PROSPECTUS DATED 26 NOVEMBER 2001

We have made an application to the Singapore Exchange Securities Trading Limited ``SGX-ST'') for permission to deal in and for quotation of all the ordinary shares of $0.05 each the ``Shares'') in the capital of China Aviation Oil Singapore) Corporation Ltd the ``Company'') which are the subject of this Invitation the ``New Shares'') and the Shares which may be issued upon the exercise of the options to be granted under the China Aviation Oil Share Option Scheme the ``Option Shares''). Such permission will be granted when we have been admitted to the Of®cial List of the SGX-ST. Acceptance of applications will be conditional upon permission being granted to deal in, and for quotation of, all of the issued Shares, the New Shares and the Option Shares. If the completion of the Invitation does not occur because the SGX-ST's permission is not granted or for any other reasons, moneys paid in respect of any application accepted will be returned to you at your own risk without interest or any share of revenue or other bene®t arising therefrom and you will not have any claim against us or the Manager.

The SGX-ST assumes no responsibility for the correctness of any of the statements or opinions made or reports contained in this Prospectus. Admission to the Of®cial List of SGX-ST is not to be taken as an indication of the merits of the Invitation, our Company, our subsidiary, our Shares, the New Shares, the CAO Scheme or the Option Shares.

A copy of this Prospectus has been lodged with the Registrar of Companies and Businesses in Singapore who takes no responsibility for its contents.

POTENTIAL INVESTORS IN OUR COMPANY SHOULD BE AWARE OF THE HIGH DEPENDENCE OF OUR COMPANY ON OUR PARENT GROUP WHO IS OUR MAJOR CUSTOMER. INVESTING IN THE SHARES INVOLVES A HIGH DEGREE OF RISK, WHICH ARE DESCRIBED IN THE SECTION ``RISK FACTORS'' ON PAGES 18 TO 23 OF THIS PROSPECTUS.

CHINA AVIATION OIL SINGAPORE) CORPORATION LTD
Incorporated in Singapore on 26 May 1993)

Invitation in respect of 144,000,000 New Shares of $0.05 each comprising:± 1) 10,000,000 Offer Shares at $0.56 for each Offer Share by way of public offer; and 2) 134,000,000 Placement Shares by way of placement, comprising:± i) 131,500,000 Placement Shares at $0.56 for each Placement Share for applications by way of Placement Shares Application Forms; ii) 1,600,000 Placement Shares at $0.56 for each Placement Share for applications through theInternet;and iii) 900,000 Reserved Shares at $0.56 for each Share reserved for the management and employees of the Group, payablein full on application.

Manager, Underwriter and Placement Agent CONTENTS

Page

CORPORATE INFORMATION ...... 4

DEFINITIONS ...... 5

GLOSSARY OF TECHNICAL TERMS ...... 8

DETAILS OF THE INVITATION ...... 10

LISTING ON THE SGX-ST ...... 10 INDICATIVE TIMETABLE FOR LISTING ...... 11

SELLING RESTRICTIONS IN HONG KONG ...... 12

PROSPECTUS SUMMARY ...... 13 OUR COMPANY ...... 13

THE INVITATION ...... 15

ISSUE STATISTICS ...... 16

RISK FACTORS ...... 18

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS ...... 24

USE OF PROCEEDS ...... 26

DIVIDEND POLICY ...... 27

CAPITALISATION AND INDEBTEDNESS ...... 28

DILUTION ...... 29

KEY FINANCIAL DATA ...... 30

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ...... 32 OVERVIEW ...... 32

RESULTS OF OPERATIONS ...... 34 LIQUIDITY AND CAPITAL RESOURCES ...... 40 REVIEW OF FINANCIAL POSITION ...... 41

FOREIGN EXCHANGE ...... 43 PROFIT FORECAST ...... 44

BUSINESS ...... 45

HISTORY ...... 45 CORPORATE STRUCTURE ...... 47

1 Page BUSINESS ...... 47

Business Overview ...... 47 Our Business ...... 48

Clean Petroleum Products ...... 48 Black Petroleum Products ...... 50

Crude Oil ...... 51 Petrochemical Products ...... 51

Derivatives Products ...... 51 Travel Business ...... 52 Operations ...... 53

Credit Terms and Credit Policy ...... 53 Pricing ...... 54

Risk Management ...... 54 Internal Controls ...... 55

CUSTOMERS ...... 56

SUPPLIERS ...... 57 AWARDS ...... 58

SALES AND MARKETING ...... 58 COMPETITION ...... 58

OUR COMPETITIVE STRENGTHS ...... 59 PROSPECTS ...... 60

OUR STRATEGY AND FUTURE PLANS ...... 61 PROPERTY ...... 62

LEGAL PROCEEDINGS ...... 63 INSURANCE ...... 63

EXCHANGE CONTROLS ...... 63 EMPLOYEES ...... 63

DIRECTORS AND MANAGEMENT ...... 64 DIRECTORS ...... 64

MANAGEMENT ...... 67 MANAGEMENT REPORTING STRUCTURE ...... 69

DIRECTORS' REMUNERATION ...... 70 SERVICE AGREEMENT ...... 70

CORPORATE GOVERNANCE ...... 72

2 Page INTERESTED PERSON TRANSACTIONS ...... 73

PAST AND PRESENT INTERESTED PERSON TRANSACTIONS ...... 73 POTENTIAL INTERESTED PERSON TRANSACTIONS ...... 75

SHAREHOLDERS' MANDATE ...... 75

POTENTIAL CONFLICT OF INTERESTS ...... 78

SHARE OPTION SCHEME ...... 79

CHINA AVIATION OIL SHARE OPTION SCHEME ...... 79

SHAREHOLDERS ...... 86

OWNERSHIP STRUCTURE ...... 86 MERGER OF CAOSC ...... 86

MORATORIUM ...... 87

SHARE CAPITAL ...... 88

TAXATION ...... 90

CLEARANCE AND SETTLEMENT ...... 93

DIRECTORS' REPORT ...... 94

LETTER FROM THE AUDITOR AND REPORTING ACCOUNTANTS IN RELATION TO THE CONSOLIDATED PROFIT FORECAST FOR THE FINANCIAL YEAR ENDING 31 DECEMBER 2001 ...... 95

ACCOUNTANTS' REPORT ...... 96

GENERAL AND STATUTORY INFORMATION ...... 120

APPENDIX I TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE ...... 136

ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING PRINTED APPLICATION FORMS ...... 140 ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS ...... 144

APPENDIX II RULES OF THE CHINA AVIATION OIL SHARE OPTION SCHEME ...... 152

APPENDIX III

DESCRIPTION OF SHARE CAPITAL ...... 171

APPENDIX IV

SUMMARY OF MATERIAL CHANGES TO THE PRELIMINARY PROSPECTUS DATED 13 NOVEMBER 2001 ...... 175

3 CORPORATE INFORMATION

BOARD OF DIRECTORS : Jia Changbin =Chairman and Non-Executive Director) Chen Jiulin =Managing Director) Bao Xiaoyan =Non-Executive Director) Zhang Junru =Non-Executive Director) Gao Renwen =Non-Executive Director) Zhang Yizhou =Non-Executive Director) Jerry Lee Kian Eng =Independent Director) Tan Hui Boon =Independent Director) Yan Xuetong =Independent Director)

COMPANY SECRETARIES : Adrian Mark Chang Choon Siew =CPA) Anne Skading

REGISTERED OFFICE AND : 8 Temasek Boulevard PRINCIPAL OFFICE #31-02 Suntec Tower Three Singapore 038988 Tel: 334 8979 Fax: 333 5283

SHARE REGISTRAR AND : Lim Associates =Pte) Ltd SHARE TRANSFER OFFICE 10 Collyer Quay# 19-08 Ocean Building Singapore 049315

MANAGER, UNDERWRITER : The Development Bank of Singapore Ltd AND PLACEMENT AGENT 6 Shenton Way DBS Bank Building Tower One Singapore 068809

SOLICITORS TO THE : Wong Partnership INVITATION 80 Raf¯es Place# 58-01 UOB Plaza 1 Singapore 048624

AUDITORS AND REPORTING : Ernst & Young ACCOUNTANTS Certi®ed Public Accountants 10 Collyer Quay #21-01 Ocean Building Singapore 049315

LEGAL ADVISERS AS TO PRC : Jun He Law Of®ces LAW China Resources Building, 20th Floor 8 Jianguomenbei Avenue Beijing 100005 People's Republic of China

4 DEFINITIONS

In this Prospectus and the accompanying Application Forms, the following de®nitions apply where the context so admits:±

Companies

``CAO'' or ``Company'' : China Aviation Oil =Singapore) Corporation Ltd. The terms ``we'', ``our'', ``our Company'' or ``us'' have correlative meanings

``CAOSC'' or ``Parent : China Aviation Oil Supply Corporation Company''

``CASC'' : China Aviation Supplies Import and Export Corporation

``Greater China Travel'' : Greater China Travel Industry =Singapore) Pte Ltd, a subsidiary of the Company

``Parent Group'' : The group of companies comprising of CAOSC, its subsidiaries =not including our Company) and its associated companies

``The Group'' : The Company and its subsidiary

General

``AOT'' : Approved Oil Trader

``ATM'' : Automated teller machine of a Participating Bank

``Application Forms'' : The printed application forms to be used for the purpose of the Invitation and which form part of this Prospectus

``Application List'' : The list of applications for subscription of the New Shares

``associated company'' : A company in which at least 20% but not more than 50% of its shares are held by another company which it is an associated company of

``CAAC'' : Ministry of Civil Aviation Administration of China

``CAO Scheme'' : The China Aviation Oil Share Option Scheme

``CDP'' : The Central Depository =Pte) Limited

``CPF'' : The Central Provident Fund

``Companies Act'' : Companies Act, Chapter 50, of Singapore, as amended from time to time

``DBS-Vickers'' : DBS Vickers Securities =Singapore) Pte Ltd

``Directors'' : The directors of our Company as at the date of this Prospectus

``EPS'' : Earnings per Share

``Electronic Applications'' : Applications for the Offer Shares made through an ATM of one of the Participating Banks or through the Internet Banking web-sites of the relevant Participating Banks or applications for the Internet Placement Shares made through the web-site of DBS-Vickers, in accordance with the terms and conditions of this Prospectus

``Executive Of®cers'' : The executive of®cers of our Company as at the date of this Prospectus

5 ``FY'' : Financial year ended or ending 31 December

``GTP'' : Global Trader Programme

``Hong Kong SAR'' : Hong Kong Special Administrative Region

``Internet Placement : 1,600,000 Placement Shares for applications through the Internet Shares'' web-site of DBS-Vickers, subject to and on the terms and conditions of this Prospectus

``Invitation'' : The invitation by our Company to the public to subscribe for and/ or purchase the Invitation Shares, subject to and on the terms and conditions of this Prospectus

``Invitation Shares'' : The 144,000,000 Shares comprising the New Shares which are the subject of the Invitation

``Issue Price'' : $0.56 for each Invitation Share

``MOFTEC'' : Ministry of Foreign Trade and Economic Cooperation of the PRC

``Manager'', ``Placement : The Development Bank of Singapore Ltd Agent'' or ``Underwriter''

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

``NBV'' : Net book value

``NTA'' : Net tangible assets

``New Shares'' : The 144,000,000 new Shares for which our Company invites applications to subscribe for pursuant to the Invitation, subject to and on the terms and conditions of this Prospectus

``Offer'' : The invitation by our Company to the public in Singapore to subscribe for and/or purchase the Offer Shares at the Issue Price, subject to and on the terms of this Prospectus

``Offer Shares'' : 10,000,000 of the Invitation Shares, which are the subject of the Offer

``Oil Majors'' : The major global oil corporations such as ExxonMobil, bp, Shell and Caltex

``PER'' : Price earnings ratio

``PRC'' or ``China'' : The People's Republic of China

``Participating Banks'' : The Development Bank of Singapore Ltd =including its POSBank Services division) =``DBS Bank''), Keppel TatLee Bank Limited =``KTB''), Oversea-Chinese Banking Corporation Limited =``OCBC'') Group =comprising OCBC and Bank of Singapore Limited), United Overseas Bank Limited =``UOB'') Group =comprising UOB, and its subsidiaries Overseas Union Bank Limited =``OUB''), Far Eastern Bank Limited and Industrial & Commercial Bank Limited)

``Placement'' : The placement by the Placement Agent on behalf of our Company of the Placement Shares at the Issue Price, subject to and on the terms and conditions of this Prospectus

6 ``Placement Shares'' : 134,000,000 of the Invitation Shares, which are the subject of the Placement

``Reserved Shares'' : 900,000 of the Placement Shares reserved for the management and employees of the Group

``Securities Account'' : Securities account maintained by a depositor with CDP

``SGX-ST'' or ``Singapore : Singapore Exchange Securities Trading Limited Exchange''

``SGX-ST Listing Manual'' : SGX-ST's requirements regarding listing as contained in a manual published by the SGX-ST as amended from time to time

``Shares'' : Ordinary shares of $0.05 each in the capital of our Company

``USA'' : United States of America

``WTO'' : World Trade Organisation

``%'' or ``per cent.'' : Per centum

``S$'' or ``$'' and ``cents'' : Singapore dollars and cents respectively

``US$'' and ``US cents'' : US dollars and cents respectively

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

Any reference in this Prospectus and the Application Forms to any statute or enactment is a reference to that statute or enactment for the time being amended or re-enacted. Any word de®ned under the Companies Act or any statutory modi®cation thereof and used in this Prospectus and the Application Forms shall have the meaning assigned to it under the Companies Act, or such statutory modi®cation, as the case may be.

Any reference in this Prospectus and the Application Forms to shares being allotted 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 otherwise stated.

7 GLOSSARY OF TECHNICAL TERMS

To facilitate a better understanding of the business of the Company, the following glossary provides an explanation on some of the technical terms and abbreviations relating to the Company's industry:±

Shipping Terms

``CFR'' : ``Cost and Freight'' means that the seller delivers when the goods pass the ship's rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of loss of or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer.

``CIF'' : ``Cost, Insurance and Freight'' means that the seller delivers when the goods pass the ship's rail in the port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of loss of or damage to the goods, as well as any additional cost due to events occurring after the time of delivery, are transferred from the seller to the buyer. However, the seller also has to procure marine insurance against the buyer's risk of loss of or damage to the goods during the carriage.

``FOB'' : ``Free on Board'' means that the seller delivers when the goods pass the ship's rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point.

Others

``Crude Oil'' : A ¯uid made up of various hydrocarbon components, natural gas liquids and ®xed gases.

``Demurrage'' : The detention of a vessel in loading or unloading beyond the time agreed upon. Demurrage charges are usually incurred for any delay.

``Feedstock'' : Raw material used by a processing plant =i.e., cracker) for the manufacture of chemicals, synthetic rubber and variety of plastics.

``Fixed Price'' : Contract whereby the price is an absolute US dollar price.

``Floating Price'' : Contract whereby pricing is related to a market index.

``Gasoil'' : An intermediate distillate product used for diesel fuel, heating fuel and sometimes as feedstock.

``Hedging'' : Taking a position in futures that offsets the price risk associated with a physical position.

``Letter of Credit'' : A banking mechanism which allows importers to offer secure terms to exporters.

``Linear Low Density : A plastic that is used predominantly in ®lm applications due to its Resin'' toughness, ¯exibility, and relative transparency.

``MOPS'' : Mean Of Platt's Singapore, which is a daily price report whereby its price assessments are used as a market index.

``Naptha feedstock'' : Straight-run gasoline fractions. Used as a feedstock for reforming and as a petrochemical feedstock.

8 ``Oil Derivatives'' : A derivative is any form of trading instrument whose value is based in some way on =or derived from) outcomes in another market.

``Paper Swap'' : A custom-tailored, individually negotiated transaction designed to manage ®nancial risk. Parties exchange payments based on changes in the price of the commodity or a market index, while ®xing the price they effectively pay for the physical commodity. The transaction enables each party to manage exposure to commodity prices or index values. Settlements are made in cash.

``Platt's System'' : The specialist international energy market reporting system, which provides breaking news, in-depth analysis and price assessments that are the standard reference of the oil industry.

9 DETAILS OF THE INVITATION

LISTING ON THE SGX-ST

We have applied to the SGX-ST for permission to deal in and for quotation of all our Shares in our capital already issued as well as the New Shares which are the subject of this Invitation and the Option Shares. Such permission will be granted when we have been admitted to the Of®cial List of SGX-ST. Our allocation of the Invitation Shares will be conditional upon completion of the Invitation, which is subject to certain conditions, including the SGX-ST granting permission to deal in and for quotation of all of our issued Shares, the New Shares and the Option Shares. If the completion of the Invitation does not occur because the SGX-ST's permission is not granted or for any other reasons, moneys paid in respect of any application accepted will be returned to you at your own risk without interest or any share of revenue or other bene®t arising therefrom and you will not have any claim against us or the Manager.

The SGX-ST assumes no responsibility for the correctness of any of the statements or opinions made or reports contained in this Prospectus. Admission to the Of®cial List of SGX-ST is not to be taken as an indication of the merits of the Invitation, our Company, our subsidiary, our Shares, the New Shares, the CAO Scheme or the Option Shares.

The Directors individually and collectively accept full responsibility for the accuracy of the information given in this Prospectus and con®rm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and the opinions expressed in this Prospectus are fair and accurate in all material respects as at the date of this Prospectus and there are no other material facts the omission of which would make any statement in this Prospectus misleading and that the pro®t forecast has been stated after due and careful enquiry.

We have not authorised any person to give any information or to make any representation not contained in this Prospectus in connection with the Invitation. If such information or representation is given or made, it must not be relied upon as having been authorised by us, the Manager, the Underwriter or the Placement Agent. Neither the delivery of this Prospectus and the Application Forms nor the Invitation shall, under any circumstances, constitute a continuing representation or create any suggestion or implication that there has been no change in our affairs or in any statement of fact or information contained in this Prospectus since the date of this Prospectus. Where such changes occur and are material, or are required to be disclosed by law and/or the SGX-ST, an announcement of the same will be made to the SGX-ST and, if required, a supplementary document or replacement document pursuant to Section 50A of the Companies Act will be lodged and immediate steps will be taken to comply with the requirements of Section 50A. All applicants should take note of such announcement and, upon the release of such announcement, you shall be deemed to have notice of such changes. Save as expressly stated in this Prospectus, nothing herein is, or may be relied upon as, a promise or representation as to our future performance or policies.

This Prospectus has been prepared solely for the purpose of the Invitation and may not be relied upon by any person for any other purpose. This Prospectus does not constitute an offer, solicitation or invitation to subscribe for the Invitation Shares in any jurisdiction in which such offer, solicitation or invitation is unauthorised or unlawful or to any person to whom it is unlawful to make such offer, solicitation or invitation.

Copies of this Prospectus and the Application Forms may be obtained on request, subject to availability, from:± The Development Bank of Singapore Ltd 6 Shenton Way DBS Bank Building Tower One Singapore 068809 and from branches of DBS Bank =including its POSBank Services Division), members of the Association of Banks in Singapore, members of the SGX-ST and merchant banks in Singapore.

10 The Application List will open at 10.00 a.m. on 4 December 2001 and will remain open until 12.00 noon on the same day or such later date and time as our Directors may, in their absolute discretion, decide, subject to any limitation under all applicable laws.

INDICATIVE TIMETABLE FOR LISTING In accordance with the Singapore Exchange's News Release of 28 May 1993 on the trading of initial public offering shares on a ``when issued'' basis, an indicative timetable is set out below for the reference of applicants:±

Indicative Date/Time Event

12.00 noon on 4 December 2001 Close of Application List

5 December 2001 Balloting of applications, if necessary =in the event of over- subscription for the Offer Shares)

9.00 a.m. on 6 December 2001 Commence trading on a ``when issued'' basis

18 December 2001 Last day for trading on a ``when issued'' basis

9.00 a.m. on 19 December 2001 Commence trading on a ``ready'' basis

24 December 2001 Settlement date for all trades done on a ``when issued'' basis and for trades done on a ``ready'' basis on 19 December 2001

The above timetable is only indicative as it assumes that the close of the Application List is 4 December 2001, the date of admission of our Company to the Of®cial List of SGX-ST is 6 December 2001, the SGX-ST's shareholding spread requirement will be complied with and the New Shares will be issued and fully paid-up prior to 6 December 2001. The actual date on which the Shares will commence trading on a ``when issued'' basis will be announced when it is con®rmed by the SGX-ST.

The above timetable and procedure may be subject to such modications as the SGX-ST may in its discretion decide, including the decision to permit trading on a ``when issued'' basis and the commencement date of such trading. All persons trading in the Shares on a ``when issued'' basis do so at their own risk. In particular, persons trading in the Shares before their Securities Accounts with CDP are credited with the relevant number of Shares do so at the risk of selling Shares which neither they nor their nominees, as the case may be, have been allotted or are otherwise bene®cially entitled to. Such persons are also exposed to the risk of having to cover their net sell positions earlier if ``when issued'' trading ends sooner than the indicative date mentioned above. Persons who have a net sell position traded on a ``when issued'' basis should close their position on or before the ®rst day of ``ready'' basis trading.

In the event of any changes in the closure of the Application List or the time period during which the Invitation is open, we will publicly announce the same:± =i) through a MASNET announcement to be posted on the Internet at SGX-ST web-site http:// www.sgx.com; and =ii) in a local English newspaper, namely, The Straits Times.

Investors should consult the SGX-ST announcement of the ``ready'' listing date on the Internet ?at SGX-ST website http://www.sgx.com), INTV or newspapers, or check with their brokers on the date on which trading on a ``ready'' basis will commence. We will provide details of the results of the Invitation through the channels in =i) and =ii) above.

11 SELLING RESTRICTIONS IN HONG KONG

This Prospectus has not been registered with the Registrar of Companies in Hong Kong and accordingly, except as mentioned below, no copy of this document may be issued, circulated or distributed in Hong Kong.

A numbered copy of this document may, however, be issued by the Placement Agent or its designated sub-placement agents to a limited number of prospective applicants for the Placement Shares in Hong Kong in a manner which does not constitute an offer of the Placement Shares to the public in Hong Kong or an issue, circulation or distribution in Hong Kong of a prospectus for the purposes of the Companies Ordinance =Chapter 32 of the Laws of Hong Kong). An application for the Placement Shares is not invited from any persons in Hong Kong other than a person to whom a numbered copy of this Prospectus has been issued by the Placement Agent or its designated sub- placement agents and, if made, will not be accepted, unless the applicant satis®es the Placement Agent or its designated sub-placement agent that he is a person whose business involves the acquisition and disposal, or the holding, of securities =whether as principal or as agent).

No person to whom a numbered copy of this Prospectus is issued may issue, circulate or distribute this Prospectus in Hong Kong or make or give a copy of this Prospectus to any other person, other than their legal, ®nancial, tax or other appropriate advisers who are subject to a duty of con®dentiality to such person.

The Placement Agent has agreed with the Company that it =and each of its designated sub-placement agents, if any) has not offered or sold, and will not offer or sell, in Hong Kong, by means of any document, any Shares other than to persons whose ordinary business it is to buy or sell shares or debentures, whether as principal or agent, or in circumstances which do not constitute an offer of the Placement Shares to the public within the meaning of the Companies Ordinance =Chapter 32 of the Laws of Hong Kong).

This document may not be issued in Hong Kong by any person who is not a registered dealer or an exempt dealer within the meaning of the Securities Ordinance =Chapter 333 of the Laws of Hong Kong).

12 PROSPECTUS SUMMARY

This summary highlights certain information found in greater detail elsewhere in this Prospectus. In addition to this summary, we urge you to read the entire Prospectus carefully, especially the discussion of risks of investing in our shares under ``Risk Factors'', before deciding to buy our Shares. References in this Prospectus to ``CAO'', ``Company'', ``we'', ``our'' and ``us'' refer to our Company.

OUR COMPANY Who We Are Our Company was incorporated in Singapore under the Companies Act as a private company limited by shares on 26 May 1993. We became a public company on 6 November 2001 and changed our name from China Aviation Oil =Singapore) Pte Ltd to China Aviation Oil =Singapore) Corporation Ltd.

Our core business is in the procurement of jet fuel from overseas markets for distribution to the PRC civil aviation industry through our Parent Company, China Aviation Oil Supply Corporation =``CAOSC''), its subsidiaries and associated companies. CAOSC is a large state-owned enterprise in the PRC. Its businesses include the construction of jet fuel infrastructure =for example, pipelines and storage tanks), the procurement of jet fuel supply equipment, the supply of jet fuel =including jet fuel purchase, transportation, storage and delivery into aircrafts) to airports in the PRC, and the provision of refueling services to aeroplanes in the PRC airports. CAOSC owns oil storage terminals, dedicated jetties, railways and pipelines infrastructure to support its business operations. CAOSC is the sole entity authorised by the PRC government to allocate the import quota for the import of jet fuel into the PRC. In January 2001, CAOSC directed all its subsidiaries and associated companies to import jet fuel solely from our Company.

In the course of our procurement activities, we also provide value-added services to our customers and end-users. These services include assurance of prompt delivery of commodities, offer of lower shipping, storage and transportation costs, offer of lower fuel cost through bulk purchases, provision of market information and advice for inventory planning and risk management, and assurance of consistent supply of high quality fuels.

Besides jet fuel procurement, we are also engaged in the trading of petroleum products such as jet fuel, gasoil, fuel oil, crude oil and plastics and oil derivatives by capitalising on our jet fuel business and market opportunities. Our operations are based primarily in Singapore.

Our Company's performance and efforts were recognised when, on 27July 1998, we were conferred the Approved Oil Trader =``AOT'') award by the Singapore Ministry of Trade and Industry. The AOT award is an endorsement of a company's performance as oil traders as well as its contributions to the Singapore economy. As at 2 January 2001, we are one of the 54 oil companies which have this AOT status. This award, which enables us to enjoy a concessionary 10% tax rate on qualifying income for a ®ve-year period from 1998, marked the milestone of our business presence in the international oil market. The AOT award is now known as the Global Trader Programme =``GTP'') award.

In view of the increase in the procurement and trading volume over the years, our Company set up a risk management committee and established risk management procedures to oversee all trades and monitor the risk of each and every deal.

13 Our Financial Performance Our revenue in FY1998, FY1999 and FY2000 were $170.7 million, $414.5 million and $963.7 million respectively. This represented increases of 142.8% in FY1999 and 132.5% in FY2000 over the preceding ®nancial years. Over the same period, we recorded pro®t after tax of $6.4 million, $8.8 million and $13.5 million respectively, which represented increases of 37.5% and 53.4% respectively over the preceding ®nancial years. As at end June 2001, our revenue and pro®t after tax were $425.0 million and $29.7million respectively.

For FY2001, we forecast our revenue to increase by 12.6% to $1,085 million, and our pro®t after tax to increase by 196.3% to $40 million over FY2000.

We do not have long-term borrowings over the past three ®nancial years. Our cash and cash equivalents as at end June 2001 was $49.6 million.

Our Strategy and Future Plans Our strategy and future plans consist of a three-prong approach:± . Maintain and improve margins for jet fuel procurement . Strategic investments in oil facilities businesses, such as Shanghai Pudong International Airport Aviation Fuel Supply Corporation Ltd . Geographical expansion

Our Competitive Strengths

We believe that we possess the following competitive strengths which enable us to compete effectively against other players in the market, and to gain a foothold in the market:± . We have an experienced management team to chart our progress. . We enjoy competitive transportation cost. . We obtain strong support from our Parent Company. . We are familiar with the business environment in the PRC.

For more details on our competitive strengths, please refer to pages 59 to 60 of this Prospectus.

Our Corporate Structure We are currently 100% owned by China Aviation Oil Supply Corporation =``CAOSC'') and we will be 75% owned by CAOSC following the Invitation. We have one subsidiary, Greater China Travel, which is in the business of providing travel services.

Where You Can Find Us Our executive and registered of®ce is at 8 Temasek Boulevard, #31-02 Suntec Tower Three, Singapore 038988. Our telephone number is 334 8979. Our internet address is http://www.caosco.com.

Information contained on our website does not constitute a part of this Prospectus.

14 THE INVITATION Size : 144,000,000 New Shares, comprising 10,000,000 Offer Shares and 134,000,000 Placement Shares. The New Shares will, upon issue and allotment, rank pari passu in all respects with the existing issued Shares.

Price : $0.56 for each New Share.

Purpose of the Invitation : Our Directors believe that the listing of our Company and the quotation of the Shares on SGX-ST will enhance the public image of the Company and enable the Company to raise funds from the capital markets to ®nance its business expansion. It will also provide members of the public, Directors, management, employees, business associates and others who have contributed to the success of our Group, with an opportunity to participate in the equity of our Company.

Reserved Shares : 900,000 Placement Shares will be reserved for the management and employees of the Group. The Reserved Shares will be offered at $0.56 each. In the event that any of the Reserved Shares are not taken up, they will be made available to satisfy applications for the Placement Shares or, in the event of an under-subscription for the Placement Shares, to satisy applications made by members of the public for the Offer Shares.

Listing Status : Our Shares will be quoted on the Mainboard of the SGX-ST, subject to admission of our Company to the Of®cial List of SGX-ST and permission for dealing in and for quotation of our Shares being granted by the SGX-ST.

15 ISSUE STATISTICS

Issue Price for each New Share : $0.56

Net Tangible Assets

The NTA per Share based on the consolidated balance sheet of the Group as at 30 June 2001 and after adjusting for the Share Split referred to on page 88 of this Prospectus =the ``Adjusted NTA''):± =a) Before adjusting for the estimated net proceeds of the Invitation and : 13.6 cents based on the pre-¯otation share capital of 432,000,000 Shares =b) After adjusting for the estimated net proceeds of the Invitation and : 23.5 cents based on the post-¯otation enlarged share capital of 576,000,000 Shares

Premium of Issue Price over the Adjusted NTA per Share as at 30 June 2001:± =a) Before adjusting for the estimated net proceeds of the Invitation and : 311.8% based on the pre-¯otation share capital of 432,000,000 Shares =b) After adjusting for the estimated net proceeds of the Invitation and : 138.3% based on the post-¯otation enlarged share capital of 576,000,000 Shares

Earnings

Historical net EPS of the Group for FY2000 based on the pre-¯otation share : 3.1 cents capital of 432,000,000 Shares

Historical net EPS of the Group for FY2000 based on the pre-¯otation share : 2.9 cents capital of 432,000,000 Shares, assuming that the Service Agreement =as set out on pages 70 to 71 of this Prospectus) had been in place from the beginning of FY2000=3)

Forecast net EPS of the Group for FY2001 based on the weighted average : 9.0 cents share capital of 444,000,000 Shares=1)

Price Earnings Ratio

Historical PER based on the historical net EPS of the Group for FY2000 based : 18.1 times on the pre-¯otation share capital of the Group of 432,000,000 Shares

Historical PER based on the historical net EPS of the Group for FY2000 based : 19.3 times on the pre-¯otation capital of 432,000,000 Shares, assuming that the Service Agreement =as set out on pages 70 to 71 of this Prospectus) had been in place from the beginning of FY2000=3)

Forecast PER based on the forecast net EPS of the Group for FY2001 based : 6.2 times on the weighted average share capital of 444,000,000 Shares

Net Operating Cash Flow=2)

Historical net operating cash ¯ow per Share of the Group for FY2000 based : 1.5 cents on the pre-¯otation share capital of 432,000,000 Shares

Historical net operating cash ¯ow per Share of the Group for FY2000 based : 1.3 cents on the pre-¯otation share capital of 432,000,000 Shares, assuming that the Service Agreement =as set out on pages 70 to 71 of this Prospectus) had been in place from the beginning of FY2000=3)

16 Forecast net operating cash ¯ow per Share of the Group for FY2001 based on : 11.3 cents the weighted average share capital of 444,000,000 Shares

Price to Cash Flow Ratio

Historical price to net operating cash ¯ow based on the historical net : 37.3 times operating cash ¯ow per Share of the Group for FY2000 based on the pre- ¯otation share capital of 432,000,000 Shares

Historical price to net operating cash ¯ow based on the historical net : 43.1 times operating cash ¯ow per Share of the Group for FY2000 based on the pre- ¯otation share capital of 432,000,000 shares, assuming that the Service Agreement =as set out on pages 70 to 71 of this Prospectus) been in place from the beginning of FY2000=3)

Forecast price to net operating cash ¯ow based on the forecast net operating : 5.0 times cash ¯ow per Share of the Group for FY2001 based on the weighted average share capital of 444,000,000 Shares

Market Capitalisation Our market capitalisation based on the post-Invitation share capital of : $322.56 million 576,000,000 Shares and the Issue price of $0.56

Notes:± =1) The forecast net EPS is calculated based on the weighted-average number of issued shares of 444,000,000 Shares assuming that the New Shares will be issued in December 2001, and a forecast net pro®t after tax of S$40 million for FY2001. =2) Net operating cash ¯ow is de®ned as net pro®t before tax after adjusting for non-cash items, income tax paid, interest income and expense, and changes in working capital. =3) Had the Service Agreement set out on pages 70 to 71 of this Prospectus been effected from the beginning of FY2000, the estimated total remuneration for the Directors would have been approximately $1,166,993 instead of $234,471, and the pro®t after tax in respect of FY2000 would have been approximately $12,666,183 instead of $13,504,705. The adjusted net earnings per Share for FY2000 based on the pre-invitation share capital of 432,000,000 shares would have been 2.9 cents instead of 3.1 cents.

17 RISK FACTORS

Prospective investors should carefully consider and evaluate the following considerations and all other information contained in this Prospectus before deciding to invest in our shares. If any of the following considerations and uncertainties develop into actual events, our business, results of operations and ®nancial condition could be materially and adversely affected. In such cases, the trading price of our shares could decline due to any of these considerations and uncertainties, and you may lose all or part of your investment in our shares.

RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY IN GENERAL

We are reliant on our Parent Group which is our major customer Our jet fuel business is heavily dependent on our Parent Company, its subsidiaries and associated companies which import jet fuel from us. Approximately 98.3% of all our jet fuel trades in FY2000 were with our Parent Group. As our Parent Group is a major importer of jet fuel in the PRC, our market share of the total jet fuel imports into the PRC in FY2000 amounts to approximately 92%. Our market share is dependent on our Parent Group continuing to place jet fuel orders with us. Although we have the intention of expanding our customer base, we will continue, in the foreseeable future, to be reliant on our Parent Group for our jet fuel business.

Our Parent Company has issued a management directive on 3 January 2001 to all its subsidiaries and associated companies to purchase all imported jet fuel from our Company on a long-term basis beginning January 2001. In addition, our Parent Company has issued another management directive on 8 October 2001 to our Company stating that it will not withdraw the management directive on 3 January 2001 within the next few years, and it will not set up another overseas company carrying on the business of jet fuel procurement that will compete with our business. However, as the management directives are given unilaterally by our Parent Company, our Company will not be able to guarantee that our Parent Company will not withdraw these management directives. In the event that our Parent Company does not continue to place jet fuel orders with us or it revokes the above management directives, we may face competition from other jet fuel traders, and as a result, our jet fuel sales may decrease and and we may not continue to control our market share in the future. This will have a material adverse effect on our Company as a decrease in jet fuel sales will adversely affect our pro®ts.

We are dependent on our Parent Company being authorised by the PRC government to allocate import quota for jet fuel The PRC is currently geared towards a market-oriented economy. During this process, it is inevitable that unprecedented changes in the business climate such as changes in import restrictions may occur. In addition, as oil is highly regarded as a strategic resource in many countries, there is a risk that the PRC government might reorganize and restructure the methods of oil importation into the PRC.

As our jet fuel business is dependent on our Parent Company being authorised by the PRC government to allocate the import quota for jet fuel and a high percentage of our jet fuel business is with our Parent Group in the PRC, any change in import regulations on jet fuel may adversely affect our business.

In the event that the PRC government revokes or restricts the authority given to our Parent Company to allocate the jet fuel import quota, or liberalises the importation of jet fuel to allow more entities other than our Parent Group to import jet fuel, our sales to the PRC market through our Parent Group will be affected and this might have an adverse impact on our pro®tability.

18 We are reliant on our key executives Our success will depend to a great extent on the efforts of our Chairman, our Managing Director, the heads of our Trading Divisions, Ms Chen Yanting and Mr Gerard Rigby, and on our ability to continue to attract, retain and motivate quali®ed personnel, particularly during periods of rapid growth. The competition for such quali®ed personnel is intense, and the loss of the services of one or more of these individuals without adequate replacement or the inability to attract new quali®ed personnel could have a material adverse effect on us.

We are particularly vulnerable to the loss of our Chairman, who is one of the key executives in our Parent Company and who is responsible for making decisions in the Parent Company which have a positive impact on our Company, and our Managing Director, who is responsible for overseeing our daily operations and formulating our business strategies. Our Company currently does not have any speci®c handover procedures that will ensure that there are suitable replacements in the event of the loss of the services of our Chairman and our Managing Director. As such, the loss of the services of our Chairman and our Managing Director without suitable replacements may lead to the loss or deterioration of important business relationships and support from our Parent Group and may affect the direction of our Company and result in a negative impact on the future prospects of our Company.

We are vulnerable to the volatility in oil prices The oil market is volatile and often unpredictable as it is subject to prevailing demand and supply conditions. Oil price generally increases when there is a shortage of oil supply or an upsurge in demand for oil. Adverse movements in the prices of oil products in which we trade are likely to affect our pro®ts in situations when we may have committed to sell cargoes at ®xed prices but we may have committed to buy at ¯oating rates or we may not have sourced the cargoes from the suppliers. If the oil prices increase after we have concluded our contract to sell, we may have to purchase the cargoes at the higher prevailing prices and our pro®t margin will be reduced. Similarly, we may incur losses from the decline in oil prices when we may have committed to buy cargoes at ®xed rate but have committed to sell the cargoes at ¯oating rate.

In addition, an increase in oil prices may cause our customers to defer purchases of oil and other oil products, hence affecting our pro®ts for that period. In 1999, the lowest price of jet fuel was US$12.675 per barrel and at its highest point in the same year, the price was US$30.475 per barrel. This illustrates the ¯uctuations that might exist in the jet fuel market. Please refer to the section on ``Business'' on pages 47to 55 of this Prospectus for more information on the ¯uctuations of jet fuel and fuel oil prices.

We are subject to risks arising fromderivatives trading We trade oil derivatives such as paper swaps and futures in the course of our hedging activities. At times, we may take open positions in derivatives when our traders based on their experience and analysis of the market are of the view that their open positions are likely to pro®t from the market movement. As such, we are exposed to the risks arising from the ¯uctuations of prices and we cannot assure that all our derivatives trading on the opportunistic basis will result in pro®ts. Any signi®cant movements in oil prices against our open positions may result in huge losses and our revenue and pro®ts being adversely affected.

Though we have implemented risk management guidelines for all our derivatives trading, we cannot ensure that our traders will strictly follow these guidelines. If they do not follow these guidelines, we may suffer signi®cant losses from such activities and our revenue and pro®ts will be adversely affected.

19 We are subject to credit risk Each transaction in the course of our business usually amounts to more than US$1 million and may even exceed US$15 million. We might encounter serious cash ¯ow problems if we encounter any credit problems with our customers or end users. Credit problems may cause a material negative impact on our ®nancial position. Although we have not encountered cash ¯ow problems in the past, we may be increasingly exposed to such risks as we expect to be dealing with a greater number of other companies as we expand our business.

We are vulnerable to the volatility of the freight market The freight market can also be very volatile. In 2000, the lowest freight costs for a vessel charter from Singapore to Qinhuangdao was US$350,000 in January, whilst the highest freight costs for charter of the same vessel was US$750,000 in December. When we sell on CIF or CFR terms or when we buy on FOB terms, we have to bear the freight costs. If the freight prices are very high, it can add heavily to our business cost and erode our earnings. As we have no control over the freight costs, we will not be able to ensure that we will only charter vessels when the freight costs are low.

We are reliant on our GTP status As the GTP scheme =formerly known as the AOT scheme), we are currently able to obtain preferential tax treatment, having to pay only a tax rate of 10% on the income derived from qualifying trading transactions of approved products in our business. However, the Singapore Trade Development Board reviews the GTP award every ®ve years and we are unable to ensure that we will continue to maintain this status in the future. The loss of this award will lead to an increase in tax expenses and affect our Company's pro®ts.

Decrease in global air traf®c will adversely affect our sales Our business of procuring jet fuel to the PRC market is closely tied to the amount of air traf®c from the PRC aviation industry. Unforeseen circumstances, such as the recent terrorist attack in New York on 11 September 2001, may lead to a fall in demand for air travel in the PRC, which may consequently lead to a decline in demand for imported jet fuel to the PRC market. This will adversely affect our sales of jet fuel to the PRC market and our pro®ts.

Failure to compete effectively in a highly competitive environment will adversely affect our pro®tability and prospects The oil trading industry is highly competitive as the barriers to entry are low. If we do not compete effectively with our competitors, for example, as regards to price and services, our pro®tability and prospects will be adversely affected. We cannot assure you that we will be able to compete successfully in the future against our existing or potential competitors or that our business, ®nancial condition and results of operation will not be adversely affected by increased competition. More foreign players may enter the PRC oil markets now that the PRC is admitted into the WTO. As a result, we may face greater competition which may affect our sales and pro®ts and may cause us to gradually lose our dominant share in the PRC jet fuel import market.

We are subject to foreign exchange translation losses As all our sale and purchase transactions in physical and paper trades are conducted in US$, we are generally not subject to signi®cant foreign exchange transaction risks. We are however subject to foreign exchange translation risk as our reporting currency is denominated in S$ while our transaction currency is denominated in US$. We do experience a small extent of foreign exchange transaction risk as we need to convert our US$ cash ¯ow to S$ to pay off our operating expenses such as staff costs. Any signi®cant depreciation of the US$ against S$ will result in a signi®cant foreign exchange translation loss and accordingly reduce our Company's pro®t.

20 COUNTRY RISKS

Uncertainty in the PRC legal system may make it dif®cult for us to predict the outcome of any disputes that we may be involved in The PRC legal system is based on the PRC Constitution and is made up of written laws, regulations, circulars and directives. The PRC government is still in the process of developing its legal system, so as to meet the needs of investors and to encourage foreign investment. As the PRC economy is undergoing development generally at a faster pace than its legal system, some degree of uncertainty exists in connection with whether and how existing laws and regulations will apply to certain events or circumstances.

As a large proportion of our customers are from the PRC, we may, in the future, be involved in disputes with some of these PRC entities. We may have to resolve our disputes before the PRC legal system and using PRC laws. Some of the laws and regulations, and the interpretation, implementation and enforcement thereof, are still at an experimental stage and are therefore subject to policy changes. Further, precedents on the interpretation, implementation and enforcement of the PRC laws and regulations are limited, and court decisions in the PRC do not have any binding effect on lower courts. Accordingly, the outcome of dispute resolutions may not be as consistent or predictable as in the other more developed jurisdictions and it may be dif®cult to obtain swift and equitable enforcement of the laws in the PRC, or to obtain enforcement of judgement by a court of another jurisdiction.

Our results and ®nancial conditions are highly susceptible to changes in the PRC's political, economic and social conditions as our revenue is currently substantially derived from our operations in the PRC Our operations may be adversely affected by signi®cant changes in the political, economic and social conditions in the PRC. This is because a large percentage of our trades are with PRC customers. In FY2000, approximately 94% of our revenue was derived from our trades with PRC customers. Changes in policies and tax laws which are not favorable to businesses in the PRC may adversely affect our Parent Group's growth and in turn adversely impact our sales and therefore our pro®tability. In addition, payments from our PRC customers through the import agents are currently made in US$. Any changes in foreign exchange or capital control policies in the PRC which restricts repatriation of US$ outside the PRC may lead to our accepting payment in other currencies, which may in turn expose us to foreign exchange risks.

Since 1978, the PRC government has undergone various reforms of its economic systems. Such reforms, for example the ``open door'' reform policy``, have resulted in economic growth for the PRC in the last two decades. However, many of the reforms are unprecedented or experimental and are expected to be re®ned and modi®ed from time to time. Other political, economic and social factors may also lead to further readjustment of the reform measures. In the event that such re®nement and readjustment processes have an adverse effect on the economy of the PRC, our sales to our PRC customers may be adversely affected and this may consequently have a material impact on our operations in the PRC or a material adverse impact on our ®nancial performance.

21 RISKS RELATING TO OWNERSHIP OF OUR SHARES

Our ordinary shares have never been publicly traded; share prices might be volatile Prior to the Invitation, there has not been a public market for our ordinary shares. We cannot predict the extent to which a trading market will develop or how liquid the market might become. The initial public offering price of our ordinary shares will be determined by negotiations between representatives of the Underwriter and us and may not be indicative of prices that will prevail in the trading market.

The trading price of our ordinary shares could be subject to ¯uctuations in response to variations in our results of operations, changes in general economic conditions, changes in accounting principles or other developments affecting us, our customers, or our competitors, changes in ®nancial estimates by securities analysts, the operating and stock price performance of other companies, general stock market price ¯uctuations and other events or factors. Volatility in the price of our ordinary shares may be caused by factors beyond our control and may be unrelated and disproportionate to our operating results. Our ordinary shares may trade at prices signi®cantly below the Issue Price.

Singapore laws contain provisions that could discourage a takeover of our company The Companies Act =Chapter 50) of Singapore and the Singapore Code on Take-Overs and mergers =the ``Take-Over Code'') contain certain provisions that may delay, deter or prevent a future takeover or change in control of our Company. Any person acquiring an interest =either on his own or together with parties acting in concert with him) in 25% or more of our voting shares must extend a takeover offer for the remaining voting shares in accordance with the Take-Over Code. A takeover offer is also required to be made if a person holding between 25% and 50% =both inclusive) of the voting rights =either on his own or together with parties acting in concert with him) acquires an additional 3% of our voting shares in any 12-month period. Accordingly, any person =i) acquiring an interest either in 25% or more of our voting shares, or =ii) holding between 25% and 50% =both inclusive) of our voting shares directly =either on his own or together with parties acting in concert with him) and who acquires an additional 3% of our voting shares in any 12-month period, must extend a takeover offer for the remaining voting shares.

These provisions may discourage or prevent certain types of transactions involving an actual or threatened change of control of our Company. This may harm you because a transaction of that kind may allow you to sell your shares at a price above the prevailing market price.

Future sales of securities by our Company or existing Shareholders may adversely affect the price of our ordinary shares There will be 576,000,000 ordinary shares immediately following the Invitation. Such ordinary shares may be sold in the public market in Singapore. In addition, we will be granting options under our China Aviation Oil Share Option Scheme. If these options are exercised and the ordinary shares are fully paid for, such ordinary shares would also be freely tradeable in Singapore.

Sales of substantial number of shares in the public market following the Invitation could adversely affect the price of our Shares.

Our substantial shareholder, CAOSC, will retain majority control over our Company after the Invitation, which will allow them to in¯uence the outcome of matters submitted to shareholders for approval Upon the completion of the Invitation, our substantial shareholder, CAOSC, will own 75% of the issued Shares. As a result, CAOSC, will be able to exercise signi®cant in¯uence over all matters requiring shareholder approval, including the election of directors and the approval of signi®cant corporate transactions, and will have veto power with respect to any shareholder action or approval requiring a majority vote. Such concentration of ownership also may have the effect of delaying, preventing or deterring a change in control of the Company which may bene®t our Company's shareholders.

22 Dilution of our substantial shareholder's shareholding in our Company such that we are no longer a subsidiary of our Parent Company may adversely affect our relationship with our Parent Group Our market share in jet fuel procurement is largely dependent on our relationship with our Parent Group which is forged as a result of our Company being a subsidiary of our Parent Company. In the event that there is dilution of our Parent Company's stake in our Company as a result of sale of Shares by our Parent Company or future placements of our Company's shares to other shareholders, such that our Parent Company no longer holds the majority stake in our Company, our relationship with our Parent Group may be eroded. As a result, our Parent Group may not continue to place jet fuel orders with us or it may revoke the management directive given to the Parent Group to place jet fuel orders with us and we may have to compete with the other jet fuel traders to obtain orders from our Parent Group. Our jet fuel sales and pro®ts may then be materially adversely affected.

23 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

All statements contained in this Prospectus, statements made in press releases and oral statements that may be made by us or our officers, directors or employees acting on our behalf that are not statements of historical fact constitute ``forward-looking statements''. You can identify some of these forward 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 these words are not the exclusive means of identifying forward-looking statements. All statements regarding our expected financial position, business strategy, plans and prospects are forward- looking statements. These forward-looking statements, including statements as to:± . our revenue and profitability; . expected growth in demand; . expected growth in our handling capacity; . other expected industry trends; . anticipated completion and startup dates for expansion projects; and . other matters discussed in this offering memorandum regarding matters that are not historical fact, are only predictions. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include, among others:± . changes in political, social and economic conditions and the regulatory environment in Singapore and other countries in which we conduct business; . changes in currency exchange rates; . our anticipated growth strategies and expected internal growth; . changes in fees for our services; . changes in the availability and prices of, and import tariffs on, the raw materials we need to operate our business; . changes in customer preferences; . demographic changes; . changes in competitive conditions and our ability to compete under these conditions; . changes in our future capital needs and the availability of financing and capital to fund these needs; and . other factors beyond our control.

Given the risks and uncertainties that may cause our actual future results, performance or achievements to be materially different than expected, expressed or implied by the forward-looking statements in this offering memorandum, we advise you not to place undue reliance on those statements. We are not representing or warranting to you that our actual future results, performance or achievements will be as discussed in those statements.

24 Neither the delivery of this Prospectus and the Application Forms nor the Invitation shall, under any circumstances, constitute a continuing representation or create any suggestion or implication that there has been no change in the affairs of the Company or the Manager or any statement of fact or information contained in this Prospectus since the date of this Prospectus. Where such changes occur and are material or are required to be disclosed by law and/or the SGX-ST, an announcement of the same will be made to the SGX-ST and, if required, a supplementary document or replacement document pursuant to Section 50A of the Companies Act will be lodged and immediate steps will be taken to comply with the requirements of Section 50A. Investors should take note of any such announcements and, upon release of such an announcement, shall be deemed to have notice of such changes. Further, we disclaim any responsibility to update any of those forward-looking statements or publicly announce any revisions to those forwarding-looking statements to re¯ect future developments, events or circumstances. We are, however, subject to the listing rules of the SGX-ST regarding corporate disclosure.

