circular dated 1 february 2008 this circular is … · recommendation of the judicial managers........

CIRCULAR DATED 1 FEBRUARY 2008

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

IF YOU ARE IN ANY DOUBT AS TO THE ACTION YOU SHOULD TAKE, YOU SHOULD CONSULT YOUR STOCKBROKER,BANK MANAGER, SOLICITOR, ACCOUNTANT OR OTHER PROFESSIONAL ADVISER IMMEDIATELY.

Capitalised terms appearing on the cover of this Circular have the same meanings as defined in the section entitled “Definition”of this Circular.

If you have sold or transferred all your Shares in the capital of NEOCORP INTERNATIONAL LTD. (the “Company”), you shouldforward this Circular, the Notice of Extraordinary General Meeting and the attached Proxy Form immediately to the purchaser ortransferee or to the stockbroker or agent through whom you effected the sale for onward transmission to the purchaser ortransferee.

The SGX-ST assumes no responsibility for the correctness of any statements made, reports contained or opinions expressed inthis Circular. The approval in-principle granted by the SGX-ST to the Company for the listing of and quotation for ComplianceShares, Consideration Shares, Loan Conversion Shares, Tritech Shares and Scheme Shares on the SGX-ST is not to be takenas an indication of the merits of the Proposed Acquisition, the Proposed Compliance Placement, the Convertible Loan, theScheme, the Company, the Enlarged Group, the Shares, Compliance Shares, Consideration Shares, Loan Conversion Shares,Tritech Shares and Scheme Shares.

YOUR ATTENTION IS DRAWN TO THE SECTION ENTITLED “RISK FACTORS” OF THIS CIRCULAR WHICH YOU SHOULDREVIEW CAREFULLY.

NEOCORP INTERNATIONAL LTD.(IN JUDICIAL MANAGEMENT)(Registration No. 198902648H)

(Incorporated in the Republic of Singapore)

CIRCULAR TO SHAREHOLDERS

in relation to:

1. The Proposed Pre-Acquisition Consolidation;

2. The proposed allotment and issue of 5,350,000 new Pre-Acquisition Shares pursuant to the conversion ofS$160,500 of the Tritech Loan into Shares at the rate of S$0.03 for each Pre-Acquisition Share in satisfaction ofthe repayment obligations under the loan agreement pertaining to the Tritech Loan;

3. The proposed allotment and issue of up to 64,726,000 new Pre-Acquisition Shares to the Creditors pursuant tothe terms of the Scheme of Arrangement;

4. The Proposed Capital Reduction;

5. The proposed allotment and issue of up to 100,000,000 new Pre-Acquisition Shares to the Vendors pursuant tothe Convertible Loan Agreement;

6. The proposed acquisition of the Sale Shares and the allotment and issue of the Consideration Shares;

7. The Proposed Post-Acquisition Consolidation;

8. The proposed allotment and issue of up to 172,932,000 new Shares in connection with the completion of theProposed Compliance Placement, for the purpose of meeting the shareholding distribution requirements of theListing Manual;

9. The proposed change of name of the Company from “Neocorp International Ltd.” to “Novo Group Ltd.”; and

10. The proposed Whitewash Resolution.

Financial Adviser to the Company

Mitsubishi UFJ Securities (Singapore), Limited(Registration No. 198502290M)


Independent Financial Adviser in respect of the Whitewash Resolution

Phillip Securities Pte Ltd(Registration No. 197501035Z)


IMPORTANT DATES AND TIMES

Last date and time for lodgement of Proxy Form : 25 February 2008 at 10.00 a.m.

Date and time of Extraordinary General Meeting : 27 February 2008 at 10.00 a.m.

Place of Extraordinary General Meeting : Singapore Management UniversityLee Kong Chian School of BusinessSeminar Room 2.5 (Level 2)81 Victoria StreetSingapore 188065

CORPORATE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

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

EXCHANGE RATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS . . . . . . . . . . . . . 16

LETTER TO SHAREHOLDERS

1. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

2. SUMMARY OF PROPOSED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

2.1 Proposed Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

2.2 Proposd Pre-Acquisition Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

2.3 Proposed Allotment and Issue of Tritech Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

2.4 Proposed Allotment and Issue of the Scheme Shares . . . . . . . . . . . . . . . . . . . . . . . 22

2.5 Proposed Capital Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

2.6 Proposed Acquisition of the Sale Shares and the Allotment and Issue of theConsideration Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

2.7 Proposed Allotment and Issue of the Loan Conversion Shares. . . . . . . . . . . . . . . . . 22

2.8 Proposed Post-Acquisition Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

2.9 Proposed Allotment and Issue of Compliance Shares . . . . . . . . . . . . . . . . . . . . . . . 23

2.10 Proposed Change of Name of the Company from “Neocorp International Ltd.” to “NovoGroup Ltd.” . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

2.11 Proposed Whitewash Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

2.12 Purpose of this Circular. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

3. PROPOSED OUTSTANDING DEBTS CONVERSION . . . . . . . . . . . . . . . . . . . . . . . 24

3.1 Scheme of Arrangement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

3.2 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

3.3 List of Creditors and Outstanding Debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25

4. PROPOSED PRE-ACQUISITION CONSOLIDATION . . . . . . . . . . . . . . . . . . . . . . . . 26

4.1 Proposed Pre-Acquisition Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

4.2 Conditions Precedent for the Proposed Pre-Acquisition Consolidation . . . . . . . . . . . 26

4.3 Updating of Register of Members and Depository Register for the Shares . . . . . . . . 26

4.4 Deposit of Share Certificates with CDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

4.5 Issue of New Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

4.6 Share Certificates Not Valid for Settlement of Trades on SGX-ST . . . . . . . . . . . . . . 27

4.7 Trading Arrangements for the Pre-Acquisition Shares . . . . . . . . . . . . . . . . . . . . . . . 28

4.8 Trading Arrangements for Odd Lots. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

TABLE OF CONTENTS

i

5. PROPOSED ACQUISITION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

5.1 The Novo SPA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

5.2 The Purchase Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

5.3 Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

5.4 Appointment of New Directors to the Board on Completion of the ProposedAcquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

5.5 Undertaking by the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31

5.6 Rationale for the Proposed Acquisition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

6. PROPOSED WHITEWASH RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

6.1 Mandatory General Offer Requirement under the Code . . . . . . . . . . . . . . . . . . . . . . 33

6.2 Conditional Waiver of the Mandatory General Offer Requirement by the SIC . . . . . . 33

6.3 Whitewash Resolution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

7. PROPOSED COMPLIANCE PLACEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

7.1 Proposed Compliance Placement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

7.2 Details for the Proposed Compliance Placement . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

7.3 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

8. PROPOSED ALLOTMENT AND ISSUE OF TRITECH SHARES . . . . . . . . . . . . . . . 37

9. PROPOSED CONVERSION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37

10. PROPOSED CAPITAL REDUCTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

10.1 Rationale for the Proposed Capital Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

10.2 Details of the Proposed Capital Reduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

10.3 Conditions of the Proposed Capital Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

10.4 Financial Effects of the Proposed Capital Reduction . . . . . . . . . . . . . . . . . . . . . . . . 39

11. PROPOSED CHANGE OF NAME. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

11.1 Proposed Change of Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

11.2 Rationale for the Proposed Change of Name. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

11.3 Adminstrative Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

12. PROPOSED POST-ACQUISITION CONSOLIDATION. . . . . . . . . . . . . . . . . . . . . . . 39

12.1 Proposed Post-Acquisition Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

12.2 Conditions Precedent for the Proposed Post-Acquisition Consolidation . . . . . . . . . . 40

12.3 Updating of Register of Members and Depository Register for the Shares . . . . . . . . 40

12.4 Deposit of Share Certificates with CDP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

12.5 Issue of New Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

12.6 Share Certificates Not Valid for Settlement of Trades on SGX-ST . . . . . . . . . . . . . . 41

12.7 Trading Arrangements for the Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

12.8 Trading Arrangements for Odd Lots. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

TABLE OF CONTENTS

ii

13. THE ENLARGED GROUP AFTER THE PROPOSED TRANSACTIONS . . . . . . . . . 42

13.1 Information on the Novo Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

13.2 Enlarged Group Structure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43

13.3 Principal Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45

13.4 Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46

13.5 Moratorium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

13.6 Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

13.7 Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48

13.8 Financial Effects of the Proposed Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50

13.9 Dividend Policy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

13.10 Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54

13.11 Exchange Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

13.12 Proposed Directors and Proposed Executive Officers . . . . . . . . . . . . . . . . . . . . . . . 59

14. RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

14.1 Risk Factors relating to the Novo Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66

14.2 Other Risk Factors relating to the Enlarged Group. . . . . . . . . . . . . . . . . . . . . . . . . . 70

15. ADVICE OF THE INDEPENDENT FINANCIAL ADVISER IN RELATION TO THEWHITEWASH RESOLUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

16. INTERESTS OF JUDICIAL MANAGERS, DIRECTORS AND SUBSTANTIALSHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72

17. RECOMMENDATION OF THE JUDICIAL MANAGERS. . . . . . . . . . . . . . . . . . . . . . 73

18. EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

19. ACTION TO BE TAKEN BY SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 73

20. JUDICIAL MANAGERS’ RESPONSIBILITY STATEMENT . . . . . . . . . . . . . . . . . . . . 73

21. FINANCIAL ADVISER’S RESPONSIBILITY STATEMENT. . . . . . . . . . . . . . . . . . . . 74

22. CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

23. DOCUMENTS AVAILABLE FOR INSPECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74

24. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75

LETTER TO SHAREHOLDERS FROM NOVO GROUP

A. INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

B. INFORMATION ON THE NOVO GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

B.1.1 Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76

B.1.2 Group Structure of the Novo Group. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77

TABLE OF CONTENTS

iii

B.2 Share Capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

B.2.1 Principal Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

B.3 History and Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

B.3.1 History and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80

B.3.2 Business Model . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

B.3.3 Simplified Workflow Process Illustration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90

B.3.4 Quality Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91

B.3.5 Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

B.3.6 Sales and Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

B.3.7 Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

B.3.8 Seasonality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

B.3.9 Staff Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92

B.3.10 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

B.3.11 Major Suppliers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

B.3.12 Major Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94

B.3.13 Credit Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95

B.3.14 Inventory Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

B.3.15 Properties and Fixed Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96

B.3.16 Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

B.3.17 Competitive Strengths. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97

B.3.18 Government Regulations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98

B.3.19 Trends and Prospects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99

B.3.20 Future Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102

B.4 Management’s Discussion and Analysis of Financial Condition and Results ofOperations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103

B.4.1 Financial Information of Novo Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104

B.4.2 Review of Past Performance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107

B.4.3 Liquidity and Capital Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120

B.4.4 Material Capital Expenditures and Divestments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

B.4.5 Capitalisation and Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125

B.4.6 Foreign Exchange Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

B.4.7 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127

B.5 Directors, Key Executive Officers and Employees of the Enlarged Group . . . . . . . . . 128

B.5.1 Directors and Key Executive Officers of the Enlarged Group . . . . . . . . . . . . . . . . . . 128

B.5.2 Management Reporting Structure of the Novo Group. . . . . . . . . . . . . . . . . . . . . . . . 135

B.5.3 Remuneration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

B.5.4 Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136

B.6 Interested Person Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137

B.7 Conflicts of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

TABLE OF CONTENTS

iv

B.8 Material Background Information on the Proposed Directors, Proposed ExecutiveOfficers and Controlling Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142

B.9 Service Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145

B.10 Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

B.10.1 Board Practices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

B.10.2 New Nominating Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146

B.10.3 New Remuneration Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

B.10.4 New Audit Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

B.10.5 Information Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149

C. PROPOSED DIRECTORS AND VENDORS’ RESPONSIBILITY STATEMENT . . . . . 149

APPENDIX A : MATERIAL CONTRACTS AND MATERIAL LITIGATION OF THE NOVOGROUP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

APPENDIX B : LETTER FROM PHILLIP SECURITIES PTE LTD TO JUDICIALMANAGERS OF NEOCORP INTERNATIONAL LTD. . . . . . . . . . . . . . . . B-1

APPENDIX C : UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATIONFOR THE FINANCIAL PERIOD FROM 31 JANUARY 2005 TO 30 APRIL2006 AND FINANCIAL YEAR ENDED 30 APRIL 2007 . . . . . . . . . . . . . . C-1

APPENDIX D : UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATIONFOR THE FINANCIAL PERIOD FROM 1 MAY 2007 TO 30 SEPTEMBER2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-1

APPENDIX E : AUDITED FINANCIAL STATEMENTS OF NOVO COMMODITIESLIMITED FOR THE FINANCIAL PERIOD FROM 31 JANUARY 2005(DATE OF INCORPORATION) TO 30 APRIL 2006 AND FINANCIALYEAR ENDED 30 APRIL 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-1

NOTICE OF EXTRAORDINARY GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1

PROXY FORM

TABLE OF CONTENTS

v

This page has been intentionally left blank.

Current Board of Directors : Gurbachan Singh (Independent Director)Paul Lin Yin Mew (Director)Khoo Boo Tat (Director)Charlie Koh Tai Joo (Director)Eric Tiong Hin Won (Director)Soh Gim Teik (Independent Director)Ong Eng Hin (Independent Director)

Proposed New Board ofDirectors (to be appointedsubject to and uponCompletion)

: Yu Wing Keung, Dicky (Executive Chairman)Chow Kin Wa (Executive Director)Chow Kin San (Non-Executive Director)Chua Keng Hiang (Independent Director)Tan Siok Chin (Independent Director)

Company Secretary : Foo Soon Soo, LLB (Hons), FCIS, FCPA

Registered Office : 47 Hill Street #05-01Singapore Chinese Chamber of Commerce & IndustryBuildingSingapore 179365

Share Registrar and ShareTransfer Office

: Boardroom Corporate & Advisory Services Pte Ltd3 Church Street#08-01 Samsung HubSingapore 049483

Judicial Managers : Kon Yin TongWong Kian Kokc/o 47 Hill Street #05-01Singapore Chinese Chamber of Commerce & IndustryBuildingSingapore 179365

Financial Adviser to theCompany

: Mitsubishi UFJ Securities (Singapore), Limited9 Raffles Place#01-01 Republic PlazaSingapore 048619

Auditors to the Company : BDO RafflesCertified Public Accountants5 Shenton Way#07-01 UIC BuildingSingapore 068808

Reporting Accountants to theCompany

: Baker Tilly TFWLCLCertified Public Accountants15 Beach Road#03-10 Beach CentreSingapore 189677

CORPORATE INFORMATION

1

Legal Adviser to the Companyon Singapore Law

: Wee Woon Hong & Associates30 Raffles Place#19-04 Chevron HouseSingapore 048622

Independent Financial Adviserin relation to the ProposedWhitewash Resolution

: Phillip Securities Pte Ltd250 North Bridge Road#06-00 Raffles City TowerSingapore 179101

Financial Adviser to NovoGroup

: PricewaterhouseCoopers Corporate Finance Pte Ltd8 Cross Street#17-00, PWC BuildingSingapore 048424

CORPORATE INFORMATION

2

The following definitions apply throughout this Circular, unless the context requires otherwise:

Group Companies and Enlarged Group Companies

“Company” or “Neocorp” : Neocorp International Ltd.

“Enlarged Group” : The Company and Novo Group after completion of theProposed Acquisition

“Global Wealth TL” : Global Wealth Trading Ltd., a company incorporated in theBritish Virgin Islands

“Iron And Steel” : Iron And Steel Resources Limited, a company incorporated inHong Kong

“Neocorp Group” : The Company and its subsidiaries

“Nova SPL” : Nova Shipping Pte. Ltd., a company incorporated in Singapore

“Novo BVI” : Novo Commodities Limited, a company incorporated in theBritish Virgin Islands

“Novo CPL” : Novo Commodities Pte. Ltd., a company incorporated inSingapore

“Novo” or “Novo Group” or“Sale Companies”

: The group of companies comprising Nova Maritime (B.V.I.)Limited, Nova Shipping Pte. Ltd., Novo Investment Limited,Novo Commodities Limited, Novo Commodities Pte. Ltd.,Novo Commodities Limited, Novosteel DMCC and GlobalWealth Trading Ltd, which owns 30% of the aggregateshareholding in each of Rico Group Ltd (the sole holdingcompany of Novostal Limited) and Novostal Pte. Ltd.

