JES International : Capitalisation of Amounts Owing

JES INTERNATIONAL HOLDINGS LIMITED

(Incorporated in the Republic of Singapore on 4 April 2006) (Company Registration Number 200604831K)

CAPITALISATION OF AMOUNTS OWING BY JES INTERNATIONAL HOLDINGS LIMITED TO JES OVERSEAS INVESTMENT LIMITED

1. INTRODUCTION

   The Board of Directors (the "Board") of JES International Holdings Limited (the "Company") wishes to announce that the Company and JES Overseas Investment Limited (the "Subscriber") has entered into a subscription agreement on 19 May 2017 (the "Subscription Agreement").

2. INFORMATION ON THE SUBSCRIBER AND BACKGROUND TO THE SUBSCRIPTION AGREEMENT

3. The Subscriber is a company incorporated in the British Virgin Islands. Its principal business is that of investment holding and it is a controlling shareholder of the Company, holding 412,803,200 shares or 34.17% of the total issued and paid-up share capital of the Company.

4. The Subscriber had advanced sums of monies to the Company for the purposes of payment of part of the Company's trade payables and operating expenses of the Company's corporate office and as at the financial year ended 31 December 2015 ("FY2015"), such advanced sums amount to S$2,790,480 (the "Trade Loan").

5. Additionally, certain of the Company's subsidiaries (the "Defaulting Subsidiaries") had entered into shipbuilding contracts dated 12 September 2012 (the "Shipbuilding Contracts") with Vega Shipbuilding 1 Pte Ltd, a company incorporated in Singapore (the "Beneficiary") pursuant to which the Company had given a corporate guarantee dated 12 September 2012 in favour of the Beneficiary to secure the performance of the Defaulting Subsidiaries' obligations under the Shipbuilding Contracts (the "Corporate Guarantee").

6. The Defaulting Subsidiaries were subsequently unable to perform their obligations under the Shipbuilding Contracts and the Beneficiary accordingly called on the Corporate Guarantee. The Company was unable to discharge its obligations under the Corporate Guarantee and at the request of the Company, the Subscriber had discharged the obligations of the Company by making a cash payment for and on behalf of the Company to the Beneficiary in the financial year ended 31 December 2016, amounting to S$4,563,086 (the "Vega Loan").

7. Further, the Company refers to its announcement dated 4 July 2014 (Ref: SG140704OTHRCLE0) in relation to the proposed transaction with Scibois Co Ltd (the "Scibois Transaction") wherein it was announced that the Company had entered into a share lending agreement with the Subscriber on 4 July 2014 (the "Share Lending Agreement") pursuant to which the Subscriber had lent shares in the Company to the Company for the purposes of the Scibois Transaction.

8. A total of 120,802,800 shares (the "Transferred Shares") in the Company was lent to the Company pursuant to the Share Lending Agreement, to be transferred to Yang Shushan (the "Transferee"). The Transferred Shares were the subject of a moratorium as agreed between the Company and the Transferee, the terms of which were subsequently breached by the Transferee when he subsequently transferred 60,000,000 shares in the Company (the "Breach").

9. Subsequently, the Singapore High Court had on 5 April 2016 awarded the Company a sum of S$2,088,600 as damages arising out of the Breach, being the monetary value of 60,000,000 shares of the Company at S$0.03 per share, together with interests and costs (the "Judgment Sum"). The Company takes the position that the Subscriber is entitled to the Judgment Sum as it is awarded based on part of the Transferred Shares which were borrowed from the Subscriber.

10. Pursuant to a loan and settlement agreement entered into between the Company and the Subscriber on 19 May 2017 (the "Loan and Settlement Agreement") and subject to the terms and conditions therein, the sum of the Trade Loan, the Vega Loan and the Judgment Loan being a total of S$9,442,166 would constitute a loan from the Subscriber to the Company (the "Shareholder Loan").