25 USE OF PROCEEDS

The net proceeds from the issue of our New Shares, after deducting estimated issue expenses, are estimated to be approximately $76.6 million.

We intend to use the net proceeds for the following purposes:± =1) approximately $57.0 million will be used for future expansion via joint ventures and/or strategic investments in the PRC and Hong Kong SAR; =2) approximately $15.5 million will be used to acquire companies and/or set up subsidiaries in USA and Europe within the next two years; and =3) the balance of $4.1 million will be used for working capital.

From time to time, we may acquire or make investments in additional businesses, products and technologies or establish joint ventures or strategic partnerships that we believe will complement our current and future businesses. Some of these acquisitions or investments could be material. Subject to the receipt of all relevant approvals, we intend to use part of our proceeds to acquire from CAOSC, a 33% equity interest in Shanghai Pudong International Airport Aviation Fuel Supply Corporation Ltd, one of our major customers. For more details on the proposed acquisition, please refer to pages 61 to 62 under ``Our Strategy And Future Plans'' and page 75 under ``Potential Interested Person Transactions'' of this Prospectus.

Pending the deployment of funds, the net proceeds may be used for working capital or to repay bank borrowings, deposited with banks and ®nancial institutions or invested in money market instruments as our Directors may deem ®t.

26 DIVIDEND POLICY

We do not have a ®xed dividend policy. To date, we have not distributed any dividends. We intend to retain our earnings for FY2000 to ®nance the expansion of our business and operations and do not intend to pay any cash dividends for FY2000.

Our Company may, by ordinary resolution, declare dividends at a general meeting, but it may not pay dividends in excess of the amount recommended by the Directors. The Directors may declare an interim dividend without seeking shareholders' approval. Our Company must pay all dividends out of its pro®ts or pursuant to Section 69 of the Companies Act.

In making their recommendation, the Directors will consider, among other things, our future earnings, operations, capital requirements, cash ¯ow and ®nancial conditions, as well as general business conditions and other factors which they might consider appropriate.

For FY2001, we expect to recommend and distribute $16.0 million as gross dividends to our shareholders =both existing shareholders and shareholders after the Invitation), subject to:± . the level of our cash and retained earnings; . our projected levels of capital expenditure and other investment plans; and . our ®nancial performance in FY2001.

27 CAPITALISATION AND INDEBTEDNESS

The following table shows our cash and cash equivalents, debt and capitalisation as at 30 September 2001:± =i) on an actual basis; and =ii) as adjusted to give effect to the sale of 144,000,000 ordinary shares in the Invitation and the application of net proceeds, based on the initial public offering price of $0.56 per ordinary share, after deducting underwriting discounts and estimated offering expenses.

As at 30 September 2001 Actual As ?unaudited) Adjusted $'000 $'000 Cash and cash equivalents 56,771 133,411

Short-term debt Secured 26,285 26,285 Unsecured Ð Ð

26,285 26,285 Long-term debt Secured Ð Ð Unsecured Ð Ð ÐÐ

Shareholders' equity Authorised capital 60,000 60,000

Issued and paid-up capital 21,600 28,800 Share premium Ð 69,440 Retained earnings 38,409 38,409

Total Shareholders' equity 60,009 136,649

Total capitalisation 60,009 136,649

28 DILUTION

Dilution is the amount by which the price paid by the applicants of our New Shares exceeds the NTA per Share after the Invitation. Our NTA per Share as at 30 June 2001 before adjusting for the net proceeds from the Invitation and based on the pre-¯otation share capital of 432,000,000 Shares was approximately 13.6 cents per Share.

Our NTA as at 30 June 2001, adjusted for the issuance by us of 144,000,000 New Shares at an Issue Price of $0.56 per Share, after deducting underwriting commissions, placement commissions, brokerage and estimated expenses paid by us in relation to the Invitation, would be 23.5 cents per Share. This represents an immediate increase in NTA of 9.9 cents per Share to our existing Shareholders and an immediate dilution in NTA of 32.5 cents per Share to new public investors. The following table illustrates this per Share dilution:±

As at 30 June 2001 Per Share ?cents) Issue Price per Share 56.0 NTA per Share as at 30 June 2001, based on the pre-Invitation issued share capital of 432,000,000 shares 13.6 Increase in NTA per Share attributable to new public investors 9.9 NTA per Share after the Invitation 23.5

Dilution in NTA per Share to new public investors 32.5

The following table summarises the total number of Shares issued by us, the total consideration paid to us or to be paid to us and the average price per Share paid by our existing Shareholders and by our new public investors in the Invitation.

Number of Average Price Shares % Consideration % Per Share ?$) ?cents) Existing Shareholders 432,000,000 75 600,000 0.7 0.14 New Public Investors 144,000,000 25 80,640,000 99.3 56.00

Total 576,000,000 100 81,240,000 100 14.10

29 KEY FINANCIAL DATA

You should read the following key ®nancial information in conjunction with the Accountants' Report and the related notes thereto, the section on ``Management's Discussion and Analysis of Financial Condition and Results of Operations'' and other notes included elsewhere in this Prospectus. Our ®nancial statements are prepared and presented in accordance with Singapore Statements of Accounting Standards.

Results of Operations of the Company and Group=1)

------C o m pany ------Group ------Financial Financial Year ended Year ended Six months ended 31 December 31 December 30 June S$'000 1998 1999 2000 2000 2000 2001 ?unaudited) Revenue 170,718 414,547 963,717 963,717 333,417 425,007

Cost of Goods Sold =162,303) =401,514) =920,809) =920,809) =334,360) =396,327)

Gross Pro®t 8,415 13,033 42,908 42,908 =943) 28,680

Other Income=2) 144 1,023 1,172 1,172 393 3,340

Staff and Related Costs =205) =1,930) =8,310) =8,310) =510) =891)

Provision for Doubtful Debts=3) Ð speci®c Ð Ð =1,606) =1,606) Ð Ð Ð general Ð Ð =3,389) =3,389) Ð Ð

Operating Expenses Other operating expenses =784) =2,497) =14,158) =14,158) =1,360) =2,149) Foreign currency =losses)/gains =474) 372 315 315 163 4,590

Pro®t fromoperating activities 7,096 10,001 16,932 16,932 =2,257) 33,570

Finance Costs =20) =195) =750) =750) =265) =581)

Pro®t before taxation 7,076 9,806 16,182 16,182 =2,522) 32,989 Taxation =649) =1,012) =2,677) =2,677) 0 =3,305)

Net Pro®t after taxation 6,4278,79413,505 13,505 =2,522) 29,684

EPS ?cents)=4) 1.5 2.0 3.1 3.1 =0.6) 6.9

Notes:± =1) The Company incorporated a wholly-owned subsidiary, Greater China Travel Industry =Singapore) Pte Ltd on 10 November 2000. Accordingly, our Group's consolidated ®nancial statements have been prepared since FY2000. =2) Other income consists of interest, rental and sundry income. =3) Speci®c provision applies to debts that were more than 60 days and general provision is calculated based on 3% of December 2000's debtor balance. =4) For comparative purposes, the earnings per share is calculated using pro®t after taxation and divided by the pre-¯otation share capital of 432,000,000 Shares.

30 Review of Financial Position of the Company and Group=1) ------C o m pany ------Group ------As at ------A s a t 3 1 December ------30 June S$'000 1998 1999 2000 2000 2001 Fixed Assets 142 3,859 3,774 3,959 4,347

Subsidiary Company Ð Ð 185 Ð Ð

Current Assets Trade debtors =net) 40,445 62,502 93,155 93,155 91,097 Other debtors, deposits and prepayments 724 247 78 78 1,034 Amount due from related company Ð Ð Ð Ð 200 Fixed deposits Ð 7,197 13,260 13,260 44,013 Cash & bank balances 4,536 4,330 4,656 4,656 5,583 45,705 74,276 111,149 111,149 141,927 Current Liabilities Trade creditors 38,393 60,545 37,916 37,916 67,069 Other creditors and accruals 76 379 1,491 1,491 1,107 Accrued staff cost 7 690 6,785 6,785 6,889 Amount due to holding company Ð Ð 8,840 8,840 9,473 Trust receipt payables Ð Ð 28,439 28,439 Ð Provision for taxation 643 989 2,600 2,600 2,710 39,119 62,603 86,071 86,071 87,248

Net Current Assets 6,586 11,673 25,078 25,078 54,679 Non-Current Liabilities Deferred taxation =5) =15) =15) =15) =320) Total Assets less Liabilities 6,723 15,517 29,022 29,022 58,706

Share capital and reserves Share capital 600 5,000 5,000 5,000 21,600 Accumulated pro®ts 6,123 10,51724,022 24,022 37,106 6,723 15,517 29,022 29,022 58,706

NTA per Share ?cents)=2) 1.6 3.6 6.7 6.7 13.6

Notes:± =1) The Company incorporated a wholly-owned subsidiary, Greater China Travel Industry =Singapore) Pte Ltd on 10 November 2000. Accordingly, our Group's consolidated ®nancial statements have been prepared since FY2000. =2) For comparative purposes, the NTA per Share is calculated based on the pre-¯otation share capital of 432,000,000 Shares.

31 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our ®nancial condition and results of operations should be read in conjunction with the consolidated statements and the related notes included elsewhere in this Prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ from those projected in the forward-looking statements. Factors that might cause future results to differ signi®cantly from those projected in the forward-looking statements include, but are not limited to, those discussed below and elsewhere in this Prospectus, particularly in ``Risk Factors''.

OVERVIEW Revenue Our company is principally engaged in the procurement and trading of oil products, namely clean petroleum products, black petroleum products, crude oil and petrochemical products. We recognise revenue upon delivery of the oil products to our customers. In accordance with Singapore accounting standard and industry practices, net pro®t and loss from trading in paper swaps and futures is also recognised as part of the revenue. Our procurement and trading business is historically non- seasonal and therefore is not signi®cantly subject to any particular seasonal ¯uctuations.

Factors that will affect our revenue are:±

$1) Demand for jet fuel import in the PRC In FY2000, we accounted for approximately 92% of the total jet fuel import into China. The China aviation market is expected to grow as China's economy continues to expand. Growth in China's aviation market may have an impact on the demand for imported jet fuel, and consequently our revenue base.

$2) Overall demand for various petroleum and petrochemical products. As we expand our product scope, our revenue is dependent on the general demand for other petroleum and petrochemical products. A decline in such demand will have a negative impact on our revenue.

$3) Fluctuations in world oil prices Fluctuations in world oil prices can affect our revenue. If we have committed to sell cargoes at ¯oating prices and the oil prices drop drastically, our revenue will be adversely affected.

$4) Extent of competition Our revenue will be affected by the extent of competition from other oil trading companies in the trading of petroleum, crude oil and petrochemical products. We may reduce our selling price to increase trading activities should competition intensify.

$5) Loss of support from Parent Group Our revenue is signi®cantly dependent on the support from our Parent Group which is our major customer. In January 2001, our Parent Company issued a management directive to all its subsidiaries and associated companies to import jet fuel from our Company. In the event that our Parent Company does not continue to place jet fuel orders with us or that it revokes the management directive, our revenue will be adversely affected.

$6) Loss of experienced traders Our trading revenue is generated by our experienced traders we recruited to specialise in trading different oil products. Any loss of such experienced traders, if without suitable replacement, would have an adverse impact on our trading revenue.

32 $7) Derivatives transactions Our revenue is affected by the paper swaps and futures transactions which we enter into for hedging and trading. A net gain from derivative transactions will increase our revenue whereas a net loss from the transactions will reduce our revenue. Depending on the effectiveness of our hedging or trading strategy in responding to the oil market condition, we may realise loss from our paper swap and futures transactions, thereby reducing our revenue. More details on derivatives are disclosed on page 51 of the Prospectus. The breakdown of the pro®t and loss from our paper swap and futures transactions are as follows:±

S$'000 Gain/Loss) FY1998 FY1999 FY2000 Paper Swaps1,977) 3,405 12,192) FuturesÐ 9 180) Total 1,977) 3,414 12,372)

$8) Travel Business We incorporated a subsidiary, Greater China Travel Industry $Singapore) Pte Ltd in FY2000 to complement our core business by providing travel services to our customers and hence improving our relationship with them. We have no intention of devoting any signi®cant amount of time and resources to expanding this travel business and do not expect the subsidiary to contribute signi®cantly to our consolidated revenue in the future.

Cost of Sales Our cost of sales comprise mainly the cost of purchasing the oil products including the freight cost. Cost of sales constituted 95.1%, 96.9% and 95.5% of our total revenue in FY1998, FY1999 and FY2000 respectively.

Factors that will affect our cost of sales are:±

$1) Volatility of oil prices Our cost of sales will be affected by the volatility of the oil prices. Any increase in the prices of oil products we purchase will increase our cost of sales.

$2) Supply of oil products Cost of sales is dependent on the available supply of oil products. In the event of any acute shortage of supply of oil products or if we cannot ®nd a cheaper alternative source of supply, our cost of sales will be adversely affected.

$3) Freight cost Although freight cost constitutes a small percentage of our cost of sales, it is signi®cant in absolute terms. For example, in FY2000, freight cost was approximately S$11.0 million or 1.2% of cost of sales. Any signi®cant increase in freight cost will have a negative impact on our cost of sales.

Operating Costs and Expenses Operating costs and expenses comprise mainly staff and related costs, ®nance costs, provision for doubtful debts and management fee to our Parent Company.

33 The breakdown of our operating costs and expenses for the past three ®nancial years and for the six months ended 30 June 2001 are as follows:±

Six months ended FY1998 FY1999 FY2000 30 June 2001 S$'000 % S$'000 % S$'000 % S$'000 % Staff and related costs 205 20 1,930 42 8,310 29 891 25 Finance costs 20 2 195 4 750 3 581 16 Provision for doubtful debts Ð Ð Ð Ð 4,995 18 Ð Ð Management fee to Parent Company Ð Ð Ð Ð 8,840 31 Ð Ð Other operating expenses 784 78 2,497 54 5,318 19 2,149 59

Total 1,009 100 4,622 100 28,213 100 3,621 100

Staff and related costs comprise salaries, bonus, CPF and employees' welfare bene®ts. Staff and related costs increased signi®cantly over the past three ®nancial years, as we recruited experienced traders to expand our procurement and trading volume. In particular, the signi®cantly higher staff and related costs in FY2000 was due to the US$3.5 million provision for staff bonus, which we intend to pay out in FY2002.

Finance costs consist mainly of interest expenses from trust receipts issued by banks and administrative bank charges. Finance costs increased signi®cantly in FY2000 as we commenced using trust receipts to ®nance our business.

A $5.0 million provision for doubtful debt charged in FY2000 consisted of a speci®c provision amounting to $1.6 million and a general provision of $3.4 million. Speci®c provision was for those debts that were more than 60 days, comprising mainly the late payment charges and demurrage costs owed by our PRC customers who may disagree with incurring the costs themselves. As such, it would take some time for us to liaise with them before they ®nally paid up the costs. General provision was calculated based on 3% of December 2000's debtor balance. Although we have made the provisions for doubtful debts, we have not experienced any bad debts to date.

We incurred a one-off management fee of US$5.0 million to be paid to our Parent Company in FY2001 for its management support which allow us to use its facilities and award us with contracts, thereby enabling us to procure approximately 92% of jet fuel imports to PRC in FY2000. We do not intend to pay to our Parent Company any other sums in the future for their management support.

Other operating expenses include directors' fee and remuneration, depreciation of ®xed assets, and rental expense, travelling and training expenses. The other operating expenses increased signi®cantly from FY1999 to FY2000, mainly due to an increase of $0.7 million in travelling expenses in the course of our business activities, and an increase of $1.7 million in training expenses $including the sponsorship of Executive Masters in Business Administration programme to some of our Directors and Parent Group employees). Please refer to page 75 for details on the sponsorship of Executive Masters in Business Administration programme.

RESULTS OF OPERATIONS Our segmental results can be classi®ed by products, namely Clean Petroleum Products, Black Petroleum Products, Crude Oil, Petrochemical Products and Derivatives Products. Our segmental results by geographical region are based on the location of our customers, and can be classi®ed into PRC and ``Other Regions''.

34 Overview For clean petroleum products, we are mainly in the jet fuel procurement which has been our principal source of revenue, and a small portion in gas oil. About 98.3% of the revenue from jet fuel procurement and trading in FY2000 was attributable to our PRC market. In FY1999, in our efforts to expand our trading activity in PRC market, we commenced trading in fuel oil, a black petroleum product, and plastic resins, a petrochemical product. To diversify our market exposure, we also started trading in gas oil in FY1999 and crude oil in FY2000 to our customers from non-PRC markets, such as Indonesia, Philippines, Hong Kong and Taiwan. Revenue in FY2000 attributable to the PRC market constitutes approximately 94% of our total revenue whereas other markets represent the remaining 6%.

$i) Review of Past Performance by Product Revenue Six Months Ended FY1998 FY1999 FY2000 30 June 2001 S$'000 % S$'000 % S$'000 % S$'000 % Clean Petroleum Products172,695 101 342,065 83 811,446 84 376,277 89 Ð Jet Fuel 172,695 101 330,379 80 809,596 84 376,277 89 Ð Gas Oil Ð Ð 11,686 3 1,850 0 0 0

Black Petroleum ProductsÐ Ð 64,820 15 115,099 12 42,818 10 Ð Fuel Oil Ð Ð 64,820 15 115,099 12 42,818 10

Crude Oil Ð Ð Ð Ð 40,438 4 0 0

Petrochemical ProductsÐ Ð 4,248 1 9,106 1 5,616 1 Ð Plastics Resins Ð Ð 4,248 1 9,106 1 5,616 1

Derivative Products$1) 1,977) 1) 3,414 1 12,372) 1) 296 0

170,718 100 414,547 100 963,717 100 425,007 100

Note:± $1) Net gain or loss from Derivative Products is treated as an addition or a deduction to the revenue respectively.

Pro®t Before Tax And Pro®t Before Tax Margin Six Months Ended FY1998 FY1999 FY2000 30 June 2001 S$'000 % S$'000 % S$'000 % S$'000 % Clean Petroleum Products7,076 4.1 8,161 2.4 13,489 1.7 29,360 7.8 Ð Jet Fuel 7,076 4.1 7,885 2.4 13,458 1.7 29,360 7.8 Ð Gas Oil Ð Ð 276 2.4 31 1.7 0 0

Black Petroleum ProductsÐ Ð 1,545 2.4 1,864 1.6 3,299 7.7 Ð Fuel Oil Ð Ð 1,545 2.4 1,864 1.6 3,299 7.7

Crude Oil Ð Ð Ð Ð 679 1.7 0 0

Petrochemical ProductsÐ Ð 100 2.4 150 1.6 330 5.9 Ð Plastics Resins Ð Ð 100 2.4 150 1.6 330 5.9

7,076 4.1 9,806 2.4 16,182 1.7 32,989 7.8

35 $ii) Review of Past Performance by Geographical Region Revenue

Six Months Ended FY1998 FY1999 FY2000 30 June 2001 S$'000 % S$'000 % S$'000 % S$'000 % PRC 170,718 100 387,504 93 907,918 94 425,007 100 Other Regions Ð Ð 27,043 7 55,799 6 0 0

170,718 100 414,547 100 963,717 100 425,007 100

Pro®t Before Tax And Pro®t Before Tax Margin

Six Months Ended FY1998 FY1999 FY2000 30 June 2001 S$'000 % S$'000 % S$'000 % S$'000 % PRC 7,076 4.1 9,166 2.2 15,245 1.6 32,989 7.8 Other Regions Ð Ð 640 0.2 937 0 0 0

7,076 4.1 9,806 2.4 16,182 1.6 32,989 7.8

FY1999 vsFY1998 Revenue Our revenue in FY1999 increased signi®cantly by 142.8% over FY1998 to $414.5 million. The increase was due to several contributing factors. In FY1999, our sales of jet fuel increased markedly by 91.3% to $330.4 million from $172.7 million in FY1998 due primarily to increase in sales to the PRC. With the support from our Parent Group which is our major customer, we managed to capture approximately 83% of the market share of jet fuel import into the PRC.

We also expanded our trading business in FY1999 by including more oil related products to our portfolio such as fuel oil and plastic resins, and by expanding sales to new customers based in Hong Kong, Philippines and Taiwan. Fuel oil trading generated $64.8 million in revenue in FY1999, representing 16% of the total revenue in that year. Our revenue arising from trading in new countries constituted 7% of the total revenue in FY1999 or $27.0 million.

Moreover, we made a net pro®t of $3.4 million from our derivatives transactions in FY1999 compared to a net loss of $2.0 million in FY1998. We traded in derivatives to hedge the risk associated with our physical trades, and to take open positions when our traders were of the view that the open positions would likely to gain from the market trend. For derivatives transactions which were entered for hedging purpose, gains from our derivatives positions were used to offset losses from our physical trades due to price ¯uctuations and vice versa. Although we made gains and losses from individual derivatives transactions in FY1999, we had a pro®t of $3.4 million on a net basis, which contributed to our revenue in FY1999.

36 Cost of Sales Cost of sales grew from $162.3 million in FY1998 to $401.5 million in FY1999, or an increase of 147.4%. This is consistent with the high growth rate in our revenue in FY1999. The difference in the percentage growth between our turnover and our cost of sales in FY1999 was attributable to the inclusion of a net gain from paper swap transactions to the revenue, the inclusion of freight costs in the cost of sales and some of the oil transactions whereby the sale price contracted with the customer and the cost price contracted with the supplier were entered on different terms, i.e. ®xed rate and ¯oating rate and vice versa. An instance is when we purchased an oil cargo at a ¯oating rate and sold it to our customers at a ®xed rate. When the oil price rose, our cost of sales increased but our revenue from the sale of oil remained unchanged.

Gross Pro®t Gross pro®t margin declined by 1.8 percentage points from 4.9% in FY1998 to 3.1% in FY1999. The decrease in the overall gross pro®t margin in FY1999 was attributable to the inclusion of trading in fuel oil and plastics which yielded lower pro®t margin vis-aÁ -vis jet fuel, as well as our entry into new countries where we had to compete for customers' orders. In FY1999, the gross pro®t margin for jet fuel was in the range of US$6.21 to US$13.55 per metric ton whereas the gross pro®t margin for fuel oil was in the range of US$0.50 to US$5.83 per metric ton.

Other Income Other income comprised mainly interest income from banks and charges $at approximately 11.5% per annum) to the oil customers for late payment and income from renting out the of®ce property at Suntec Tower Two. Other income grew by 900.0% from $0.1 million in FY1998 to $1.0 million in FY1999, mainly due to a signi®cant increase in interest income from our US$ denominated ®xed deposit $the rate of which was about 7% per annum in FY1999) to $0.5 million in FY1999 and late payment interest from the oil customers amounting to $0.3 million in FY1999.

Operating costs and expenses Our operating costs and expenses increased signi®cantly by $3.6 million from $1.0 million in FY1998 to $4.6 million in FY1999. The increase was mainly due to a $1.7 million increase in staff costs as we expanded our trading team from two to four traders and increased our staff to support our growing business. It was also a result of a $1.7 million increase in other operating expenses such as travelling expenses which were mainly incurred as part of our continual effort to enhance relationships with our PRC customers, who are from our Parent Group.

Pro®t before tax Our pro®t before tax increased from $7.1 million in FY1998 to $9.8 million in FY1999 or an increase of 38.0%. This increase was due to the higher absolute growth in our trading revenue which more than offset the decline in pre-tax pro®t margin from 4.1% to 2.4% in FY1999.

Tax Due to our AOT status in 1998, we enjoyed a concessionary tax rate of 10% on our income derived from qualifying oil trading transactions for a period of ®ve years with effect from 1 January 1998. As such, our effective tax rate on our pre-tax pro®t for FY1999 was a lower 10.3% compared to the then Singapore statutory tax rate of 26.0%.

Pro®t after tax Our pro®t after tax grew signi®cantly by 37.5% from $6.4 million in FY1998 to $8.8 million in FY1999. This was consistent with the overall increase in revenue from the sale of our oil products and the net pro®t gained from our paper swap deals during the period under review.

37 FY2000 vsFY1999 Revenue Our revenue continued to grow signi®cantly by 132.5% to $963.7 million in FY2000, mainly due to an increase of 132.9% in the sales of jet fuel to $809.6 million in FY2000. Our jet fuel trades increased by 25.3% from 1,176,730 metric tons in FY1999 to 1,473,933 metric tons in FY2000, whereas the price of jet fuel increased signi®cantly by 59.3% from US$21.59 to US$34.39 during the same period. Due to continual support from our Parent Group which is our major customer, we had approximately 92% of the jet fuel imports into the PRC. Our FY2000 revenue was augmented by an increase in the sales of fuel oil to $111 million and an increase in sales of plastics to $8.9 million. Our sale of fuel oil increased by 70.0% in FY2000 due to a smaller revenue base in FY1999 as we started fuel oil trading in September 1999. Our increase in revenue from plastic sales was a result of an increase in trading volume from 4,187 metric tons to 7,895 metric tons. In FY2000, we sold one cargo of crude oil to Indonesia, contributing $40.4 million to our FY2000 revenue. Our sales to the PRC market in FY2000 remained fairly constant at 94% of the total revenue in FY2000.

In accordance with Singapore accounting standards, a net loss from paper transactions is treated as a deduction to the revenue. As such, our revenue in FY2000 was lowered by a net loss of $12.4 million from our derivatives trades. The net loss comprised a $8.7 million loss from open positions and a $3.7 million loss from hedging activities. The $8.7 million loss which occurred mainly in the ®rst half of FY2000 arose because the open positions were not closely monitored then and the market price moved in the adverse direction. To avoid similar incident from occurring, we have formulated a set of risk management procedures and established a risk management committee in October 2000. Details on our risk management system can be found on page 54 of the Prospectus.

Our revenues from the ®rst half and second half of FY2000 were $333.4 million and $630.3 million respectively. The higher revenue in the second half of FY2000 was due to higher jet fuel prices contracted with our PRC customers coupled with higher quantity of jet fuel traded $i.e. 0.85 million metric tons in the second half of FY2000 compared with 0.63 million metric tons in the ®rst half of FY2000). The higher demand for jet fuel import in the second half of FY2000 was due to the fact that the PRC domestic jet fuel price was more expensive than the international jet fuel price by approximately US$6 to US$7.50 per barrel.

Cost of Sales Cost of sales grew by 129.3% from $401.5 million in FY1999 to $920.8 million in FY2000. This was consistent with the 132.5% growth in our overall sales in FY2000. The difference in the percentage growth between our revenue and cost of sales in FY2000 was attributable to the inclusion of a net loss from paper swap transactions to the revenue, the inclusion of freight costs in the cost of sales and some of the oil transactions whereby the sale price contracted with the customer and the cost price contracted with the supplier were entered on different terms, i.e. ®xed rate and ¯oating rate and vice versa. An instance is when we bought the oil at a ¯oating rate and sold the oil to our customers at a ®xed rate. When the oil price declined, our cost of sales decreased but our revenue from the sale of oil remained unchanged.

Gross Pro®t Gross pro®t margin increased by 1.4 percentage points from 3.1% in FY1999 to 4.5% in FY2000. Increase in the overall gross pro®t margin was attributed to the signi®cant 140.4% increase in the sales of the higher-margin jet fuel to the PRC market, amounting to $801.5 million. Despite making a loss of $0.9 million in the ®rst half of FY2000 due to loss in paper trading, we made a gross pro®t of $42.9 million for the whole of FY2000. This was due to signi®cantly higher margins earned from the jet fuel trades in the second half of FY2000 as a result of favourable market condition.

Other Income Other income grew slightly by 14.6% to $1.2 million in FY2000, largely due to a $0.3 million increase in interest income from our ®xed deposits and a $0.2 million increase in rental income from our leasehold property.

38 Operating costs and expenses Our operating costs and expenses increased signi®cantly by 513.0% from $4.6 million in FY1999 to $28.2 million in FY2000. The increase is a result of four contributing factors, speci®cally $i) a provision for US$3.5 million staff bonus which we intend to pay out in FY2002, $ii) a $5.0 million provision for doubtful debt arising from speci®c provision for those debts that are outstanding for more than 60 days and general provision which is calculated based on 3% of December 2000's debtor balance, $iii) a one-time US$5 million management fee to our Parent Company for its management support which enable us to procure approximately 92% of the jet fuel import to PRC market., and $iv) a $2.8 million increase in other operating expenses, attributable mainly to an increase of $0.7 million in travelling expenses in the course of our business activities, and an increase of $1.7 million in training expenses $including the sponsorship of Executive Masters in Business Administration programme for some of our Directors and Parent Group employees). Please refer to page 75 for more details on the sponsorship. In addition, bank charges increased signi®cantly by 185% from $0.2 million to $0.57 million in FY2000 as we increased the use of Letter of Credit facilities offered by the banks to pay our oil suppliers.

Pro®t before tax Our pro®t before tax increased from $9.8 million in FY1999 to $16.2 million or an increase in 65.3%. Although our gross pro®t margin increased in FY2000, pre-tax pro®t margin declined from 2.4% to 1.7% during the same period due to the higher operating costs and expenses as mentioned above.

Tax Our tax amounted to $2.7 million in FY2000, compared to $1.0 million in FY1999. As a proportion of pre-tax pro®t, the effective tax rate for FY2000 increased to 16.5% from 10.3% in FY1999.

Pro®t after tax Our pro®t after tax continued to increase signi®cantly and by a larger 53.4% from $8.8 million in FY1999 to $13.5 million in FY2000, consistent with the high growth rate of sales during the period under review.

Six monthsended 30 June 2001 vssixmonthsended 30 June 2000 Revenue Our revenue increased by 27.5% or $91.6 million from $333.4 million in the ®rst six months ended 30 June 2000 to $425.0 million in the ®rst six months ended 30 June 2001. The increase in our revenue was mainly due to an increase in jet fuel orders placed by our PRC customers, coupled with a lower revenue base in the six months ended 30 June 2000 due to a net loss of $8.7 million in trading paper swaps. For the six months ended 30 June 2001, our jet fuel sales of $376.3 million constituted 89% of our total revenue for the six months. Revenue from jet fuel increased by 25.5% as our cargoes to PRC increased to 787,135 metric tons for the six months ended 30 June 2001 compared to 627,096 metric tons for the previous six-month period ended 30 June 2000.

Cost of Sales Our cost of sales grew by 18.5% from $334.4 million in the six months ended 30 June 2000 to $396.3 million in the six months ended 30 June 2001. The $61.9 million increase in cost of sales is in line with the higher sales in our oil products for the six months ended 30 June 2001.

Gross Pro®t On a gross margin basis, we made a loss of $0.9 million for the six months ended 30 June 2000 due to the net loss of $8.6 million in our paper swaps trading. As a result of the loss from trading in paper swaps, our revenue was reduced to $333.4 million which was lower than the cost of sales of $334.4 million.

39 For the six months ended 30 June 2001, we made a gross pro®t margin of 6.7% or $28.7 million, of which only a small portion amounting to $0.3 million was attributable to a net gain from our paper swap activities.

Other Income Other income grew signi®cantly from $0.4 million for the six months ended 30 June 2000 to $3.3 million for the six months ended 30 June 2001, mainly due to an increase in interest income as a result of late payment by our oil customers.

Operating costs and expenses Our operating costs and expenses increased by 71.4% or $1.5 million to $3.6 million for six months ended 30 June 2001 from $2.1 million for the same period in the previous year. The increase is due to a 74.7% increase in staff and related costs, a 119.2% increase in bank charges for issuing Letters of Credit on our behalf, and a 58.0% increase in other operating expenses. Staff costs increased to $0.9 million for the six months ended 30 June 2001 compared with $0.5 million for the same period in FY2000, as we increased our staff to 24 employees as at 30 June 2001. Other operating expenses increased to $2.1 million as we incurred higher travelling expenses as part of relationship building with our customers.

Pro®t before tax Our pro®t before tax for the six months ended 30 June 2001 stood at $33.0 million or a margin of 7.8% based on the revenue during the period. In contrast, we made a net loss of $2.5 million for the six-month period ended 30 June 2000, which was largely the result of the net loss from trading in paper swaps. We were able to achieve a pro®t before tax margin of 7.8% mainly due to higher margins from the sale of larger quantities of jet fuel to PRC, augmented by substantially higher income from late payment charges imposed on customers.

Tax Our tax expense for the six months ended 30 June 2001 was $3.3 million. Our effective tax rate was 10.0% based on the pre-tax pro®t during the six-month period. There was no tax expense in the six-month period ended 30 June 2000 as our Company incurred an operating loss.

Pro®t after tax In contrast with a net loss of $2.5 million for the six months ended 30 June 2000, we made an after-tax net pro®t of $29.7 million for the six months ended 30 June 2001. As a proportion of the revenue, the pro®t after tax margin for the six months ended 30 June 2001 was 7.0%.

LIQUIDITY AND CAPITAL RESOURCES A summary of our cash ¯ow for the past three ®nancial years and for the six months ended 30 June 2001 is as follows:±

Six months ended S$'000 FY1998 FY1999 FY2000 30 June 2001 Net cash ¯ow from operating activities 4,377 10,863 6,663 32,261 Net cash used in investing activities $61) $3,872) $274) $581)

Net increase in cash and cash equivalents 4,316 6,991 6,389 31,680

Cash and cash equivalents at end of period 4,536 11,527 17,916 49,596

40 Our business growth has been ®nanced mainly through a combination of retained earnings, and credit facilities from banks and suppliers.

The cash generated from our operations are mainly through the sale of oil products to customers. Our main uses of cash have been for the purchase of oil products from suppliers, and paying staff related expenses and administrative costs. As at 30 June 2001, we have in total credit facilities of US$100 million from banks, and we do not engage in long-term borrowings. In our opinion, we believe that we are able to meet the present working capital requirements after taking into account our cash position and present credit facilities from banks and suppliers.

Approximately 95% of our cash and cash equivalents are denominated in US$ as our trading transactions are all in US$ terms. Only a small portion of our cash is maintained in S$ to meet the local operating expenses, such as staff costs.

Our cash and cash equivalents increased by 155.6% from $4.5 million in FY1998 to $11.5 million in FY1999. The increase of $7.0 million in cash and cash equivalents during this period was due to an operating cash in¯ow of $10.9 million offset by an investing cash out¯ow of $3.9 million for the purchase of a leasehold of®ce property in Suntec Tower, Singapore.

Our cash and cash equivalents grew by 55.7% or an increase of $6.4 million to $17.9 million in FY2000. Net cash generated from operating activities after adjusting for changes in working capital was $6.7 million in FY2000. We incurred a small investing cash out¯ow of $89,000 in FY2000 for the purchase of ®xed assets such as computers and of®ce equipment. Our net cash and cash equivalents as at 30 June 2001 stood at $49.6 million, an increase of $31.7 million over the cash balances as at end FY2000.

On 28 August 2001, we paid $9.5 million for a leasehold property at Suntec Tower Three for use as our of®ces.

REVIEW OF FINANCIAL POSITION Fixed Assets Fixed assets consist primarily of leasehold property, motor vehicles, furniture and ®ttings and of®ce equipment.

Our ®xed assets increased signi®cantly from $0.1 million in FY1998 to $3.9 million in FY1999, as we purchased a leasehold of®ce property at Suntec Tower Two, Singapore for $3.9 million on commercial terms in June 1999. The purchase was ®nanced by our own cash resources. Although the of®ce property was acquired with the intention for our own use, we discovered that we were able to rent out the property at a higher rate than the rent we paid for our then existing of®ce premise. As such, we decided to continue renting the of®ce property to earn an incremental rental income after netting off rental expense.

Our ®xed assets increased slightly to $4.0 million in FY2000 due to purchase of computers and of®ce equipment. As of 30 June 2001, our ®xed assets increased by $0.3 million to $4.3 million mainly due to net addition arising from of®ce renovation.

Current Assets Current assets comprise mainly trade debtors, deposit and prepayments, ®xed deposits, cash and bank balances.

41 Our current assets increased by 62.5% or $28.6 million from $45.7 million in FY1998 to $74.3 million in FY1999, mainly due to our ®xed deposits and an increase in our trade debtors' balances. We invested approximately $7.2 million of our FY1999 operating pro®t in US$ denominated ®xed deposit whose rate was about 7% per annum in FY1999. The increase in trade debtors by $22.1 million or 54.7% to $62.5 million in FY1999 was in line with the signi®cant increase in revenue in FY1999. Our cash and bank balances fell slightly from $4.5 million to $4.3 million from FY1998 to FY1999. Our margin deposits, which were required by banks as deposit for issuing Letters of Credit to our suppliers, fell signi®cantly from $0.7 million in FY1998 to $0.2 million in FY1999. The decline in margin deposits was attributable to banks lowering their margin requirements in consideration of our creditworthiness, and our suppliers providing us with open credits which eliminated the need for Letters of Credit.

In FY2000, our current assets increased by 49.5% to $111.1 million from $74.3 million in FY1999. This was attributable to more operating pro®t being invested in ®xed deposits and higher trade debtors' balances, which increased by $6.1 million and $30.7 million respectively in FY2000. The increase was a result of higher sales and pro®ts achieved in FY2000. Our cash and bank balances stood at $4.7 million in FY2000, which was increased from $4.3 million in FY1999. Our margin deposits with banks continued to decline signi®cantly to $11,000 in FY2000 due to the same contributing factors in FY1999.

As at end June 2001, our current assets totalled $141.9 million, or an increase of 27.7% when compared to our current assets as at end FY2000. Our current assets increased by $30.8 million mainly due to a $30.7 million increase in ®xed deposits and a $0.9 million increase in cash and bank balances as a result of operating cash in¯ow during the six-month period and a 10% deposit of $0.9 million for the purchase of our of®ce property in Suntec Tower Three. This was offset by a decrease of $2.1 million in trade receivables as we received payments from our customers.

Current Liabilities Current liabilities comprise mainly trade creditors, other creditors and accruals, accrued staff costs, amount due to Parent Company, trust receipts and provision for taxation.

Our current liabilities increased by 60.1% or $23.5 million from $39.1 million in FY1998 to $62.6 million in FY1999. The increase in trade creditors of $22.1 million was attributable to higher amount of purchases, in line with the increase in our sales in FY1999. Tax provision increased by $0.3 million in FY1999 as we generated higher pro®ts.

In FY2000, current liabilities increased by 37.5% to $86.1 million compared to FY1999. The increase resulted from a one-time management fee of US$5 million payable to our parent company for its management support in the past in various ways including the use of its storage and distribution facilities as well as the award of jet fuel contracts to us. The increase in current liabilities was also attributable to an accrued staff bonus of US$3.5 million, and the use of trust receipts amounting to $28.4 million in lieu of trade credits which was reduced by $22.6 million in FY2000. We only commenced using trust receipts to fund our oil purchase from suppliers in FY2000 when banks started to provide us with such funding facilities. We substituted trust receipts for trade credits as banks' trust receipts charge a lower rate than that offered by our trade creditors. Trust receipt payables are secured by a letter of set-off which gives the bank the right to offset our ®xed deposits or cash in the event that we are unable to pay the trust receipts. The increase in $1.6 million in tax provision was attributable to higher pro®ts generated in FY2000.

42 As at 30 June 2001, our current liabilities amounted to $87.2 million. Our trade credits increased by 77.0% from $37.9 million as at end December 2001 to $67.1 million as at end June 2000 as some of our major suppliers offered us with open credits which eliminated the need for Letters of Credit and trust receipts from banks. We did not have any outstanding trust receipts payable as at 30 June 2001 because we utilised cash to pay off the banks and we will continue to use trust receipts as a funding source. As at end June 2001, the accrued staff bonus and the management fee due to our Parent Company were approximately $6.9 million and $9.5 million respectively on a translated basis. We intend to pay the management fee this year and the accrued staff bonus in FY2002.

Non-current liabilities Our non-current liabilities consist of deferred taxation. The amount of deferred taxation was small and increased marginally from $5,000 in FY1998 to $15,000 in FY1999 and FY2000. Our company did not have long-term borrowings during the past three ®nancial years. As at 30 June 2001, our deferred taxation increased to $320,000 mainly due to the large unrealised exchange gain arising from translation of US$ denominated balances as at the end of the period.

Shareholders' equity Our shareholders' equity increased by 131.3% from $6.7 million to $15.5 million in FY1999, due to an issue of bonus shares for $4.4 million from capitalising retained earnings and a net increase in retained pro®ts of $4.4 million in FY1999. Shareholders' equity increased by 87.0% or $13.5 million to $29.0 million in FY2000 due to reinvestment of our pro®ts to ®nance business growth. As at 30 June 2001, our shareholders' equity increased signi®cantly to $58.7 million due to accumulated pro®ts as a result of better margins earned from jet fuel trades due to favourable market conditions. Our company's share capital has increased from $5.0 million as at end December 2000 to $21.6 million as at end June 2001 due to a bonus issue of $16.6 million from capitalising retained earnings.

FOREIGN EXCHANGE As all our sale and purchase transactions in physical and paper trades are conducted in US$, we are generally not subject to signi®cant foreign exchange transaction risks. We are however subject to foreign exchange translation risk as our reporting currency is denominated in S$ while our transaction currency is denominated in US$. Our foreign exchange transaction risk arises as a result of our need to convert our US$ cash ¯ow to S$ to pay off our operating expenses such as staff costs. Any signi®cant ¯uctuation in the exchange rate between US$ and S$ will have an impact on the foreign exchange translation gain or loss and accordingly our Company's pro®t.

Our net foreign exchange gain or loss as a proportion of our turnover and pro®t before tax for the last three ®nancial years and the six months ended 30 June 2001 are as follows:± Six months ended FY1998 FY1999 FY2000 30 June 2001 Net foreign exchange gain/$loss) $S$'000) $474) 372 315 4,590 % of revenue 0.28 0.09 0.03 1.10 % of PBT 6.7 3.8 1.9 13.9

We have not used any ®nancial hedging instruments to manage our foreign exchange risk since our sale and purchase transactions are denominated in the same currency, US dollar. Our foreign exchange gains/losses in FY1998, FY1999 and FY2000 had been relatively low due to relatively stable exchange rates between US$ and S$. We recorded a signi®cant gain of $4.6 million in foreign exchange for the six months ended 30 June 2001 mainly due to translation gain as our US$ denominated cash and cash equivalents were translated at a higher rate of S$1.82 as at 30 June 2001 compared to S$1.7 as at 30 December 2000, and had increased signi®cantly from $17.9 million as at 30 December 2001 to $49.6 million as at 30 June 2001.

43 PROFIT FORECAST Barring unforeseen circumstances and based on the assumptions below, we expect to record a revenue of approximately $1,085 million and pro®t after tax of approximately $40 million for the ®nancial year ending 31 December 2001. For the ®rst six months ended June 2001, we have achieved a revenue of $425.0 million and a pro®t after tax of $29.7 million, representing 39.2% and 74.3% of our respective forecast ®gures. Pro®t after tax in the ®rst half of 2001 is expected to be higher than in the second half due to higher margins earned from jet fuel trades owing to favourable market condition and signi®cant foreign exchange translation gain recorded in the ®rst half of 2001.

Our revenue for FY2001 is forecast to increase by 12.6% or $121.3 million from $963.7 million in FY2000 to approximately $1,085 million due to an increase in the quantities of oil products traded and the recruitment of additional traders who are committed to generate higher sales. Our cost of sales is forecast to increase in line with the growth in revenue. In addition, our operating expenses is forecast to decrease signi®cantly due to a larger operating expense base in FY2000 attributable to the one-time management fee to our Parent Company and the provisions for staff bonus and doubtful debts.

Accordingly, pro®t after tax is forecast to increase by 196.3% or $26.5 million from $13.5 million in FY2000 to approximately $40 million in FY2001.

Assumptions Underlying the Pro®t Forecast The profit forecast for the financial year ending 31 December 2001, for which our Directors are solely responsible, is made on the following assumptions:± $a) There will be no significant changes in the current demand and prevailing economic conditions in Singapore and China that may directly or indirectly adversely affect the activities and performance of the Group and its major customers and suppliers; $b) There will be no material changes in existing political, economic, legal or regulatory conditions affecting the activities of the Company, the industry or the countries in which the Group operates; $c) There will be no material changes, other than as announced and projected for, in the bases or rates of taxation, employer's CPF contribution, tariffs, duties, currency exchange rates and interest rates from those prevailing at the date of the projections and which may affect the Group's performance; $d) There will be no major industrial disputes, economic and political changes or any abnormal circumstances which will adversely affect the operations of the Group; $e) There will be no significant changes in the prevailing cost of materials, labour and other operating costs essential for the Group's principal activities; and $f) The in¯ation rate and exchange rates of foreign currencies will not change signi®cantly from their present levels.

44 BUSINESS

HISTORY Our Company was incorporated as a joint venture among three parties: CAOSC, China Foreign Trade Transportation Corporation $``SINOTRANS'') and Neptune Orient Lines Ltd $``NOL''), in Singapore on 26 May 1993 under the name ``Sino Aviation Oil Transportation $Singapore) Pte Ltd''.

The joint venture was primarily engaged in the business of marine transportation. Due to limited market knowledge and management experience in the ®eld of marine transportation, the joint venture did not operate as planned and was not successful. As a result, we operated at a loss from 1993 to end 1994.

On 14 February 1995, CAOSC acquired NOL's and SINOTRANS' respective stakes in our Company, and as a result, our Company became the ®rst wholly-owned overseas subsidiary of CAOSC. CAOSC, our Parent Company, is a large state-owned enterprise in the PRC. Its business includes the construction of jet fuel infrastructure $for example, pipelines and storage tanks) and the procurement of aviation oil supply equipment and supply of jet fuel $including jet fuel purchase, transportation and storage and delivery into aircrafts) to airports throughout the PRC. CAOSC owns oil storage terminals, dedicated jetties, railways and pipelines infrastructure to support its business operations. CAOSC has a regular demand for foreign imports of jet fuel from international oil suppliers. To meet its demand for jet fuel, CAOSC had previously purchased through third party trading companies and oil corporations such as ExxonMobil, bp, Shell and Caltex $the ``Oil Majors''). To reduce business costs, CAOSC had plans then to set up an overseas subsidiary to source for jet fuel on behalf of CAOSC. CAOSC's acquisition of NOL's and SINOTRANS' stakes in our Company was to maintain a presence in Singapore with a view to utilising our Company as an overseas procurement arm to import jet fuel into China. All approvals required for CAOSC's acquisition of NOL's and SINOTRANS' stake in our Company have been obtained.

CAOSC's plans to use our Company as an overseas procurement arm did not materialise immediately because our Parent Company spent some time planning the operations of our Company and obtaining the requisite approvals from the PRC authorities. As such, our Company was dormant and no business activities were carried out from 1995 to the ®rst half of 1997. On 1 July 1997, our Company commenced its operations of procuring jet fuel for CAOSC by sourcing from the international oil markets. To manage our Company in this new business, CAOSC had, on 28 June 1997, appointed Mr Chen Jiulin to head our operations.

In the beginning, we faced common start-up issues such as a lack of familiarity with the international jet fuel market and constraints in manpower, banking facilities and business network. We also had to divert attention from our business to resolve internal administrative issues between our Company and our Parent Company. Because of these issues, our turnover was low. Our sales volume in 1997 was 36,000 metric tons and our turnover was about S$11 million. At the end of the same year, our accumulated losses were approximately S$0.3 million.

However, we began to see an improvement in our business in 1998. This was mainly due to the efforts of our Board of Directors, and the management team. With their efforts, we managed to overcome the start-up problems and resolve the internal issues with our Parent Company. At the same time, the Asian ®nancial crisis in 1998 eliminated some of our competitors who had incurred substantial losses. By the end of 1998, our trading volume had started to improve and had increased to 1.32 million metric tons. Our total turnover in 1998 amounted to approximately S$170.7 million and we made a net pro®t before tax of approximately S$7.1 million.

45 Our Company's performance culminated on 27 July 1998 when we were conferred the AOT award by the Singapore Ministry of Trade and Industry. The AOT award is an endorsement of a company's performance as well as its contributions to the Singapore economy. In a circular issued by the Singapore Trade Development Board, it was stated that only companies which are considered well- established international players in the procurement, distribution and transportation of crude oil and petroleum products are considered for the AOT scheme and applicants must have worldwide networks and good track records. As at 2 January 2001, we are one of the 54 oil companies which have this AOT status. Amongst these 54 AOTs are Oil Majors or their subsidiaries like BP Singapore Pte Ltd, Caltex Trading Pte Ltd, ExxonMobil Asia Paci®c Pte Ltd and Shell Eastern Trading $Pte) Ltd. This award marked the milestone of our business presence in the international oil market. As an AOT company, we enjoy a concessionary tax rate of 10% on qualifying income for a period of ®ve years with effect from 1 January 1998. The AOT award is now known as the Global Trader Programme $``GTP'') award and the terms and conditions governing the GTP award remain unchanged from those governing the AOT award.

In 1999, we further developed our business by including more oil products such as fuel oil and petrochemical products such as plastic resins in our portfolio and also by expanding sales to other countries such as Hong Kong SAR, Philippines and Taiwan. We had started trading in plastic resins which account for a very small percentage of our total turnover because the volume traded for plastic resins is small compared to our procurement and trading volume for jet fuel and fuel oil. By the end of 1999, our procurement and trading volume increased to 3.23 million metric tons achieving a turnover of $414.5 million and a net pro®t before tax of approximately $9.8 million. We had, by the end of 1999, approximately 83% market share of total jet fuel import into the PRC. To re¯ect our status as a wholly owned subsidiary of CAOSC and the fact that our core business is in jet fuel procurement, we changed our name from ``Sino Aviation Oil Transportation $Singapore) Pte Ltd'' to ``China Aviation Oil $Singapore) Pte Ltd'' on 13 May 1999.

By the year 2000, our sale of jet fuel to the PRC's end users had stabilised and we had gained 92% market share of total jet fuel imports into the PRC. In view of the marked increase in the procurement and trading volume, our Company also set up a risk management committee to oversee all trades and monitor the risk of each and every deal. $Please refer to page 54 for more details on our risk management.) The procurement and trading volume for FY2000 was 3.57 million metric tons. Our turnover was approximately $963.7 million and our net pro®t before tax had increased to about $16.2 million. From 1998 to 2000, we established our credibility and won the support from banks and trade suppliers. We had trade ®nancing facilities of more than US$100 million by the end of 2000. We also incorporated our subsidiary, Greater China Travel Industry $Singapore) Pte Ltd in November 2000, to provide travel services to our customers and for our own travel requirements.

