JES International : First Quarter Results

JES INTERNATIONAL HOLDINGS LIMITED

(Company Registration No: 200604831K)

Unaudited Results for the First Quarter ended 31 March 2017

PART I - INFORMATION REQUIRED FOR QUARTERLY ANNOUNCEMENTS

Explanatory notes:

On 4 March 2015, the Company has requested for mandatory trading suspension over the Company's shares from the Singapore Exchange Securities Trading Limited ("SGX-ST") as Jiangsu Eastern Heavy Industries Co., Ltd ("JEHI"), a major subsidiary of the Company in the People's Republic of China (the "PRC"), had filed an application in Taizhou Intermediate People's Court, Jiangsu Province (the "Taizhou Court") in the PRC for a proposed restructuring scheme between JEHI and certain of its creditors (the "Application") for the purposes of implementing and facilitating the Group's consensual restructuring of its debt and liabilities in a manner which would maximise the value of the Company and its assets for its creditors and shareholders (the "Proposed Restructuring"). However, the Application had been rejected by the Taizhou Court and that JEHI had subsequently submitted an appeal to the next higher court in the Chinese judiciary hierarchy, the Jiangsu High People's Court (the "Jiangsu High Court") (the "Appeal"). Referring to the Announcement made by the Company on 30 September 2016 where it was announced that Jingjiang Court has released a public notice on 20 September 2016, it is noted that Xingrui Accountant Office Ltd Co and Jiangsu Tianzi Law Offices have been appointed as the Managers of the Restructuring. The Managers have applied to the court as its Proposal to treat the PRC Subsidiaries as a single merged entity for the purposes of conducting of the Restructuring as the PRC Subsidiaries have largely the same group of creditors. The application to treat the PRC Subsidiaries as a single merged entity has been approved by the Jingjiang Court on 25 October 2016.

The Company had on 12 February 2016 entered into a conditional sale and purchase agreement (the "SPA") with Hong Kong Victo International Limited (the "Purchaser"), pursuant to which the Company has agreed to sell and the Purchaser has agreed to purchase the whole of the registered capitals of JEHI and Jiangsu New Eastern Marine Engineering Equipment Co., Ltd ("JNEME") and 49% of the registered capital of Jiangsu Nereus Shipyard Co., Ltd ("JNS") (the "Proposed Disposal"). The Proposed Disposal will result in the disposal of the Group's shipbuilding business, which as at the date of this report would comprise of JEHI, JNEME, JNS, Jingjiang Eastern Heavy Steel Structure Co., Ltd ("JEHSS") and JYJJP Eastern Shipyard Supplies Co., Ltd ("JES Supplies") (collectively, the "PRC Subsidiaries"). Neither the Proposed Restructuring nor the Proposed Disposal is conditional upon the other, and accordingly, the Proposed Restructuring is independent of the Proposed Disposal. Regardless of the Proposed Restructuring, the Company will proceed with the Proposed Disposal provided that all of the conditions in the SPA are fulfilled. It was also agreed that the Purchaser will assume all responsibilities, duties and obligations of the Company in all matters relating to the Proposed Restructuring from the date of the SPA, including but not limited to liaising with the all relevant authorities and affected parties on the Proposed Restructuring.

As previously announced by the Company on 2 July 2015 and 20 August 2015, the Group does not currently have in its possession all of its accounting and/or administrative records of the PRC Subsidiaries. There was no proper handover of accounting records from Mr Jin Xin to the current Management. In fact, some of the Group's electronic and paper records have been either removed or destroyed by relatives of Mr Jin Xin and the local police are still continuing their investigations in relation to the unrecovered records. Whilst some of such electronic and paper records have since been recovered, such records are currently not in the possession of the Group but in the possession of local courts and/or the local police (as the case may be) due to the Proposed Restructuring and misappropriation by the said individuals. The remaining records of the PRC Subsidiaries are not in the possession of the local courts and/or police have yet to be recovered by the Company. Some records have been destroyed by relatives of Mr Jin Xin and the local police are still continuing their investigations in relation to the unrecovered records.

Accordingly, the current Board is of the view that it may be misleading to consolidate the accounts of the PRC Subsidiaries when the Company and the Auditors are unable to verify the completeness, accuracy, or truthfulness of such records. The Company's Hong Kong and Singapore subsidiaries are dormant companies and management is in the process of striking off the same.

On 28 October 2016, the Company had entered into a framework acquisition agreement (the "Framework Agreement") with Teo Woon Tiong, Tan Hin Kon, Teo Chew Seng @ Peter Chang, Lo Chia Chen, Pang Jet Seng, Pang Lay Seng, Teo Lay Seng and Khoo Hin Keat (collectively, the "Vendors") pursuant to which the Vendors propose to sell, and the Company acquire, 100% of the entire issued and paid-up share capital of Maya Asia Resources Sdn. Bhd. (the "Target Company"). The Target Company is an investment holding company and certain of its subsidiaries are engaged in, inter alia, the trading and manufacturing of plastic products, foodstuffs, household insecticides, seasoning, beverages and infant products.

As announced by the Company on 29 November 2016, the Company has entered into a conditional sale and purchase agreement to acquire 100% of the entire issued and paid-up share capital of Maya Asia Resources Sdn. Bhd. (the "Target Company") (the "Proposed Acquisition"). On 1 March 2017, First Completion of the Proposed Acquisition has taken place and following the First Completion of the Proposed Acquisition, all beneficial interest in the entire issued and paid-up share capital of the Target Company have been transferred to the Company and the Company now beneficially owns 100% of the issued and paid up share capital of the Target Company. Following the First Completion, the Company has majority board seats in the Target Company.

