FEDERAL INTERNATIONAL (2000) LTD (Company Registration No. 199907113K) (Incorporated in the Republic of Singapore)

PROPOSED DISPOSAL OF VESSEL

1.

INTRODUCTION The board of directors (the “Board”) of Federal International (2000) Limited (the “Company”) wishes to announce that Federal Offshore Services Pte Ltd (the “Vendor”), in which the Company owns 60% of the issued and paid-up share capital, has entered into a sale and purchase agreement (the “Sale and Purchase Agreement”) with PT Sinar Mentari Prima (“PT Sinar”), PT Multiline Shipping Services (“PT Multiline”) and PT Saratoga Sentra Business (“PT SSB”) (collectively the “Purchasers”), pursuant to which, inter alia, the Purchasers will purchase, through a nominated company (“Nominated Company”) or PT Pelayaran Antarbuwana Pertala (“PTAP”) (as the vehicle of the Purchasers) from the Vendor for a consideration of US$29,100,000 the “FSO Federal I” (the “Vessel”), which is currently owned by the Vendor (the “Proposed Transaction”).

2.

INFORMATION ON THE VESSEL The Vessel was acquired by the Vendor in its ordinary course of business in 2006 using the proceeds from the private placement, which was undertaken by the Company in 2006. The Vessel is currently chartered to Petrochina International Jabung Ltd. (“Petrochina”) under an agreement entered into between (a) PTAP, the Vendor and KK Marine Inc. (“KKM”), a subsidiary of the Vendor (the “Consortium”) and (b) Petrochina.

3.

THE SALE AND PURCHASE AGREEMENT

3.1

Purchase Consideration: The purchase price of the Vessel payable by the Purchasers under the Sale and Purchase Agreement is US$29,100,000 (the “Purchase Consideration”).

3.2

Basis for determining the Purchase Consideration: The Purchase Consideration was arrived at on an arm’s length “willing buyer, willing seller” basis.

3.3

Terms of payment: The Purchase Consideration will be satisfied in the following manner: (a)

US$2,910,000, representing 10% of the Purchase Consideration (the “Down Payment”) will be paid within five (5) business days from the date of the Sale and Purchase Agreement; and

(b)

US$26,190,000, representing the balance of the Purchase Consideration of US$26,190,000 (the “Balance”) will be paid within three (3) business 1

days before the closing date which may not be later than sixty (60) days from the receipt by the Vendor of the Down Payment (“Closing Date”). As at the date of the announcement, the Purchasers have paid the Down Payment. 3.4

The proceeds from the Purchase Consideration will be applied first towards total satisfaction of the debt secured by the existing mortgage over the Vessel and other securities and the remainder will be for the Vendor’s own account.

4.

MATERIAL CONDITIONS TO THE PROPOSED TRANSACTION

4.1

The Proposed Transaction is subject to the closing of the acquisition of PTAP by PT Multiline (“Acquisition”).

4.2

Conditions Precedent: Under the terms of the Sale and Purchase Agreement, closing of the Proposed Transaction is conditional upon the fulfilment of the following conditions precedent by the Closing Date: (a)

approvals of the board of directors of the Vendor and the Company, and if required under the listing rules of the Singapore Exchange Securities Trading Limited (“SGX-ST”), the approval of the shareholders of the Company (the “Shareholders”) of the Proposed Transaction;

(b)

receipt of the Petrochina approval as set out in paragraph 4.3 below; and

(c)

independent report(s) on the results of the due diligence, which is satisfactory to the Purchasers. The results of the due diligence will be deemed to be satisfactory if they do not disclose any material or substantial inaccuracies in the Vendor’s representations and warranties.

If any of the conditions precedent is not fulfilled by the Closing Date or if the Vendor fails to complete notwithstanding that the conditions precedent have been fulfilled, the Purchasers may by written notice to the Vendor terminate the Sale and Purchase Agreement and, depending on which conditions precedent were not satisfied and subject to further conditions in the Sale and Purchase Agreement, the Vendor must: (i)

return the Down Payment with interest to the Purchasers;

(ii)

purchase the shares of PTAP within four (4) business days after the date of closing of the Acquisition, for a price not exceeding the shares purchase price paid by PT Multiline; and/or

(iii)

pay the Purchasers damages, if any, which shall be capped at an amount equivalent to 10% of the Down Payment.

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4.3

Petrochina Approval: The Vendor will as soon as possible upon settlement of the Down Payment by the Purchasers, inform Petrochina of the Proposed Transaction, and use reasonable endeavours to obtain approval from Petrochina, for, among others, the assignment of the respective rights and obligations of the Vendor and KKM pursuant to the Consortium and the charter agreements to the Nominated Company or PTAP (as the case may be); and the release and discharge of the Vendor and KKM from all obligations, liabilities and responsibilities in respect of the charter with effect on and from the Closing Date.

4.4

Closing: Closing of the Proposed Transaction will take place on the Closing Date, immediately following, and on the same day as, the closing of the Acquisition.

5.

RATIONALE FOR THE PROPOSED TRANSACTION The Board is of the view that the Proposed Transaction is in the best interests of the Company and the Shareholders as: (a)

due to Indonesian law requirements, the Vessel, which is currently operating in Indonesian waters pursuant to the charter to Petrochina, will be required to fly the Indonesian flag. Currently, no member of the Group qualifies for majority ownership of an Indonesian-flagged vessel;

(b)

the Purchase Consideration takes into account the proper market value of the Vessel; and

(c)

the gain from the Proposed Transaction will improve the liquidity of the Company and its subsidiaries.