“Novo HK” : Novo Commodities Limited, a company incorporated in HongKong

“Novo IL” : Novo Investment Limited, a company incorporated in HongKong

“Nova MBL” : Nova Maritime (B.V.I.) Limited, a company incorporated in theBritish Virgin Islands

“Novostal HK” : Novostal Limited, a company incorporated in Hong Kong

“Novostal PL” : Novostal Pte. Ltd., a company incorporated in Singapore

“Rico” : Rico Group Ltd, a company incorporated in the British VirginIslands

“Xinghua BVI” : Xinghua Holdings Limited, a company incorporated in theBritish Virgin Islands

“Xinghua HK” : Xinghua Holdings (China) Limited, a company incorporated inHong Kong

DEFINITIONS

3

Companies, Organisations and Agencies

“ACRA” : Accounting and Corporate Regulatory Authority of Singapore

“CDP” : The Central Depository (Pte) Ltd

“CPF” : Central Provident Fund

“Independent FinancialAdviser” or “PhillipSecurities”

: Phillip Securities Pte Ltd

“IE Singapore” : International Enterprise Singapore

“Reporting Accountants” : Baker Tilly TFWLCL

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

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

“SGX-ST” : Singapore Exchange Securities Trading Limited

“SIC” : Securities Industry Council of Singapore

“WTO” : World Trade Organisation

General

“5MFY07” : The financial period from 1 May 2006 to 30 September 2006 inrelation to Novo Group’s financial information

“5MFY08” : The financial period from 1 May 2007 to 30 September 2007 inrelation to Novo Group’s financial information

“AGM” : The annual general meeting of the Company

“Articles of Association” : The articles of association of the Company, as amended fromtime to time

“Ascertainment Date” : 28 October 2005, being the date on which the Order forJudicial Management of the Company was made by the Court

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

(i) his immediate family;

(ii) the trustees of any trust of which he or hisimmediate family is a beneficiary or, in the case ofa discretionary trust, is a discretionary object; and

(iii) any company in which he and his immediate familytogether (directly or indirectly) have an interest of30% or more

DEFINITIONS

4

(b) in relation to a substantial shareholder or a controllingshareholder (being a company) means any othercompany which is its subsidiary or holding company or isa subsidiary of such holding company or one in the equityof which it and/or such other company or companiestaken together (directly or indirectly) have an interest of30% or more

“Audit Committee” : The audit committee of the Company or the Enlarged Group,as the case may be

“Board” : The board of Directors of the Company or the Enlarged Group,as the case may be

“Book Closure Date” : The date and time, to be determined by the Judicial Managersor the Directors (as the case may be) for the purpose of theProposed Pre-Acquisition Consolidation and Proposed Post-Acquisition Consolidation, which will be on the same day

“Business Day” : A day on which commercial banks are open for business inSingapore, other than Saturdays, Sundays and days whichhave been gazetted as public holidays in Singapore

“BVI” : British Virgin Islands

“Circular” : This circular to Shareholders dated 1 February 2008

“CIS” : Commonwealth of Independent States

“Code” : The Singapore Code on Take-overs and Mergers

“Completion” : The completion of the sale and purchase of the Sale Sharesunder the Novo SPA

“Compliance Shares” : Up to 172,932,000 new Shares to be allotted and issuedpursuant to the Proposed Compliance Placement

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

“Completion Date” : The date on which the Proposed Acquisition is completed

“Consideration Shares” : The 3,688,270,000 new Pre-Acquisition Shares to be allottedand issued to the Vendors at an issue price of S$0.03 each insatisfaction of the consideration for the Proposed Acquisition

“Controlling Shareholder” : Means a person who (as defined in the Listing Manual):

(a) holds, directly or indirectly, 15.0% or more of the nominalamount of all voting shares in the Company or the NovoGroup, as the case may be (unless otherwise exceptedby SGX-ST); or

(b) in fact exercises control over the Company

“Convertible Loan” : The convertible loan extended by the Vendors which is thesubject of the Convertible Loan Agreement

DEFINITIONS

5

“Convertible Loan Agreement” : The convertible loan agreement dated 31 July 2007 enteredinto between the Company and the Vendors

“Creditors” : Any person who has, or claims to have, any claim against theCompany arising out of, or having its origin in any matteroccurring on or prior to the Ascertainment Date or arising outof any transaction, act or omission of the Company or anyperson on or before the Ascertainment Date whether the claimbe present or contingent or whether liquidated, or soundingonly in damages and whether in contract or tort howsoeverarising, including any person to whom such a claim has beenassigned (irrespective of whether such assignment takesplace before, on or after the Ascertainment Date), andincluding any other creditor who had entered into agreementswith the Judicial Manager, acting on behalf of the Companyunder which such creditors had agreed to receive shares in thecapital of the Company pursuant to the Scheme ofArrangement in lieu of and/or in addition to payment by theCompany, including contractual interest if applicable up to theAscertainment Date

“Creditors’ Meeting” : The meeting of the Voting Creditors to be convened for thepurpose of considering and, if thought fit, approving (with orwithout modification) the Scheme of Arrangement

“Debt Restructuring Plan” : The debt restructuring plan as described in the section entitled“Proposed Outstanding Debts Conversion” of this Circular

“Directors” : The directors of the Company or the Enlarged Group, as thecase may be

“EGM” : The extraordinary general meeting of the Company, notice ofwhich is set out in the section entitled “Notice of ExtraordinaryMeeting” of this Circular

“Enlarged Share Capital” : The enlarged share capital of the Company after completion ofthe Proposed Transactions

“FP2006” : The financial period from 31 January 2005 (date ofincorporation of Novo HK) to 30 April 2006 in relation to NovoGroup’s financial information

“FRS” : Singapore Financial Reporting Standard

“FY” : Financial year of the respective entities as follows:

(a) in the case of the Company, the financial year ended orending 30 November, as the case may be; and

(b) in the case of Novo Group and the Enlarged Group, thefinancial year ended or ending 30 April, as the case maybe

DEFINITIONS

6

“FY2007NPAT” : The audited net profit after tax of the Sale Companies on acombined basis for the financial year ended 30 April 2007 inUS$, based on the exchange rate of S$/US$ of 1.52, whichwas determined by reference to the spot rate of exchange forS$/US$ quoted on Bloomberg on 30 April 2007

“Hong Kong” : The Hong Kong Special Administrative Region of the PRC

“Independent Directors” : The independent Directors of the Company or the EnlargedGroup, as the case may be

“Independent Shareholders” : Shareholders of the Company who are independent of theVendors and their concert parties for the purpose of theWhitewash Resolution

“Judicial Managers” : Kon Yin Tong and Wong Kian Kok of Messrs Foo Kon TanGrant Thornton or such other judicial managers of theCompany as may be appointed by the High Court from time totime

“Latest Practicable Date” : 25 January 2008, being the latest practicable date prior toprinting of this Circular

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

“Loan Conversion Shares” : Up to 100,000,000 new Pre-Acquisition Shares to be allottedand issued to the Vendors at an issue price of S$0.03 eachpursuant to the Convertible Loan Agreement

“Long Term FrameworkAgreement”

: Has the meaning ascribed to it in section B.3.1 in the Letter toShareholders from Novo Group of this Circular

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

“Memorandum” : The memorandum of association of the Company, asamended from time to time

“Nominating Committee” : The nominating committee of the Company or the EnlargedGroup, as the case may be

“Novo SPA” : The sale and purchase agreement dated 23 August 2007entered into between the Company and the Vendors in relationto the Proposed Acquisition

“NA” : Not applicable

“NTA” : Net tangible assets

“NTL” : Net tangible liabilities

“Outstanding Debt” : The aggregate debt owed to the Creditors as at theAscertainment date

“PBT” : Profit before tax

DEFINITIONS

7

“Placement Agreements” : Has the meaning ascribed to it in the section entitled “TheProposed Compliance Placement” in the Letter toShareholders of this Circular

“PRC” : People’s Republic of China, excluding the specialadministrative regions, Hong Kong and Macau for the purposeof this Circular and for geographical reference only

“Pre-Acquisition Shares” : Has the meaning ascribed to it in section 2.2 in the Letter toShareholders of this Circular

“Proposed Acquisition” : The proposed acquisition of the Sale Companies by theCompany from the Vendors, on and subject to the terms andconditions of the Novo SPA

“Proposed Capital Reduction” : Has the meaning ascribed to it in section 2.5 in the Letter toShareholders of this Circular

“Proposed Change of Name” : Has the meaning ascribed to it in section 2.10 in the Letter toShareholders of this Circular

“Proposed CompliancePlacement”

: The proposed placement of Compliance Shares by theCompany for the purposes of meeting the shareholding spreadrequirements of the Listing Manual

“Proposed Conversion” : Has the meaning ascribed to it in section 2.7 in the Letter toShareholders of this Circular

“Proposed Directors” : The directors proposed to be appointed to the new Boardfollowing completion of the Proposed Transactions

“Proposed Executive Officers” : The executive officers proposed to be appointed followingcompletion of the Proposed Transactions

“Proposed Post-AcquisitionConsolidation”

: Has the meaning ascribed to it in section 2.8 in the Letter toShareholders of this Circular

“Proposed Pre-AcquisitionConsolidation”

: Has the meaning ascribed to it in section 2.2 in the Letter toShareholders of this Circular

“Proposed Transactions” : The Proposed Pre-Acquisition Consolidation, the proposedallotment and issue of the Tritech Shares, the proposedallotment and issue of the Scheme Shares, the ProposedCapital Reduction, the proposed allotment and issue of theLoan Conversion Shares, the Proposed Acquisition and theallotment and issue of the Consideration Shares, theProposed Post-Acquisition Consolidation, the ProposedChange of Name, the Proposed Whitewash Resolution andthe proposed allotment and issue of the Compliance Shares

“Proven Creditors” : Creditors of the Company who are required to file their proofsof debts with the Judicial Managers and whose debts havebeen proven to the satisfaction of the Judicial Managers

DEFINITIONS

8

“Proxy Form” : The proxy form in respect of the EGM as set out in this Circular

“Public” : Persons other than:

(a) directors, chief executive officer, substantialshareholders or controlling shareholders of the issuerand its subsidiary companies; and

(b) associates of the persons in paragraph (a)

“Record Date” : In relation to any dividends, rights, allotments or otherdistributions, the date as at the close of business (or suchother time as may have been notified by the Company), onwhich Shareholders must be registered with the Company orwith CDP in order to participate in such dividends, rights,allotments or other distributions

“Remuneration Committee” : The remuneration committee of the Company or the EnlargedGroup, as the case may be

“Sale Shares” : The issued share capital of the Sale Companies

“Securities Account” : Securities account maintained by a Depositor with CDP butdoes not include a securities sub-account

“Securities and Futures Act”or “SFA”

: Securities and Futures Act (Chapter 289) of Singapore

“Service Agreements” : Has the meaning ascribed to it in the section entitled “ServiceAgreements” in the Letter to Shareholders from Novo Group ofthis Circular

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

“Shareholders” : Registered holders of Shares, existing shares or Pre-Acquisition Shares, as the case may be, in the Register ofMembers of the Company, except that where the registeredholder is CDP, the term “Shareholders” shall, in relation to suchShares or existing shares, mean the Depositors whosesecurities accounts maintained with CDP are credited withShares or existing shares, as the case may be

“Scheme of Arrangement” : Has the meaning ascribed to it in the section entitled “Schemeof Arrangement” in the Letter to Shareholders of this Circular

“Scheme Claim” : A claim of a Creditor

“Scheme Manager” : Mr Kon Yin Tong and Mr Wong Kian Kok both of Messrs FooKon Tan Grant Thornton or such other person or persons asmay be appointed pursuant to the provisions of the Scheme ofArrangement

“Scheme Shares” : Up to 64,726,000 new Pre-Acquisition Shares to be allottedand issued pursuant to the Scheme of Arrangement

DEFINITIONS

9

“Tritech” : Tritech International Holdings Pte Ltd, a company incorporatedin Singapore

“Tritech Loan” : The loan of S$520,000 extended by Tritech to the Companypursuant to Tritech SPA

“Tritech Shares” : 5,350,000 new Pre-Acquisition Shares to be allotted andissued pursuant to the conversion of S$160,500 Tritech Loaninto Shares at the rate of S$0.03 for each Share

“Tritech SPA” : The conditional sale and purchase agreement dated 2 August2006 entered into between Tritech and the Company

“Vendors” : Yu Wing Keung, Dicky and Chow Kin Wa collectively and“Vendor” means any one of them

“Vendors’ Concert PartyGroup”

: The Vendors and New Page Investments Ltd.

“Voting Creditors” : A creditor, whose claim has been admitted by the SchemeManagers for the purpose of voting at the Creditors’ Meeting

“Whitewash Resolution” : The proposed resolution for the Independent Shareholders towaive their rights to receive a mandatory offer from theVendors and their concert parties for all the Shares or newShares as the case may be, in issue and not already owned,controlled or agreed to be acquired by the Vendors and theirconcert parties following the allotment and issue of theConsideration Shares and Loan Conversion Shares

“YA” : Year of Assessment

Currencies, Units of Measurements and Others

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

“RMB” : Renminbi

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

“HK$” : Hong Kong dollars

“AED” : United Arab Emirates Dirham

“mt” : Metric tonnes

“sq ft” : Square feet

“sq m” : Square metres

“%” or “per cent.” : Per centum or percentage

The expressions “associate”, “associated company”, “group”, “related entity”, “related corporation”,“subsidiary” and “substantial shareholder” shall have the meanings ascribed to them respectively in theFourth Schedule of the Securities and Futures (Offers of Investments) (Shares and Debentures)Regulations 2005 and the Companies Act.

DEFINITIONS

10

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

The terms “acting in concert”, “concert parties”, “associates” and “Whitewash Resolution” shall have themeanings ascribed to them respectively in the Code.

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

Any reference in this Circular to any enactment is a reference to that enactment for the time beingamended or re-enacted. Any word defined under the Securities and Futures Act, the Companies Act orthe Code or any statutory modification thereof and used in this Circular shall, where applicable, havethe meaning ascribed to it under the Securities and Futures Act, the Companies Act or the Code or anystatutory modification thereof as the case may be, unless the context requires otherwise.

Certain names with Chinese characters have been translated into English names. Such translations areprovided solely for the convenience of Singapore-based Shareholders. They may not have beenregistered with the relevant PRC authorities and should not be construed as representations that theEnglish names actually represent the Chinese characters.

Any reference in this Circular to Shares and/or new Shares being allotted to a person includes allotmentto CDP for the account of that person.

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

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

DEFINITIONS

11

The following glossary contains explanations of certain technical terms and abbreviations used in thisCircular in connection with the Novo Group and its businesses. The terms and their assigned meaningsmay not correspond to standard industry meanings or usages of these terms.

“billets” : A solid semi-finished round or square product that is subject tofurther hot rolling so as to be made into “profiles” such asbeams, channels, angles and flats, and bars such as deformedbars, round bars and wire rods, all of which are essentialconstruction and fabrication materials

“blast furnace” : A vertical furnace, using coke as the primary fuel, with a roundcross-section, which is the most common furnace currentlyused for smelting iron

“CIF” : Cost, insurance and freight. CIF means that the seller has thesame obligations as under CFR but with the addition that hehas to procure marine insurance against the buyer’s risk ofloss of or damage to the goods during the carriage. The sellercontracts for insurance and pays the insurance premium. Thebuyer should note that under the CIF term the seller is onlyrequired to obtain minimal insurance coverage

“CFR” : Cost and freight. CFR means that the seller delivers whengoods pass the ship’s rail in the port of shipment. The sellermust pay the costs and freight necessary to bring the goods tothe named port of destination but the risk of loss of or damageto the goods, as well as any additional costs due to eventsoccurring after the time of delivery, are transferred from theseller to the buyer

“CQD” : Customary Quick Despatch means unfixed laytime and therewould be no Demurrage and Despatch to be incurred. In thisterm, shipper in loading port and receiver in discharge mustendeavour their best to load or discharge the cargorespectively as fast as possible and in accordance with theload/discharge port customs practices. If the shipper orreceiver can arrange the cargo and/or documents prior tovessel’s arrival in port, the shipper or receiver shall not beresponsible for any time loss incurred by the vessel

“channels” : A hot rolled structural shape that looks like “[“

“coated steel” : Steel is often coated with some other materials to help preventcorrosion. Coated steel usually refers to steel products coatedwith zinc, tin, aluminium and/or pre-painted colour

“cold rolled coils” : A product produced from hot rolled descaled (pickled) coils bycold reducing to the desired thickness, generally to be followedby annealing and temper rolling. They are used extensively inthe automobile industry and household appliances

GLOSSARY OF TECHNICAL TERMS

12

“cold rolled sheet” : A product cut from cold rolled coil into desired length. If thesheet is not annealed after cold reduction it is known as fullhard

“continuous casting” : The process whereby molten steel is continuously cast intosteel of specific cross-sectional shapes and dimensions by acontinuous steel casting machine

“converter furnace” : A furnace for smelting steel, utilising blown oxygen, which isthe most common furnace currently used for smelting steel

“deformed bars” : Deformed bars are manufactured from the process of hotrolling and are widely used in the construction industry. It isusually named reinforced concrete deformed steel bars

“ETA” : Estimated time of arrival

“ETD” : Estimated time of departure

“FO” : A pricing term indicating that the quoted prices include the costof unloading the goods from the vessel. This means cost ofunloading a vessel is borne by the charterer or receiver

“FOB” : Freight on board. FOB means that the seller fulfils hisobligation to deliver when the goods have passed over theship’s rail at the named port of shipment. This means that thebuyer has to bear all costs and risks of loss of or damage to thegoods from that point. The FOB term requires the seller toclear the goods for export

“hot rolled coils” : Hot rolled coils are produced by the process of hot rolling.They are produced in varying thicknesses according tospecification. For storage and transportation, they are turnedinto coil form before further shearing into plates and strips forthe fabrication industry

“hot rolled plates” : Hot rolled plates are steel plates produced by the process ofhot rolling. They are produced in varying thickness and sizesaccording to specification. They are widely used inconstruction and shipbuilding industry

“L/C” : Letter of credit. A document issued mostly by a financialinstitution which provides payment undertaking to abeneficiary against complying documents as stated therein

“merchant bar” : This is a group of commodity steel shapes that consist ofrounds, squares, flats, strips, angles, and channels, whichfabricators, steel service centers and manufacturers cut, bendand shape into products. Merchant bars require morespecialized processing than reinforcing bar

“molten iron” : Liquid pig iron

“molten steel” : Liquid steel


13

“pig iron” : The iron material extracted from the sintered ores in the ironsmelting process

“slab” : Slabs are semi-finished products for further hot rolling processto steel coils and plates

“smelting” : The process whereby the raw materials are processed intomolten iron or steel through a series of physical and chemicalreactions in a blast furnace, an open hearth furnace, aconverter or an electric furnace

“SGS” : SGS is Societe Generale de Surveillance, it is the world’sleading inspection, verification, testing and certificationcompany. SGS is recognized as the global benchmark forquality and integrity

“square bar” : A square piece of solid steel which is usually 6 inches or lessin width

“SRCC” : Strikes, Riots & Civil Commotions. If the insured placed thisSRCC, the insurance cover shall cover any loss or damage tothe subject-matter insured caused by strikes, riots and civilcommotions

“steel rolling” : The process whereby a rolling mill is used to turn semi-finishedproducts from the steel smelting process (billets) into steelproducts of various kinds

“steel strips” : Steel products which are produced from steel billets and/orslabs being rolled into strips and coiled by a coiler

“TPND” : Theft, Pilferage and Non-delivery. If the insured places thisTPND, the insurance cover shall cover any loss of or damageto the subject-matter insured caused by theft, pilferage andnon-delivery

“wire rods” : Wire rods are manufactured from the process of hot rolling andare used in the construction industry. They can also be usedfor further process to produce rail and wire


14

US$ TO S$ EXCHANGE RATES

The following table sets out the average exchange rates that have been used to translate theconsolidated financial statements of Novo Group and the unaudited pro forma consolidated financialinformation of the Enlarged Group for their respective financial periods set out in this Circular. Theseexchange rates should not be construed as a representation that those US$ amounts could have been,or could be, converted into S$, as the case may be, at any particular rates, the rates stated below, orat all. Where applicable, the exchange rates in this table are used for the Novo Group and the EnlargedGroup’s financial accounts disclosed elsewhere in this Circular.

S$/US$ RateAverage Closing

FP2006 1.652 1.584

FY2007 1.553 1.520

5MFY07 1.581 1.585

5MFY08 1.522 1.486

The table below sets forth the high and low exchange rates between US$ and S$ for each month forthe past six months, and how many S$ can be bought with one US$.

S$/US$ RateMonth High Low

July 2007 1.536 1.506

August 2007 1.541 1.513

September 2007 1.528 1.486

October 2007 1.484 1.448

November 2007 1.453 1.440

December 2007 1.461 1.437

As at the Latest Practicable Date, the exchange rate between S$ and US$ was S$1.423 to US$1.00.

Source: Bloomberg L.P. The Company has included the exchange rates in its proper form and context in this Circular. BloombergL.P. has not consented to the inclusion of the above exchange rate in this Circular.