To implement our long-term goal of continuing to expand our business internationally and to obtain reliable sources of ®nancing for such expansion, we became a public company on 6 November 2001 and changed our name to ``China Aviation Oil $Singapore) Corporation Ltd''.

46 CORPORATE STRUCTURE Our corporate structure after the Invitation is as follows:±

CAOSC(1) THE PUBLIC

75% 25%

OUR COMPANY

100%

GREATER CHINA TRAVEL(2)

Notes:± $1) CAOSC, our Parent Company will own approximately 75% of the enlarged share capital of our Company. It is a stated- owned enterprise in the PRC. According to the provisions of the Law of the People's Republic of China on Industrial Enterprises Owned by the Whole People, CAOSC's assets are owned by the people of the PRC $i.e. the State). The State Council exercises ownership rights to CAOSC's assets on behalf of the State. CAAC is the State organisation in charge of the civil aviation industry in the PRC, therefore, it supervises and manages CAOSC under the authorisation of the State Council. $2) Greater China Travel Industry $Singapore) Pte Ltd was incorporated in Singapore as our Company's wholly-owned subsidiary. Its primary business is the provision of travel services.

BUSINESS Business Overview We are in the business of procurement and trading of petroleum products such as jet fuel, gasoil, fuel oil, crude oil and plastics, and oil derivatives. Our business can be divided into the following categories:± $1) Clean petroleum products $2) Black petroleum products $3) Crude Oil $4) Petrochemical products $5) Oil derivative products

Our procurement activities are currently restricted to the procurement of jet fuel for the PRC market.

Clean petroleum products accounted for approximately 84% of our total turnover for FY2000. Our customers are mainly from the PRC who own transportation and storage facilities for jet fuel. We supply jet fuel to our customers by transporting the jet fuel in bulk via chartered vessels to various ports in the PRC. Our customers would then store the cargoes in their storage facilities or transport them to the airport refueling depots.

A smaller, but nonetheless integral, part of our business is the trading of black petroleum products such as fuel oil which accounts for approximately 12% of our total turnover in FY2000. Our customers for fuel oil are also mainly from the PRC who are in the business of owning and operating power plants.

47 We are also currently engaged in the trading of petrochemical products and crude oil, which forms in total approximately 5% of our total turnover in FY2000. We intend to increase our trading volume, but such increase will be opportunistic depending on the various market conditions. From time to time, we are engaged in paper swaps to hedge our jet fuel and fuel oil cargoes, and crude oil futures to hedge our crude oil cargoes. Moreover, as and when there are attractive opportunities our traders may, based on their experience and market analysis take open positions in paper swaps and futures with the aim of making pro®ts. A subsidiary of our Company was incorporated in November 2000 under the name of Greater China Travel Industry $Singapore) Pte Ltd and had commenced business in May 2001. The principal business of this subsidiary is the provision of travel services. This subsidiary was set up to complement our main business by providing additional services to our customers and hence improving our relationship with our customers. As we are committed to maintaining a focused and cohesive business direction, we have no intention of devoting any substantial amount of time and resources to expanding this business.

Our Business Clean Petroleum Products Clean petroleum products include, amongst others, jet fuel and gasoil. Jet fuel is a distillate from the oil re®ning process and is used worldwide as the main source of energy to power aviation vehicles. Jet fuel forms the core business segment of our Company, accounting for approximately 84% of our total turnover in FY2000. We source for supplies of jet fuel from all over the world to sell to our customers based mainly in the PRC. We currently constitute substantially all of the total jet fuel imports to the PRC. Currently, one-third of the total jet fuel consumption in the PRC is imported whilst the remaining two-thirds is supplied by domestic re®neries. Our jet fuel business can be classi®ed into $1) procurement of jet fuel for our customers in the PRC and $2) trading of jet fuel with international parties.

Jet Fuel Procurement Our core business is in the procurement of jet fuel from overseas markets for distribution to the PRC civil aviation industry through our Parent Group. Our Parent Company is a large state-owned enterprise in the PRC whose businesses include the construction of jet fuel infrastructure, procurement, transportation, storage and supply of jet fuel to airports in the PRC and provision of refueling services to aeroplanes in the PRC airports. CAOSC is authorised by the Ministry of Foreign Trade and Economic Cooperation of the PRC $``MOFTEC'') to allocate the import quota for jet fuel import into the PRC. As our Parent Company requires great quantities of jet fuel, we have a ready market for our jet fuel procurement business. When we began our jet fuel procurement business in 1998, we had to tender for contracts for the supply of jet fuel to our Parent Company amidst competition from international oil companies. On 3 January 2001, our Parent Company issued a management directive to all its subsidiaries and associated companies to purchase all imported jet fuel from our Company on a long-term basis beginning January 2001. On 8 October 2001, our Parent Company issued another management directive to our Company stating that it would not withdraw the management directive on 3 January 2001 within the next few years, and that it would not set up another overseas company to carry on the business of jet fuel procurement that would compete with us. We procure jet fuel for PRC companies within our Parent Group which is our major customer. The quantity sold each time ranges from 25,000 metric tons to 45,000 metric tons. We begin the process of jet fuel procurement for our PRC customers after receiving orders from our customer by sending out an invitation to tender via telex to potential suppliers. The volume of jet fuel to be stipulated in each of these invitations to tender will usually be decided after we take into account the potential demand from other buyers and the current market price of jet fuel. After receiving tenders, our trading team analyses all the quotations and will decide on which supplier to choose. The choice of supplier is reliant on a few main factors such as the selling price, the shipping terms and the credit terms.

48 A sales quotation including price, shipping terms and other terms is then presented to our customers after we have ®rm offer from our suppliers. It is at this point in time when we will provide our customers with value-added services which include analysing the jet fuel market and presenting proposals and suggestions to them. If at times we are of the view that the pricing of jet fuel is considerably cheap, we may suggest to our customers to increase the quantity of jet fuel imported. After exploring the options, our customers will then con®rm the order for jet fuel and appoint an import agent which has been pre-approved by the PRC government in connection with the order. The industry practice for oil trading companies is to secure contracts either on a cargo basis or on a term basis. Cargo basis refers to contracting with a counterparty based on any speci®c cargo. Term basis refers to contracting with a counterparty for a number of cargoes for a speci®ed period of time, and it could be short term $such as a few months) or long term $such as up to three years). In the case of our PRC customers except for Shanghai Pudong International Airport Aviation Fuel Supply Corporation and South China Bluesky Aviation Oil Ltd $refer to ``Customers'' section on page 56 of this Prospectus), we do not enter into written contracts with them directly because it is stipulated under PRC regulations that all trades in oil products have to be conducted through import agents. Although we do not enter into contracts directly with our customers in the PRC but through import agents, we re¯ect the credit terms that we have negotiated with our PRC customers in our written contracts with the import agents. Our practice with respect to contracts being secured with our PRC customers is in line with the industry practice based on the fact that the contracts are concluded on a cargo basis. However, it differs from industry practice in that we have to enter into contracts with the import agents instead of our customers. Our jet fuel procurement process may be summarized as below:±

Receive orders from PRC customers

Send invitation to suppliers for tender

Determine our preferred supplier

Propose, and negotiate with PRC customers

Receive confirmation from our customers on the appointment of import agent

If we purchase on FOB If we purchase on CFR If we purchase on CIF terms terms terms

We charter vessels We purchase insurance

Suppliers load cargo

Arrival at destination and discharging of jet fuel

49 Jet Fuel Trading We are also engaged in jet fuel trading operations and we trade jet fuel with customers from other countries besides the PRC if and when opportunities arise. When our customers have a con®rmed order for jet fuel, they will usually send out invitations to tender stating the quantity of jet fuel required, the destination port, the shipping terms and the delivery period. We will then put in a bid and if the customer accepts our bid, we will proceed to ful®l the order from the cargoes we have on hand. The rest of the process by which we trade jet fuel is similar to the process of jet fuel procurement. Jet fuel trading is very competitive and as a result, our pro®t margins are usually smaller than our margins for procurement. We have, to date, concluded a few transactions with customers in Hong Kong SAR and the Philippines. The price of jet fuel is volatile. Like other commodities, the price of jet fuel is subject to various factors such as demand and supply ¯uctuations, speculative forces and crude oil price. In 1998, the average price of kerosene $jet fuel is a type of kerosene) was US$16.31 per barrel. In 1999, the average price of kerosene was US$21.59 per barrel and in 2000, the average price of kerosene was US$34.39.

Gasoil Gasoil is an intermediate distillate product used as diesel fuel, heating fuel and sometimes as feedstock. Our business in the trading of gasoil is opportunistic in that we trade in these commodities only when attractive opportunities arise.

Black Petroleum Products Black petroleum products include, amongst others, fuel oil. Fuel oil is the heavy distillate from the oil re®ning process, which is used as fuel for power stations and marine boilers. The trading of fuel oil accounted for approximately 12% of our total turnover in FY2000. Our main fuel oil customers are located in the Guangdong Province of the PRC and are usually companies which own power plants. We do not enter into written contracts with these PRC customers directly but instead execute written contracts with import agents for the import of such amounts of fuel oil. As the fuel oil market is highly competitive, our customers do not rely only on us to source for fuel oil. They would usually send out notices to oil trading companies stating their fuel oil requirements and conclude the contract with whichever company that can supply fuel oil at the lowest price and that is able to assure the quality of the fuel oil. However, we believe that with our experience, good reputation and service, our customers will be attracted to come back to us for future fuel oil orders. A large percentage of the fuel oil that we purchase is from Korea $approximately 36.8% of the total amount of fuel oil that we had purchased in FY2000 was from Korea) and we arrange for the fuel oil to be shipped to various ports such as Huangpu in Guangdong. Each shipment is about 35,000 metric tons. Almost all fuel oil deals are structured on a ``back-to-back'' basis. This means that if the cargo is bought at a ®xed price, the cargo will be sold at a ®xed price. In this way, our risk exposure is contained. As in the case of jet fuel, the price of fuel oil is also volatile and subject to the same factors affecting the price of jet fuel. In 1998, the average price for fuel oil $grade HSFO 180CST) was US$68.95 per metric ton. In 1999, the average price for fuel oil $grade HSFO 180CST) was US$102.13 per metric ton and in 2000, the average price for fuel oil $grade HSFO 180CST) was US$158.77 per metric ton.

50 Crude Oil Crude oil is extracted from the earth. It is the raw material for all oil products. The trading of crude oil accounted for approximately 4% of our total turnover for FY2000. Our business in the trading of crude oil is opportunistic in that we trade in these commodities only when attractive opportunities arise. Attractive opportunities may arise when other companies approach our Company with attractive propositions to trade crude oil or when our traders based on available market information and their experience, analyse that the market is moving in certain directions which allow our Company to make pro®ts. If the traders are of the view that the price of crude oil is on an upwards trend, we may decide to buy crude oil with a view to sell it at a pro®t. If the traders take the view that the price of crude oil is on a downwards trend, we may accept orders for crude oil from buyers with a view to buying the crude oil at a later date at lower prices.

Petrochemical Products Petrochemical products include, amongst others, plastics. Plastics are derived from the naphtha feedstock, which is a by-product of oil. The plastics industry although distinct from the oil industry is also affected by the similar changes that affect the oil industry. When the oil prices go up, the prices of the plastic resins will eventually go up. However, the volatility of the plastic resins price does not affect our business as we typically commit to sell the cargoes to the customers at an agreed price which comprises a pro®t margin and the cost of our purchase. We also minimise our risk exposure by not holding any inventory of plastics. Our business in plastic resins trading consists generally of the sourcing of plastic products such as Linear Low Density Polyethylene Resin and supplying the same to our customers in the PRC. Our suppliers are mainly from Singapore, Malaysia and Saudi Arabia but we have also purchased from suppliers in Thailand and Italy. The main provinces in the PRC that we export the plastic resins to are Jiangsu, Shanxi, Shandong, Yunnan, Sichuan, Hubei and Hunan. The trading of plastics accounted for approximately 1% of our total turnover for FY2000. We are unable to predict if this percentage will change signi®cantly in the future. Due to the relatively small contract amount involved $ranging from US$30,000 to US$500,000) as compared to jet fuel and fuel oil transactions, the turnover generated from plastic resins trading is not substantial when compared to our jet fuel and fuel oil trading.

Derivatives Products We trade in paper swaps to hedge the price risk exposure associated with our jet fuel and fuel oil cargoes, and crude oil futures to hedge our crude oil cargoes. Typically, we engage in hedging activities as and when we have an exposure which arises whenever the trader buys the oil at a ®xed price and sells the oil at a ¯oating price or vice versa. Besides hedging, we also engage in opportunistic trading by taking open positions in derivatives instruments when our traders, based on their experience and analysis of the market were of the view that the open positions would likely gain from the expected market movement. A paper swap is essentially an exchange of ¯oating price risk for a ®xed price and consists of two simultaneous transactions. In one transaction, an entity $who wish to hedge his risk exposure) is committed to pay a ®xed price for a speci®ed quantity of oil at the end of a speci®ed time period from the swap dealer, and in another transaction, the entity agrees to receive from the swap dealer a ¯oating price which will be determined at the end of the time period. As the ¯oating price will ¯uctuate depending on the market condition, the entity will either pay or receive the net difference between the ®xed price and the ¯oating price at the expiration of the swap.

51 As an illustration of the use of paper swaps for hedging, an entity may have committed to buy a speci®ed quantity of oil from its oil supplier at a ¯oating price and sell the same quantity of oil to its customer at a ®xed price. If the oil price were to increase signi®cantly, the ¯oating price which the entity had committed to pay to the oil supplier would increase. As such, the entity will suffer a loss or a reduction in pro®t since it will be receiving a ®xed price from its customer. In order to hedge its ¯oating risk exposure, the entity may enter into a swap in which he will receive ¯oating price and pay ®xed price for a speci®ed oil quantity. Through this arrangement, the higher ¯oating price he receives from the paper swap will offset the higher oil price which he needs to pay the oil supplier, thereby effectively eliminating his ¯oating risk exposure. An oil futures contract is a standardized contract between a buyer and a seller to buy or sell oil products at a future date. Oil futures price ¯uctuates from day to day, and as a result, oil futures contract buyers and sellers attempt to pro®t from these price changes as well as to lower the risk of transacting in the underlying products. An oil futures contract is mainly traded on the New York Mercantile Exchange, International Petroleum Exchange and Singapore Exchange. When futures contracts expire, some of these contracts have physical delivery requirements whereas some contracts are settled by cash. To illustrate the use of oil futures for hedging, a person may be contracted to sell oil to his customer at a ¯oating price which will only be determined at a later time, i.e. time T. To protect himself against selling at a lower price due to falling oil price, he may sell a oil futures contract now. At time T, if the oil price has indeed fallen, he will incur a loss from his physical cargo trade. However, this loss will be offset by a corresponding gain in his futures position which is equal to the difference between the current futures price and the settlement price at time T.

Travel business We incorporated a subsidiary under the name of Greater China Travel Industry $Singapore) Pte Ltd in November 2000. Our subsidiary commenced operations after we obtained the requisite travel licence from the Singapore Tourism Board on 14 May 2001. The principal business of this subsidiary is the provision of travel services, which include air ¯ights, hotel accommodation and cruise tickets. This subsidiary was set up to complement our main business by providing additional services to our customers, and hence improving our relationship with our customers as well as to provide for our own travel needs. As our long-term customers are mainly from the PRC and have regular travel requirements to other parts of the world, we have adopted the practice of helping them with their travel arrangements. Before we commenced our travel business, we used to purchase travel packages at market prices from various travel agencies. We incurred the travel expenses for the customers as part of building our customer relationship. In FY1999, we incurred $0.70 million in travel expenses, out of which $0.43 million was for our PRC customers and $0.27 million was for our staff. In FY2000, our travel expense was $1.52 million, out of which $1.26 million was for customers and $0.26 million for our staff. Due to the frequent travel requirements, we believe that it would be cost advantageous to set up a travel agency so that our Company can purchase the travel packages at a cheaper price from the travel agency. The travel agency will still be able to make a pro®t because it can purchase the travel packages directly from wholesale travel service suppliers at lower wholesale prices. In future, we intend to purchase travel packages through our travel subsidiary directly from wholesale travel service providers. Our travel business is intended to be ancillary to our main business. As we are committed to maintaining a focused and cohesive business direction, we have no intention of devoting any substantial amount of time and resource to expanding this travel business.

52 Operations We have a dedicated group of employees that focuses on managing the administrative arrangements in relation to the trade transactions. Upon receipt of trade con®rmation from our customers giving us details such as quantity, delivery period, delivery port, shipping term and pricing, we will prepare the necessary legal and shipping documents. Depending on the contract terms, we also have to manage vessel transportation, such as liaising with the relevant import agents and port authorities. As certain ports only import a small amount of jet fuel each month, we can arrange for the vessels to unload at several ports in one journey. By doing this, we are able to save on freight costs.

Credit Terms and Credit Policy For jet fuel sales, we usually give our customers a shorter credit period ranging from 27 days to 30 days than that given to us by our suppliers ranging from 30 days to 35 days. This enables us to maintain a healthy cash ¯ow. As competition is stiffer in the fuel oil market, we are usually given a shorter payment period of approximately 30 days by the fuel oil suppliers. Because of the shorter credit period, we usually give our customers a credit period of not more than 27 days. This gives us ample lag time to manage our cash ¯ow. As at end December 2001, our trade debtor balances which have been outstanding for less than or equal to 30 days, more than 30 days but less than or equal to 60 days, more than 60 days but less than or equal to 90 days and more than 90 days, as a proportion of the total trade balance, are 52.78%, 45.04%, 0.01% and 2.17% respectively. In situations where our customers are late in payment and we have not received the payment at the date when we are required to pay our suppliers, we may utilise trust receipts facility from banks to ®nance the purchase cost. Generally, in the event that we foresee or encounter cash ¯ow mismatches arising from timing differences between the receipt of payments from our customers and our payments to our suppliers, we may utilise the credit lines that we have from our banks. Although we have made provisions for doubtful debts, we have not experienced any bad debts to date. Speci®c provision applies to debts that are outstanding for more than 60 days and general provision is calculated based on 3% of year-end debtor balance. Although most of our customers are part of our Parent Group, we have adhered strictly to our established collection policies that are the same for customers who are part of our Parent Group and customers who are not. For example, customers who are part of our Parent Group are subject to the same late payment charges that we impose on all customers. As we wish to maintain good relations with our customers, we only take legal action as the last resort against customers who do not ful®l their contractual obligations. As for our trades with our PRC customers, we would take legal action against the import agents whom we have entered into contracts with. Our exposure to credit risks are highlighted under ``Risk Factors'' on pages 18 to 23 of this Prospectus.

53 Pricing Our transactions are either concluded at ®xed prices or ¯oating prices. Our ¯oating prices are usually pegged to average daily prices re¯ected on the Platt's system which are known as ``MOPS'' or ``Mean of Platts Singapore''. Usually the deals are concluded on a back-to-back basis to reduce our risk exposure. This means that if we have agreed to pay our suppliers a ¯oating price $for example, MOPS + 1.50), we will get our customers to agree to pay us a ¯oating price $for example, MOPS + 2.00). The same back-to-back structure also applies to transactions at ®xed prices.

Risk Management On 1 October 2000, we established a Risk Management Committee to monitor and control our risk exposure arising from physical and derivative trades at all times, and have adopted a set of risk management procedures that govern our physical and derivatives trades. The Risk Management Committee comprises Mr Tan Chin Boon, our Director of Banking Relations & Head of Risk Management, Mr Adrian Mark Chang, our Group Financial Controller, Ms Elena Ng, our Risk Controller and Mr Heng Kian Siang, our Finance Manager. Our Director of Banking Relations & Head of Risk Management, and Group Financial Controller report directly to our Managing Director, Mr Chen on various matters relating to banking relationship and credit facilities to ®nance all trading activities of our Company, and risk management in the areas of market risk, credit risk and counterparty risk to control the overall risk exposure of our Company. Our Director, Banking Relations & Risk Management, also functions as a Credit Controller responsible for assessing the credit risk and country risk of the banks issuing the Letters of Credit for exports, and the counterparty risk of our customers or oil trading companies who are counterparties in our physical trades. Some basic information required for the credit assessment include the customers' background information and their latest ®nancial statements. Generally, our physical sales to customers must be covered by Letter of Credit issued by banks. The role of the Risk Controller is to monitor and report to the Managing Director, Mr Chen the risk exposure of all paper transactions to ensure that our risk exposure is limited. The Risk Controller will check the paper trade details submitted by the traders, verify and receive trade con®rmation from the counterparties such as the suppliers, customers and oil trading ®rms. She will then record the trade details into a centralised database and maintain all the trading positions taken by the traders. At the start of each trading day, our Risk Controller will prepare a daily report which will disclose separately the net positions of paper trades for hedging and opportunistic trading. The net positions are valued based on the daily market price. The daily report also segregates the realised and unrealised gains or losses from the derivatives transactions. The daily report is circulated to our Managing Director, Mr Chen, and the traders for their information and monitoring. Segregation of duties is an important element in our risk management procedures. To avoid con¯ict of interests, our traders are not involved in the recording of trade details and cannot access the central database, to which only the Risk Controller has access. The trade settlement function is separately handled by Mr Heng Kian Siang, our Finance Manager. Traders are required to indicate via email whether each paper trade concluded is for hedging or opportunistic trading. Our Risk Controller maintains different spreadsheets to separately account for paper trades which are for hedging or for opportunistic trading. On July 2001, we implemented a stop loss limit of US$500,000 for each Paper Trader for his trades in paper swaps and oil futures to minimise risk exposure to our Company. As we currently have three Paper Traders, the aggregate loss limit for our Company is US$1.5 million. Moreover, when the total mark-to-market unrealised loss for a Paper Trader has reached US$200,000 at the end of a trading day, the Managing Director, Mr Chen and the Risk Management Committee and the trader will be put on alert by our Risk Controller. In the event that the loss reaches the US$500,000 limit, all open positions must be closed unless approval from the Managing Director, Mr Chen is obtained. Only upon his approval can the positions in excess of the limit be carried out. These positions will be monitored closely by the Paper Trader and the Risk Controller.

Risk Management Procedure for Hedging with Paper Swaps When a trader is engaged in a physical trade, he will identify and quantify the expected underlying risk exposure and communicate the exposure to another trader who trades in paper swaps $``Paper

54 Trader''). The Paper Trader will formulate a hedging strategy and discuss with our Managing Director. Hedging strategy shall address issues such as the price to enter the hedge, amount of hedge, when to reduce or close out the hedge position. Hedging strategy must be approved by our Managing Director. Once the Physical Trader has advised the Paper Trader on the conclusion of the physical trade, the Paper Trader shall implement the hedging strategy without delay. Once the hedge is concluded, the Paper Trader will submit the trade details to the Managing Director, Mr Chen, the Finance Manager and the Risk Controller. The Risk Controller will check the trade details to ensure that all the paper trades details are consistent with the supporting documents. Risk Controller will then record the trade details into the centralised database. Paper Trader will monitor the market from time to time and take initiatives to discuss with Managing Director to adjust hedge when the market moves. The Risk Controller may request the counterparty to open a Letter of Credit with our Company as bene®ciary when the counterparty daily mark-to-market loss exceeds US$50,000. As our approved paper swap counterparties are Oil Majors, AOT companies, and oil trading companies with good ®nancial standings, it is not likely that they would not provide the Letter of Credit upon our request. In the unlikely event that they fail to issue the Letter of Credit within three days from our date of request, there would be a breach of contract. We would then inform the counterparties that we would release the news to the market and oil brokers, square off the paper position and claim from them any losses which we would incur from squaring off the paper position.

Risk Management Procedure for Opportunistic Trading in Paper Swaps Our Paper Traders are authorised by our Managing Director to trade in paper swaps. Our traders may take open positions when they are of the view that their open positions would likely allow pro®t from the market trend based on their market experience. The Paper Trader will have to strictly adhere to the trading strategy and observe the stop loss limit. Once the open position is created, the Paper Trader will monitor the market and his open position on a 24-hour basis through his oil broker. As in the case for hedging, the Paper Trader will submit the trade details to the Risk Controller who will check the details before recording them into the centralised database.

Internal Controls Our auditors had in June 2001 during the course of their engagement, reviewed our Company's accounting systems and internal controls and highlighted certain issues which are set out below. In a follow up review in October 2001, our auditors noted that their recommendations had been implemented by our Company.

Risk Management procedures Our auditors noted that the risk management procedures had not been implemented although they had been formulated under a Management Directive no. 8. They recommended that the procedures be implemented as soon as possible. However, our Company indicated that most of the procedures had already been implemented in various stages as and when the respective transactions commenced. Moreover, our risk management committee met regularly to address the various risks faced by our Company.

Segregation of duties Our auditors noted that our Company did not have a proper system to segregate duties because of a limited number of staff. They noted that since the second half of 2001, the paper trades had been executed and approved by the Managing Director, Mr Chen. Our Company has since recruited a paper trader to be responsible for all paper trades, with separate control of paper entries and daily mark-to-market by our Finance Division.

55 Communication of underlying exposure Our auditors noted that the paper traders were informed verbally by the operations staff when they had identi®ed an underlying exposure from the terms of the sales and purchases of the physical cargoes. Our auditors recommended that the operations staff communicate the underlying exposure identi®ed by way of documentation, as this would reduce the risk of miscommunication which may result in inappropriate hedging. Our company has implemented the recommendation and the physical trader communicates the underlying exposure via email to the paper trader. The email is ®led together with the corresponding paper swap contracts as a form of audit trail.

Review of bank reconciliations Our auditors noted that bank reconciliations were performed monthly by the Finance Manager and were not reviewed by an independent executive. They recommended that the preparation and review of bank reconciliations be handled by different staff. Our Company has since recruited a Head of Finance who is responsible for reviewing the bank reconciliations as well as overseeing other ®nance functions.

CUSTOMERS Under PRC regulations, all import of oil products have to be conducted through import agents approved by the PRC government. As a result, we do not execute written contracts with PRC companies which order oil from us, but we enter into written contracts with import agents instead. The import agents will usually execute a back-to-back written contract with the companies that order oil products from us. Although we do not enter into written contracts directly with these companies that order oil products from us except for South China Bluesky Aviation Oil Ltd and Shanghai Pudong International Airport Aviation Fuel Supply Corporation Ltd, we consider them, and not the import agents, as our customers because the terms under which we supply oil products are negotiated directly with these companies and the role of the import agents is limited to acting as an agent for these companies in taking care of the procedural matters in connection with the import of oil products. Our major customers who accounted for more than 5% of our total turnover for each of the past three ®nancial years are as follows:± Percentage of Total Turnover %) FY1998 FY1999 FY2000 CAOSC Aviation Oil Corporation Ltd 62.00 44.92 37.51 Shanghai Pudong International Airport Aviation Fuel Supply Corporation Ltd Ð Ð 16.58 China Aviation Oil Supply East China Corporation $branch of CAOSC) 23.96 28.17 14.58 South China Bluesky Aviation Oil Ltd. 14.04 5.03 10.35 Sinochem Guangdong Import & Export Corporation Ð Ð 5.52 Total 100.00 78.12 84.54

CAOSC Aviation Oil Corporation Ltd, China Aviation Oil Supply East China Corporation, and South China Bluesky Aviation Oil Ltd are our Parent Company's subsidiaries. Shanghai Pudong International Airport Aviation Fuel Supply Corporation is our Parent Company's associated company. With the exception of Sinochem Guangdong Import & Export Corporation, all the above major customers are part of the Parent Group. These major customers who are part of our Parent Group accounted for 100.00%, 78.12% and 79.02% in total of our total turnover for FY1998, FY1999 and FY2000 respectively.

56 We supply only jet fuel to CAOSC Aviation Oil Corporation Ltd, China Aviation Oil Supply East China Corporation, South China Bluesky Aviation Oil Ltd and Shanghai Pudong International Airport Aviation Fuel Supply Corporation Ltd, whereas we only supply fuel oil to Sinochem Guangdong Import & Export Corporation. CAO has established contracts with Shanghai Pudong International Airport Aviation Fuel Supply Corporation Ltd and South China Bluesky Aviation Oil Ltd to supply jet fuel for two years with effect from February 2001 and June 2001, respectively. As both the Pudong and Bluesky companies are joint-ventures, and according to their joint venture agreements, they have to enter into commercial contracts with third parties such as CAO to supply jet fuel.

Shanghai Pudong International Airport Aviation Fuel Supply Corporation Ltd and Sinochem Guangdong became our customers in FY2000.

Save as disclosed above and for our Directors, Messrs Jia Changbin, Bao Xiaoyan, Zhang Junru, Gao Renwen and Zhang Yizhou, all of whom are employees of our Parent Company, none of our Directors or substantial shareholders has an interest $direct or indirect) in the above-mentioned customers.

SUPPLIERS Our suppliers of jet fuel are either oil trading companies or re®neries. These include SK Corporation in South Korea, its subsidiary, SK Energy Asia Pte Ltd in Singapore, the Petroleum Authority of Thailand, Coastal Subic Bay Terminal, Inc. in the Philippines and other Oil Majors. Although the actual source of jet fuel comes mainly from Saudi Arabia and India, we do not trade directly with oil companies in these countries because of the presence of country risks.

Our major suppliers who accounted for more than 5% of our total purchases for each of the past three ®nancial years are as follows:±

Percentage of Total Purchases %) FY1998 FY1999 FY2000 Shell International Eastern Trading Company Ð 13.90 20.26 BP Singapore Pte Ltd 27.21 18.90 10.49 S-Oil Corporation Ð 10.52 9.95 Vitol Asia Pte Ltd 10.91 25.27 9.16 Glencore Singapore Pte Ltd Ð 3.62 8.40 Tra®gura Beheer BV Ð 7.07 1.93 SK Energy Asia Pte Ltd 0.94 5.70 6.54 Concord International Oil Ltd 33.03 4.27 Ð China National United Oil Corporation 18.04 Ð Ð

Total 90.13 89.25 66.73

We usually purchase from suppliers who are able to offer us the best prices. Because of this, we do not purchase from the same suppliers all the time, and therefore, our Company does not have a ®xed purchasing pattern.

None of our Directors or substantial shareholders has an interest $direct or indirect) in the above- mentioned suppliers.

57 AWARDS Approved Oil Trader We were awarded the AOT status by the Singapore Ministry of Trade and Industry with effect from 1 January 1998 for a period of ®ve years. Pursuant to the status, we enjoy a concessionary tax rate of 10% on all qualifying income: $i) purchasing and selling petroleum or petroleum products; $ii) purchasing futures contracts and futures options contracts covering petroleum and petroleum products; $iii) making and receiving payments under swaps, caps, collars, ¯oors, swap options and other forms of over-the-counter instruments covering petroleum or petroleum products; and $iv) foreign exchange gains incidental to the above transactions, where such transactions are with companies that are considered non-resident in Singapore or with companies that have a similar AOT status.

The AOT award is now known as the Global Trader Programme $``GTP'') award. The terms and conditions governing the GTP award remains unchanged from those governing the AOT award.

SALES AND MARKETING We have not adopted any speci®c sales and marketing schemes and we have not set up a sales team to head our sales and marketing efforts. This is because the costs for setting up a sales team may not be cost-effective at this point in time. Our sales in jet fuel are mainly with our Parent Group. Most of our sales in fuel oil, crude oil and plastics are established through our traders who have an existing network of contacts.

COMPETITION Clean Petroleum Products Our market position in jet fuel procurement is rather unique because only our Parent Company, CAOSC, is given the authority by the Ministry of Foreign Trade and Economic Cooperation of the PRC $``MOFTEC'') to allocate the import quota for jet fuel, and CAOSC has issued a management directive in January 2001 to all its subsidiaries and associated companies to import jet fuel from us. We believe that it is not likely for our Parent Company to withdraw the directive because it will not be in the Parent Company's interests to do so since it is currently our sole shareholder, and will be our single largest shareholder after the listing. To provide further support, the Parent Company has issued another directive in October 2001 stating that it will not set up another overseas company to compete with us for jet fuel procurement business. Prior to the issuance of the directive in January 2001, our Company had been providing cost effective procurement services to our Parent Group as evident from our 92% market share of the total jet fuel import into the PRC in FY2000 despite competition from international oil suppliers.

In addition, because jet fuel is a strategic and important resource for most countries, the supply of jet fuel is usually under close watch of the relevant governments. It is then crucial for any jet fuel company in the PRC to have good relations with the Chinese government. As our Parent Company is state-owned, we have that advantage which most other jet fuel suppliers do not. We believe that we do not have immediate competitors in the jet fuel import business for the PRC market.

It is part of our strategy to expand our jet fuel business activities geographically to other parts of the world. The international market for jet fuel business is quite competitive as a large part of the global market is dominated by the Oil Majors and airlines.

Black Petroleum Products The competition in fuel oil trading is keen. We believe our main competitors in the trading of fuel oil include China National Chemicals Import and Export Corporation, Marc Rich $Singapore) Pte Ltd, and Tra®gura Pte Ltd.

58 Crude Oil and Petrochemical Products There is a very large international market for the trading of crude oil. The international market is dominated by the international Oil Majors. As we trade crude oil to different parties from all over the world, these Oil Majors pose ®erce competition to us.

The competition in the plastics trading industry is also very intense. Our major competitors in the plastics trading industry include Daelim Corporation, Hyundai Corporation, Itochu Plastics Private Limited, Sumitomo Corporation $Singapore) Pte Ltd, Marubeni Plastics Asia Pte Ltd and Equate Marketing Company E.C.

OUR COMPETITIVE STRENGTHS We believe that our achievements have been possible because of our competitive strengths as summarised below:±

Experienced Management Team Our Chairman, Mr Jia Changbin and our Managing Director, Mr Chen Jiulin, have more than twenty- eight years' experience and eight years' experience respectively in the jet fuel industry. Mr Jia has played an important role in forging good relations with our Parent Company since he became our Chairman in 2000. Since Mr Chen took over our Company as Managing Director in 1997, he has improved our pre-tax pro®ts from approximately $7 million in FY1998 to approximately $16 million in FY2000.

Mr Jia and Mr Chen have also brought in experienced managers to head our trading operations. Each of our trading managers, Ms Chen Yanting, Mr Gerard Rigby, Ms Shi Jinbo and Ms Wu Xuehong, has over ®ve years' experience in the trading of oil products.

Competitive Transportation Cost One of the special competitive advantages we enjoy is our low cost in oil transportation for all shipments to the PRC. All chartered vessels have to meet the Chinese ports' requirements, including sea-worthiness of the vessel and customs declarations before they are allowed to dock at the port. Our Company is familiar with various Chinese ports. As a result, we are able to charter vessels from China that meet the Chinese ports' requirements. The cost of chartering such vessels in PRC is comparatively lower than those vessels chartered from other countries which need to pay a premium for conformance to the Chinese port requirements.

In addition, because we have several PRC customers who may place orders for oil to be unloaded at different ports in China, we are able to arrange for a chartered vessel from the PRC to unload the cargoes at different ports in the PRC, thereby lowering our transportation costs. This advantage allows us to be more aggressive in pricing when competing with other oil companies.

Strong Support from Parent Company The strong support and trust from our Parent Company provides us with competitive advantages that other oil companies do not have. Our Parent Company's strong support is shown by the management directive that it has issued to its subsidiaries and associated companies to import jet fuel solely from our Company. Moreover, our Parent Company allows us to use its distribution network, transportation and storage facilities in the PRC. In addition, we enjoy a competitive edge over our competitors by our ability to form strategic alliances with our Parent Company to boost our pro®le when competing with other oil companies.

Familiarity with Chinese Business Environment Familiarity with the business environment in the PRC is another strength of our Company. The PRC is reforming its economic system and legal system, and as a result, the market structures and business practices in the PRC are undergoing constant changes. To maintain our market position, we must be able to spot market trends to be able to grasp business opportunities in the PRC.

59 Our management team consists of some PRC nationals, namely Mr Chen Jiulin, Ms Chen Yanting, Ms Shi Jinbo and Ms Wu Xuehong, all of whom have the necessary knowledge of and experience in the PRC market, which other international companies may be unable to acquire in a short time.

PROSPECTS The potential of the oil market in the PRC is large. The PRC has been an oil importing country since 1993. It is anticipated that from 1 January 2004, the PRC will lift its quota on the import of crude oil and oil products and as a result, the PRC may import more crude oil and oil products. We highlight the potential of the oil market in the PRC below:±

Potential of the jet fuel industry Jet fuel imports in the PRC have increased by 60 times since 1991. From 2000, it is estimated that the PRC will increase its import of jet fuel by approximately 16% per annum, which works out to be an estimated annual import volume of 16 million metric tons by 2016. In addition, the current airplane to population ratio in the PRC is small if we compare the ratio with that of a developed country like the USA. We believe that the number of airplanes in the PRC will potentially grow to meet the demands of PRC's large population and this in turn will signal an increase in jet fuel consumption in the PRC as well as an increase in volume of jet fuel imported in the PRC. The following table illustrates the population, number of airports, number of airplanes and jet fuel consumption ®gures in the PRC as compared to those for the USA.

Jet Fuel Consumption Number of Number of barrelsof oil per day) Population Airports Airplanes PRC 0.1 million 1.25 billion 149 949 USA 1.7 million 0.28 billion$1) 18,443 219,646

Sources: U.S Department of Transportation, FAA General Aviation and Air Taxi Activity 5and Avionics) Surveys, Energy Information Administration of USD and Civil Aviation Administration of China.

Note:± All ®gures as at 1999 unless otherwise stated $1) as at 2000

Potential of the fuel oil industry The PRC is the biggest importer of fuel oil in Asia. The import of fuel oil in the PRC has increased by approximately twenty $20) times in the last ten $10) years. Due to the lack of fuel oil supply in the PRC, reliance on imported fuel oil in the PRC is increasing. The following table illustrates the increase in import of fuel oil in the PRC.

Import of Fuel Oil in 1990 Import of Fuel Oil in 1999 Total Current Consumption metric tons) metric tons) metric tons) 0.8 million 17.57 million 33 million ± 35 million

Source: Year 2000 China Oil Trade Conference, provided by Ministry of Foreign Trade and Economic Co-operation of China

Potential of the crude oil industry In 1999, the PRC imported 36.61 million metric tons of crude oil, reaching its historical high. It is estimated that the shortage of crude oil supply in the PRC will reach 100 million metric tons by the year of 2010, which will be sourced outside of the PRC.

1999 Import 2000 First Half Import 2010 Estimated Import metric tons) metric tons) metric tons) 36.61 million 32.41 million 100 million

Source: Year 2000 China Oil Trade Conference, provided by Ministry of Foreign Trade and Economic Co-operation of China

60 Although more foreign players may enter into the jet fuel supply market in the PRC with the admission of the PRC into the WTO thereby increasing the competition that our Company may face, this may not adversely affect our Company, but may instead provide excellent growth opportunities for our Company because of the following reasons:±

International competition hasalready existed International jet fuel suppliers have entered the PRC market a few years ago and we have faced competition from these international suppliers since then. As our Parent Company had previously granted contracts based on tenders, we had to compete with these international oil suppliers to secure business from our Parent Company. For example, in March 2000, we did not manage to secure one important contract from our Parent Company just because our tender price was US$0.05 higher than that of our Korean competitor.

However, we have a proven track record that despite the competition, we have been able to capture a large portion of the jet fuel import market in the PRC because of our competitive strengths as disclosed on pages 59 to 60 of the Prospectus. We believe that even though there may be an increase in competition from international players when the PRC is admitted into the WTO, we will still be able to compete effectively and maintain our market position in the PRC.

Our Parent Company has a controlled strategic position Through owning most of the jet fuel supplying infrastructure, facilities and distribution network, our Parent Group has built up a strategic advantage in jet fuel supply market in the PRC. Foreign companies who wish to enter the market may not be able to obtain the government's approval for the building of a secondary set of infrastructure besides the set owned by the Parent Group as this may lead to wastage of resources. In addition, even if government approval is given, the foreign companies will have to make large investments to build up the same level of infrastructure that our Parent Group has built up over the years. This poses a high barrier to entry into the pro®table Chinese domestic market by the international players.

Import quota may be lifted After its WTO entry, the PRC may gradually remove its import quota. The import quantity of crude oil and oil products may increase as the cost of domestic oil is generally higher than the cost of imported oil. Our Company may gain a larger market share by increasing sales of jet fuel, fuel oil and other oil products.

OUR STRATEGY AND FUTURE PLANS . Maintain and improve margin for jet fuel procurement We will continue to focus on jet fuel procurement as our core business activity, and intend to maintain and improve margin for our jet fuel procurement activity by lowering the cost of purchase. Being the sole jet fuel procurement entity for the import into the PRC, and with the gradual removal of the import quota for jet fuel by the PRC after the WTO, we envisage a larger demand for jet fuel import into the PRC. By leveraging on increasing purchase volume, we will be able to lower our purchase, storage and transportation costs on a per-unit basis, thereby increasing our margins. In addition, we intend to enter into term contracts with oil re®neries which will enable us to secure a steady supply of jet fuel and lock in ®xed price when the market price is low. The term contracts will also allow us to enjoy volume discount. We will be able to maintain low purchase cost by hedging against any potential price decline.

. Joint Ventures and strategic investments in oil facilities businesses We also have plans to invest in storage and refueling facilities mainly in the PRC close to the locations of our customers. Storage facilities allow us to hold and store excess quantities of jet fuel or fuel oil and give us the ¯exibility to buy excess quantities of these when prices are low. We can then sell the stored jet fuel or fuel oil when prices go up, therefore increasing our pro®t margins. Investments in refueling facilities will allow us to build an infrastructure for the distribution of jet fuel and fuel oil. This infrastructure will complement our trade in jet fuel and fuel oil and broaden our earnings base.

61 To further these plans, we are proposing to acquire a 33% interest in Shanghai Pudong International Airport Aviation Supply Corporation Ltd, one of our major customers and a 50% interest in China Aviation Oil Supply Corporation $Hong Kong) Company Limited, from CAOSC. The terms of the proposed acquisitions will be subject to negotiations between CAOSC and us.

Shanghai Pudong International Airport Aviation Fuel Supply Corporation Ltd is a joint-venture between CAOSC $33%), Shanghai Pudong International Airport Company $40%) and Sinopec Sales Company $27%). It owns and operates all the refueling facilities in Shanghai Pudong International Airport and has the exclusive right to supply jet fuel to airlines using the Shanghai Pudong International Airport. According to year 2000 statistics released by CAAC, Shanghai Pudong International Airport ranks as the fourth largest airport in the PRC in terms of cargo and mail volume handled, and sixth largest in terms of passenger volume. In addition, there are of®cial plans to develop Shanghai Pudong International Airport into the Asian and Paci®c Aviation Junction Center by 2005. According to an article released in the website http://www.adcweb.org, it is anticipated that by 2005, Shanghai Pudong International Airport will handle an annual volume of more than 20 million passengers and one million tons of cargo and mail volume, ranking it as one of the busiest airports in the world. We believe that the growth of Shanghai Pudong International Airport presents good growth prospects for Shanghai Pudong International Airport Aviation Fuel Supply Corporation Ltd and our strategic investment in this company may increase the pro®tability of our Company.

China Aviation Oil Supply Corporation $Hong Kong) Company Limited is in the business of supplying jet fuel to various airlines in Hong Kong SAR. We believe that such strategic investments may boost our sales and pro®ts, hence enhancing our competitiveness in the market.

. Geographical Expansion We are also targeting geographical expansion of our business through penetrating the markets in other parts of the world. We are actively recruiting international oil traders and we have plans to invest in USA and Europe, within the next one or two years to develop our geographical base. These companies are in the business of marketing and distributing oil products to end users as well as owning logistics facilities which are used to transport and store oil.

PROPERTY The following are properties owned by our Company:± Land Area/ Net Book Built-up Value Description/ Area Annual asat Uses of Square Leasehold Lease Intention for 30 June Location Property Feet) Term Rental Redevelopment 2001) $) $'000) 9 Temasek Boulevard, Rental 2,335.78 99 years from Not None 3,292 #37-01, 1 March 1989 applicable Suntec Tower Two, Singapore 038989 8 Temasek Boulevard, Of®ce 4,736 99 years from Not None 9,472 #31-02, 1 March 1989 applicable Suntec Tower Three, Singapore 038988

The aforesaid properties are not mortgaged.

62 LEGAL PROCEEDINGS We are currently not engaged in any legal or arbitration proceedings as plaintiff or defendant in respect of any claims or amounts which are material in the context of this Invitation and our Directors have no knowledge of any legal or arbitration proceedings pending or threatened against our Company or of any facts likely to give rise to any legal or arbitration proceedings which might materially affect the ®nancial position or rights of our Company.

INSURANCE Our company has taken up a marine open insurance cover of up to US$20 million for each shipment of cargo with China Insurance Company Limited. The period of cover commenced from 31 August 2000 and will continue until terminated either by our Company or the insurer. The premium payable by our Company under this insurance scheme is calculated at 0.039% of the value of each cargo. The insurance will expire only upon a cancellation notice from either party. The products covered include jet fuel, clean petroleum products and fuel oil.

EXCHANGE CONTROLS We are not affected by any governmental laws, decrees, regulations and other legislation that affect the import and export of capital, or affect the availability of cash and cash equivalents for use by our Company.

EMPLOYEES We set out below the total number of our employees and the various departments as at the end of the ®nancial years ended 31 December 1998, 1999 and 2000.

------A sa t 3 1 December ------1998 1999 2000 General Management 1 1 1 Finance 234 Procurement and Trading 2 4 4 Investment 002 Operations 012 Administrative Support 1 3 4 Total 61217

In FY1998, 6 persons were in our employment. We had 12 employees in FY1999. In FY2000, our staff strength grew to 17. As of 30 June 2001, our Group had 24 employees. None of these employees have entered into collective bargaining or union agreements. We have never experienced a work stoppage, strike or labour dispute. We consider the relations with our employees to be good.

We have two remuneration schemes for our traders. Traders under the ®rst scheme are each given a lower basic salary. In addition to this basic salary, our Company pays each trader a commission that is calculated as a percentage of the pro®ts that the trader has made for our Company. The percentage is usually higher for traders who are more experienced and have better track records. Traders under the second scheme are paid a higher ®xed income and they do not participate in any pro®t-sharing or commission schemes. However, traders under the second scheme may be given a variable yearly bonus at the discretion of our Board of Directors, which will take into account factors including $but not limited to) their performance and their abilities to achieve various pro®t targets. The traders usually have the option to choose which remuneration scheme they wish to be under and the terms of their contract will then be negotiated between the trader and our Company.

63 DIRECTORS AND MANAGEMENT

DIRECTORS Our Board of Directors is entrusted with the responsibility for the overall management of the Company. Our Directors are appointed by our shareholders. The names, addresses, ages and principal occupations of our Directors are as follows:±

Name Age Address Principal Occupation

Jia Changbin 47 Unit 13-C, No. 23 Beiyuan, Vice-President, Guancheng Garden, Haidian CAOSC District, Beijing, 100088 PRC

Chen Jiulin 40 120 Tanjong Rhu Road, Managing Director, #06-01, CAO Singapore 436904

Gao Renwen 54Blk 16, 10-C,# Director of Procurement Guancheng South Garden, Division, Madian, Haidian District, CAOSC Beijing, China 100088

Zhang Junru 51 Blk 16,# 5-C, Director of Audit Division, Guancheng South Garden, CAOSC Madian, Haidian District, Beijing, China 100088

Bao Xiaoyan 37 Blk 8# 910 North Building, Director of Finance Giqingli, Chaoyang District, Division, Beijing, China 100028 CAOSC

Zhang Yizhou 36 Blk 6, Unit 6,# 11-B, Director of Enterprise Guancheng North Garden, Administration Division, Madian, Haidian District, CAOSC Beijing, China 100088

Jerry Lee Kian Eng 58 20 Jago Close, Partner, Singapore 428435 Ng Lee & Associates Ð DFK

Tan Hui Boon 63 31 Greenview Crescent, Independent Director, Singapore 289336 Changi International Airport Services Pte Ltd, and CIAS CInternational) Pte Ltd

Yan Xuetong 49 Apt 501, Northwest Building 13, Director of Institute of Tsinghua, Beijing, Internal Studies, China 100084 Tsinghua University

Messrs Jerry Lee Kian Eng, Tan Hui Boon and Yan Xuetong are our Independent Directors.

64 Information on the area of responsibility and working experience of our Directors are set out below:± Mr Jia Changbin is the Chairman of our Board of Directors. He is one of the key executives in our Parent Company and is responsible for making decisions in the Parent Company which have a positive impact on our Company He has been in the jet fuel business for more than 28 years. He obtained his Masters degree in Economics from East China Normal University in 1999. He joined the Shanghai Branch of CAAC as administrator in 1973. He was subsequently appointed in 1984as a deputy director. In 1990, he became deputy general manager of China Aviation Oil Supply East China Co. He was responsible for the company's strategic planning and business development. He then was promoted to General Manager in the same company in 1997. In 1999, he became Vice President of CAOSC overseeing business development, operations and safety. In 2000, he was appointed as Chairman and Non-Executive Director of our Company.

Mr Chen Jiulin is the Managing Director of our Company. He oversees all the day-to-day operations of our Company and is responsible for charting the growth and future of our Company. He has over 8 years of management experience in the oil trading industry. He graduated in 1987 with a Bachelor Degree in Arts from Peking University, PRC. He went on to obtain his Postgraduate Diploma in Law from the China University of Political Science and Law in Beijing in 1996. Early this year, he completed the Executive Masters in Business Administration Programme in the National University of Singapore. In 1990, he joined Beijing Aircraft Maintenance Engineering Company Limited as a Senior Of®cer of the Personnel and Administration Department. His duties included charting the human resource policy of the company and facilitating communication between the Company and other foreign parties. In 1993, he took on the position of Deputy Director of the Joint Venture Division in CAOSC where he coordinated and conducted joint venture negotiations and liaised with various Chinese government bureaus, lawyers, banks and other external consultants. During his employment with CAOSC, Mr Chen represented CAOSC as the chief negotiator and project manager for various projects and was instrumental in obtaining various approvals required from the PRC State Council. In 1997, Mr Chen was sent by CAOSC to become the Managing Director of our Company.

Mr Gao Renwen is one of our Non-Executive Directors. He is currently Director of the Procurement Division in CAOSC and he oversees all purchases, transportation and sales of jet fuel for CAOSC. He graduated in 1991 from the CCP Institute of Beijing with a Diploma in Economic Administration. In 2001, he graduated from the College of Logistics Engineering in Chongqing, PRC, with a Diploma in Management of Fuels. From 1964to 1990, he worked as a Section Head in CAAC. From 1990 to 1991, he took on the position of Deputy Director in CAAC. In 1991, he joined CAOSC as its Deputy Director of the Procurement Division. In 1996, he was promoted to the position of Director of the Procurement Division, a position he holds currently. He was appointed to our Board as our Non-Executive Director on 9 November 2001.

