billings received and receivables (9,219,742) –

Amount due from customers for contract work 5,480,908 833,150

Represented by:

Construction work-in-progress in excess of progress billings 5,480,908 833,150

5,480,908 833,150

15. OTHER RECEIVABLES


$ $

Prepayments 174,723 181,627Deferred expenses 258,592 151,581Deposit paid for purchase of vessels 407,790 –Staff loans 499 513Other deposits 20,698 6,406Other receivable – 2,740

862,302 342,867

Staff loans and other receivable are non-interest bearing and are repayable on demand.

Other receivables are denominated in the following currencies:


$ $

Singapore Dollars 667,675 326,656Indonesia Rupiah 7,547 16,211United States Dollars 187,080 –

862,302 342,867

II-25




16. DUE FROM / (TO) SUBSIDIARY, HOLDING COMPANY, DIRECTOR AND RELATED PARTIES(NON-TRADE)

The amounts due from / (to) subsidiary, holding company, director and related parties areunsecured, interest-free and repayable on demand.

17. CASH AND BANK BALANCES

Cash and bank balances are denominated in the following currencies:


$ $

United States Dollars 317,722 128,990Singapore Dollars 846,888 294,350Indonesia Rupiah 29,493 14,515

1,194,103 437,855

18. TRADE PAYABLES

Trade payables are denominated in the following currencies:


$ $

Singapore Dollars 8,212,044 5,021,168United States Dollars 128,343 354,048Japanese Yen – 202,260Indonesia Rupiah 145,495 65,397Malaysian Ringgit 22,520 –

8,508,402 5,642,873

19. OTHER PAYABLES


$ $

Advances from customers 1,187,993 1,137,619Accrued operating expenses 60,781 174,478Other payables 1,169,599 1,821,679

2,418,373 3,133,776

II-26




19. OTHER PAYABLES (Continued)

Included in other payables are as follows:

(i) Amount owing to a third party of $1,113,699 (2006: $1,531,336) on the acquisition of asubsidiary, RMN. The amount is interest free and is repayable on demand.

(ii) In year 2006, amount owing to Indonesia Land Authority of IDR1,329,913,842 (equivalent to$231,289) for expenses relating to the acquisition of leasehold land by a subsidiary inIndonesia was settled in February 2007.

Other payables are denominated in the following currencies:


$ $

Singapore Dollars 2,321,627 2,810,235Indonesia Rupiah 89,779 310,516Malaysian Ringgit 6,967 11,895United States Dollars – 1,130

2,418,373 3,133,776

20. INTEREST-BEARING LOANS – SECURED

Bank Effective Number Instalments Unaudited Audited loans interest rate of instalments commenced from 31 March 2007 30 September 2006

$ $

Fixed rate

#1 5.92% 48 Jan’07 2,690,625 –

#2 5.65% 16 (Quarterly) Jul’07 5,688,000 –

#3 7.81% 48 Dec’02, May’03and Aug’03 62,946 259,042

#4 6.58% 48 Aug’03 and Oct’03 – 279,114

#5 7.34% 48 Nov’03 and Mar’04 – 425,841

#6 5.35% 48 Aug’05, Oct’05, Dec’05 and

Feb’06 3,498,340 4,122,137

#7 6.60% 36 May’06 644,510 781,552

12,584,421 5,867,686

II-27






$ $

Floating rate

#8 2,372,118 2,687,375#9 1,100,000 400,000#10 895,892 910,465#11 675,092 800,000#12 455,000 840,000#13 – 2,664,000#14 881,636 931,324#15 1,180,000 –#16 628,000 –#17 1,499,819 –#18 3,499,560 –

13,187,117 9,233,164

Amount repayable:

Not later than one year 10,198,127 8,264,937Later than one year and not later than five years 14,823,758 6,069,912Later than five years 749,653 766,001

25,771,538 15,100,850

The loans are denominated in the following currencies:


$ $

Singapore Dollars 24,889,902 14,169,526Indonesia Rupiah 881,636 931,324

25,771,538 15,100,850

II-28





Loans #1 to #7

The loans are secured by a first mortgage over the assets and joint and several guarantees bycertain directors of the Group and the following:

(i) Loans #1, #2 and #6, assignment of rights, earnings and benefits from charter agreements;assignment of insurance policies and a corporate guarantee from a related party.

(ii) Loans #2, the Group shall maintain a minimum net worth of $4 million and a maximum debtto equity ratio of 2.5:1.

(iii) Loans #5 and #7, assignment of insurance policies.

(iv) Loans #6, the Group shall maintain a net worth of not less than $3.6 million. Net worth isdefined as the sum of paid up capital, revenue reserve and loans from directors andshareholders. The Group shall maintain a maximum loan to security ratio of 70% at all times.

Loans #8 to #9

The loans are secured by a first legal mortgage over the assets, joint and several guarantees bycertain directors of the Group and assignment of charter hire proceeds. Interest is charged at5.25% per annum for the first year and 0.25% per annum over the bank’s prime rate thereafter.

Term loans #8 are repayable over 48 monthly instalments commencing from August and October2006.

Term loans #9 is a short term loan repayable over 4 monthly instalments upon full drawdown.Interest is charged at 0.25% per annum over the bank’s prime rate on monthly rest.

Loan #10

The loan is secured by a first legal mortgage over freehold office building (Note 10) and a joint andseveral guarantee from certain directors of the Group. Interest is charged at a fixed rate of 4.5%per annum with monthly rest for the first year, 5% per annum with monthly rest for the second yearand 1.75% per annum above prevailing enterprise base rate with monthly rest thereafter. The loanis repayable over 20 years commencing from June 2006.

In the event that the total amount outstanding under the facility exceeds 88% of the averageexternal and internal of the market value of the freehold office building, the said bank is entitled toreduce the credit limit and require repayment of such amount and additional security to befurnished.

Loan #11

The loan is secured by a second mortgage over the two vessels under loan #3. Interest is chargedat 3% per annum above the financial institution’s prevailing prime lending rate and calculated ondaily basis.

The non-revolving loan was subsequently converted to a term loan repayable over 24 monthlyinstalments commencing from December 2006. Interest is charged at an effective rate of 8.07% perannum and is calculated on a flat annual rate of 3.95%.

II-29





Loan #12

The loan is secured by a first legal mortgage over the assets and joint and several guarantees fromcertain directors of the Group. The loans are repayable on demand and non-revolving. Interest ischarged at 3% per annum above the financial institution’s prevailing prime lending rate andsubjected to a yearly review.

Loan #13

The loan (“Construction loan”) was to finance the construction of vessels to be built by a relatedcompany. It is secured by the following:

(i) security charge over all vessel materials and work in progress;

(ii) assignment of the Construction Agreement between the Company and Shipbuilder;

(iii) assignment of all insurances;

(iv) assignment of charter earnings for charter contracts greater than twelve (12) months;

(v) joint and several guarantee by certain directors; and

(vi) corporate guarantee by a related party.

Interest was charge at 2.3% per annum above One Month Singapore Offer Rate and accruedinterest is payable on monthly basis. The loan was converted to term loan #2 on 21 March 2007.

Loan #14

The loan is a revolving loan obtained for the shipyard’s working capital. Interest is charged at 4%below the Indonesia banks’ term lending rate on daily basis and it is secured by a deposit providedby a director of the Company.

Loan #15

The loan is a working capital loan and interest is charged at 3% per annum above the Singaporeprime lending rate calculated on a daily basis and it is repayable on demand, non revolving andsubject to yearly review. The loan is secured by assets of a subsidiary and joint several guaranteeby the directors of the company. Subsequent to the period ended 31 March 2007, this loan wasrestructured to a 4-year term loan on 2 July 2007 and its repayable over 48 monthly instalmentswhich bears interest of 3.17% per annum above the Singapore prime lending rate.

Loan #16

The Group was granted loans amounting to $4,896,512 from bank to finance the purchase of sixvessels of which $628,000 was drawdown. Interest charged is at 1.375% per annum above thebank’s prime rate on monthly rest, is repayable over 48 monthly instalments and is secured bylegal mortgage over the vessels, assignment of insurance policies and charter earnings, and jointand several personal guarantee of the directors of the Company. Subsequent to the period ended31 March 2007, $2,000,000 was drawdown on 15 August 2007.

II-30





Loan #17

The loan is obtained for the shipyard’s working capital. Interest is charged at 6.5% per annumsubject to monthly revised interest rate, is repayable on 28 December 2007 and secured by theassets of a subsidiary, all assets (current and future) of a subsidiary, assets of certain directors ofthe Company and related parties, guarantees of certain directors of the Company and relatedparties, and assignment of insurance policies in respect of the above assets secured. Subsequentto the period ended 31 March 2007, the Group was granted an option to extend the repayment by2 years from the due date.

Loan #18

The loan is obtained for the shipyard’s working capital. Interest is charged at 7% per annum subjectto monthly revised interest rate and the loan is repayable over 20 quarterly instalments as follow:

1st to 4th quarter $100,000 each quarter5th to 8th quarter $150,000 each quarter9th to 12th quarter $175,000 each quarter13th to 20th quarter $225,000 each quarter

The loan is secured by the assets of a subsidiary, all assets (current and future), assets of certaindirectors of the Company and related parties, guarantees of certain directors of the Company andrelated parties, and assignment of insurance policies in respect of the above assets secured.

All loans granted to the Group by the directors, shareholders, holding companies, related partiesshall be subordinated under the terms of loans #2, #3, #5, #11, #13, #15 and #16.

The carrying amounts of current borrowings approximate their fair value. The fair values of non-current portions of bank borrowings at fixed rates until the maturity of the instrument are as follows:

Carrying amounts Fair value2007 2006 2007 2006

$ $ $ $

Non current portions of bank borrowings at fixed rate 9,405,268 3,423,717 9,214,235 3,273,071

The fair value of bank term loans have been determined using discounted estimated cash flows.The discount rates are the current market incremental lending rates for similar types of lending,borrowing and leasing arrangements.

II-31




21. SHARE CAPITAL

Company

Number of shares $

Issued and fully paidAt date of incorporation, 10 July 2006- ordinary shares 3 3

Issurance of ordinary shares 1,320,003 1,320,003

At 31 March 2007 1,320,006 1,320,006

The holders of ordinary shares are entitled to receive dividends as and when declared by theCompany. All ordinary shares carry one vote per share without restriction.

Pursuant to the Companies (Amendment) Act 2005 which came into effect on 30 January 2006,the concepts of par value, authorised share capital, share premium, capital redemption reserve andshare discounts have been abolished.

22. RELATED PARTY TRANSACTIONS

Other than those related party information disclosed elsewhere in the interim combined financialstatements, the following are significant related party transactions entered into by the Group withrelated parties who are not members of the Group during the period at terms agreed between theparties:


$ $

IncomeCharter income charged to related parties 5,307,502 5,795,348

Cost and expensesCrew supply expenses charged by a related party 215,267 267,872Ship agency fees charged by a related party 72,959 90,827Office rental charged by a related party – 27,000Administrative fee charged by a related party – 1,500Purchases from related parties (1) 248,728 1,342,496Procurement expenses charged by a related party (2) 7,160 84,413

OthersPurchase of vessels from a related party – 1,200,000Purchase of equipment and machinery from a related party 295,571 64,000Sale of vessels to a related party 1,500,000 –Purchase of land from a related party (3) – 1,544,348Vessels recovery fees paid to a related party capitalized as part of vessels cost (4) – 300,000

Key management personnel remuneration (5) 368,009 454,047

II-32




22. RELATED PARTY TRANSACTIONS (Continued)

(1) Included in the transactions were $Nil (30 September 2006: $1,238,337) not conducted on an arm’s length basis norbased on normal commercial terms.

(2) The transactions were not conducted on an arm’s length basis nor based on normal commercial terms.

(3) The purchase transaction was not conducted on an arm’s length basis nor based on normal commercial terms. Priorto the transfer of the land which was completed in August 2006, MP Shipyard leased the land from the related partyfor the period from February 2005 to August 2006 for its shipyard operations on a rent free basis.

(4) The fee relates to the reimbursement for all out-of-pocket expenses incurred in the recovery of hijacked vessel. Thetransaction would not normally be regarded as entered into on an arm’s length basis as the related party did notcharge any fee in providing such services.

(5) This includes directors’ remuneration and relates to short term employment benefits.

23. CAPITAL EXPENDITURE COMMITMENTS

Capital commitments contracted for as at the balance sheet date but not provided for in thecombined financial statement is as follows:


$ $

Capital commitments in respect of contracts placed for purchase property, plant and equipment 6,505,514 8,169,000

24. SEGMENT INFORMATION

For the period from 1 October 2006 to 31 March 2007, the Group’s primary format for reportingsegment information is business segments, with each segment representing a strategic businesssegment that offers different services. The Group’s business segments are organised as follows:

(i) Ship chartering – Relates to charter hire activities.(ii) Shipyard – Relates to ship building and ship repair activities.(iii) Others – Relates to general corporate activities.

Unallocated segment assets and liabilities which cannot be directly attributable to individualsegments and it is impractical to allocate them to the segments.

II-33





The following table present revenue and results information regarding the Group’s businesssegment for the period ended 31 March 2007:

Business Segments

Unaudited Ship1 October 2006 to 31 March 2007 chartering Shipyard Others Group

$ $ $ $

Revenue- external sales 8,385,369 8,567,871 – 16,953,240

Segment resultsProfit / (loss) from operations 4,696,728 241,196 (935) 4,936,989Financial cost (422,192)

Profit before tax 4,514,797Income tax (145,754)


Segment assets 30,917,715 21,099,952 – 52,017,667Unallocated assets 1,342,718




Other informationCapital expenditures 7,261,777 1,200,467 – 8,462,244Depreciation of property, plant and equipment 1,023,492 500,363 – 1,523,855

II-34





Business Segments

Unaudited Ship1 October 2005 to 31 March 2006 chartering Shipyard Others Group

$ $ $ $

Revenue- external sales 4,169,083 1,480,929 – 5,650,012

Segment resultsProfit from operations 1,356,816 19,688 – 1,376,504Financial expenses, net (176,484)

Profit before tax 1,200,020Income tax –


Segment assets 17,623,426 2,975,174 – 20,598,600




Other informationCapital expenditures 3,279,607 1,029,155 – 4,308,762Depreciation of property, plant and equipment 567,510 – – 567,510


The following table presents revenue, capital expenditures and certain asset information regarding the Group’sgeographical segments for the period ended 31 March 2007.

Unaudited1 October 2006 to 31 March 2007 Singapore Indonesia Others Total

$ $ $ $

Revenue 959,414 13,254,504 2,739,322 16,953,240

Segment assets 38,817,836 14,542,549 – 53,360,385


II-35






The following table presents revenue, capital expenditures and certain asset information regardingthe Group’s geographical segments for the period ended 31 March 2006.