EXCHANGE RATES

15

All statements contained in this Circular, statements made in the press releases and oral statementsthat may be made by the Company, the Judicial Managers, employees acting on behalf of theCompany, the Novo Group, the Vendors, as the directors of Novo Group and the executive officers oremployees acting on behalf of the Novo Group and/or any of the Novo Group’s subsidiaries that are notstatements of historical fact, constitute “forward-looking statements”. Some of these statements can beidentified by words that have a bias towards, or are, forward-looking such as “anticipate”, “believe”,“could”, “estimate”, “expect”, “forecast”, “if”, “intend”, “may”, “plan”, “possible”, “probable”, “project”,“should”, “will” and “would” or similar words. However, you should note that these words are not theexclusive means of identifying forward-looking statements. All statements regarding the expectedfinancial position, business strategies, plans and prospects of the Company, the Novo Group and/or theEnlarged Group are forward-looking statements. These forward looking statements, including but notlimited to, statements as to:

• revenue and profitability;

• any expected growth;

• expected industry trends;

• future expansion plans;

• anticipated completion and start-up dates for projects; and

• other matters of the Company, Novo Group and/or the Enlarged Group discussed in this Circularregarding matters that are not historical fact,

are only predictions. These forward-looking statements involve known and unknown risks, uncertaintiesand other factors that may cause the actual future results, performance or achievements of theCompany, the Novo Group and/or the Enlarged Group to be materially different from any future results,performance or achievements expected, expressed or implied by such forward-looking statements.These risk factors and uncertainties are discussed in more detail in this Circular, in particular, but notlimited to, discussions in the section entitled “Risk Factors” in the Letter to Shareholders from the NovoGroup of this Circular.

Given the risks and uncertainties that may cause the actual future results, performance orachievements of the Company, the Novo Group and/or the Enlarged Group to be materially differentfrom that expected, expressed or implied by the forward-looking statements in this Circular, unduereliance must not be placed on these statements.

The Company, the Novo Group, their respective directors and executive officers are not representingor warranting to you that the actual future results, performance or achievements of the Company, theNovo Group and/or the Enlarged Group will be as those discussed in those statements. The actualfuture results of the Company, the Novo Group and/or the Enlarged Group may differ materially fromthose anticipated in these forward-looking statements as a result of the risks faced by the Company, theNovo Group and/or the Enlarged Group. Further, the Company, the Novo Group and/or the EnlargedGroup disclaim any responsibility to update any of those forward-looking statements or publiclyannounce any revisions to those forward-looking statements to reflect their future developments,events or circumstances.

Upon completion of the Proposed Acquisition, the Enlarged Group will be subject to the listing rules ofthe SGX-ST regarding corporate disclosure.

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

16

NEOCORP INTERNATIONAL LTD.(IN JUDICIAL MANAGEMENT)(Company Registration Number 198902648H)


1 February 2008

Judicial Managers: Registered Office:

Kon Yin TongWong Kian Kok

47 Hill Street #05-01Singapore Chinese Chamber ofCommerce & Industry BuildingSingapore 179365

Unless otherwise defined or the context otherwise requires, all terms defined in this Circularshall have the same meaning herein.

To: The Shareholders

Dear Sir/Madam:

(1) The Proposed Pre-Acquisition Consolidation;

(2) The proposed allotment and issue of 5,350,000 new Pre-Acquisition Shares pursuant to theconversion of S$160,500 of the Tritech Loan into Shares at the rate of S$0.03 for eachPre-Acquisition Share in satisfaction of the repayment obligations under the loanagreement pertaining to the Tritech Loan;

(3) The proposed allotment and issue of up to 64,726,000 new Pre-Acquisition Shares to theCreditors pursuant to the terms of the Scheme of Arrangement;

(4) The Proposed Capital Reduction;

(5) The proposed allotment and issue of up to 100,000,000 new Pre-Acquisition Shares to theVendors pursuant to the Convertible Loan Agreement;

(6) The proposed acquisition of the Sale Shares and the allotment and issue of theConsideration Shares;

(7) The Proposed Post-Acquisition Consolidation;

(8) The proposed allotment and issue of up to 172,932,000 new Shares in connection with theProposed Compliance Placement, for the purpose of meeting the shareholding distributionrequirements of the Listing Manual;

(9) The proposed change of name of the Company from “Neocorp International Ltd.” to “NovoGroup Ltd.”; and

(10) The proposed Whitewash Resolution.

1. INTRODUCTION

1.1 History And Recent Development Of The Company

The Company was incorporated on 29 June 1989 as Fortech Pte Ltd. On 9 October 1992, theCompany changed its name to Presscrete Ground Engineering Pte Ltd. On 12 September1996, the Company was converted to a public company limited by shares and changed its


17

name to Presscrete Holdings Ltd, an investment holding company. The Company was listedon SGX-SESDAQ on 30 September 1996. The Company changed its name to “NeocorpInternational Ltd.” on 12 August 2003.

On 20 December 2004, the Company announced the proposed merger with Yoma StrategicInvestments Ltd under a merger agreement dated 18 December 2004 by way of a scheme ofarrangement. The merger agreement with Yoma Strategic Investments Ltd lapsed on 31October 2005 and the proposed merger did not materialize.

As the Company was unable to pay its debts as they fell due, it was placed under judicialmanagement on 28 October 2005 under an order of the High Court of Singapore whereby MrKon Yin Tong and Mr Wong Kian Kok of Messrs Foo Kon Tan Grant Thornton were appointedthe Judicial Managers of the Company. Under the Half Year Financial Statement for the periodended 31 May 2005, the Company and its subsidiaries recorded a loss after income tax ofS$6.3 million.

Adventure Systems Pte Ltd (“ASPL”), a wholly owned subsidiary of the Company was sold toTerence Low Min Hwee on 8 November 2005 and was based on (i) a cash consideration ofS$1,000, (ii) a payment of S$4,500 to the Company in total settlement of an outstanding debtof approximately S$51,112 from Adventure Systems Pte Ltd to the Company, and (iii) apayment of S$4,500 in total settlement of an outstanding debt of approximately S$74,625from Adventure Systems Pte Ltd to Presscrete Engineering Pte Ltd (“Presscrete”) (theCompany’s other subsidiary then). The Judicial Managers decided to sell ASPL based on themanagement accounts as at 30 September 2005 as ASPL was insolvent and has beenmaking losses. Further, the Company does not have the funds available to support theoperations of ASPL.

The Company was unable to support the funding requirements of Presscrete, and Presscretewas sold to Tritech on 23 February 2006 for a purchase consideration of S$600,000.

On 17 August 2006, the Company announced that it had on 2 August 2006 entered into theTritech SPA with Tritech to acquire the entire issued share capital of Tritech Engineering &Testing (Singapore) Pte Ltd, Tritech-Geokon Singapore Pte Ltd, Syseng (S) Pte Ltd, TritechGeotechnic Pte Ltd, Tritech Water Technologies Co. Ltd, Tritech Consultants Pte Ltd, BeijingWisetec Technologies Co. Ltd and Terra Tritech Engineering (M) Sdn Bhd at an aggregateprice of S$20,000,000 to be satisfied by share consideration. In addition, the Company hadalso entered into a convertible loan note agreement with Tritech on 2 August 2006 for thesubscription and issue of convertible loan notes up to the principal sum of S$1,500,000.

On 29 June 2007, the Company announced that the Company and Tritech have on 20 June2007 mutually agreed in writing to terminate the Tritech SPA. The Tritech SPA could notproceed as certain conditions precedent in the Tritech SPA could not be achieved.

On 4 September 2007, the High Court granted an extension of the order placing the Companyunder judicial management to 17 October 2007, which was extended to 14 April 2008.

The Company has three subsidiaries: Adventure Training Systems (Asia Pacific) Pte Ltd,Neocorp Innovations Pte Ltd and Ceramic Technologies Pte Ltd, all of which are in liquidation.

The purpose of this Circular is to provide you with information on, to explain the rationale of,and to seek your approval for the Proposed Transactions.


18

This Circular has been prepared solely for the purposes outlined above and may not be reliedupon by any persons (other than the Shareholders to whom this Circular is despatched to bythe Company) or for any other purpose.

2. SUMMARY OF PROPOSED TRANSACTIONS

OVERVIEW OF PROPOSED TRANSACTIONS

Issuance of up to 100,000,000 Pre-Acquisition Sharespursuant to conversion of Convertible Loan,referred to as “Loan Conversion Shares”

Existing Issued Share Capital

25-into-1 share consolidation,referred to as “Pre-Acquisition Consolidation” and

each consolidated share referred to as“Pre-Acquisition Share”

Issuance of 64,726,000 Pre-Acquisition Sharespursuant to Scheme of Arrangement,

referred to as “Scheme Shares”

Issuance of 5,350,000 Pre-Acquisition Sharespursuant to conversion of Tritech Loan,

referred to as “Tritech Shares”

Issuance of 3,688,270,000 Pre-Acquisition Sharespursuant to the Proposed Acquisition,

referred to as “Consideration Shares”

Issuance of up to 172,932,000 Shares pursuant to theProposed Compliance Placement,

referred to as “Compliance Shares”

8-into-1 share consolidation,referred to as “Post-Acquisition Consolidation” and

each consolidated share referred to as “Share”

Pre-acquisition stage andeach share referred to as“Pre-Acquisition Share”

Post-acquisition stage andeach share referred to as

“Share”


19

2.1 Proposed Acquisition

On 11 July 2007, the Judicial Managers announced that on 10 July 2007, the Company hadentered into a non-binding memorandum of understanding with the Vendors in relation to theproposed acquisition by the Company of the existing companies under the Vendors’ controlengaged in or otherwise ancillary to the business of steel trading in exchange for a majoritystake in the Company.

Subsequently, on 28 August 2007, the Judicial Managers announced that the Company hadon 23 August 2007, entered into the Novo SPA with the Vendors to acquire the SaleCompanies for an aggregate price equivalent to ten (10) times of the FY2007NPAT whichamounts to approximately S$110.65 million (the “Sale Price”).

The Company has also entered into the Convertible Loan Agreement with the Vendors on 31July 2007 for the subscription and issue of convertible loan notes for an aggregate principalamount of up to S$3,000,000, wherein the Vendors are to extend a loan of up to S$3,000,000(“Convertible Loan Notes”) to the Company to fund payment of professional fees and cost andexpenses associated with the Proposed Acquisition. The Convertible Loan Notes will not beissued until after the Shareholders’ approval for such issue has been granted and theWhitewash Resolution has been passed. The Vendors will have the option to convert all orpart of the Convertible Loan into Shares at the price of S$0.03 per new Loan ConversionShare equivalent to the amount of Convertible Loan converted as determined by the Vendors.

Please refer to the section entitled “Proposed Conversion” of this Circular for moreinformation.

Pursuant to Rule 1015 of the Listing Manual, Shareholders’ and the SGX-ST’s approval mustbe obtained for a “very substantial acquisition”. Rule 1006 of the Listing Manual sets out thecomputation for relative figures, where any of the relative figures is 100% or more, or if thetransaction is one which will result in the change in control of a listed company, such atransaction is a “very substantial acquisition”.

Based on the audited accounts of the Company for FY2004, being the last audited financialstatements issued by the Company prior to being placed under judicial management(1) andthe unaudited combined management accounts of the Sale Companies for FY2007, therelative figures for the Proposed Acquisition computed on the bases set out in Rule 1006 (a)to (d) of the SGX-ST Listing Manual are as follows: –

(a) Net asset value of assets to be disposed of, compared with thegroup’s net asset value

Not applicable(2)

(b) Net profits attributable to the Sale Companies for FY2007(3) ascompared with the net profit of the Company for FY2004

Not meaningful(4)

(c) Aggregate value of the consideration for the ProposedAcquisition(5) as compared with the Company’s marketcapitalisation

1,499%

(d) The number of Consideration Shares to be issued by theCompany as consideration for the Proposed Acquisition,compared with the number of equity securities previously inissue(6)

18,738%


20

Notes:

(1) Based on the audited financial statements of the Company for FY2004. Subsequently, before the Company wassuspended on 15 September 2005 from trading on the SGX-SESDAQ. The last announced financial statementsof the Company were for the half year period ended 31 May 2005 which was unaudited.

(2) The transaction involves an acquisition and not a disposal.

(3) Based on the net profit after tax of the Sale Companies for the financial year ended 30 April 2007 as stated inthe unaudited pro-forma combined financial information, attached in Appendix C of this Circular.

(4) The ratio is not meaningful as the Company incurred a loss of S$5.27 million for FY2004.

(5) Based on the net profit after tax of the Sale Companies for the financial year ended 30 April 2007 as stated inthe unaudited pro-forma combined financial information, attached in Appendix C of this Circular, multiplied by ten.

(6) Taking into consideration the Proposed Pre-Acquisition Consolidation but excluding the Proposed Post-Acquisition Consolidation.

As the Vendors will hold approximately 97.7% of the enlarged issued share capital of theEnlarged Group after the Proposed Transactions but before the Proposed CompliancePlacement, a change of control will arise immediately in respect thereof.

Further, as the relative figures as computed on the bases set out in Rule 1006(d) of the ListingManual exceed 100%, and given that completion of the Proposed Acquisition will result in achange in control of the Company, the Proposed Acquisition constitutes a “Very SubstantialAcquisition” or “Reverse Takeover Transaction” as defined in Chapter 10 of the ListingManual. Accordingly, the Proposed Acquisition is subject to the approval of Shareholderspursuant to Rule 1015 of the Listing Manual.

The SGX-ST had on 30 January 2008 granted approval in-principle to the Company for theProposed Acquisition and the listing and quotation of the Consideration Shares on theSGX-ST subject to, inter alia, Shareholders’ approval being obtained for the ProposedAcquisition and the issue of the Consideration Shares. Approval in-principle granted by theSGX-ST to the Company for the Proposed Acquisition and the listing of and quotation for theConsideration Shares on SGX-ST is in no way reflective of the merits of the ProposedAcquisition, the Enlarged Group, the Novo Group, the Company, the existing issued Sharesand/or the Consideration Shares.

Further information on the Proposed Acquisition are set out in the section entitled “ProposedAcquisition” of this Circular.

2.2 Proposed Pre-Acquisition Consolidation

In connection with the Proposed Acquisition, the Company proposes to carry out a shareconsolidation (the “Proposed Pre-Acquisition Consolidation”) pursuant to which it is proposedthat every 25 existing shares be consolidated into one share, each share referred to as“Pre-Acquisition Share”. As at the Latest Practicable Date, the issued and paid-up capital ofthe Company is S$31,451,650.50 comprising 492,084,283 existing shares. Pursuant to theProposed Pre-Acquisition Consolidation, the Company will have an issued and paid-upcapital of S$31,451,650.50 comprising 19,683,371 Pre-Acquisition Shares, fractional Sharebeing disregarded.

2.3 Proposed allotment and issue of Tritech Shares

In connection with the Proposed Acquisition, it is proposed that the Company allots and issuesthe Tritech Shares, comprising an aggregate of 5,350,000 new Pre-Acquisition Shares,pursuant to the conversion of S$160,500 of the Tritech Loan into Shares at the rate of S$0.03for each new Pre-Acquisition Shares to be issued to Tritech and the repayment in cash ofS$259,500 as full and final settlement of the Tritech Loan.


21

2.4 Proposed allotment and issue of the Scheme Shares

In connection with the Scheme of Arrangement, the Company proposes to issue and allot theScheme Shares, comprising up to 64,726,000 new Pre-Acquisition Shares, to the Creditorsin full satisfaction, release and discharge of the Company’s liabilities under the OutstandingDebts.

Under the terms of the Scheme of Arrangement, the Outstanding Debts are to be satisfied bythe issue and allotment of up to 64,726,000 new Pre-Acquisition Shares to all unsecuredcreditors of the Company as at 28 October 2005 with valid claims including the ProvenCreditors.

2.5 Proposed Capital Reduction

The Company is proposing to undertake a capital reduction exercise (the “Proposed CapitalReduction”) to cancel share capital to the extent of such amounts that have been permanentlylost or unrepresented by available assets as at 25 January 2008, pursuant to Article 12 of theArticles of Association and Section 78G read with Section 78I of the Companies Act.

2.6 Proposed Acquisition of the Sale Shares and the allotment and issue of theConsideration Shares

In connection with the Proposed Acquisition, it is proposed that the Company allots and issuesConsideration Shares, comprising 3,688,270,000 new Pre-Acquisition Shares, to the Vendorsand their nominee, New Page Investments Ltd in such proportion as may be directed by theVendors at their discretion in satisfaction of the Sale Price for the Proposed Acquisition.

2.7 Proposed allotment and issue of the Loan Conversion Shares

In connection with the Proposed Acquisition, it is proposed that the Company allots and issuesthe Loan Conversion Shares, comprising up to 100,000,000 new Pre-Acquisition Shares, tothe Vendors pursuant to the Convertible Loan Agreement (the “Proposed Conversion”).

2.8 Proposed Post-Acquisition Consolidation

After the completion of the Proposed Transactions (other than the Proposed Post-AcquisitionConsolidation and Proposed Compliance Placement), the Company will have an issued andpaid-up capital of S$115,774,699 comprising 3,878,029,371 Pre-Acquisition Shares.Pursuant to the SGX-ST’s requirement that the issue price of the shares shall be a minimumof S$0.20 per share, the Company proposes to carry out a further share consolidation (the“Proposed Post-Acquisition Consolidation”) pursuant to which it is proposed that every eightPre-Acquisition Shares arising from the Proposed Transactions (other than the ProposedPost-Acquisition Consolidation and Proposed Compliance Placement) be consolidated intoone Share. The Proposed Post-Acquisition Consolidation shall only take effect upon thesuccessful completion of the other transactions comprising the Proposed Transactions butbefore the Proposed Compliance Placement, which will take place before the listing andquotation of the Consideration Shares, Conversion Shares, Tritech Shares and SchemeShares. Upon the completion of the Proposed Post-Acquisition Consolidation, the Companywill have an issued and paid-up capital of S$115,774,699 comprising 484,753,671 Shares,fractional Share being disregarded.


22

2.9 Proposed allotment and issue of the Compliance Shares

For the purposes of meeting the shareholding spread requirements set out in the ListingManual and also to raise funds for general working capital and capital expenditure purposes,the Company currently intends to place out the Compliance Shares, comprising up to172,932,000 new Shares to public investors. The issue of the Compliance Shares pursuantto the Proposed Compliance Placement is subject to Shareholders’ approval to be obtainedat the EGM and conditional upon the Proposed Post-Acquisition Consolidation having takenplace. Please refer to section entitled “The Proposed Compliance Placement” and “ProposedPost-Acquisition Consolidation” for further details.

2.10 Proposed change of name of the Company from “Neocorp International Ltd.” to “NovoGroup Ltd.”

The Company is seeking the approval of the Shareholders to change the Company’s nameto “Novo Group Ltd.” after the Proposed Transactions to better reflect the new activities of theCompany (the “Proposed Change of Name”). The proposed change of name will only takeeffect after the Proposed Transactions.

2.11 Proposed Whitewash Resolution

Upon completion of the Proposed Transactions (but before the Proposed Post-AcquisitionConsolidation and Proposed Compliance Placement), the Vendors, as well as through theirnominee, New Page Investments Ltd, will hold in aggregate of up to approximately3,788,270,000 Pre-Acquisition Shares, representing approximately 97.7% of the total issuedshare capital of the Company.