Ms Zhang Junru is one of our Non-Executive Directors. She is currently Director of the Audit Division in CAOSC and she oversees all internal audits on CAOSC. She graduated in 1990 from the Central Institute of CCP, PRC, with a Diploma in Economic Administration. She started her career in 1969 as an Accountant in Lights Factory of Beijing, PRC. In 1985, she joined CAAC as an Accountant. In 1990, she was appointed as the Deputy Director of the Finance Division in CAOSC. In 1996, she was promoted to Director of the Audit Division in CAOSC, a position she holds currently. She was appointed to our Board as our Non-Executive Director on 9 November 2001.

Ms Bao Xiaoyan is one of our Non-Executive Directors. She is currently Director of the Finance Division in CAOSC. She graduated in 1986 from Shanxi Finance Institute with a Bachelor Degree in Finance. In 2000, she obtained a Masters Degree in Business Management from the Central Institute of CCP, PRC. In 2001, she completed the Executive Masters in the Business Administration Programme in the National University of Singapore. She started her professional career in 1986 when she joined the Finance Department of the CAAC as its Deputy Director of the Finance Department. In 1998, she joined CAOSC as its Director of Finance, a position she holds currently. She was appointed to our Board as our Non-Executive Director on 9 November 2001.

65 Mr Zhang Yizhou is one of our Non-Executive Directors. He is currently Director of the Entreprise Administration Division in CAOSC. He graduated in 1989 from Central University of Nationalities, PRC with a Bachelor Degree in Economics. After graduation, he worked as an Executive in the Department of Personnel and Labour in the Ministry of Construction, PRC. From 1992 to 1994, he held the position of Executive Of®cer in CAOSC's Public Relationship Division. In 1994, he was appointed as the Deputy General Manager of Hainan Paci®c Oil Co. Ltd. In 1997, he was promoted to become the General Manager of Hainan Paci®c Oil Co. Ltd. In 2000, he became the Director of CAOSC's Enterprise Administration Division. He was appointed to our Board as our Non-Executive Director on 9 November 2001.

Mr Tan Hui Boon is one of our Independent Directors. Mr Tan graduated from the University of Singapore in 1963 with a Bachelor of Science CFirst Class Honours). In 1967, he obtained a Postgraduate Diploma in Chemical Engineering from University College, London University. In 1968, he obtained a Masters of Science CBio-Chemical Engineering) with Distinction from London University. He began his professional career as a Chemist in the Economic Development Board, Singapore in 1963. In 1966, he took sabatical to pursue further studies in London University. In 1968, he joined Singapore Institute of Standards in Research as an Assistant Director. In 1974, he joined Singapore Airport Terminal Services Limited CSATS) as an Administration Manager. In 1978, he became a Division Manager in SATS Cargo. In 1980, he was promoted to the position of General Manager of Administration in SATS. In 1984, he was appointed as the Chief Executive Of®cer of SATS Catering Pte Ltd. In 1989, he became the Director of Finance in Singapore Airlines Limited CSIA) In 1994, he was appointed as the Chief Executive Of®cer of SATS Airport Services Pte Ltd. In 1998, he took on the position of Senior Vice President CSpecial Projects) in SIA, a position he held till end June 2000 when he retired. He is currently serving as an independent director for Changi International Airport Services Pte Ltd and CIAS CInternational) Pte Ltd. He was appointed to our Board as our Independent Director on 7 November 2001.

Dr Yan Xuetong is one of our Independent Directors. He is currently serving as the Director of the Institute of International Studies, Tsinghua University. Dr Yan graduated from Heilongjiang University in 1982 with a Bachelor Degree in Arts. In 1986, he graduated from the Institute of International Relations with a Masters in Arts. In 1992, he graduated from the University of California, Berkeley with a Ph.D. From 1982 to 1987, he was working as a Researcher, China Institute of Contemporary International Relations. He was a visiting professor at the University of California, Berkeley in 1994. In 1995, he was a visiting professor at the Georgia Institute of Technology. In 1998, he was a visiting professor at the Monterey Institute of International Studies. From 1993 to 2000, he served as the Director of Foreign Policy Centre of China Institute of Contemporary International Relations. He is also a member of China Committee of the Council of Security Cooperation of Asia-Paci®c CCSCAP), a board member of China Arms Control Association, a board member of China Asia-Paci®c Association and an advisor of the Korean Journal of Defense Analysis, Journal of Chinese Political Science, World Affairs, Southeast Asia Studies. He was appointed to our Board as our Independent Director on 11 November 2001.

Mr Jerry Lee Kian Eng is one of our Independent Directors. He is currently an approved company auditor and liquidator under the Act. He graduated in 1965 from the Singapore Polytechnic with a professional diploma in accountancy. He was admitted into the Institute of Certi®ed Public Accountants of Singapore in 1966 and has been a member since. After graduation, he joined the Inland Revenue Department of Singapore as an examiner. In 1969, he joined Price Waterhouse & Co as a Senior Tax Assistant. He then joined Tang Peng Yeu & Co. in 1973 as its Audit & Tax Manager. In 1974, he became the partner of Ng, Lee & Associates - DFK Cformerly known as Tang Peng Yue & Co.), practising as a CPA. In 1989, he took up the position of a partner in Yeo Yong Poh & Co. in addition to his position at Ng, Lee & Associates - DFK and he is currently holding both positions. He serves as a member of the Inquiry Committee appointed by the Public Accountants Board, Singapore on the Inquiry into the Audit of Barings Futures CSingapore) Pte Ltd. Since 1991, Mr Lee has been appointed as a director, member of the Executive Committee and Vice President for the Asia-Paci®c Region of DFK International, a major worldwide group of independent accounting ®rms and business advisors. He is currently still holding these positions. He was appointed to our Board as our Independent Director on 7 November 2001.

66 MANAGEMENT Our day-to-day operations are entrusted to our Managing Director who is assisted by a management team of experienced Executive Of®cers. The names, addresses, ages and principal occupations of our Executive Of®cers are as follows:±

Name Age Address Principal Occupation

Chen Yanting 57 Blk 238,# 07-02, Head of Trading Division I Toa Payoh Lorong 1, Singapore 310238

Gerard Rigby 40 72 Coronation Drive, Head of Trading Division II Singapore 269611

Adrian Mark Chang 39 Blk 29A,# 04-78, Group Financial Controller Choon Siew Chai Chee Avenue, Singapore 461029

Wu Xuehong 35 Blk 204,# 04-433, Trading Manager of Bishan Street 23, Trading Division I Singapore 570204

Shi Jinbo 3422 Simei Street, 11-12, # Trading Manager of Melville Park, Trading Division II Singapore 529945

Tan Chin Boon 59 369 Holland Road, Director of Banking #14-06, Allsworth Park, Relations & Head of Risk Singapore 278640 Management

William Chan 35 Blk 568,# 10-160, Head of Business Choa Chu Kang Street 52, Development & Investment Singapore 680568 Division

Heng Kian Siang 32 Blk 38,# 04-487, Finance Manager Circuit Road, Singapore 370038

Our Executive Of®cers' working experience are set out below:±

Ms Chen Yanting is our Head of Trading Division I. She is responsible for overseeing all jet fuel procurement activities in our Company. She has over 10 years experience in the jet fuel industry. She graduated from the University of International Economy and Trade in China in 1968. After graduation, she took up a teaching post in the College of CAAC Management and was promoted to the position of assistant professor in 1987. In 1990, she joined CAOSC as a staff member and was responsible for the worldwide purchase of jet fuel for all aircrafts operated by CAAC. From 1992, she was responsible for the import of jet fuel for CAOSC. At the end of 1998, she was sent by CAOSC to Singapore to head the jet fuel trading activities of our Company.

Mr Gerard Rigby is our Head of Trading Division II. He is responsible for overseeing all trading activities Cother than jet fuel procurement) in our Company. He has extensive experience of about 13 years in petroleum products trading and supply in both Sydney and Singapore. He graduated with a Bachelor of Commerce in Industrial Relations from the University of New South Wales in 1985. He then obtained a Masters of Commerce in Economics and Industrial Relations from University of New South Wales in 1989. He joined Australian Airlines in 1980 as a clerk and cashier when he was concurrently studying for his Bachelor degree. In 1986, he joined Ampol Ltd. as a personnel of®cer. Subsequently in 1988, there was a change in his job position in Ampol Ltd and he was appointed their Supply and Shipping Analyst. In 1993, he became a Supply Trading Executive in the same company. In 1995, Ampol merged with Caltex Australia to form Australian Petroleum and he was

67 appointed as a Products Trader where his main job scope was to negotiate the sale and purchase of re®ned petroleum products. In 1997, he became a Trader in Risk Management at Caltex Trading Singapore where he was responsible for identifying, developing and implementing hedging strategies. In 1999, he took on the position of Product Trading and Risk Manager in Caltex Australia before he joined us recently in 2001.

Mr Adrian Mark Chang Choon Siew is our Group Financial Controller. He is responsible for overseeing our Group's ®nancial planning, risk management, accounting and taxation functions. He graduated in 1985 from Monash University, Melbourne, Australia, with a Bachelor of Economics Ð Accounting. He obtained a Masters of Business Administration Ð International Business in 1993 from the same university. He is currently a Non-Practising CPA of the Institute of CPA of Singapore and a Chartered Accountant of the Institute of Chartered Accountants, Australia. He started his professional career in 1986 as an Audit Assistant/Senior in Deloittes, Haskins & Sells Singapore. In 1989, he joined Pannell Kerr Forster, Melbourne, as a Senior Accountant. In 1994, he joined American Home Assurance Pte Ltd, Singapore as their Finance & Accounting Manager. In 1995, he joined UFL Management Services Pte Ltd Singapore as their Financial Controller. In 2000, he joined 3Com Asia Paci®c Rim Pte Ltd Singapore as their Finance Manager. He joined our Group as Group Financial Controller in October 2001.

Ms Shi Jinbo is our Trading Manager of Trading Division II. She is responsible for managing all fuel oil trading in our Company. She has approximately 12 years' working experience in both government organisations as well as private companies. In 1989, she graduated with a Bachelor of Economics from the University of Foreign Trade and Foreign Language in Guangzhou, PRC, in which she specialised in international trade. In 1997, she graduated with a Diploma in Marketing from the Singapore Institute of Management. She is currently taking a part-time Masters in Business Administration course in the University of South Australia and is expected to graduate by the end of this year. In 1989, she took up the position of Government Of®cial and Training Trader in the Ministry of Foreign Trade and Economy Cooperation. She subsequently joined NamKwong Petroleum and Chemicals Co., Ltd in 1991 as their Chief of Commodity and was responsible for managing the trading department. In 1994, she joined Louis Dreyfus Energy Asia Paci®c Pte Ltd. as their Marketing Manager before joining Cosco-Feoso CSingapore) Pte Ltd in 1996 as their Trading Manager. She joined our Company as Trading Manager in 2000.

Ms Wu Xuehong is our Trading Manager of Trading Division I. She is responsible for managing all plastics trading in our Company. She has approximately 12 years of business experience in the plastics trading industry. She graduated with a Bachelor of Economy from Tianjin Nankai University in China in 1989, where she majored in Economics. After graduation, she joined China National Chemicals Import and Export Corp as a sales executive. In 1993, she was seconded to Sinochem Trading CS) Pte Ltd as the Business Manager, where she was responsible for establishing the plastics department. In 1998, she was transferred back to Sinochem's head of®ce in the PRC where she was promoted to the position of Division Manager. As Division Manager, she was responsible for overseeing all imports of plastics into the market in the PRC. She joined our Company as our Trading Manager in 1999.

Mr Tan Chin Boon is our Director of Banking Relations & Head of Risk Management. He is responsible for managing bank relationships and various bank arrangements, and overseeing the Risk Management Committee. He has over 30 years experience in the banking industry in the region and Asia Paci®c before he became a ®nance consultant. He graduated with a Bachelor of Arts CHonours) from the University of Singapore in 1964. After graduation, he joined the Overseas Chinese Banking Corporation as an Assistant Accountant. In 1969, he joined the United Overseas Bank Limited as an of®cer in the Foreign Department. In 1971, he was sent to the Tokyo Representative Of®ce as a Representative before he was subsequently promoted to become the Assistant Branch Manager of the Tokyo Branch of UOB. In 1974, he was appointed to the position of Assistant Manager of the Overseas Branches Division of UOB where he was in charge of setting up a new division to centralise supervision and control of all overseas branches of the UOB Group. In 1975, he was promoted to the position of Manager of the Credit and Marketing Division of UOB where he had to perform dual functions of covering onshore and offshore marketing and credit analysis. He joined the Malayan Banking Berhad C``Maybank''), Singapore Main Of®ce, in 1984as the Manager of Credit and Marketing Division. He was subsequently promoted to the position of Senior

68 Manager of the Corporate Banking Division in 1988. In 1993, he became the Assistant General Manager of the Corporate Banking and Trade Finance Division in Maybank. In 1996, he became a Consultant to ACMA Ltd. He then joined the Raja Garuda Mas Group of Indonesia as their General Manager of Finance in 1997. He was the Finance Consultant for President Agri Trading Co Ltd of Thailand in 1999 before he joined our Company in 2000.

Mr William Chan is our Head of Business Development & Investment Division. His main duties include strategic planning and investment. He has over 13 years of experience in the ®nance and investment industry. In 1987, he graduated from Dalian University of Technology in China with a Degree in Marine Engineering. In 1995, he graduated with a Masters in Business Administration from the National University of Singapore and subsequently obtained a Postgraduate Diploma in Commercial Law from the National University of Singapore in 1998. In 1987, he joined the People's Insurance Company of China as a Business Analyst where he assisted in formulating and revising corporate strategies and business plans. In 1995, he took up the position of a Senior Executive in Cathay Trust Co. Limited. As a Senior Executive, his job scope included identifying and analysing investment opportunities and conducting ®nancial modelling. In 1996, he joined Dow Chemical Paci®c CSingapore) Pte Ltd as their Finance Manager where he specialised in joint venture restructuring, mergers and acquisitions, ®nancial risk management and treasury activities. He joined our Company in 2000.

Mr Heng Kian Siang is our Finance Manager. His responsibilities include assisting our Group Financial Controller in ®nancial planning, risk management, accounting and taxation functions. He graduated from a tertiary programme in Business Administration at the Southeast Asia Union College, Singapore. In 1993, he graduated from the Walla Walla College, Washington, USA, with a Bachelor of Science in Business Administration. He is currently pursuing professional quali®cation from the Chartered Association of Certi®ed Accountants as well as a Master of Business in Professional Accounting from Victoria University, Melbourne, Australia. From 1994to 1999, he joined the General Conference Auditing Service in Singapore as a Staff Auditor. In 1999, he joined our Company as an Accountant. In 2000, he was promoted to be the Finance Manager of our Group.

MANAGEMENT REPORTING STRUCTURE The following chart shows our management reporting structure as at the date of this Prospectus:±

Chen Jiulin Managing Director

Banking Business Trading Trading Relations & Finance Development & Division I Division II Risk Division Investment Division Management

Chen Yanting Gerard Rigby Tan Chin Boon Adrian Mark Chang William Chan (Head) (Head) (Director) Choon Siew (Head) (Group Financial Wu Xuehong Shi Jinbo Controller) (Manager) (Manager) Heng Kian Siang (Finance Manager)

69 DIRECTORS' REMUNERATION The remuneration of the Directors on an aggregate basis and in remuneration bands for FY1999 and FY2000 is as follows:± Ca) Aggregate Directors' remuneration by category

Year Ended 31 December 1999 Year Ended 31 December 2000 ------$'000 ------$'000 ------Executive Non-Executive Total Executive Non-Executive Total Directors Directors71) $'000 Directors Directors71) $'000 S$221 Ð S$221 S$234C2) Ð S$234C2)

Notes:± C1) None of our Non-Executive Directors received any remuneration for their services in the past two years. C2) Mr Chen Jiulin is entitled to a bonus payment for his services in FY2000 amounting to approximately 20% to 50% of the U$3.5 million set aside as bonus for our staff. The exact percentage will be determined by our Board of Directors at a later date.

Cb) Number of Directors in remuneration bands

Year Ended 31 December 1999 Year Ended 31 December 2000 Non- Non- Executive Executive Executive Executive Directors Directors71) Total Directors Directors71) Total $500,000 and above Ð Ð Ð Ð Ð Ð $250,000 to $499,999 Ð Ð Ð Ð Ð Ð Below $250,000 1 Ð 1 1 Ð 1

SERVICE AGREEMENT On 9 November 2001, our Company entered into a service agreement Cthe ``Service Agreement'') with Mr Chen Jiulin Cthe ``Appointee'') to appoint him as our Managing Director for a period of four C4) years commencing on 1 January 2002. Thereafter, the Service Agreement shall automatically be renewed for such period until terminated by either party.

After an initial eighteen-month period, the Service Agreement may be terminated at any time by either party giving the other party not less than six months' written notice of such termination or either party paying the other party an amount equivalent to six months' salary in lieu of such notice. The Service Agreement may be terminated by our Company without any notice or payment in lieu of notice upon the occurrence of certain events, such as the conviction of the Appointee of a criminal offence, misconduct by the Appointee or a breach of the Appointee's obligations under the Service Agreement.

Under the Service Agreement, the Appointee shall not, directly or indirectly, be engaged, concerned or interested in the business undertaken by the Company for a period of one year after his ceasing to be an executive of our Company C``non-competition obligations'').

70 Pursuant to his Service Agreement, the Appointee will receive an annual salary of $480,000.00. The annual salary of the Appointee shall be reviewed annually and shall be adjusted by an amount as may be determined by our Remuneration Committee. The Appointee, who has an interest in the subject matter, will abstain from the participation in the review and from making any recommendation in relation to himself. The Appointee is also entitled to an annual wage supplement equivalent to three month's salary for every 12 months of service. In addition, Mr Chen is also entitled to a share of our pro®ts, to be calculated as follows:±

Our Company's pro®ts before tax 7based on audited consolidated pro®ts of our Company before pro®t sharing and tax and after minority interest and extraordinary items) Percentage of pro®ts '$ 7per year)

First S$12 million CUp to S$12 million) 0%

Next S$8 million CMore than S$12 million and up to S$20 million) 7%

Next S$15 million CMore than S$20 million and up to S$35 million) 9%

Thereafter CMore than S$35 million) 10%

The Appointee is also entitled to be reimbursed for personal income tax incurred on his income derived from the Company, travelling, transport, hotel, entertainment and other expenses reasonably and properly incurred by him in the performance of his duties, as well as other bene®ts including health and medical bene®ts.

Had this Service Agreement been effected in FY2000, the estimated total remuneration for the Director would have been approximately $1,166,993 instead of $234,471, the pro®t before tax in respect of FY2000 would have been approximately $15,249,102 instead of $16,181,624, and the pro®t after tax in respect of FY2000 would have been approximately $12,666,183 instead of $13,504,705.

The Company has also previously entered into various letters of employment with all of the Executive Of®cers. Such letters typically provide for the salary payable to the Executive Of®cers, their working hours, annual leave, medical bene®ts, grounds of termination and certain restrictive covenants.

71 CORPORATE GOVERNANCE

The Directors recognise the importance of corporate governance and the offering of high standards of accountability to the shareholders of our Company, and will follow closely the best practice outlined in the Best Practices Guide issued by SGX-ST. Our Board of Directors has formed two committees: Ci) the Audit Committee; and Cii) the Remuneration Committee.

Audit Committee Our Audit Committee comprises Messrs Zhang Junru, Jerry Lee Kian Eng and Yan Xuetong. Mr Jerry Lee will be the Chairman of the Audit Committee.

The Audit Committee shall meet periodically to perform the following functions:± Ca) to review with the external auditors the audit plan, their evaluation of the system of internal controls, their audit report, their management letter and the management's response; Cb) to review the half-year and annual financial statements and balance sheet and profit and loss accounts before submission to the board of directors for approval, focusing in particular, on changes in accounting policies and practices, major risks areas, significant adjustments resulting from the audit, the going concern statement, compliance with accounting standards as well as compliance with any stock exchange and statutory/regulatory requirements; Cc) to review the internal control procedures and ensure co-ordination between the external auditors and the management, reviewing the assistance given by the management to the auditors, and discuss problems and concerns, if any, arising from the interim and final audits, and any matters which the auditors may wish to discuss Cin the absence of the management where necessary); Cd) to review and discuss with the external auditors any suspected fraud or irregularity, or suspected infringement of any laws, rules or regulations, which has or is likely to have a material impact on the Group's operating results or financial position, and the management's response; Ce) to consider the appointment or re-appointment of the external auditors and matters relating to resignation or dismissal of auditors; Cf) to review and approve interested person transactions, falling within the scope of Chapter 9A of the SGX-ST Listing Manual; Cg) to undertake such other reviews and projects as may be requested by the Board of Directors and will report to the Board of Directors its findings from time to time on matters arising and requiring the attention of the Audit Committee; and Ch) to generally undertake such other functions and duties as may be required by statute or the SGX-ST Listing Manual, and by such amendments made thereto from time to time.

Apart from the duties listed above, the Audit Committee shall commission and review the ®ndings of internal investigations into matters where there is any suspected fraud or irregularity, or failure of internal controls or infringement of any Singapore law, rule or regulation which has or is likely to have a material impact on the Company's operating results and/or ®nancial position.

Remuneration Committee Our Remuneration Committee comprises Messrs Chen Jiulin, Zhang Yizhou, Jerry Lee Kian Eng, Yan Xuetong and Tan Hui Boon. Dr Yan Xuetong will be the Chairman of our Remuneration Committee.

72 INTERESTED PERSON TRANSACTIONS

PAST AND PRESENT INTERESTED PERSON TRANSACTIONS Save as disclosed below, no Director, substantial shareholder or Executive Of®cer was or is interested in any material transaction undertaken by the Company within the past three ®nancial years ended 31 December 1998, 31 December 1999 and 31 December 2000.

Jet Fuel Trade Contracts Prior to the Invitation, we were a wholly-owned subsidiary of CAOSC. Immediately after the Invitation, CAOSC will hold 75% of our issued and paid-up capital. Accordingly, CAOSC is our substantial shareholder. Messrs Jia Changbin, Zhang Junru, Gao Renwen, Bao Xiaoyan and Zhang Yizhou are part of the senior management of CAOSC.

CAOSC holds majority equity interests amounting to 50% or more of the total equity in CAOSC Aviation Oil Co. Ltd, South China Bluesky Aviation Oil Ltd and Shenzhen Airport Development Co.. CAOSC holds equity interests amounting to more than 25% of the total equity in Shanghai Pudong International Airport Aviation Fuel Supply Corporation Ltd which is therefore an associate of our Parent Company. China Aviation Oil Supply East China Corporation is a branch of CAOSC.

Our Company has, from time to time, entered into jet fuel trade contracts with members of our Parent Group.

The following table shows the aggregate annual contract sums collected by our Company from our Parent Group in the past three ®nancial years:±

Name of Company FY1998 FY1999 FY2000 7S$'000) 7S$'000) 7S$'000) CAOSC Aviation Oil Co. Ltd 107,079 184,660 365,937 China Aviation Oil Supply East China Corporation 41,373 115,801 119,096 Cbranch of CAOSC) Shanghai Pudong International Airport Aviation Ð Ð 161,765 Fuel Supply Corporation Ltd South China Bluesky Aviation Oil Ltd 24,243 29,686 100,964 Shenzhen Airport Development Co. Ð Ð 13,321

Total 172,695 330,147 761,083

The percentage of the aggregate annual contract sums collected by our Company from our Parent Group over our annual turnover in the past three ®nancial years were as follows:±

FY1998 FY1999 FY2000 7% of annual turnover) 7% of annual turnover) 7% of annual turnover) 100.00 80.30 77.97

All future jet fuel contracts between our Company and our Parent Group will be entered into on an arm's length basis and on normal commercial terms, and be subject to the review procedures referred to on page 77 of this Prospectus.

73 Management Fees Our Parent Company has provided us with management support in the past in various ways, including allowing us to use their facilities, such as their distribution network, transportation and storage facilities, and awarding us with contracts from the Parent Company, enabling us to secure approximately 92% of the jet fuel import market in the PRC in FY2000. In addition, our Parent Company had on 3 January 2001 issued a management directive to all its subsidiaries and associated companies to import jet fuel from our Company. As consideration for the support rendered to us by our Parent Company and in view of the fact that our Parent Company had not rendered any fee for such support in the previous years so as to enable us to use our pro®ts to fund further growth of our Company, our Parent Company had written to our Company requesting a one-time management fee of US$5 million. We intend to make the full payment this year. This is a one-off payment and we do not intend to pay to our Parent Company any other sums in the future for their management support.

Auditing Services Mr Jerry Lee Kian Eng, one of our Independent Directors, is a senior partner of Ng, Lee & Associates Ð DFK. In the last three ®nancial years, we had engaged Ng, Lee & Associates Ð DFK as our auditors and tax advisors.

The following table shows the aggregate annual contract sums paid by our Company to Ng, Lee & Associates Ð DFK in the past three ®nancial years:±

FY1998 FY1999 FY2000 Types of services 7S$) 7S$) 7S$) Tax advice 3,300 2,550 3,050 Auditor's fees 7,500 12,000 ÐC1)

Total 10,800 14,550 3,050

Note:± C1) Ernst & Young were appointed as our auditors for FY2000.

All the above transactions were carried out on normal commercial terms. As Ernst & Young has been appointed by our Group to provide tax advice and audit services, Ng Lee & Associates Ð DFK was not be engaged as our Group's tax adviser and auditor with effect from FY2000.

Our Directors believe that our previous transactions with Ng, Lee & Associates Ð DFK will not interfere with the exercise of independent judgment by Mr Jerry Lee Kian Eng in his role as an Independent Director as going forward, Ng, Lee & Associates Ð DFK will no longer be engaged as our Group's auditors. However, as part of good corporate governance practice, Mr Jerry Lee Kian Eng shall abstain from deciding on matters in which he is interested or in which a con¯ict of interest may arise.

Loan to Sino-Sky Technology Ltd 7``Sino-Sky'') We had on 11 January 2001 entered into an agreement with Sino-Sky, an associate of our Parent Company, to lend Sino-Sky an amount of RMB1 million Cthe ``Loan''). The Loan together with interest at the rate of 4.65% per month was repayable on 30 April 2001 and was unsecured. The Loan was not repaid on 30 April 2001.

As at the date of this prospectus, this loan has been settled in full by Sino-Sky. We do not expect to provide any loans to Sino-Sky in the future.

74 Sponsorship for Executive Masters in Business Administration programme In FY2000, our Company paid a total of USD 485,436.90 as fees for the Executive Masters in Business Administration programme from the National University of Singapore for a total of 18 people, including our Directors, Mr Jia Changbin, Mr Chen Jiulin and Ms Bao Xiaoyan and some Parent Group employees. These people are not required to serve our Company under any bond and do not need to repay the programme fees to our Company.

Our Company had sponsored the course for Mr Chen as we believed that the course would provide him with knowledge that could be bene®cially applied to the management of our Company. We had sponsored the courses for our Parent Group employees including Messrs Jia Changbin and Bao Xiaoyan as part of our efforts to further develop our relationship with our Parent Group who is our major customer. The sponsorship of these Parent Group employees could indirectly bene®t our Company as they are key executives in our Parent Group who are in a position to make decisions that are bene®cial to our Company.

As at the date of this Prospectus, the fees have been paid and there are no outstanding sums to be paid. Any future sponsorships will be subject to the review and approval of the Audit Committee.

POTENTIAL INTERESTED PERSON TRANSACTIONS CAOSC had, on 24September 2001, issued a directive to us stating its intention to sell its thirty-three per cent. C33%) interest in Shanghai Pudong International Airport Aviation Fuel Supply Corporation, and its ®fty per cent. C50%) interest in China Aviation Oil Supply Corporation CHong Kong) Company Limited to us. The terms of the proposed sale will be subject to negotiations between us and CAOSC.

Shanghai Pudong International Airport Aviation Fuel Supply Company is in the business of owning and operating refueling facilities in Shanghai Pudong International Airport and supplying jet fuel to airlines using the Shanghai Pudong International Airport. China Aviation Oil Supply Corporation CHong Kong) Company Limited is in the business of supplying jet fuel to various airlines in Hong Kong SAR.

The proposed acquisitions are expected to take place after the Invitation. As CAOSC is an Interested Person within the de®nition set out in the Listing Manual, our acquisition of the equity interests in these two companies shall constitute Interested Person Transactions. As these transactions do not fall within the ambit of the proposed Shareholders' Mandate, they shall be subject to the relevant provisions of Chapter 9A of the Listing Manual. Besides complying with the requirements of Chapter 9A of the Listing Manual, we will also ensure that we will comply with the other requirements under the Listing Manual, including the provisions under Chapter 10 if they are applicable.

SHAREHOLDERS' MANDATE Our Company has and will continue to deal with the other members of the Parent Group in the ordinary course of business of our Company. These transactions are carried out on an arm's length basis and on terms which are either commercially negotiated by the respective parties, commercially competitive or based on publicly quoted prices. It is likely that, in the ordinary course of business, we may from time to time enter into interested person transactions with some degree of frequency.

Chapter 9A of the SGX-ST Listing Manual allows a listed company to obtain a mandate from its shareholders for recurrent interested person transactions which are of a revenue or trading nature or for those necessary for its day-to-day operations. These transactions may not include the purchase or sale of assets, undertakings or businesses, provisions of ®nancial assistance, loans, payments of any kind or amount or any other transactions which are not of a revenue or trading nature, as well as establishment of joint ventures or joint investments.

Chapter 9A Requirements Under Chapter 9A of the SGX-ST Listing Manual, an interested person transaction, the value of which is below three per cent. C3%) of our Company's latest audited net tangible assets C``Threshold 1''), does not require shareholders' approval or an immediate announcement. An interested person transaction, the value of which is equal to or above three per cent. C3%) and below ®ve per cent C5%) of our Company's latest audited net tangible assets C``Threshold 2''), does not require shareholders' approval but must be announced immediately. An interested person transaction, the

75 value of which is equal to or above ®ve per cent. C5%) of our Company's latest audited net tangible assets requires shareholders' approval and an immediate announcement. In addition, if the aggregate value of all Threshold 1 transactions entered into with the same interested person during one ®nancial year shall, at any time during the ®nancial year, is equal to or more than Threshold 1, the latest Threshold 1 transaction and all future Threshold 1 transactions during that ®nancial year must be announced immediately. If the aggregated value of all Threshold 2 transactions entered into with the same interested person during one ®nancial year shall, at any time during that ®nancial year, is equal to or more than Threshold 2, the latest Threshold 2 transaction and all future Threshold 2 transactions during the ®nancial year must be approved by shareholders and announced immediately. For the purposes of the above aggregation, transactions below $100,000 each are not taken into account.

Rationale for and Bene®t to our Company transacting with Interested Persons Our trades with our Parent Group account for a large percentage of our total turnover. Approximately 98.3% of all our jet fuel trades are with our Parent Group. We anticipate that such trades with our Parent Group will continue to account for a large percentage of our turnover in view of the management directive issued by our Parent Company on 3 January 2001 to all its subsidiaries and associated companies to purchase all imported jet fuel from our Company on a long-term basis beginning January 2001. Such a management directive is bene®cial to our Company because it ensures that we have a steady source of customers and that we do not have to face competition from other traders with respect to these customers. In addition, even though these trades are conducted with our Parent Group, they are on normal commercial terms which enable our Company to make pro®ts on these trades. Therefore, it is in the interest of our Company to continue to enter into these interested transactions.

In view of the time-sensitive nature of commercial transactions, it would be advantageous to us to obtain a mandate to enter into interested person transactions, provided that the transactions are made at arm's length and on our normal commercial terms which enable us to make pro®ts on these trades and are not prejudicial to our shareholders. The mandate will eliminate, among others, the need for us to convene separate general meetings on each occasion to seek our shareholders' approval as and when potential transactions with interested persons arise. This will reduce substantially the administrative time, inconvenience and expenses associated with the convening of such meetings, without compromising our corporate objectives and adversely affecting our business opportunities. On 9 November 2001, our shareholders approved a mandate Cthe ``Shareholders' Mandate'') for us to enter into the following categories of interested person transactions with the following categories of interested persons.

Entity at Risk Under the de®nition under Chapter 9A of the SGX-ST Listing Manual, our Company and our subsidiary are considered entities at risk from the interested person transactions.

Categories of interested persons The Shareholders' Mandate will apply to the interested person transactions which are carried out with all the members of our Parent Group Cthe ``Interested Persons'' and each an ``Interested Person''). Currently, the members of our Parent Group with whom we trade and sell jet fuel to are CAOSC Aviation Oil Co. Ltd, China Aviation Oil Supply East China Corporation, Shanghai Pudong International Airport Aviation Fuel Supply Corporation Ltd, South China Bluesky Aviation Oil Ltd, and Shenzhen Airport Development Co.. This Shareholders' Mandate will also apply to other members of our Parent Group with whom we may trade and sell jet fuel to in the future.

Transactions with Interested Persons which do not fall within the ambit of the proposed Shareholders' Mandate shall be subject to the relevant provision of Chapter 9A of the Listing Manual. The Shareholders' Mandate will not apply to interested person transactions with our Directors and their respective associates for which separate shareholders' approval will be obtained of it becomes necessary to do so.

76 Categories of interested persons transactions The interested person transactions with the Interested Persons which will be covered by the Shareholders' Mandate are the trading and sale of jet fuel to the Interested Persons.

Scope of Shareholders'Mandate Transactions with interested persons which do not fall within the ambit of the mandate will be subject to the relevant provisions of Chapter 9A of the SGX-ST Listing Manual. The mandate will continue in force until our next Annual General Meeting. We will thereafter seek the approval of our shareholders for the renewal of the mandate at each Annual General Meeting, subject to disclosure in the annual report of the aggregate value of transactions conducted under the mandate during the ®nancial year as required under Clause 9A10C2)Ca)Ci) of the SGX-ST Listing Manual, or as required under any other provisions in the SGX-ST Listing Manual, and satisfactory review by the Audit Committee.

Review procedures for mandated interested person transactions To ensure that the mandated interested person transactions are undertaken at arm's length and on commercial terms, and will not be prejudicial to our shareholders, the mandate incorporates the following review procedures:

Ci) when buying services and products from an interested person, two other quotations from non-interested persons will be obtained for comparison, whenever possible. The Managing Director will review these comparables, taking into account all pertinent factors including, but not limited to price, quality, delivery time and track record, to ensure that the interests of minority shareholders are not disadvantaged; and Cii) when selling products to an interested person, the price and terms of two other successful sales of similar products to third parties will be used as comparison, whenever possible. The Managing Director will review these comparables, taking into account all pertinent factors including, but not limited to price, quality, delivery time and track record, to ensure that the interests of minority shareholders are not disadvantaged.

The Audit Committee will review all interested person transactions at least twice a year to ensure that they are carried out at arm's length and in accordance with the procedures outlined above. It will take into account all relevant non-quantitative factors. In the event that a member of the Audit Committee is interested in any interested person transaction, he will abstain from reviewing that particular transaction. Furthermore, if during these periodic reviews, the Audit Committee believes that the guidelines and procedures as stated above are not suf®cient to ensure that interests of minority shareholders are not prejudiced, we will revert to our shareholders for a fresh mandate based on new guidelines and procedures

Our Audit Committee has reviewed the terms of the mandate and is satis®ed that the review procedures are suf®cient to ensure that interested person transactions will be made at arm's length and in accordance with normal commercial terms, and hence, will not be prejudicial to our shareholders, nor be disadvantageous to us.

In addition, the Audit Committee will include the review of interested person transactions as part of its standard procedures while examining the adequacy of its internal controls. The Board of Directors will also ensure that all disclosure, approval and other requirements on interested person transactions, including those required by prevailing legislation, listing rules of the SGX-ST and accounting standards, are complied with.

77 POTENTIAL CONFLICT OF INTERESTS

Save as disclosed in this Prospectus:± Ci) no Director, Executive Officer or substantial shareholder of our Group has any material interest, direct or indirect, in any transactions subsisting at the date of this Prospectus to which our Group is a party which is significant in relation to the business of our Group taken as a whole; Cii) no Director, Executive Officer or substantial shareholder of our Group has any material interest, direct or indirect, in any business carrying on the same trade as our Group; Ciii) no Director, Executive Officer or substantial shareholder of our Group has any material interest, direct or indirect, in any enterprise or company that is our Group's major customer or supplier of goods and services; and Civ) no Director, Executive Of®cer or substantial shareholder of our Group has any material interest, direct or indirect, in any material transactions undertaken by our Group within the last three years.

78 SHARE OPTION SCHEME

CHINA AVIATION OIL SHARE OPTION SCHEME The following is a summary of the principal terms of the China Aviation Oil Share Option Scheme and is quali®ed in its entirety by reference to the Rules of the China Aviation Oil Share Option Scheme set out in Appendix II of this Prospectus. Capitalised terms used in this summary which are not otherwise de®ned in this summary bear the same meaning as ascribed to them in the China Aviation Oil Share Option Scheme.

Scope The Scheme covers eligible Executives, Executive and Non-Executive Directors of our Group and Executives and Executive Directors of our Parent Group, who are not Controlling Shareholders or their associates.

Objectives It is our Group's long term objective to pursue continuous growth and expansion in its business and operations, and it recognises that maintaining an experienced and committed workforce is important towards achieving such an objective. Hence, it is desired that the Company should implement a share option scheme which gives the Company the ¯exibility to use share options as a means of promoting long term staff retention and to recognise and reward the efforts of those who have directly contributed to the success, growth or development of the Group. Such ¯exibility would include a discretion to offer and grant share options at a discount to the market price of the Shares.

Administration Ca) This Scheme shall be administered by the Remuneration Committee C``Committee''), consisting of Messrs Chen Jiulin, Zhang Yizhou, Jerry Lee Kian Eng, Yan Xuetong and Tan Hui Boon, in its absolute discretion with such powers and duties as are conferred on it by the Board of Directors. Cb) The Committee shall have the power, from time to time, to make or vary such regulations Cnot being inconsistent with this Scheme and in accordance with the provisions of the SGX-ST Listing Manual) for the implementation and administration of this Scheme as it thinks fit. Cc) Any decision of the Committee, made pursuant to any provision of this Scheme Cother than a matter to be certified by the Auditors), shall be final and binding Cincluding any decisions pertaining to disputes as to the interpretation of the Scheme or any rule, regulation, or procedure thereunder or as to any rights under the Scheme). Cd) A Grantee who is a member of the Committee shall not be involved in its deliberation in respect of Options to be granted to him.

Size of the Scheme As the Company intends to extend the Scheme to Executives and Directors Cincluding Non-Executive Directors) of the Group and Executives and Directors Cexcluding Non-Executive Directors) of the Parent Group, who are not Controlling Shareholders of the Group or their associates, it is proposing that the aggregate number of Shares over which the Committee may grant Options on any date, when added to the number of Shares issued and issuable in respect of all Options granted under the Scheme, shall not exceed 15% of the issued share capital of the Company on the date immediately preceding the Offer Date of the Option.

79 Although currently we have 24persons in the employment of our Group as at the date of this Prospectus, we anticipate that the number of employees will grow over the next few years. One of the objectives of the Company is to attract and retain talent for the long-term growth and pro®tability of the Group, hence more employees would necessarily have to be recruited thereby further enlarging the pool of Participants. Secondly, the number of Participants is also expected to grow as the Company brings its business into greater heights of expansion in the new millennium. Such expansion may at times take the form of buying into or acquiring companies with strategic value, together with their management teams and employees. The employee base, and thus the number of eligible Participants, will inevitably increase as a result. In addition, we have included Parent Group Executives and Parent Group Executive Directors under the Scheme, hence enlarging the number of possible Participants to the Scheme. If the number of Options available under the Scheme is small, the Company may only be able to grant a small number of Options to each Participant, which may not be a suf®ciently attractive incentive. Therefore the Company must have suf®cient number of Options to offer to new employees of the Group and Parent Group as well as to existing ones. The number of Options offered must also be signi®cant enough to serve as a meaningful reward for contribution to the Group.

As mentioned earlier, the Company intends to include more people into the Scheme. Hence there should be suf®cient number of Options under the Scheme to meet this end. This will also give greater ¯exibility to the Company in the structuring of remuneration and incentive packages for these deserving Executives and Directors. A larger pool of Participants will mean that more people can have a direct stake in the Company.

Accordingly, the Company believes that the size of the Scheme up to 15% of the issued share capital of the Company will be imperative in achieving the above purposes.

Eligibility Full-time con®rmed employees of the Group and the Parent Group and its subsidiaries Cincluding Directors holding of®ce in an executive capacity) and Non-Executive Directors of the Group , who have attained the age of twenty-one C21) years on or prior to the relevant Offer Date and are not undischarged bankrupts and who have not entered into a composition with their respective creditors, shall be eligible to participate in the Scheme, at the absolute discretion of the Committee. For the avoidance of doubt, Controlling Shareholders Ci.e. a shareholder exercising control over the Company and unless rebutted, a person who controls directly or indirectly a shareholding of ®fteen per cent. C15%) or more of the Company's issued shares capital shall be presumed a Controlling Shareholder of the Company) and their associates will not be entitled to participate in the Scheme.

Any grant of Options to a Parent Group Executive or a Parent Group Director which, together with Options already granted to that Parent Group Executive or Parent Group Director in any capacity under the Scheme, represents ®ve C5) per cent. or more of the total number of Shares available to Parent Group Executives and Parent Group Directors under the Scheme, shall be approved by independent shareholders of the Company in a separate resolution for each such Parent Group Executive or Parent Group Director.

The aggregate number of Shares which may be offered by way of grant of Options to Parent Group Executives and Parent Group Directors in any capacity under the Scheme shall not exceed twenty C20) per cent. of the total number of Shares available under the Scheme, and such aggregate number of Shares which may be offered to Parent Group Executives and Parent Group Directors in their capacity as such under the Scheme shall be approved by independent shareholders of the Company in a separate resolution.

Maximum Entitlement Subject to the limits stipulated in the Rules under ``Eligibility'', the aggregate number of Shares in respect of which Options may be offered to a Grantee for subscription in accordance with the Scheme shall be determined at the discretion of the Committee which shall take into account Cwhere applicable) criteria such as the rank and responsibilities within the Group, performance, years of service and potential for future development of the Grantee, and the performance of the Company.

80 Options to Executives and Directors of the Parent Group and Non-Executive Directors As Non-Executive Directors of our Group also contribute directly or indirectly to the growth of the Group, it is desirable that they be allowed to participate in the Scheme. In this way, the Company may acknowledge and give due recognition to the service and contribution to the Group by such Non-Executive Directors.

Our Non-Executive Directors, although not involved in the day to day running of our business, can also play an invaluable role in the success of the Company by contributing the wealth of their experience and expertise, in, inter alia, ®nance and marketing to our Board of Directors for the bene®t of the Group. Through the participation of the Non-Executive Directors in the Scheme, we may acknowledge and give recognition to outstanding services and contributions made by a Non-Executive Director of the Company. Through this way, it will also allow us to continue to attract directors of great ability and aptitude onto our Board. This will help enhance the growth and long term pro®tability of our business.

However, as their services and contributions are incomparable to those of the Executives of the Group any options that may be offered and granted to any such Director would be intended as a token of the Company's appreciation. As such, the offers and grants of such options will comprise of only a relatively small percentage Cin terms of frequency of grants and/or numbers of Shares offered under options) of the total options that would be offered and granted to Participants of the Scheme, being principally, the Executives of the Group. Our Directors believe that as the number of Options to be granted to these Non-Executive Directors are relatively small Calthough we have not con®rmed the number of Options to be granted to them), any such grant of Options to our Independent Directors will not affect their independent judgment.

The Company also recognises that Executives, Executive Directors of the Parent Group do contribute to the growth, development and success of the Company and appropriate means of rewarding these Executives and Executive Directors should be available. As highlighted under the ``Business'' section, our jet fuel sales to our Parent Group accounted for approximately 79.02% of our total turnover for jet fuel in FY2000. The bene®ts contributed by these Parent Group Executives and Executive Directors to our Parent Group have an impact on the success of our Parent Group. In turn, the success and growth of our Parent Group has an indirect but important impact on our Group because we believe that this positively impacts our Group's jet fuel sales. For the purpose of assessing their contributions, the Committee may adopt a performance framework which incorporates ®nancial and/ or non-®nancial performance measurement criteria. As the services and contribution of these persons cannot be measured in the same way as those of Executives and Directors of our Group, and while it is desired that participation in the Scheme be extended to them, any Option that may be offered to them would be extended as a token of the Company's appreciation. As such, the offer and grant of such Options to them is expected to be less frequent and/or would comprise less than those that would be offered and granted to Executives of the Company and its Subsidiaries as the Scheme is intended to operate as a share incentive scheme for the Executives and Directors of our Group.

In this way, the Company may acknowledge and give recognition to service and contribution to the Group by such Parent Group Executives and Executive Directors. We do not currently intend to invite Controlling Shareholders of the Company and their associates or Non-Executive Directors of our Parent Group to participate in the Scheme.

Acceptance of Options Options are personal to the Grantees to whom they are granted and shall not be sold, mortgaged, transferred, charged, assigned, pledged or otherwise disposed of or encumbered in whole or in part or in any way whatsoever unless approved in writing by the Committee, but may be exercised by the Grantee's duly appointed personal representative in the event of the death of such a Grantee. The grant of an Option by the Committee to a Grantee shall be accepted within thirty C30) days after the relevant Offer Date. Upon acceptance of the Option, the Grantee to whom it is granted will pay to the Company a consideration of $1.00. Any offer which is not accepted shall, upon the expiry of the thirty C30) day period, automatically lapse and shall be null and void and of no effect.

81 Exercise Price Ca) Subject to any adjustment pursuant to Rule 9 of the China Aviation Oil Share Option Scheme, the Exercise Price for each Share in respect of which an Option is exercisable shall be determined by the Committee at its absolute discretion, and fixed by the Committee at:± Ci) a price Cthe ``Market Price'') equal to the average of the last dealt prices for a Share, as determined by reference to the local English newspapers, the Business Times or other publication published by the SGX-ST for the 5 consecutive trading days immediately preceding the Offering Date of that Option, rounded up to the nearest whole cent in the event of fractional prices; or Cii) a price which is set at a discount to the Market Price, provided that:± C1) the maximum discount shall not exceed 20% of the Market Price; and C2) the Shareholders of the Company in an AGM or EGM shall have authorised the making of offers and grants of Options under the Scheme at a discount not exceeding the maximum discount as aforesaid.

The ability to offer Options to Participants of the China Aviation Oil Share Option Scheme with Exercise Prices set at a discount to the prevailing market price of our Shares will serve as a means to recognise Participants for their outstanding performance as well as to motivate them to continue to excel while encouraging them to have greater dedication and loyalty to our Group through a longer vesting period before the option may be exercised.

Cb) The flexibility to grant Options to subscribe for Shares with discounted Exercise Prices is also intended to cater to situations where the stock market performance has overrun the general market conditions. In such events, the Committee will have the absolute discretion to:± Ci) grant Options to subscribe for Shares with discounted Exercise Prices subject on the aforesaid limit; and Cii) determine the Participants to whom, and the Options to which, such reduction in Exercise Prices will apply. In determining whether to give a discount and the quantum of such discount, the Committee shall be at liberty to take into consideration factors including the performance of our Group, the years of service and the performance of the participant concerned, the contribution of the participant to the success and development of our Group, and the prevailing market conditions. It is envisaged that our Company may consider granting Option Shares with Exercise Prices set at a discount to the market price of our Shares prevailing at the time of grant under circumstances including Cbut not limited to) the following:± C1) where, due to speculative forces in the stock market resulting in an overrun of the market, the market price of our Shares at the time of the grant of Options is not a true reflection of the financial performance of our Company; C2) to enable our Company to offer competitive remuneration packages in the event that the practice of granting Options with Exercise Prices that are at a discount to the then prevailing market price becomes a general market norm. As share Options become more significant components of executive remuneration packages, a discretion to grant Options with discounted Exercise Prices will provide our Company with a means to maintain the competitiveness of our Group's remuneration strategy; and/or C3) where our Group needs to provide more compelling motivation for speci®c business units to improve our performance, grants of share Options with discounted Exercise Prices will help to align the interests of employees to those of the shareholders as they would be perceived more positively by the employees who receive such Options.

82 The Committee will determine on a case by case basis whether a discount will be given, and if so, the quantum of the discount, taking into account the objective that is desired to be achieved by our Company and the prevailing market conditions. As the actual discount given will depend on the relevant circumstances, the extent of the discount may vary from one case to another, subject to a maximum discount of 20% to the market price of our Shares. The discretion to grant Options to subscribe for Shares at an exercise price set at a discount to the market price will, however, be used judiciously. The amount of the discount may vary from one offer to another, and from time to time, subject to a maximum of 20% to the market price of our Shares.

Where the Exercise Price as determined above is less than the par value of the Share, the Exercise Price shall be the par value.

Alteration of Capital If a variation in the issued share capital of the Company occurs Cwhether by way of a capitalisation of pro®ts or rights issue or reduction Cincluding any reduction arising by reason of the Company purchasing or acquiring its issued Shares), subdivision or consolidation or distribution, or otherwise howsoever), the Exercise Price in respect of Shares comprised in an Option to the extent unexercised and/or the nominal value, class and/or number of Shares comprised in an Option to the extent unexercised and the rights attached thereto, or in respect of which additional Options may be granted to Participants under the Scheme and/or the maximum entitlement in any Financial Year, may, at the option of the Committee, be adjusted in such manner as the Committee may determine to be appropriate and, except in relation to a capitalisation issue, upon the written con®rmation of the Auditors Cacting only as experts and not as arbitrators) that in their opinion, such adjustment is fair and reasonable.

However, the cancellation of issued Shares purchased or acquired by the Company during the period when a share purchase mandate granted by Shareholders of the Company Cincluding any renewal of such mandate) is in force by way of a market purchase of such Shares undertaken by the Company on the SGX-ST shall not normally be regarded as a circumstance requiring adjustment unless the Committee shall consider an adjustment to be appropriate, or unless the Committee determines that an adjustment should be made, having regard to market purchases of Shares undertaken by the Company from time to time during the period the share purchase mandate Cor any renewal thereof) is in force.