Unaudited1 October 2005 to 31 March 2006 Singapore Indonesia Others Total

$ $ $ $

Revenue 1,484,929 3,390,525 774,558 5,650,012

Segment assets 17,623,426 2,975,174 – 20,598,600


25. FINANCIAL INSTRUMENTS

Financial risk management objectives and policies

The Group’s principal financial instruments comprise bank borrowings and cash and bankbalances. The main purpose of these financial instruments is to raise finance for the Group’soperation. The Group has various other financial assets and liabilities such as trade receivables,and trade payables, which arise directly from its operations.

The main risks arising from the Group’s financial instruments are interest rate risk (both fair valueand cash flow), liquidity risk, foreign currency risk and credit risk. The board reviews and agreespolicies for managing each of these risks as summarised below.

Credit risk

Credit risk or the risk of counterparties defaulting, is managed through the application of creditapprovals credit limits and debt monitoring procedures.

Financial instruments which potentially expose the Group to credit risk consist primarily or cashand cash equivalents and trade and other receivables. The cash and cash equivalents are placedwith various reputable financial institutions.

The maximum exposure to credit risk is represented by the carrying amount of the financial assetsas stated in the balance sheet. The Group has no significant concentrations of credit risk.

Interest rate risk

The Group’s exposures to movement in market interest rates relate primarily to its long term debtobligations borrowings with financial institutions. The Group does not use derivative financialinstruments to hedge its interest risk.

The Group obtains additional financing through bank borrowings. The Group’s policy is to obtainthe most favourable interest rates available. Surplus funds are placed with reputable banks togenerate interest income.

Information relating to the Group’s interest rate exposure is also disclosed in the note 20.

II-36




25. FINANCIAL INSTRUMENTS (Continued)

Financial risk management objectives and policies (Continued)

Liquidity risk

The Group’s objective is to maintain a balance between continuity of funding and flexibility throughthe use of bank loans and leasing arrangements. The Group monitors and maintains a level of cashand cash equivalents deemed adequate by the management to finance the Group’s operations andto mitigate the fluctuations in cash flows.

Foreign currency risk

The Group operates in two countries and, as a result, is exposed foreign exchange risks arisingfrom various currency exposures. In addition to transactional exposures, the Group is also exposedto foreign exchange movements on its net investment in the foreign subsidiary. It is not the Group’spolicy to enter into derivative forward foreign exchange contracts for hedging and speculativepurposes.

Fair value

The carrying amounts of the financial assets and financial liabilities with a maturity of less than oneyear are assumed to approximate their fair values.

The Group does not anticipate that the carrying amounts recorded at balance sheet dates wouldsignificantly different from the values that would eventually be received or settled except for asdisclosed in Note 20.

26. SUBSEQUENT EVENTS

Subsequent to financial period ended 31 March 2007,

(a) The Group entered into the following agreements with third party:

(i) Sale and purchase agreements with third parties to dispose of 7 units of vessels foran aggregate consideration of $4,825,000 of which 2 have been completed in themonth of June 2007 and 4 completed in the month of July 2007.

(ii) Agreements to purchase plant and equipments amounting to $1,178,080

(iii) Agreements for the construction of workshops, warehouse and shipyard developmentamounting to $478,100.

(iv) Agreements to purchase 4 units of vessels for an aggregate consideration of$3,620,000.

(b) Borrowings

(i) On 18 April 2007, the Group was granted loans amounting to $2,887,500 to financethe purchase of two vessels. Interest is charged at 1.75% per annum above theSingapore prime lending rate. The loan is repayable over 48 monthly instalments andsecured by a legal mortgage over the vessels and joint and several personalguarantee from the directors of the Company.

II-37





(b) Borrowings (Continued)

(ii) On 30 April 2007, the Group was granted a loan amounting to $640,000 to finance thepurchase of a vessel. Interest is charged at effective rate of 6.75% and is calculatedat a flat rate of 3.4366% per annum, to be paid monthly in advance. The loan isrepayable over 48 monthly instalments and is secured by legal mortgage over thevessel, assignment of insurance policies, and a joint and several personal guaranteefrom the directors of the Company.

(c) On 3 May 2007, the issued shares capital of RMN was increased from IDR 150 million toIDR 2,000 million through the allotment of 3,700 shares of IDR 500,000 each. MP Shipyardand MP Marine were allotted 3,660 shares amounting to IDR 1,830 million and 40 sharesamounting to IDR 20 million, representing 99% and 1% shareholding of RMN respectively.There is no change on the effective equity interest held by the Group.

(d) Pursuant to extraordinary general meeting held on 3 September 2007, the shareholdersapproved, inter-alia, the following:

(i) an amount of $3,000,000 owing by the Company to Mr Lee Wan Tang be capitalizedat a price of $1.00 per share, into 3,000,000 ordinary shares in the capital of theCompany to be issued, credited as fully paid, to Nautical International HoldingsLimited in accordance with the directions of Mr Lee Wan Tang;

(ii) an amount of $3,000,000 injected or to be injected in cash by Nautical InternationalHoldings Limited into the Company to be credited at a price of $1.00 per share, into3,000,000 ordinary shares in the capital of the Company to be issued, credited as fullypaid, to Nautical International Holdings Limited;

(iii) an amount of $180,000 owing by the Company to Winvest Management Pte Ltd becapitalized at a price of $8.17 per share, into 22,027 ordinary shares in the capital ofthe Company to be issued, credited as fully paid, in accordance with the directions ofWinvest Management Pte Ltd as to 17,622 shares to Mr Lim Han Boon, 2,203 sharesto Mr Chan Kum Onn Roger and 2,202 shares to Mr Ang Eng Lim;

(iv) the capitalisation of the retained earnings of the Company by way of a bonus issue of10,657,967 ordinary shares fully paid to the shareholders of the Company (the “BonusIssue”);

(v) the sub-division of each Share in the existing issued share capital of the Company into11.9 Shares (the “Share Split”);

(vi) the conversion of the Company into a public limited company and the change of thename to “Marco Polo Marine Ltd.”;

(vii) the listing and quotation of all the issued Shares (including the New Shares to beallotted and issued) on the SGX-SESDAQ;

II-38





(d) Pursuant to extraordinary general meeting held on 3 September 2007, the shareholdersapproved, inter-alia, the following: (Continued)

(viii) the adoption of a new set of Articles of Association;

(ix) the allotment and issue of 53,550,000 New Shares which are the subject of theInvitation, on the basis that the New Shares, when allotted, issued and fully paid, willrank pari passu in all respects with the existing Shares; and

(x) the authorisation of the Directors, pursuant to Section 161 of the Companies Act, to

(1) allot and issue shares whether by way of rights, bonus or otherwise (includingshares as may be issued pursuant to any Instrument (as defined below) madeor granted by the Directors while this resolution is in force notwithstanding thatthe authority conferred by this resolution may have ceased to be in force at thetime of issue of such shares), and / or

(2) make or grant offers, agreements or options (collectively, “Instruments”) thatmight or would require shares to be issued, including but not limited to thecreation and issue of warrants, debentures or other instruments convertible intoshares,

at any time and upon such terms and conditions and for such purposes and to such personsas the Directors may in their absolute discretion deem fit, provided that the aggregatenumber of Shares issued pursuant to such authority (including Shares issued pursuant toany Instrument but excluding Shares which may be issued pursuant to any adjustments(“Adjustments”) effected under any relevant Instrument, which Adjustment shall be made incompliance with the provisions of the Listing Manual of the SGX-ST for the time being inforce (unless such compliance has been waived by the SGX-ST) and the Articles ofAssociation for the time being of the Company), shall not exceed 50% of the issued sharecapital of the Company immediately after the invitation by the Company to the public tosubscribe for the New Shares (the “Invitation”), and provided that the aggregate number ofsuch Shares to be issued other than on a pro rata basis in pursuance to such authority(including Shares issued pursuant to any instrument but excluding shares which may beissued pursuant to any Adjustment effected under any relevant Instrument) to the existingShareholders shall not exceed 20% of the issued share capital of the Company immediatelyafter the Invitation, and, unless revoked or varied by the Company in general meeting, suchauthority shall continue in force until the conclusion of the next Annual General Meeting ofthe Company or the date by which the next Annual General Meeting of the Company isrequired by law to be held, whichever is the earlier.

II-39





(e) On 3 September 2007, 2 customers, owned by the same party, of MP Shipyard claimed anaggregate amount of (i) $73,780 for the late delivery of 4 vessels which were deliveredsubsequent to financial period ended 31 March 2007 and (ii) IDR 193,274,010 (orapproximately $32,000) for loss of income as a result of downtime needed to repair one ofthe vessels.

Management represented that the company is currently consulting its legal advisers as tothe appropriate response to the claim. However, there is no financial impact on the currentfinancial period.

(f) Pursuant to the board resolution dated 5 September 2007, an amount owing to the Companyby one of its subsidiary amounting to $3,000,000 was capitalised at a price of $1.00 pershare into 3,000,000 ordinary shares in the share capital of this subsidiary.

27. PRIOR PERIOD COMPARATIVE

Prior period comparatives figures for the profit and loss statement which relate to the period from 1October 2005 to 31 March 2006 have not been reviewed or audited.

II-40



Statement by Directors

In the opinion of the directors, the accompanying interim combined financial statements together withnotes thereto, as set out on pages II-2 to II-40, are drawn up so as to present fairly, the financial positionsof Marco Polo Marine Ltd. (the “Company”) and its subsidiaries (collectively, the “Group”) as at 31 March2007 and of the interim results, changes in equity and cash flows of the Group for the financial periodended on those dates, and at the date of this statement, there are reasonable grounds to believe that theCompany will be able to pay its debts as and when they fall due.

On behalf of the Board of Directors

LIE LY @ LIELY LEE SALLY @ LAI QIN ZHIDirector Director

Singapore27 September 2007

II-41



27 September 2007


Dear Sirs

This report has been prepared for inclusion in the Prospectus in connection with the initial public offeringof the ordinary shares of Marco Polo Marine Ltd. (the “Company”).

We report on the unaudited pro forma consolidated financial information of the Company and itssubsidiaries (collectively, the “Group”) set out on page III-3 to III-10 of the Prospectus which has beenprepared, for illustrative purposes only, are based on certain assumptions after making certainadjustments to show what:

(i) the financial position of the Group as at 30 September 2006 would have been if the SignificantEvents stated in Explanatory Note (a) to the unaudited pro forma consolidated financial informationhad occurred on 30 September 2006; and

(ii) the financial results and cash flows of the Group for the financial year ended 30 September 2006would have been if the Significant Events stated in Explanatory Note (a) had occurred since 1October 2005.

The unaudited pro forma consolidated financial information, because of their nature, may not give a truepicture of the Group’s actual financial position, results and cash flows.

The unaudited pro forma consolidated financial information is the responsibility of the directors of theCompany. Our responsibility is to express an opinion on the unaudited pro forma consolidated financialinformation based on our work.

We carried out our procedures in accordance with Singapore Statement of Auditing Practice 24: Auditorsand Public Offering Documents. Our work, which involved no independent examination of the unauditedpro forma consolidated financial information, consisted primarily of comparing the unaudited pro formaconsolidated financial information to the financial statements of the Group for the financial year ended 30September 2006, considering the evidence supporting the adjustments and discussing the unaudited proforma consolidated financial information with the directors of the Company.

III-1

APPENDIX III – INDEPENDENT AUDITORS’ REPORT ON THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

OF MARCO POLO MARINE LTD. AND ITS SUBSIDIARIES FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2006

Horwath First Trust



7 Temasek Boulevard


Singapore 038987

Tel: (65) 6221 0338

Fax: (65) 6221 1080

www.horwath.com.sg

In our opinion:

(a) the unaudited pro forma consolidated financial information have been properly prepared:

(i) on the basis stated in Explanatory Note (b) to the unaudited pro forma consolidated financialinformation; and

(ii) in a manner consistent with the accounting policies of the Group; and

(b) each material adjustment set out in Explanatory Note (b) that was made to the information used inthe preparation of the unaudited pro forma consolidated financial information is appropriate for thepurpose of preparing such financial information.

Yours faithfully



III-2



MARCO POLO MARINE LTD.UNAUDITED PRO FORMA CONSOLIDATED PROFIT AND LOSS STATEMENT FOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2006

Unaudited proAudited combined forma consolidated

profit and loss profit and lossstatement for the statement for the

year ended Pro forma year endedNote 30 September 2006 adjustments 30 September 2006

$ $ $

Revenue 15,886,488 15,886,488

Cost of sales (v) (11,390,743) (1,973,411) (13,364,154)

Gross profit 4,495,745 2,522,334

Other operating income (v) 663,254 2,952,133 3,615,387Negative goodwill arising on acquisition 2,158,491 2,158,491Administrative expenses (807,072) (807,072)Other operating expenses (781,254) (781,254)Finance cost (336,577) (336,577)


Income tax (63) (63)

Profit for the year 5,392,524 6,371,246

Earnings per share (cents)Basic (1) 2.97

Diluted (2) 2.38



The accompanying explanatory notes are an integral part of the unaudited pro forma consolidated financialinformation.