Accordingly unless otherwise waived by the Independent Shareholders of the Companypursuant to a Whitewash Resolution passed at a general meeting, the Vendors and theparties acting in concert with it will be obliged to make a mandatory general offer for theremaining Shares of the Company not owned or controlled by them pursuant to Rule 14 of theCode as following the Proposed Acquisition by the Vendors of the Sale Shares, theshareholding of the Vendors and their concert parties will aggregate to more than 30% of theenlarged share capital of the Company.

Phillip Securities has been appointed the IFA to the Judicial Managers of the Company inrelation to the Proposed Whitewash Resolution.

Further information on the proposed Whitewash Resolution and the letter from PhillipSecurities to the Judicial Managers of the Company in relation to the proposed WhitewashResolution are set out in the section entitled “Proposed Whitewash Resolution” and AppendixB of this Circular respectively.

2.12 Purpose of this Circular

The purpose of this Circular is to provide you with information relating to and the rationale of,and to seek Shareholders’ approval for the Proposed Transactions at the forthcoming EGM.


23

3. PROPOSED OUTSTANDING DEBTS CONVERSION

3.1 Scheme of Arrangement

In conjunction with the Proposed Transactions, the Company has entered into the Scheme ofArrangement with the Creditors which contains, inter alia, the following debt restructuring plan(the “Debt Restructuring Plan”):

(a) The Proposed Pre-Acquisition Consolidation for consolidating every 25 existing ordinaryshares in the Company into one Pre-Acquisition Share;

(b) The allotment and issue of the Tritech Shares pursuant to the conversion of S$160,500of the Tritech Loan into Shares at the rate of S$0.03 for each new ordinary share in theCompany to be issued to Tritech and the repayment in cash of S$259,500 as full andfinal settlement of the Tritech Loan;

(c) The allotment and issue of the Scheme Shares to all Creditors of the Company as at 28October 2005 with valid claims including the Proven Creditors pursuant to the terms ofthe Scheme of Arrangement; and

(d) The Proposed Capital Reduction to cancel share capital to the extent of such amountsthat have been permanently lost or unrepresented by available assets, pursuant toArticle 12 of the Company’s Articles of Association and Part IV Division 3A of theCompanies Act as at 31 July 2007.

Accordingly, pursuant to the aforesaid, the Creditors will receive approximately S$0.12 to adollar of Outstanding Debt to be satisfied by issue of Pre-Acquisition Shares at S$0.03 each.

The Scheme of Arrangement was approved by the Creditors on 24 September 2007 and wassanctioned by the court on 11 October 2007. The issuance of Scheme Shares, if approved byShareholders at the EGM, pursuant to the Scheme of Arrangement shall constitute a full andfinal settlement of all liabilities owed by the Company to the respective Creditors in respect oftheir Scheme Claim.

3.2 Conditions Precedent

The completion of the Scheme of Arrangement, is conditional upon the following conditions,as applicable, being satisfied and approvals being obtained, and such approvals not beingwithdrawn or amended as at completion of the Scheme of Arrangement:

(a) Approval of the Scheme of Arrangement comprising the Debt Restructuring Plan or, asthe case may be, the modified Debt Restructuring Plan, by the Voting Creditorsrepresenting at least three-fourths (75%) in value of both classes of Creditors presentand voting at the Creditors’ Meeting. In this respect, Tritech shall, by itself, form oneclass of Creditor and the remaining Creditors shall together form the other class ofCreditors;

(b) The confirmation by the Court pursuant to Section 227X read with Section 210(3) of theAct and an office copy of the Order of the Court sanctioning the Scheme of Arrangementbeing delivered for lodgement to the ACRA pursuant to Section 210(5) of the Act;

(c) Approval of the Shareholders of the Company at an extraordinary general meeting for(i) the Proposed Pre-Acquisition Consolidation; (ii) the allotment and issue of the TritechShares; (iii) the allotment and issue of the Scheme Shares; (iv) the Capital Reduction;(v) the allotment and issue of the Loan Conversion Shares to the Vendors pursuant tothe Convertible Loan Agreement, should the Vendors elect to convert the loan into


24

shares in part or in whole; (vi) acquisition of the Sales Shares; (vii) the allotment andissue of the Consideration Shares; and (viii) the Whitewash Resolution, and all mattersincidental to or connection with the Scheme of Arrangement;

(d) The approval in-principle of the SGX-ST being obtained for the listing and quotation ofthe Scheme Shares and all conditions set out in such approval; and

(e) The completion of the Proposed Acquisition as contemplated under the Novo SPA.

As at the Latest Practicable Date, the Scheme of Arrangement was approved by the Creditorson 24 September 2007 and was sanctioned by the court on 11 October 2007.

3.3 List of Creditors and Outstanding Debts

Based on the Outstanding Debts, Scheme Shares comprising a total of up to 64,726,000Pre-Acquisition Shares will be issued and allotted to the Creditors upon completion of theScheme of Arrangement.

As at 24 September 2007, the Creditors and the number of Pre-Acquisition Shares to beissued to them are set out in the table below:

NameNo. of Scheme

Shares Allocated

1 Asia Spectrum Pte Ltd 57,241

2 BDO Raffles 21,285

3 Corporate Alliance Pte Ltd 6,346

4 Haq & Selvam 180,471

5 Investors’ Secretarius Pte Ltd 4,315

6 Khattar Wong & Partners 46,026

7 Lim Associates (Pte) Ltd (now known as Boardroom Corporate &Advisory Services Pte Ltd) 38,071

8 LTC & Associates 160,111

9 MGI Menon & Associates 30,157

10 NeoCorp Innovations Pte Ltd 10,043,843

11 Presscrete Engineering Pte Ltd 28,496,628

12 Shook Lin & Bok 578,013

13 Singapore Exchange Securities Trading Limited 39,496

14 The Central Depository (Pte) Limited 16,388

15 Xpress Media Pte Ltd 33,750

16 Comptroller of Income Tax 509,962

17 DBS Bank Ltd 893,887

18 Gurbachan Singh 40,382

19 Khoo Boo Tat 113,973

20 KPMG Corporate Finance Pte Ltd 21,347

21 Lim Dow Kean 97,520

22 Ong Eng Hin 113,069


25

NameNo. of Scheme

Shares Allocated

23 Overseas-Chinese Banking Corporation Limited 6,344,613

24 Pannell Kerr Forster 302,864

25 Paul Lin Yin Mew 111,915

26 Standard Chartered Bank 8,067,974

27 Sumitomo Corporation (Singapore) Pte Ltd 7,233,038

28 The Overseas Assurance Company Limited 1,123,315

Total 64,726,000

4. PROPOSED PRE-ACQUISITION CONSOLIDATION

4.1 Proposed Pre-Acquisition Consolidation

After the Book Closure Date, every 25 existing shares registered in the name of eachShareholder will be consolidated to constitute one Pre-Acquisition Share.

Shareholders should note that the number of Pre-Acqusition Shares which Shareholders willbe entitled to, based on their holdings of existing shares as at the Book Closure Date, will berounded down to the nearest whole Pre-Acquisition Share and any fractions of Shares arisingfrom the Proposed Pre-Acquisition Consolidation will be disregarded. As the proceeds of thesale of fractions of Pre-Acquisition Shares arising from the Proposed Pre-AcquisitionConsolidation are likely to be less than the administrative costs and expenses involved indespatching such proceeds to the Shareholders, fractions of Pre-Acquisition Shares arisingfrom the Proposed Pre-Acquisition Consolidation will be aggregated and dealt with in suchmanner as the Directors may, in their absolute discretion, deem fit in the interest of theCompany. Each Pre-Acquisition Share will rank pari passu with each other.

As at the Latest Practicable Date, the Company has a total issued share capital ofS$31,451,650.50 divided into 492,084,283 existing shares. Following the implementation ofthe Proposed Pre-Acquisition Consolidation, the Company will have a total issued sharecapital of S$31,451,650.50 divided into approximately 19,683,371 Pre-Acquisition Shares.

The Proposed Pre-Acquisition Consolidation has no effect on the shareholders’ funds of theEnlarged Group. Shareholders will not be required to make any payment to the Company inrespect of the Proposed Pre-Acquisition Consolidation.

4.2 Conditions Precedent for the Proposed Pre-Acquisition Consolidation

The implementation of the Proposed Pre-Acquisition Consolidation is subject toShareholders’ approval by way of an ordinary resolution at the EGM.

4.3 Updating of Register of Members and Depository Register for the Shares

If the ordinary resolution in the Notice of EGM relating to the Proposed Pre-AcquisitionConsolidation is passed at the EGM, the Shareholders’ entitlements of the Pre-AcquisitionShares will be determined on the Book Closure Date, whereupon the Register of Membersand the Depository Register will be updated to reflect the number of Pre-Acquisition Sharesheld by Shareholders.


26

4.4 Deposit of Share Certificates with CDP

Shareholders who hold physical share certificates for the existing shares in their own names(“Old Share Certificates”) and who wish to deposit the same with CDP and have their sharescredited to their Securities Accounts maintained with CDP must deposit their Old ShareCertificates, together with duly executed instruments of transfer in favour of CDP, no later thantwelve (12) Market Days prior to the Book Closure Date.

After the Book Closure Date, CDP will only accept for deposit share certificates forPre-Acquisition Shares (“New Share Certificates”). Shareholders who wish to deposit theirshare certificates with CDP after the Book Closure Date must first deliver their Old ShareCertificates to the Share Registrar for cancellation and issue of New Share Certificates inreplacement thereof as described below.

4.5 Issue of New Share Certificates

Shareholders who have deposited their Old Share Certificates with CDP at least twelve (12)Market Days prior to the Book Closure Date need not take any action. The Company willarrange with CDP to facilitate the exchange of New Share Certificates pursuant to theProposed Pre-Acquisition Consolidation.

Shareholders who have not deposited their Old Share Certificates as aforesaid or who do notwish to deposit their Old Share Certificates with CDP are advised to forward all their OldShare Certificates to the Share Registrar, Boardroom Corporate & Advisory Services Pte Ltd,as soon as possible after they have been notified of the Book Closure Date for cancellationand exchange for New Share Certificates. No receipt will be issued by the Share Registrar forthe receipt of the physical Old Share Certificates. The New Share Certificates will be sent byordinary mail to the registered addresses of the Shareholders at their own risk within ten (10)Market Days from the Book Closure Date or the date of receipt of the Old Share Certificates,whichever is later.

Shareholders should note that New Share Certificates will not be issued to Shareholdersunless their Old Share Certificates have been tendered to the Share Registrar forcancellation.

Shareholders should notify the Share Registrar if they have lost any of their existing Old ShareCertificates or if there is any change in their address from that reflected in the Register ofMembers of the Company.

Shareholders are to deliver their respective Old Share Certificates to the Share Registrar orCDP in accordance with the provisions set out above only after the announcement of the BookClosure Date by the Company.

4.6 Share Certificates not valid for settlement of trades on SGX-ST

Shareholders who hold physical share certificates are reminded that their Old ShareCertificates will not be valid for settlement of trading in the Pre-Acquisition Shares on theSGX-ST (as the Company is under a book-entry (scripless) settlement system) but willcontinue to be accepted for cancellation and issue of New Share Certificates in replacementthereof for an indefinite period by the Share Registrar. The New Share Certificates will not bevalid for delivery for trades done on the SGX-ST although they will continue to be prima facieevidence of legal title.


27

4.7 Trading arrangements for the Pre-Acquisition Shares

Subject to the approval for the Proposed Pre-Acquisition Consolidation by the Shareholdersat the EGM, with effect from 9.00 a.m. on the effective trading date, trading in thePre-Acquisition Shares will be in board lots of 1,000 Pre-Acquisition Shares.

4.8 Trading arrangements for odd lots

All fractional entitlements arising upon the implementation of the Proposed Pre-AcquisitionConsolidation will be aggregated and dealt with in such manner as the Judicial Managers orthe Directors (as the case may be) may, in their absolute discretion, deem fit in the interestof the Company.

The existing shares are currently traded in board lots of 1,000 shares in the ready market.Following the Proposed Pre-Acquisition Consolidation, the securities accounts maintainedwith CDP of Shareholders (being Depositors) may be credited with odd lots of Pre-AcquisitionShares (that is, lots other than board lots of 1,000 Pre-Acquisition Shares). Shareholders whoreceive odd lots of Pre-Acquisition Shares pursuant to the Proposed Pre-AcquisitionConsolidation and who wish to trade in odd lots on the SGX-ST should note that the unit sharemarket has been set up to allow trading in odd lots with a minimum size of one Pre-AcquisitionShare on the SGX-ST. The unit share market will enable trading in odd lots in any quantity lessthan one board lot of the underlying Pre-Acquisition Shares in the ready market.

The events described under paragraph 4.3 to 4.8 will not take place physically as new sharecertificates to be issued will take into consideration the Proposed Post-AcquisitionConsolidation if Ordinary Resolution 6 is approved by Shareholders. These sections areincluded herewith mainly for completeness and disclosure purpose. Nonetheless, in the eventthat the Ordinary Resolution 6 is not approved by Shareholders, the aforesaid events underparagraph 4.3 to 4.8 will take place.

5. PROPOSED ACQUISITION

5.1 The Novo SPA

Pursuant to the Novo SPA, the Company will acquire the issued share capital of the SaleCompanies from the Vendors at the aggregate price of equivalent to ten (10) times theFY2007NPAT, which was arrived at on a willing seller and willing buyer basis.

5.2 The Purchase Consideration

The Sale Price for the sale and purchase of Sale Companies which amounts to approximatelyS$110.65 million is to be satisfied by the allotment and issue of the Consideration Shares,comprising 3,688,270,000 new Pre-Acquisition Shares at the issue price of S$0.03 each. Theaggregate number of Consideration Shares to be allotted and issued representsapproximately 95.1% of the Enlarged Share Capital after the Proposed Transactions butbefore the Proposed Compliance Placement.


Completion of the Proposed Acquisition is conditional upon the fulfilment of certain conditionsprecedent on or before Completion Date including, amongst others, the following:

(a) The Company being satisfied by 10 September 2007 with the results of the due diligence(whether legal, financial, contractual, tax or otherwise) to be carried out by the Company


28

and/or its advisers on the Sale Companies, including without limitation the title to and thestatus and condition of the properties (whether movable or immovable), assets (whethertangible or intangible), liabilities, businesses, operations, records, financial position,accounts, results, legal and corporate structure of the Sale Companies, and any otherinformation disclosed to the Company;

(b) The Vendors being satisfied by 10 September 2007 with the results of the due diligence(whether legal, financial, contractual, tax or otherwise) to be carried out by the Vendorsand/or its advisers on the Company, including without limitation the title to and the statusand condition of any properties (whether movable or immovable), assets (whethertangible or intangible), liabilities, businesses, operations, records, financial position,accounts, results, legal and corporate structure, its subsidiaries and associatedcompanies;

(c) The SIC having granted the Vendors and its concert parties, and not having revoked orrepealed such grant, a waiver of their obligation to make a mandatory offer under Rule14 of the Code for the shares in the Company not held by them and their concert partiesand from having to comply with the requirements of Rule 14 of the Code subject to (i)any conditions that the SIC may impose; and (ii) the Shareholders approving at ageneral meeting of the Company the Whitewash Resolution for the waiver of the rightsof the Independent Shareholders of the Company to receive a mandatory takeover offerfrom the Vendors, for all the shares of the Company not already owned by them andpersons acting in concert with them as a result of the transactions contemplated in theNovo SPA, provided that they and any persons not independent of them, abstain fromvoting on the Whitewash Resolution.

(d) Approval being obtained from the Shareholders at an EGM to be convened for thepurpose of approving:

(i) The Proposed Pre-Acquisition Consolidation;

(ii) The allotment and issue of the Tritech Shares pursuant to the conversion ofS$160,500 of the Tritech Loan into Pre-Acquisition Shares at the rate of S$0.03 foreach Pre-Acquisition Share in satisfaction of the repayment obligations under theloan agreement pertaining to the Tritech Loan;

(iii) The allotment and issue of the Scheme Shares to Creditors of the Company as at28 October 2005 with valid claims including the Proven Creditors pursuant to theterms of the Scheme of Arrangement;

(iv) The Proposed Capital Reduction;

(v) The allotment and issue of the Loan Conversion Shares to the Vendors pursuantto the Convertible Loan Agreement, should the Vendors elect to convert theConvertible Loan into Shares in part or in whole;

(vi) Acquisition of the Sale Shares and the allotment and issue of the ConsiderationShares; and

(vii) The Whitewash Resolution;

(e) The consolidation of every twenty five (25) existing shares into one (1) Pre-AcquisitionShare pursuant to the Proposed Pre-Acquisition Consolidation;

(f) The approval of the Scheme of Arrangement to be entered into between the Companyand all its unsecured creditors as at 28 October 2005 pursuant to which the Companyshall allot and issue up to a maximum of 64,726,000 new Pre-Acquisition Shares to allits unsecured creditors as at 28 October 2005 in full and final settlement of all


29

outstanding liabilities and the High Court of Singapore under Section 210 of theCompanies Act, a copy of the order of court sanctioning the Scheme of Arrangementbeing filed with the ACRA and completion of the Scheme of Arrangement;

(g) The sanction of and confirmation by the Court to the Capital Reduction;

(h) The Company obtaining the Convertible Loan from the Vendors pursuant to theConvertible Loan Agreement and the conversion of the Convertible Loan into LoanConversion Shares in satisfaction of the repayment of the Convertible Loan if so electedby the Vendors;

(i) Where applicable, the lodgement by the Company of an Offer Information Statementwith the Monetary Authority of Singapore with respect to the allotment and issue of theLoan Conversion Shares, the Scheme Shares and the Tritech Shares;

(j) Approval in-principle being received from the SGX-ST for the transfer and admission tothe Mainboard of the SGX-ST and for the dealing in and quotation for the ConsiderationShares, Loan Conversion Shares, Tritech Shares and Scheme Shares, such approvalnot being revoked, rescinded or cancelled prior to Completion and, where such approvalin-principle is obtained subject to any conditions, such conditions being reasonablyacceptable to the Vendors and the Company as confirmed by these parties;

(k) There being no delisting of the existing shares of the Company from the SGX-SESDAQprior to the Completion date;

(l) The receipt of a notification by SGX-ST that it has no further comments to theCompany’s draft Shareholders’ circular prepared in relation to the Company’sacquisition of the Sale Shares;

(m) The lifting of the trading suspension imposed on the Company or the receipt of anynotification from the SGX-ST to that effect, provided that the Company shall be able tocomply with all conditions imposed by the SGX-ST in the said notification (if any) withinsuch timeframe imposed by the SGX-ST or two (2) months from the date of the saidnotification, whichever is the earlier;

(n) The appointment of such directors nominated by the Vendors to form the Company’sboard of directors;

(o) The Vendors and Company not having received notice of any injunction or other order,directive or notice restraining or prohibiting the consummation of the transactionscontemplated by the Conditional Agreement, and there being no action seeking torestrain or prohibit the consummation thereof, or seeking damages in connectiontherewith, which is pending or any such injunction, other order or action which isthreatened;

(p) The receipt of a written confirmation from Tritech that (i) it acknowledges the reductionof the amount due to it under the Tritech Loan; and (ii) it has no further claim against theCompany for any amount whatsoever; and

(q) Save for the Convertible Loan Agreement and professional expenses incurred under theNovo SPA, the Company having no liabilities, negative reserves and/or accumulatedlosses after the completion of the Scheme of Arrangement, Proposed Pre-AcquisitionConsolidation and Capital Reduction as evidenced from its management accounts afterthe completion of the Scheme of Arrangement, Proposed Pre-Acquisition Consolidationand Capital Reduction but not later than the same month end during which the proposedextraordinary general meeting will be held.