Option Period Ca) Options granted at the Exercise Price at no discount to the Market Price shall only be exercisable, in whole or in part Cprovided that an Option may be exercised in part only in respect of 1,000 Shares or any integral multiple thereof), at any time, by a Participant after the ®rst anniversary of the Offer Date of that Option, provided always that Options shall be exercised before the tenth anniversary of the relevant Offer Date, in the case of Executives Options , and before the ®fth anniversary of the relevant Offer Date, in the case of Non-Executive Options, or such earlier date as may be determined by the Committee, failing which all unexercised Options shall immediately lapse and become null and void and a Participant shall have no claim against the Company.

Cb) Options granted with the Exercise Price set at a discount to Market Price shall only be exercisable, in whole or in part Cprovided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof), at any time, by a Participant after the second anniversary of the Offer Date of that Option, provided always that Options shall be exercised before the tenth anniversary of the relevant Offer Date in the case of Executive Options or the fifth anniversary of the relevant Offer Date in the case of Non-Executive Options, or such earlier date as may be determined by the Committee, failing which all unexercised Options shall immediately lapse and become null and void and a Participant shall have no claim against the Company. Special provisions deal with the lapse or earlier exercise of Options in circumstances which include:± Ci) the termination of the Executive's employment;

83 Cii) the bankruptcy of the Grantee or the entering into a composition with the Grantee's creditors; Ciii) the misconduct of the Grantee; Civ) the death of the Grantee; Cv) a take-over of the Company; Cvi) the winding up of the Company; Cvii) the reconstruction of the Company; and Cviii) the amalgamation of the Company with another company.

Rights of NewShares Shares which are allotted on the exercise of an Option by a Participant shall be issued, as the Participant may elect, in the name of CDP to the credit of the securities account of the Participant maintained with CDP or the Participant's securities sub-account with a CDP Depository Agent or in the name of the Participant.

Shares allotted and issued upon the exercise of an Option shall be subject to all provisions of the Memorandum and Articles of Association of the Company and shall rank pari passu in all respects with the then existing issued Shares in the capital of the Company except for any dividends, rights, allotments or other distributions, the record date of which is prior to the date on which such an Option is exercised. For this purpose, ``record date'' means the date as at the close of business on which shareholders must be registered in order to participate in any dividends, rights, allotments or other distributions Cas the case may be).

Alterations and Modi®cations to the Scheme Subject to the approval of the SGX-ST Cand any other stock exchange on which the Shares may be listed or quoted) and such other regulatory authorities as may be necessary, the provisions of the Scheme may be amended from time to time by a resolution of the Committee provided that any amendment which shall alter adversely the rights attached to any Option and which Cin the opinion of the Committee) materially alters the rights attached to the Options granted prior to such amendment shall only be effected, with the consent in writing of such number of Participants who, if they exercised their Options in full, would thereby become entitled to not less than three-quarters C3/4) in nominal amount of all the Shares which would fall to be issued and allotted upon the exercise in full of all outstanding Options, nor shall any modi®cation or alteration be made to the advantage of Participants except with the prior approval of shareholders at a general meeting provided always the Committee may at any time by resolution Cand without any other formality, save for the prior approval of the SGX-ST) amend or alter the Scheme in any way to the extent necessary to cause the Scheme to comply with any statutory provision or the provisions or the regulations of any regulatory or other relevant authority or body Cincluding the SGX-ST).

Duration of the Scheme The Scheme shall continue to be in force at the discretion of the Committee, subject to a maximum period of ten years, commencing on the date on which the Scheme is adopted by shareholders in the Extraordinary General Meeting. Subject to compliance with any applicable laws and regulations in Singapore, the Scheme may be continued beyond the above-stipulated period with the approval of the shareholders in a general meeting and of any relevant authorities which may then be required.

Size of the Scheme The aggregate number of shares over which the Committee may grant Options on any date, when added to the number of shares issued and issuable in respect of all Options granted under the Scheme, shall not exceed ®fteen per cent. C15%) of the total issued share capital of the Company on the date immediately preceding Offer Date of the Options.

84 Potential cost of Options granted pursuant to the Scheme It should be noted that any Options granted for Shares in the Company Cwhether or not the subscription price is set at a discount to market price of the Shares) would have a fair value. Insofar as Options are granted at a consideration which is less than their fair value, there will be a cost to the Company, the size of which will depend on whether the Options are granted at market price or at a discount.

Generally, the longer the validity period of the Option and the higher the discount in respect of the Exercise Price, the higher will be the potential cost. However, such cost will not be carried in the Company's books as the International Accounting Standards Committee and Singapore Accounting Standards currently have no such accounting standards on the recognition of potential cost of granting share options. If in the future such compensation cost is recognised by the then prevailing accounting standards, it will be charged to the Company's pro®t and loss account at the time of grant.

The cost to the Company of granting Options includes the following:± Ca) the exercise of an Option at a discount to the market price would translate into a reduction of the proceeds from the exercise of such Option, as compared to the proceeds that the Company would have received had the exercise been made at the prevailing market price of the Shares. Such reduction of the exercise proceeds would represent the monetary cost to the Company of granting Options at a discount exercise price; Cb) as the monetary cost of granting Options at a discount is borne by the Company, the earnings of the Company would effectively be reduced by an amount corresponding to the reduced interest earnings that the Company would have received from the difference in proceeds from a subscription price with no discount versus the discounted exercise price. Such reduction would, accordingly, result in the dilution of the Company's earnings per Shares; and Cc) the effect of the issue of new Shares upon the exercise of Options on the Company's net tangible asset per Share is accretive if the exercise price is above the net tangible asset per Share, but dilutive otherwise. The dilutive effect is greater if the exercise price is at a discount to the market price.

The costs discussed in Ca), Cb) and Cc) above would materialise only upon the exercise of the relevant Options.

Financial Effects of the Scheme and Dilution Effect Based on international accounting standards as currently applied, the grant of Options under the Scheme will not impact on the Company's pro®tability, as no cash outlay would be expended by the Company or the Group at the time of the grant of such Options, as compared with cash bonuses. However, whenever Options are granted to subscribe for new Shares in the capital of the Company Cwhether the Exercise Price is at Market Price or at a discount to Market Price of the Shares at the time of grant), such Options have a fair value at the time of their grant. The fair value of an Option at the time of grant is the estimated amount that a willing buyer would pay a willing seller for the Option on the grant date. Under the Scheme, Options are granted at a nominal consideration. Insofar as such Options are granted at a consideration which is less than the fair value at the time of grant, there will be a cost to the Company Cin that the Company will receive from the Participant upon the grant of the Option to him, a consideration that is less than the fair value of the Option), the size of which will depend on factors such as the amount of Options granted pursuant to the Scheme, and the Market Price of the Shares at the time of grant. If, however, such cost were to be recognised, it would have to be charged to the Company's pro®t and loss account at the time that the Options are granted. Subject as aforesaid, as and when Options are exercised, the cash in¯ow will add to the net asset value of the Company, and its share capital base will grow.

The grant of Options by the Company from time to time pursuant to the Scheme will affect shareholders of the Company to the extent that their shareholdings will be diluted accordingly when such Options are exercised and new shares of the Company are issued. In addition, the issue of new Shares upon the exercise of Options will dilute the Company's net tangible asset per Share and earnings per Share.

85 SHAREHOLDERS

OWNERSHIP STRUCTURE The shareholders of our Company and their respective shareholdings before and after the Invitation, after taking into account the stock split to $0.05 par value, are set out below:±

Before the Invitation After the Invitation Number of Number of Substantial Shareholder Shares % Shares % CAOSC!1) 432,000,000 100 432,000,000 75

Other shareholders less than 5%) Public Ð Ð 144,000,000 25

432,000,000 100 576,000,000 100

Note:± !1) CAOSC is a PRC State owned enterprise established in accordance with the laws and regulations of the PRC. As the listing of the Company involves only assets that are outside of the PRC, such listing is not required to be approved by the China Securities Regulatory Commission but is required to be approved by CAAC. In a letter issued by CAAC dated 23 March 2001, CAAC approved the listing of CAO subject to CAOSC's owning at least 75% of the enlarged shareholding of CAO. Therefore, all relevant approvals in the PRC required for the listing of the Company have been obtained. Any subsequent transfer, sale or disposal of CAOSC's assets will require the approval of CAAC and MOFTEC.

Pursuant to resolutions passed on 2 April 1999 at an EGM, our Shareholders approved the allotment and issue of 4,400,000 ordinary shares of $1.00 each by way of a bonus issue to CAOSC. Pursuant to resolutions passed on 6 April 2001 at an EGM, our Shareholders approved the allotment and issue of 16,600,000 ordinary shares of $1.00 each by way of a bonus issue to CAOSC. There has been no change in CAOSC's percentage ownership of the total issued share capital of our Company for the past three years.

CAOSC is not entitled to any different voting rights from the other shareholders.

None of the Directors of our Company or his/her associates !as de®ned in the SGX-ST Listing Manual) will subscribe for any of the Invitation Shares and none of the employees of our Company will act as nominee on behalf of the Directors and/or his/her associates.

MERGER OF CAOSC It has been announced in the PRC that CAOSC, will merge with China Aviation Supplies Import and Export Corporation !"CASC"). Both CAOSC and CASC are PRC state-owned enterprises established in accordance with the laws and regulations of the PRC. No announcement has been made as yet as to the form the merger will take; for example, whether a new entity will be formed to take over the assets of both companies or whether CASC will take over the assets of CAOSC.

Notwithstanding the merger, the entity which will hold the new group will be a PRC state-owned enterprise established in accordance with the laws of the PRC.

The Securities Industry Council had on 12 November 2001 ruled that in the event that CASC or a new entity takes over the assets of CAOSC pursuant to the merger, CASC or the new entity will not incur any take-over obligations under the Singapore Take-Over Code.

86 MORATORIUM To demonstrate its commitment to the Company, CAOSC, which owns 432,000,000 Shares, has undertaken not to, subject to any disposal or transfer pursuant to the merger referred to above, dispose of or transfer its shareholding in our Company for a period of six months commencing from the date of admission of our Company to the Of®cial List of SGX-ST. In addition, for a further period of six months thereafter, CAOSC has undertaken not to reduce its shareholding to below 50% of its shareholding in our Company as at the date of admission to the Of®cial List of SGX-ST. CAOSC has also undertaken, in the event of a disposal or transfer pursuant to the merger referred to above, to procure that the transferee will provide a similar undertaking for the remaining period of the moratorium. In accordance with the laws and regulations of the PRC, CAOSC may not dispose of or transfer any Shares except with the prior approval of CAAC and MOFTEC.

CAOSC is currently a PRC state-owned enterprise established in accordance with the laws and regulations of the PRC. Any changes in the State's interest in CAOSC is beyond the control of our Company and there is no assurance that there will be no such changes.

87 SHARE CAPITAL

We were incorporated on 26 May 1993 in the Republic of Singapore as a private limited company under the name of ``China Aviation Oil CSingapore) Pte Ltd''. On 6 November 2001, we converted into a public limited company and changed our name to ``China Aviation Oil CSingapore) Corporation Ltd''. We have only one class of shares, namely, the ordinary shares, which are registered shares and which have identical rights in all respects and rank equally with one another. Our Articles of Association provide that we may issue shares of a different class with preferential, deferred, quali®ed or other special rights, privileges or conditions as our Board of Directors may determine and may issue preference shares which are, or at our option are, subject to redemption, subject to certain limitations. Our directors may issue shares at a premium. If shares are issued at a premium, a sum equal to the aggregate amount or value of the premium will, subject to certain exceptions, be transferred to a share premium account. There are no founder, management, deferred or unissued shares reserved for any purpose.

As at 30 June 2000, our authorized capital was $60,000,000 consisting of 60,000,000 ordinary shares of S$1.00 each.

At an extraordinary general meeting C``EGM'') held on 6 November 2001, the sole shareholder of our Company, CAOSC, a state-owned enterprise in the PRC, approved, inter alia, the following:± Ci) the conversion of our Company into a public limited company and the change of our name to ``China Aviation Oil CSingapore) Corporation Ltd''; and Cii) the adoption of a new set of Articles of Association of our Company;

At an EGM held on 9 November 2001, the sole shareholder of our Company, CAOSC, a state-owned enterprise in the PRC, approved, inter alia, the following:- Ci) the sub-division of each ordinary share of $1.00 each in the authorised and issued share capital of our Company into 20 shares of $0.05 each Cthe ``Share Split''); Cii) the proposed invitation of such number of new shares of $0.05 each in the Company C``New Shares'') to be issued pursuant to the Invitation; Ciii) the issue of the New Shares which are the subject of the Invitation. The New Shares, when issued and fully paid, will rank pari passu in all respects with the existing issued and fully paid Shares; Civ) the adoption of the China Aviation Oil Share Option Scheme; and Cv) the adoption of the Shareholders' Mandate.

Restriction on the issue of newshares In accordance with the laws and regulations of the PRC, CAOSC would need to seek the approval of CAAC and MOFTEC, in order to vote in favour of any shareholders' resolution approving the issue of new shares.

88 Capitalisation Details of changes in the issued and paid-up share capital of our Company since 31 December 2000 and our issued and paid-up share capital immediately after the Invitation are as follows:±

Number of Resultant Issued Par Value Shares Share Capital 7$) 7$) Issued and fully paid ordinary shares of $1.00 each as 1.00 5,000,000 5,000,000 at 31 December 2000 Bonus Shares 1.00 16,600,000 16,600,000 Share Capital of ordinary shares of $1.00 each 1.00 21,600,000 21,600,000 after the Bonus Issue Subdivision of ordinary share of $1.00 each to 0.05 432,000,000 21,600,000 ordinary shares of $0.05 each C``Share Split'') Pre-Invitation share capital 0.05 432,000,000 21,600,000 New Shares to be issued for public subscription 0.05 144,000,000 7,200,000

Post-Invitation share capital 0.05 576,000,000 28,800,000

The authorised share capital and the shareholders' funds of our Company as at 31 December 2000 before and after adjustments to re¯ect the Share Split and the issue of New Shares pursuant to the Invitation are as set out below. These statements should be read in conjunction with the Accountants' Report set out on pages 96 to 119 of this Prospectus.

As at 31 December 2000 As adjusted Authorised Share Capital 7$'000) 7$'000) Ordinary shares of $1.00 each 60,000 Ð Ordinary shares of $0.05 each Ð 60,000

As at 31 December 2000 As adjusted Shareholders' Funds 7$'000) 7$'000) Issued and paid-up share capital 5,000 28,800 Share premium Ð 69,440 Retained earnings 24,022 24,022

29,022 122,262

89 TAXATION

The following is a discussion of certain tax matters arising under the current tax laws in Singapore and is not intended to be and does not constitute legal or tax advice. While this discussion is considered to be a correct interpretation of existing laws in force as at the date of this Prospectus, no assurance can be given that courts or ®scal authorities responsible for the administration of such laws will agree with this interpretation or that changes in such laws will not occur. The discussion is limited to a general description of certain tax consequences in Singapore with respect to ownership of the Share by Singapore investors, and does not purport to be a comprehensive nor exhaustive description of all of the tax considerations that may be relevant to a decision to purchase the Shares.

Prospective investors should consult their tax advisers regarding Singapore tax and other tax consequences of owning and disposing the Shares. It is emphasised that neither the Company, the Directors nor any other persons involved in the Invitation accepts responsibility for any tax effects or liabilities resulting from the subscription for, purchase, holding or disposal of the Shares. Dividends payable by the Company on the Shares will be declared in Singapore dollars and paid to shareholders in Singapore dollars.

Singapore Taxation The following discussion describes the material Singapore income tax, stamp duty and estate duty consequences of the purchase, ownership and disposal of the Shares.

Income Tax General Singapore resident taxpayers, which include individuals who are residing in Singapore and companies which are controlled or managed in Singapore, are subject to Singapore income tax on:± Ca) income accruing in or derived from Singapore; and Cb) foreign income received in Singapore.

A company will be regarded as being resident in Singapore if the control and management of its business is exercised in Singapore Cfor example, if the company's board of directors meets and conducts the business of the company in Singapore). An individual will be regarded as being resident in Singapore in a year of assessment if, in the preceding year, he was physically present in Singapore or exercised employment in Singapore Cother than as a director of a company) for 183 days or more, or if he resides in Singapore.

Non-Singapore resident corporate taxpayers, subject to certain exceptions, are subject to Singapore income tax on:± Ci) income that is accrued in or derived from Singapore; and Cii) foreign income received in Singapore.

Non-Singapore resident individuals, subject to certain exceptions, are subject to Singapore income tax only on income accruing in or derived from Singapore.

The corporate tax rate in Singapore is currently 24.5%. The rate also applies to non-Singapore resident taxpayers. There is a partial tax exemption scheme which benefits all companies with effect from the Year of Assessment 2002. Under this Scheme, tax exemption is granted on up to $100,000 of a company's chargeable income as follows:± Ca) 75% of up to the first $10,000 chargeable income; and Cb) 50% of the next $90,000.

90 The remaining chargeable income will be taxed at 24.5%. The new corporate tax rate applies to the Company's business income for the ®nancial year ending 31 December 2001 and subsequent years and other income such as interest and dividends received from 1 January 2001.

Subject to any applicable tax treaty, non-Singapore resident taxpayers are subject to a withholding tax of 24.5% on certain categories of income derived from Singapore from 1 January 2001 or generally at 15.0% on interest, royalty and rental of movable property received from Singapore.

Cash Dividend Distributions Under Singapore's taxation system, the tax paid by the Company at the prevailing corporate tax rate is in effect imputed to, and deemed to be paid on behalf of its shareholders. Shareholders receive dividends net of such tax. Shareholders are taxed on the gross amount of dividends Cthat is, on the amount of net dividends plus an amount equal to the gross dividends multiplied by the prevailing corporate tax rate). The tax paid by the Company effectively becomes available to its shareholders as a tax credit to offset their Singapore income tax liability on the gross amount of dividends paid by the Company.

Singapore does not impose withholding tax on dividends paid to Singapore resident or non-Singapore resident shareholders. As the tax paid by the Company at the prevailing corporate tax rate is deemed to be paid by its shareholders, no further Singapore income tax liability is imposed on dividends received by such non-resident shareholders. Conversely, such non-resident shareholders who do not have deductible expenses which are accepted by the Inland Revenue Authority of Singapore CIRAS) as attributable to such dividend income will normally not receive any refund from the IRAS. Singapore taxpayers are taxed on dividends received from the Company at the income tax rates applicable to each taxpayer. Where their income tax liabilities on the dividends are lower Cor, as the case may be, higher) than the tax deducted at source from such dividends at the prevailing corporate rate, such resident shareholders may receive a refund from Cor, as the case may be, have to pay further tax to) the IRAS.

If the Company pays dividends on the Shares out of any income that has been taxed at a concessionary tax rate, such dividends will be free of Singapore tax in the hands of the shareholders Cother than on any shares of a preferential nature).

Where the Company receives foreign income that has not been subject to full Singapore income tax due to the availability of foreign tax credits, the Company may pay tax exempt dividends out of the foreign income received in Singapore. The amount of such foreign income available to cover the distribution of tax exempt dividends to shareholders is equal to the foreign tax credit allowed divided by the prevailing corporate tax rate, less the foreign tax paid.

The Company will credit such foreign income to a special account Cknown as the ``Section 13E account''). Any subsequent dividends paid by the Company out of this account to its shareholders Cother than on any shares of a preferential nature) will be tax exempt subject to certain conditions.

Bonus Issues And Scrip Dividends Under current Singapore tax law and practice, a capitalisation of pro®ts followed by the issue of new shares, credited as fully paid, pro-rata to shareholders C``bonus issue'') does not represent a distribution of dividends by a company to its shareholders. Therefore, a Singapore resident shareholder receiving shares by way of a bonus issue should not have a liability to Singapore tax.

When a dividend is to be satis®ed wholly or in part in the form of an allotment of ordinary shares credited as fully paid, the dividend declared will be treated as income subject to Singapore tax. Similarly, when shareholders are given the right to elect to receive an allotment of ordinary shares credited as fully paid in lieu of cash, the dividend declared will be treated as dividend income and be subject to Singapore tax.

91 Gains on Disposal of Ordinary Shares Singapore does not impose tax on capital gains. However, gains may be construed to be of an income nature and subject to tax if:± Ca) they arise from activities which the IRAS regards as the carrying on of a trade in Singapore; or Cb) they are short-term gains from the sale of real property and shares in unlisted companies with substantial real property or real property related assets in Singapore, except where such sales are contracted on or after 13 October 2001.

Any pro®ts from the disposal of ordinary shares are not taxable in Singapore unless the seller is regarded as having derived gains of an income nature, in which case, the disposal pro®ts would be taxable.

Stamp Duty No stamp duty is payable on the issue of new ordinary shares of the Company. Where existing ordinary shares are acquired in Singapore, stamp duty is payable on the instrument of transfer of the ordinary shares at the rate of $2.00 for every $1,000 market value of the ordinary shares. Where dutiable instruments are executed on or after 13 October 2001, the stamp duty payable will be reduced by 30%. This reduction in stamp duty will however expire at the end of 2002.

The purchaser is liable for stamp duty, unless otherwise agreed. No stamp duty is payable if no instrument of transfer is executed or the instrument of transfer is executed outside Singapore. However, stamp duty may be payable if the instrument of transfer which is executed outside Singapore is received in Singapore.

The above stamp duty is not applicable to electronic transfers of the ordinary shares through the CDP.

Goods and Services Tax 7``GST'') The sale of the Shares by an investor belonging in Singapore through an SGX-ST member or to another person belonging in Singapore is an exempt sale not subject to GST. Any GST directly or indirectly incurred by the investor in respect of this exempt sale will become an additional cost to the investor.

Where the Shares are sold by the investor belonging outside Singapore, the sale is a taxable sale subject to GST at zero-rate. Any GST incurred by a GST-registered investor in the making of this supply in the course of furtherance of a business is claimable as a refund from the Comptroller of GST.

Services such as brokerage, handling and clearing services rendered by a GST-registered person to an investor belonging in Singapore in connection with the investor's purchase, sale or holding of the Shares will be subject to GST at the current rate of three per cent. Similar services rendered to an investor belonging outside Singapore are subject to GST at zero-rate.

Estate Duties Singapore estate the value of most movable and immovable property situated in Singapore owned by individuals who are not domiciled in Singapore, subject to speci®c exemption limits. Singapore estate the value of most immovable property situated in Singapore and on most movable property, wherever it may be, owned by individuals who are domiciled in Singapore, subject to speci®c exemption limits. The Company's ordinary shares are considered to be movable property situated in Singapore as the Company is a company incorporated in Singapore and the share register is maintained in Singapore.

Accordingly, the Company's ordinary shares held by an individual are subject to Singapore estate duty upon such individual's death, whether or not such individual is domiciled in Singapore. Singapore estate duty is payable to the extent that the value of the ordinary shares aggregated with any other assets subject to Singapore estate duty exceeds S$600,000. Unless other exemptions apply to other assets, for example, the separate exemption limit for residential properties, any excess beyond S$600,000 will be taxed at 5% on the ®rst S$12,000,000 of the individual's Singapore chargeable assets and thereafter at 10%. Individuals should consult their own tax advisors regarding the Singapore estate duty consequences of their ownership of the Company's ordinary shares.

92 CLEARANCE AND SETTLEMENT

Upon listing and quotation on SGX-ST, our Shares will be traded under the book-entry settlement system of the CDP, and all dealings in and transactions of the Shares through SGX-ST will be effected in accordance with the terms and conditions for the operation of securities accounts with the CDP, as amended from time to time.

Our Shares will be registered in the name of CDP or its nominee and held by CDP for and on behalf of persons 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 register maintained by the CDP, rather than CDP, will be treated, under our Articles of Association and the Act, as members of the Company in respect of the number of Shares credited to their respective securities accounts.

Persons holding the Shares in securities account with CDP may withdraw the number of the Shares they own from the book-entry settlement system in the form of physical share certi®cates. Such share certi®cates will, however, not be valid for delivery pursuant to trades transacted on SGX-ST, although they will be prima facie evidence of title and may be transferred in accordance with our Articles of Association. A fee of S$10.00 for each withdrawal of 1,000 Shares or less and a fee of S$25.00 for each withdrawal of more than 1,000 Shares is payable upon withdrawing the Shares from the book-entry settlement system and obtaining physical share certi®cates. In addition, a fee of S$2.00 or such other amount as our Directors may decide, is payable to the share registrar for each share certi®cate issued and a stamp duty of S$10.00 is also payable when the Shares are withdrawn in the name of the person withdrawing the Shares or S$0.20 per S$100.00 or part thereof of the last transacted price where it is withdrawn in the name of a third party. Persons holding physical share certi®cates who wish to trade on the SGX-ST must deposit with CDP their share certi®cates together with the duly executed and stamped instruments of transfer in favour of CDP, and have their respective securities accounts credited with the number of Shares deposited with the number of Shares deposited before they can effect the desired trades. A fee of S$20.00 is payable upon the deposit of each instrument of transfer with CDP.

Transactions in the Shares under the book-entry settlement system will be re¯ected by the seller's securities account being debited with the number of Shares sold and the buyer's securities account being credited with the number of Shares acquired. No transfer of stamp duty is currently payable for the Shares that are settled on a book-entry basis.

A Singapore clearing fee for trades in Shares on the SGX-ST is payable at the rate of 0.05% of the transaction value. The clearing fee, instrument of transfer deposit fee and share withdrawal fee may be subject to Singapore Goods and Services Tax, currently at 3%.

Dealings of the Shares will be carried out in Singapore dollars and will be effected for settlement on CDP on a scripless basis. Settlement of trades on a normal ``ready'' basis on the SGX-ST generally takes place on the third business day following the transaction date, and payment for the securities is generally settled 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 agent may be a member company of the SGX-ST, bank, merchant bank, or trust company.

93 DIRECTORS' REPORT

26 November 2001

The Shareholders China Aviation Oil CSingapore) Corporation Ltd 8 Temasek Boulevard #31-02 Suntec Tower Three Singapore 038988

Dear Sirs:

This report has been prepared for inclusion in the prospectus Cthe ``Prospectus'') of China Aviation Oil CSingapore) Corporation Ltd Cthe ``Company'') to be dated 26 November 2001 in connection with the Invitation in respect of 144,000,000 ordinary shares of $0.05 each in the capital of our Company.

On behalf of the Directors of our Company, I report that, having made due inquiry in relation to the period between 30 June 2001, the date to which the last audited accounts of our Company were made up, and the date hereof, being a date not earlier than 14days before the issue of the Prospectus:±

Ca) the business of our Company and subsidiary has, in the opinion of the Directors, been satisfactorily maintained;

Cb) in the opinion of the Directors, no circumstances have arisen since the last Annual General Meeting of our Company which would adversely affect the trading or the value of the assets of our Company and our subsidiary;

Cc) the current assets of our Company and our subsidiary appear in the books at values which are believed to be realisable in the ordinary course of business;

Cd) no contingent liabilities have arisen by reason of any guarantees given by our Company or subsidiary; and

Ce) save as disclosed on pages 88 and 89 of the Prospectus, there has been no change in the published reserves or any unusual factors affecting the pro®ts of our Company and our subsidiary since 30 June 2001, the date to which the last audited accounts of our Company and our subsidiary were made up to.

Yours faithfully For and on behalf of the Board of Directors

Chen Jiulin Managing Director

94 26 November 2001

The Board of Directors China Aviation Oil CSingapore) Corporation Ltd 8 Temasek Boulevard #31-02 Suntec Tower Three Singapore 038988

Dear Sirs:

Letter from the Auditor and Reporting Accountants in relation to the Consolidated Pro®t Forecast for the ®nancial year ending 31 December 2001

This letter has been prepared for inclusion in the prospectus to be dated 26 November 2001 Cthe ``Prospectus'') in connection with the Invitation by China Aviation Oil CSingapore) Corporation Ltd Cthe ``Company'') in respect of 144,000,000 new shares of $0.05 each in the Company.

We have examined the consolidated pro®t forecast of the Company and its subsidiary company Cthe ``Group'') for the ®nancial year ending 31 December 2001 set out on page 44 in accordance with the Singapore Standards on Auditing applicable to the examination of prospective ®nancial information. The Directors are solely responsible for the consolidated pro®t forecast including the assumptions set out on page 44 of the Prospectus on which the forecast is based.

The consolidated pro®t forecast includes results shown by the audited Statement of Group Results for the six months ended 30 June 2001.

Based on our examination of the evidence supporting the assumptions, nothing has come to our attention which cause us to believe that these assumptions do not provide a reasonable basis for the consolidated pro®t forecast. In our opinion, the consolidated pro®t forecast, so far as the accounting policies and calculations are concerned, is properly prepared on the basis of the assumptions, is consistent with the accounting policies normally adopted by the Group, and is presented in accordance with the Singapore Statements of Accounting Standards.

Yours faithfully,

ERNST & YOUNG Certi®ed Public Accountants

Partner: Mrs Lim Siew Koon

Singapore

95 ACCOUNTANTS' REPORT

26 November 2001

The Board of Directors China Aviation Oil Singapore)Corporation Ltd 8 Temasek Boulevard #31-02 Suntec Tower Three Singapore 038988

Dear Sirs:

1. INTRODUCTION This report has been prepared for inclusion in the prospectus of China Aviation Oil Singapore) Corporation Ltd ``the Company'')to be dated 26 November 2001 in connection with the Invitation by the Company in respect of 144,000,000 new ordinary Shares of $0.05 each comprising:± a)10,000,000 Offer Shares at $0.56 for each Offer Share by way of public offer; and b)134,000,000 Placement Shares by way of placement comprising:± i)131,500,000 Placement Shares at $0.56 for each Placement Share for applications by way of Placement Shares' Application Forms; ii)1,600,000 Placement Shares at $0.56 for each Placement Share for applications through the Internet; and iii)900,000 Reserved Shares at $0.56 for each Share reserved for the management and employees of the Group, payable in full on application.

2. THE COMPANY 2.1 The Company was incorporated in the Republic of Singapore on 26 May 1993 in the name of Sino Aviation Oil Transportation Singapore)Pte Ltd as a private company limited by shares. On 13 May 1999, the Company changed its name to China Aviation Oil Singapore)Pte Ltd. On 6 November 2001, the Company was converted into a public company limited by shares and was renamed China Aviation Oil Singapore)Corporation Ltd.

2.2 At the date of incorporation, the authorised share capital of the Company was $600,000 divided into 600,000 ordinary shares of $1.00 each and 600,000 ordinary shares of $1.00 each fully paid were issued at par for cash to the subscribers at the time of incorporation.

The movements in the authorised, issued and paid up share capital of the Company since the date of incorporation to the date of this report are as follows:±

Authorised Issued and share paid-up Shares issued and Date capital capital consideration $$ 26 May 1993 600,000 600,000 Issue of 600,000 ordinary shares of $1.00 each at par for cash 2 April 1999 10,000,000 5,000,000 Increase in authorised share capital via the creation of 9,400,000 ordinary shares of $1.00 each Issue of 4,400,000 ordinary shares of $1.00 each via bonus issue by capitalisation of $4,400,000 from revenue reserves

96 2. THE COMPANY
cont'd)

Authorised Issued and share paid-up Shares issued and Date capital capital consideration $$ 8 June 2000 20,000,000 5,000,000 Increase in authorised share capital via the creation of 10,000,000 ordinary shares of $1.00 each 6 April 2001 60,000,000 21,600,000 Increase in authorised share capital via the creation of 40,000,000 ordinary shares of $1.00 each Issue of 16,600,000 ordinary shares of $1.00 each via bonus issue by capitalisation of $16,600,000 from revenue reserves

As at the date of this report, the authorised share capital of the Company was $60,000,000 divided into 1,200,000,000 ordinary shares of $0.05 each. The issued and fully paid share capital was $21,600,000 divided into 432,000,000 ordinary shares of $0.05 each.

2.3 The principal activities of the Company consist of trading in aviation oil and petroleum products.

2.4 On 10 November 2000, a wholly-owned subsidiary company, Greater China Travel Industry Singapore)Pte Ltd was incorporated:±

Issued and fully ------paid-up capital ------Name of subsidiary Date of At At (country of incorporation) incorporation incorporation 30.6.2001 Interest $ $ % Greater China Travel 10.11.2000 150,000 150,000 100 Industry Singapore)Pte Ltd Singapore)

Accordingly, consolidated ®nancial statements have been prepared for the year ended 31 December 2000 and the six months period ended 30 June 2001.

The principal activities of the subsidiary company is to carry on the business of travel and tourist agents.

2.5 The Company and the Group operate in Singapore and employed 24 employees as of 30 June 2001.

2.6 At an Extraordinary General Meeting ``EGM'')held on 6 November 2001, the sole shareholder of the Company, China Aviation Oil Supply Corporation ``CAOSC''), a state-owned enterprise in the PRC, approved, inter alia, the following:±

i)the conversion of the Company into a public limited company and the change of its name to ``China Aviation Oil Singapore)Corporation Ltd''; ii)the adoption of a new set of Articles of Association of the Company;

At an EGM held on 9 November 2001, the sole shareholder of the Company, CAOSC, a state- owned enterprise in the PRC, approved, inter alia, the following:±

i)the sub-division of each ordinary share of $1.00 each in the authorised and issued share capital of the Company into 20 shares of $0.05 each the ``Share split''); ii)the proposed invitation of such number of new shares of $0.05 each in the Company ``New Shares'')to be issued pursuant to the Invitation;

97 2. THE COMPANY
cont'd) iii)the issue of the New Shares which are the subject of the Invitation. The New Shares, when issued and fully paid, will rank pari passu in all respects with the existing issued and fully paid Shares; iv)the adoption of the China Aviation Oil Share Option Scheme; and v)the adoption of the Shareholders' Mandate.

2.7 The ®nancial statements of the Company for the years ended 31 December 1998 to 1999 were audited by Ng, Lee and Associates Ð DFK. We were the auditors of the Company and of the Group for the year ended 31 December 2000 and the six months ended 30 June 2001. The auditor's reports to the members of the Company were unquali®ed for the ®nancial years ended 31 December 1998 and 1999 and of the Company and Group for the ®nancial year ended 31 December 2000 and the six months ended 30 June 2001.

2.8 The information set out in the following paragraphs is based on the audited ®nancial statements of the Company and of the Group, after making any reclassi®cations as necessary for the inclusion of our report in this prospectus issued by the Company and the Group. The audited ®nancial statements have been prepared on the basis of the accounting policies set out below. For all the accounting periods dealt with in this report, the audited ®nancial statements have been prepared in accordance throughout with the Singapore Statements of Accounting Standards.

3. SIGNIFICANT ACCOUNTING POLICIES a) Basis of preparation The financial statements of the Company and of the Group have been prepared in accordance with the Singapore Statements of Accounting Standards and applicable requirements of Singapore law. The ®nancial statements have been prepared on a historical cost basis.

b) Principles of consolidation The consolidated financial statements comprise the accounts of China Aviation Oil Singapore)Corporation Ltd the parent company)and its controlled subsidiary, after the elimination of all material intercompany transactions. The subsidiary company is consolidated from the date the parent obtains control until such time as control ceases. Acquisition of subsidiary company is accounted for using the purchase method of accounting. The ®nancial statements of the subsidiary company are prepared for the same reporting period as the parent company using consistent accounting policies. Adjustments are made to conform any dissimilar material accounting policies that may exist.

c) Investment in subsidiary company Shares in subsidiary company are stated in the Company's balance sheet at cost after write-down for permanent diminution in value.

d) Fixed assets Fixed assets are stated at cost less accumulated depreciation. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to working condition for its intended use. Expenditure for additions, improvements and renewals are capitalised and expenditure for maintenance and repairs are charged to the pro®t and loss account when assets are sold or retired, their cost and accumulated depreciation are removed from the ®nancial statements and any gain or loss resulting from their disposal is included in the pro®t and loss account.

98 3. SIGNIFICANT ACCOUNTING POLICIES
cont'd) e) Depreciation Depreciation is calculated on the straight-line method to write off the cost or valuation of fixed assets over their estimated useful lives. Depreciation charge is computed as from the dates the assets are put into use. The estimated useful lives are as follows:± Leasehold property 50 years Motor vehicles 10 years Furniture and ®ttings 5 years Of®ce equipment 5 years Renovation 5 years Computers 3 years Signboard 5 years

Fully depreciated ®xed assets are retained in the ®nancial statements until they are no longer in use and no further charge for depreciation is made in respect of these assets.

f) Foreign currency translation Monetary assets and liabilities denominated in non-SGD currencies are translated into SGD equivalents using year-end spot foreign exchange rates. Non-monetary assets and liabilities are translated using exchange rates that existed when the values were determined. Exchange differences on foreign currency transactions are included in the pro®t and loss account.

g) Deferred taxation Deferred taxation is accounted for using the liability method whereby the tax charge for the year is based on the disclosed book pro®t after adjusting for all permanent differences. The amount of taxation deferred on account of all timing differences is re¯ected in the deferred taxation account. Deferred tax bene®ts are not recognised unless there is reasonable expectation of their realisation.

h) Revenue recognition i)Revenue from sale of goods is recognised when goods are delivered. ii)Pro®t or loss on paper swap deals and futures are recognised when deals are completed.

i) Cash and cash equivalents Cash and cash equivalents are de®ned as cash and bank balances and ®xed deposits for the purposes of the consolidated cash ¯ow statement.

99 4. SEGMENT INFORMATION The Group's and Company's operating businesses are organised and managed separately according to the nature of products provided, with each segment representing a strategic business unit that offers different products and serves different markets.

The following tables present revenue and profit information regarding industry segments for the six months period ended 30 June 2001 and the years ended 31 December 2000, 1999 and 1998 and certain asset and liability information regarding industry segments at 30 June 2001 and 31 December 2000, 1999 and 1998:± Business segments

------Clean Petroleum Products ------Black Petroleum Products ------Crude Oil ------Sub Total b/f ------Group ------Company ------Group ------Company ------Group ------Company ------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year 1.1.01 Year 1.1.01 Year Year Year 1.1.01 Year 1.1.01 Year Year Year 1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended to ended to ended ended ended to ended to ended ended ended to ended to ended ended ended 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Sales to external customers 376,277 811,446 376,277 811,446 342,065 172,695 42,818 115,099 42,818 115,099 64,820 Ð Ð 40,438 Ð 40,438 Ð Ð 419,095 966,983 419,095 966,983 406,885 172,695

100 Total revenue 376,277 811,446 376,277 811,446 342,065 172,695 42,818 115,099 42,818 115,099 64,820 Ð Ð 40,438 Ð 40,438 Ð Ð 419,095 966,983 419,095 966,983 406,885 172,695

Segment result 376,277 811,446 376,277 811,446 342,065 172,695 42,818 115,099 42,818 115,099 64,820 Ð Ð 40,438 Ð 40,438 Ð Ð 419,095 966,983 419,095 966,983 406,885 172,695

Operating pro®t Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð ÐÐÐÐÐÐÐÐÐ Finance costs Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð ÐÐÐÐÐÐÐÐÐ Pro®t before tax Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð ÐÐÐÐÐÐÐÐÐ Tax expense Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð ÐÐÐÐÐÐÐÐÐ Pro®t from ordinary activities Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð ÐÐÐÐÐÐÐÐÐ

Net pro®t Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð ÐÐÐÐÐÐÐÐÐ

Total assets Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð ÐÐÐÐÐÐÐÐÐ

Total liabilities Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð ÐÐÐÐÐÐÐÐÐ 4. SEGMENT INFORMATION
cont'd) Business segments

------Sub Total c/f ------Petrochemical Products ------Derivatives Trading ------Total ------Group ------Company ------Group ------Company ------Group ------Company ------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year 1.1.01 Year 1.1.01 Year Year Year 1.1.01 Year 1.1.01 Year Year Year 1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended to ended to ended ended ended to ended to ended ended ended to ended to ended ended ended 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Sales to external customers 419,095 966,983 419,095 966,983 406,885 172,695 5,616 9,106 5,616 9,106 4,248 Ð 296 (12,372) 296 (12,372) 3,414 (1,977) 425,007 963,717 425,007 963,717 414,547 170,718 Total revenue 419,095 966,983 419,095 966,983 406,885 172,695 5,616 9,106 5,616 9,106 4,248 Ð 296 (12,372) 296 (12,372) 3,414 (1,977) 425,007 963,717 425,007 963,717 414,547 170,718

Segment result 419,095 966,983 419,095 966,983 406,885 172,695 5,616 9,106 5,616 9,106 4,248 Ð 296 (12,372) 296 (12,372) 3,414 (1,977) 425,007 963,717 425,007 963,717 414,547 170,718

Operating pro®t Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð Ð Ð Ð 33,570 16,932 33,579 16,932 10,001 7,096 Finance costs Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð Ð Ð Ð (581) (750) (581) (750) (195) (20) 101 Pro®t before tax Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð Ð Ð Ð 32,989 16,182 32,998 16,182 9,806 7,076 Tax expense Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð Ð Ð Ð (3,305) (2,677) (3,305) (2,677) (1,012) (649) Pro®t from ordinary activities Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð Ð Ð Ð 29,684 13,505 29,693 13,505 8,794 6,427

Net pro®t Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð Ð Ð Ð 29,684 13,505 29,693 13,505 8,794 6,427

Total assets Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð Ð Ð Ð 146,274 115,108 146,283 115,108 78,135 45,847

Total liabilities Ð ÐÐÐÐÐÐÐÐÐÐÐÐÐ Ð Ð Ð Ð 87,568 86,086 87,568 86,086 62,618 39,124 4. SEGMENT INFORMATION
cont'd) Geographical segments The following table presents revenue and expenditure information regarding geographical segments for the six months period ended 30 June 2001 and the years ended 31 December 2000, 1999 and 1998 and certain asset information regarding geographical segments at 30 June 2001, 31 December 2000, 1999 and 1998:±

------China ------Other Regions ------Total ------Group ------Company ------Group ------Company ------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year 1.1.01 Year 1.1.01 Year Year Year 1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended to ended to ended ended ended to ended to ended ended ended 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Sales to external customers 425,007 907,918 425,007 907,918 387,504 170,718 Ð 55,799 Ð 55,799 27,043 Ð 425,007 963,717 425,007 963,717 414,547 170,718

Total revenue 425,007 907,918 425,007 907,918 387,504 170,718 Ð 55,799 Ð 55,799 27,043 Ð 425,007 963,717 425,007 963,717 414,547 170,718

102 Other geographical information:

Capital expenditure Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð Ð 581 274 581 89 3,873 61

On 10 November 2000, a wholly-owned subsidiary company, Greater China Travel Industry Singapore)Pte Ltd was incorporated. Accordingly, consolidated ®nancial statements have been prepared for the six months period ended 30 June 2001 and the year ended 31 December 2000. 5. FINANCIAL INFORMATION 5.1 Balance sheets The balance sheets as at the end of the three ®nancial years as at 31 December 1998 to 31 December 2000 and as at 30 June 2001 are set out below:±

------Group ------Company ------Note 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Non-current assets Fixed assets 6.1 4,347 3,959 4,171 3,774 3,859 142 Subsidiary company 6.2 Ð Ð 335 185 Ð Ð Current assets Trade debtors &net) 6.3 91,097 93,155 91,097 93,155 62,502 40,445 Other debtors, deposits and prepayments 6.4 1,034 78 1,034 78 247 724 Amount due from related company 6.5 200 Ð 200 Ð Ð Ð Fixed deposits 44,013 13,260 44,013 13,260 7,197 Ð Cash and bank balances 5,583 4,656 5,433 4,656 4,330 4,536

141,927 111,149 141,777 111,149 74,276 45,705

Current liabilities Trade creditors 67,069 37,916 67,069 37,916 60,545 38,393 Other creditors and accruals 6.6 1,107 1,491 1,107 1,491 379 76 Accrued staff cost 6.7 6,889 6,785 6,889 6,785 690 7 Amount due to holding company 6.8 9,473 8,840 9,473 8,840 Ð Ð Trust receipt payables 6.9 Ð 28,439 Ð 28,439 Ð Ð Provision for taxation 2,710 2,600 2,710 2,600 989 643

87,248 86,071 87,248 86,071 62,603 39,119

Net current assets 54,679 25,078 54,529 25,078 11,673 6,586 Non-current liabilities Deferred taxation 6.10 &320) &15) &320) &15) &15) &5)

58,706 29,022 58,715 29,022 15,517 6,723

Share capital and reserves Share capital 6.11 21,600 5,000 21,600 5,000 5,000 600 Accumulated pro®ts 37,106 24,022 37,115 24,022 10,517 6,123

58,706 29,022 58,715 29,022 15,517 6,723

On 10 November 2000, a wholly-owned subsidiary company, Greater China Travel Industry &Singapore) Pte Ltd was incorporated. Accordingly, consolidated ®nancial statements have been prepared for the six months period ended 30 June 2001 and the year ended 31 December 2000.

103 5. FINANCIAL INFORMATION cont'd) 5.2 Income statements The results of the Company for each of the three ®nancial years ended 31 December 1998 through 31 December 2000 and for the six months period ended 30 June 2001 are set out below:±

------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended Note 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Revenue 6.12 425,007 963,717 425,007 963,717 414,547 170,718 Cost of sales &396,327) &920,809) &396,327) &920,809) &401,514) &162,303)

Gross pro®t 28,680 42,908 28,680 42,908 13,033 8,415 Other income 6.13 3,340 1,172 3,340 1,172 1,023 144 Staff and related costs &891) &8,310) &891) &8,310) &1,930) &205) Provision for doubtful debts Ð speci®c Ð &1,606) Ð &1,606) Ð Ð Ð general Ð &3,389) Ð &3,389) Ð Ð Foreign exchange gain/&loss) 4,590 315 4,590 315 372 &474) Other operating expenses 6.14 &2,149) &14,158) &2,140) &14,158) &2,497) &784)

Pro®t from operating activities 33,570 16,932 33,579 16,932 10,001 7,096 Finance costs 6.15 &581) &750) &581) &750) &195) &20)

Pro®t before taxation 32,989 16,182 32,998 16,182 9,806 7,076 Taxation 6.16 &3,305) &2,677) &3,305) &2,677) &1,012) &649)

Net pro®t after taxation 29,684 13,505 29,693 13,505 8,794 6,427

Earnings per ordinary share &in cents) 6.17 Before shares split 137.4 62.5 137.4 62.5 40.7 29.8

After shares split 6.9 3.1 6.9 3.1 2.0 1.5

104 5. FINANCIAL INFORMATION cont'd) 5.3 Consolidated statement of changes in equity The movements in equity of the Company and of the Group for each of the three ®nancial years ended 31 December 1998 through 31 December 2000 and for the six months period ended 30 June 2001 are set out below:±

------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Issued share capital Balance at beginning of the period/year 5,000 5,000 5,000 5,000 600 600 Issuance of ordinary shares 16,600 Ð 16,600 Ð 4,400 Ð

Balance at end of the period/year 21,600 5,000 21,600 5,000 5,000 600

Accumulated pro®ts Balance at beginning of the period/year 24,022 10,517 24,022 10,517 6,123 &304) Net pro®t for the period/year 29,684 13,505 29,693 13,505 8,794 6,427 Amount capitalised for issue of bonus shares &16,600) Ð &16,600) Ð &4,400) Ð

Balance at end of the period/year 37,106 24,022 37,115 24,022 10,517 6,123

Total equity and reserve 58,706 29,022 58,715 29,022 15,517 6,723

105 5. FINANCIAL INFORMATION cont'd) 5.4 Consolidated cash ¯ow statements The cash ¯ows of the Company and of the Group for each of the three ®nancial years ended 31 December 1998 through 31 December 2000 and for the six months period ended 30 June 2001 are set out below:± ------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended Note 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Cash ¯ow from operating activities Pro®t before taxation 32,989 16,182 32,998 16,182 9,806 7,076 Adjustments for: Depreciation of ®xed assets 95 174 86 174 136 30 Fixed assets written off 98 Ð 98 Ð 6 Ð Loss on sale of ®xed assets ÐÐÐÐ13Ð Provision for doubtful debts Ð 4,995 Ð 4,995 Ð Ð Interest income &3,294) &959) &3,294) &959) &820) &84) Interest expense 421 181 421 181 Ð Ð 30,309 20,573 30,309 20,573 9,141 7,022 Operating pro®t before reinvestment in working capital Decrease/&increase) in trade debtors 2,058 &35,648) 2,058 &35,648) &22,057) &40,445) &Increase)/decrease in other debtors, deposits and prepayments &956) 169 &956) 169 477 &697) Increase in amount due from related company &200) Ð &200) Ð Ð Ð Increase in amount due to holding company 633 8,840 633 8,840 Ð Ð Increase/&decrease) in trade creditors 29,153 &22,629) 29,153 &22,629) 22,152 38,393 &Decrease)/increase in other creditors and accruals &384) 1,112 &384) 1,112 303 &23) Increase in accrued staff costs 104 6,095 104 6,095 683 43 &Decrease)/increase in trust receipts &28,439) 28,439 &28,439) 28,439 Ð Ð 32,278 6,951 32,278 6,951 10,699 4,293 Cash generated from operations Income tax paid &2,890) &1,066) &2,890) &1,066) &656) Ð Interest received 3,294 959 3,294 959 820 84 Interest paid &421) &181) &421) &181) Ð Ð Net cash ¯ow from operating activities 32,261 6,663 32,261 6,663 10,863 4,377 Cash ¯ow from investing activities Proceeds from sale of ®xed assets ÐÐÐÐ 1Ð Purchase of ®xed assets &581) &274) &581) &89) &3,873) &61) Acquisition of subsidiary company Ð Ð Ð &150) Ð Ð Advances to subsidiary company Ð Ð &150) &35) Ð Ð Net cash used in investing activities &581) &274) &731) &274) &3,872) &61) Net increase in cash and cash equivalents 31,680 6,389 31,530 6,389 6,991 4,316 Cash and cash equivalents at beginning of the ®nancial period/year 17,916 11,527 17,916 11,527 4,536 220 Cash and cash equivalents at end of ®nancial period/year 6.18 49,596 17,916 49,446 17,916 11,527 4,536

On 10 November 2000, a wholly-owned subsidiary company, Greater China Travel Industry &Singapore) Pte Ltd was incorporated. Accordingly, a consolidated cash ¯ow statement is presented in the ®nancial statements for the six months period ended 30 June 2001 and the year ended 31 December 2000.