III-3



MARCO POLO MARINE LTD.UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETAS AT 30 SEPTEMBER 2006

Unaudited proAudited combined forma consolidated

balance sheet as at Pro forma balance sheet as atNote 30 September 2006 adjustments 30 September 2006

$ $ $

Non-current assetsProperty, plant and equipment (v) 37,410,549 26,184,612 63,595,161

Current assetsInventories 2,101,648 2,101,648Trade receivables 893,600 893,600Due from customers on construction contracts 833,150 833,150

Other receivables (iii) 342,867 180,000 522,867Due from holding company (non-trade) 3 3Due from related parties (trade) 154,382 154,382Cash and bank balances (ii),(v) 437,855 11,555,000 11,992,855

4,763,505 16,498,505

TOTAL ASSETS 42,174,054 80,093,666

Current liabilitiesTrade payables 5,642,873 5,642,873Other payables (v) 3,133,776 16,344,859 19,478,635Due to related parties (trade) 791,176 791,176Due to related parties (non-trade) 464,215 464,215Due to a director (non-trade) (i) 6,179,046 (3,000,000) 3,179,046Interest-bearing loans (secured) 8,264,937 8,264,937

24,476,023 37,820,882

Non-current liabilityInterest-bearing loans (secured) (v) 6,835,913 17,416,031 24,251,944


NET ASSETS 10,862,118 18,020,840

Shareholders’ equityShare capital (i),(ii),(iii),(iv) 1,320,006 16,837,967 18,157,973Translation reserve 22,282 22,282Accumulated profits / (losses) (iv),(v) 9,519,830 (9,679,245) (159,415)

TOTAL EQUITY 10,862,118 18,020,840


III-4



MARCO POLO MARINE LTD.UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE FINANCIAL YEAR ENDED 30 SEPTEMBER 2006

Audited combined Unaudited prostatement of forma consolidated

cash flows for the statement of cash flowsyear ended Pro forma for the year ended

Note 30 September 2006 adjustments 30 September 2006

$ $ $

Cash flows from operating activitiesProfit before tax (v) 5,392,587 978,722 6,371,309Adjustments for:

Depreciation of property, plant andequipment (v) 1,433,616 1,973,411 3,407,027

Property, plant and equipment written off 670 670

Interest expense 336,577 336,577Interest income (8,995) (8,995)Gain on disposal of plant and equipment (v) (626,990) (2,952,133) (3,579,123)

Negative goodwill arising on acquisition of a subsidiary (2,158,491) (2,158,491)

Operating profit before working capital changes 4,368,974 4,368,974

Inventories (2,101,648) (2,101,648)Trade and other receivables 1,943,121 1,943,121Due from customers on construction contracts (833,150) (833,150)

Trade and other payables (v) 4,279,028 16,344,859 20,623,887

Cash generated from operating activities 7,656,325 24,001,184Interest received 8,995 8,995Interest paid (336,577) (336,577)Income tax paid (63) (63)

Net cash generated from operating activities 7,328,680 23,673,539

Cash flows from investing activitiesAcquisition of a subsidiary, net of cash acquired (2,249) (2,249)

Purchase of property, plant and equipment (v) (23,358,267) (33,760,890) (57,119,157)

Proceeds from disposal of plant and equipment (v) 1,080,000 8,555,000 9,635,000


III-5



MARCO POLO MARINE LTD.UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

Audited combined Unaudited prostatement of forma consolidated

cash flows for the statement of cash flowsyear ended Pro forma for the year ended

Note 30 September 2006 adjustments 30 September 2006

$ $ $

Cash flows from financing activitiesProceeds from issue of new shares (ii) 455,006 3,000,000 3,455,006Proceeds from bank loans, net (v) 11,238,207 17,416,031 28,654,238Due from holding company (non-trade) (3) (3)Deferred expenses (151,581) (151,581)Due to related parties (non-trade) 384,665 384,665Due to a director (non-trade) 3,434,852 3,434,852


Net increase in cash and bank balances 409,310 11,964,310

Cash and bank balances at beginning of year 61,842 61,842

Effect of exchange rate changes on cash and bank balances (33,297) (33,297)

Cash and bank balances at end of year 437,855 11,992,855


III-6



EXPLANATORY NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIALINFORMATION

(a) Significant events

Save for the following changes to the capital structure of the Company enumerated in (i) to (v) andthe subsequent significant assets acquisitions and disposals, enumerated in (vi) herein (the“Significant Events”), the directors of the Company, as at the date of this report, are not aware ofany significant acquisition / disposal of any asset or any entity, business or business trust by theGroup after 30 September 2006 and / or any significant changes to the capital structure of theCompany subsequent to 30 September 2006.

(i) On 3 September 2007, the Company allotted and issued 3,000,000 ordinary shares to adirector, Mr Lee Wan Tang by capitalising the amount due to the director amounting to $3million.

(ii) On 3 September 2007, the Company allotted and issued 3,000,000 ordinary shares for thecapital injection of $3 million by Nautical International Holdings Ltd..

(iii) On 3 September 2007, the Company allotted and issued 22,027 ordinary shares to WinvestManagement Pte Ltd (“Winvest”) by capitalising the amount due to Winvest amounting to$180,000 as partial settlement of the consultancy services rendered by Winvest. The totalamount of such consultancy services is $300,000 of which the balance of $120,000 would besettled in cash.

(iv) On 3 September 2007, the Company capitalised $10,657,967 of the retained earnings by wayof a bonus issue of 10,657,967 ordinary shares fully credited and paid to the shareholders.

(v) On 3 September 2007, the sub-division of each ordinary share in the existing issued sharecapital of the Company into 11.9 ordinary shares.

(vi) Subsequent to financial year ended 31 September 2006, the Company has the followingsignificant assets acquisitions and disposals as follows:

� disposal of 12 vessels with net book value of $5,602,867;

� 11 new vessels built / purchased amounting to $13,007,600;

� capital expenditure incurred and committed on shipyard development amounting toapproximately $8,659,726; and

� 14 new vessels committed to be built / purchased amounting to $12,093,564.

The pro forma accounting entries and / or adjustments relating to the Significant Events and for thepurpose of preparing the unaudited pro forma consolidated financial information, are detailed inNote (b) below.

III-7



EXPLANATORY NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIALINFORMATION (Continued)

(b) Basis of preparation of the unaudited pro forma consolidated financial information

The unaudited pro forma consolidated financial information, which comprise the pro formaconsolidated profit and loss statement, pro forma consolidated balance sheet and pro formaconsolidated statement of cash flows, set out herein have been prepared for illustrative purposesonly to show what the financial position of the Group as at 30 September 2006 and the financialresults and cash flows for the financial year ended 30 September 2006 would have been based oncertain assumptions and after making certain adjustments as described below.

The unaudited pro forma consolidated financial information for the financial year ended 30September 2006 has been prepared for inclusion in the Prospectus in connection with the initialpublic offering of the ordinary shares of Marco Polo Marine Ltd. (the “Company”) and should be readin conjunction with the combined financial statements of the Group for the financial year ended 30September 2006. The unaudited pro forma consolidated financial information, because of theirnature, may not give a true picture of the Group’s actual financial position, results and cash flows.

The unaudited pro forma consolidated financial information has been prepared based on thecombined financial statements of the Company for the financial year ended 30 September 2006which were prepared by the directors and / or management of the Company in accordance withSingapore Financial Reporting Standards and audited by Horwath First Trust, in accordance withSingapore Standards on Auditing. The auditors’ report on the financial statements was not qualified.

The unaudited pro forma consolidated financial information for the financial year ended 30September 2006 is prepared for illustrative purposes only. These are prepared based on certainassumptions and after making certain adjustments to show what:

� the financial position of the Group as at 30 September 2006 would have been if theSignificant Events as described in Explanatory Note (a) above had occurred on 30September 2006; and

� the financial results and cash flows of the Group for the financial year ended 30 September2006 would have been if the Significant Events as described in Explanatory Note (a) abovehad occurred on 1 October 2005.

As the revenue contributions from the assets acquisitions as described in Explanatory Note (a)above cannot be reliably estimated, the financial results do not take into account such pro formaeffects.

Based on the assumptions discussed above, the following material adjustments have been made tothe combined financial statements of the Group in arriving at the unaudited pro forma consolidatedfinancial information. These adjustments are as follows:

Adjustment (i)

$

Debit Due to a director (non-trade) 3,000,000Credit Share capital (3,000,000)

III-8




(b) Basis of preparation of the unaudited pro forma consolidated financial information (continued)

This pro forma adjustment is raised to recognise the pro forma effects of the Company allotting andissuing 3,000,000 ordinary shares to a director, Mr Lee Wan Tang by capitalising the amount due tothe director.

Adjustment (ii)

$

Debit Cash and bank balances 3,000,000Credit Share capital (3,000,000)

This pro forma adjustment is raised to recognise the pro forma effects of the Company allotting andissuing 3,000,000 ordinary shares for the capital injection by Nautical International Holdings Ltd..

Adjustment (iii)

$

Debit Other receivables (Deferred Expenses) 180,000Credit Share capital (180,000)

This pro forma adjustment is raised to recognise the pro forma effects of the Company allotting andissuing 22,027 ordinary shares to Winvest by capitalising the amount due to Winvest.

Adjustment (iv)

$

Debit Accumulated profits 10,657,967Credit Share capital (10,657,967)

This pro forma adjustment is raised to recognise the pro forma effects of the Company capitalisingthe accumulated profits account by way of a bonus issue of 10,657,967 ordinary shares fullycredited and paid to the shareholders.

Adjustment (v)

$

Debit Property, plant and equipment 26,184,612Cash and bank balances 8,555,000Cost of sales - depreciation 1,973,411

Credit Interest-bearing loans (long-term) (17,416,031)Gain from disposal of vessels (2,952,133)Other payables (16,344,859)

This pro forma adjustment is raised to recognise the pro forma effects of subsequent significantassets acquisitions and disposals as described in Explanatory Note (a) (vi).

III-9




(b) Basis of preparation of the unaudited pro forma consolidated financial information (continued)

The unaudited pro forma consolidated financial information, because of their nature, is notnecessarily indicative and may not give a true picture of the actual financial position or results of theGroup. For the purpose of preparing this set of unaudited pro forma consolidated financialinformation, the directors have not considered the effects of other events other than those discussedin Explanatory Note (a).

III-10



APPENDIX IV – INDEPENDENT AUDITORS’ REPORT ON THE UNAUDITED PRO FORMA CONSOLIDATED INTERIM FINANCIALINFORMATION OF MARCO POLO MARINE LTD. AND ITS SUBSIDIARIES

FOR THE SIX-MONTH PERIOD ENDED 31 MARCH 2007

27 September 2007


Dear Sirs

This report has been prepared for inclusion in the Prospectus in connection with the initial public offeringof the ordinary shares of Marco Polo Marine Ltd. (the “Company”).

We report on the unaudited pro forma consolidated interim financial information of the Company and itssubsidiaries (collectively, the “Group”) set out on page IV-3 to IV-9 of the Prospectus which has beenprepared, for illustrative purposes only, are based on certain assumptions after making certainadjustments to show what:

(i) the financial position of the Group as at 31 March 2007 would have been if the Significant Eventsstated in Explanatory Note (a) to the unaudited pro forma consolidated interim financial informationhad occurred on 31 March 2007; and

(ii) the financial results and cash flows of the Group for the financial period ended 31 March 2007would have been if the Significant Events stated in Explanatory Note (a) had occurred since 1October 2006.

The unaudited pro forma consolidated interim financial information, because of their nature, may not givea true picture of the Group’s actual financial position, results and cash flows.

The unaudited pro forma consolidated interim financial information is the responsibility of the directors ofthe Company. Our responsibility is to express an opinion on the unaudited pro forma consolidated interimfinancial information based on our work.

We carried out our procedures in accordance with Singapore Statement of Auditing Practice 24: Auditorsand Public Offering Documents. Our work, which involved no independent examination of the unauditedpro forma consolidated interim financial information, consisted primarily of comparing the unaudited proforma consolidated interim financial information to the unaudited interim financial statements of the Groupfor the six-month period ended 31 March 2007, considering the evidence supporting the adjustments anddiscussing the unaudited pro forma consolidated interim financial information with the directors of theCompany.

IV-1

Horwath First Trust



7 Temasek Boulevard


Singapore 038987

Tel: (65) 6221 0338

Fax: (65) 6221 1080

www.horwath.com.sg

In our opinion:

(a) the unaudited pro forma consolidated interim financial information have been properly prepared:

(i) on the basis stated in Explanatory Note (b) to the unaudited pro forma consolidated interimfinancial information; and

(ii) in a manner consistent with the accounting policies of the Group; and

(b) each material adjustment set out in Explanatory Note (b) that was made to the information used inthe preparation of the unaudited pro forma consolidated interim financial information is appropriatefor the purpose of preparing such financial information.

Yours faithfully

HORWATH FIRST TRUST Singapore


IV-2



IV-3



MARCO POLO MARINE LTD.UNAUDITED PRO FORMA CONSOLIDATED PROFIT AND LOSS STATEMENT FOR THE FINANCIAL PERIOD 1 OCTOBER 2006 TO 31 MARCH 2007

Unaudited pro Unaudited combined forma consolidated

profit and loss profit and lossstatement for the statement for thesix-month period six-month period

ended Pro forma endedNote 31 March 2007 adjustments 31 March 2007

$ $ $

Revenue 16,953,240 16,953,240

Cost of sales (v) (10,970,674) (666,736) (11,637,410)

Gross profit 5,982,566 5,315,830

Other operating income (v) 1,428,635 1,809,164 3,237,799Administrative expenses (734,474) (734,474)Other operating expenses (1,739,738) (1,739,738)Finance cost (422,192) (422,192)


Income tax (145,754) (145,754)

Profit after tax 4,369,043 5,511,471

Earnings per share (cents)Basic(1) 2.57

Diluted(2) 2.06



The accompanying explanatory notes are an integral part of the unaudited pro forma consolidated interim financialinformation.

IV-4



MARCO POLO MARINE LTD.UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETAS AT 31 MARCH 2007

Unaudited pro Unaudited combined forma consolidatedbalance sheet as at Pro forma balance sheet as at

Note 31 March 2007 adjustments 31 March 2007

$ $ $

Non-current assetsProperty, plant and equipment (v) 41,599,517 18,332,577 59,932,094

Current assetsInventories 2,747,441 2,747,441Trade receivables 1,476,114 1,476,114Due from customers on construction contracts 5,480,908 5,480,908

Other receivables (iii) 862,302 180,000 1,042,302Cash and bank balances (i),(ii),(v) 1,194,103 10,025,417 11,219,520

11,760,868 21,966,285

TOTAL ASSETS 53,360,385 81,898,379

Current liabilitiesTrade payables 8,508,402 8,508,402Other payables (v) 2,418,373 11,322,118 13,740,491Due to related parties (trade) 1,102,850 1,102,850Due to a director (non-trade) (i) 279,583 (279,583) –Provision for tax 145,557 145,557Interest-bearing loans (secured) 10,198,127 10,198,127

22,652,892 33,695,427

Non-current liabilityInterest-bearing loans (secured) (v) 15,573,411 10,173,031 25,746,442


NET ASSETS 15,134,082 22,456,510

Shareholders’ equityShare capital (i),(ii),(iii),(iv) 1,320,006 16,837,967 18,157,973Translation reserve (74,797) (74,797)Accumulated profits (iv),(v) 13,888,873 (9,515,539) 4,373,334

TOTAL EQUITY 15,134,082 22,456,510


IV-5



MARCO POLO MARINE LTD.UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE FINANCIAL PERIOD 1 OCTOBER 2006 TO 31 MARCH 2007

Unaudited proUnaudited forma consolidated

combined statement statement of cashof cash flows for the flows for the

six-month period ended Pro forma six-month period endedNote 31 March 2007 adjustments 31 March 2007

$ $ $

Cash flows from operating activitiesProfit before tax (v) 4,514,797 1,142,428 5,657,225Adjustments for:

Depreciation of property, plant and equipment (v) 1,523,855 666,736 2,190,591

Interest expenses 422,192 422,192Gain on disposal of plant and equipment (v) (1,143,666) (1,809,164) (2,952,830)

Operating profit before working capital changes 5,317,178 5,317,178

Inventories (645,793) (645,793)Trade and other receivables (840,556) (840,556)Due from customers on construction contracts (4,647,758) (4,647,758)

Trade and other payables (v) 2,461,800 11,322,118 13,783,918

Cash generated from operating activities 1,644,871 12,966,989Interest paid (422,192) (422,192)

Net cash from operating activities 1,222,679 12,544,797

Cash flows from investing activitiesPurchase of property, plant and equipment (v) (8,819,157) (21,495,149) (30,314,306)

Proceeds from disposal of plant and equipment (v) 4,250,000 4,305,000 8,555,000


Cash flows from financing activitiesProceeds from issue of new shares (i),(ii) – 5,720,417 5,720,417Proceeds from bank loans (v) 10,670,688 10,173,031 20,843,719Due from holding company (non-trade) 3 3Deferred expenses (107,011) (107,011)Due to related parties (non-trade) (464,215) (464,215)Due to a director (non-trade) (5,899,463) (5,899,463)


Net increase in cash and bank balances 853,524 10,878,941

Cash and bank balances at beginning of period 437,855 437,855

Effect of exchange rate changes on cash and bank balances (97,276) (97,276)

Cash and bank balances at end of period 1,194,103 11,219,520


IV-6



EXPLANATORY NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED INTERIM FINANCIALINFORMATION

(a) Significant events

Save for the following changes to the capital structure of the Company enumerated in (i) to (v) andthe subsequent significant assets acquisitions and disposals enumerated in (vi) herein (the“Significant Events”), the directors of the Company, as at the date of this report, are not aware ofany significant acquisition / disposal of any asset or any entity, business or business trust by theGroup and / or any significant changes to the capital structure of the Company subsequent to 31March 2007.