30

If any of the conditions precedent is not fulfilled or waived by mutual consent of the parties by30 April 2008, the Novo SPA shall, ipso facto, cease and determine and, the Convertible LoanAgreement or for any antecedent breach of the Novo SPA neither party shall have any claimagainst the other party for costs, damages, compensation or anything whatsoever.

Completion of the Proposed Acquisition is to take place within two (2) weeks after all theconditions precedent set out above have been fulfilled (or if not fulfilled, are waived by theCompany or the Vendors in accordance with the Novo SPA).

As at the Latest Practicable Date, conditions (a) and (b) have been fulfilled. The SIC has, on3 October 2007, granted a waiver of the requirement for the Vendors’ Concert Party Group tomake a general offer for the Company under Rule 14 of the Code as a result of the acquisitionof the Consideration Shares pursuant to the Proposed Acquisition. Please see the sectionentitled “Conditional Waiver of the General Offer Requirement by the SIC” in the Letter toShareholders of this Circular for more information on the conditions set out by the SIC inrelation to such waiver.

The SGX-ST, has on 30 January 2008, granted its in-principle approval for the listing andquotation of the Consideration Shares.

Please note that the approval in-principle granted by the SGX-ST to the Company forthe listing of and quotation for Compliance Shares, Consideration Shares, LoanConversion Shares, Tritech Shares and Scheme Shares on the SGX-ST is not to betaken as an indication of the merits of the Proposed Compliance, the ProposedAcquisition, the Convertible Loan, the Scheme, the Company, the Novo Group, theEnlarged Group, the Shares, Compliance Shares, Consideration Shares, LoanConversion Shares, Tritech Shares and Scheme Share.

5.4 Appointment of New Directors to the Board on Completion of the Proposed Acquisition

On Completion, the Judicial Managers shall procure the resignation of Gurbachan Singh, PaulLin Yin Mew, Khoo Boo Tat, Charlie Koh Tai Joo, Eric Tiong Hin Won, Soh Gim Teik, Ong EngHin and propose the appointment of the new directors.

After completion of the Proposed Acquisition, the new Board of the Enlarged Group shallcomprise:

(a) Yu Wing Keung, Dicky;

(b) Chow Kin Wa;

(c) Chow Kin San;

(d) Chua Keng Hiang; and

(e) Tan Siok Chin.

Further information on the Proposed Directors of the Enlarged Group is set out in the sectionentitled “Directors and Key Executive Officers of the Novo Group” of this Circular.

5.5 Undertakings by the Company

The Company has agreed with and undertaken to the Vendors that:

(a) It will take all necessary steps to convene the Creditors’ Meeting and an EGM as soonas practicable to approve the Proposed Transactions, in this regard, the Company shall


31

use its best endeavours to procure irrevocable undertakings from a majority of theexisting shareholders of the Company, to vote in favour of the transactions contemplatedunder the Novo SPA at the EGM to be convened;

(b) It will submit an additional listing application to the SGX-ST for the listing and quotationof the Consideration Shares, the Loan Conversion Shares (if any), the Tritech Sharesand the Scheme Shares and that it will at all times promptly furnish any undertakingsand do all such acts and things as may be within its powers and required for suchpurposes and use its best endeavours to maintain such listing and comply with allrequirements and procedures of the SGX-ST and CDP relating to the listing andquotation of the same; and

(c) Upon the receipt of the written request of the Vendors, the Company shall provide to theVendors a copy of its management accounts as soon as available but in any event withinthirty (30) days after the end of each month.

5.6 Rationale for the Proposed Acquisition

The Acquisition is expected to transform the Company into a major global steel tradingbusiness with significantly enhanced market capitalisation, prospects, business scale andprofitability. The Acquisition will enable the lifting of the suspension of trading of the Shares,and the Company intends to make an application to the SGX-ST for the transfer of its listingon the SGX SESDAQ to the SGX-ST Mainboard on completion of the reverse take-over andProposed Compliance Placement.

In addition, to reflect the new ownership structure and the new core business of the Company,it is proposed that the Company’s name be changed to “Novo Group Ltd.”. As at the date ofthis Circular, approval has been obtained from the ACRA for the proposed change of name bythe Company and the proposed name has been reserved.

Based on the Company’s unaudited balance sheet as at 31 July 2007, the Company had acapital deficiency of S$16.4 million and a NTL per existing share of 3.34 cents. Uponcompletion of the Proposed Acquisition, the judicial management of the Company will beterminated. The Company will have a new board of directors and a new key managementteam, who are experienced in the trading of raw materials, semi-finished and finishedproducts in the steel industry.

The Judicial Managers believe the Proposed Acquisition will benefit the Company and that itis in the interests of all Shareholders and Creditors because the Proposed Acquisitionrepresents an opportunity to revive the Company and allows it to take active steps to applyfor the current trading suspension on its shares, or new Shares, as the case may be, to belifted. Resumption in the trading of its shares, or new Shares, as the case may be, will providethe minority Shareholders with the opportunity to liquidate or deal with their shareholdings inthe Company. Since trading in the shares was suspended, the Company has found itchallenging in its search for profitable companies and businesses that are able to satisfy thequantitative criteria for a re-listing under Rule 211 of the Listing Manual. The JudicialManagers are of the view that the Novo Group is a profitable group, supported by a goodoperating track record which will be able to satisfy, in addition to the requirement of Rule 211of the Listing Manual, also the requirements of Rule 210 of the Listing Manual. Please see theLetter to Shareholders from the Novo Group of this Circular for more information on thehistory, business and prospects of the Novo Group.


32

It is proposed that the Company allots and issues Consideration Shares, comprising3,688,270,000 new Pre-Acquisition Shares (to be consolidated into 461,033,750 Sharespursuant to the Proposed Post-Acquisition Consolidation), to the Vendors and their nominee,New Page Investments Ltd in such proportion as may be directed by the Vendors at theirdiscretion in satisfaction of the Sale Price for the Proposed Acquisition.

6. PROPOSED WHITEWASH RESOLUTION

6.1 Mandatory General Offer requirement under The Code

As at the Latest Practicable Date, the Vendors and their concert parties do not hold anyShares or instruments convertible into rights to subscribe for and options in respect of Sharesor new Shares, as the case may be. Upon completion of the Proposed Acquisition and theProposed Conversion (but before the Proposed Compliance Placement), the Vendors, as wellas their nominee, New Page Investments Ltd, will in aggregate hold up to approximately3,788,270,000 new Pre-Acquisition Shares (to be consolidated into 473,533,750 Sharespursuant to the Proposed Post-Acquisition Consolidation), representing 97.7% of the totalissued share capital of the Company.

Pursuant to Rule 14 of the Code and Section 139 of the SFA, the Vendors and/or their concertparties will be required to make a mandatory unconditional general offer for all the remainingShares or new Shares, as the case may be, not owned or agreed to be acquired by theVendors and/or their concert parties at the highest price paid or agreed to be paid by theVendors and/or their concert parties for the Shares in the past six months, unless suchobligation is waived by the SIC.

6.2 Conditional waiver of the Mandatory General Offer requirement by the SIC

The SIC has on, 3 October 2007, waived the requirement for the Vendors and their concertparties to make a general offer for the Company under Rule 14 of the Code in the event thatthe Vendors’ Concert Party Group’s voting rights increase to 30% or more as a result of theacquisition of the Consideration Shares pursuant to the Proposed Acquisition, subject to thefollowing conditions:

(a) a majority of holders of voting rights of the Company approve at a general meeting,before the issue of the Consideration Shares to the Vendors’ Concert Party Group, theWhitewash Resolution by way of a poll to waive their rights to receive a general offerfrom the Vendors’ Concert Party Group;

(b) the Whitewash Resolution is separate from other resolutions;

(c) the Vendors’ Concert Party Group, parties acting in concert with them and parties notindependent of them abstain from voting on the Whitewash Resolution;

(d) the Vendors’ Concert Party Group and their concert parties did not acquire and are notto acquire, any Shares or instruments convertible into and options in respect of Shares(other than subscriptions for, rights to subscribe for, instruments convertible into oroptions in respect of new shares in the Company which have been disclosed in thisCircular):

(i) during the period between the announcement of the Proposed Acquisition and thedate Shareholders’ approval is obtained for the Whitewash Resolution; and


33

(ii) in the six (6) months prior to the announcement of the Proposed Acquisition, butsubsequent to negotiations, discussions or the reaching of understandings oragreements with the directors of the Company in relation to such issue;

(e) the Company appoints an independent financial adviser to advise the IndependentShareholders on the Whitewash Resolution;

(f) the Company sets out clearly in its circular to Shareholders:

(i) details of the proposed issue of the Consideration Shares;

(ii) the dilution effect of issuing the Consideration Shares pursuant to the ProposedAcquisition to existing holders of voting rights;

(iii) the number and percentage of voting rights in the Company as well as the numberof instruments convertible into, rights to subscribe for and options in respect ofShares held by the Vendors’ Concert Party Group and their concert parties as atthe Latest Practicable Date;

(iv) the number and percentage of voting rights to be issued to the Vendors’ ConcertParty Group under the Proposed Acquisition;

(v) a specific and prominent reference to the fact that the Proposed Acquisition willresult in the Vendors’ Concert Party Group holding shares carrying over 49% of thevoting rights of the Company based on its enlarged share capital and the Vendors’Concert Party Group will be free to acquire further Shares without incurring anyobligation under Rule 14 of the Code to make a general offer for the Company; and

(vi) that Shareholders, by voting for the Whitewash Resolution, are waiving their rightsto a general offer from the Vendors’ Concert Party Group at the highest price paidby the Vendors’ Concert Party Group and their concert parties for the Shares in thepast six (6) months preceding the commencement of the Proposed Acquisition;

(g) this Circular states that the waiver granted by the SIC to the Vendors’ Concert PartyGroup and their concert parties from the requirement to make a general offer under Rule14 is subject to the conditions stated in paragraphs (a) to (f) above;

(h) the Vendors’ Concert Party Group obtains the SIC’s approval in advance for those partsof this Circular that refer to the Whitewash Resolution; and

(i) to rely on the Whitewash Resolution, the acquisition of the Consideration Shares by theVendors’ Concert Party Group pursuant to the Proposed Acquisition must be completedwithin three (3) months of the approval of the Whitewash Resolution.

As at the Latest Practicable Date, all the above conditions imposed by the SIC (save andexcept for the condition requiring approval of the majority of voting rights of the Companypresent and voting at a general meeting for the Whitewash Resolution) have been satisfied.

6.3 Whitewash Resolution

Shareholders are requested to vote on a poll, the Whitewash Resolution set out as anordinary resolution in the Notice of EGM as set out in the section entitled “Notice ofExtraordinary General Meeting” of this Circular, waiving their rights to receive a general offerfrom the Vendors’ Concert Party Group and their concert parties for the Company under Rule14 of the Code arising from the issue and allotment of the Consideration Shares to theVendors’ Concert Party Group pursuant to the Proposed Acquisition.


34

Shareholders should also note that by voting in favour of the Whitewash Resolution,they will be waiving their rights to receive a general offer from the Vendors’ ConcertParty Group, which the Vendors’ Concert Party Group would otherwise be obliged tomake at the highest price paid or agreed to be paid by the Vendors’ Concert PartyGroup and their concert parties for Shares or new Shares, as the case may be, in thepast six months, in accordance with Rule 14 of the Code and Section 139 of the SFA.

Pursuant to obtaining Shareholders’ approval for the Whitewash Resolution and uponcompletion of the Proposed Acquisition, the Vendors will, through New PageInvestments Ltd, hold in excess of 49.0% of the Enlarged Share Capital. IndependentShareholders should note that by voting for the Whitewash Resolution, they will bewaiving their rights to a general offer from the Vendors’ Concert Party Group and underRule 14 of the Code, the Vendors and their concert parties could thereafter acquireadditional new Shares in the Company without incurring a mandatory unconditionalgeneral offer obligation insofar as their aggregate equity interests remain in excess of49.0% in the six months prior to any such subsequent acquisition of new Shares in theCompany.

Independent Shareholders should note that the Proposed Acquisition is conditionalupon the Whitewash Resolution being approved by the Shareholders as the WhitewashResolution is a condition precedent in the Novo SPA. If the Independent Shareholdersdo not vote in favour of the Whitewash Resolution, the Proposed Acquisition will NOTbe completed.

Phillip Securities has been appointed as the Independent Financial Adviser to the JudicialManagers in relation to the Whitewash Resolution. A copy of letter from Phillip Securities inrelation to the Whitewash Resolution is reproduced in Appendix B of this Circular.

7. PROPOSED COMPLIANCE PLACEMENT

7.1 Proposed Compliance Placement

On completion of the Proposed Transaction (excluding the Proposed CompliancePlacement), the Vendors will own approximately 97.7% of the enlarged issued and paid-upshare capital of the Company. The balance of the enlarged issued and paid-up share capitalof the Company being held in the hands of public Shareholders will be 2.3%. Pursuant to theprovisions of Rule 210(1)(a) of the Listing Manual, at least 25% of the enlarged issued sharecapital of the Company must be held in the hands of at least 1,000 public Shareholders inorder for the Company to maintain its listing status. Whilst the requirements on theshareholding spread relating to the number of public Shareholders will be satisfied followingthe completion of the Proposed Transactions, the Proposed Compliance Placement will berequired to be effected to comply with the requirement to have at least 25% of the enlargedissued share capital of the Company to be held by public Shareholders.

For the purposes of meeting the shareholding distribution requirements set out in the ListingManual and also to raise funds for general working capital and capital expenditure purposes,the Company currently intends to place out up to 172,932,000 Compliance Shares to publicinvestors at an issue price to be determined by the Company in consultation with the FinancialAdviser and placement agent(s) to be appointed, but will not be less than S$0.20 per Share,subject to the prevailing market conditions at the time of placement.


35

7.2 Details of the Proposed Compliance Placement

As at the date of this Circular, the Company has not enter into any share placementagreements in relation to the Proposed Compliance Placement. The Company is currently indiscussion with prospective placement agents to undertake the Proposed CompliancePlacement.

Subject to Shareholders’ approval of the resolutions set out in the Notice of EGM attached tothis Circular, the Company will be entering into definitive share placement agreements (the“Placement Agreements”) with placement agents and/or investors for the ProposedCompliance Placement of new Shares.

The Proposed Compliance Placement is expected to be completed within one month from thedate of Completion, subject to, amongst other things, the following conditions being fulfilled orotherwise waived by the investors:

(a) completion of the Novo SPA;

(b) approval by Shareholders of the allotment and issue of the Compliance Shares;

(c) approval in-principle for the listing and quotation of the Compliance Shares on theOfficial List of the SGX-ST being obtained from the SGX-ST and not revoked oramended; and

(d) the SGX-ST granting its in-principle approval for the lifting of the trading suspension inthe Company’s ordinary shares.

The SGX-ST, has on 30 January 2008, granted its in-principle approval for the listing andquotation of the Compliance Shares.

Please note that the approval in-principle granted by the SGX-ST to the Company forthe listing and quotation of the Compliance Shares, the Consideration Shares, LoanConversion Shares, Tritech Shares and Scheme Shares on the SGX-ST is not to betaken as an indication of the merits of the Proposed Acquisition, Proposed CompliancePlacement, the Company, the Novo Group, the Enlarged Group, the Shares,Consideration Shares, Tritech Shares, Scheme Shares, Loan Coversion Shares and/orCompliance Shares.

Completion of the Proposed Compliance Placement is expected to take place within onemonth after completion of the Proposed Acquisition and the listing of and quotation for theCompliance Shares on the SGX-ST is expected to take place simultaneously with or after thelisting of and quotation for the Consideration Shares.


36

7.3 Use of Proceeds

The Company expects to receive net proceeds of approximately S$40 million (after deductingestimated expenses) from the Proposed Compliance Placement. The new Board intends toapply such net proceeds for the following purposes with priority given to business expansionover working capital:

PurposeEstimated amount

(S$’million)

Investment, acquisition and joint venture 6.0

Set up offices in PRC, Dubai and India(1) 1.5

Working capital(2) 32.5

Total 40.0

Notes:–

(1) S$1.5 million to be incurred for the capital expenditures required to set-up new offices in PRC, Dubai and India.

(2) Working capital includes approximately an additional S$18 million of restricted fixed deposits to be placed withfinancial institutions for new trading facilities extended as well as normal working capital required to fund revenuegrowth and to meet business expenses arising from business expansion.

Pending the specific deployment of funds, the proceeds may be placed as deposits withfinancial institutions or added to the working capital or used to reduce bank borrowings orused for investment in short-term money market instruments as may be determined by thenew Board in their absolute discretion.

8. PROPOSED ALLOTMENT AND ISSUE OF TRITECH SHARES

In connection with the Proposed Acquisition, it is proposed that the Company allots and issuesthe Tritech Shares, comprising 5,350,000 new Pre-Acquisition Shares, pursuant to theconversion of S$160,500 of the Tritech Loan into Shares at the rate of S$0.03 for each newPre-Acquisition Share to be issued to Tritech and the repayment in cash of S$259,500 as fulland final settlement of the Tritech Loan.

The issue of the Tritech Shares is subject to the receipt of a written confirmation from Tritechthat (i) it acknowledges the reduction of the amount due to it under the Tritech Loan; and (ii)it has no further claim against the Company for any amount whatsoever. On 8 January 2008,the Company has received written confirmation on the same from Tritech.

9. PROPOSED CONVERSION

In order to raise funding for the Proposed Acquisition, the Company had on 31 July 2007,entered the Convertible Loan Agreement with the Vendors for the issuance of the ConvertibleLoan Notes to the Vendors. The Convertible Loan Notes shall be ranked senior in priority tothe unsecured obligations of the Issuer but after the Judicial Managers’ fees and expensesincurred pursuant to Section 227D(2) of the Act. Upon the successful completion of theProposed Acquisition and lifting of suspension of the Shares of the Company, the Vendorsshall have the option to elect to convert the Convertible Loan Notes into new Pre-AcquisitionShares at the issue price of S$0.03 per Pre-Acquisition Share.