106 6. NOTES TO THE FINANCIAL STATEMENTS 6.1 Fixed assets

Furniture Leasehold Motor and Office property vehicles fittings equipment Renovation Computers Signboard Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Group For ®nancial period ended 30 June 2001 Cost At 1 January 2001 3,429 530 3 76 159 107 Ð 4,304 Additions Ð Ð 43 9 517 12 Ð 581 Disposals Ð Ð Ð &1) Ð Ð Ð &1) Write-offs Ð Ð Ð Ð &159) Ð Ð &159)

At 30 June 2001 3,429 530 46 84 517 119 Ð 4,725 Accumulated depreciation At 1 January 2001 103 122 1 19 50 50 Ð 345 Charge for 2001 34 26 1 8 11 15 Ð 95 Disposals Ð Ð Ð &1) Ð Ð Ð &1) Write-offs Ð Ð Ð Ð &61) Ð Ð &61) At 30 June 2001 137 148 2 26 Ð 65 Ð 378

Charge for 2000 69 35 Ð 10 30 30 Ð 174

Net book value At 30 June 2001 3,292 382 44 58 517 54 Ð 4,347

At 31 December 2000 3,326 408 2 57 109 57 Ð 3,959

Furniture Leasehold Motor and Office property vehicles fittings equipment Renovation Computers Signboard Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Group For ®nancial year ended 31 December 2000 Cost At 1 January 2000 3,429 345 3 41 131 81 Ð 4,030 Additions Ð 185 Ð 35 28 26 Ð 274 At 31 December 2000 3,429 530 3 76 159 107 Ð 4,304 Accumulated depreciation At 1 January 2000 34 87 1 9 20 20 Ð 171 Charge for 2000 69 35 Ð 10 30 30 Ð 174 At 31 December 2000 103 122 1 19 50 50 Ð 345 Net book value At 31 December 2000 3,326 408 2 57 109 57 Ð 3,959

107 6. NOTES TO THE FINANCIAL STATEMENTS cont'd)

Furniture Leasehold Motor and Office property vehicles fittings equipment Renovation Computers Signboard Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Company For ®nancial period ended 30 June 2001 Cost At 1 January 2001 3,429 345 3 76 159 107 Ð 4,119 Additions Ð Ð 43 9 517 12 Ð 581 Disposals Ð Ð Ð &1) Ð Ð Ð &1) Write-offs Ð Ð Ð Ð &159) Ð Ð &159) At 30 June 2001 3,429 345 46 84 517 119 Ð 4,540 Accumulated depreciation At 1 January 2001 103 122 1 19 50 50 Ð 345 Charge for the period 34 17 1 8 11 15 Ð 86 Disposals Ð Ð Ð &1) Ð Ð Ð &1) Write-offs Ð Ð Ð Ð &61) Ð Ð &61) At 30 June 2001 137 139 2 26 Ð 65 Ð 369 Charge for 2000 69 35 Ð 10 30 30 Ð 174

Net book value At 30 June 2001 3,292 206 44 58 517 54 Ð 4,171

At 31 December 2000 3,326 223 2 57 109 57 Ð 3,774

Furniture Leasehold Motor and Office property vehicles fittings equipment Renovation Computers Signboard Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Company For ®nancial year ended 31 December 2000 Cost At 1 January 2000 3,429 345 3 41 131 81 Ð 4,030 Additions Ð Ð Ð 35 28 26 Ð 89 At 31 December 2000 3,429 345 3 76 159 107 Ð 4,119 Accumulated depreciation At 1 January 2000 34 87 1 9 20 20 Ð 171 Charge for 2000 69 35 Ð 10 30 30 Ð 174 At 31 December 2000 103 122 1 19 50 50 Ð 345 Charge for 1999 34 63 1 5 17 16 Ð 136

Net book value At 31 December 2000 3,326 223 2 57 109 57 Ð 3,774

At 31 December 1999 3,395 258 2 32 111 61 Ð 3,859

108 6. NOTES TO THE FINANCIAL STATEMENTS cont'd)

Furniture Leasehold Motor and Office property vehicles fittings equipment Renovation Computers Signboard Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Company For ®nancial year ended 31 December 1999 Cost At 1 January 1999 Ð 99 3 14 38 24 5 183 Additions 3,429 265 1 27 93 58 Ð 3,873 Disposals Ð &19) &1) Ð Ð &1) &5) &26) At 31 December 1999 3,429 345 3 41 131 81 Ð 4,030 Accumulated depreciation At 1 January 1999 Ð 29 Ð 4 3 4 1 41 Charge for 1999 34 63 1 5 17 16 Ð 136 Disposals Ð &5) Ð Ð Ð Ð &1) &6) At 31 December 1999 34 87 1 9 20 20 Ð 171 Charge for 1998 Ð 20 Ð 3 2 4 1 30

Net book value At 31 December 1999 3,395 258 2 32 111 61 Ð 3,859

At 31 December 1998 Ð 70 3 10 35 20 4 142

Furniture Leasehold Motor and Office property vehicles fittings equipment Renovation Computers Signboard Total $'000 $'000 $'000 $'000 $'000 $'000 $'000 $'000 Company For ®nancial year ended 31 December 1998 Cost At 1 January 1998 Ð 99 Ð 12 4 3 4 122 Additions Ð Ð 3 2 34 21 1 61 At 31 December 1998 Ð 99 3 14 38 24 5 183 Accumulated depreciation At 1 January 1998 Ð 9 Ð 1 1 Ð Ð 11 Charge for 1998 Ð 20 Ð 3 2 4 1 30

At 31 December 1998 Ð 29 Ð 4 3 4 1 41

Charge for 1997 Ð 10 Ð 1 Ð Ð Ð 11

Net book value At 31 December 1998 Ð 70 3 10 35 20 4 142

109 6. NOTES TO THE FINANCIAL STATEMENTS cont'd) 6.2 Subsidiary company ------Group ------Company ------30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Unquoted shares at cost Ð Ð 150 150 Ð Ð Amount due from subsidiary company, non-trade Ð Ð 185 35 Ð Ð

Ð Ð 335 185 Ð Ð

The amount due from subsidiary company is unsecured and interest-free. This amount is not due for payment within the next 12 months.

Details of the subsidiary company at the end of the ®nancial period are as follows:±

Name of Percentge company ------Cost to Company ------of equity interest ------9Country of Principal incorporation) activity 30.6.01 31.12.00 31.12.99 31.12.98 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 % % % % Greater China Travel and 150 150 Ð Ð 100 100 Ð Ð Travel tourist Industry agents &Singapore) Pte Ltd &Singapore)

6.3 Trade debtors ------Group ------Company ------30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Trade debtors are stated after providing for doubtful debts of 4,995 4,995 4,995 4,995 Ð Ð

Analysis of provision for doubtful debts:± Speci®c provision Balance at beginning of the period/year 1,606 Ð 1,606 Ð Ð Ð Charge to pro®t and loss account Ð 1,606 Ð 1,606 Ð Ð Reclassi®cation to 1,114 Ð 1,114 Ð Ð Ð

Balance at end of the period/year 2,720 1,606 2,720 1,606 Ð Ð

General provision Balance at beginning of the period/year 3,389 Ð 3,389 Ð Ð Ð Charge to pro®t and loss account Ð 3,389 Ð 3,389 Ð Ð Reclassi®cation &from) &1,114) Ð &1,114) Ð Ð Ð

Balance at end of the period/year 2,275 3,389 2,275 3,389 Ð Ð

Total 4,995 4,995 4,995 4,995 Ð Ð

110 6. NOTES TO THE FINANCIAL STATEMENTS cont'd) 6.4 Other debtors,deposits and prepayments

------Group ------Company ------30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Staff advance 24 64 24 64 7 Ð Sundry deposits 27 3 27 3 4 11 Margin deposits 11 11 11 11 183 697 Other debtors 25 Ð 25 Ð Ð Ð Interest receivable Ð Ð Ð Ð 53 12 Purchase deposit 947 Ð 947 Ð Ð 4

1,034 78 1,034 78 247 724

6.5 Amount due from related company Amount due from related company is non-trade in nature. The amount is unsecured, bears interest at 4.65% &2000 : Nil%) and is due for payment within the next 12 months.

6.6 Other creditors and accruals

------Group ------Company ------30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Rental deposits 31 31 31 31 31 Ð Other deposits 120 120 120 120 Ð Ð Course fees 884 825 884 825 Ð Ð Other accruals 72 515 72 515 348 76

1,107 1,491 1,107 1,491 379 76

6.7 Accrued staff cost

------Group ------Company ------30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Staff bonus 6,376 5,950 6,376 5,950 Ð Ð Payroll reserve 478 478 478 478 279 Ð Central Provident Fund contributions 35 294 35 294 208 7 Sales commission Ð 63 Ð 63 203 Ð

6,889 6,785 6,889 6,785 690 7

111 6. NOTES TO THE FINANCIAL STATEMENTS cont'd) 6.8 Amount due to holding company Amount due to holding company by the Company and the Group is non-trade in nature. The amount is interest-free, unsecured and have no ®xed terms of repayment.

6.9 Trust receipt payables Trust receipt payables of Nil &2000: $28,438,596, 1999 and 1998 : Nil) of the Company and of the Group are secured by a letter of set-off, bear interest at Nil &2000: 7.48% to 7.53%, 1999 and 1998 : Nil%) per annum.

6.10 Deferred taxation

------Group ------Company ------30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Balance at beginning of the period/year 15 15 15 15 5 Ð Charge to pro®t and loss account 305 Ð 305 Ð 10 5

Balance at end of the period/year 320 15 320 15 15 5

The components of the deferred tax liabilities are as follows:± Difference between book and tax values of ®xed assets 22 15 22 15 15 5 General provision for doubtful debts &830) Ð &830) Ð Ð Ð Gain on foreign exchange 1,128 Ð 1,128 Ð Ð Ð

320 15 320 15 15 5

112 6. NOTES TO THE FINANCIAL STATEMENTS cont'd) 6.11 Share capital ------Group ------Company ------30.6.2001 ------31.12. 2000 ------30.6.2001 ------31.12.2000 ------31.12.1999 ------31.12.1998 ----- No. of No. of No. of No. of No. of No. of share share share share share share 9'000) $'000 9'000) $'000 9'000) $'000 9'000) $'000 9'000) $'000 9'000) $'000 Authorised:± Ordinary shares of $1 each: Balance at beginning of the period/year 20,000 20,000 10,000 10,000 20,000 10,000 10,000 10,000 600 600 600 600 Additions during the period/year 40,000 40,000 10,000 10,000 40,000 10,000 10,000 10,000 9,400 9,400 Ð Ð Balance at end of the period/year 60,000 60,000 20,000 20,000 60,000 20,000 20,000 20,000 10,000 10,000 600 600

Issued and fully paid:± Ordinary shares of $1 each: 113 Balance at beginning of the period/year 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 600 600 600 600 Issued during the period/year 16,600 16,600 Ð Ð 16,600 16,600 Ð Ð 4,400 4,400 Ð Ð Balance at end of the period/year 21,600 21,600 5,000 5,000 21,600 21,600 5,000 5,000 5,000 5,000 600 600

During the ®nancial year ended 31 December 1999, the Company's authorised share capital was increased from $600,000 to $10,000,000 by the creation of additional 9,400,000 ordinary shares of $1 each ranking pari passu in all respects with the existing shares of the Company.

During the ®nancial year ended 31 December 1999, the Company increased its paid-up share capital to $5,000,000 by way of bonus issue of 4,400,000 ordinary shares of $1 each through capitalisation of revenue reserves.

During the ®nancial year ended 31 December 2000, the Company's and the Group's authorised share capital was increased from $10,000,000 to $20,000,000 by the creation of additional 10,000,000 ordinary shares of $1 each ranking pari passu in all respects with the existing shares of the Company and Group.

During the ®nancial period ended 30 June 2001, the Company's authorised share capital was increased from $20,000,000 to $60,000,000 by the creation of additional 40,000,000 ordinary shares of $1 each ranking pari passu in all respects with the existing shares of the Company.

During the ®nancial period ended 30 June 2001, the Company increased its paid-up share capital to $21,600,000 by way of bonus issue of 16,600,000 ordinary shares of $1 each through capitalisation of revenue reserves. 6. NOTES TO THE FINANCIAL STATEMENTS cont'd) 6.12 Revenue Revenue comprises dealing in and sale of aviation oil and petroleum products as follows:±

------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Physical trades 424,711 976,089 424,711 976,089 411,133 172,695 Paper swap deals &net) 296 &12,192) 296 &12,192) 3,405 &1,977) Futures &net) Ð &180) Ð &180) 9 Ð

425,007 963,717 425,007 963,717 414,547 170,718

6.13 Other income ------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Interest income Ð bank 1,061 809 1,061 809 484 84 Ð others 2,233 150 2,233 150 336 Ð Rental income 46 213 46 213 38 Ð Sundry income Ð Ð Ð Ð 165 60

3,340 1,172 3,340 1,172 1,023 144

6.14 Other operating expenses Other operating expenses includes the following items:±

------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Auditor's remuneration 25 25 25 25 12 8 Directors' remuneration 82 234 82 234 221 66 Directors' fee Ð Ð Ð Ð Ð 14 Depreciation of ®xed assets 95 174 86 174 136 30 Fixed assets written off 98 Ð 98 Ð 6 Ð Loss on sale of ®xed assets Ð Ð Ð Ð 13 Ð Rental expense 127 281 127 281 294 176 Management fee Ð 8,840 Ð 8,840 Ð Ð

Incorporation expenses amounting to Nil: &2000: $7,100, 1999 and 1998 : Nil) incurred by the subsidiary company were borne by the Company.

114 6. NOTES TO THE FINANCIAL STATEMENTS cont'd) 6.15 Finance costs

------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Interest expense Ð trust receipt 421 113 421 113 Ð Ð Ð others Ð 68 Ð 68 Ð Ð Bank charges 160 569 160 569 195 20

581 750 581 750 195 20

6.16 Taxation

------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Income tax: Tax on pro®t Ð current period/year 3,000 2,600 3,000 2,600 1,002 644 Ð prior year Ð 77 Ð 77 Ð Ð Deferred tax 305 Ð 305 Ð 10 5

3,305 2,677 3,305 2,677 1,012 649

The income tax expense for the ®nancial period is signi®cantly lower than the amount determined by applying the statutory tax rate of 24.5% &2000: 25.5%; 1999 and 1998 : 26%) on the Company's and the Group's pre-tax pro®t for the ®nancial period/year as the Company had been granted Approved Oil Trader status and its income derived from qualifying oil trading transactions is subject to tax at the concessionary rate of 10%. The subsidiary company has no trading activities during the period and is in a tax loss position.

115 6. NOTES TO THE FINANCIAL STATEMENTS cont'd) 6.17 Earnings per share The earnings per share is calculated by dividing the net pro®t for the period/year attributable to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period/year.

------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Net pro®t after taxation attributable to ordinary shareholders 29,684 13,505 29,693 13,505 8,794 6,427

Weighted average number of ordinary shares &'000s)* 21,600 21,600 21,600 21,600 21,600 21,600

Earnings per ordinary share &in cents)* 137.4 62.5 137.4 62.5 40.7 29.8

Weighted average number of ordinary shares &'000)** 432,000 432,000 432,000 432,000 432,000 432,000

Earnings per ordinary share &in cents)** 6.9 3.1 6.9 3.1 2.0 1.5

* The number of ordinary shares outstanding before the bonus issue of ordinary shares is adjusted for the proportionate change in the number of ordinary shares outstanding as if the bonus issue had occurred at the beginning of the earliest period reported. ** After sub-division of each ordinary share of $1.00 each in the issued share capital of the Company into 20 shares of $0.05 each &the ``share split'').

6.18 Cash and cash equivalents Cash and cash equivalents comprise the following:±

------Group ------Company ------30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Fixed deposits 44,013 13,260 44,013 13,260 7,197 Ð Cash and bank balances 5,583 4,656 5,433 4,656 4,330 4,536

49,596 17,916 49,446 17,916 11,527 4,536

116 6. NOTES TO THE FINANCIAL STATEMENTS cont'd) 6.19 Related party transactions Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party, or exercise signi®cant in¯uence over the other party in making ®nancial and operating decisions. Parties are also considered to be related if they are subject to common control or common signi®cant in¯uence. Related parties may be individuals or corporate entities.

The Company and the Group had the following signi®cant transactions at terms agreed by relevant parties concerned during the period/year:±

------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Income tax: Sale of physical fuel 376,277 761,083 376,277 761,083 330,147 172,695 Management fee to holding company Ð 8,840 Ð 8,840 Ð Ð

6.20 Capital and lease commitment Operating lease commitments Rental expense was $127,088, $280,800, $293,863 and $176,154 for the six months period ended 30 June 2001 and the years ended 31 December 2000, 1999 and 1998 respectively. Future minimum rentals under non-cancellable leases are as follows at the end of the period/ year:±

------Group ------Company ------1.1.01 Year 1.1.01 Year Year Year to ended to ended ended ended 30.6.01 31.12.00 30.6.01 31.12.00 31.12.99 31.12.98 $'000 $'000 $'000 $'000 $'000 $'000 Within one year 26 104 26 104 104 156 After one year but not more than ®ve years Ð Ð Ð Ð Ð 104

6.21 Subsequent events At an Extraordinary General Meeting &``EGM'') held on 6 November 2001, the sole shareholder of the Company, China Aviation Oil Supply Corporation &``CAOSC''), a state-owned enterprise in the PRC, approved, inter alia, the following:±

&i) the conversion of the Company into a public limited company and the change of its name to ``China Aviation Oil &Singapore) Corporation Ltd''; &ii) the adoption of a new set of Articles of Association of the Company;

At an EGM held on 9 November 2001, the sole shareholder of the Company, CAOSC, a state- owned enterprise in the PRC, approved, inter alia, the following:±

&i) the sub-division of each ordinary share of $1.00 each in the authorised and issued share capital of the Company into 20 shares of $0.05 each &the ``Share split''); &ii) the proposed invitation of such number of new shares of $0.05 each in the Company &``New Shares'') to be issued pursuant to the Invitation;

117 6. NOTES TO THE FINANCIAL STATEMENTS cont'd) &iii) the issue of the New Shares which are the subject of the Invitation. The New Shares, when issued and fully paid, will rank pari passu in all respects with the existing issued and fully paid Shares; &iv) the adoption of the China Aviation Oil Share Option Scheme; and &v) the adoption of the Shareholders' Mandate.

6.22 Net tangible asset backing of the Group The net tangible asset backing of the Group for each ordinary share of $0.05 each is based on the statement of net assets of the Group as at 30 June 2001 and after taking into account the issue of 144,000,000 New Shares of $0.56 each, which forms the subject of the Invitation, and the proceeds and estimated expenses in connection therewith.

$'000 Net tangible assets Net tangible assets as at 30 June 2001 58,706 Add: Proceeds from the issue of 144,000,000 New Shares of $0.05 each at $0.56 per share, which forms the subject of this Invitation 80,640 Less: Estimated expenses of the Invitation &4,000)

135,346

Number of shares '000 Issued share capital Issued and paid-up capital as at 30 June 2001 21,600

Sub-division of ordinary shares of $1.00 each to $0.05 each 432,000 Issue of 144,000,000 New Shares of $0.05 each, in connection with the Invitation 144,000

Issued and paid-up share capital after the Invitation 576,000

Net tangible asset backing per share ¢s) 23.5

6.23 Dividends No dividends have been paid or proposed by the companies in the Group for the period/years under review.

6.24 Audited accounts No audited accounts of the Company or its subsidiary company have been prepared for any period subsequent to 30 June 2001.

118 6. NOTES TO THE FINANCIAL STATEMENTS cont'd) 6.25 Comparative ®gures Certain comparative ®gures, extracted from the audited ®nancial statements of China Aviation Oil &Singapore) Pte Ltd for the years ended 31 December 1998 to 31 December 2000 and for the six months period ended 30 June 2001, have been reclassi®ed for presentation purposes.

Yours faithfully,

ERNST & YOUNG Certi®ed Public Accountants

Partner: Mrs Lim Siew Koon

Singapore

119 GENERAL AND STATUTORY INFORMATION

INFORMATION ON DIRECTORS AND EXECUTIVE OFFICERS 1. The name, age, address and principal occupation of each of the Directors and Executive Of®cers of our Company are set out from pages 64 to 69of this Prospectus.

2. The present and past directorships #held in the ®ve years preceding the date of this Prospectus) of each of the Directors, other than those held in our Company, are set out as follows:±

Name Present directorships Past directorships

Jia Changbin Shanghai Pudong International Nil Airport Aviation Fuel Supply Corporation Ltd

China Aviation Oil Supply Corporation #Hong Kong) Limited

Chen Jiulin Greater China Travel Industry Nil #Singapore) Pte Ltd

Bao Xiaoyan CAOSC Aviation Oil Co., Ltd Nil Haikou Meiya Industry Co., Ltd

Zhang Junru Nil Nil

Gao Renwen CAOSC Aviation Oil Co., Ltd Nil

Zhang Yizhou South China Bluesky Aviation Oil Nil Ltd.

Jerry Lee Kian Eng J & S Holdings Pte Ltd

DFK Consultancy #Singapore) Pte Ltd

Ng, Lee Ð DFK Consultancy Pte Ltd

Lee Hwa Trading & Transportation Pte Ltd

Tan Hui Boon Changi International Airport SATS Airport Services Pte Ltd Services Pte Ltd Singapore Airport Duty-Free CIAS #International) Pte Ltd Emporium #Private) Limited

Conolly Investments Pty Ltd. Asia Airfreight Terminal Company Limited

Asia-Paci®c Star Private Limited

Beijing Aviation Ground Services Ltd

Yan Xuetong Nil Nil

120 3. The present and past directorships #held in the ®ve years preceding the date of this Prospectus) of the Executive Of®cers are set out as follows:±

Name Present directorships Past directorships

Shi Jinbo Baulkham International Pte Ltd Nil

Tan Chin Boon Magnatech Ltd Nil

William Chan Greater China Travel Industry Nil #Singapore) Pte Ltd

4. None of the Directors and Executive Of®cers has any family relationship with or is related by blood or marriage to one another or with any of the substantial shareholders of our Company.

5. None of the Directors or Executive Of®cers is or was involved in any of the following events:± #i) a petition in the last 10 years under any bankruptcy laws ®led in any jurisdiction against him or any partnership in which he was a partner or any corporation of which he was a director or an executive of®cer; #ii) unsatis®ed judgements outstanding against him; #iii) a conviction of any offence, in Singapore or elsewhere, involving fraud or dishonesty punishable with imprisonment for three months or more, or charged for violation of any securities laws or any such pending criminal proceedings against him; #iv) a conviction of any offence, in Singapore or elsewhere, involving a breach of any securities or ®nancial market laws, rules or regulations; #v) the subject of judgement in any civil proceeding in Singapore or elsewhere in the last 10 years involving fraud, misrepresentation or dishonesty or any such pending civil proceeding against him; #vi) a conviction in Singapore or elsewhere of any offence in connection with the formation or management of any corporation; #vii) disquali®cation from acting as a director of any company, or from taking part in any way directly or indirectly in the management of any company; #viii) the subject of any order, judgement or ruling of any court of competent jurisdiction, tribunal or governmental body permanently or temporarily enjoining him from engaging in any type of business practice or activity; and #ix) the management or conduct of affairs of any company or partnership which has been investigated by an inspector appointed under the provisions of the Companies Act, or other securities enactment or by any other regulatory body in connection with any matter involving the company partnership occurring or arising during the period when he was so concerned with the company or partnership.

6. The aggregate emoluments #including CPF contributions thereon) paid to the Directors for services rendered in all capacities to our Company and subsidiary for the last ®nancial year ended 31 December 2000 was $234,000.

7. Save as disclosed on pages 70 to 71 of this Prospectus, there are no existing or proposed service contracts between our Executive Directors or Executive Of®cers and our Company or subsidiary.

8. No option to subscribe for shares in, or debentures of, our Company or subsidiary has been granted to, or has been exercised by, any of the Directors or Executive Of®cers within the two years preceding the date of this Prospectus.

121 9. None of the Directors 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 by or disposed of by or leased to our Company or subsidiary, or are proposed to be acquired or disposed of by or leased to our Company or subsidiary.

10. None of the Directors, Executive Of®cers or substantial shareholders of our Company has any interest, direct or indirect, in any business carrying on a similar trade as our Company or subsidiary.

11. None of the Directors has any interest in any existing contract or arrangement which is signi®cant in relation to the business of the Company or subsidiary taken as a whole.

12. No Director, substantial shareholder or Executive Of®cer has any interest, direct or indirect, in any business carrying on a similar trade as our Company or subsidiary.

13. There is no shareholding quali®cation for Directors in the Articles of Association of our Company.

14. The interests of the Directors and substantial shareholders of our Company in the Shares as at the date of this Prospectus, as recorded in the Register of Directors' Shareholdings and the Register of substantial shareholders maintained under the provisions of the Companies Act, are as follows:± Number of Shares Number of Shares which the Directors registered in the and substantial names of Directors shareholders are and substantial deemed to have an shareholders % interest % Directors ÐÐÐÐ CAOSC )Substantial 432,000,000 100 Ð Ð shareholder)

15. No Director has any interest in the Shares, including the New Shares which are the subject of this Invitation.

16. No sum or bene®t has been paid or has been agreed to be paid to any Director or expert, or to any ®rm in which such Director or expert is a partner or any corporation in which such Director or expert holds shares or debentures, in cash or shares or otherwise, by any person to induce him to become, or to qualify him as, a Director, or otherwise for services rendered by him or by such ®rm or corporation in connection with the promotion or formation of our Company.

SHARE CAPITAL 17. As at the date of this Prospectus, 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 the Shares are stated in the Articles of Association of our Company. The substantial shareholder of our Company is not entitled to any different voting rights from the other shareholders.

122 18. The changes in the issued and paid-up share capital of our Company or subsidiary within the three years preceding the date of this Prospectus:±

Our Company #1) Pursuant to resolutions passed on 2 April 1999 at an Extraordinary General Meeting #``EGM''), our sole shareholder approved an increase in the authorised share capital of the Company from $600,000 to $10,000,000.

#2) Pursuant to resolutions passed on 2 April 1999 at an EGM, our sole shareholder approved the allotment and issue of 4,400,000 ordinary shares of $1.00 each by way of a bonus issue to CAOSC.

#3) Pursuant to resolutions passed on 8 June 2000 at an EGM, our sole shareholder approved an increase in the authorised share capital of the Company from $10,000,000 to $20,000,000 by the creation of an additional 10,000,000 ordinary shares of $1.00 each ranking pari passu in all respects with the existing shares of the Company.

#4) Pursuant to resolutions passed on 6 April 2001 at an EGM, our sole shareholder approved an increase in the authorised share capital of the Company from $20,000,000 to $60,000,000 by the creation of an additional 40,000,000 ordinary shares of $1.00 each ranking pari passu in all respects with the existing shares of the Company.

#5) Pursuant to resolutions passed on 6 April 2001 at an EGM, our sole shareholder approved the allotment and issue of 16,600,000 ordinary shares of $1.00 each by way of a bonus issue to CAOSC.

Greater China Travel #1) Pursuant to board resolutions passed on 27 November 2000, Greater China Travel's directors approved the allotment and issue of 149,999 ordinary subscriber shares of $1.00 each to Mr Chen Jiulin.

#2) Pursuant to board resolutions passed on 27 November 2000, Greater China Travel's directors approved the allotment and issue of 1 ordinary subscriber share of $1.00 each to Mr William Chan.

19. Save as disclosed in Paragraph 18 above, no shares in, or debentures of, our Company and subsidiary have been issued, or are proposed to be issued, as fully or partly paid for cash or for a consideration other than cash, within the two years preceding the date of this Prospectus.

20. No person has been, or is entitled to be, granted an option to subscribe for shares in, or debentures of, our Company or subsidiary.

MEMORANDUM AND ARTICLES OF ASSOCIATION 21. We are registered in Singapore with the Registrar of Companies and Businesses. Our Company registration number is 199303293Z. The objects and purpose of our Company are set out in paragraph 3 of our Memorandum of Association. The following provisions of the Articles of Association of our Company relate to the Directors' borrowing powers and remuneration, and restrictions on voting powers of Directors in interested transactions. They also describe Shareholders' voting rights, restrictions on transferability of shares. Also included is a description of how we conduct our general meetings:±

Directors' Remuneration Article 79 The ordinary fees of the Directors shall from time to time be determined by an Ordinary Resolution of the Company and shall not be increased except pursuant to an Ordinary

123 Resolution passed at a General Meeting where notice of the proposed increase shall have been given in the notice convening the General Meeting and shall #unless such resolution otherwise provides) be divisible among the Directors as they may agree, or failing agreement, equally, except that any Director who shall hold of®ce for part only of the period in respect of which such fees is payable shall be entitled only to rank in such division for a proportion of fees related to the period during which he has held of®ce.

Article 80 #A) Any Director who holds any executive of®ce, or who serves on any committee of the Directors, or who otherwise performs services which in the opinion of the Directors are outside the scope of ordinary duties of a Director, may be paid such extra remuneration by way of salary, commission or otherwise as the Directors may determine.

#B) The fees #including any remuneration under Article 80#A) above) in the case of a Director other than an Executive Director shall be payable by a ®xed sum and shall not at any time be by commission on or percentage of the pro®ts or turnover, and no Director whether an Executive Director or otherwise shall be remunerated by a commission on or percentage of turnover.

Article 81 The Company may repay to any Director all such reasonable expenses as he may incur in attending and returning from meetings of the Directors or of any committee of the Directors or General Meetings or otherwise in or about the business of the Company.

Article 82 The Directors shall have power to pay and agree to pay pensions or other retirement, superannuation, death or disability bene®ts to #or to any person in respect of) any Director for the time being holding any executive of®ce and for the purpose of providing any such pensions or other bene®ts to contribute to any scheme or fund or to pay premiums.

Article 83 A Director may be party to or in any way interested in any contract or arrangement or transaction to which the Company is a party or in which the Company is in any way interested and he may hold and be remunerated in respect of any of®ce or place of pro®t #other than the of®ce of Auditor of the Company or any subsidiary thereof) under the Company or any other company in which the Company is in any way interested and he #or any ®rm of which he is a member) may act in a professional capacity for the Company or any such other company and be remunerated therefor and in any such case as aforesaid #save as otherwise agreed) he may retain for his own absolute use and bene®t all pro®ts and advantages accruing to him thereunder or in consequence thereof.

Article 84 #A) The Directors may from time to time appoint one or more of their body to be the holder of any executive of®ce #including, where considered appropriate, the of®ce of Chairman or Deputy Chairman) on such terms and for such period as they may #subject to the provisions of the Statutes) determine and, without prejudice to the terms of any contract entered into in any particular case, may at any time revoke such appointment.

#B) The appointment of any Director to the of®ce of Chairman or Deputy Chairman or Managing or Joint Managing or Deputy or Assistant Managing Director shall automatically determine if he ceases to be a Director but without prejudice to any claim for damages for breach of any contract of service between him and the Company.

124 #C) The appointment of any Director to any other executive of®ce shall not automatically determine if he ceases from any cause to be a Director, unless the contract or resolution under which he holds of®ce shall expressly state otherwise, in which event such determination shall be without prejudice to any claim for damages for breach of any contract of service between him and the Company.

Article 88 The remuneration of a Managing Director shall from time to time be ®xed by the Directors and may, subject to these presents, be by way of salary or commission or participation in pro®ts or by any or all these modes but he shall not under any circumstances be remunerated by a commission on or a percentage of turnover.

Borrowing Powers of Directors Article 109 Subject as hereinafter provided and to the provisions of the Statutes, the Directors may exercise all the powers of the Company to borrow money, to mortgage or charge its undertaking, property and uncalled capital and to issue debentures and other securities, whether outright or as collateral security for any debt, liability or obligation of the Company or of any third party.

Restrictions on Voting Powers of Directors Article 102 A Director shall not vote in respect of any contract or proposed contract or arrangement or any other proposal whatsoever in which he has any personal material interest, directly or indirectly. A Director shall not be counted in the quorum at a meeting in relation to any resolution on which he is debarred from voting.

Shareholders' Voting Rights Article 48 The holders of stock shall, according to the amount of stock held by them, have the same rights, privileges and advantages as regards dividend, return of capital, voting and other matters, as if they held the shares from which the stock arose, but no such privilege or advantage #except as regards participation in the pro®ts or assets of the Company) shall be conferred by an amount of stock which would not, if existing in shares, have conferred such privilege or advantage; and no such conversion shall affect or prejudice any preference or other special privileges attached to the shares so converted.

Article 65 Subject and without prejudice to any special privileges or restrictions as to voting for the time being attached to any special class of shares for the time being forming part of the capital of the company, each member entitled to vote may vote in person or by proxy. On a show of hands, every member who is present in person or by proxy shall have one vote and on a poll, every member who is present in person or by proxy shall have one vote for every share which he holds or represents. For the purpose of determining the number of votes which a member, being a Depositor, or his proxy may cast at any General Meeting on a poll, the reference to shares held or represented shall, in relation to shares of that Depositor, be the number of shares entered against his name in the Depository Register as at forty-eight hours before the time of the relevant General Meeting as certi®ed by the Depository to the Company.

Article 66 In the case of joint holders of a share, the vote of the senior who tenders a vote, whether in person or by proxy, shall be accepted to the exclusion of the votes of the other joint holders

125 and for this purpose, seniority shall be determined by the order in which the names stand in the Register of Members or #as the case may be) the Depository Register in respect of the share.

Article 67 Where in Singapore or elsewhere, a receiver or other person #by whatever name called) has been appointed by any court claiming jurisdiction in that behalf to exercise powers with respect to the property or affairs of any member on the ground #however formulated) of mental disorder, the Directors may in their absolute discretion, upon or subject to production of such evidence of the appointment as the Directors may require, permit such receiver or other person on behalf of such member to vote in person or by proxy at any General Meeting or to exercise any other right conferred by membership in relation to meetings of the Company.

Article 68 No member shall, unless the Directors otherwise determine, be entitled in respect of shares held by him to vote at a General Meeting either personally or by proxy or to exercise any other right conferred by membership in relation to meetings of the Company if any call or other sum presently payable by him to the Company in respect of such shares remains unpaid.

Article 69 No objection shall be raised as to the admissibility of any vote except at the meeting or adjourned meeting at which the vote objected to is or may be given or tendered and every vote not disallowed at such meeting shall be valid for all purposes. Any such objection shall be referred to the chairman of the meeting whose decision shall be ®nal and conclusive.

Article 70 On a poll, votes may be given personally or by proxy and a person entitled to more than one vote need not use all his votes or cast all the votes he uses in the same way.

Article 71 #A) A member may appoint not more than two proxies to attend and vote at the same General Meeting Provided that if the member is a Depositor, the Company shall be entitled and bound: #a) to reject any instrument of proxy lodged if the Depositor is not shown to have any shares entered against his name in the Depository Register as at forty-eight hours before the time of the relevant General Meeting as certi®ed by the Depository to the Company; and #b) to accept as the maximum number of votes which in aggregate the proxy or proxies appointed by the Depositor is or are able to cast on a poll a number which is the number of shares entered against the name of that Depositor in the Depository Register as at forty-eight hours before the time of the relevant General Meeting as certi®ed by the Depository to the Company, whether that number is greater or smaller than the number speci®ed in any instrument of proxy executed by or on behalf of that Depositor.

#B) The Company shall be entitled and bound, in determining rights to vote and other matters in respect of a completed instrument of proxy submitted to it, to have regard to the instructions #if any) given by and the notes #if any) set out in the instrument of proxy.

126 #C) In any case where a form of proxy appoints more than one proxy, the proportion of the shareholding concerned to be represented by each proxy shall be speci®ed in the form of proxy.

#D) A proxy need not be a member of the Company.

Article 72 #A) An instrument appointing a proxy shall be in writing in any usual or common form or in any other form which the Directors may approve and: #a) in the case of an individual, shall be signed by the appointor or his attorney; and #b) in the case of a corporation, shall be either given under its common seal or signed on its behalf by an attorney or a duly authorised of®cer of the corporation.

#B) The signature on such instrument need not be witnessed. Where an instrument appointing a proxy is signed on behalf of the appointor by an attorney, the letter or power of attorney or a duly certi®ed copy thereof must #failing previous registration with the Company) be lodged with the instrument of proxy pursuant to Article 73, failing which the instrument may be treated as invalid.

Article 73 An instrument appointing a proxy must be left at such place or one of such places #if any) as may be speci®ed for that purpose in or by way of note to or in any document accompanying the notice convening the meeting #or, if no place is so speci®ed, at the Of®ce) not less than forty- eight hours before the time appointed for the holding of the meeting or adjourned meeting or #in the case of a poll taken otherwise than at or on the same day as the meeting or adjourned meeting) for the taking of the poll at which it is to be used, and in default shall not be treated as valid. The instrument shall, unless the contrary is stated thereon, be valid as well for any adjournment of the meeting as for the meeting to which it relates; Provided that an instrument of proxy relating to more than one meeting #including any adjournment thereof) having once been so delivered for the purposes of any meeting shall not be required again to be delivered for the purposes of any subsequent meeting to which it relates.

Article 74 An instrument appointing a proxy shall be deemed to include the right to demand or join in demanding a poll, to move any resolution or amendment thereto and to speak at the meeting.

Article 75 A vote cast by proxy shall not be invalidated by the previous death or insanity of the principal or by the revocation of the appointment of the proxy or of the authority under which the appointment was made Provided that no intimation in writing of such death, insanity or revocation shall have been received by the Company at the Of®ce at least one hour before the commencement of the meeting or adjourned meeting or #in the case of a poll taken otherwise than at or on the same day as the meeting or adjourned meeting) the time appointed for the taking of the poll at which the vote is cast.

Class Rights Article 4 Subject to the Statutes, no shares may be issued by the Directors without the prior approval of the Company in General Meeting but subject thereto and to Article 8, and to any special rights attached to any shares for the time being issued, the Directors may allot or grant options over or otherwise dispose of the same to such persons on such terms and conditions and for such consideration and at such time and subject or not to the payment of any part of the amount thereof in cash as the Directors may think ®t, and any shares may be issued with such

127 preferential, deferred, quali®ed or special rights, privileges or conditions as the Directors may think ®t, and preference shares may be issued which are or at the option of the Company are liable to be redeemed, the terms and manner of redemption being determined by the Directors, Provided always that: #a) no shares shall be issued to transfer a controlling interest in the Company without the prior approval of the members in a General Meeting; #b) no shares shall be issued at a discount except in accordance with the Statutes; #c) #subject to any direction to the contrary that may be given by the Company in a General Meeting) any issue of shares for cash to members holding shares of any class shall be offered to such members in proportion as nearly as may be to the number of shares of such class then held by them and the provisions of the second sentence of Article 8#A) with such adaptations as are necessary shall apply; #d) the rights attaching to shares of a class other than ordinary shares shall be expressed in the resolution creating the same.

Article 5 #A) In the event of preference shares being issued, the total nominal value of issued preference shares shall not at any time exceed the total nominal value of the issued ordinary shares and preference Shareholders shall have the same rights as ordinary Shareholders as regards receiving of notices, reports and balance sheets and attending General Meetings of the Company, and preference Shareholders shall also have the right to vote at any meeting convened for the purpose of reducing the capital or winding-up or sanctioning a sale of the undertaking of the Company or where the proposal to be submitted to the meeting directly affects their rights and privileges or when the dividend on the preference shares is more than six months in arrear.

#B) The Company has power to issue further preference capital ranking equally with, or in priority to, preference shares already issued.

Variation of Class Rights Article 6 #A) Whenever the share capital of the Company is divided into different classes of shares, the special rights attached to any class may, subject to the provisions of the Statutes, be varied or abrogated either with the consent in writing of the holders of three-quarters in nominal value of the issued shares of the class or with the sanction of a Special Resolution passed at a separate General Meeting of the holders of the shares of the class #but not otherwise) and may be so varied or abrogated either whilst the Company is a going concern or during or in contemplation of a winding-up. To every such separate General Meeting, all the provisions of these presents relating to General Meetings of the Company and to the proceedings thereat shall mutatis mutandis apply, except that the necessary quorum shall be two persons at least holding or representing by proxy at least one-third in nominal value of the issued shares of the class and that any holder of shares of the class present in person or by proxy may demand a poll and that every such holder shall on a poll have one vote for every share of the class held by him, Provided always that where the necessary majority for such a Special Resolution is not obtained at such General Meeting, consent in writing if obtained from the holders of three-quarters in nominal value of the issued shares of the class concerned within two months of such General Meeting shall be as valid and effectual as a Special Resolution carried at such General Meeting. The foregoing provisions of this Article shall apply to the variation or abrogation of the special rights attached to some only of the shares of any class as if each group of shares of the class differently treated formed a separate class the special rights whereof are to be varied.

128 #B) The repayment of preference capital other than redeemable preference capital, or any alteration of preference Shareholders' rights, may only be made pursuant to a Special Resolution of the preference Shareholders concerned Provided Always that where the necessary majority for such a Special Resolution is not obtained at the General Meeting, consent in writing if obtained from the holders of three-fourths of the preference shares concerned within two months of the General Meeting, shall be as valid and effectual as a special resolution carried at the General Meeting.

#C) The special rights attached to any class of shares having preferential rights shall not, unless otherwise expressly provided by the terms of issue thereof, be deemed to be varied by the creation or issue of further shares ranking as regards participation in the pro®ts or assets of the Company in some or all respects pari passu therewith but in no respect in priority thereto.

Transfer of Shares Article 36 All transfers of the legal title in shares may be effected by the registered holders thereof by transfer in writing in the form for the time being approved by any Stock Exchange upon which the Company may be listed. The instrument of transfer of any share shall be signed by or on behalf of both the transferor and the transferee and be witnessed Provided that an instrument of transfer in respect of which the transferee is the Depository shall be effective although not signed or witnessed by or on behalf of the Depository. The transferor shall remain the holder of the shares concerned until the name of the transferee is entered in the Register of Members in respect thereof.

Article 37 The Register of Members may be closed at such times and for such period as the Directors may from time to time determine Provided always that such Register shall not be closed for more than thirty days in any year Provided always that the Company shall give prior notice of such closure as may be required to any Stock Exchange upon which the Company may be listed, stating the period and purpose or purposes for which the closure is made.

Article 38 #A) There shall be no restriction on the transfer of fully paid up shares #except where required by law or the Rules, Bye-Laws or listing rules of any Stock Exchange upon which the shares of the Company may be listed) but the Directors may in their discretion decline to register any transfer of shares upon which the Company has a lien and in the case of shares not fully paid up, may refuse to register a transfer to a transferee of whom they do not approve #except where such refusal to register contravenes the listing rules of any Stock Exchange upon which the shares of the Company may be listed) Provided always that in the event of the Directors refusing to register a transfer of shares, they shall within one month beginning with the day on which the application for a transfer of shares was made, serve a notice in writing to the applicant stating the facts which are considered to justify the refusal as required by the Statutes.

#B) The Directors may in their sole discretion refuse to register any instrument of transfer of shares unless: #a) all or any part of the stamp duty #if any) payable on each share certi®cate and such fee not exceeding $2 as the Directors may from time to time require pursuant to Article 41, is paid to the Company in respect thereof;

129 #b) the instrument of transfer is deposited at the Of®ce or at such other place #if any) as the Directors may appoint accompanied by the certi®cates of the shares to which it relates, and such other evidence as the Directors may reasonably require to show the right of the transferor to make the transfer and, if the instrument of transfer is executed by some other person on his behalf, the authority of the person so to do; #c) the instrument of transfer is in respect of only one class of shares; and #d) the amount of the proper duty with which each share certi®cate to be issued in consequence of the registration of such transfer is chargeable under any law for the time being in force relating to stamps is tendered.

Article 39 If the Directors refuse to register a transfer of any shares, they shall within one month after the date on which the transfer was lodged with the Company send to the transferor and the transferee notice of the refusal as required by the Statutes.

Article 40 All instruments of transfer which are registered may be retained by the Company.

Article 41 There shall be paid to the Company in respect of the registration of any instrument of transfer or probate or letters of administration or certi®cate of marriage or death or stop notice or power of attorney or other document relating to or affecting the title to any shares or otherwise for making any entry in the Register of Members affecting the title to any shares such fee not exceeding $2 as the Directors may from time to time require or prescribe.

Article 42 The Company shall be entitled to destroy all instruments of transfer which have been registered at any time after the expiration of six years from the date of registration thereof and all dividend mandates and noti®cations of change of address at any time after the expiration of six years from the date of recording thereof and all share certi®cates which have been cancelled at any time after the expiration of six years from the date of the cancellation thereof and it shall conclusively be presumed in favour of the Company that every entry in the Register of Members purporting to have been made on the basis of an instrument of transfer or other document so destroyed was duly and properly made and every instrument of transfer so destroyed was a valid and effective instrument duly and properly registered and every share certi®cate duly and properly cancelled and every other document hereinbefore mentioned so destroyed was a valid and effective document in accordance with the recorded particulars thereof in the books or records of the Company; Provided always that: #a) the provisions aforesaid shall apply only to the destruction of a document in good faith and without notice of any claim #regardless of the parties thereto) to which the document might be relevant; #b) nothing herein contained shall be construed as imposing upon the Company any liability in respect of the destruction of any such document earlier than as aforesaid or in any other circumstances which would not attach to the Company in the absence of this Article; and #c) references herein to the destruction of any document include references to the disposal thereof in any manner.

130 Article 47 The holders of stock may transfer the same or any part thereof in the same manner and subject to the same Articles and subject to which the shares from which the stock arose might previously to conversion have been transferred #or as near thereto as circumstances admit) but no stock shall be transferable except in such units #not being greater than the nominal amount of the shares from which the stock arose) as the Directors may from time to time determine.

BANK BORROWINGS AND WORKING CAPITAL 22. Save as disclosed on page 28 of this Prospectus and in the Accountants' Report, the Company had, as at 30 June 2001 no other borrowings or indebtedness in the nature of borrowings including bank overdrafts and liabilities under acceptances #other than normal trading bills) or acceptance credits, mortgages, charges, hire purchase commitments, guarantees or other contingent liabilities.

23. In the opinion of the Directors, no minimum amount must be raised by the Invitation in order to provide for the following items:±

#a) the purchase price of any property purchased or to be purchased; #b) estimated issue expenses #including underwriting commission and brokerage) for this Invitation payable by our Company; #c) the repayment of any money borrowed by our Company in respect of any of the foregoing matters; and #d) working capital.

Although no minimum amounts must be raised by the Invitation in order to provide for the items set out above, the estimated amounts proposed to be provided out of the proceeds of the Invitation for the items #b) and #d) are approximately $4.0 million and $4.1 million respectively. In the event the Invitation is cancelled, these amounts will be provided out of funds generated from operations or bank borrowings. No amounts are to be provided for the items #a) and #c) out of other sources of funding.

24. The Directors are of the opinion that, after taking into account the amount available under existing banking facilities and the net proceeds from the issue of the New Shares, the Company will have adequate working capital to meet its present requirements.

MATERIAL CONTRACTS 25. The dates of, parties to and general nature of all material contracts, not being contracts entered into in the ordinary course of business, entered into by our Company and its subsidiary during the two years preceding the date of this Prospectus are as follows:± #a) the Option dated 28 May 2001 for purchase of the property at 8 Temasek Boulevard, #31-02, Suntec Tower Three, Singapore 038988; #b) the Service Agreement dated 9November 2001 between our Company and Mr Chen Jiulin referred to on pages 70 to 71 of this Prospectus; #c) the Management and Underwriting Agreement referred to on pages 132 to 133 of this Prospectus; #d) the Placement Agreement referred to on pages 132 to 133 of this Prospectus; #e) the Receiving Bank Agreement referred to on page 133 of this Prospectus; and #f) the Depository Agreement dated 23 November 2001 between our Company and CDP pursuant to which CDP agreed to act as depository for our Company.

131 LITIGATION 26. Neither our Company nor its subsidiary is engaged in any legal or arbitration proceedings as plaintiff or defendant in respect of any claims or amounts which are material in the context of this Invitation and the Directors have no knowledge of any legal or arbitration proceedings pending or threatened against our Company or subsidiary or of any facts likely to give rise to any legal or arbitration proceedings which might materially affect the ®nancial position or business of our Company or its subsidiary.

MANAGEMENT, UNDERWRITING AND PLACEMENT ARRANGEMENTS 27. Pursuant to the management and underwriting agreement dated 26 November 2001 #the ``Management and Underwriting Agreement'') made between our Company and DBS Bank, our Company appointed DBS Bank as the Manager to manage the Invitation and to underwrite the Offer Shares on a committed basis. DBS Bank will receive a management fee from our Company for its services as the Manager of the Invitation.

28. Pursuant to the Management and Underwriting Agreement, DBS Bank has agreed to underwrite the Offer Shares for an underwriting commission of 1.5 per cent. of the Issue Price for each Offer Share. Brokerage will be paid by our Company to members of the SGX-ST, merchant banks and members of the Association of Banks in Singapore in respect of successful applications made on Application Forms bearing their respective stamps or to Participating Banks in respect of successful applications made through Electronic Applications at their ATMs, at the rate of 1 per cent. of the Issue Price for each Offer Share.

29. Pursuant to the placement agreement dated 26 November 2001 #the ``Placement Agreement'') entered into between our Company and DBS Bank, DBS Bank agreed to subscribe for or procure subscriptions for the Placement Shares on a committed basis for a placement commission of 1.5 per cent. of the Issue Price for each Placement Share.

30. Save as aforesaid, no commission, discount or brokerage has been paid or other special terms granted within the two years preceding the date of this Prospectus or is payable to any Director, promoter, expert, proposed Director or any other person for subscribing or agreeing to subscribe or procuring or agreeing to procure subscriptions for any shares in or debentures of our Company or subsidiary.

31. The Management and Underwriting Agreement may be terminated by the Underwriter at any time on or before the closing of the Application List on the occurrence of certain events including, inter alia:± #i) any change or any development involving a prospective change or any crisis in national or international monetary, ®nancial, economic or political conditions #including but without limiting thereto conditions in the stock market, in the foreign exchange market and conditions with respect to interest rates, in Singapore and overseas); or #ii) foreign exchange controls in Singapore and overseas or any occurrence of a combination of any such changes or developments or crises, or any deterioration of any such conditions;

which has resulted or is in the reasonable opinion of the Manager likely to result in the conditions in the stock market in Singapore and/or stock markets overseas being materially and adversely affected; or the success of the Invitation being materially prejudiced; or it becoming inadvisable, inexpedient or not commercially viable for the Invitation to commence, be proceeded with or completed; or it becoming for any reason not commercially viable or otherwise contrary to or outside the usual commercial customs or practices in Singapore for the Manager to observe or perform or be obliged to observe or perform the terms of this Agreement or the Invitation; or the business, trading position, operations or prospects of the Company being materially and adversely affected.