(i) On 3 September 2007, the Company allotted and issued 3,000,000 ordinary shares to adirector, Mr Lee Wan Tang by capitalising the amount due to the director amounting to $3million.

(ii) On 3 September 2007, the Company allotted and issued 3,000,000 ordinary shares for thecapital injection of $3 million by Nautical International Holdings Ltd.

(iii) On 3 September 2007, the Company allotted and issued 22,027 ordinary shares to WinvestManagement Pte Ltd (“Winvest”) by capitalising the amount due to Winvest amounting to$180,000 as partial settlement of the consultancy services rendered by Winvest. The totalamount of such consultancy services is $300,000 of which the balance of $120,000 would besettled in cash.

(iv) On 3 September 2007, the Company capitalised $10,657,967 of the retained earnings by wayof a bonus issue of 10,657,967 ordinary shares fully credited and paid to the shareholders.

(v) On 3 September 2007, the sub-division of each ordinary share in the existing issued sharecapital of the Company into 11.9 ordinary shares.

(vi) Subsequent to financial period ended 31 March 2007, the Company has the followingsignificant assets acquisitions and disposals as follows:

� disposal of 6 vessels with net book value of $2,495,836;

� 3 new vessels built / purchased amounting to $3,408,527;

� capital expenditure incurred and committed on shipyard development amounting toapproximately $5,993,058; and

� 14 new vessels committed to be built / purchased amounting to $12,093,564.

The pro forma accounting entries and / or adjustments relating to the Significant Events and for thepurpose of preparing the unaudited pro forma consolidated interim financial information, aredetailed in Note (b) below.

(b) Basis of preparation of the unaudited pro forma consolidated interim financial information

The unaudited pro forma consolidated interim financial information, which comprise the pro formaconsolidated interim profit and loss statement, pro forma consolidated interim balance sheet andpro forma consolidated interim statement of cash flows, set out herein have been prepared forillustrative purposes only to show what the financial position of the Group as at 31 March 2007 andthe financial results and cash flows for the six-month period ended 31 March 2007 would have beenbased on certain assumptions and after making certain adjustments as described below.

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EXPLANATORY NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED INTERIM FINANCIALINFORMATION (Continued)

(b) Basis of preparation of the unaudited pro forma consolidated interim financial information(continued)

The unaudited pro forma consolidated interim financial information for the six months ended 31 March 2007 has been prepared for inclusion in the Prospectus in connection with the initialpublic offering of the ordinary shares of Marco Polo Marine Ltd. (the “Company”) and should be readin conjunction with the unaudited interim combined financial statements of the Group for the six-month period ended 31 March 2007. The unaudited pro forma consolidated interim financialinformation, because of their nature, may not give a true picture of the Group’s actual financialposition, results and cash flows.

The unaudited pro forma consolidated interim financial information has been prepared based on theinterim combined financial statements of the Company for the six-month period ended 31 March2007 which were prepared by the directors and / or the management of the Company in accordancewith Singapore Financial Reporting Standards.

The unaudited pro forma consolidated interim financial information for the six-month period ended31 March 2007 is prepared for illustrative purposes only. These are prepared based on certainassumptions and after making certain adjustments to show what:

� the financial position of the Group as at 31 March 2007 would have been if the SignificantEvents as described in Explanatory Note (a) above had occurred on 31 March 2007; and

� the financial results and cash flows of the Group for the six months ended 31 March 2007would have been if the Significant Events as described in Explanatory Note (a) above hadoccurred on 1 October 2006.

As the revenue contributions from the assets acquisitions as described in Explanatory Note (a)above cannot be reliably estimated, the financial results do not take into account such pro formaeffects.

Based on the assumptions discussed above, the following material adjustments have been made tothe interim combined financial statements of the Group in arriving at the unaudited pro formaconsolidated interim financial information. These adjustments are as follows:

Adjustment (i)(a)

$

Debit Cash and bank balances 2,720,417Credit Due to a director (non-trade) (2,720,417)

Adjustment (i)(b)

$

Debit Due to a director (non-trade) 3,000,000Credit Share capital (3,000,000)



This pro forma adjustment is raised to recognise the pro forma effects of the Company allotted andissue 3,000,000 ordinary shares to a director, Mr Lee Wan Tang by capitalising the amount due tothe director.

Adjustment (ii)

$

Debit Cash and bank balances 3,000,000Credit Share capital (3,000,000)

This pro forma adjustment is raised to recognise the pro forma effects of the Company allotting andissuing 3,000,000 ordinary shares for the capital injection by Nautical International Holdings Ltd..

Adjustment (iii)

$

Debit Other receivables (Deferred Expenses) 180,000Credit Share capital (180,000)

This pro forma adjustment is raised to recognise the pro forma effects of the Company allotting andissuing 22,027 ordinary shares to Winvest by capitalising the amount due to Winvest.

Adjustment (iv)

$

Debit Accumulated profits 10,657,967Credit Share capital (10,657,967)

This pro forma adjustment is raised to recognise the pro forma effects of the Company capitalisingthe accumulated profits account by way of a bonus issue of 10,657,967 ordinary shares fullycredited and paid to the shareholders.

Adjustment (v)

$

Debit Property, plant and equipment 18,332,577Cash and bank balances 4,305,000Cost of sales - depreciation 666,736

Credit Interest-bearing loans (long-term) (10,173,031)Gain from disposal of vessels (1,809,164)Other payables (11,322,118)

This pro forma adjustment is raised to recognise the pro forma effects of subsequent significantassets acquisitions and disposals as described in Explanatory Note (a) (vi).

IV-8





The unaudited pro forma consolidated interim financial information, because of their nature, is notnecessarily indicative and may not give a true picture of the actual financial position or results of theGroup. For the purpose of preparing this set of unaudited pro forma consolidated interim financialinformation, the directors have not considered the effects of other events other than those discussedin Explanatory Note (a).

IV-9

APPENDIX IV – INDEPENDENT AUDITORS’ REPORT ON THE UNAUDITED PRO FORMA CONSOLIDATED INTERIM FINANCIALINFORMATION OF MARCO POLO MARINE LTD AND ITS SUBSIDIARIES

FOR THE 6-MONTH PERIOD ENDED 31 MARCH 2007

The discussion below provides a summary of the principal objects of our Company as set out in ourMemorandum of Association and certain provisions of our Articles of Association and the laws ofSingapore. This discussion is only a summary and is qualified by reference to Singapore law and ourMemorandum 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 200610073Z. Our Memorandum of Association sets out the objects for which ourCompany was formed, including carrying on business as, inter alia, manufacturers, refiners and dealers inchemicals such as plastics, resins and goods and articles made from the same and compounds and by-products thereof.

Summary of our Articles of Association

1. Directors

(a) 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 counted inthe quorum present at the meeting.

(b) Remuneration

Fees payable to Non-Executive Directors shall be a fixed sum (not being a commission on ora percentage of profits or turnover of the Company) as shall from time to time be determinedby the Company in general meeting. Fees payable to Directors shall not be increased exceptat a general meeting convened by a notice specifying the intention to propose such increase.

Any director who holds any executive office, or who serves on any committee of theDirectors, or who performs services outside the ordinary duties of a Director, may be paidextra remuneration by way of salary, commission or otherwise, as the Directors maydetermine.

The remuneration of a Managing Director shall be fixed by the Directors and may be by wayof salary or commission or participation in profits or by any or all of these modes but shallnot be by a commission on or a percentage of turnover.

The Directors shall have power to pay pensions or other retirement, superannuation, deathor disability benefits to any Director for the time being holding any executive office and forthe purpose of providing any such pensions or other benefits, to contribute to any scheme orfund or to pay premiums.

The Directors shall not vote in respect of any contract or proposed contract or arrangementor any other proposal whatsoever in which he has any person material interest, directly orindirectly. A Director shall also not be counted in the quorum at a meeting in relation to anyresolution on which he is debarred from voting.

(c) Borrowing

Our Directors may exercise all the powers of our Company to raise or borrow money, tomortgage or charge its undertaking, property and uncalled capital, and to secure any debt,liability or obligation of our Company.

V-1


(d) Retirement Age Limit

There is no retirement age limit for Directors under our Articles of Association. Section153(1) of the Companies Act however, provides that no person of or over the age of 70years shall be appointed a director of a public company, unless he is appointed or re-appointed as a director of the Company or authorised to continue in office as a director ofthe Company by way of an ordinary resolution passed at an annual general meeting of theCompany.

(e) Shareholding qualification

There is no shareholding qualification for Directors in the Memorandum and Articles ofAssociation of the 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 the ordinaryshares, are recognised as our Shareholders.

(a) Dividends and distributions

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 capitalize 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 up oneach shareholder’s ordinary shares, unless the rights attaching to an issue of any ordinaryshare provide otherwise. Unless otherwise directed, dividends are paid by cheque or warrantsent through the post to each shareholder at his registered address. Notwithstanding theforegoing, the payment by us to CDP of any dividend payable to a shareholder whose nameis entered in the depository register shall, to the extent of payment made to CDP, dischargeus from any liability to that shareholder in respect of that payment.

The payment by the Directors of any unclaimed dividends or other moneys payable on or inrespect of a share into a separate account shall not constitute the 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 the Company. Any dividend unclaimed after aperiod of six (6) years after having been declared may be forfeited and shall revert to theCompany 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.

The Directors may retain any dividends or other moneys 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.

(b) Voting rights

A holder of our ordinary shares is entitled to attend, speak and vote at any general meeting,in person or by proxy. Proxies need not be a shareholder of the Company. A person whoholds ordinary shares through the SGX-ST book-entry settlement system will only be entitledto vote at a general meeting as a shareholder if his name appears on the depository registermaintained by CDP 48 hours before the general meeting. Except as otherwise provided inour Articles of Association, two or more shareholders must be present in person or by proxyto constitute a quorum at any general meeting. Under our Articles of Association, on a show

V-2


of hands, every shareholder present in person or by proxy shall have one vote (provided thatin the case 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 tied 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 the 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 of theholders of the shares of the class. To every such separate general meeting, the provisions of ourArticles of Association relating to general meetings of the Company to the proceedings thereatshall mutatis mutandis apply, except that the necessary quorum shall be two persons at leastholding or representing by proxy at least one-third of the total voting rights of the issued shares ofthe class, and that any holder of shares of the class present in person or by proxy may demand apoll and that every such holder shall on a poll have one vote for every share of the class held byhim, 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.

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 their shares.

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27 September 2007

The Independent DirectorsMarco Polo Marine Ltd.1 Sims Lane #04-11Singapore 387355

Dear Sirs

THE PROPOSED ADOPTION OF A SHAREHOLDERS’ MANDATE FOR INTERESTED PERSONTRANSACTIONS

1. INTRODUCTION

Marco Polo Marine Ltd. (the Company) is proposing to adopt a shareholders’ mandate (theShareholders’ Mandate) in the form set out in the Singapore Exchange Securities Trading LimitedListing Manual (the Listing Manual) to enable the entering into of certain categories oftransactions with specified classes of the Company’s interested persons. This letter has beenprepared for use by Lim Han Boon and Sim Swee Yam Peter (the Independent Directors), inrelation to the Shareholders’ Mandate and will be incorporated into the prospectus dated 27September 2007 of the Company to be issued in connection with the proposed listing of the sharesof the Company on the SGX-ST Dealing and Automated Quotation System (SGX-Sesdaq) whichprovides, inter alia, the details of the Shareholders’ Mandate and the recommendation of theIndependent Directors thereon (the Prospectus). Unless otherwise defined, all terms defined in theProspectus shall have the same meaning herein.

To comply with the requirements of Chapter 9 of the Listing Manual, Omega Capital Limited(Omega Capital) has been appointed as the independent financial adviser to provide an opinionon whether the guidelines and review procedures set out in the Shareholders’ Mandate (theGuidelines and Review Procedures under Shareholders’ Mandate) as described in page 129 ofthe Prospectus for determining the transacting prices of the interested person transactions aresufficient to ensure that the transactions will be carried out on normal commercial terms and willnot be prejudicial to the interests of the Company and the minority Shareholders.

2. TERMS OF REFERENCE

The objective of this letter is to provide our independent opinion, for the purposes of Chapter 9 ofthe Listing Manual, on whether the Guidelines and Review Procedures under Shareholders’Mandate for determining the transaction process of the Interested Person Transaction are sufficientto ensure that the transactions will be carried out on normal commercial terms and will not beprejudicial to the interests of the Company and the minority Shareholders.

It is not within our terms of reference, nor have we been requested to evaluate or comment on themerits and/or associated risk, whether commercial, financial or otherwise, of the Shareholders’Mandate, the Interested Person Transaction or any other interested person transactions enteredinto or about to be entered into, as well as for transactions that are not subject to the thresholdsunder Chapter 9 of the Listing Manual, or the prospects of the Group and as such, we have notexpressed an opinion thereon. Such evaluations or comments are and remain the soleresponsibility of the Directors although we may draw upon their views or make such comments inrespect thereof (to the extent deemed necessary or appropriate by us) in arriving in our opinion.

(Incorporated in the Republic of Singapore)(Company Registration Number: 200000713E)

VI-1

APPENDIX VI – LETTER FROM OMEGA CAPITAL LIMITED TO THE INDEPENDENT DIRECTORS OF MARCO POLO MARINE LTD.

We were neither involved nor responsible, in any aspect, in the deliberations on and determinationsof the scope of the Shareholders’ Mandate, the Interested Person Transactions and the Guidelinesand Review Procedures under the Shareholders’ Mandate. Such deliberations and determinationsremain the responsibility of the Directors and the management of the Group. We do not warrantcompliance by the Group with the Guidelines and Review Procedures under the Shareholders’Mandate.