The Vendors have, on 27 September 2007, given a written confirmation to the Companyconfirming their election to convert the Convertible Loan Notes into new Shares as providedunder the Convertible Loan Agreement.


37

The Convertible Loan Notes will not be issued until after the Shareholders’ approval for suchissue has been granted and the Whitewash Resolution has been passed.

It is proposed that the Company allots and issues Loan Conversion Shares comprising100,000,000 new Pre-Acquisition Shares to the Vendors pursuant to the Convertible LoanAgreement.

10. PROPOSED CAPITAL REDUCTION

10.1 Rationale for the Proposed Capital Reduction

The Company is proposing to undertake a capital reduction exercise pursuant to Article 12 ofthe Articles of Association and Section 78G read with Section 78I of the Companies Act. Thepurpose of the Proposed Capital Reduction is to cancel paid-up share capital no longerrepresented by available assets due to the accumulated losses and to write-off part of theaccumulated losses of the Company as at 25 January 2008, amounting to approximatelyS$33,541,778.

As at 25 January 2008, the Company has accumulated losses of approximatelyS$47,904,065. The losses were incurred by the businesses of the Company prior to theacquisition of Novo Group, and these businesses have been discontinued since.

As the business of Novo Group has been profitable since 2005, the objective of the ProposedCapital Reduction is intended to better reflect the financial position of the Company followingcompletion of the acquisition of Novo Group and to facilitate the declaration of dividendssometime in the future, if appropriate.

10.2 Details of the Proposed Capital Reduction

The Proposed Capital Reduction will be undertaken pursuant to Section 78G read withSection 78I of the Companies Act and will be effected in the following manner:

(a) subject to the satisfaction of the conditions precedent referred to in Paragraph 10.3below, by an application made to the High Court of Singapore for an order approving thereduction in share capital which has been lost or is unrepresented by available assetsto the extent of S$33,541,778, either unconditionally or on such terms and conditions asthe High Court thinks fit; and

(b) that an amount equal to S$33,541,778 being the credit arising from the cancellation ofthe issued and paid up capital, be applied in writing off the accumulated losses of theCompany as at 25 January 2008 to the extent of S$33,541,778.

10.3 Conditions of the Proposed Capital Reduction

The Proposed Capital Reduction is subject to, inter alia, the following:

(a) the approval of Shareholders at the EGM to be convened;

(b) the consent being obtained from any qualifying creditor within the meaning of Section78H of the Companies Act, if applicable; and

(c) the filing of the relevant documents with the ACRA within 8 days commencing from thedate on which the special resolution is passed approving the Proposed CapitalReduction.


38

10.4 Financial Effects of the Proposed Capital Reduction

The Proposed Capital Reduction is an accounting procedure that reduces the existing issuedand paid up share capital of the Company to write-off the deficit in the accumulated lossaccount. The exercise represents merely a change in the composition of reserves and doesnot entail any outflow of cash or change to the assets of the Company.

The Proposed Capital Reduction will reduce the share capital by approximately S$33,541,778to write-off the deficit in the accumulated loss account of the Company. The number of Sharesin the capital of the Company held by Shareholders will remain unchanged following theProposed Capital Reduction.

The Proposed Capital Reduction will not have any impact on the net tangible assets, earningsand gearing of the Company.

11. PROPOSED CHANGE OF NAME

11.1 Proposed Change of Name

The Company is proposing to change its name from “Neocorp International Ltd.” to “NovoGroup Ltd.”. As at the date of this Circular, approval has been obtained from the ACRA for theproposed change of name by the Company to “Novo Group Ltd.” and the proposed name hasbeen reserved.

11.2 Rationale for the Proposed Change of Name

To reflect the new ownership structure and the new core business of the Enlarged Group, itis proposed that the Company’s name be changed to “Novo Group Ltd.”. The change of nameof the Company will only take effect after completion of the Proposed Acquisition.

11.3 Administrative Procedures

Subject to the resolution for the change of the Company’s name to “Novo Group Ltd.” beingcarried as a special resolution at the EGM, the Company will, on the completion date, lodgethe requisite pro forma notification with the ACRA relating to its change of name. Upon theissue by the ACRA of a certificate on change of name to the Company under its new name,the change of name shall become effective. The Company will issue an announcement, afterits receipt of such certificate from the ACRA, to notify Shareholders of the coming into effectof the Company’s new name.

Shareholders should note that the change of the Company’s name does not affect the legalstatus of the Company.

12. PROPOSED POST-ACQUISITION CONSOLIDATION

12.1 Proposed Post-Acquisition Consolidation

Following the completion of the Proposed Transactions but before the Proposed Post-Acquisition Consolidation and the Proposed Compliance Placement, every eight Pre-Acquisition Shares to be registered in the name of each Shareholder will be consolidated toconstitute one Share.


39

Shareholders should note that the number of Shares which Shareholders will be entitled to,based on their holdings of Pre-Acquisition Shares as at the Book Closure Date, will berounded down to the nearest whole Share and any fractions of Shares arising from theProposed Post-Acquisition Consolidation will be disregarded. As the proceeds of the sale offractions of Shares arising from the Proposed Post-Acquisition Consolidation are likely to beless than the administrative costs and expenses involved in despatching such proceeds to theShareholders, fractions of Shares arising from the Proposed Post-Acquisition Consolidationwill be aggregated and dealt with in such manner as the Directors may, in their absolutediscretion, deem fit in the interest of the Company. Each Share will rank pari passu with eachother, and will be traded in board lots of 1,000 Shares.

After the Proposed Transactions but before the Proposed Post-Acquisition Consolidation andthe Proposed Compliance Placement, the Company will have an issued and paid-up capitalof S$115,774,699 comprising 3,878,029,371 Pre-Acquisition Shares. Pursuant to theProposed Post-Acquisition Consolidation, the Company will have an issued and paid-upcapital of S$115,774,699 comprising 484,753,671 Shares, fractional Share beingdisregarded.

The Proposed Post-Acquisition Consolidation has no effect on the shareholders’ funds of theEnlarged Group. Shareholders will not be required to make any payment to the Company inrespect of the Proposed Post-Acquisition Consolidation.

12.2 Conditions Precedent for the Proposed Post-Acquisition Consolidation

The Proposed Post-Acquisition Consolidation shall only take effect upon the successfulcompletion of the other transactions comprising the Proposed Transactions but before theProposed Compliance Placement, which will take place before the listing and quotation of theConsideration Shares, Conversion Shares, Tritech Shares and Scheme Shares.

The implementation of the Proposed Post-Acquisition Consolidation is subject toShareholders’ approval by way of an ordinary resolution at the EGM.

The Vendors have been notified of the Proposed Post-Acquisition Consolidation and theyhave confirmed in writing that they have no objection to the Proposed Post-AcquisitionConsolidation.

An announcement will be made by the Company to notify Shareholders of the date when theProposed Post-Acquisition Consolidation will become effective and the date on which theShares will trade on the SGX-ST in board lots of 1,000 Shares as well as the Books ClosureDate in due course.

12.3 Updating of Register of Members and Depository Register for the Shares

If the ordinary resolution in the Notice of EGM relating to the Proposed Post-AcquisitionConsolidation is passed at the EGM, the Shareholders’ entitlements of the Shares will bedetermined on the Book Closure Date, whereupon the Register of Members and theDepository Register will be updated to reflect the number of Shares held by Shareholders,and the Shares will begin trading in board lots of 1,000 Shares on the effective trading date.


40

12.4 Deposit of Share Certificates with CDP

Shareholders who hold physical share certificates for the existing shares in their own names(“Old Share Certificates”) and who wish to deposit the same with CDP and have their Sharescredited to their Securities Accounts maintained with CDP must deposit their Old ShareCertificates, together with duly executed instruments of transfer in favour of CDP, no later thantwelve (12) Market Days prior to the Book Closure Date.

After the Book Closure Date, CDP will only accept for deposit share certificates for Shares(“New Share Certificates”). Shareholders who wish to deposit their share certificates withCDP after the Book Closure Date must first deliver their Old Share Certificates to the ShareRegistrar for cancellation and issue of New Share Certificates in replacement thereof asdescribed below.

12.5 Issue of New Share Certificates

Shareholders who have deposited their Old Share Certificates with CDP at least twelve (12)Market Days prior to the Book Closure Date need not take any action. The Company willarrange with CDP to facilitate the exchange of New Share Certificates pursuant to theProposed Post-Acquisition Consolidation.

Shareholders who have not deposited their Old Share Certificates as aforesaid or who do notwish to deposit their Old Share Certificates with CDP are advised to forward all their OldShare Certificates to the Share Registrar, Boardroom Corporate & Advisory Services Pte Ltd,as soon as possible after they have been notified of the Book Closure Date for cancellationand exchange for New Share Certificates. No receipt will be issued by the Share Registrar forthe receipt of the physical Old Share Certificates. The New Share Certificates will be sent byordinary mail to the registered addresses of the Shareholders at their own risk within ten (10)Market Days from the Book Closure Date or the date of receipt of the Old Share Certificates,whichever is later.

Shareholders should note that New Share Certificates will not be issued to Shareholdersunless their Old Share Certificates have been tendered to the Share Registrar forcancellation.

Shareholders should notify the Share Registrar if they have lost any of their existing Old ShareCertificates or if there is any change in their address from that reflected in the Register ofMembers of the Company.

Shareholders are to deliver their respective Old Share Certificates to the Share Registrar orCDP in accordance with the provisions set out above only after the announcement of the BookClosure Date by the Company.

12.6 Share Certificates not valid for settlement of trades on SGX-ST

Shareholders who hold physical share certificates are reminded that their Old ShareCertificates will not be valid for settlement of trading in the Shares on the SGX-ST (as theCompany is under a book-entry (scripless) settlement system) but will continue to beaccepted for cancellation and issue of New Share Certificates in replacement thereof for anindefinite period by the Share Registrar. The New Share Certificates will not be valid fordelivery for trades done on the SGX-ST although they will continue to be prima facie evidenceof legal title.


41

12.7 Trading arrangements for the Shares

Subject to the approval for the Proposed Post-Acquisition Consolidation by the Shareholdersat the EGM, with effect from 9.00 a.m. on the effective trading date, trading in the Shares willbe in board lots of 1,000 Shares.

12.8 Trading arrangements for odd lots

All fractional entitlements arising upon the implementation of the Proposed Post-AcquisitionConsolidation will be aggregated and dealt with in such manner as the Judicial Managers orthe Directors (as the case may be) may, in their absolute discretion, deem fit in the interestof the Company.

The existing shares are currently traded in board lots of 1,000 shares in the ready market.Following the Proposed Post-Acquisition Consolidation, the securities accounts maintainedwith CDP of Shareholders (being Depositors) may be credited with odd lots of Shares (that is,lots other than board lots of 1,000 Shares). Shareholders who receive odd lots of Sharespursuant to the Proposed Post-Acquisition Consolidation and who wish to trade in odd lots onthe SGX-ST should note that the unit share market has been set up to allow trading in odd lotswith a minimum size of one Share on the SGX-ST. The unit share market will enable tradingin odd lots in any quantity less than one board lot of the underlying Shares in the readymarket.

13. THE ENLARGED GROUP AFTER THE PROPOSED TRANSACTIONS

13.1 Information on the Novo Group

The information on the Novo Group is set out in paragraph B of the Letter to Shareholdersfrom Novo Group.


42


13.2 Enlarged Group Structure

The corporate structure of the Enlarged Group upon completion of the Proposed Transactions is as follows:

Rico

30% 30%

Novo Group Ltd.

100%

100% 100%

100%

100%

100% 100%100%

100%

Nova MBL

Nova SPL Novo IL Novo HK

Novo BVI Novo CPL Global Wealth TL

Novostal HK

Novostal PL

50%

Xinghua BVI

100%

Xinghua HK

45%

Iron And Steel

Novosteel DMCC

43

The details of the subsidiaries and associated companies of the Enlarged Group, assumingthe Proposed Acquisition has been completed as at the Latest Practicable Date, is as follows:

Name of subsidiary/associated company

Place of business andincorporation Principal activities

Effective equityinterest held by

the EnlargedGroup on

completion of theProposed

Acquisition

Global Wealth TradingLtd(6)

(1)/BVI Investment holding 100%

Nova Shipping Pte. Ltd.(7) Singapore/Singapore Shipping brokerage 100%

Novo CommoditiesLimited(6)

(2)/BVI Trading andinvestment

100%

Novo Commodities Pte.Ltd.(7)

Singapore/Singapore Trading andinvestment

100%

Novo CommoditiesLimited(7)

Hong Kong/Hong Kong Trading andinvestment

100%

Novo InvestmentLimited(7)

Hong Kong/Hong Kong Consultancyservices

100%

Nova Maritime (B.V.I.)Limited(7)

(2)/BVI Shipping brokerage 100%

Novosteel DMCC(7) United Arab Emirates/United Arab Emirates

Trading andinvestment

100%

Xinghua HoldingsLimited(8)

(1)/BVI Investment holding 50%(9)

Xinghua Holdings (China)Limited(8)

(1)/Hong Kong Investment holding 50%(9)

Iron And Steel ResourcesLimited(8)

Hong Kong/Hong Kong Trading andinvestment

45%(9)

Novostal Limited Hong Kong/Hong Kong Trading andinvestment

30%(3)

Novostal Pte. Ltd Singapore/Singapore Trading andinvestment

30%(4)

Rico Group Ltd (1)/BVI Investment holding 30%(5)

Notes:

(1) These companies are investment holdings companies and do not carry out any operations.

(2) These companies are currently dormant.

(3) Novostal Limited is a wholly-owned subsidiary of Rico Group Ltd, a 30% owned associated company of GlobalWealth Trading Ltd.

(4) Novostal Pte Ltd is an associated company with 30% of its issued share capital being held by Global WealthTrading Ltd. The remaining shareholders of the company are Mr Jureeratana Surapong (35%) and MsLimpiyachart Sirinuch (35%) who are not related to any Directors or Shareholders of Novo Group.

(5) Rico Group Ltd is an associated company with 30% of its issued share capital being held by Global WealthTrading Ltd. The remaining shareholders of the company are Mr Jureeratana Surapong (35%) and MsLimpiyachart Sirinuch (35%) who are not related to any Directors or Shareholders of Novo Group.


44

(6) The total 1 share issued fully-paid of Global Wealth Trading Ltd was transferred to Yu Wing Keung, Dicky on 7September 2004. Prior to the acquisition by the company of the interests in Novostal Pte. Ltd. and Rico GroupLtd, the company was dormant since the date of its incorporation.

(7) Please refer to the section entitled “Principal Business Activities” in the Letter to Shareholders from Novo Groupof this Circular for more information on the subsidiaries’ business functions and scope of services.

(8) Please refer to the section entitled “Future Plans” in the Letter to Shareholders from Novo Group of this Circularfor more information of the associated companies’ business functions and scope of services.

(9) Please refer to the section entitled “Future Plans” in the Letter to shareholders from Novo Group of this Circularfor more information on the remaining shareholders of the associated companies.

Save as disclosed in this Circular, none of the Directors, substantial shareholders and/or theProposed Directors has any interest, whether direct or indirect, in the Enlarged Group or anyof the subsidiaries and associated companies of the Enlarged Group.

None of the above subsidiaries and associated companies of the Enlarged Group is listed onany stock exchange.

13.3 Principal Business

Following completion of the Proposed Acquisition, the principal business of the EnlargedGroup will be that of the Novo Group. Please see the section entitled “Business Model” in theLetter to Shareholders from the Novo Group of this Circular for more information on the NovoGroup, its business and prospects.


45


13.4 Principal Shareholders

Details of the changes in shareholding structure after, inter alia, the completion of the Debts Restructuring Plan, the Proposed Conversion, the ProposedAcquisition, the Proposed Post-Acquisition Consolidation and the Proposed Compliance Placement are set out in the following table:

Before the Proposed Pre-Acquisition Consolidation, theDebt Restructuring Plan, the

Proposed Conversion, ProposedAcquisition, Proposed Post-

Acquisition Consolidation and theProposed Compliance Placement

After the Proposed Pre-Acquisition Consolidation, the

Debt Restructuring Plan butbefore the Proposed Conversion,

the Proposed Acquisition,Proposed Post-Acquisition

Consolidation and the ProposedCompliance Placement

After the Proposed Pre-Acquisition Consolidation, theDebt Restructuring Plan, the

Proposed Conversion(1) and theProposed Acquisition but beforethe Proposed Post-AcquisitionConsolidation and Proposed

Compliance Placement

After the Proposed Pre-Acquisition Consolidation, theDebt Restructuring Plan, the

Proposed Conversion, theProposed Acquisition, ProposedPost-Acquisition Consolidationand the Proposed Compliance

Placement(2)

No. of Shares% of total

issued Shares No. of Shares% of total



issued Shares

Existing Directors:

Ong Eng Hin — — — — — — — —

Soh Gim Teik — — — — — — — —

Tiong Hin Won, Eric 1,000,000 0.20 40,000 0.04 40,000 n.m(6) 5,000 n.m.(6)

Koh Tai Joo Charlie — — — — — — — —

Gurbachan Singh — — — — — — — —

Khoo Boo Tat 26,691,435 5.42 1,067,657 1.19 1,067,657 0.03 133,457 0.02

Lin Yin Mew @ Paul — — — — — — — —

Vendors’ Concert Party Group(3):

Yu Wing Keung, Dicky — — — — 184,289,000 4.75 23,036,125 3.50

Chow Kin Wa — — — — 78,981,000 2.04 9,872,625 1.50

New Page Investments Ltd(4) — — — — 3,525,000,000 90.90 440,625,000 67.00

Substantial Shareholders who arenot Directors:

Neo Investment Pte Ltd 210,202,103 42.72 8,408,084 9.37 8,408,084 0.22 1,051,010 0.16

See Lop Fu James 24,589,220 5.00 983,569 1.10 983,569 0.02 122,946 0.02

Creditors(5) — — 70,076,000 78.07 70,076,000 1.81 8,759,500 1.33

Others (Public) 229,601,525 46.66 9,184,061 10.23 9,184,061 0.23 174,080,008 26.47

Total 492,084,283 100.00 89,759,371 100.00 3,878,029,371 100.00 657,685,671 100.00

46


Notes:

(1) The Proposed Conversion takes into account up to 100,000,000 Pre-Acquisition Shares alloted to the Vendors under the Convertible Loan Agreement.

(2) The illustration is based on the assumption that the Vendors will not place out their shares under the Proposed Compliance Placement.

(3) Total number of shares include the Consideration Shares and the Conversion Shares.

(4) New Page Investments Ltd is 70% and 30% held by Yu Wing Keung, Dicky and Chow Kin Wa, respectively

(5) The number of ordinary shares issued to the unsecured creditors and Tritech are 64,726,000 Pre-Acquisition Shares and 5,350,000 Pre-Acquisition Shares respectively.

(6) Not meaningful.