11. The Company shall issue 115,000,000 shares in the Company, representing approximately 8.69% of the entire issued and paid-up share capital of the Company on a fully diluted basis (the "Subscription Shares") equivalent to S$2,990,000 at S$0.026 per share, being the weighted average price of the Company's shares for trades done on the SGX-ST for the full market day on 3 March 2015 (the preceding market day before trading in the Company's shares was halted) and up to 4.07 p.m. on 4 March 2015, being the last market day on which trading in the Company's shares were halted and since subsequently suspended (the "Capitalisation of Loan") to the Subscriber for the purposes of repayment of the Shareholder Loan

12. Alternatively and only when the Capitalisation of Loan cannot be effected, the Shareholder Loan may be repaid by the Company to the Subscriber by way of cash, within 6 months from the date of the Loan and Settlement Agreement.

13. The balance amount of the Shareholder Loan being S$6,452,166 (the "Balance") shall be interest-free from the date of the Loan and Settlement Agreement to the date of resumption of trading in the Company's shares. Upon the resumption of trading in the Company's shares, the Audit Committee of the Company shall negotiate with the Subscriber on the interest payable on the Shareholder Loan, if any.

14. In the event that the Company is unable to allot and issue the Subscription Shares to the Subscriber in connection with the Capitalisation of Loan, interests shall be payable on the entire sum of Shareholder Loan.

15. PRINCIPAL TERMS OF THE SUBSCRIPTION AGREEMENT

16. The Company shall issue 115,000,000 shares in the Company, representing 8.69% of the entire issued and paid-up share capital of the Company on a fully diluted basis (the "Subscription Shares") equivalent to S$2,990,000 at S$0.026 per share, being the weighted average price of S$0.026 of the Company's shares for trades done on the SGX-ST for the full market day on 3 March 2015 (the preceding market day before trading in the Company's shares was halted) and up to 4.07 p.m. on 4 March 2015, being the last market day on which trading in the Company's shares were halted and since subsequently suspended (the "Capitalisation of Loan") to the Subscriber for the purposes of repayment of the Shareholder Loan.

17. The shareholding structure subsequent to the Capitalisation of Loan is:

    Shareholding of the Subscriber before Capitalisation of Loan	Capitalisation of Loan*	Shareholding of the Subscriber after Capitalisation of Loan*
    412,803,200	115,000,000	527,803,200
    34.17%	8.69%	39.89%
    *calculated based on the enlarged share capital of the Company subsequent to the Capitalisation of Loan

18. Subsequent to the Capitalisation of Loan, the Company will have an enlarged share capital comprising 1,323,028,000 issued and paid-up shares.

19. Conditions Precedent to the Subscription Agreement

    The issue and allotment of the Subscription Shares to the Subscriber shall be subject to, inter alia:

20. approval in-principle for the listing and quotation of the Subscription Shares on the Mainboard of the SGX-ST (on conditions, if any, acceptable to the Company and the Investor) having been obtained from the SGX-ST and remaining in full force and effect and where such approval is given subject to conditions which must be fulfilled on or before the Completion Date, such conditions being reasonably acceptable to the Investor or fulfilled by the Company, as the case may be;

21. the Company obtaining such approval(s) from the Board in connection with the Subscription Agreement and the transactions contemplated herein as may be necessary;

22. the allotment, issue and subscription of the Subscription Shares by the Subscriber not being prohibited by any statute, order, rule or regulation promulgated or issued hereafter by any legislative, executive or regulatory body or authority of Singapore;

23. the representations and warranties of the Company in the Subscription Agreement being true, accurate and correct in all material respects as if made on the Completion Date, with reference to the then existing circumstances and the Company having performed in all material respects all of its obligations therein to be performed on or before the Completion Date; and

24. the approval of the shareholders having been obtained pursuant to Rule 805 or 806 of the SGX-ST Listing Manual (as the case may be), for the allotment and issue of the Subscription Shares to the Subscriber.

    "Completion Date" for the purposes of Paragraph 3.4 means the date notified in writing by the Company to the Subscriber as the date of Completion.