In the course of our evaluation of the Guidelines and Review Procedures in connection to theShareholders’ Mandate, we have held discussions with certain Directors and the management ofthe Group and have examined the information provided to us by the Group. We have notindependently verified such information furnished by the Directors and the management of theGroup or any representation or assurance made by them, whether written or verbal, andaccordingly cannot and do not warrant or accept responsibility for the accuracy or completeness ofsuch information, representation or assurance. Nevertheless, the Directors have confirmed to usthat, to the best of their knowledge and belief, the information provided to us (whether written orverbal) as well as the information contained in the Prospectus constitutes a full and true disclosure,in all material aspects, of all material facts relating to the Shareholders’ Mandate and there is nomaterial information, the omission of which, would make any of the information contained herein orin the Prospectus inaccurate, incomplete or misleading in any material aspect.

We have also made reasonable enquiries and used our judgment in assessing such informationand have found no reason to doubt the reliability of such information. We have further assumedthat all statements of fact, belief, opinion and intention made by the Directors in the Prospectushave been reasonably made after due and careful enquiry. We have not conducted acomprehensive review of the business, operations and financial condition of the Group or thetransactions described in the Prospectus.

Our views, as set forth in this letter, are based on the prevailing market, regulatory and economicconditions, our analysis of the information provided in the Prospectus as well as the informationprovided to us by the Group as of the Latest Practicable Date. As such, we do not assume anyresponsibility in updating, revising or reaffirming our opinion should any development occursubsequently after the Latest Practicable Date that may affect our opinion contained herein.

Our opinion is addressed to the Independent Directors for their use and benefit in their deliberationof the Shareholders’ Mandate. The recommendations made to the Shareholders in relation to theShareholders’ Mandate shall remain the responsibility of the Independent Directors. Our opinionshould not be relied on as a recommendation to any Shareholder of the Group as to how suchShareholder should vote on the Shareholders’ Mandate or any matter related thereto. EachShareholder may have different investment objectives and considerations and should seekprofessional advice.

Our opinion in relations to the Shareholders’ Mandate should be considered in the contextof the entirety of this letter and the Prospectus.

3. THE SHAREHOLDERS’ MANDATE FOR INTERESTED PERSON TRANSACTIONS

3.1 Background

It is envisaged that, in the ordinary course of business, interested person transactions between theCompany, its subsidiaries and associated companies which are considered to be “entities at risk”within the meaning of Chapter 9 of the Listing Manual on the one hand, and the companiescontrolled by the Lee family such as BRJ, BBR, MKW, SRC and their respective subsidiaries andassociates on the other, are likely to occur with some degree of frequency and may arise at anytime and from time to time. The categories of interested person transactions are described in page129 of the Prospectus.

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In view of the time-sensitive and frequent nature of such interested person transactions, the Groupproposes to obtain a Shareholders’ Mandate for the Group to engage in the category oftransactions during its normal course of business described on page 134 of the Prospectus (theCategories of the Interested Person Transactions) with the companies controlled by the Leefamily such as BRJ, BBR, MKW, SRC and their respective subsidiaries and Associates providedthat such transactions are made at arm’s length, are on normal commercial terms and are notprejudicial to the interests of the Company and its minority Shareholders.

The Shareholders’ Mandate does not cover any interested person transaction which has a value ofless than S$100,000 as the threshold and aggregation requirements of Chapter 9 of the ListingManual do not apply to such transactions.

3.2 Interested Person Transaction

Salient information on the Interested Person Transaction, including: -

(i) the categories of interested persons;

(ii) the rationale for and benefits of the Shareholders’ Mandate;

(iii) the guidelines and review procedures under Shareholders’ Mandate;

(iv) the threshold limits; and

(v) guidelines and review procedures for future Interested Person Transactions other than thosecovered in the Shareholders’ Mandate.

as set out in pages 128 to 135 of the Prospectus.

3.3 Validity Period of the Shareholders’ Mandate

The Shareholders’ Mandate will be effective until the earlier of: (i) the first annual general meeting(AGM) of the Company following its admission to the Official List of the SGX-Sesdaq; or (ii) the firstanniversary of the date of its admission to the Official List of the SGX-Sesdaq. Thereafter, approvalfrom Shareholders will be sought for the renewal of the Shareholders’ Mandate at the first AGM ofthe Company following its listing or the first anniversary of the listing date, whichever is earlier, andat each subsequent AGM of the Company, subject to satisfactory review by the Company’sIndependent Directors of its continued application to transactions with interested persons.

3.4 Disclosure

In accordance with the requirements of Chapter 9 of the Listing Manual, disclosure is required tobe made in the Group’s annual report (Annual Report) of the aggregate value of all InterestedPerson Transactions conducted with interested persons pursuant to the Shareholders’ Mandateduring the current financial year, and in the Annual Reports for subsequent financial years that theShareholders’ Mandate continues in force. The Company will also announce the aggregate value oftransactions conducted pursuant to the Shareholders’ Mandate for the financial periods that it isrequired to report on pursuant to Rule 705 of the Listing Manual within the time required for theannouncement of such report.

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3.5 Other Interested Person Transactions

The Independent Directors should note that any transaction between any company within theGroup and the interested persons which does not fall within the ambit of the Shareholders’Mandate (as set out in page 135 of the Prospectus) shall be subject to the relevant provisions ofChapter 9 of the Listing Manual and/or other applicable provisions of the Listing Manual. Suchtransactions will, unless specifically excluded from the ambit of Chapter 9 of the Listing Manual,require an immediate announcement where:

(i) the transaction is of a value equal to, or more than, 3% of the Group’s latest auditedconsolidated net tangible assets; or

(ii) the aggregate value of all transactions entered into with the same interested person duringthe same financial year amounts to 3% or more of the Group’s latest audited consolidatednet tangible assets.

Shareholders’ approval (in addition to an immediate announcement) is required where:

(i) the transaction is of a value equal to, or more than, 5% of the Group’s latest auditedconsolidated net tangible assets; or

(ii) the transaction, when aggregated with other transactions entered into with the sameinterested person during the same financial year, is of a value equal to, or more than, 5% ofthe Group’s latest audited consolidated net tangible assets.

3.6 OTHER CONSIDERATIONS

In respect of the procedures for the review of the Interested Person Transactions, we took note ofthe review threshold limits, the review and approval process when entering into the InterestedPersons Transactions as well as the periodic report to and review by the Audit Committee of thesetransactions.

In addition, we noted that the Audit Committee will review the threshold limits (be it in absolutedollar amount or as a percentage of the latest prevailing audited consolidated NTA of the Group)annually to assure that they are not prejudicial to the interests of the Group and the minorityShareholders. The Audit Committee will also review reports submitted by the Financial Controlleron a half-yearly basis to ascertain that the guidelines and procedures established to monitorInterested Person Transactions have been complied with and the relevant approvals obtained. Inaddition, its Audit Committee shall also review from time to time such guidelines and procedures todetermine if they are adequate and/or commercially practicable in ensuring that transactionsbetween the Company and its interested persons are conducted on normal commercial terms.Pursuant to Rule 920(1)(b)(iv) and (vii) of the Listing Manual, if during its periodic reviews, theAudit Committee believes that the guidelines and procedures as stated under Guidelines andReview Procedures under Shareholders’ Mandate are inappropriate or not sufficient to ensure thatInterested Person Transactions will be carried out on an arm’s length basis and on normalcommercial terms and will not be prejudicial to the interests of the Company and its minorityShareholders, the Company will seek a fresh mandate from the Shareholders based on newguidelines and procedures. During the period prior to obtaining a fresh mandate from theShareholders, all transactions with interested persons will be subject to prior review and approvalby the Audit Committee.

We advise Shareholders to read section entitled “Interested Person Transactions” of the Prospectuscarefully.

VI-4


4. CONCLUSION

In arriving at our opinion on whether the Guidelines and Review Procedures for determining thetransaction prices of the Interested Persons Transactions for the purposes of the Shareholders’Mandate are sufficient to ensure that the transactions will be carried out on normal commercialterms and will not be prejudicial to the interests of the Company and its minority Shareholders, wehave considered the following

(i) rationale for and the benefits to the Shareholders of the Shareholders’ Mandate;

(ii) the guidelines and review procedures adopted for the Interested Person Transactions; and

(iii) the role of the Audit Committee and the Independent Directors.

Based on the analysis undertaken and subject to the qualifications and assumptions madeherein, Omega Capital is of the opinion that the Guidelines and Review Procedures fordetermining the transaction prices under the Shareholders’ Mandate, if always and strictlyadhered to at all times , are sufficient to ensure that the transactions will be carried out onnormal commercial terms and will not be prejudicial to the interests of the Company and itsminority Shareholders.

We have prepared this letter for the use of the Independent Directors of the Company for theirconsideration of the Shareholders’ Mandate and for inclusion in the Prospectus to be dated 27September 2007. This letter (or any part thereof) may not be reproduced, disseminated or quoted(or any part thereof) for any other purpose at any time and in any manner except with OmegaCapital’s prior written consent in each specific case.

This letter is governed by, and construed in accordance with, the laws of Singapore, and is strictlylimited to the matters stated herein and does not apply by implication to any other matter.

Our opinion should not be relied on as an indication of the merits of the Interested PersonTransactions, the Company or the Shares to any potential investor of the Company nor arecommendation to any future shareholder of the Company as to how such shareholder shouldvote on the renewal of the Shareholders’ Mandate, if such is obtained for the Interested PersonTransactions in the future. As each potential investor and future shareholder of the Company mayhave different investment objectives and considerations, they should seek appropriate professionaladvice that is tailored to their circumstances.

This letter is governed by, and construed in accordance with, the laws of Singapore, and is strictlylimited to the matters stated herein and does not apply by implication to any other matter.

Yours trulyFor and on behalf of Omega Capital Limited

David Tan Chao Hsiung Chief Executive Officer

VI-5


VII-1

APPENDIX VII – TERMS, CONDITIONS AND PROCEDURESFOR APPLICATION AND ACCEPTANCE

You are invited to apply and subscribe for 53,550,000 New Shares at the Issue Price for each New Sharesubject to the following terms and conditions:-

1. YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 NEW SHARES AND INTEGRALMULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OF SHARES WILLBE REJECTED.

2. Your application for Offer Shares may be made by way of Offer Shares Application Forms or byway of Electronic Applications through ATMs of the Participating Banks (“ATM ElectronicApplications”) or through Internet Banking (“IB”) websites of the relevant Participating Banks(“Internet Electronic Applications”, which together with ATM Electronic Applications, shall bereferred to as “Electronic Applications”). Your application for the Placement Shares (other thanReserved Shares) may only be made by way of printed Placement Shares Application Forms.Should you be eligible, your application for Reserved Shares may only be made by way of printedReserved Shares Application Forms. YOU MAY NOT USE CPF FUNDS TO APPLY FOR THESHARES.

3. You are allowed to submit only one application in your own name for the Offer Shares or thePlacement Shares (other than Reserved Shares). If you submit an application for OfferShares by way of an Application Form, you MAY NOT submit another application for OfferShares by way of an Electronic Application and vice versa. Such separate applications shallbe deemed to be multiple applications and may be rejected at the discretion of ourCompany, except in the case of applications by approved nominees companies, where eachapplication is made on behalf of a different beneficiary.

If you submit an application for Offer Shares by way of an ATM Electronic Application, youMAY NOT submit another application for Offer Shares by way of an Internet ElectronicApplication and vice versa. Such separate applications shall be deemed to be multipleapplications and may be rejected at the discretion of our Company.

If you, being other than an approved nominee company, have submitted an application forOffer Shares in your own name, you should not submit any other application for OfferShares, whether by way of an Application Form or by way of an Electronic Application, forany other person. Such separate applications shall be deemed to be multiple applicationsand may be rejected at the discretion of our Company.

If you have made an application for Placement Shares (other than Reserved Shares), youshould not make any application for Offer Shares either by way of an Application Form orby way of an Electronic Application and vice versa. Such separate applications shall bedeemed to be multiple applications and may be rejected at the discretion of our Company.

Conversely, if you have made an application for Offer Shares either by way of an ElectronicApplication or by way of an Application Form, you may not make any application forPlacement Shares (other than Reserved Shares). Such separate applications shall bedeemed to be a multiple applications and may be rejected at the discretion of our Company.

If you have made an application for Reserved Shares, you may submit one separateapplication for the Offer Shares in your own name by way of an Application Form or by wayof an Electronic Application, or submit one separate application for Placement Shares (otherthan Reserved Shares) by way of an Application Form, provided that you adhere to theterms and conditions of this Prospectus. Such separate applications shall NOT be treatedas multiple applications.

VII-2


Joint applications shall be rejected. Multiple applications for New Shares shall be liable tobe rejected at the discretion of our Company. If you submit or procure submissions ofmultiple share applications for Offer Shares, Placement Shares or both Offer Shares andPlacement Shares, you may be deemed to have committed an offence under the Penal Code,Chapter 224 of Singapore and the SFA, and your applications may be referred to the relevantauthorities for investigation. Multiple applications or those appearing to be or suspected ofbeing multiple applications may be rejected at the discretion of our Company.

4. We will not accept applications from any person under the age of 21 years, undischargedbankrupts, sole-proprietorships, partnerships, chops or non-corporate bodies, joint SecuritiesAccount holders of CDP and from applicants whose addresses (furnished in their ApplicationForms or, in the case of Electronic Applications, contained in the records of the relevantParticipating Banks) bear post office box numbers.

No person acting or purporting to act on behalf of a deceased person is allowed to apply under theSecurities Account with CDP in the name of the deceased at the time of the application.

5. We will not recognise the existence of a trust. An application by a trustee or trustees must thereforebe made in his/her/their own name(s) and without qualification or, where the application is made byway of an Application Form by a nominee, in the name(s) of an approved nominee company orcompanies after complying with paragraph 6 below.

6. WE WILL ONLY ACCEPT APPLICATIONS FROM APPROVED NOMINEE COMPANIES ONLY.Approved nominee companies are defined as banks, merchant banks, finance companies,insurance companies, licensed securities dealers in Singapore and nominee companies controlledby them. Applications made by nominees other than approved nominee companies shall berejected.

7. IF YOU ARE NOT AN APPROVED NOMINEE COMPANY, YOU MUST MAINTAIN A SECURITIESACCOUNT WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR APPLICATION. If you donot have an existing Securities Account with CDP in your own name at the time of your application,your application will be rejected (if you apply by way of an Application Form), or you will not be ableto complete your Electronic Application (if you apply by way of an Electronic Application). If youhave an existing Securities Account with CDP but fail to provide your Securities Account number orprovide an incorrect Securities Account number in Section B of the Application Form or in yourElectronic Application, as the case may be, your application is liable to be rejected. Subject toparagraph 8 below, your application shall be rejected if your particulars such as name,NRIC/passport number, nationality and permanent residence status provided in your ApplicationForm or contained in the records of the relevant Participating Bank at the time of your ElectronicApplication, as the case may be, differ from those particulars in your Securities Account asmaintained with CDP. If you possess more than one individual direct Securities Account with CDP,your application shall be rejected.