132 32. The Placement Agreement is conditional upon the Management and Underwriting Agreement not having been terminated or rescinded pursuant to the provisions of the Management and Underwriting Agreement.

MISCELLANEOUS 33. Saved as disclosed in this Prospectus, our Company and subsidiary have no relationship with the Manager and Underwriter.

34. The nature of the business of our Company is stated on pages 47 to 56 of this Prospectus as re¯ected in Clause 3 of the Company's Memorandum of Association. The corporations which are deemed to be related to our Company by virtue of Section 6 of the Companies Act are:

Holding Company China Aviation Oil Supply Corporation

Subsidiary Greater China Travel Industry #Singapore) Pte Ltd

35. The time of opening of the Application List is set out on page 11 of this Prospectus.

36. The amount payable on application is $0.56 for each Offer Share and $0.56 for each Placement Share. There has been no previous issue of shares by our Company or offer for subscription of its shares, to the public within the two years preceding the date of this Prospectus.

37. Application moneys received by our Company in respect of successful applications #including successful applications which are subsequently rejected) will be placed in a separate non-interest bearing account with DBS Bank #the ``Receiving Bank''). In the ordinary course of business, the Receiving Bank will deploy these moneys in the interbank money market. Our Company and the Receiving Bank have agreed pursuant to a letter dated 26 November #the ``Receiving Bank Agreement'') that our Company will receive for their own account a 50% share of any net revenue in excess of $50,000 earned by the Receiving Bank from the deployment of such moneys in the interbank money market. Any refund of all or part of the application moneys to unsuccessful or partially successful applicants will be made without any interest or any share of such revenue or any other bene®t arising therefrom.

38. No property has been purchased or acquired or proposed to be purchased or acquired by our Company or subsidiary which is to be paid for wholly or partly out of the proceeds of the issue of the New Shares or the purchase or acquisition of which has not been completed at the date of the issue of this Prospectus, other than property the contract for the purchase or acquisition whereof was entered into in the ordinary course of business of our Company or subsidiary, the contract not being made in contemplation of the Invitation nor the Invitation in consequence of the contract.

39. The estimated amount of expenses in connection with the Invitation, including underwriting commission, placement commission, brokerage, management fee, auditors' fee, solicitors' fee and advertising and printing expenses, as well as fees payable to the SGX-ST and the Registry of Companies and Businesses in relation to the Invitation will be borne by our Company and is approximately $4.0 million, which can be broken down as follows:± $ Listing fee payable to SGX-ST 14,400 Professional fees 1,000,000 Underwriting and placement commission and brokerage 2,016,000 Miscellaneous expenses 969,600

Total estimated expenses in connection with the Invitation 4,000,000

133 40. There have been no public takeover offers by third parties in respect of our Shares or by us in respect of other companies' shares which have occurred during the last and current ®nancial year.

41. No amount of cash or securities or bene®t has been paid or given to any promoter within the two years preceding the date of this Prospectus or is proposed or intended to be paid or given to any promoter at any time.

42. The Directors are not aware of any material information, including trading factors or risks, which are not mentioned elsewhere in this Prospectus, which is unlikely to be known or anticipated by the general public and which could materially affect the pro®ts of our Company and its subsidiary.

43. Save as disclosed in this Prospectus, the ®nancial condition and operations of our Company and its subsidiary are not likely to be affected by any of the following:± #a) known trends or demands, commitments, events or uncertainties that will result in or are reasonably likely to result in our Group's liquidity increasing or decreasing in any material way; #b) material commitments for capital expenditure; #c) unusual or infrequent events or transactions or any signi®cant economic changes that materially affected the amount of reported income from operations; and #d) known trends or uncertainties that have had or that our Group reasonably expects will have a material favourable or unfavourable impact on revenues or operating income.

44. No Shares shall be allotted on the basis of this Prospectus later than six months after the date of this Prospectus.

45. Our Company currently has no intention of changing the auditors of our Company after the listing of our Company on the SGX-ST.

AUDITORS 46. Ernst & Young, our auditors, have audited our consolidated ®nancial statements for the ®nancial year ended 31 December 2000 and for the six months thereafter ended 30 June 2001 included in this Prospectus. The auditors of our Company for the years ended 31 December 1998 and 31 December 1999 were Ng, Lee & Associates Ð DFK.

CONSENTS 47. The Auditors and Reporting Accountants have given and have not withdrawn their written consent to the issue of this Prospectus with the inclusion herein of their Accountants' Report, their Letter in Relation to the Consolidated Pro®t Forecast for the ®nancial year ending 31 December 2001 and references to their name in the form and context in which it appears in this Prospectus and to act in such capacity in relation to this Prospectus.

48. The Manager, Underwriter and Placement Agent, the Solicitors to the Invitation, the Legal Advisers as to PRC Law and the Share Registrar and the Share Transfer Of®ce have each given and have not withdrawn their respective written consents to the issue of this Prospectus with the inclusion herein of their respective names and references thereto in the form and context in which they respectively appear in this Prospectus and to act in such respective capacities in relation to this Prospectus.

134 STATEMENT BY THE DIRECTORS 49. This Prospectus has been seen and approved by the Directors and they collectively and individually accept full responsibility for the accuracy of the information given herein and con®rm, having made all reasonable enquiries, that to the best of their knowledge and belief, the facts stated and opinions expressed in this Prospectus are fair and accurate in all material respects and there are no material facts the omission of which would make any statement in this Prospectus misleading. The Directors also con®rm that the pro®t forecast for the ®nancial year ending 31 December 2001 has been stated after due and careful enquiry.

STATEMENT BY THE MANAGER 50. The Manager acknowledges that, to the best of its knowledge and belief, based on information furnished to it by the Company, this Prospectus constitutes a full and true disclosure of all the material facts about the Invitation and the Company and its subsidiary and it is not aware of any other facts the omission of which would make any statements herein misleading, and that it is satis®ed that the pro®t forecast stated by the Directors has been made after due and careful enquiry.

DOCUMENTS FOR INSPECTION 51. The following documents or copies thereof may be inspected at the registered of®ce of our Company at 8 Temasek Boulevard #31-02 Suntec Tower Three, Singapore 038988 during normal business hours for a period of six months from the date of this Prospectus:± #a) the Memorandum and Articles of Association of our Company; #b) the Directors' Report set out on page 94 of this Prospectus; #c) the letter from the Auditor and Reporting Accountants in relation to the Consolidated Pro®t Forecast for the ®nancial year ending 31 December 2001 set out on page 95 of this Prospectus; #d) the Accountants' Report set out on pages 96 to 119 of this Prospectus; #e) the material contracts referred to in on page 131 of this Prospectus; and #f) the letters of consent referred to in on page 134 of this Prospectus.

135 APPENDIX I

TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE

Applications are invited for the subscription of the New Shares at the Issue Price, subject to the following terms and conditions:±

1. YOUR APPLICATION MUST BE MADE IN LOTS OF 1,000 NEW SHARES OR INTEGRAL MULTIPLES THEREOF. YOUR APPLICATION FOR ANY OTHER NUMBER OF NEW SHARES WILL BE REJECTED.

2. Your application for the Offer Shares may be made by way of the printed WHITE Offer Shares Application Forms or by way of Automated Teller Machine #``ATMs'') belonging to the Participating Banks #``ATM Electronic Applications'') or the Internet Bank #``IB'') web-sites of the relevant Participating Banks #``Internet Electronic Applications'' and together with ATM Electronic Applications, shall be referred to as ``Electronic Applications'').

Application for Internet Placement Shares #also ``Internet Electronic Applications'') may only be made by way of an Internet Electronic Application through the web-site of DBS Vickers Securities #Singapore) Pte Ltd #``DBS-Vickers'') at ``www.vb.com.sg'' if you have an internet trading account with DBS-Vickers.

Applications for Placement Shares #other than the Internet Placement Shares through the web- site of DBS-Vickers) may only be made by way of the printed BLUE Placement Shares Application Forms.

You may not use your CPF funds to apply for the New Shares.

3. Only one application may be made for the bene®t of one person for either the Offer Shares or the Placement Shares )other than the Reserved Shares) in his own name. A person submitting an application for the Offer Shares by way of the Offer Shares Application Form may not submit another application by way of Electronic Application and vice versa. A person submitting an application for the Offer Shares by way of an ATM Electronic Application may not submit another application for Offer Shares by way of an Internet Electronic Application and vice versa. Such separate applications will be deemed to be multiple applications and shall be rejected.

A person, other than an approved nominee company, who is submitting an application in his own name should not submit any other applications, whether on a printed Application Form or through an Electronic Application, for any other person. Such separate applications will be deemed to be multiple applications and shall be rejected.

An applicant who has made an application for the Internet Placement Shares by way of an Internet Electronic Application through the web-site of DBS-Vickers shall not make another application for the Placement Shares by way of a printed Placement Shares Application Form or by way of another Internet Electronic Application. Conversely, a person submitting an application for the Placement Shares by way of a printed Placement Shares Application Form shall not make another application for Placement Shares using another printed Placement Shares Application Form or by way of Internet Electronic Application through the web-site of DBS-Vickers. Such separate applications shall be deemed to be multiple applications and shall be rejected.

An applicant who has agreed with the Placement Agent to subscribe for Placement Shares )other than the Reserved Shares) or who otherwise subscribes for Placement Shares shall not make or procure any separate application for Offer Shares either by way of the Offer Shares Application Form or through an Electronic Application. Such separate applications will be deemed to be multiple applications and shall be rejected.

136 Conversely, an applicant who has made an application for Offer Shares either by way of the Offer Shares Application Form or through an Electronic Application shall not make any separate application for the Placement Shares )other than the Reserved Shares) whether by way of a printed Placement Shares Application Form or by way of an Internet Electronic Application. Such separate applications will be deemed to be multiple applications and shall be rejected.

Joint or multiple applications will be rejected. Persons submitting or procuring submissions of multiple share applications )whether for Offer Shares, Placement Shares or both Offer Shares and Placement Shares) may be deemed to have committed an offence under the Penal Code )Chapter 224) of Singapore and the Securities Industry Act )Chapter 289) of Singapore, and such applications may be referred to the relevant authorities for investigation. Multiple applications or those appearing to be or suspected of being multiple applications will be liable to be rejected at the discretion of our Company.

An applicant who has made an application for Reserved Shares using the Reserved Shares Application Form may submit one separate application for Offer Shares in his own name either by way of an Offer Shares Application Form or through an Electronic Application or submit one separate application for Placement Shares )other than Reserved Shares) by way of a Placement Shares Application Form, provided he adheres to the terms and conditions of this Prospectus. Such separate applications will not be treated as multiple applications.

4. We will not accept applications from any person under the age of 21 years, undischarged bankrupts, sole-proprietorships, partnerships, chops or non-corporate bodies, joint Securities Account holders of CDP and from applicants whose addresses #furnished in their printed Application Forms or, in the case of Electronic Applications, contained in the records of the relevant Participating Banks, as the case may be) bear post of®ce box numbers.

In addition, applicants who wish to subscribe for the Placement Shares through the web-site of DBS-Vickers #a) must not be corporations, sole-proprietorships, partnerships, chops or any other business entities; #b) must be over the age of 21 years; #c) must not be undischarged bankrupts; #d) must apply for the New Shares in Singapore; #e) must have a mailing address in Singapore; and #f) must be customers who maintain internet trading accounts with DBS-Vickers.

5. We will not recognise the existence of a trust. Any application by a trustee or trustees must be made in his/their own name#s) and without quali®cation or, where the application is made by way of a printed Application Form by a nominee, in the name#s) of an approved nominee company or approved nominee companies after complying with paragraph 6 below.

6. WE WILL ONLY ACCEPT NOMINEE APPLICATIONS FROM APPROVED NOMINEE COMPANIES. Approved nominee companies are de®ned as banks, merchant banks, ®nance companies, insurance companies, licensed securities dealers in Singapore and nominee companies controlled by them. Applications made by nominees other than approved nominee companies will be rejected.

7. IF YOU ARE NOT AN APPROVED NOMINEE COMPANY, YOU MUST MAINTAIN A SECURITIES ACCOUNT WITH CDP IN YOUR OWN NAME AT THE TIME OF YOUR APPLICATION. If you do not have an existing Securities Account with CDP in your own name at the time of application, your application will be rejected #if you apply by way of an Application Form) or you will not be able to complete your Electronic Application #if you apply by way of an Electronic Application). If you have an existing Securities Account but fail to provide your Securities Account number or provide an incorrect Securities Account number in section B of the Application Form or in your Electronic Application, as the case may be, your application is liable to be rejected. Subject to paragraph 8 below, your application shall be rejected if your particulars such as name, NRIC/passport number, nationality and permanent residence status provided in your Application Form, or in the case of an Electronic Application, contained in the records of the relevant Participating Bank or DBS-Vickers at the time of your Electronic Application, as the case may be, differ from those particulars in your Securities Account as

137 maintained by CDP. If you have 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 Electronic Application, contained in the records of the relevant Participating Bank or DBS-Vickers, as the case may be, is different from the address registered with CDP, you must inform CDP of your updated address promptly, failing which the noti®cation letter on successful allocation 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 to the instructions set out in the Application Forms and this Prospectus or which does not comply with the instructions for Electronic Applications or with the terms and conditions of this Prospectus or, in the case of an application by way of an Application Form, which is illegible, incomplete, incorrectly completed or which is accompanied by an improperly drawn up or improper form of remittance. Our Company further reserves the right to treat as valid any applications not completed or submitted or effected in all respects in accordance with the instructions set out in the Application Forms or the instructions for Electronic Applications or the terms and conditions of this Prospectus, and also to present for payment or other processes all remittances at any time after receipt and to have full access to all information relating to, or deriving 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 to ballot, any application, without assigning any reason therefor, and we will not entertain any enquiry and/or correspondence on the decision of our Company. This right applies to applications made by way of Application Forms and by way of Electronic Applications. In deciding the basis of allotment, our Company will give due consideration to the desirability of allotting the New Shares to a reasonable number of applicants with a view to establishing an adequate market for the Shares.

11. Share certi®cates will be registered in the name of CDP and will be forwarded only to CDP. It is expected that CDP will send to you, at your own risk, within 15 Market Days after the close of the Application List, a statement of account stating that your Securities Account has been credited with the number of New Shares allotted to you. This will be the only acknowledgement of application moneys 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 New Shares allotted to you. This authorisation applies to applications made by way of printed Application Forms and by way of Electronic Applications.

12. In the event of an under-subscription for the Offer Shares as at the close of the Application List, that number of Offer Shares under-subscribed shall be made available to satisfy excess applications for the Placement Shares to the extent there is an over-subscription for the Placement Shares as at the close of the Application List.

In the event of an under-subscription for the Placement Shares as at the close of the Application List, that number of Placement Shares under-subscribed shall be made available to satisfy applications for the Offer Shares to the extent that there is an over-subscription for the Offer Shares as at the close of the Application List.

In the event of an under-subscription for the Internet Placement Shares to be applied for through the web-site of DBS-Vickers as at the close of the Application List, that number of Internet Placement Shares under-subscribed shall be made available to satisfy applications for the Placement Shares by way of Placement Shares Application Forms to the extent that there is an over-subscription for such Placement Shares as at the close of the Application List or to satisfy applications for the Offer Shares, to the extent that there is an over-subscription for the Offer Shares as at the close of the Application List.

138 In the event of an over-subscription for the Offer Shares as at the close of the Application List and/or the Placement Shares #including the Internet Placement Shares) are fully subscribed or over-subscribed as at the close of the Application List, the successful applications for the Offer Shares will be determined by ballot or otherwise as determined by our Directors and approved by the SGX-ST.

13. You irrevocably authorise CDP to disclose the outcome of your application, including the number of New Shares allotted to you pursuant to your application, to authorised operators.

14. Any reference to ``you'' or the ``Applicant'' in this section shall include an individual, a corporation, an approved nominee company and trustee applying for the Offer Shares by way of an Application Form or by way of an Electronic Application and a person applying for the Placement Shares #including the Internet Placement Shares). .

15. By completing and delivering an Application Form and, in the case of an ATM Electronic Application, by pressing the ``Enter'' or ``OK'' or ``Con®rm'' or ``Yes'' key or any other relevant key on the ATM or in the case of an Internet Electronic Application, by clicking ``Submit'' or ``Continue'' or ``Yes'' or ``Con®rm'' or any other button on the IB web-site screen in accordance with the provisions herein, you:± #a) irrevocably offer to subscribe for the number of New Shares speci®ed in your application #or such smaller number for which the application is accepted) at the Issue Price for each New Share and agree that you will accept such New Shares as may be allocated to you, in each case on the terms of, and subject to the conditions set out in, this Prospectus and the Memorandum and Articles of Association of the Company; #b) agree that in the event of any inconsistency between the terms and conditions for application set out in this Prospectus and those set out in the web-site of DBS-Vickers, or the IB web-sites or ATMs of the Participating 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 to the Company forthwith; and #d) warrant the truth and accuracy of the information in your application.

16. Our acceptance of applications will be conditional upon, inter alia, our Company being satis®ed that:± #a) permission has been granted by the SGX-ST to deal in, and for quotation of, all our existing Shares and the New Shares on the Of®cial List of the SGX-ST; and #b) the Management and Underwriting Agreement, and the Placement Agreement referred to on pages 132 to 133 of this Prospectus have become unconditional and have not been terminated.

17. We will not hold any application in reserve.

18. We will not allot any Shares on the basis of this Prospectus later than six months after the date of this Prospectus.

19. Additional terms and conditions for applications by way of Application Forms are set out on pages 140 to 143 of this Prospectus.

20. Additional terms and conditions for applications by way of Electronic Applications are set out on pages 144 to 151 of this Prospectus.

139 ADDITIONAL TERMS AND CONDITIONS FOR APPLICATIONS USING PRINTED APPLICATION FORMS You shall make an application by way of an Application Form. Such application shall be made on and subject to the terms and conditions of this Prospectus, including but not limited to the terms and conditions appearing below as well as those set out under the section on ``TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE'' on pages 136 to 139of this Prospectus, as well as the Memorandum and Articles of Association of our Company.

1. Your application for the Offer Shares must be made using the WHITE Application Forms for Offer Shares and BLUE of®cial envelopes ``A'' and ``B'', accompanying and forming part of this Prospectus.

Applications for Placement Shares #other than Internet Placement Shares) by way of Application Forms must be made using the BLUE Application Forms for Placement Shares, accompanying and forming part of this Prospectus.

We draw your attention to the detailed instructions contained in the respective Application Forms and this Prospectus for the completion of the Application Forms which must be carefully followed. Our Company reserves the right to reject applications which do not conform strictly to the instructions set out in the Application Forms and this Prospectus or to the terms and conditions of this Prospectus or which are illegible, incomplete, incorrectly completed or which are accompanied by improperly drawn remittances.

2. You must complete your Application Forms in English. Please type or write clearly in ink using BLOCK LETTERS.

3. You must complete all spaces in your Application Forms except those under the heading ``FOR OFFICIAL USE ONLY'' and you must write the words ``NOT APPLICABLE'' or ``N.A.'' in any space that 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 name as it appears in your identity card #if you have such an identi®cation document) or in your passport and, in the case of corporations, in your full names as registered with a competent authority. If you are not an individual, you must complete the Application Form under the hand of an of®cial who must state the name and capacity in which he signs the Application Form. If you are a corporation completing the Application Form, you are required to af®x your Common Seal #if any) in accordance with your Memorandum and Articles of Association or equivalent constitutive documents of the corporation. If you are a corporate Applicant and your application is successful, a copy of your Memorandum and Articles of Association or equivalent constitutive documents must be lodged with our Company's Share Registrar and Share Transfer Of®ce. Our Company reserves the right to require you to produce documentary proof of identi®cation for veri®cation 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 page 7#a) is deleted, you must also complete Section C of the Application Form with particulars of the bene®cial owner#s). #c) If you fail to make the required declaration in paragraph 7#a) or 7#b), as the case may be, on page 1 of the Application Form, your application is liable to be rejected.

6. You #whether an individual or corporate Applicant, whether incorporated or unincorporated and wherever incorporated or constituted), will be required to declare whether you are a citizen or permanent resident of Singapore or a corporation in which citizens or permanent residents of Singapore or any body corporate constituted under any statute of Singapore having an interest in the aggregate of more than 50 per cent. of the issued share capital of or interests in such corporations. If you are an approved nominee company, you are required to declare whether the bene®cial owner of the New Shares is a citizen or permanent resident of Singapore or a

140 corporation, whether incorporated or unincorporated and wherever incorporated or constituted, in which citizens or permanent residents of Singapore or any body corporate incorporated or constituted under any statute of Singapore have an interest in the aggregate of more than 50 per cent. of the issued share capital of or interests in such corporation.

7. You may apply for the New Shares using only cash. Each application must be accompanied by a cash remittance in Singapore currency for the full amount payable, in respect of the number of New Shares applied for, in the form of a BANKER'S DRAFT, CASHIER'S ORDER or POSB CASHIER'S ORDER drawn on a bank in Singapore, made out in favour of ``CAO SHARE ISSUE ACCOUNT'' crossed ``A/C PAYEE ONLY'', or in the form of a DBS AUTOBANK CASHIER'S ORDER EQUIVALENT, with your name and address written clearly on the reverse side. Applications not accompanied by any payment or accompanied by any other form of payment will not be accepted. Remittances bearing ``Not Transferable'' or ``Non Transferable'' crossings will be rejected.

No acknowledgement of receipt will be issued for applications or application moneys received.

8. Monies paid in respect of unsuccessful applications are expected to be returned #without interest or any share of revenue or other bene®t arising therefrom) to you by ordinary post within 3 Market Days after the close of the Application List at your own risk. Where your application is rejected or accepted in part only, the full amount or the balance of the application moneys, as the case may be, will be refunded #without interest or any share of revenue or other bene®t arising therefrom) to you by ordinary post at your own risk within 14 Market Days after the close of the Application List, provided that the remittance accompanying such application which has been presented for payment or other processes has been honoured and the application moneys received in the designated share issue account. Unsuccessful applicants using DBS Autobank Cashier's Order Equivalent will have the full amount of their application moneys #without interest or any share of revenue or other bene®t arising therefrom) automatically credited to their accounts maintained with DBS Bank.

9. Capitalised terms used in the Application Forms and de®ned in this Prospectus shall bear the meanings 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 agreeing to close the Application List at 12:00 noon on 4 December 2001 or such other time or date as our Directors may, in consultation with the Manager decide and by completing and delivering this Application Form:±- #i) your application is irrevocable; and #ii) your remittance will be honoured on ®rst presentation and that any moneys returnable may be held pending clearance of your payment without interest or any share of revenue or other bene®t arising therefrom; #b) all applications, acceptances or contracts resulting therefrom under the Invitation shall be governed by and construed in accordance with the laws of Singapore and that you irrevocably 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 noti®cation by or on behalf of our Company and not otherwise, notwithstanding any remittance being presented for payment by or on behalf of our Company; #d) you will not be entitled to exercise any remedy of rescission for misrepresentation at any time after acceptance of your application; and #e) reliance is placed solely on information contained in this Prospectus and that none of our Company, the Manager, the Underwriter, the Placement Agent, or any other person involved in the Invitation shall have any liability for any information not so contained.

141 Applications for Offer Shares 1. Your application for Offer Shares MUST be made using the WHITE Offer Shares Application Forms and BLUE of®cial envelopes ``A'' and ``B''.

2. You must:± #a) enclose the WHITE Offer Shares Application Form, duly completed and signed, together with your correct remittance in accordance with the terms and conditions of this Prospectus, in the BLUE of®cial envelope ``A'' provided; #b) in appropriate spaces on the BLUE of®cial 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) af®x adequate Singapore postage; #c) SEAL THE BLUE OFFICIAL ENVELOPE ``A''; #d) write, in the special box provided on the larger BLUE of®cial envelope ``B'' addressed to The Development Bank of Singapore Ltd, 6 Shenton Way,# 28-00 DBS Building Tower One, Singapore 068809, the number of Offer Shares you have applied for; and #e) insert BLUE of®cial envelope ``A'' into BLUE of®cial envelope ``B'', seal BLUE of®cial envelope ``B'', af®x adequate Singapore postage on BLUE of®cial envelope ``B'' #if despatching by ordinary post) and thereafter DESPATCH BY ORDINARY POST OR DELIVER BY HAND the documents at your own risk to The Development Bank of Singapore Ltd, 6 Shenton Way,# 28-00 DBS Building Tower One, Singapore 068809, so as to arrive by 12:00 noon on 4 December 2001 or such other time as our Company may, in consultation with the Manager, decide. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement of receipt will be issued for any application or remittance received.

3. Applications that are illegible, incomplete or incorrectly completed or accompanied by improperly drawn remittances or which are not honoured upon their ®rst presentation are liable to be rejected.

4. ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement of receipt will be issued for any application or remittance received.

Applications for Placement Shares 1. Your application for Placement Shares must be made using the BLUE Placement Shares Application Forms.

2. The completed BLUE Placement Shares Application Form and your remittance, in accordance with the terms and conditions of the Prospectus, for the full amount payable in respect of the number of Placement Shares applied for with your name and address written clearly on the reverse side, must be enclosed and sealed in an envelope to be provided by you. You must af®x adequate Singapore postage on the envelope #if despatching by ordinary post) and thereafter the sealed envelope must be DESPATCHED BY ORDINARY POST OR DELIVERED BY HAND at your own risk to The Development Bank of Singapore Ltd, 6 Shenton Way,# 28-00 DBS Building Tower One, Singapore 068809, for the attention of Equity Capital Markets, to arrive by 12:00 noon on 4 December 2001 or such other time as our Company may, in consultation with the Manager decide. Local Urgent Mail or Registered Post must NOT be used. No acknowledgement receipt will be issued for any application or remittance received.

3. ONLY ONE APPLICATION should be enclosed in each envelope. No acknowledgement of receipt will be issued for any application or remittance received.

142 4. Alternatively, you may remit your application moneys by electronic transfer to the account of DBS Bank, Shenton Way Branch, Current Account No. 003-710016-1, in favour of ``CAO SHARE ISSUE ACCOUNT'' for the number of Placement Shares applied for by 12.00 noon on 4 December 2001. Applicants who remit their application moneys via electronic transfer should send a copy of the telegraphic transfer advice slip to DBS Bank, 6 Shenton Way #28-00, DBS Building Tower One, Singapore 068809, for the attention of Equity Capital Markets, to arrive by 12.00 noon on 4 December 2001.

Applications for Reserved Shares 1. Your application for Reserved Shares must be made using the PINK Application Forms.

2. The completed and signed PINK Reserved Shares Application Form and the applicant's remittance in accordance with the terms and conditions of this Prospectus for the full amount payable in respect of the number of Reserved Shares applied for must be enclosed and sealed in an envelope to be provided by the applicant. You must af®x adequate Singapore postage on the envelope #if despatching by ordinary post) and thereafter despatch by ORDINARY POST OR DELIVER BY HAND at your own risk to our Company's registered of®ce presently at 8 Temasek Boulevard# 31-02 Suntec Tower Three, Singapore 038988, so as to arrive by 12.00 noon on 4 December 2001 or such later time or date as our Directors may, in their absolute discretion, decide. Local Urgent Mail or Registered Post must NOT be used.

3. ONLY ONE APPLICATION may be enclosed in each envelope. No acknowledgement of receipt will be issued for any application or remittance received.

143 ADDITIONAL TERMS AND CONDITIONS FOR ELECTRONIC APPLICATIONS The procedures for Electronic Applications are set out on the ATM screens #in the case of ATM Electronic Applications) and the IB web-site screens #in the case of Internet Electronic Applications) of the relevant Participating Banks and the web-site screen of DBS-Vickers #the ``Steps''). Currently, DBS Bank, OUB and UOB are the only Participating Banks through which the Internet Electronic Applications may be made. For illustration purposes, the procedures for Electronic Applications through ATMs, the IB web-site of DBS Bank and the website of DBS-Vickers are set out in the ``Steps for ATM Electronic Applications for Offer Shares through ATMs of DBS Bank #including its POSBank Services Division)'' and the ``Steps for Internet Electronic Applications for Offer Shares through the IB web-site of DBS Bank'' and the ``Steps for Internet Electronic Applications for Placement Shares through the web-site of DBS-Vickers'' appearing on pages 149to 151 of this Prospectus. Please read carefully the terms of this Prospectus, the Steps and the terms and conditions for Electronic Applications set out below carefully before making an Electronic Application. Any reference to ``you'' or the ``Applicant'' in the Additional Terms and Conditions for Electronic Applications and the Steps shall refer to you making an application for Offer Shares through an ATM or the IB web-site of a relevant Participating Bank, or Placement Shares through the web-site of DBS-Vickers.

The Steps set out the actions that you must take at ATMs or the IB web-site of DBS Bank to complete an Electronic Application. The actions that you must take at the ATMs or the IB web-sites of the other Participating Banks and the web-site of DBS-Vickers are set out on the ATM screens or the IB web- site screens of the relevant Participating Banks and the web-site screen of DBS-Vickers.

You must have an existing bank account with and be an ATM cardholder of one of the Participating Banks before you can make an Electronic Application at the ATMs. An ATM card issued by one Participating Bank cannot be used to apply for New Shares at an ATM belonging to other Participating Banks. Upon the completion of your ATM Electronic Application transaction, you will receive an ATM transaction slip #``Transaction Record''), con®rming the details of your ATM Electronic Application. The Transaction Record is for your retention and should not be submitted with any printed Application Form.

You must ensure that you enter your own Securities Account Number when using the ATM card issued to you in your own name. If you fail to use your own ATM card or do not key in your own Securities Account number, your application will be rejected. If you operate a joint bank account with any of the Participating Banks, you must ensure that you enter your own Securities Account number when using the ATM card issued to you in your own name. Using your own Securities Account number with an ATM card which is not issued to you in your own name will render your Electronic Application liable to be rejected.

For an Internet Electronic Application, you must have a bank account with and a User Identi®cation #``User ID'') and a Personal Identi®cation Number #``PIN'') given by the relevant Participating Banks or DBS-Vickers, in the case of you applying for Placement Shares through DBS-Vickers. Upon completion of your Internet Electronic Application through the IB web-site of DBS Bank, there will be an on-screen con®rmation #``Con®rmation Screen'') of the application which can be printed out by you for your record. This printed record of the Con®rmation Screen is for your retention and should not be submitted with any printed Application Form.

If you are making an Internet Electronic Application, you must ensure that the mailing address of your account selected for the application is in Singapore and you must declare that the application is being made in Singapore. Otherwise, your application is liable to be rejected. In this connection, you will be asked to declare that you are in Singapore at the time when you make the application.

Your Electronic Application shall be made on the terms and, subject to the conditions of this Prospectus, including but not limited to, the terms and conditions appearing below and those set out under the section on ``TERMS AND CONDITIONS AND PROCEDURES FOR APPLICATION AND ACCEPTANCE'' on pages 136 to 139of this Prospectus, as well as the Memorandum and Articles of Association of our Company.

144 1. In connection with your Electronic Application for the Offer Shares or Placement Shares in the case of you applying for Internet Placement Shares through DBS-Vickers, you are required to con®rm statements to the following effect in the course of activating the Electronic Application:± #a) that you have received a copy of this Prospectus #in the case of ATM Electronic Applications only) and have read, understood and agreed to all the terms and conditions of application for the Offer Shares or Placement Shares and this Prospectus prior to effecting the Electronic 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 resident status, CDP Securities Account number, and share application amount #the ``Relevant Particulars'') from your account with the relevant Participating Bank or DBS-Vickers, as the case may be, to our Share Registrar, CDP, SCCS, our Company, and the Manager #the ``Relevant Parties''); and

#c) that this is your only application for the Offer Shares or Placement Shares, as the case may be, and it is made in your name and at your own risk.

Your application will not be successfully completed and cannot be recorded as a completed transaction unless you press the ``Enter'' or ``OK'' or ``Con®rm'' or ``Yes'' or any other relevant key in the ATM or click ``Con®rm'' or ``OK'' or ``Submit'' or ``Continue'' or ``Yes'' or any other relevant button on the Internet screen. By doing so, you shall be treated as signifying your con®rmation of each of the above three statements. In respect of statement 1#b) above, your con®rmation, by pressing the ``Enter'' or ``OK'' or ``Con®rm'' or ``Yes'' or any other relevant key or by clicking ``Con®rm'' or ``OK'' or ``Submit'' or ``Continue'' or ``Yes'' or any other relevant button, shall signify and shall be treated as your written permission, given in accordance with the relevant laws of Singapore, including Section 47#4) of the Banking Act #Chapter 19) of Singapore, to the disclosure by that Participating Bank or DBS-Vickers, as the case may be, of the Relevant Particulars of your account#s) with that Participating Bank or DBS-VIckers to the Relevant Parties.

2. By making an electronic application you con®rm that you are not applying for Offer Shares or Placement Shares as a nominee of any other person and that any electronic application that you make is the only application made by you as the bene®cial owner. You shall make only one electronic application and shall not make any other application for Offer Shares or Placement Shares )other than for the Reserved Shares) whether at the ATMs of any Participating Bank or the IB web-sites of the relevant Participating Banks or the web-site of DBS-Vickers, as the case may be, or on the Application Forms. Where you have made an application for New Shares on an Application Form, you shall not make an Electronic Application for Offer Shares and vice versa.

3. You must have suf®cient funds in your bank account with your Participating Bank at the time you make your Electronic Application, failing which your Electronic Application will not be complete. Any Electronic Application which does not conform strictly to the instructions set out in this Prospectus or on the screens of the ATM through which your Electronic Application is being made shall be rejected.

You may make an ATM Electronic Application at the ATM of any Participating Bank or an Internet Electronic Application at the IB web-sites of the relevant Participating Banks for Offer Shares, using only cash by authorising such Participating Bank to deduct the full amount payable from your account with such Participating Bank.

If you make an application to subscribe for Internet Placement Shares through the web- site of DBS-Vickers, you must have suf®cient funds in your nominated Automatic Payment account with an Automatic Payment Facility )direct debit/credit authorisation or ``GIRO'') with DBS-Vickers. Your application will be rejected if there are insuf®cient funds in your account for DBS-Vickers to deduct the full amount payable from your account for your application.

145 4. You irrevocably agree and undertake to subscribe for and to accept the number of Offer Shares or Placement Shares, as the case may be, applied for as stated on the Transaction Record or the Con®rmation Screen or any lesser number of such Offer Shares or Placement Shares that may be allotted to you in respect of your Electronic Application. In the event that our Company decides to allot any lesser number of such Offer Shares or Placement Shares or not to allot any Offer Shares or Placement Shares to you, you agree to accept such decision as ®nal. If your Electronic Application is successful, your con®rmation #by your action of pressing the ``Enter'' or ``OK'' or ``Con®rm'' or ``Yes'' or any other relevant key on the ATM or clicking ``Con®rm'' or ``OK'' or ``Submit'' or ``Continue'' or ``Yes'' or any other relevant button on the Internet screen) of the number of Offer Shares or Placement Shares applied for shall signify and shall be treated as your acceptance of the number of Offer Shares or Placement Shares that may be allotted to you and your agreement to be bound by the Memorandum and Articles of Association of our Company.

5. We will not keep any application in reserve. Where your Electronic Application is unsuccessful, the full amount of the application moneys will be refunded #without interest or any share of revenue or other bene®t arising therefrom) to you by being automatically credited to your account with your Participating Bank or if you have applied for the Internet Placement Shares through DBS-Vickers, by ordinary post or such other means as DBS-Vickers may agree with you, at your risk, within 3 Market Days after the close of the Application List provided that the remittance in respect of such application which has been presented for payment or other processes has been honoured and the application moneys received in the designated share issue account. Trading on a ``when-issued'' basis, if applicable, is expected to commence after such refund has been made.

Where your Electronic Application is rejected or accepted in part only, the full amount or the balance of the application moneys, as the case may be, will be refunded )without interest or any share of revenue or other bene®t arising therefrom) to you by being automatically credited to your account with your Participating Bank or if you have applied for the Internet Placement Shares through DBS-Vickers, by ordinary post or such other means as DBS-Vickers may agree with you, at your risk, within 14 Market Days after the close of the Application List provided that the remittance in respect of such application which has been presented for payment or other processes has been honoured and the application moneys received in the designated share issue account.

Responsibility for timely refund of application moneys from unsuccessful or partially successful Electronic Applications lies solely with the respective Participating Banks and with DBS-Vickers. Therefore, you are strongly advised to consult your Participating Bank or DBS-Vickers as to the status of your Electronic Application and/or the refund of any money to you from unsuccessful or partially successful Electronic Application, to determine the exact number of Shares allotted to you before trading the Shares on the SGX-ST. Neither the SGX-ST, the CDP, the SCCS, the Participating Banks, DBS-Vickers, our Company, nor the Manager assume any responsibility for any loss that may be incurred as a result of you having to cover any net sell positions or from buy-in procedures activated by the SGX-ST.

If your Electronic Application is made through the ATMs of UOB Group and is unsuccessful, it is expected that a computer-generated notice will be sent to you by the relevant Participating Bank #at your address stated in the records of the relevant Participating Bank as at the date of your Electronic Application) by ordinary post at your own risk within three Market Days after the close of the Application List. If your Electronic Application is made through the ATMs of OCBC Group, OUB Group, KTB or DBS Bank )including its POSBank Services Division) and is unsuccessful, no noti®cation will be sent by the relevant Participating Bank.

If your Internet Electronic Application made through the IB web-site of UOB, OUB, or DBS Bank, as the case may be, is unsuccessful, no noti®cation will be sent by such Participating Bank.

It is expected that successful applicants who applied for Internet Placement Shares through the web-site of DBS-Vickers will be noti®ed of the results of their application by way of an e-mail noti®cation no later than the evening of the day immediately prior to the commencement of trading of the Shares on SGX-ST.

146 6. Applicants who make ATM Electronic Applications through the ATMs of the following banks may check the provisional results of their ATM Electronic Applications as follows:±

Bank Telephone Other Channels Operating Hours Service expected from DBS 1800-3296666 Internet Banking or Internet 24 hours a day 7.00 p.m. on the Bank #for POSB account holders) Kiosk balloting day 1800-111 1111 www.dbs.com.sg* #for DBS account holders) 327 4767 KTB 222 8228 ATM ATM: 24 hours a day ATM: Evening of the balloting day Phone Banking: Mon-Fri: 0800-2200 Phone Banking: Sat: 0800-1500 8.00 a.m. on the day after the balloting day OCBC 1800-363 3333 ATM ATM: 24 hours a day Evening of the balloting day Phone Banking: 24 hours a day OUB 1800-224 2000 OUB Personal Internet Banking Phone Banking/ Evening of the Internet Banking: balloting day www.oub.com.sg* 24 hours a day

OUB Mobile Buzz OUB Mobile Buzz**: 24 hours a day UOB 1800-533 5533 ATM #Other Transactions Ð Phone Banking/ 6.00 p.m. on the 1800-222 2121 ``IPO Enquiry'') ATM***: balloting day www.uobgroup.com*** 24 hours a day

* Applicants who have made Internet Electronic Applications through the Internet Banking website of DBS Bank or OUB may also check the result of their applications through the same channels listed in the table above in relation to ATM Electronic Applications made at the ATMs of DBS Bank or OUB. ** Applicants who have made Electronic Applications through the ATMs or the Internet Banking website of OUB and who have activated their OUB Mobile Buzz services will be noti®ed of the results of their Electronic Applications via their mobile phones. *** Applicants who have made Electronic Applications through the ATMs or the Internet Banking website of UOB may check the results of their applications through UOB CyberBank, UOB Group's ATMs or UOB Phone Banking services.

7. Applicants may apply for the New Shares, save for Internet Placement Shares, through any ATMs or IB web-site of his Participating Bank, using only cash by authorising his Participating Bank to deduct the full amount payable from his bank account#s) with such Participating Bank.

8. Electronic Applications shall close at 12:00 noon on 4 December 2001 or such other time as our Company may, in consultation with the Manager, decide. All Internet Electronic Applications must be received by 12:00 noon on 4 December 2001. An Internet Electronic Application is deemed to be received when it enters the designated information system of the relevant Participating Bank or DBS-Vickers, as the case may be.

9. You are deemed to have irrevocably requested and authorised our Company to:± #a) register the Offer Shares or Placement Shares, as the case may be, allotted to you in the name of CDP for deposit into your Securities Account; #b) send the relevant Share certi®cate#s) to CDP; #c) return or refund #without interest or any share of revenue earned or other bene®t arising therefrom) the application moneys, should your Electronic Application be rejected, by automatically crediting your bank account with your Participating Bank or if you have applied for the Internet Placement Shares through DBS-Vickers, by ordinary post or such other means as DBS-Vickers may agree with you, at your risk, within 3 Market Days after the close of the Application List; and

147 #d) return or refund #without interest or any share of revenue or other bene®t arising therefrom) the balance of the application moneys, should your Electronic Application be accepted in part only, by automatically crediting your bank account with your Participating Bank or if you have applied for the Internet Placement Shares through DBS-Vickers, by ordinary post or such other means as DBS-Vickers may agree with you, at your risk, within 14 Market Days after the close of the Application List.

10. You irrevocably agree and acknowledge that your Electronic Application is subject to risks of electrical, electronic, technical and computer-related faults and breakdown, ®res, acts of God and other events beyond the control of the Participating Banks, DBS-Vickers, the Company and the Manager, and in any such event our Company, the Manager, DBS-Vickers and/or the relevant Participating Bank do not receive your Electronic Application, or data relating to your Electronic Application or the tape or any other devices containing such data is lost, corrupted or not otherwise accessible, whether wholly or partially for whatever reason, you shall be deemed not to have made an Electronic Application and you shall have no claim whatsoever against our Company, the Manager, DBS-Vickers and/or the relevant Participating Bank for Offer Shares or Placement Shares, as the case may be, applied for or for any compensation, loss or damage.

11. We do not recognise the existence of a trust. Any Electronic Application by a trustee must be made in his own name and without quali®cation. Our Company will reject any application by any person acting as nominee.

12. All your particulars in the records of your Participating Bank or DBS-Vickers at the time you make your Electronic Application shall be deemed to be true and correct and your Participating Bank, DBS-Vickers and the relevant parties shall be entitled to rely on the accuracy thereof. If there has been any change in your particulars after making your Electronic Application, you shall promptly notify your Participating Bank or DBS-Vickers.

13. You should ensure that your personal particulars as recorded by both CDP and the relevant Participating Bank or DBS-Vickers are correct and identical, otherwise, your Electronic Application is liable to be rejected. You should promptly inform CDP of any change in address, failing which the noti®cation letter on successful allotment will be sent to your address last registered with CDP.

14. 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, through the Participating Banks and DBS-Vickers acting as agents of our Company, at the ATMs and the IB web-sites of the relevant Participating Banks and at the web-site of DBS-Vickers:± #i) your Electronic Application is irrevocable; and #ii) your Electronic Application, the acceptance by our Company and the contract resulting therefrom under the Invitation shall be governed by and construed in accordance with the laws of Singapore and you irrevocably submit to the non-exclusive jurisdiction of the Singapore courts; #b) none of our Company, the Manager, the Participating Banks or DBS-Vickers 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 our Company or CDP due to breakdowns or failure of transmission, delivery or communication facilities or any risks referred to in paragraph 9above or to any cause beyond their respective controls; #c) in respect of the Offer Shares or the Placement Shares, as the case may be, for which your Electronic Application has been successfully completed and not rejected, acceptance of your Electronic Application shall be constitute by written noti®cation by or on behalf of our Company and not otherwise, notwithstanding any payment received by or on behalf of our Company;

148 #d) you will not be entitled to exercise any remedy for rescission for misrepresentation at any time after acceptance of your application; and #e) reliance is placed solely on information contained in this Prospectus and that none of our Company, the Manager, the Underwriter, the Placement Agent nor any other person involved in the Invitation shall have any liability for any information not so contained.

Steps for Electronic Applications for Offer Shares through ATMs of DBS Bank )including its POSBank Services Division) Instructions for ATM Electronic Applications will appear on the ATM screens of the Participating Bank. For illustration purposes, the steps for making an ATM Electronic Application through a DBS Bank or POSBank ATM are shown below. Certain words appearing on the screen are in abbreviated form #``A/c'', ``amt'', ``appln'', ``&'', ``I/C'' and ``No.'' refer to ``Account'', ``amount'', ``application'', ``and'', ``NRIC'' and ``Number'' respectively. Instructions for ATM Electronic Applications on the ATM screens of Participating Banks #other than DBS Bank #including its POSBank Services Division)), may differ slightly from those represented below.

Step 1: Insert your personal DBS or POSBank ATM Card

2: Enter your Personal Identi®cation Number

3: Select ``CASHCARD & MORE SERVICES''

4: Select ``ESA-IPO SHARE/BOND/RIGHTS''

5: Select ``ELECTRONIC SECURITY APPLICATION #IPO-SHARE/BOND)'' to ``CAO''

6: Press the ``ENTER'' key to acknowledge:± . You have read, understood and agreed to all terms of the application & the Prospectus. . You consent to disclose your name, I/C/Passport No., address, nationality, CDP Securities A/c No., and share application amount from your Bank Account)s) to share registrars, SCCS, CDP, CPF, issuer. . For FIXED price share application, this is your only application and it is made in your own name and at your own risk. . You are not a US Person as referred to in the Prospectus/Document, where applicable.

7: Select your nationality

8: Select the DBS Bank account #Autosave/Current/Savings/Savings Plus) or the POSBank account #current/savings) from which to debit your application moneys

9: Enter the number of securities you wish to apply for using cash

10: Enter your own 12-digit CDP Securities Account number. #Note: This step will be omitted automatically if your CDP Securities Account number has already been stored in the Bank's records)

11: Check the details of your share application, your I/C/passport number and CDP Securities Account number and number of securities on the screen and press the ``ENTER'' key to con®rm application

12: Remove the Transaction Record for your reference and retention only

149 Steps for Internet Electronic Application for Offer Shares through the IB web-site of DBS Bank For illustrative purposes, the steps for making an Internet Electronic Application through the DBS Bank IB web-site is shown below. Certain words appearing on the screen are in abbreviated form #``A/C'', ``amt'', ``&'', ``I/C'' and ``No.'' refer to ``Account'', ``Amount'', ``and'', ``NRIC'' and ``Number'' respectively),

Step 1: Click on to DBS Bank web-site #www.dbs.com)

2: Login to Internet banking

3: Enter your User ID and PIN

4: Select ``Electronic Security Application''

5: Click ``Yes'' to proceed and to warrant that you have observed and complied with all applicable laws and regulations

6: Click on ``CAO'' and click the ``Submit'' button

7: Click ``Con®rm'' to con®rm:± #a) You have read, understood and agreed to all terms of application and the Prospectus #b) You consent to disclose your name, No., address, nationality, CDP Securities A/C No., CPF Investment A/C No. and share application amount from your DBS/ POSBank Account#s) to share registrars, SCCS, CDP, CPF Board and issuer#s) #c) This application is made in your own name and at your own risk #d) For FIXED price share application, this is your only application. For TENDER price securities application, this is your only application at the selected tender price. #e) You are not a US Person as referred to in the Prospectus/Document, where applicable

8: Fill in details for share application and click ``Submit''

9: Check the details of your share application, your I/C/passport No. and click ``OK'' to con®rm your application

10: Print Con®rmation Screen #optional) for your reference & retention only

150 Steps for Internet Electronic Application for Placement Shares through the web-site of DBS-Vickers For illustrative purposes, the steps for making an application through the web-site of DBS-Vickers is shown below:±

Step 1: Access the web-site at ``www.vb.com.sg''

2: Click on to the IPO hyperlink

3: Login with user ID and password

4: Click ``Yes'' to con®rm, inter alia, that you are in Singapore

5: Select CAO IPO by clicking on CAO IPO hyperlink

6: Click ``I Agree'' to con®rm, inter alia:± #a) You have read a copy of this Prospectus and understood and agreed to all the terms and conditions of application for the shares pursuant to the invitation #``Shares'') and this Prospectus prior to effecting the Electronic Application and agree to be bound by the same. #b) You consent to the disclosure of your name, NRIC or passport number, address, nationality and permanent resident status, CDP Securities Account number, CPF Investment Account number #if applicable) and share application amount from your account wiith DBS-Vickers to the Share Registrar, SCCS, CDP, CPF, the Issuer and the Manager. #c) This application is your only application for the Shares and it is made in your own name and at your own risk. #d) This application is made in Singapore. #e) You understand that these are not deposits or other obligations of or guaranteed or insured by DBS-Vickers and are subject to investment risks, including the possible loss of the principal amount invested. #f) You are not a US Person.

7: Fill in details for share application and click ``Next''.

8: Check details of your share application and your personal particulars on the screen and click ``Place Order'' to submit your application.

9: Click ``Con®rm Order'' to continue.

10: Print page for your reference and retention only.

151 APPENDIX II

RULES OF THE CHINA AVIATION OIL SHARE OPTION SCHEME

1. DEFINITIONS In this Scheme, unless the context otherwise requires, the following words and expressions shall have the following meanings:± ``Act'' The Companies Act, Chapter 50 of Singapore, as amended or modi®ed from time to time.

``AGM'' Annual General Meeting.

``associate'' shall have the meaning ascribed to it in the SGX-ST Listing Manual.

``Auditors'' The auditors of the Company for the time being.

``Board'' The Board of Directors of the Company for the time being.

``CDP'' The Central Depository .Pte) Limited.

``Committee'' A committee of Directors of the Company for the time being duly authorised and appointed by the Board pursuant to Rule 16 to administer the Scheme.

``Company'' or ``CAO'' China Aviation Oil .Singapore) Corporation Ltd.

``control'' The capacity to dominate decision making, directly or indirectly, in relation to the ®nancial and operating policies of that company being controlled.

``Controlling Shareholder'' A Shareholder exercising control over the Company and unless rebutted, a person who controls directly or indirectly a shareholding of ®fteen per cent. .15%) or more of the Company's issued share capital shall be presumed to be a Controlling Shareholder of the Company.

``Director'' A person holding of®ce as a director for the time being of the Group and/or the Parent Company .as the case may be).