6.

FINANCIAL EFFECTS OF THE PROPOSED TRANSACTION

6.1

Use of proceeds: The net proceeds from the disposal of the Vessel will be used to repay bank loans, thus improving the working capital of the Group.

6.2

Book value: The carrying net book value of the Vessel in the accounts of the Group is approximately US$19,610,000 as at 30 September 2010. On completion of the Proposed Transaction, the Company will realise an estimated net gain of approximately US$4,074,000.

6.3

Net Tangible Asset (“NTA”) per Share: (a)

For illustration purposes, assuming that the Proposed Transaction had taken place on 31 December 2009 being the end of the most recently completed financial year (for which financial results are available) and based on the audited consolidated financial statements of the Group at 31 December 2009, the Proposed Transaction would have had the following effect on the Group’s NTA as presented in the table below: -

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S$’000 NTA (S$ million)

Before Proposed Transaction 109.3

After Proposed Transaction 114.7

22.97

24.10

NTA per share (cents)

(b)

For illustration purposes, assuming that the Proposed Transaction had taken place on 30 September 2010, the Proposed Transaction would have had the following effect on the Group’s NTA as presented in the table below: -

S$’000 NTA (S$ million)

Before Proposed Transaction 101.1

After Proposed Transaction 106.4

18.76

19.76

NTA per share (cents)

6.4

Earnings per Share (“EPS”): (a)

For illustration purposes, assuming that the Proposed Transaction had been completed on 1 January 2009, being the beginning of the most recently completed financial year (for which financial results are available) and based on the audited consolidated financial statements of the Group for financial year ended 31 December 2009, the Proposed Transaction would have had the following effects on the Group’s EPS as presented in the following table: -

For FY 2009

Before Proposed Transaction (12,859)

After Proposed Transaction (7,496)

420,382

420,382

Basic

(3.06)

(1.78)

Fully Diluted

(3.06)

(1.78)

Group Loss after tax (S$’000) Weighted Average Number of shares EPS (cents):

(b)

For illustration purposes, assuming that the Proposed Transaction had been completed on 30 September 2010, the Proposed Transaction would have had the following effects on the Group’s EPS as presented in the following table: 4

As at 30 September 2010 Group Loss after tax (S$’000)

Before Proposed Transaction (9,088)

After Proposed Transaction (3,725)

517,861

517,861

Basic

(1.75)

(0.72)

Fully Diluted

(1.75)

(0.72)

Weighted Average Number of shares EPS (cents):

7.

INTERESTS OF DIRECTORS AND CONTROLLING SHAREHOLDERS None of the directors or controlling Shareholders of the Company has any interest, whether direct or indirect, in the Proposed Transaction other than through their shareholdings in the Company.

8.

APPROVAL OF THE SHAREHOLDERS

8.1

Rule 1006 of the Listing Manual: The relative figures computed on the bases set out in the Rule 1006 of the Listing Manual are as follows: Rule 1006(a) – the net asset value of the assets to be disposed of, compared with the Group’s net asset value.

17.3%

Rule 1006(b) – The net profits attributable to the assets disposed, compared with Group’s net profits.

(14.9)%1

Rule 1006(c) – The aggregate value of the consideration given, compared with the Company’s market capitalisation based on the total number of issued shares excluding treasury shares.

50.7%2

Rule 1006(d) – The number of equity securities issued by the Company as consideration for an acquisition, compared with the number of equity securities previously in issue.

This basis of computation is not applicable as no equity securities will be issued.

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Note: 1.

The net profit attributable to the Vessel for the 9 months ended 30 September 2010 (assuming that the Proposed Transaction was completed on 30 September 2010) would have been S$2,271,000. The Group’s net loss before tax for 9 months ended 30 September 2010 is S$15,269,000. The relative figure for the net profit attributable to the Vessel compared to the Group’s net loss is S$2,271,000/ S$15,269,000, which is equivalent to a negative 14.9%.

2.

The aggregate value of consideration given is S$39,495,000. The Company’s market capitalisation as at 21 January 2011 is S$77,864,000. The relative figure for the aggregate value of consideration received compared to the Company’s market capitalisation is S$39,495,000/ S$77,864,000, which is equivalent to 50.7%.

As the relative figures under Rules 1006(b) and 1006(c) of the Listing Manual exceed 20%, the Proposed Transaction constitutes a major transaction as defined in Chapter 10 of the Listing Manual. Accordingly, the Proposed Transaction is subject to approval of the Shareholders in a general meeting. 8.2

Extraordinary General Meeting: A circular setting out further information and details of the Proposed Transaction, together with a notice of the extraordinary general meeting to be convened, will be despatched to the Shareholders in due course.

9.

DOCUMENTS FOR INSPECTION Copies of the Sale and Purchase Agreement and the annual report of the Group for financial year 2009 are available for inspection by Shareholders during normal business hours at the registered address of the Company at 47 Genting Road Singapore 349489, for a period of three (3) months from the date of this announcement.

By Order of the Board Koh Kian Kiong Executive Chairman & CEO 24 January 2011

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