The Shares held by the Directors and Substantial Shareholders do not have different voting rights from other Shareholders of the Company.

Save as disclosed above, to the best knowledge and belief of the Judicial Managers, the Company is not directly or indirectly, owned or controlled,whether severally or jointly, by any person or government.

To the best knowledge and belief of the Judicial Managers, there are no known arrangements the operation of which may, at a subsequent date, resultin a change in control of the Company.

47

13.5 Moratorium

To demonstrate their commitment to the Enlarged Group, the Vendors and their nominee,New Page Investments Ltd, who will hold the Consideration Shares and Conversion Shares,have undertaken not to dispose of or transfer any of the Consideration Shares andConversion Shares for a period of 12 months from the date of the listing of the Shares, andhas undertaken to retain at least 50.0% of the aggregate of the Consideration Shares andConversion Shares they hold for a period of 12 months thereafter. The Vendors have alsoundertaken not to dispose of or transfer any part of their shareholdings in New PageInvestments Ltd for a period of 24 months from the date of the listing of the Shares.

13.6 Prospects

Following completion of the Proposed Acquisition, the prospects of the Enlarged Group willmaterially be those of the Novo Group. Please see the section entitled “Trends andProspects” in the Letter to Shareholders from the Novo Group of this Circular for moreinformation.

13.7 Financial Information

The following financial information should be read in conjunction with the full text of thisCircular, including the “Unaudited Pro Forma Combined Financial Information For TheFinancial Period From 31 January 2005 to 30 April 2006 and Financial Year Ended 30 April2007” set out in Appendix C to this Circular.

13.7.1 Waiver of Rule 1015(5)(b) of the Listing Manual

The Company has been in judicial management since 28 October 2005. Since then, theJudicial Managers have disposed of some of the assets and written off the investments in thesubsidiaries that were in liquidation. After which the Company became a dormant company.As such, the Company is of the view that the presentation of the pro forma financialinformation of Novo Group will enable shareholders to make an informed assessment of theNovo Group and that the non-inclusion of a separate disclosure of pro forma financialinformation on the Enlarged Group will not be materially prejudicial to the interest of theShareholders.

The SGX-ST has waived the requirement for the inclusion in this Circular the unaudited proforma financial information of the Enlarged Group for FP2006, FY2007 and 5MFY08.


48

13.7.2 Pro Forma Unaudited Combined Income Statements of the Novo Group

The pro forma unaudited combined income statements of the Novo Group for FP2006 andFY2007 are as follows:

(US$) FP2006 FY2007

Revenue 76,009,897 310,913,163

Cost of sales (70,849,807) (276,304,527)

Gross profit 5,160,090 34,608,636

Other operating income 478,294 1,254,632

Distribution and selling expenses (4,048,275) (24,894,884)

Administrative expenses (209,003) (620,844)

Finance costs (233,454) (1,502,656)

Share of results of associated companies 346,235 (24,881)

Profit before income tax 1,493,887 8,820,003

Income tax (198,704) (1,540,522)

Profit for the period/year 1,295,183 7,279,481

Earnings per Share (US$ in cents)(1)

Basic 0.27 1.50

Diluted 0.27 1.50

Note:

(1) For comparative purposes, EPS for the period/year under review have been computed based on the profit for theperiod/year and pre-compliance share capital of 484,753,671 Shares.

13.7.3 Pro Forma Unaudited Combined Balance Sheets of the Novo Group

The pro forma unaudited combined balance sheets of the Novo Group as at 30 April 2006 andas at 30 April 2007 are as follows:

(US$) As at 30 April 2006 As at 30 April 2007

Non-current assets

Property, plant and equipment — 1,446,173

Investment in associated companies 742,096 717,215

742,096 2,163,388

Current assets

Receivables 21,341,317 12,206,386

Cash and bank balances 3,378,398 14,594,603

24,719,715 26,800,989

Total Assets 25,461,811 28,964,377

Non-current liability

Borrowings — 434,817

Current liabilities

Payables 22,938,054 15,715,953


49

(US$) As at 30 April 2006 As at 30 April 2007

Bank overdraft — 10,258

Borrowings 397,540 1,211,082

Tax payable 198,704 1,739,226

23,534,298 18,676,519

Total Liabilities 23,534,298 19,111,336

Net assets 1,927,513 9,853,041

Equity attributable to equity holders of theCompany

Share capital 632,330 1,278,377

Retained earnings 1,295,183 8,574,664

1,927,513 9,853,041

NTA per share (US$ in cents) (1) 0.40 2.03

Note:

(1) For comparative purposes, NTA per share for the period/year under review have been computed based on theNTA as at 30 April 2006 and 30 April 2007 respectively and pre-compliance share capital of 484,753,671 Shares.

13.8 Financial Effects of the Proposed Transactions

13.8.1 Financial position of the Company

Based on the Company’s unaudited balance sheet as at 31 July 2007, the Company had acapital deficiency of S$16.4 million and a NTL per Share of 3.34 cents. Upon completion ofthe Proposed Acquisition, the judicial management of the Company will be terminated. TheNTL per Share is due to accumulated losses of S$47,891,898 as at 31 July 2007 exceedingthe issued share capital of the Company of S$31,451,650.50. Subsequent to 31 July 2007and up to the Latest Practicable Date, there has been no material developments or changeto the financial position of the Company, other than continued losses incurred for operatingexpenses.

13.8.2 Financial Effects

The financial effects of the Proposed Transactions on the Company and the Enlarged Groupare presented herein solely for illustrative purposes only. The objective is to illustrate what thehistorical information might have been had the Completion been completed at an earlier date.However, such information is not necessarily indicative of the actual results of the operationsor the related effects in the financial position that would have been attained had theCompletion been completed at such an earlier date. Given that the pro forma financial effectspresented below is pro forma in nature and only for illustrative purposes, it does not representthe actual financial position and/or results of the Company immediately after the completionof the Proposed Transactions.


50

For the purposes of the following sections stated below, the pro forma financial effects ofcompletion of the Proposed Transactions have been prepared based on the followinginformation:

(a) the audited financial statements of the Company for FY2004 being the last auditedresults of the Company before the Company’s Shares were suspended on 15September 2005 from trading on SGX-SESDAQ;

(b) the management accounts of the Company as at 31 July 2007; and

(c) the unaudited pro forma combined financial information of the Sale Companies forFY2007.

Share Capital

Number ofShares

Issued capital(S$)

Issued capital(US$)(1)

Existing number of shares 492,084,283 31,451,651 22,102,355

Number of shares pursuant to the ProposedPre-Acquisition Consolidation and theProposed Capital Reduction 19,683,371 12,512 8,793

New Shares to be issued pursuant to theScheme of Arrangement and issue ofTritech Shares 70,076,000 2,102,280 1,477,358

New Shares to be issued pursuant to theProposed Acquisition 3,688,270,000 110,648,100 77,756,922

New Shares to be issued pursuant to theissue of the Loan Conversion Shares 100,000,000 3,000,000 2,108,222

Total number of shares after the ProposedTransactions but before the ProposedCompliance Placement 3,878,029,371 115,762,892 81,351,295

Number of Shares pursuant to the ProposedPost-Acquisition Consolidation 484,753,671 115,762,892 81,351,295

New Shares to be issued pursuant to theProposed Compliance Placement(2) 172,932,000 41,503,680 29,166,325

Enlarged Share Capital 657,685,671 157,266,572 110,517,620

Notes:

(1) Translated based on the exchange rate between S$ and US$ of S$1.423 to US$1.00 as at the Latest PracticableDate.

(2) Calculated based on the assumption that issue price for Compliance Shares is S$0.24 for each Share.


51

(Loss)/Earnings per share

The pro forma financial effects of the Proposed Transactions and Proposed Post-AcquisitionConsolidation on the earnings/(loss) per Share of the Enlarged Group for FY2004, being thelatest audited financial statements of the Company, are as follows:

(Loss)/Profitafter income

tax attributableto equityholders

US$ ‘000Number of

Shares

(Loss)/Earnings per

Share (UScents)

Before the Proposed Transactions (3,215)(1) 492,084,283 (0.65)

Before the Proposed Transactions and theProposed Post-Acquisition Consolidation butbefore the Proposed Compliance Placement 7,279(2) 484,753,671 1.50

After the Proposed Transactions and theProposed Post-Acquisition Consolidation 7,279(2) 657,685,671 1.11

Notes:

(1) Based on the audited financial statements of the Company for FY2004, the Company reported a loss ofS$5,268,000. Subsequently, before the trading of the Company’s Shares was suspended on 15 September 2005from trading on the SGX-ST the last announced financial statements of the Company was for the half year periodended 31 May 2005 which was unaudited. The loss of S$5,268,000 is converted to US$ at the prevailingexchange rate of 1.6386 as at 30 November 2004.

(2) This is based solely on the unaudited combined profit after tax for FY2007 of Novo Group of US$7,279,481.Neocorp has had no operations in the past 2 years as it was under judicial management.

NTA/NTL

The pro forma financial effects of the Proposed Transactions and Proposed Post-AcquisitionConsolidation on the NTA of the Enlarged Group as at 30 November 2004, being the lastaudited financial statements of the Company, are as follows:

NTA/(NTL)(US$ ‘000)

Number ofShares

NTA/(NTL)per Share(US cents)

Before the Proposed Transactions (10,830)(1) 492,084,283 (2.20)

After the Proposed Transactions and theProposed Post-Acquisition Consolidation butbefore the Proposed Compliance Placement 9,862(2) 484,753,671 2.03

After the Proposed Transactions and theProposed Post-Acquisition Consolidation 36,045(3) 657,685,671 5.48(4)

Notes:

(1) Based on the Company’s unaudited balance sheet as at 31 July 2007, the Company had a negativeshareholder’s equity of S$16.4 million (including accumulated losses of S$47.9 million as at 31 July 2007).Subsequent to 31 July 2007 up to the Latest Practicable Date, there has been no material developments orchange to the financial position of the Company, other than continued losses incurred for operating expenses.The negative shareholder’s equity of S$16.4 million is converted to US$ at the prevailing exchange rate of 1.5143as at 31 July 2007.

(2) This is computed based on the unaudited NTA of Novo Group as at 30 April 2007 of US$9.85 million and theunaudited NTA of the Company (after the Scheme of Arrangement) which amounts to US$8,793.

(3) The estimated net proceeds arising from the Proposed Compliance Placement is US$26.18 million.


52

Gearing

The pro forma financial effects of the Proposed Transactions and Proposed Post-AcquisitionConsolidation on the gearing of the Enlarged Group as at 30 November 2004, being the lastaudited statement of the Company, are as follows:

Totalborrowings(US$’000)

Shareholders’funds

(US$’000)Gearing(times)

Before the Proposed Transactions(1) 5,975 12,351 0.48

NTA of Enlarged Group (after the Schemeof Arrangement) 1,656(2) 9,862 0.17

Add: Goodwill(3) — 1,884 N.A.

After the Proposed Transactions and theProposed Post-Acquisition Consolidation butbefore the Proposed Compliance Placement 1,656(2) 11,746 0.14

After the Proposed Transactions and theProposed Post-Acquisition Consolidation 1,656(2) 37,929(4) 0.04

Notes:

(1) Based on the Company’s audited balance sheet as at 30 November 2004, the Company had a total borrowingof S$9.79 million and shareholder’s funds of S$20.24 million. The total borrowings and shareholder’s funds areconverted to US$ at the prevailing exchange rate of 1.6386 as at 30 November 2004.

(2) Based on the Novo Group’ unaudited combined balance sheet as at 30 April 2007, Novo Group had a totalborrowing of US$1.66 million.

(3) Please refer to the Effect of Goodwill section below.

(4) Calculated based on the assumption that issue price for Complance Shares is S$0.24 for each Share. Theestimated net proceeds arising from the Proposed Compliance Placement is US$26.18 million.

Effect of Goodwill

The Proposed Transactions are required to be accounted for upon completion in accordancewith the accounting policies of the Enlarged Group (which is in accordance with FRS103-Business Combinations).

For the purpose of computing goodwill under reverse acquisitions, goodwill is calculated asbeing the difference between the fair value of the consideration effectively given by NovoGroup to acquire the Company and the aggregate of the fair values of the identifiable netassets of the Company. This is approximately US$1.88 million, based on the exchange rateas at Latest Practicable Date.

The goodwill will be determined upon completion of the acquisition and accounted for inaccordance with the accounting policies of the Enlarged Group and such actual fair valuesand goodwill may differ from the goodwill value stated herein. Currently, there has not beenan impairment assessment performed on the resultant goodwill.

As at the balance sheet date after the completion of the acquisition, the Enlarged Group willassess whether there is any indication of impairment. If any indication exists, the assets’recoverable amounts are estimated. An impairment loss is recognised if the carrying amountexceeds the recoverable amount, which could be up to the full amount of approximatelyUS$1.88 million.


53

13.9 Dividend Policy

The Company has not declared, approved and paid any dividend for FY2004, FY2005 andFP2006. The Novo Group have not declared, approved and paid any dividend for FP2006 andFY2007. On 31 December 2007, the Novo Group declared and paid an interim dividend inrespect of FY2008 amounting to US$4 million to its shareholders. Both the Company and theNovo Group did not have a fixed policy in the past. Past dividends paid are not necessarilyreflective of future dividend payments.

The Enlarged Group does not currently have a fixed dividend policy. The frequency andamount of future dividends on ordinary shares will depend on the earnings, cash flow,financial condition and other factors of the Enlarged Group. The Enlarged Group may declareannual dividends with the approval of Shareholders in a general meeting. The Directors of theCompany may also declare an interim dividend. The Company must pay all dividends out ofprofits. There is no assurance that dividends will be paid in the future or of the amount ortiming of any dividends that will be paid in the future.

Shareholders and potential investors should note that all the foregoing statements arestatements of the intention of the new Board and shall not constitute legally bindingstatements in respect of future dividends which may be subject to the Proposed Directors’sole and absolute discretion. No inference should or can be made from any of the foregoingstatements as to actual future profitability of the Enlarged Group or the Enlarged Group’sability to pay dividends in the future.

13.10 Taxation

The following is a discussion of certain tax matters arising under the current tax laws inSingapore and Hong Kong and is not intended to be and does not constitute legal or taxadvice. While this discussion is considered to be a correct interpretation of existing laws inforce as of the date of this Circular, no assurance can be given that courts or fiscal authoritiesresponsible for the administration of such laws will agree with this interpretation or thatchanges in such laws will not occur. The discussion is limited to a general description ofcertain tax consequences in Singapore and Hong Kong with respect to ownership of theShares by Singapore investors and does not purport to be a comprehensive nor exhaustivedescription of all of the tax considerations relating to the ownership of the Shares.

Prospective investors should consult their tax advisers regarding Singapore and Hong Kongtax and other tax consequences of owning and disposing the Shares. It is emphasised thatneither the Company, the Judicial Managers, the Directors nor any other persons involved inthe Proposed Transactions accepts responsibility for any tax effects or liabilities resulting fromthe subscription for, purchase, holding or disposal of the Shares.

SINGAPORE TAXATION

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

1. Individual Income Tax

Individual taxpayers who are Singapore tax residents are subject to tax on incomeaccrued or derived from Singapore. All foreign-sourced income (except for incomereceived through a partnership in Singapore) received on or after 1 January 2004 in


54

Singapore by tax resident individuals will be exempt from tax. Certain Singapore-sourced investment income (such as interest from debt securities) derived by taxresident individuals on or after 1 January 2004 from certain financial instruments (otherthan income derived through a partnership in Singapore or from the carrying on of atrade, business or profession) will be exempt from tax.

For a Singapore tax resident individual, the tax rate will vary according to the individual’scircumstances but is subject to a maximum rate of 20 per cent. With effect from the yearof assessment 2007.

Non-resident individuals, subject to certain exceptions, are generally subject to incometax on income accrued in or derived from Singapore at a flat rate of 20 per cent.

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 employmentin Singapore (other than as a director of a company) for 183 days or more, or if heresides in Singapore.

2. Corporate Income Tax

Corporate taxpayers who are Singapore tax residents are subject to Singapore incometax on income accrued in or derived from Singapore and subject to certain exceptions,on foreign-sourced income received or deemed to be received in Singapore fromoutside Singapore. Foreign-sourced income in the form of dividends, branch profits andservices income received or deemed to be received in Singapore by resident taxpayerson or after 1 June 2003 will be exempt from tax if certain prescribed conditions are met.

Non-resident corporate taxpayers are subject to income tax on income accrued in orderived from Singapore and on foreign income received in Singapore, subject to certainexceptions.

A corporate taxpayer is regarded as resident for Singapore tax purposes if its businessis controlled and managed in Singapore. The corporate tax rate in Singapore is 18 percent. with effect from year of assessment 2008. Further, corporate tax exemption willapply to the first S$300,000 of a company’s chargeable income as follows:

(i) 75 per cent. of up to the first S$10,000 of a company’s chargeable income(excluding Singapore franked dividends); and

(ii) 50 per cent. of up to the next S$290,000 of a company’s chargeable income(excluding Singapore franked dividends).

Further, companies will, subject to certain conditions, be eligible for full tax exemption ontheir normal chargeable income (other than Singapore dividends) of up to S$100,000and 50% tax exemption on up to the next S$200,000 of normal chargeable income ineach of the company’s first three consecutive years of assessment. The conditionswhich a new company must satisfy in order to claim this exemption for a year ofassessment include (a) it must be incorporated in Singapore; (b) it must be tax residentin Singapore for that year of assessment; and (c) it must have no more than 20shareholders all of whom are individuals throughout the basis period for that year ofassessment. The remaining chargeable income (after the tax exemption) will be taxedat the applicable corporate tax rate.


55

Novo CPL and Novostal PL were awarded the Global Trader Programme status for aperiod of five years from 1 May 2007 and 1 January 2006 respectively by IE Singaporewhich entitles them to enjoy concessionary tax rate of 10% on income derived fromqualifying trading transactions, provided the qualifying conditions are met.

Cash Dividend Distributions

Income subject to normal corporate tax rules

As the Company will be tax resident in Singapore, dividends paid by the Company wouldbe considered as sourced from Singapore. Dividends received in respect of the Sharesby either Singapore tax resident or non-Singapore tax resident taxpayers are not subjectto Singapore withholding tax, even if paid to non-Singapore resident shareholders.

Prior to 1 January 2003, Singapore operated an imputation system of taxation. Underthe imputation system, the income tax paid by a Singapore tax resident company on itstaxable income was imputed to and deemed to be paid on behalf of its shareholders,upon distribution. Where these profits were distributed as dividends (commonly knownas franked dividends) to shareholders, the dividends received by the shareholders werenet of the corporate income tax paid by the Company. Shareholders were taxed on thegross amount of dividends (that is, the amount of net proceeds received plus an amountwhich the Company had deducted from the gross proceeds and paid as corporateincome tax). The income tax paid effectively becomes available to shareholders as a taxcredit for set-off against their Singapore income tax liabilities.