8. If your address as stated in the Application Form or, in the case of an ElectronicApplication, contained in the records of the relevant Participating Bank, as the case may be,is different from the address registered with CDP, you must inform CDP of your updatedaddress promptly, failing which the notification letter on successful allotment and othercorrespondence from CDP will be sent to your address last registered with CDP.

9. Our Company reserves the right to reject any application which does not conform strictly tothe instructions set out in the Application Form and in this Prospectus or which does notcomply with the instructions for Electronic Applications or with the terms and conditions ofthis Prospectus or, in the case of an application by way of an Application Form, which isillegible, incomplete, incorrectly completed or which is accompanied by an improperlydrawn remittance or improper form of remittance.

VII-3


Our Company further reserves the right to treat as valid any applications not completed orsubmitted or effected in all respects in accordance with the instructions set out in theApplication Forms or the instructions for Electronic Applications or the terms andconditions of this Prospectus and also to present for payment or other processes allremittances at any time after receipt and to have full access to all information relating to, orderiving from, such remittances or the processing thereof.

10. Our Company reserves the right to reject or to accept, in whole or in part, or to scale down or toballot any application, without assigning any reason therefor, and no enquiry and/orcorrespondence on the decision of our Company will be entertained. This right applies toapplications made by way of Application Forms and by way of Electronic Applications. In decidingthe basis of allotment which shall be at our discretion, due consideration will be given to thedesirability of allotting the New Shares to a reasonable number of Applicants with a view toestablishing an adequate market for the Shares.

11. Share certificates will be registered in the name of CDP and will be forwarded only to CDP. It isexpected that CDP will send to you, at your own risk, within 15 Market Days after the close of theApplication List, a statement of account stating that your Securities Account has been credited withthe number of New Shares allotted to you, if your application is successful. This will be the onlyacknowledgement of application monies received and is not an acknowledgement by our Company.You irrevocably authorise CDP to complete and sign on your behalf, as transferee or renouncee,any instrument of transfer and/or other documents required for the issue or transfer of the NewShares allotted to you. This authorisation applies to applications made by way of Application Formsand by way of Electronic Applications.

12. In the event that our Company lodges a supplementary or replacement prospectus (“RelevantDocument”) pursuant to the SFA or any applicable legislation in force from time to time prior to theclose of the Invitation, and the New Shares have not been issued, we will (as required by law andsubject to the SFA), at our Company’s sole and absolute discretion, either:-

(i) within 2 days (excluding any Saturday, Sunday or public holiday) from the date of thelodgement of the Relevant Document, give you notice in writing of how to obtain, or arrangeto receive, a copy of the same and provide you with an option to withdraw your applicationand take all reasonable steps to make available within a reasonable period the RelevantDocument to you if you have indicated that you wish to obtain, or have arranged to receive, acopy of the Relevant Document;

(ii) within 7 days of the lodgement of the Relevant Document give you a copy of the RelevantDocument and provide you with an option to withdraw your application; or

(iii) deem your application as withdrawn and cancelled and refund your application monies(without interest or any share of revenue or other benefit arising therefrom) to you within 7days from the lodgement of the Relevant Document.

Any applicant who wishes to exercise his option under paragraph 12(i) and (ii) above to withdrawhis application for the New Shares shall, within 14 days from the date of lodgement of the RelevantDocument, notify us whereupon we shall, within 7 days from the receipt of such notification, returnall monies in respect of such application (without interest or any share of revenue or other benefitarising therefrom) to you and at your own risk.

In the event that at any time at the time of the lodgement of the Relevant Document, the NewShares have already been issued but trading has not commenced, we will (as required by law), atour Company’s sole and absolute discretion, either:-

(iv) within 2 days (excluding Saturday, Sunday or public holiday) from the date of the lodgementof the Relevant Document, give you notice in writing of how to obtain, or arrange to receive,a copy of the same and provide you with an option to return to the Company the InvitationShares which you do not wish to retain title in and take all reasonable steps to makeavailable within a reasonable period the Relevant Document to you if you have indicated thatyou wish to obtain, or have arranged to receive, a copy of the Relevant Document;

(v) within 7 days from the lodgement of the Relevant Document give you a copy of the RelevantDocument and provide you with an option to return the New Shares; or

(vi) deem the issue as void and refund your payment for the New Shares (without interest or anyshare of revenue or other benefit arising therefrom) within 7 days from the lodgement of theRelevant Document.

Any applicant who wishes to exercise his option under paragraph 12(iv) and (v) above to return theNew Shares issued to him shall, within 14 days from the date of lodgement of the RelevantDocument, notify us of this and return all documents, if any, purporting to be evidence of title ofthose New Shares, whereupon we shall, within 7 days from the receipt of such notification anddocuments, pay to him all monies paid by him for the New Shares without interest or any share ofrevenue or other benefit arising therefrom and at his own risk, and the New Shares issued to himshall be void.

Additional terms and instructions applicable upon the lodgement of the supplementary orreplacement prospectus, including instructions on how you can exercise the option to withdrawyour application or return the New Shares allotted to you, may be found in such supplementary orreplacement prospectus.

13. In the event of an under-subscription for Offer Shares as at the close of the Application List, thatnumber of Offer Shares under-subscribed shall be made available to satisfy applications forPlacement Shares to the extent that there is an over-subscription for Placement Shares as at theclose of the Application List.

Any of the Reserved Shares not taken up will be made available first to satisfy applications for thePlacement Shares to the extent that there is an over-subscription for the Placement Shares andthen to satisfy applications for Offer Shares to the extent that there is an over-subscription for OfferShares.

In the event of an under-subscription for Placement Shares (other than Reserved Shares) as at theclose of the Application List, that number of Placement Shares (other than Reserved Shares)under-subscribed shall be made available to satisfy applications for Offer Shares to the extent thatthere is an over-subscription for Offer Shares as at the close of the Application List.

In the event of an over-subscription for Offer Shares as at the close of the Application List andPlacement Shares are fully subscribed or over-subscribed as at the close of the Application List,the successful applications for Offer Shares will be determined by ballot or otherwise asdetermined by our Company and approved by the SGX-ST, if required.

In all the above instances, the basis of allotment of the New Shares as may be decided by ourDirectors in ensuring a reasonable spread of shareholders of our Company, shall be made public,as soon as practicable, via an announcement through the SGX-ST and by advertisement in agenerally circulating daily press.

VII-4


VII-5


14. You consent to the disclosure of you name, NRIC/passport number, address, nationality,permanent resident status, CDP Securities Account number, CPF Investment Account number (ifapplicable) and share application amount from your account with the relevant Participating Bank tothe Registrar for the Invitation and Singapore Share Transfer Agent, SCCS, SGX-ST, CDP, theCompany and the Issue Manager. You irrevocably authorise CDP to disclose the outcome of yourapplication, including the number of New Shares allotted to you pursuant to your application, to us,the Manager, Underwriter and Placement Agent, Primary Sub-Underwriters and Primary Sub-Placement Agents and any other parties so authorised by the forgoing persons. CDP shall not beliable for any delays, failures or inaccuracies in the recording, storage or transmission or delivery ofdata relating to Electronic Applications.

15. Any reference to “you” or the “Applicant” in this section shall include an individual, a corporation, anapproved nominee and trustee applying for the Offer Shares by way of an Application Form or byway of an Electronic Application, a person applying for the Placement Shares through thePlacement Agents and a person applying for the Reserved Shares.

16. By completing and delivering an Application Form or by making and completing an ElectronicApplication by (in the case of an ATM Electronic Application) pressing the “Enter” or “OK” or“Confirm” or “Yes” or any other relevant key on the ATM (as the case may be) or by (in the case ofan Internet Electronic Application) clicking “Submit” or “Continue” or “Yes” or “Confirm” or any otherrelevant button on the IB website screen (as the case may be) in accordance with the provisions ofthis Prospectus, you:-

(a) irrevocably offer to subscribe for the number of New Shares specified in your application (orsuch smaller number for which the application is accepted) at the Issue Price and agree thatyou will accept such New Shares as may be allotted to you, in each case subject to theconditions set out in this Prospectus and the Memorandum and Articles of Association of ourCompany;

(b) agree that, in the event of any inconsistency between the terms and conditions set forapplication set out in this Prospectus and those set out in the ATMs or IB websites of theParticipating Banks, the terms and conditions set out in this Prospectus shall prevail;

(c) agree that the aggregate Issue Price for the New Shares applied for is due and payable tothe Company forthwith;

(d) warrant the truth and accuracy of the information provided in your application, andacknowledge and agree that such information, representations and declarations will be reliedon by our Company in determining whether to accept your application and/or whether to allotany New Shares to you; and

(e) agree and warrant that, if the laws of any jurisdictions outside Singapore are applicable toyour application, you have complied with all such laws and none of our Company, theManager, the Underwriter, the Placement Agent, the Primary Sub-Underwriters and/or thePrimary Sub-Placement Agents will infringe any such laws as a result of the acceptance ofyour application.

17. Our acceptance of applications will be conditional upon, inter alia, our Company being satisfied that:-

(a) permission has been granted by the SGX-ST to deal in and for quotation for all our existingShares and the New Shares on the Official List of SGX-SESDAQ;

VII-6


(b) the Management and Underwriting Agreement and the Placement Agreement referred to inthe sub-section entitled “Management, Underwriting and Placement Agreement” under thesection entitled “General and Statutory Information” of this Prospectus have becomeunconditional and have not been terminated; and

(c) the Authority has not served a stop order which directs that no or no further shares to whichthis Prospectus relates be allotted or issued.

18. In the event that a stop order in respect of the New Shares is served by the Authority or othercompetent authority, and

(a) the New Shares have not been issued, we will (as required by law) deem all applicationswithdrawn and cancelled and our Company shall refund the application monies (withoutinterest or any share of revenue or other benefit arising therefrom) to you within 14 daysfrom the date of the stop order; or

(b) If the New Shares have already been issued but trading has not commenced, the issue will(as required by law) be deemed void and:-

(i) if documents purporting to evidence title had been issued to you, our Company shallinform you to return such documents to our Company within 14 days from that date;and

(ii) we will refund the application monies (without interest or any share of revenue or otherbenefit arising therefrom) to you within 7 days from the date of receipt of thosedocuments (if applicable) or the date of the stop order, whichever is later.

This shall not apply where only an interim stop order has been served.

19. In the event that an interim stop order in respect of the New Shares is served by the Authority orother competent authority, no New Shares shall be issued to you until the Authority revokes theinterim stop order.

20. The Authority is not able to serve a stop order in respect of the New Shares if the New Shareshave been issued and listed on a securities exchange and trading in them has commenced.

21. In the event of any changes in the closure of the Application List or the time period during whichthe Invitation is open, we will publicly announce the same through a SGXNET announcement to beposted on the Internet at the SGX-ST website http://www.sgx.com and through a paidadvertisement in a local English newspaper.

22. We will not hold any application in reserve.

23. We will not allot shares on the basis of this Prospectus later than six months after the date ofregistration of this Prospectus.

24. Additional terms and conditions for applications by way of Application Forms are set out on pagesVII-7 to VII-10 of this Prospectus.

25. Additional terms and conditions for applications by way of Electronic Applications are set out onpages VII-11 to VII-20 of this Prospectus.

VII-7


ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING APPLICATION FORMS

Applications by way of an Application Form shall be made on, and subject to, the terms and conditions ofthis Prospectus including but not limited to the terms and conditions appearing below as well as those setout under the section entitled “TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION ANDACCEPTANCE” of this Prospectus, as well as the Memorandum and Articles of Association of ourCompany.

1. Your application must be made using the WHITE Application Forms and WHITE official envelopes“A” and “B” for Offer Shares, the BLUE Application Forms for Placement Shares (other thanReserved Shares) or the PINK Application Forms for Reserved Shares accompanying and formingpart of this Prospectus. We draw your attention to the detailed instructions contained in therespective Application Forms and this Prospectus for the completion of the Application Formswhich must be carefully followed. Our Company reserves the right to reject applications whichdo not conform strictly to the instructions set out in the Application Forms and thisProspectus or to the terms and conditions of this Prospectus or which are illegible,incomplete, incorrectly completed or which are accompanied by improperly drawnremittances or improper form of remittance.

2. Your Application Forms must be completed in English. Please type or write clearly in ink usingBLOCK LETTERS.

3. All spaces in the Application Forms except those under the heading “FOR OFFICIAL USE ONLY”must be completed and the words “NOT APPLICABLE” or “N.A.” should be written in any spacethat is not applicable.

4. Individuals, corporations, approved nominee companies and trustees must give their names in full.If you are an individual, you must make your application using your full names as it appears in youridentity cards (if you have such an identification document) or in your passports and, in the case ofa corporation, in your full name as registered with a competent authority. If you are not anindividual, you must complete the Application Form under the hand of an official who must statethe name and capacity in which he signs the Application Form. If you are a corporation completingthe Application Form, you are required to affix your Common Seal (if any) in accordance with yourMemorandum and Articles of Association or equivalent constitutive documents of the corporation. Ifyou are a corporate applicant and your application is successful, a copy of your Memorandum andArticles of Association or equivalent constitutive documents must be lodged with our Company’sShare Registrar and Share Transfer Office. Our Company reserves the right to require you toproduce documentary proof of identification for verification purposes.

5. (a) You must complete Sections A and B and sign page 1 of the Application Form.

(b) You are required to delete either paragraph 7(a) or 7(b) on page 1 of the Application Form.Where paragraph 7(a) is deleted, you must also complete Section C of the ApplicationForms with particulars of the beneficial owner(s).

(c) If you fail to make the required declaration in paragraph 7(a) or 7(b), as the case may be, onpage 1 of the Application Form, your application is liable to be rejected.

You (whether you are an individual or corporate applicant, whether incorporated or unincorporatedand wherever incorporated or constituted) will be required to declare whether you are a citizen orpermanent resident of Singapore or a corporation in which citizens or permanent residents ofSingapore or any body corporate constituted under any statute of Singapore having an interest inthe aggregate of more than 50.0 per cent. of the issued share capital of or interests in suchcorporations. If you are an approved nominee company, you are required to declare whether thebeneficial owner of the Shares is a citizen or permanent resident of Singapore or a corporation,

VII-8


whether incorporated or unincorporated and wherever incorporated or constituted, in which citizensor permanent residents of Singapore or any body corporate whether incorporated orunincorporated and wherever incorporated or constituted under any statute of Singapore have aninterest in the aggregate of more than 50.0 per cent. of the issued share capital of or interests insuch corporation.