In light of the above, the Company has consolidated the Target Company's financial information from 1 March 2017 to 31 March 2017 for the financial statement of the Group for the first quarter ended 31 March 2017 ("1Q 2017").

In the event that the Proposed Acquisition fails to take place, the Company will treat the unwinding of the Proposed Acquisition as a disposal of the Target Company. In such an instance, the Company shall derecognise the assets (including any goodwill that was capitalised as a result of the business combination) and liabilities of the Target Company at its carrying amounts at the date when control is lost and recognise the fair value of consideration received from the transaction that led to the loss of control, if any. The resulting difference is recognised in the income statement as gain or loss on disposal of the subsidiary attributable to the Company.

The Company would like to advise shareholders to act with caution when reviewing such financial information. 1.(a) (i) An income statement and statement of comprehensive income, or a statement of comprehensive income, for the group, together with a comparative statement for the corresponding period of the immediately preceding financial year.

Unaudited Consolidated Income Statement

The Group		The Company
1Q17	1Q16	% change	1Q17	1Q16	% change
M YR' 000	MYR'000	+/(-)	MYR'000		MYR'000	+/(-)
Revenue	7,789	-	NM	-	-	-
Cost of sales	(5,439)	-	NM	-	-	-
Gross (loss)/profit	2,350	-	NM	-	-	-
Other operating income	136	-	NM	77	94,224	(99.92%)
Selling and distribution costs	-	-	-	-	-
Administrative expenses	(234)	-	NM	(631)		(1,333)	(52.66%)
Other operating expenses	(1,874)	-	NM	-	-	-
Finance costs	(102)	-	NM	-	-	-
Profit/(Loss) before income tax	277	-	NM	(554)		92,891	NM
Income tax expense	(56)	-	NM	-	-	-
Profit/ (Loss) for the period	221	-	NM	(554)		92,891	NM

Unaudited Consolidated Statement of Comprehensive Income

Profit/(Loss) for the period	221	-	NM	(554)	92,891	NM
Other Comprehensive (expense)/income
Foreign currency translation difference	(1,071)	-	NM	(1,071)	(1,927)	44.42%
Total Comprehensive expense for the period	(850)	-	NM	(1,625)	90,964	NM

NM - Not meaningful.

1.(a) (ii) The following items (with appropriate breakdowns and explanations), if significant, must either be included in the income statement or in the notes to the income statement for the current financial period reported on and the corresponding period of the immediately preceding financial year: -

The Group		The Company
1Q17	1Q16	% change	1Q17	1Q16	% change
M YR' 000	MYR'000	+/(-)	M YR' 000	MYR'000	+/(-)
Income/(expense):
Interest income	*	-	NM	*	*	NM
Waiver of payables to subsidiaries	-	-	NM	-	94,224	NM
Depreciation of property, plant and equipment	266	-	NM	-	NM
Interest expenses	102	-	NM	-	*	NM

* Less than MYR 1,000 NM - Not meaningful.

1.(b) (i) A statement of financial position (for the issuer and group), together with a comparative statement as at the end of the immediately preceding financial year.

Statement of Financial Position

The Group		The Company
As at 31 Mar 2017	As at As at 31 Dec 2016 31 Mar 2017		As at 31 Dec 2016
M YR' 000	MYR'000	M YR' 000	MYR'000
ASSETS
Non-current assets
Property, plant and equipment	25,233	-	79		69
Subsidiary	-	-	49,000		-
Intangible assets	19,953	-	-	-
45,186	- 49,07	9	69
Current assets
Trade receivable	17,140	- 29		-
Other receivables, prepayments and deposits	17,162	- 11,71	6	11,508
Inventories	12,275	-	-	-
Amounts due from a subsidiary	3,263	- 3,26	3	2,249
Cash and cash equivalents	1,476	- 554		124
Total current assets	51,316	- 15,56	3	13,881
Less: current liabilities
Due to ultimate holding company	23,279	- 23,27	9	22,748
Due to subsidiaries	21,328	- 21,32	8	19,451
Borrowings	29,654	- 17,34	5	16,950
Trade and other payables	15,453	- 3,49	9	2,975
Finance lease liabilities	854	-	-	-
Deferred consideration	28,000	- 28,00	0	-
Due to directors	220	-	-	-
Income tax payable	-	-	-	12
Total current liabilities	118,788	- 93,45	1	62,134
Less: Non-current liabilities
Deferred tax liabilities	1,550	-	-	-
Borrowings	279	-	-	-
Deferred consideration	21,000	- 21,00	0	-
Finance lease liabilities	3,077	-	-	-
Total non-current liabilities	25,906	- 21,00	0	-
Net liabilities	(48,191)	- (49,809	)	(48,184)
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY
Share capital	641,523	- 641,52	3	641,523
Capital reserve	27,692	- 27,69	2	27,692
Revaluation reserve	824	-	-	-
Foreign currency translation reserve	146,948	- 146,94	8	148,019
Accumulated losses	(865,197)	- (865,972	)	(865,418)
Equity attributable to owners of the Company	(48,210)	- (49,809	)	(48,184)
Non-controlling interest	19	-	-	-
Total equity	(48,191)	- (49,809	)	(48,184)