``EGM'' Extraordinary General Meeting.

``Executive'' Any full-time con®rmed employee of the Group selected by the Committee to participate in the Scheme in accordance with Rule 4.

``Executive Director'' A Director who is a full-time employee of the Group and who performs an executive function.

``Executive Option'' The right to subscribe for Shares granted or to be granted to an Executive, including an Executive Director, and a Parent Company Executive including a Parent Company Executive Director, pursuant to the Scheme and for the time being subsisting.

``Exercise Price'' The price at which a Participant shall subscribe for each Share upon the exercise of an Option in accordance with the Scheme.

152 ``Financial Year'' Each period of twelve .12) months or more or less than twelve .12) months, at the end of which the balance of accounts of the Company are prepared and audited, for the purpose of laying the same before an annual general meeting of the Company.

``Grantee'' The person to whom an offer of an Option is made.

``Group'' The Company and its Subsidiaries .as they may exist from time to time).

``Market Day'' A day on which the SGX-ST is open for trading of securities.

``Market Price'' The price as de®ned in Rule 9.1.i).

``Non-Executive Director'' A Director other than one holding of®ce in an executive capacity in the Group.

``Non-Executive Option'' The right to subscribe for Shares granted or to be granted to a Non-Executive Director, a Parent Subsidiary Executive and a Parent Subsidiary Executive Director pursuant to the Scheme and for the time being subsisting.

``Offer Date'' The date on which an offer to grant an Option is made.

``Option'' The contract constituted by acceptance in the manner set out in Rule 8 of any offer made in accordance with the terms of the Scheme.

``Option Period'' Subject as provided in Rules 11 and 15, the period for the exercise of an Option being a period commencing after the ®rst anniversary of the Offer Date of that Option .in the case of an Option for Exercise Price at no discount), or after the second anniversary .in the case of an Option with Exercise Price at a discount) and expiring on .and including) the date immediately preceding the tenth anniversary of the Offer Date in the case of an Executive Option and ®fth anniversary of the Offer Date, in the case of a Non-Executive Option or, in either case, such other shorter period determined by the Committee.

``Parent Company'' China Aviation Oil Supply Corporation.

``Parent Company Executive'' Any full-time con®rmed employee of the Parent Company selected by the Committee to participate in the Scheme in accordance with Rule 4.

``Parent Company Executive A Director who is a full-time employee of the Parent Company Director'' and who performs an executive function.

``Parent Group'' Parent Company and its Parent Subsidiaries.

``Parent Group Executive'' Any full-time con®rmed employee of the Parent Group selected by the Committee to participate in the Scheme in accordance with Rule 4.

``Parent Group Executive A Director who is a full-time employee of the Parent Group Director'' and who performs an executive function.

``Parent Group Non-Executive A Director other than one holding of®ce in an executive Director'' capacity in the Parent Group.

153 ``Parent Subsidiary'' A company which is for the time being a subsidiary of the Parent Company .but excluding the Group) as de®ned by Section 5of the Act.

``Parent Subsidiary Executive'' Any full-time con®rmed employee of the Parent Subsidiary selected by the Committee to participate in the Scheme in accordance with Rule 4.

``Parent Subsidiary Executive A Director who is a full-time employee of the Parent Director'' Subsidiary and who performs an executive function.

``Participant'' The holder of an Option.

``Record Date'' The date as at the close of business on which Shareholders must be registered in order to participate in any dividends, rights, allotments or other distributions .as the case may be).

``Scheme'' The China Aviation Oil Share Option Scheme, as modi®ed or amended from time to time.

``SGX-ST'' The Singapore Exchange Securities Trading Limited.

``Shareholders'' The registered holders for the time being of the Shares .other than the CDP) or, in the case of Depositors, Depositors who have Shares entered against their names in the Depository Register.

``Shares'' Ordinary shares of $0.05each in the capital of the Company.

``Subsidiary'' A company which is for the time being a subsidiary of the Company as de®ned by Section 5of the Act.

``S$'' or ``$'' Singapore dollars.

The terms ``Depositor'', ``Depository Register'' and ``Depository Agent'' shall have the meanings ascribed to them respectively by Section 130A of the Act.

The term ``associate'' shall have the meaning ascribed to it by the SGX-ST Listing Manual.

Words denoting the singular shall, where applicable, include the plural and vice versa and words denoting the masculine gender shall, where applicable, include the feminine and neuter gender. References to persons shall include corporations.

Any reference in the Scheme to any enactment is a reference to that enactment as for the time being amended or re-enacted. Any word de®ned under the Act or any statutory modi®cation thereof and used in this Scheme shall, where applicable, have the same meaning assigned to it under the Act.

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

2. NAME OF THE SCHEME The Scheme shall be called the ``China Aviation Oil Share Option Scheme''.

3. OBJECTIVES OF THE SCHEME It is the Group's long term objective to pursue continuous growth and expansion in its business and operations, and it recognises that maintaining an experienced and committed workforce is important towards achieving such an objective. Hence, it is desired that the Group should implement a share option scheme which gives the Group the ¯exibility to use share options as a means of promoting long term staff retention and to recognise and reward the efforts of those

154 who have directly contributed to the success, growth or development of the Group. Such ¯exibility would include a discretion to offer and grant share options at a discount to the market price of the Shares.

4. ELIGIBILITY 4.1 Subject to Rule 4.5below, the Executives' eligibility to participate in the Scheme shall be at the absolute discretion of the Committee, which would be exercised judiciously, and in addition, such person must:± .i) be con®rmed in his/her employment with the Group; .ii) have attained the age of twenty-one .21) years on or before the Offer Date; and .iii) not be an undischarged bankrupt and must not have entered into a composition with his creditors.

4.2 Subject to Rule 4.5below, the Parent Group Executives' eligibility to participate in the Scheme shall be at the absolute discretion of the Committee, which would be exercised judiciously, and in addition, such person must:± .i) be con®rmed in his/her employment with the Parent Group; .ii) have attained the age of twenty-one .21) years on or before the Offer Date; .iii) not be an undischarged bankrupt and must not have entered into a composition with his creditors; and .iv) who, in the opinion of the Committee, has contributed or will contribute to the success of the Group.

4.3 Executive Directors and Parent Group Executive Directors who satisfy the eligibility requirements in Rule 4.1.i), .ii) and .iii), and Rule 4.2.i), .ii), .iii) and .iv) respectively, subject to Rule 4.5shall also be eligible to participate in the Scheme.

4.4 Subject to Rule 4.5below, Non-Executive Directors who satisfy the eligibility requirements in Rule 4.1.ii) and .iii) and Rule 4.2.ii), .iii) and .iv) respectively shall also be eligible to participate in the Scheme. Parent Group Non-Executive Directors shall not be eligible to participate in the Scheme.

4.5Persons who are Controlling Shareholders and their associates shall not be eligible to participate in the Scheme.

4.6 Any grant of Options to a Parent Group Executive or a Parent Group Director which, together with Options already granted to that Parent Group Executive or Parent Group Director in any capacity under the Scheme, represents ®ve .5) per cent. or more of the total number of Shares available to Parent Group Executives or Parent Group Directors under the Scheme, shall be approved by independent shareholders of the Company in a separate resolution for each such Parent Group Executive or Parent Group Director.

4.7 The aggregate number of Shares which may be offered by way of grant of Options to Parent Group Executives and Parent Group Directors in any capacity under the Scheme shall not exceed twenty .20) per cent. of the total number of Shares available under the Scheme, and such aggregate number of Shares which may be offered to Parent Group Executives and Parent Group Directors in their capacity as such under the Scheme shall be approved by independent shareholders of the Company in a separate resolution.

4.8 Subject to the Act and any requirement of the SGX-ST or any other stock exchange on which the Shares may be listed or quoted, the terms of eligibility for participation in the Scheme, except for Rule 4.7 above, may be amended from time to time at the absolute discretion of the Committee, which would be exercised judiciously.

155 5. MAXIMUM ENTITLEMENT Subject to Rule 4 and Rule 10, the aggregate number of Shares in respect of which Options may be offered to a Grantee for subscription in accordance with the Scheme shall be determined at the discretion of the Committee, which would be exercised judiciously. The Committee shall take into account criteria such as the rank and responsibilities within the Group, performance, years of service/appointment and potential for future development of the Grantee and the performance of the Group.

6. SIZE OF THE SCHEME The aggregate number of Shares over which the Committee may grant Options on any date, when added to the number of Shares issued and issuable in respect of all Options granted under the Scheme, shall not exceed 15% of the issued share capital of the Company at any time and from time to time on the date immediately preceding the Offer Date of any relevant Option.

7. OFFER DATE The Committee may, save as provided in Rule 4, Rule 5and Rule 6, offer to grant Options to such Grantees as it may select in its absolute discretion, which would be exercised judiciously, at any time during the period when the Scheme is in force, except that no Options shall be granted during the period of thirty .30) days immediately preceding the date of announcement of the Company's interim and/or ®nal results .whichever the case may be). In addition, in the event that an announcement on any matter of an exceptional nature involving unpublished price sensitive information is made, offers to grant Options may only be made after the date on which such announcement is released.

An offer to grant the Option to a Grantee shall be made by way of a letter .the ``Letter of Offer'') in the form or substantially in the form set out in Schedule A, subject to such modi®cations as the Committee may determine from time to time.

8. ACCEPTANCE OF OFFER 8.1 An Option offered to a Grantee pursuant to Rule 7 may only be accepted by the Grantee within thirty .30) days after the relevant Offer Date and not later than 5.00 p.m. on the thirtieth day from such Offer Date .i) by completing, signing and returning to the Company the Acceptance Form in or substantially in the form set out in Schedule B, subject to such modi®cation as the Committee may from time to time determine, accompanied by payment of $1.00 as consideration or such other amount and such other documentation as the Committee may require and .ii) if, at the date on which the Company receives from the Grantee the Acceptance Form in respect of the Option as aforesaid, he remains eligible to participate in the Scheme in accordance with these Rules.

8.2 If a grant of an Option is not accepted strictly in the manner as provided in this Rule 8, such offer shall, upon the expiry of the thirty .30) days period, automatically lapse and shall forthwith be deemed to be null and void and be of no effect.

8.3 The Company shall be entitled to reject any purported acceptance of a grant of an Option made pursuant to this Rule 8 or Exercise Notice given pursuant to Rule 12 which does not strictly comply with the terms of the Scheme.

8.4 Options are personal to the Grantees to whom they are granted and shall not be sold, mortgaged, transferred, charged, assigned, pledged or otherwise disposed of or encumbered in whole or in part or in any way whatsoever without the Committee's prior written approval, but may be exercised by the Grantee's duly appointed personal representative as provided in Rule 11.6 in the event of the death of such Grantee.

156 8.5The Grantee may accept or refuse the whole or part of the offer. If only part of the offer is accepted, the Grantee shall accept the offer in multiples of 1,000 Shares. The Committee shall within ®fteen .15) Market Days of receipt of the Acceptance Form and consideration, acknowledge receipt of the same.

8.6 In the event that a grant of an Option results in a contravention of any applicable law or regulation, such grant shall be null and void and of no effect and the relevant Participant shall have no claim whatsoever against the Company.

8.7 Unless the Committee determines otherwise, any offer of Options shall automatically lapse and become null, void and of no effect and shall not be capable of acceptance if:± .a) it is not accepted in the manner as provided in Rule 8.1 within the thirty .30) days period; or .b) the Grantee dies prior to his acceptance of the Option; or .c) the Grantee is adjudicated a bankrupt or enters into composition with his creditors prior to his acceptance of the Option; or .d) the Grantee being an Executive ceases to be in the employment of the Group or, being a Director ceases to be a Director of the Group, in each case, for any reason whatsoever prior to his acceptance of the Option; or .e) the Grantee, being a Parent Group Executive, ceases to be in the employment of the Parent Group or, being a Parent Group Director ceases to be a Director of the Parent Group, in each case, for any reason whatsoever prior to his acceptance of the Option; .f) the Grantee, being a Non-Executive Director, ceases to be a Director of the Group, in each case, for any reason whatsoever prior to his acceptance of the Option; or .g) the Company is liquidated or wound-up prior to the Grantee's acceptance of the Option.

9. EXERCISE PRICE 9.1 Subject to any adjustment pursuant to Rule 10, the Exercise Price for each Share in respect of which an Option is exercisable shall be determined by the Committee at its absolute discretion, and ®xed by the Committee at:± .i) a price .the ``Market Price'') equal to the average of the last dealt prices for a Share, as determined by reference to the local English newspapers, the Business Times or other publication published by the SGX-ST for the 5consecutive trading days immediately preceding the Offer Date of that Option, rounded up to the nearest whole cent in the event of fractional prices; or .ii) a price which is set at a discount to the Market Price, provided that:± .1) the maximum discount shall not exceed 20% of the Market Price; and

.2) the Shareholders of the Company in an AGM or EGM shall have authorised the making of offers and grants of Options under this Scheme at a discount not exceeding the maximum discount as aforesaid in a separate resolution.

9.2 Where the Exercise Price as determined above is less than the par value of the Share, the Exercise Price shall be the par value.

10. ALTERATION OF CAPITAL 10.1 If a variation in the issued share capital of the Company .whether by way of a capitalisation of pro®ts or reserves or rights issue or reduction .including any reduction arising by reason of the Company purchasing or acquiring its issued Shares), subdivision, consolidation or distribution, or otherwise howsoever) should take place, then:± .i) the Exercise Price in respect of the Shares comprised in the Option to the extent unexercised; and/or

157 .ii) the par value, class and/or number of Shares comprised in the Option to the extent unexercised and the rights attached thereto; and/or .iii) the maximum entitlement in any one Financial Year; and/or .iv) the par value, class and/or number of Shares in respect of which additional Options may be granted to Participants,

may, at the option of the Committee, be adjusted in such manner as the Committee may determine to be appropriate including retrospective adjustments where such variation occurs after the date of exercise of an Option but the Record Date relating to such variation precedes such date of exercise and, except in relation to a capitalisation issue, upon the written con®rmation of the Auditors .acting only as experts and not as arbitrators), that in their opinion, such an adjustment is fair and reasonable. However, the cancellation of issued Shares purchased or acquired by the Company during the period when a share purchase mandate granted by Shareholders of the Company .including any renewal of such mandate) is in force by way of a market purchase of such Shares undertaken by the Company on the SGX-ST shall not normally be regarded as a circumstance requiring adjustment, unless the Committee shall consider an adjustment to be appropriate, or unless the Committee determines that an adjustment should be made, having regard to market purchases of Shares undertaken by the Company from time to time during the period the share purchase mandate .or any renewal thereof) is in force.

10.2 Notwithstanding the provisions of Rule 10.1 above, no such adjustment shall be made:± .i) which would result in the Shares to be issued upon the exercise of an Option being issued at a discount to the par value and if such an adjustment would but for this sub-Clause have so resulted, the Exercise Price payable shall be the par value of a Share; .ii) if as a result, the number of Shares which a Participant shall be entitled to subscribe for pursuant to the exercise of Options granted to him shall be reduced or if such variation should give a Participant a different proportion of the equity capital as that to which he was previously entitled .except in the event of consolidation of Shares); and .iii) unless the Committee after considering all relevant circumstances considers it equitable to do so.

10.3 The issue of securities as consideration for an acquisition of any assets by the Company or a private placement of securities will not be regarded as a circumstance requiring adjustment under the provisions of this Rule 10.

10.4 Upon any adjustment required to be made, the Company shall notify each Participant .or his duly appointed personal representative.s)) in writing and deliver to him .or, where applicable, his duly appointed personal representative.s)) a statement setting forth the new Exercise Price thereafter in effect and the par value, class and/or number of Shares thereafter comprised in the Option so far as unexercised.

11. OPTION PERIOD 11.1 Options granted at the Exercise Price at no discount to the Market Price shall only be exercisable, in whole or in part .provided that an Option may be exercised in part only in respect of 1,000 Shares or any integral multiple thereof), at any time, by a Participant after the ®rst anniversary of the Offer Date of that Option provided always that Options shall be exercised before the tenth anniversary of the relevant Offer Date, in the case of Executives Options, and before the ®fth anniversary of the relevant Offer Date, in the case of Non-Executive Options, or such earlier date as may be determined by the Committee, failing which all unexercised Options shall immediately lapse and become null and void and a Participant shall have no claim against the Company.

158 11.2 Options granted with the Exercise Price set at a discount to Market Price shall only be exercisable, in whole or in part .provided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof), at any time, by a Participant after the second anniversary of the Offer Date of that Option, provided always that Options shall be exercised before the tenth anniversary of the relevant Offer Date in the case of Executive Options or the ®fth anniversary of the relevant Offer Date in the case of Non-Executive Options, or such earlier date as may be determined by the Committee, failing which all unexercised Options shall immediately lapse and become null and void and a Participant shall have no claim against the Company.

11.3 An Option shall, to the extent unexercised, immediately lapse and become null and void and a Participant shall have no claim against the Company:± .i) subject to Rules 11.4, 11.5and 11.6, upon the Participant ceasing to be in full-time employment of the Group or the Parent Group, or, being a Non-Executive Director, ceases to be a Director of the Group,or, as the case may be, for any reason whatsoever; or .ii) upon the bankruptcy of the Participant or the happening of any other event which result in his being deprived of the legal or bene®cial ownership of such Option; or .iii) in the event of misconduct on the part of the Participant, as determined by the Committee in its absolute discretion, which would be exercised judiciously.

For the purpose of Rule 11.3.i), a Participant shall be deemed to have ceased to be so employed as of the date the notice of termination of employment is tendered by or is given to him, unless such notice shall be withdrawn prior to its effective date.

11.4 If a Participant ceases to be employed by the Group or the Parent Group, as the case may be, by reason of his:± .i) ill health, injury or disability, in each case, as certi®ed by a medical practitioner approved by the Committee; .ii) redundancy; .iii) retirement at or after a normal retirement age; or .iv) retirement before that age with the consent of the Committee,

or for any other reason approved in writing by the Committee, he may, at the absolute discretion of the Committee, which would be exercised judiciously, exercise any unexercised Option within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void.

11.5If a Participant ceases to be employed by a Subsidiary or a Parent Subsidiary:± .i) by reason of the Subsidiary or the Parent Subsidiary by which he is principally employed ceasing to be a company within the Group or the Parent Group or the undertaking or part of the undertaking of such Subsidiary or Parent Subsidiary being transferred otherwise than to another company within the Group or the Parent Group; or .ii) for any other reason, provided the Committee gives its consent in writing,

he may, at the absolute discretion of the Committee, which would be exercised judiciously, exercise any unexercised Options within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void.

If a Participant dies and at the date of his death holds any unexercised Option, such Option may, at the absolute discretion of the Committee, which would be exercised judiciously, be exercised by the duly appointed legal personal representatives of the Participant within the relevant Option Period and upon the expiry of such period, the Option shall immediately lapse and become null and void.

159 12 EXERCISE OF OPTIONS, ALLOTMENT AND LISTING OF SHARES 12.1 An Option may be exercised, in whole or in part .provided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof), by a Participant giving notice in writing to the Company in or substantially in the form set out in Schedule C .the ``Exercise Notice''), subject to such modi®cations as the Committee may from time to time determine. Every Exercise Notice must be accompanied by a remittance for the full amount of the aggregate Exercise Price in respect of the Shares which have been exercised under the Option, the relevant CDP charges .if any) and any other documentation the Committee may require. All payment shall be made by cheque, cashier's order, bank draft or postal order made out in favour of the Company. An Option shall be deemed to be exercised upon the receipt by the Company of the said notice duly completed and the receipt by the Company of the full amount of the aggregate Exercise Price in respect of the Shares which have been exercised under the Option.

12.2 Subject to:± .i) such consents or other actions required by any competent authority under any regulations or enactments for the time being in force as may be necessary .including any approvals required from the SGX-ST); and .ii) compliance with the Rules of the Scheme and the Memorandum and Articles of Association of the Company,

the Company shall, as soon as practicable after the exercise of an Option by a Participant but in any event within ten .10) Market Days after the date of the exercise of the Option in accordance with Rule 12.1, allot the Shares in respect of which such Option has been exercised by the Participant and within ®ve .5) Market Days from the date of such allotment, despatch the relevant share certi®cates to CDP for the credit of the securities account of that Participant by ordinary post or such other mode of delivery as the Committee may deem ®t.

12.3 The Company shall as soon as practicable after the exercise of an Option, apply to the SGX-ST or any other stock exchange on which the Shares are quoted or listed for permission to deal in and for quotation of the Shares which may be issued upon exercise of the Option and the Shares .if any) which may be issued to the Participant pursuant to any adjustments made in accordance with Rule 10.

12.4 Shares which are all allotted on the exercise of an Option by a Participant shall be issued, as the Participant may elect, in the name of CDP to the credit of the securities account of the Participant maintained with CDP or the Participant's securities sub-account with a CDP Depository Agent.

12.5Shares allotted and issued upon the exercise of an Option shall be subject to all provisions of the Memorandum and Articles of Association of the Company and shall rank pari passu in all respects with the then existing issued Shares in the capital of the Company except for any dividends, rights, allotments or other distributions, the Record Date of which is prior to the date such Option is exercised.

12.6 Except as set out in Rule 12.2 and subject to Rule 10, an Option does not confer on a Participant any right to participate in any new issue of Shares.

12.7 The Company shall keep available suf®cient unissued Shares to satisfy the full exercise of all Options for the time being remaining capable of being exercised.

160 13 ALTERATIONS AND MODIFICATIONS TO THE SCHEME 13.1 Any or all of the provisions of the Scheme may be modi®ed and/or altered at any time and from time to time by resolution of the Committee except that:± .i) any modi®cation or alteration which shall adversely alter the rights attaching to any Option granted prior to such modi®cation or alteration, and which in the opinion of the Committee, materially alters the rights attaching to any Option granted prior to such modi®cation or alteration may only be made with the consent in writing of such number of Participants who, if they exercised their Options in full, would thereby become entitled to not less than three-quarters .3/4) in par amount of all the Shares which would fall to be issued and allotted upon exercise in full of all outstanding Options; .ii) any modi®cation or alteration which would be to the advantage of Participants under the Scheme shall be subject to the prior approval of Shareholders at a general meeting; and .iii) no modi®cation or alteration shall be made without the prior approval of the SGX-ST or .if required) any other stock exchange on which the Shares are quoted or listed, and such other regulatory authorities as may be necessary.

For the purposes of Rule 13.1.i), the opinion of the Committee as to whether any modi®cation or alteration would alter adversely the rights attaching to any Option shall be ®nal and conclusive.

13.2 Notwithstanding anything to the contrary contained in Rule 13.1, the Committee may at any time by resolution .and without any other formality save for the prior approval of the SGX-ST) amend or alter the Scheme in any way to the extent necessary to cause the Scheme to comply with any statutory provision or the provisions or the regulations of any regulatory or other relevant authority or body .including the SGX-ST).

13.3 Written notice of any modi®cation or alteration made in accordance with this Rule shall be given to all Participants.

14. DURATION OF THE SCHEME 14.1 The Scheme shall continue to be in force at the discretion of the Committee, which would be exercised judiciously, subject to a maximum period of ten .10) years, commencing on the date on which the Scheme is adopted by Shareholders in the Extraordinary General Meeting. Subject to compliance with any applicable laws and regulations in Singapore, the Scheme may be continued beyond the above stipulated period with the approval of the Shareholders by ordinary resolution at a general meeting and of any relevant authorities which may then be required.

14.2 The Scheme may be terminated at any time by the Committee or by resolution of the Shareholders at a general meeting subject to all other relevant approvals which may be required and if the Scheme is so terminated, no further Options shall be offered by the Company hereunder.

14.3 The termination, discontinuance or expiry of the Scheme shall be without prejudice to the rights accrued to Options which have been granted and accepted as provided in Rule 8, whether such Options have been exercised .whether fully or partially) or not.

161 15. TAKE-OVER AND WINDING-UP OF THE COMPANY 15.1 In the event of a take-over offer being made for the Company, Participants .including Participants holding Options which are then not exercisable pursuant to the provisions of Rule 11.1 and 11.2) holding Options as yet unexercised shall, notwithstanding Rule 11 and Rule 12 but subject to Rule 15.5, be entitled to exercise such Options in full or in part in the period commencing on the date on which such offer is made or, if such offer is conditional, the date on which the offer becomes or is declared unconditional, as the case may be, and ending on the earlier of:± .i) the expiry of six .6) months thereafter, unless prior to the expiry of such six .6) month period, at the recommendation of the offeror and with the approvals of the Committee and the SGX-ST, such expiry date is extended to a later date .being a date falling not later than the date of expiry of the Option Period relating thereto); or .ii) the date of the expiry of the Option Period relating thereto,

whereupon any Option then remaining unexercised shall immediately lapse and become null and void.

Provided always that if during such period the offeror becomes entitled or bound to exercise the rights of compulsory acquisition of the Shares under the provisions of the Act and, being entitled to do so, gives notice to the Participants that it intends to exercise such rights on a speci®ed date, the Option shall remain exercisable by the Participants until such speci®ed date or the expiry of the Option Period relating thereto, whichever is earlier. Any Option not so exercised by the said speci®ed date shall lapse and become null and void provided that the rights of acquisition or obligation to acquire stated in the notice shall have been exercised or performed, as the case may be. If such rights of acquisition or obligations have not been exercised or performed, all Options shall subject to Rule 11.3 remain exercisable until the expiry of the Option Period.

15.2 If under the Act the court sanctions a compromise or arrangement proposed for the purposes of, or in connection with, a scheme for the reconstruction of the Company or its amalgamation with another company or companies, Participants .including Participants holding Options which are then not exercisable pursuant to the provisions of Rule 11.1) shall notwithstanding Rule 11 and Rule 12 but subject to Rule 15.5, be entitled to exercise any Option then held by them during the period commencing on the date upon which the compromise or arrangement is sanctioned by the court and ending either on the expiry of sixty .60) days thereafter or the date upon which the compromise or arrangement becomes effective, whichever is later .but not after the expiry of the Option Period relating thereto), whereupon any unexercised Option shall lapse and become null and void, provided always that the date of exercise of any Option shall be before the tenth anniversary of the Offer Date.

15.3 If an order or an effective resolution is passed for the winding up of the Company on the basis of its insolvency, all Options, to the extent unexercised, shall lapse and become null and void.

15.4 In the event of a members' solvent voluntary winding up .other than for amalgamation or reconstruction), Participants .including Participants holding Options which are then not exercisable pursuant to the provisions of Rule 11.1) shall, subject to Rule 15.5, be entitled within thirty .30) days of the passing of the resolution of such winding up .but not after the expiry of the Option Period relating thereto) to exercise in full any unexercised Option, after which such unexercised Option shall lapse and become null and void.

15.5 If in connection with the making of a general offer referred to in Rule 15.1 above or the scheme referred to in Rule 15.2 above or the winding up referred to in Rule 15.4 above, arrangements are made .which are con®rmed in writing by the Auditors, acting only as experts and not as arbitrators, to be fair and reasonable) for the compensation of Participants, whether by the continuation of their Options or the payment of cash or the grant of other options or otherwise, a Participant holding an Option, which is not then exercisable, may not, at the discretion of the Committee, which would be exercised judiciously, be permitted to exercise that Option as provided for in this Rule 15.

162 15.6 To the extent that an Option is not exercised within the periods referred to in this Rule 15, it shall lapse and become null and void.

16. ADMINISTRATION OF THE SCHEME 16.1 This Scheme shall be administered by the Committee in its absolute discretion, which would be exercised judiciously, with such powers and duties as are conferred on it by the Board. The Parent Company may nominate one person to the Committee.

16.2 The Committee shall have the power, from time to time, to make or vary such regulations .not being inconsistent with this Scheme and in accordance with the provisions of the SGX-ST Listing Manual) for the implementation and administration of this Scheme as it thinks ®t.

16.3 Any decision of the Committee, made pursuant to any provision of this Scheme .other than a matter to be certi®ed by the Auditors), shall be ®nal and binding .including any decision pertaining to disputes as to the interpretation of the Scheme or any rule, regulation, or procedure thereunder or as to any rights under this Scheme).

16.4 A Grantee who is a member of the Committee shall not be involved in its deliberation in respect of Options granted or to be granted to him.

17 NOTICES 17.1 Any notice given by a Participant to the Company shall be sent by post or delivered to the registered of®ce of the Company or such other address as may be noti®ed by the Company to the Participant in writing.

17.2 Any notice or documents given by the Company to a Participant shall be sent to the Participant by hand or sent to him at his home address stated in the records of the Company or the last known address of the Participant, and if sent by post shall be deemed to have been given on the day immediately following the date of posting.

18. TERMS OF EMPLOYMENT UNAFFECTED 18.1 The Scheme or any Option shall not form part of any contract of employment between the Company, any Subsidiaries, the Parent Company and its subsidiaries and any Participant. The rights and obligations of any individual under the terms of the of®ce or employment with such company within the Group, or the Parent Company or its subsidiaries shall not be affected by his participation in the Scheme or any right which he may have to participate in it or any Option which he may hold. The Scheme or any Option shall afford such an individual no additional rights to compensation or damages in consequence of the termination of such of®ce or employment for any reason whatsoever.

18.2 The Scheme shall not confer on any person any legal or equitable rights .other than those constituting the Options themselves) against the Company, any Subsidiaries, the Parent Company or any of its subsidiaries directly or indirectly or give rise to any cause of action at law or in equity against the Company and/or any Subsidiaries and/or the Parent Company and/ or its subsidiaries.

19. TAXES All taxes .including income tax) arising from the exercise of any Option granted to any Participant under the Scheme shall be borne by the Participant.

163 20. COSTS AND EXPENSES OF THE SCHEME 20.1 Each Participant shall be responsible for all fees of CDP relating to or in connection with the issue and allotment of any Shares pursuant to the exercise of any Option in CDP's name, the deposit of share certi®cate.s) with CDP, the Participant's security account with CDP or the Participant's securities sub-account with his Depository Agent and all taxes referred to in Rule 19 which shall be payable by the relevant Participant.

20.2 Save for such costs and expenses expressly provided in the Scheme to be payable by the Participants, all fees, costs, and expenses incurred by the Company in relation to the Scheme including but not limited to the fees, costs and expenses relating to the issue and allotment of the Shares pursuant to the exercise of any Option shall be borne by the Company.

21. DISCLAIMER OF LIABILITY Notwithstanding any provisions herein contained and subject to the Act, the Board, the Committee and the Company shall not under any circumstances be held liable for any costs, losses, expenses and damages whatsoever and howsoever arising in respect of any matter under or in connection with the Scheme including but not limited to the Company's delay or failure in issuing and allotting the Shares or in applying for or procuring the listing of and quotation for the Shares on the SGX-ST or any other stock exchanges on which the Shares are quoted or listed.

22. DISPUTES Any disputes or differences of any nature in connection with the Scheme shall be referred to the Committee and its decision shall be ®nal and binding in all respects.

23. CONDITION OF OPTION Every Option shall be subject to the condition that no Shares shall be issued pursuant to the exercise of an Option if such issue would be contrary to any law or enactment, or any rules or regulations of any legislative or non-legislative governing body for the time being in force in Singapore or any other relevant country.

24. DISCLOSURE IN ANNUAL REPORT The Company shall make the following disclosure in its annual report:± .a) The names of the members of the Committee; .b) The information required in the table below for the following Participants:± .i) Directors of the Company; and .ii) Participants, other than those in Rule 24.b).i) above, who receive ®ve per cent. or more of the total number of Options available under the Scheme;

Name of Options granted Aggregate Aggregate Aggregate Participant during financial Options granted Options Options year under since exercised since outstanding as review commencement commencement at end of :including of Scheme to of Scheme to financial year terms) end of financial end of financial under review year under year under review review

164 .c) .i) the names and number and terms of options granted to each Parent Group Executive or Parent Group Director who receives 5% or more of the total number of options available to Parent Group Executives and Parent Group Directors under the Scheme, during the ®nancial year under review; and .ii) the aggregate number of options granted to Parent Group Executives and Parent Group Directors for the ®nancial year under review, and since the commencement of the Scheme to the end of the ®nancial year under review; .d) .i) the numbers and proportion of options granted at a discount of ten per cent or less to the market price during the ®nancial year under review; and .ii) the numbers and proportion of options granted at a discount of more than ten per cent to the market price during the ®nancial year under review.

25. GOVERNING LAW The Scheme shall be governed by and construed in accordance with the laws of the Republic of Singapore. The Company and the Participants, by accepting the offer of the grant of Options in accordance with the Scheme, submit to the exclusive jurisdiction of the courts of the Republic of Singapore.

165 SCHEDULE A

CHINA AVIATION OIL SHARE OPTION SCHEME

LETTER OF OFFER

Serial No:______

PRIVATE AND CONFIDENTIAL

Date:

To: Name PRIVATE AND CONFIDENTIAL Designation Address

Dear Sir/Madam

We are pleased to inform you that you have been nominated by the Committee of the Board of Directors of China Aviation Oil .Singapore) Corporation Ltd .the ``Company'') to participate in the China Aviation Oil Share Option Scheme .the ``Scheme''). Terms as de®ned in the Scheme shall have the same meaning when used in this letter.

Accordingly, an offer is hereby made to grant you an Option, in consideration of the payment of a sum of $1.00, to subscribe for and be allotted ______ordinary shares of $0.05each in the capital of the Company at the price of $______per ordinary share. The Option shall be subject to the terms of this Letter of Offer and the Scheme .as the same may be amended from time to time pursuant to the terms and conditions of the Scheme), a copy of which is enclosed herewith.

The Option is personal to you and may not be sold, mortgaged, transferred, charged, assigned, pledged or otherwise disposed of or encumbered in whole or in part or in any way whatsoever.

If you wish to accept the offer, please sign and return the enclosed Acceptance Form with a sum of $1.00 not later than ______a.m./p.m. on the ______day of ______[year] ______failing which this offer will forthwith lapse.

Yours faithfully For and on behalf of China Aviation Oil .Singapore) Corporation Ltd

______Name: Designation:

166 SCHEDULE B

CHINA AVIATION OIL SHARE OPTION SCHEME

ACCEPTANCE FORM

Serial No:______

To: The Committee China Aviation Oil Share Option Scheme c/o The Company Secretary 8 Temasek Boulevard #31-02 Suntec Tower Three Singapore 038988

Closing Time and Date for Acceptance of Option : ______

No. of Shares in respect of which Option is offered : ______

Exercise Price per Share : $ ______

Total Amount Payable on acceptance of Option : $ ______.exclusive of the relevant CDP charges)

I have read your Letter of Offer dated ______.the ``Offer Date'') and agree to be bound by the terms thereof and of the China Aviation Oil Share Option Scheme stated therein. I con®rm that my acceptance of the Option will not result in the contravention of any applicable law or regulation in relation to the ownership of shares in the Company or options to subscribe for such shares.

I hereby accept the Option to subscribe for ______ordinary shares of $0.05each in the capital of China Aviation Oil .Singapore) Corporation Ltd .the ``Shares'') at $ ______per Share and enclose *cash/banker's draft/cashier's order/postal order no. ______for $1.00 being payment for the purchase of the Option.

I understand that I am not obliged to exercise the Option.

I also understand that I shall be responsible for all the fees of CDP relating to or in connection with the issue and allotment of any Shares in CDP's name, the deposit of share certi®cates with CDP, my securities account with CDP or my securities sub-account with a CDP Depository Agent .as the case may be) .collectively, the ``CDP charges'').

I con®rm that as at the date hereof:± .a) I am not less that 21 years old nor an undischarged bankrupt nor have I entered into a composition with any of my creditors; .b) I satisfy the eligibility requirements to participate in the Scheme as de®ned in Rule 4 of the Scheme; and .c) I satisfy the other requirements to participate in the Scheme as set out in the Rules of the Scheme.

I con®rm that I am not a Controlling Shareholder or an associate of a Controlling Shareholder.

167 I hereby acknowledge that you have not made any representation or warranty or given me any expectation of employment or continued employment to induce me to accept the offer and that the terms of the Letter of Offer and this Acceptance Form constitute the entire agreement between us relating to the offer.

I agree to keep all information pertaining to the grant of the Option to me con®dential.

PLEASE PRINT IN BLOCK LETTERS Name in full : ______

Designation : ______

Address : ______

Nationality : ______

*NRIC/Passport No. : ______

Signature : ______

Date : ______

* Delete as appropriate

Notes:± 1. Option must be accepted in full or in multiples of 1,000 Shares. 2. The Acceptance Form must be forwarded to the Company Secretary in an envelope marked ``Private and Con®dential''. 3. The Participant shall be informed by the Company of the relevant CDP charges payable at the time of the exercise of an Option.

168 SCHEDULE C

CHINA AVIATION OIL SHARE OPTION SCHEME

EXERCISE NOTICE

To : The Committee China Aviation Oil Share Option Scheme c/o The Company Secretary 8 Temasek Boulevard #31-02 Suntec Tower Three Singapore 038988

Total Number of ordinary shares of $0.05each .the ``Share'') at $ ______per Share under an Option granted on ______.the ``Offer Date'') : ______

Number of Shares previously allotted and issued thereunder : ______

Outstanding balance of Shares which may be allotted and issued thereunder : ______

Number of Shares now to be subscribed .in multiples of 1,000) : ______

1. Pursuant to your Letter of Offer dated ______.the ``Offer Date'') and my acceptance thereof, I hereby exercise the Option to subscribe for Shares in China Aviation Oil .Singapore) Corporation Ltd .the ``Company'') at $______per Share.

2. I hereby request the Company to allot and issue to me the number of Shares speci®ed in paragraph 1 in the name of The Central Depository .Pte) Limited .``CDP'') to the credit of my *Securities Account with a CDP/* Securities Sub-Account with a CDP Depository Agent speci®ed below and to deliver the share certi®cates relating thereto to CDP at my own risk. I further agree to bear such fees or other charges as may be imposed by CDP .the ``CDP charges'') and any stamp duties in respect thereof:±

*.a) Direct Securities Account Number : ______

*.b) Securities Sub-Account Number : ______

Name of CDP Depository Agent : ______

3. I enclose a *cheque/cashier's order/bank draft/postal order no. ______for $______in payment for the subscription of $______for the total number of the said Shares and the CDP charges of $ ______.

4. I agree to subscribe for the Shares subject to the terms of the Letter of Offer, the China Aviation Oil Share Option Scheme .as the same may be amended pursuant to the terms thereof from time to time) and the Memorandum and Articles of Association of the Company.

5. I declare that I am subscribing for the Shares for myself and not as a nominee for any other person.

169 PLEASE PRINT IN BLOCK LETTERS Name in full : ______

Designation : ______

Address : ______

Nationality : ______

*NRIC/Passport No. : ______

Signature : ______

Date : ______

* Delete as appropriate

Note:± 1. An Option may be exercised in whole or in part provided that an Option may be exercised in part only in respect of 1,000 Shares or any multiple thereof. The form entitled ``Exercise Notice'' must be forwarded to the Company Secretary in an envelope marked ``Private and Con®dential''.

170 APPENDIX III

DESCRIPTION OF SHARE CAPITAL

The discussion below provides information about our share capital, the main provisions of our Articles of Association and the laws of Singapore. This description is only a summary and is quali®ed by reference to Singapore law and our Articles of Association.

New ordinary shares New ordinary shares may only be issued with the prior approval in a general meeting of our shareholders. The approval, if granted, will lapse at the conclusion of the annual general meeting following the date on which the approval was granted or the expiration of the period within which the next Annual General Meeting after that date is required by law to be held, whichever is the earlier. However, any approval may be revoked or varied by our shareholders in general meeting.

Subject to any direction to the contrary that may be given by our shareholders in general meeting, we are required, before issue, to offer all new shares to persons who as the date of the offer are entitled to receive notices from us of general meetings in proportion, as far as the circumstances admit, to the amount of the existing shares to which they are entitled. We are required to make the offer by notice specifying the number of shares offered, and limiting a time within which the offer may be accepted and, if not accepted will be deemed to be declined. After the expiration of that time, or on the receipt of an intimation from the person to whom the offer is made that he declines to accept the shares offered, our directors may dispose of those shares in such manner as they think most bene®cial to us. Our directors may likewise dispose of any new shares which .by reason of the ratio which the new shares bear to shares held by persons entitled to an offer of new shares) cannot, in the opinion of our directors, be conveniently offered in accordance with our Articles of Association.

Subject to the Singapore Companies Act and subject to the SGX-ST waiving the requirement to convene a general meeting, we may, notwithstanding the provisions of the paragraph immediately above, issue new shares without ®rst offering them to our shareholders in proportion to the existing shares to which they are entitled, where the aggregate of the shares in any one ®nancial year .other than by way of bonus or rights issues) does not exceed 20% of our prevailing share capital. Our shareholders have given us general authority to issue any remaining approved but unissued ordinary shares prior to our next annual general meeting.

Shareholders Only persons who are registered in our register of shareholders and, in cases in which the person so registered is The Central Depository .Pte) Limited, or the CDP, the persons named as the depositors in the depository register maintained by the CDP for our ordinary shares, are recognised as shareholders.

For the purpose of determining the number of votes which a shareholder who is an account-holder directly with the CDP or a depository agent, or his proxy, may cast at any general meeting on a poll, the reference to shares held or represented shall, in relation to shares of that shareholder, be the number of shares entered against his name in the register maintained with CDP as at 48 hours before the time of the relevant general meeting as supplied by CDP to us.

We will not, except as required by law, recognise any equitable, contingent, future or partial interest in any ordinary share or other rights for any ordinary share other than the absolute right thereto of the registered holder of the ordinary share or of the person whose name is entered in the depository register for that ordinary share. We may close the register of shareholders for any time or times if we provide the Registrar of Companies and Business of Singapore at least 14 days' notice. However, the register may not be closed for more than 30 days in aggregate in any calendar year. We typically close the register to determine shareholders' entitlement to receive dividends and other distributions for no more than 10 days a year.

171 Transfer of ordinary shares Our Board of Directors may decline to register my transfer of ordinary shares which are not fully paid shares or ordinary shares on which we have a lien. Ordinary shares may be transferred by a duly signed instrument of transfer in any form acceptable to our Board of Directors. The instrument of transfer will include a declaration by the transferee stating whether the transfer will result in the transferee holding, directly or indirectly, more than 5% of our issued share capital. If our Board of Directors are of the opinion that a person or a related group of persons have an interest, directly or indirectly, in more than 5% of our issued share capital without their prior approval, our Directors may require that person or the related group of' persons to transfer the number of shares exceeding 5% of our issued share capital. Our Board of Directors may also decline to register any instrument of transfer unless, among other things, it has been duly stamped and is presented for registration together with the share certi®cate and such other evidence of' title as they may require. We will replace lost or destroyed certi®cates for ordinary shares if we are properly noti®ed and if tile applicant pays a fee which will not exceed S$2 and furnishes any evidence and indemnity that our Board of Directors may require.

General meetings of shareholders We are required to hold an annual general meeting every year and not more than 15months after the preceding annual general meeting. Our Board of' Directors may convene an extraordinary general meeting whenever it thinks ®t and must do so if shareholders representing not less than 10% of the total voting rights of all shareholders request in writing that such a meeting be held. In addition, two or more shareholders holding not less than 10% of our issued share capital may call a meeting. Unless otherwise required by law or by our Articles of Association, voting at general meetings is by ordinary resolution, requiring an af®rmative vote of a simple majority of the votes cast at that meeting.

An ordinary resolution suf®ces, for example, for the appointment of directors. A special resolution, requiring the af®rmative vote of at least 75% of the votes cast at the meeting, is necessary for certain matters under Singapore law, including the voluntary winding up of the company, amendments to our Memorandum and Articles of Association, a change of' our corporate name and a reduction in our share capital, share premium account or capital redemption reserve fund. We must give at least 21 days' notice in writing for every general meeting convened for the purpose of passing a special resolution. Ordinary resolutions generally require at least 14 days' notice in writing. The notice must be given to every shareholder holding shares conferring the right to attend and vote at the meeting and must set forth the place, the day and the hour of the meeting and, in the case of special business, the general nature of that business.

Voting rights A shareholder is entitled to attend, speak and vote at any general meeting, in person or by proxy. A proxy need not be a shareholder. A person who holds ordinary shares through the CDP book-entry clearance system will only be entitled to vote at a general meeting as a shareholder if his name appears on the depository register maintained by CDP 48 hours before the general meeting.

Except as otherwise provided in our Articles of Association, two or more shareholders must be present in person or by proxy to constitute a quorum at any general meeting. Under our Articles of Association, on a show of hands, every shareholder present in person and each proxy shall have one vote, and on a poll, every shareholder present in person or by proxy shall have one vote for each ordinary share held. A poll may be demanded in certain circumstances, including by the chairman of the meeting or by any shareholder present in person or by proxy and representing not less than 10% of the total voting rights of all shareholders having the right to attend and vote at the meeting or by any two shareholders present in person or by proxy and entitled to vote.

Dividends We may, by ordinary resolution, declare dividends at a general meeting, but we may not pay dividends in excess of the amount recommended by our Board of Directors. All dividends we declare must be paid out of our pro®ts, which would generally comprise retained earnings, or pursuant to Section 69.2) .c) of the Singapore Companies Act, which permits the application of the share premium attributable

172 to our issued shares to the payment of dividends in the form of shares. Our Board of Directors may also declare an interim dividend without the approval of our shareholders. All dividends are paid pro rata among the shareholders in proportion to the amount paid up on each shareholder's ordinary shares, unless the rights attaching to an issue of any ordinary share provides otherwise.

Bonus and rights issue Our Board of Directors may, with the approval of our shareholders at a general meeting, capitalise any reserves or pro®ts .including pro®t or monies carried and standing to any reserve or to the share premium account) and distribute the same as bonus shares credited as paid-up to the shareholders in proportion to their shareholdings. Our Board of Directors may also issue rights to take up additional ordinary shares to shareholders in proportion to their shareholdings. Such rights are subject to any conditions attached to such issue.

Takeovers The Singapore Companies Act and the Singapore Code on Takeovers and Mergers regulate the acquisition of ordinary shares of public companies and contain certain provisions that may delay, deter or prevent a future takeover or change in control of our company. Any person acquiring an interest Ð either singly or acting in concert with others in 25% or more of our voting shares must extend a takeover offer for the remaining voting shares in accordance with the provisions of the Singapore Code on Take-overs and Mergers.

``Parties acting in concert'' include a company and its related and associated companies, a company and its directors .including their relatives), a company and its pension funds, a person and any investment company, unit trust or other fund whose investment such person manages on a discretionary basis, and a ®nancial advisor and its client in respect of shares held by the ®nancial advisor and shares in the client held by funds managed by the ®nancial advisor on a discretionary basis. An offer for consideration other than cash must be accompanied by a cash alternative at not less than the highest price paid by the offeror or parties acting in concert with the offeror within the preceding 12 months. A mandatory takeover offer is also required to be made if a person holding .either singly or acting in concert with others) between 25% and 50% of the voting shares acquires additional voting shares representing more than 3% of the voting shares in any 12-month period.

Liquidation or other return of capital If our company liquidates or in the event of any other return of capital, holders of ordinary shares will be entitled to participate in any surplus assets in proportion to their shareholdings, subject to any special rights attaching to any other class of shares then existing.

Indemnity As permitted by Singapore law, our Articles of Association provide that, subject to the Singapore Companies Act, we will indemnify our Board of Directors and of®cers against any liability incurred in defending any proceedings, whether civil or criminal, which relate to anything done or omitted to have been done as an of®cer, director or employee and in which judgement is given in his favour or if the proceedings are otherwise disposed of without any ®nding or admission of any material breach of duty on his part or in which he is acquitted or in connection with any application under any statute for relief is granted to him by the court. We may not indemnify directors and of®cers against any liability which by law would otherwise attach to them in respect of any negligence, default, breach of duty or breach of trust of which they may be guilty in relation to our company.

Limitations on rights to hold or vote ordinary shares Except as described in ``Voting Rights'' and ``Takeovers'' above, there are no limitations imposed by Singapore law or by our Articles of Association on the rights of non-resident shareholders to hold or vote ordinary shares.

173 Minority rights The rights of' minority shareholders of Singapore-incorporated companies are protected under Section 216 of the Singapore Companies Act, which gives the Singapore courts a general power to make an order, upon application by any shareholder of our company, as they think fit to remedy any of the following situations:± . our affairs are being conducted or the powers of our Board of Directors are being exercised in a manner oppressive to, or in disregard of the interests of, one or more of our shareholders; or . we take an action, or threaten to take an action, or the shareholders pass a resolution, or threaten to pass a resolution, which unfairly discriminates against, or is otherwise prejudicial to, one or more of our shareholders, including the applicant.

Singapore courts have wide discretion as to the relief they may grant and that relief is in no way limited to the relief listed in the Singapore Companies Act. Without prejudice to the foregoing, Singapore courts may among other things:± . direct or prohibit any act or cancel or vary any transaction or resolution; . regulate our affairs in the future; . authorise civil proceedings to be brought in the name of, or on behalf of, the company by a person or persons and on such terms as the court may direct; . provide for the purchase of a minority shareholder's shares by our other shareholders or by our company and, in the case of a purchase of shares by us, a corresponding reduction of our share capital; or . provide that our company be wound up.

174 APPENDIX IV

SUMMARY OF MATERIAL CHANGES TO THE PRELIMINARY PROSPECTUS DATED 13 NOVEMBER 2001

Our Company issued a Preliminary Prospectus dated 13 November 2001 the ``Preliminary Prospectus''). The ®nal prospectus the ``Final Prospectus'') contains certain material changes to the Preliminary Prospectus as follows:±

1) Changes to the Reserved Shares Structure In the Preliminary Prospectus, the Reserved Shares were to have been reserved for the Directors, management, employees, business associates and others who had contributed to the success of the Group. The Reserved Shares will now only be reserved for the management and employees of the Group

2) Changes to forecast revenue The forecast revenue for FY2001 has been amended to $1,085 million and the percentage increase from the revenue for FY2000, to 12.6% in the sections ``Our Financial Performance'' on page 14 and ``Pro®t Forecast'' on page 44. Furthermore, the amount of increase has been amended to $121.3 million in the section ``Pro®t Forecast'' on page 44.

3) Changes to section on Shareholders A negative statement to the effect that none of the Directors of the Company or his/her associates as de®ned in the SGX-STListing Manual) will subscribe for any of the Invitation Shares and that none of the employees of the Company will act as nominee on behalf of the Directors and/or his/her associates, has been added to the section under ``Ownership Structure'' on page 86.

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