7. Your application must be accompanied by a remittance in Singapore currency for the full amountpayable, in respect of the number of New Shares applied for, in the form of a BANKER’S DRAFT orCASHIER’S ORDER drawn on a bank in Singapore, made out in favour of “MARCO POLOSHARE ISSUE ACCOUNT” crossed “A/C PAYEE ONLY”, and with your name and addresswritten clearly on the reverse side. Applications not accompanied by any payment or accompaniedby ANY OTHER FORM OF PAYMENT WILL NOT BE ACCEPTED. We will reject remittancesbearing “NOT TRANSFERABLE” or “NON TRANSFERABLE” crossings. No acknowledgement orreceipt will be issued by our Company or the Manager for applications and application moniesreceived.

8. Monies paid in respect of unsuccessful applications are expected to be returned (without interest orany share of revenue or other benefit arising therefrom) to you by ordinary post within 24 hours ofballoting of applications at your own risk. Where your application is rejected or accepted in partonly, the full amount or the balance of the application monies, as the case may be, will be refunded(without interest or any share of revenue or other benefit arising therefrom) to you by ordinary postat your own risk within 14 days after the close of the Application List. In the event that the Invitationdoes not proceed for any reason, the full amount of the application monies received will berefunded (without interest or any share of revenue or other benefit arising therefrom) to you byordinary post or telegraphic transfer at your own risk within five Market Days of the termination ofthe Invitation. In the event that the Invitation is cancelled by us following the issuance of a stoporder by the Authority, the application monies received will be refunded (without interest or anyshare of revenue or other benefit arising therefrom) to you by ordinary post or telegraphic transferat your own risk within 14 days from the date of the stop order.

9. Capitalised terms used in the Application Forms and defined in this Prospectus shall bear themeanings assigned to them in this Prospectus.

10. By completing and delivering the Application Form, you agree that:-

(a) in consideration of our Company having distributed the Application Form to you and agreeingto close the Application List at 12.00 noon on 1 November 2007 or such other time or dateas our Company may, in consultation with the Manager, Underwriter and Placement Agentdecide and by completing and delivering the Application Form:-

(i) your application is irrevocable; and

(ii) your remittance will be honoured on first presentation and that any monies returnablemay be held pending clearance of your payment without interest or any share ofrevenue or other benefit arising therefrom;

(b) all applications, acceptances and contracts resulting therefrom under the Invitation shall begoverned by and construed in accordance with the laws of Singapore and that youirrevocably submit to the non-exclusive jurisdiction of the Singapore courts;

(c) in respect of the New Shares for which your application has been received and not rejected,acceptance of your application shall be constituted by written notification and not otherwise,notwithstanding any remittance being presented for payment by or on behalf of ourCompany;

VII-9


(d) you will not be entitled to exercise any remedy of rescission for misrepresentation at anytime after acceptance of your application;

(e) in making your application, reliance is placed solely on the information contained in thisProspectus and that none of our Company, the Manager, the Underwriter, the PlacementAgents, the Primary Sub-Underwriters, the Primary Sub-Placement Agents or any otherperson involved in the Invitation shall have any liability for any information not so contained;

(f) you consent to the disclosure of your name, NRIC/passport number, address, nationality,permanent resident status, CDP Securities Account number, and share application amountto our Share Registrar, CDP, SCCS, SGX-ST, our Company, the Manager, the Underwriter,the Placement Agent or other authorised operators; and

(g) you irrevocably agree and undertake to subscribe for the number of New Shares applied foras stated in the Application Form or any smaller number of such New Shares that may beallotted to you in respect of your application. In the event that our Company decides to allot asmaller number of New Shares or not to allot any New Shares to you, you agree to acceptsuch decision as final.

Applications for Offer Shares

1. Your application for Offer Shares MUST be made using the WHITE Offer Shares Application Formsand WHITE official envelopes “A” and “B”.

2. You must:-

(a) enclose the WHITE Offer Shares Application Form, duly completed and signed, together withthe correct remittance in accordance with the terms and conditions of this Prospectus in theWHITE envelope “A” provided;

(b) in the appropriate spaces on WHITE envelope “A”:-

(i) write your name and address;

(ii) state the number of Offer Shares applied for;

(iii) tick the relevant box to indicate the form of payment; and

(iv) affix adequate Singapore postage;

(c) SEAL WHITE ENVELOPE “A”;

(d) write, in the special box provided on the larger WHITE envelope “B” addressed to UOB ASIALIMITED, 1 RAFFLES PLACE #13-01, OUB CENTRE, SINGAPORE 048616, the number ofOffer Shares you have applied for; and

(e) insert WHITE envelope “A” into WHITE envelope “B”, seal WHITE envelope “B” andthereafter DESPATCH BY ORDINARY POST OR DELIVER BY HAND at your own risk toUOB ASIA LIMITED, 1 RAFFLES PLACE #13-01, OUB CENTRE, SINGAPORE 048616, toarrive by 12.00 noon on 1 November 2007 or such other time as our Company may, inconsultation with UOB Asia, decide. Local Urgent Mail or Registered Post must NOTbe used.

VII-10


3. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperlydrawn remittances or improper form of remittance or which are not honoured upon their firstpresentation are liable to be rejected.

4. ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement of receiptwill be issued for any application or remittance received.

Applications for Placement Shares (other than Reserved Shares)

1. Your application for Placement Shares (other than Reserved Shares) MUST be made using theBLUE Placement Shares Application Forms.

2. The completed BLUE Placement Shares Application Form and the correct remittance in full inrespect of the number of Placement Shares applied for (in accordance with the terms andconditions of this Prospectus) with your name and address written clearly on the reverse side, mustbe enclosed and sealed in an envelope to be provided by you. The sealed envelope must beDESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at your own risk to UOB ASIALIMITED, 1 RAFFLES PLACE #13-01, OUB CENTRE, SINGAPORE 048616, to arrive by 12.00noon on 1 November 2007 or such other time as our Company may, in consultation withUOB Asia, decide. Local Urgent Mail or Registered Post must NOT be used.


4. ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement of receiptwill be issued for any application or remittance received.

Applications for Reserved Shares

1. Your application for Reserved Shares MUST be made using the PINK Reserved SharesApplication Forms.

2. The completed PINK Reserved Shares Application Form and the correct remittance (in accordancewith the terms and conditions of this Prospectus) with your name and address written clearly onthe reverse side, must be enclosed and sealed in an envelope to be provided by you. The sealedenvelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at your ownrisk to our Company’s registered office at 1 Sims Lane, #04-11, Singapore 387355 to arrive by12.00 noon on 1 November 2007 or such other time as our Company may, in consultationwith UOB Asia, decide. Local Urgent Mail or Registered Post must NOT be used.


4. ONLY ONE APPLICATION should be enclosed in each envelop. No acknowledgement of receiptwill be issued for any application or remittance received.

VII-11


ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS

The procedures for Electronic Applications are set out on the ATM screens (in the case of ATM ElectronicApplications) and the IB website screens (in the case of Internet Electronic Applications) of the relevantParticipating Banks. Currently, UOB Group and DBS, are the only Participating Banks through whichInternet Electronic Applications can be made. For illustration purposes, the procedures for ElectronicApplications through ATMs and the IB website of UOB are set out respectively in the “Steps for ElectronicApplications through ATMs of UOB” and the “Steps for Internet Electronic Applications through the IBwebsite of UOB Group” (collectively, the “Steps”) appearing on pages VII-16 to VII-20 of this Prospectus.The Steps set out the actions that you must take at an ATM or the IB website of UOB to complete anElectronic Application. Please read carefully the terms of this Prospectus, the Steps and the terms andconditions for Electronic Applications set out below before making an Electronic Application. Anyreference to “you” in the additional terms and conditions for Electronic Applications and the Steps shallrefer to you making an application for Offer Shares through an ATM or the IB website of a relevantParticipating Bank.

Applicants applying for the Offer Shares by way of Electronic Applications may incur an adminsitrative feeand/or such related charges as stipulated by the respective Participating Banks from time to time.

You must have an existing bank account with and be an ATM cardholder of one of the Participating Banksbefore you can make an Electronic Application at the ATMs. An ATM card issued by one ParticipatingBank cannot be used to apply for Offer Shares at an ATM belonging to other Participating Banks. For anInternet Electronic Application, you must have an existing bank account with and an IB User Identification(“User ID”) and a Personal Identification Number/Password (“PIN”) given by the relevant ParticipatingBank. The Steps set out the actions that you must take at ATMs or the IB website of UOB to complete anElectronic Application. The actions that you must take at ATMs or the IB websites of other ParticipatingBanks are set out on the ATM screens or the IB website screens of the relevant Participating Banks.Upon the completion of your ATM Electronic Application transaction, you will receive an ATM transactionslip (“Transaction Record”), confirming the details of your Electronic Application. Upon completion of yourInternet Electronic Application through the IB website of UOB Group, there will be an on-screenconfirmation (“Confirmation Screen”) of the application which can be printed for your record. TheTransaction Record or your printed record of the Confirmation Screen is for your retention and should notbe submitted with any Application Form.

You must ensure that you enter your own Securities Account number when using the ATM cardissued to you in your own name. If you fail to use your own ATM card or if you do not key in yourown Securities Account number, your application will be rejected. If you operate a joint bankaccount with any of the Participating Banks, you must ensure that you enter your own SecuritiesAccount number when using the ATM card issued to you in your own name. Using your ownSecurities Account number with an ATM card which is not issued to you in your own name willrender your ATM Electronic Application liable to be rejected.

You must ensure, when making an Internet Electronic Application, that your mailing address for theaccount selected for the application is in Singapore and the application is being made in Singapore andyou will be asked to declare accordingly. Otherwise your application is liable to be rejected.

You shall make an Electronic Application in accordance with and subject to the terms and conditions ofthis Prospectus including but not limited to the terms and conditions appearing below and those set outunder the section entitled “TERMS, CONDITIONS AND PROCEDURES FOR APPLICATION ANDACCEPTANCE” of this Prospectus as well as the Memorandum and Articles of Association of ourCompany.

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1. In connection with your Electronic Application for Offer Shares, you are required to confirmstatements to the following effect in the course of activating your Electronic Application:-

(a) that you have received a copy of this Prospectus (in the case of an ATM ElectronicApplication only) and have read, understood and agreed to all the terms andconditions of application for Offer Shares and this Prospectus prior to effecting theElectronic Application and agree to be bound by the same;

(b) that you consent to the disclosure of your name, NRIC/passport number, address,nationality, permanent residence status, share application amount, CPF InvestmentAccount number (if applicable) and CDP Securities Account number and applicationdetails (the “Relevant Particulars”) with the relevant Participating Bank to the CDP,CPF, SCCS, SGX-ST, Share Registrar, our Company and the Manager or otherauthorised operators (the “Relevant Parties”); and

(c) that this is your only application for Offer Shares and it is made in your own name andat your own risk.

Your application will not be successfully completed and cannot be recorded as a completedtransaction in the ATM or on the IB website unless you press the “Enter” or “Confirm” or “Yes” or“OK” or any other relevant key in the ATM or click “Confirm” or “OK” or “Submit” or “Continue” or“Yes” or any other relevant button on the IB website screen. By doing so, you shall be treated assignifying your confirmation of each of the above three statements. In respect of statement 1(b)above, such confirmation, shall signify and shall be treated as your written permission, given inaccordance with the relevant laws of Singapore including Section 47(2) of the Banking Act(Chapter 19) of Singapore to the disclosure by the relevant Participating Bank of the RelevantParticulars to the Relevant Parties.

2. BY MAKING AN ELECTRONIC APPLICATION, YOU CONFIRM THAT YOU ARE NOT APPLYINGFOR OFFER SHARES AS A NOMINEE OF ANY OTHER PERSON AND THAT ANYELECTRONIC APPLICATION THAT YOU MAKE IS THE ONLY APPLICATION MADE BY YOU ASTHE BENEFICIAL OWNER.

YOU SHOULD MAKE ONLY ONE ELECTRONIC APPLICATION FOR OFFER SHARES ANDSHOULD NOT MAKE ANY OTHER APPLICATION FOR OFFER OR PLACEMENT SHARES(OTHER THAN RESERVED SHARES), WHETHER AT THE ATMS OR THE IB WEBSITES (IFANY) OF ANY PARTICIPATING BANK OR ON THE APPLICATION FORMS. IF YOU HAVE MADEAN APPLICATION FOR OFFER OR PLACEMENT SHARES (OTHER THAN RESERVEDSHARES) ON AN APPLICATION FORM, YOU SHALL NOT MAKE AN ELECTRONICAPPLICATION FOR OFFER SHARES AND VICE VERSA.

3. You must have sufficient funds in your bank account with your Participating Bank at the time youmake your Electronic Application, failing which your Electronic Application will not be completed oraccepted. Any Electronic Application which does not conform strictly to the instructions setout in this Prospectus or on the screens of the ATM or the IB website of the relevantParticipating Bank through which your Electronic Application is being made shall berejected.

You may make an ATM Electronic Application at the ATM of any Participating Bank or an InternetElectronic Application at the IB website of the relevant Participating Bank for the Offer Shares usingonly cash by authorising such Participating Bank to deduct the full amount payable from youraccount with such Participating Bank.

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4. You irrevocably agree and undertake to subscribe for and to accept the number of Offer Sharesapplied for as stated on the Transaction Record or the Confirmation Screen or any lesser numberof Offer Shares that may be allotted to you in respect of your Electronic Application.

In the event that our Company decide to allot any lesser number of such Offer Shares or not toallot any Offer Shares to you, you agree to accept such decision as final. If your ElectronicApplication is successful, your confirmation (by your action of pressing the “Enter” or “Confirm” or“Yes” or “OK” or any other relevant key on the ATM or clicking “Confirm” or “OK” or “Submit” or“Continue” or “Yes” or any other relevant button on the IB website screen) of the number of OfferShares applied for shall signify and shall be treated as your acceptance of the number of OfferShares that may be allotted to you and your agreement to be bound by the Memorandum andArticles of Association of our Company.

5. We will not keep any applications in reserve. Where your Electronic Application is unsuccessful,the full amount of the application monies will be refunded in Singapore currency (without interest orany share of revenue or other benefit arising therefrom) to you by being automatically credited toyour account with your Participating Bank within 24 hours of balloting of the applications providedthat the remittance in respect of such application which has been presented for payment or otherprocesses have been honoured and the application monies have been received in the designatedShare issue account.

Where your Electronic Application is rejected or accepted in part only, the full amount or thebalance of the application monies, as the case may be, will be refunded in Singapore currency(without interest or any share of revenue or other benefit arising therefrom) to you by beingautomatically credited to your account with your Participating Bank within 14 days after the close ofthe Application List provided that the remittance in respect of such application which has beenpresented for payment or other processes have been honoured and the application monies havebeen received in the designated Share issue account. In the event that the Invitation does notproceed for any reason, the full amount of the application monies received will be refunded (withoutinterest or any share of revenue or other benefit arising therefrom) to you by ordinary post ortelegraphic transfer at your own risk within 5 Market Days of the termination of the Invitation.