25. APPROVALS OF THE SUBSCRIPTION AGREEMENT

26. The Subscriber currently holds 34.17% of the entire issued and paid-up share capital of the Company and accordingly, the Company shall seek approval of the shareholders for the Capitalisation of Loan pursuant to Rule 812(2) of the SGX-ST Listing Manual via an extraordinary general meeting ("EGM"). The Subscriber shall abstain from voting at the EGM pursuant to resolutions in connection with the Subscription Agreement.

27. The Subscription Shares, when allotted and issued, will represent approximately:

28. 8.69% of the issued and paid-up share capital of the Company immediately after the Capitalisation of Loan; and

29. approximately 39.89% of the enlarged share capital of the Company on a fully diluted basis immediately following the Capitalisation of Loan held by the Subscriber

and accordingly, pursuant to the requirements of the Singapore Code on Take-overs and Mergers, the Subscriber will be making an application to the Securities Industry Council ("SIC") for a waiver of the obligations of the Subscriber and its concert parties to make a mandatory offer for the Company to acquire all the remaining shares in the Company not owned, controlled or agreed to be acquired by the Subscriber.

30. The Capitalisation of Loan is further conditional upon, inter alia, grant of a waiver from the obligation of the Subscriber to make a mandatory offer for all the remaining shares in the Company not owned, controlled or agreed to be acquired by the Subscriber by the SIC pursuant to Rule 14 of the Singapore Code on Takeovers and Mergers and the approval in-principle by the SGX-ST for the listing and quotation of the Subscription Shares on the Mainboard of the SGX-ST.

31. The Company shall be appointing a suitable independent financial adviser to advice its existing public shareholders on the resolution in relation to the waiver from the obligation of the Subscriber to make a mandatory offer for all the remaining shares in the Company not owned, controlled or agreed to be acquired by the Subscriber.

32. RATIONALE FOR THE CAPITALISATION OF LOAN

33. As a result of the Company's major subsidiaries in China being non-operational and undergoing restructuring and the suspension in trading of the Company's shares since 4 March 2015, it has been difficult for the Company to raise additional funds for its working capital needs and has been experiencing strains on its cashflow.

34. Further and as announced by the Company on 10 March 2017 (Ref: SG170301OTHRQ8AT), the Company has yet to receive the Judgment Sum from the Transferee.

35. Therefore, the Company is unlikely to generate sufficient cash to repay the Shareholder Loan and accordingly, the Company has approached the Subscriber to capitalise the Shareholder Loan as an alternative to repayment via cash. This will reduce the strains on the cashflow experienced by the Company and improve the debt-to-capital position of the Company.

36. PROCEEDS AND FINANCIAL EFFECTS OF THE SUBSCRIPTION AGREEMENT

37. The proforma financial effects of the repayment of the Subscription Amount by way of an issue and allotment of the Subscription Shares set out below are strictly for illustrative purposes and do not necessarily reflect the actual future financial position and results of the Company following the Subscription Agreement.

38. As at the date of this announcement, the issued and paid-up share capital of the Company is approximately S$294,797,493 comprising 1,208,028,000 ordinary shares. Upon the completion of the repayment of the Subscription Amount by way of an issue and allotment of the Subscription Shares, the Company's issued and paid-up share capital will increase to approximately S$297,787,493 comprising 1,323,028,000 ordinary shares (assuming no prior placement).

39. Based on the Company's audited financial statements for the year ended 31 December 2016, the financial effects of the Capitalisation of Loan on the Company are estimated as follows:

40. the net asset per share based on the total number of share issued as at 31 December 2016 (being the end of the most recently completed audited financial period) of the Company, assuming that the repayment of the Subscription Amount by way of an issue and allotment of the Subscription Shares had been effected on 31 December 2016, would have increased by RMB1.62 cents, from RMB -6.18 cents to RMB -4.56 cents; and

41. the loss per share based on the total number of share issued as at 31 December 2016 (being the end of the most recently completed audited financial period) of the Company, assuming that the repayment of the Subscription Amount by way of an issue and allotment of the Subscription Shares had been effected on 1 January 2016, would have decreased by RMB 0.74 cents, from RMB 8.51 cents to RMB 7.77 cents.