Responsibility for timely refund of application monies from unsuccessful or partiallysuccessful Electronic Applications lies solely with the respective Participating Banks.Therefore, you are strongly advised to consult your Participating Bank as to the status ofyour Electronic Application and/or the refund of any monies to you from unsuccessful orpartially successful Electronic Application, to determine the exact number of Offer Sharesallotted to you before trading the Offer Shares on SGX-SESDAQ. You may also call CDPPhone at 6535 7511 to check the provisional results of your application by using your T-pin(issued by CDP upon your application for the service) and keying in the stock code (that willbe made available together with the results of the allotment via an announcement throughthe SGX-ST and by advertisement in a generally circulating daily press). To sign up for theservice, you may contact CDP customer service officers. Neither the SGX-ST, the CDP, theSCCS, the Participating Banks, our Company nor the Manager assume any responsibility forany loss that may be incurred as a result of you having to cover any net sell positions orfrom buy-in procedures activated by the SGX-ST.

6. If your Electronic Application is unsuccessful, no notification will be sent by the Participating Banks.

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If you make Electronic Applications through the ATMs of the following Participating Banks, you maycheck the results of your Electronic Applications as follows:-

ServiceBank Telephone ATM/Internet Operating hours expected from

UOB 1800-222 2121 ATM (Other Transactions ATM/Phone Banking Evening of theGroup – “IPO Enquiry”)(1) – 24 hours a day balloting day

http://www.uobgroup.com(1)(2)

Internet Banking– 24 hours a day

DBS 1800-339 6666 Internet Banking 24 hours a day Evening of the Bank (for POSB Account http://www.dbs.com(2) balloting day

holders)

1800-111 1111(for DBS Account holders)

OCBC 1800-363 3333 ATM/Internet Banking/ 24 hours a day Evening of the Phone Banking balloting dayhttp://www.ocbc.com(3)

Notes:-

(1) If you make your Electronic Applications through the ATMs or IB website of UOB Group, you may check the results ofyour application through UOB Personal Internet Banking, UOB Group ATMs or UOB PhoneBanking Services.

(2) If you make your Internet Electronic Application through the IB website of UOB Group or DBS Bank, you may checkthe result of your application through the same channels listed in the table above in relation to ATM ElectronicApplication made at ATMs of UOB Group or DBS Bank.

(3) If you have made an Electronic Application through the ATMs of OCBC Bank, you may check the results of yourElectronic Application through the same channels listed in the table above.

7. You irrevocably agree and acknowledge that your Electronic Application is subject to risks ofelectrical, electronic, technical and computer-related faults and breakdowns, fires, acts of God andother events beyond the control of the Participating Banks, our Company and the Manager,Underwriter and Placement Agent and if, in any such event, our Company, the Manager,Underwriter and Placement Agent and/or the relevant Participating Bank do not receive yourElectronic Application, or data relating to your Electronic Application or the tape or any otherdevices containing such data is lost, corrupted or not otherwise accessible, whether wholly orpartially for whatever reason, you shall be deemed not to have made an Electronic Application andyou shall have no claim whatsoever against our Company, the Manager, Underwriter andPlacement Agent and/or the relevant Participating Bank for Offer Shares applied for or for anycompensation, loss or damage.

8. Electronic Applications shall close at 12.00 noon on 1 November 2007 or such other time as ourCompany may, in consultation with UOB Asia, decide. Subject to the paragraph above, an InternetElectronic Application is deemed to be received only upon its completion, that is, when there is anon-screen confirmation of the application.

9. You are deemed to have irrevocably requested and authorised our Company to:-

(a) register the Offer Shares allotted to you in the name of CDP for deposit into your SecuritiesAccount;

VII-15


(b) send the relevant Share certificate(s) to CDP;

(c) return or refund (without interest or any share of revenue earned or other benefit arisingtherefrom) the application monies, should your Electronic Application be unsuccessful, byautomatically crediting your bank account with your Participating Bank with the relevantamount within 24 hours of the balloting of applications; and

(d) return or refund (without interest or any share of revenue or other benefit arising therefrom)the balance of the application monies, should your Electronic Application be accepted in partonly, by automatically crediting your bank account with your Participating Bank with therelevant amount within 14 days after the close of the Application List.

10. We do not recognise the existence of a trust. Any Electronic Application by a trustee must be madein your own name and without qualification. Our Company will reject any application by any personacting as nominee except those made by approved nominee companies only.

11. All your particulars in the records of your relevant Participating Bank at the time you make yourElectronic Application shall be deemed to be true and correct and your relevant Participating Bankand the Relevant Parties shall be entitled to rely on the accuracy thereof. If there has been anychange in your particulars after the time of the making of your Electronic Application, you shallpromptly notify your relevant Participating Bank.

12. You should ensure that your personal particulars as recorded by both CDP and the relevantParticipating Bank are correct and identical, otherwise, your Electronic Application is liableto be rejected. You should promptly inform CDP of any change in address, failing which thenotification letter on successful allotment will be sent to your address last registered with CDP.

13. By making and completing an Electronic Application, you are deemed to have agreed that:-

(a) in consideration of our Company making available the Electronic Application facility, throughthe Participating Banks as the agents of our Company, at the ATMs and IB websites (if any):-

(i) your Electronic Application is irrevocable; and

(ii) your Electronic Application, our acceptance and the contract resulting therefrom underthe Invitation shall be governed by and construed in accordance with the laws ofSingapore and you irrevocably submit to the non-exclusive jurisdiction of theSingapore courts;

(b) neither our Company, the Manager, Underwriter and Placement Agent, CDP nor theParticipating Banks shall be liable for any delays, failures or inaccuracies in the recording,storage or in the transmission or delivery of data relating to your Electronic Application to ourCompany or CDP due to breakdowns or failure of transmission, delivery or communicationfacilities or any risks referred to in paragraph 7 above or to any cause beyond our respectivecontrols;

(c) in respect of Offer Shares for which your Electronic Application has been successfullycompleted and not rejected, acceptance of your Electronic Application shall be constituted bywritten notification by or on behalf of our Company and not otherwise, notwithstanding anypayment received by or on behalf of our Company;

(d) you will not be entitled to exercise any remedy of rescission for misrepresentation at anytime after acceptance of your application; and

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(e) in making your application, reliance is placed solely on the information contained in thisProspectus and that none of our Company, the Manager, Underwriter and Placement Agentor any other person involved in the Invitation shall have any liability for any information not socontained.

Steps for Electronic Applications through ATMs and the IB website of UOB Group

The instructions for Electronic Applications will appear on the ATM screens and the IB website screens ofthe respective Participating Banks. For illustrative purposes, the steps for making an ElectronicApplication through UOB Group’s ATMs or through the IB website of UOB Group are shown below.Instructions for Electronic Applications appearing on the ATM screens and the IB website screens (if any)of the relevant Participating Banks (other than UOB Group) may differ from that represented below.

Owing to space constraints on UOB Group’s ATM screens, the following terms will appear in abbreviatedform:-

“&” : and

“A/C” and “A/CS” : ACCOUNT AND ACCOUNTS, respectively

“ADDR” : ADDRESS

“AMT” : AMOUNT

“APPLN” : APPLICATION

“CDP” : THE CENTRAL DEPOSITORY (PTE) LIMITED

“CPF” : CENTRAL PROVIDENT FUND BOARD

“CPFINVT A/C” : CPF INVESTMENT ACCOUNT

“ESA” : ELECTRONIC SHARE APPLICATION

“IC/PSSPT” : NRIC or PASSPORT NUMBER

“NO” or “NO.” : NUMBER

“PERSONAL NO” : PERSONAL IDENTIFICATION NUMBER

“REGISTRARS” : SHARE REGISTRARS

“SCCS” : SECURITIES CLEARING & COMPUTER SERVICES (PTE) LTD

“YR” : YOUR

Steps for an ATM Electronic Application through ATMs of UOB Group

Step 1 : Insert your personal Unicard, Uniplus card or UOB VISA/MASTER card and key in yourpersonal identification number.

2 : Select “CASHCARD/OTHER TRANSACTIONS”.

3 : Select “SECURITIES APPLICATION”.

4 : Select “ESA-FIXED”.

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5 : Select the share counter which you wish to apply for.

6 : Read and understand the following statements which will appear on the screen:-

– THIS OFFER OF SECURITIES (OR UNITS OF SECURITIES) WILL BE MADE IN,OR ACCOMPANIED BY, A COPY OF THE PROSPECTUS/DOCUMENT ORSUPPLEMENTARY DOCUMENTS. ANYONE WISHING TO ACQUIRE THESESECURITIES (OR UNITS OF SECURITIES) WILL NEED TO MAKE ANAPPLICATION IN THE MANNER SET OUT IN THE PROSPECTUS/DOCUMENTOR SUPPLEMENTARY DOCUMENT(Customer to press “ENTER” to continue)

– PLEASE CALL 1800-22-22-121 IF YOU WOULD LIKE TO FIND OUT WHERE YOUCAN OBTAIN A COPY OF THE PROSPECTUS/DOCUMENT ORSUPPLEMENTARY DOCUMENT

– WHERE APPLICABLE, A COPY OF THE PROSPECTUS/DOCUMENT ORSUPPLEMENTARY DOCUMENT HAS BEEN LODGED WITH AND REGISTEREDBY THE MONETARY AUTHORITY OF SINGAPORE WHO ASSUMES NORESPONSIBILITY FOR THE CONTENTS OF THE PROSPECTUS/DOCUMENTOR SUPPLEMENTARY DOCUMENT(Customer to press “ENTER” key to confirm that you have read and understood theabove statements)

7 : Read and understand the following terms which will appear on the screen:-

– YOU HAVE READ, UNDERSTOOD & AGREED TO ALL TERMS OF THE PROSPECTUS/DOCUMENT/SUPPLEMENTARY DOCUMENT & THISELECTRONIC APPLICATION(Customer to press “ENTER” to continue)

– YOU CONSENT TO DISCLOSE YR NAME, IC/PSSPT, NATIONALITY, ADDR,APPLN AMT, CPFINVT A/C NO & CDP A/C NO FROM YR A/CS TO CDP, CPF,SCCS, REGISTRARS, SGX-ST & ISSUER)

– THIS IS YR ONLY FIXED PRICE APPLN & IS IN YR NAME & AT YR RISK(Customer to press “ENTER” to continue)

8 : Screen will display:-

NRIC/Passport No. XXXXXXXXXXXX

IF YOUR NRIC NO / PASSPORT NO IS INCORRECT, PLEASE CANCEL THETRANSACTION AND NOTIFY THE BRANCH PERSONALLY.(Customer to press “CANCEL” or “CONFIRM”)

9 : Select mode of payment i.e. “CASH ONLY”. You will be prompted to select Cash Accounttype to debit (i.e., “CURRENT ACCOUNT / I- ACCOUNT”, “CAMPUS” OR “SAVINGSACCOUNT / TX ACCOUNT“). Should you have a few accounts linked to your ATM card, alist of linked account numbers will be displayed for you to select

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10 : After you have selected the account, your CDP Securities Account number will bedisplayed for you to confirm or change (This screen with your CDP Securities Accountnumber will be shown if your CDP Securities Account number is already stored in theATM system of UOB). If this is the first time you are using UOB’s ATM to apply forShares, your CDP Securities Account number will not be stored in the ATM system ofUOB, and the following screen will be displayed for your input of your CDP SecuritiesAccount number

11 : Read and understand the following terms which will appear on the screen:-

1. YOU ARE REQUIRED TO ENTER YOUR CDP A/C NO. FOR YOUR FIRST IPOAPPLICATION. THIS A/C NO. WOULD BE DISPLAYED FOR FUTUREAPPLICATIONS.

2. DO NOT APPLY FOR JOINT A/C HOLDER OR THIRD PARTIES

3. PLEASE USE YOUR OWN CDP A/C NO. (12 DIGITS) 1681-XXXX-XXXX

4. PRESS ENTER KEY(If you wish to terminate the transaction, please press “CANCEL”)

12 : Key in your CDP Securities Account number (12 digits) and press the “ENTER” key

13 : Select your nationality status

14 : Key in the number of Shares you wish to apply for and press the “ENTER” key

15 : Check the details of your Electronic Application on the screen and press “ENTER” key toconfirm your Electronic Application

16 : Select “NO” if you do not wish to make any further transactions and remove theTransaction Record. You should keep the Transaction Record for your own reference only

Owing to space constraints on UOB Group’s IB website screens, the following terms will appear inabbreviated form:-

“CDP” : The Central Depository (Pte) Limited

“CPF” : The Central Provident Fund

“NRIC” or “I/C” : National Registration Identity Card

“PR” : Permanent Resident

“SGD” or “$” : Singapore Dollars

“SCCS” : Securities Clearing & Computer Services (Pte) Ltd

“SGX” : Singapore Exchange Securities Trading Limited

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Steps for an Internet Electronic Application through the IB website of UOB Group

Step 1 : Connect to UOB website at http://www.uobgroup.com

2 : Locate the Login icon on the left hand side next to “Internet Banking”

3 : Click on Login and at drop list select “UOB Personal Internet Banking”

4 : Enter your Username and Password and click “Submit”

5 : Select “Investment Services” (“IPO” should be the default transaction that appears, select“Application”)

6 : Read the IMPORTANT notice and complete the declarations found on the bottom of thepage by answering Yes/No to the questions

7 : Click “Continue”

8 : Select your country of residence (you must be residing in Singapore to apply), and click“Continue”

9 : Select the IPO counter from the drop list (if there are concurrent IPOs) and click“Continue”

10 : Check the share counter, select the mode of payment and account number to debit andclick on “Continue”

11 : Read the important instructions and click on “Continue” to confirm that:-

1. You have read, understood and agreed to all terms and conditions of theapplication and Prospectus/Document or Supplementary Document.

2. You consent to disclose your name, I/C or passport number, address,nationality, CDP Securities Account number, CPF Investment Accountnumber (if applicable), and application details to the share registrars, SGX,SCCS, CDP, CPF Board and issuer.

3. This application is made in your own name for your own account and at yourown risk.

4. For FIXED/MAX price shares application, this is your only application. ForTENDER price shares application, this is your only application at the selectedtender price.

5. For FOREIGN CURRENCY securities, subject to the terms of the issue, pleasenote the following: The application monies will be debited from your bankaccount in $, based on the Bank’s prevailing board rates at the time ofapplication. The different prevailing board rates at the time of the applicationand at the time of refund of applications monies may result in either a foreignexchange profit or loss, or application monies may be debited and refundscredited in $ at the same exchange rate.

6. For 1st-Come-1st Serve securities, the number of securities applied for may bereduced, subject to the availability at the point of application.

12 : Check your personal details, details of the share counter you wish to apply for andaccount to debit

Select (a) Nationality;

Enter (b) your CDP securities account number; and

(c) the number of shares applied for

13 : Click ”Submit”, “Clear” or “Cancel”

14 : Print the Confirmation Screen (optional) for own your reference and retention only

VII-20