With effect from 1 January 2003 (subject to certain transitional rules), Singapore hasadopted the “One-Tier” Corporate Tax System (“One-Tier System”). Under this One-TierSystem, the tax collected from corporate profits is the final tax and the Company can paytax exempt (1-tier) dividends which are tax exempt in the hands of the shareholder,regardless of the tax residence status or the legal form of the shareholder.

During a five-year transitional period expiring on 31 December 2007, companies withunutilised dividend franking credits may remain under the imputation system for thepurpose of paying franked dividends. Such companies will automatically move to theOne-Tier System when the dividend franking credits are fully utilised.

Companies, however, have the irrevocable option to move to the One-Tier System at anearlier date before the dividend franking credits are exhausted. The imputation creditsystem is available only up to year of assessment 2008. Thereafter, the One-TierSystem will take effect for all companies.

Where a company has income that is exempt from tax or taxed at concessionary taxrates or utilise investment allowances or are granted tax rebates or receive foreigndividends for which a foreign tax credit (obtained pursuant to a double taxation treatywith one of Singapore’s treaty partners or unilaterally granted under the SingaporeIncome Tax Act, Chapter 134 of Singapore) has been allowed and pay dividends out ofthese sources of income, the company may pay tax exempt dividends (referred to asnormal exempt dividends) out of such income. Normal exempt dividends paid toshareholders of shares which are not of a preferential nature are free from Singaporeincome tax. In the case of a company which is in the One-Tier System, such a companycan pay tax exempt (one-tier) dividends (instead of normal exempt dividends) out of theirexempt profits to shareholders. Hence, dividends paid by such companies as taxexempt (one-tier) dividends to all their shareholders, including shareholders of shares ofa preferential nature, will not be subject to tax in the hands of these shareholders.


56

Bonus Issues And Scrip Dividends

Under current Singapore tax law and practice, a capitalisation of profits followed by theissue of new shares, credited as fully paid, pro-rata to shareholders (“bonus issue”) doesnot represent a distribution of dividends by a company to its shareholders. Therefore, aSingapore resident shareholder receiving shares by way of a bonus issue should nothave a liability to Singapore tax.

When a dividend is to be satisfied wholly or in part in the form of an allotment of ordinaryshares credited as fully paid, the dividend declared will be treated as income to itsshareholders. However, as the Company will move to the One-Tier System after 31December 2007, any dividend paid on or after 1 January 2008 will be exempt fromSingapore tax. Similarly, when shareholders are given the right to elect to receive anallotment of ordinary shares credited as fully paid in lieu of cash, the dividend declaredwill be treated as exempt (one-tier) dividend income and will not be subject to Singaporetax.

Capital Gains on Disposal of Ordinary Shares

Singapore does not impose a tax on capital gains. However, there are no specific lawsor regulations which deal with the characterisation of capital gains, and hence, gainsmay be construed to be of an income nature and therefore be subject to tax if they arisefrom activities which the Inland Revenue Authority of Singapore (“IRAS”) regards as thecarrying on of a trade or business in Singapore. Any profits from the disposal of theShares are not taxable in Singapore unless the seller is regarded as having derivedgains of an income nature in Singapore, in which case, the disposal profits would betaxable as trading income.

Adoption of FRS 39 treatment for Singapore income tax purposes

On 30 December 2005, the IRAS issued a circular entitled “Income Tax Implicationsarising from the adoption of FRS 39-Financial Instruments: Recognition andMeasurement” (the “FRS 39 Circular”). Legislative amendments to give effect to theFRS 39 Circular have been enacted via the Income Tax (Amendment) Act 2006, withsuch amendments having been deemed to come into operation on 1 January 2005. TheFRS 39 Circular generally applies, subject to the tax treatment under the FRS 39Circular should consult their own accounting and tax advisers regarding the Singaporeincome tax consequences of their acquisition, holding or conversion of the Shares.

3. Stamp Duty

There is no stamp duty payable on the allotment or holding of the Shares. Stamp dutyis payable on the instrument of transfer of the Shares at the rate of S$0.20 for everyS$100 or any part thereof, computed on the amount or value of consideration. Theamount or value of consideration is the actual consideration or market value of theShares, whichever is higher.

The purchaser is liable for stamp duty, unless there is an agreement to the contrary. Nostamp duty is payable if no instrument of transfer is executed or the instrument oftransfer is executed outside Singapore. However, stamp duty would be payable if theinstrument of transfer which is executed outside Singapore is received in Singapore.Stamp duty is, however, not applicable in respect of electronic transfers of the Sharesthrough the Central Depository system.


57

4. Goods and Services Tax (“GST”)

The sale of the Shares by an investor belonging to Singapore through a SGX-STmember or to another person belonging in Singapore is an exempt sale not subject toGST. Any GST directly or indirectly incurred by the investor in respect of this exempt salewill become an additional cost to the investor.

Where the Shares are sold by a GST-registered investor to a person belonging outsideSingapore, the sale is a taxable sale subject to GST at zero-rate. Any GST incurred bya GST-registered investor in the making of this supply in the course of furtherance of abusiness may, subject to the provisions of the Goods and Services Tax Act, be offsetagainst the investor’s GST liability and, in the event of an excess input tax credit,recovered from the Comptroller of GST of Singapore.

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’spurchase, sale or holding of the Shares will be subject to GST at the prevailing rate of7%. Similar services rendered to an investor belonging outside Singapore are subject toGST at zero-rate.

5. Estate Duty

Singapore estate duty is imposed on the value of most immovable property situated inSingapore which passes on the death of a person, whatever the domicile of thedeceased, subject to specific exemption limits. For persons domiciled in Singapore atthe date of death, estate duty is also imposed on movable property, wherever situated,subject to specific exemption limits. Movable assets of non-domiciles are exempt fromestate duty. The Shares are considered to be movable property situated in Singapore asthe Company is incorporated in Singapore.

Accordingly, the Shares held by an individual are subject to Singapore estate duty uponsuch individual’s death, if the individual is domiciled in Singapore.

Singapore estate duty is payable to the extent that the value of the Shares aggregatedwith any other assets subject to Singapore estate duty exceeds S$600,000. Unlessother estate duty exemptions apply to the other assets, any excess beyond S$600,000will be taxed at 5.0 per cent. on the first S$12,000,000 of the individual’s property subjectto Singapore estate duty and the remainder at 10 per cent. Quick succession relief isavailable for deaths occurring within two years of the individual and his beneficiary.

HONG KONG TAXATION

The following discussion describes the material Hong Kong tax on dividend and tax on gainsfrom sale.

1. Tax On Dividends

Under current practice of the Hong Kong Inland Revenue Department, no tax is payablein Hong Kong in respect of dividend paid by Novo Group.


58

2. Tax On Gains From Sales

No tax is imposed in Hong Kong in respect of capital gains. However, trading gains fromsale of property by persons carrying on trade, profession or business in Hong Kong,where the gains are derived from or arising in Hong Kong from the trade, profession orbusiness will be chargeable to Hong Kong profits tax, which is currently imposed at therate of 17.5% on corporations and at a maximum rate of 16.0% on unincorporatedbusiness.

Individuals, whether or not domiciled in Singapore, should consult their own taxadvisers regarding the Singapore tax and estate duty consequences of their ownershipof the Shares.

13.11 Exchange Controls

Exchange Controls in Singapore and Hong Kong

As at the date of this Circular, there are no laws or regulations in Singapore and Hong Kongthat may affect (a) the repatriation of capital, including the availability of cash and cashequivalents for use by the Enlarged Group; and (b) the remittance of profits that may affectdividends, interests or other payment to Shareholders.

13.12 Proposed Directors and Proposed Executive Officers

13.12.1 The Company proposes to appoint a new Board and new senior management team witheffect from the completion of the Proposed Acquisition. The current Directors willresign from the Board following completion of the Proposed Acquisition. Theparticulars of the Proposed Directors following completion of the ProposedAcquisition are as follows:

Name Age Residential address Proposed position

Yu Wing Keung, Dicky 44 52A Tower 6, Phase 2,Bel-Air Residence,No. 38 Bel-Air Avenue, Pokfulam,Hong Kong

Executive Chairman

Chow Kin Wa 41 Flat B, 51/F, Block 6Coastal Skyline, Tung ChungNew Territories, Hong Kong

Chief ExecutiveOfficer

Chow Kin San 43 Room 2821, IndiHome138, Yeung Uk RoadTsuen Wan, Hong Kong

Non-ExecutiveDirector

Chua Keng Hiang 52 Apt Blk 942 Tampines Ave 5#10-237, Singapore 520942

Independent Director

Tan Siok Chin 37 41, Ewe Boon Road, #04-43,Singapore 259335

Independent Director

The proposed Non-Executive Director, Chow Kin San, is the elder brother of Chow Kin Wa,the proposed Chief Executive Officer.


59

After the Proposed Acquisition, the Novo Group will have a new senior management team.The particulars of the Proposed Executive Officers, who are current senior management ofNovo Group, are as follows:

Name Age Residential address Proposed position

Kwan Yee Mui, Tonette 42 3A Block 6, La VistaDiscovery BayHong Kong

Treasurer

Ma Yiu Ming 46 Flat A, 15/F, Block 22Mei Wah CourtSouth Horizons, Hong Kong

General Manager,Operations

Lam Ying Ngor 49 Flat H, 16/F Ling Pak MansionPark Vale, 8 Greig RoadHong Kong

Manager, Financeand Administration

Chu Wai Lim 39 Room 601, Block FSui Wo Court, Fotan, ShatinNew Territories, Hong Kong

Manager, TradeFinance

Chan Ying Lap 55 Blk 119, Simei Street 1#10-502Singapore 520119

Manager, Operations

The Proposed Directors have represented to the Judicial Managers that, save as disclosedabove and in the section entitled “Directors, Key Executive Officers and Employees of theNovo Group” in the Letter to Shareholders from the Novo Group of this Circular and to the bestof the Proposed Directors’ knowledge and belief, none of the Proposed Directors is related toone another or to any substantial shareholder of the Company (as part of the EnlargedGroup).

Please see the section entitled “Directors, Key Executive Officers and Employees of the NovoGroup” in the Letter to Shareholders from the Novo Group of this Circular for more informationon the business and working experience of each of the Proposed Directors and ProposedExecutive Officers.

The Proposed Directors have represented to the Judicial Managers that, save as disclosedabove and in the section entitled “Interested Persons Transactions” in the Letter toShareholders from the Novo Group, and to the best of the Proposed Directors’ knowledge andbelief, there is no known arrangement or understanding with substantial shareholders,customers or suppliers of the Novo Group pursuant to which the Novo Group will appoint orcontinue to appoint any of the Proposed Directors or Proposed Executive Officers or anyperson nominated by any of them as a director or executive officer of the Company or theEnlarged Group following completion of the Proposed Acquisition.

13.12.2 Service Agreements

Yu Wing Keung, Dicky, and Chow Kin Wa will, upon completion of the Proposed Transactions,enter into service agreements (collectively the “Service Agreements” and each a “ServiceAgreement”) with the Company. Each of their Service Agreements will continue for a term ofthree years unless terminated by either party with not less than six months notice’ in writing


60

to the other. Each of the Service Agreements may also be terminated if any of them commitsa breach of the Service Agreement, such as being convicted of any offence involving fraud ordishonesty or being adjudicated bankrupt. There are no benefits payable to the ProposedExecutive Directors upon termination of their employment with the Enlarged Group.

Pursuant to the terms of the respective Service Agreements, the annual salary (inclusive offixed annual bonus comprising four months’ salaries) of the respective Proposed Directors willbe as follows:

Annual salary (inclusive of annual bonus comprising four months’salaries) US$’000

Yu Wing Keung, Dicky 320

Chow Kin Wa 256

Yu Wing Keung, Dicky, and Chow Kin Wa will be paid a performance bonus based on theEnlarged Group’s audited consolidated profits before taxation as follows:

Director PBT Performance Bonus

Yu Wing Keung, Dicky Where PBT is equal to or morethan US$8.8 million but less

than US$11.0 million

8.4% of PBT in excess ofUS$8.8 million

Where PBT is equal to or morethan US$11.0 million

10.5% of PBT in excess ofUS$11.0 million + US$184,800

Chow Kin Wa Where PBT is equal to or morethan US$8.8 million but less

than US$11.0 million




Each Proposed Executive Director shall also be entitled to the use of a car provided by theEnlarged Group during their term of service.

The Service Agreements provide that during the continuance of their employment with theEnlarged Group, Yu Wing Keung, Dicky and Chow Kin Wa shall, amongst other things, devotetheir whole time and attention to the business of the Enlarged Group and shall not engage inany other business or be concerned or interested, whether for reward or gratuitously, in anycapacity in any trade or business or occupation of a similar nature to or competitive with thatcarried on by the Enlarged Group. The prohibition extends to the holding of any public orprivate office which, in the opinion of the Enlarged Group, may hinder or otherwise interferewith the performance of their duties to the Enlarged Group.

The Service Agreements also contain non-competition undertakings by each of Yu WingKeung, Dicky and Chow Kin Wa which are effective during, as well as 12 months after thecessation of, their employment with the Enlarged Group. During such period, Yu Wing Keung,Dicky and Chow Kin Wa shall not, amongst other things, engage in any other business to beconcerned or interested, whether for reward or gratuitously, in any capacity in any trade orbusiness or occupation of a similar nature to or competitive with that carried on by theEnlarged Group.


61

Had the Service Agreements been implemented in FY2007, the profit before tax of theEnlarged Group would have been US$8.3 million, the net profit attributable to equity holdersof the Enlarged Group would have been US$6.9 million and the earnings per new Sharewould have been 0.13 US cents instead of 0.14 US cents.

Save for the Service Agreements, there are no bonus or profit sharing plans or any otherprofit-linked agreements or arrangements between the Enlarged and any of the ProposedDirectors or Proposed Executive Officers following completion of the Proposed Acquisition.

Save as disclosed above, there are no existing or proposed service contracts entered into orto be entered into by the Company or any of the subsidiaries in the Enlarged Group with anyof the Proposed Directors or Proposed Executive Officers which provides for compensationin the form of stock options, or pension, retirement or other similar benefits, or other benefits,upon the termination of employment following completion of the Proposed Acquisition.

13.12.3 Proposed Directors’ and Proposed Executive Officers’ Remuneration

The estimated amount of compensation (including annual bonus comprising 4 months’salaries but excluding performance bonus to be paid under the Service Agreements) to bepaid to the Proposed Directors and the Proposed Executive Officers for services rendered tothe Enlarged Group in remuneration bands for the whole of FY2008 is set out as follows:

FY2008(excluding

performance bonus)

Proposed Directors

Yu Wing Keung, Dicky Band II

Chow Kin Wa Band II

Chow Kin San Band I

Chua Keng Hiang Band I

Tan Siok Chin Band I

Proposed Executive Officers

Kwan Yee Mui, Tonette Band I

Ma Yiu Ming Band I

Lam Ying Ngor Band I

Chu Wai Lim Band I

Chan Ying Lap Band I

Notes:

Band I : Compensation of between S$1 to S$250,000 per annum.

Band II : Compensation of between S$250,001 to S$500,000 per annum.


62

13.12.4 Corporate Governance

Board Practices

The new Board of Directors recognises the importance of corporate governance toShareholders and will exert best efforts to implement the good practices recommended in theCode of Corporate Governance 2005.

New Nominating Committee

The new Nominating Committee will comprise the Proposed Directors, Tan Siok Chin, ChuaKeng Hiang and Chow Kin San. The chairman of the new Nominating Committee is Tan SiokChin. The new Nominating Committee has been set up to be responsible for the nominationof the Proposed Directors (including the Proposed Independent Directors of the Company)taking into consideration each proposed Director’s contribution and performance, followingcompletion of the Proposed Acquisition. The new Nominating Committee is also charged withthe responsibility of determining annually whether a proposed Director is independent. Underthe Articles, at least one-third of the proposed Directors are required to retire from office atevery annual general meeting of the Company after completion of the Proposed Acquisition.Every proposed Director must retire from office at least once every three years. A retiringproposed Director is eligible and may be nominated for re-election. Each member of theNominating Committee shall abstain from voting on any resolutions, making anyrecommendations and/or participating in any deliberations of the new Nominating Committeein respect of the assessment of his performance or re-nomination as a proposed Director.

New Remuneration Committee

The new Remuneration Committee will comprise the Proposed Directors, Tan Siok Chin,Chua Keng Hiang and Chow Kin San. The chairman of the Remuneration Committee will beTan Siok Chin. The new Remuneration Committee will be responsible for recommending tothe new Board of Directors a framework of remuneration for the proposed Directors andproposed Executive Officers and key executives, and determine specific remunerationpackages for the proposed executive chairman and each of the proposed executive Director.

The recommendations of the new Remuneration Committee will be submitted forendorsement by the entire new Board of Directors. All aspects of remuneration, including butnot limited to directors’ fees, salaries, allowances, bonuses, options and benefits-in-kind shallbe covered by the new Remuneration Committee. Each member of the new RemunerationCommittee shall abstain from voting on any resolutions, making recommendations and/orparticipating in any deliberations of the new Remuneration Committee in respect of hisremuneration package.

The total remuneration of the employees who are related to the Proposed Directors will bereviewed annually by the new Remuneration Committee to ensure that their remunerationpackages are in line the staff remuneration guidelines and commensurate with theirrespective job scopes and level of responsibilities. In the event that a member of the newRemuneration Committee is related to the employee under review, he will abstain from suchreview.

The remuneration paid to employees who are immediate family members of the proposedDirectors will be disclosed in the annual report, following completion of the ProposedAcquisition, in the event such remuneration exceeds S$150,000 for that financial year.


63

New Audit Committee

The new Audit Committee will comprise the Proposed Directors, Chua Keng Hiang, Tan SiokChin, and Chow Kin San. The chairman of the new Audit Committee is Chua Keng Hiang.

The new Audit Committee will assist the new Board of Directors in discharging theirresponsibility to safeguard the assets, maintain adequate accounting records, and developand maintain effective systems of internal control, with the overall objective of ensuring thatmanagement creates and maintains an effective control environment in the Companyfollowing completion of the Proposed Acquisition. The new Audit Committee will provide achannel of communication between the new Board of Directors, the management and theexternal auditors of the Company on matters relating to audit following completion of theProposed Acquisition. In order to facilitate the new Audit Committee to discharge itsresponsibilities, the management of the Company shall assist and provide the new AuditCommittee with access to the information relating to the individual companies within theEnlarged Group and the associated companies.

In particular, the new Audit Committee will meet at least quarterly, following completion of theProposed Acquisition, to discuss and review the following where applicable:

(a) review the audit plans of the external auditors, including the results of the external andinternal auditors’ examination and their evaluation of the system of internal accountingcontrols, their letter to management and the management’s response;

(b) review the quarterly, half-yearly and annual financial statements and balance sheet andprofit and loss accounts before submission to the new Board of Directors for approval,focusing in particular on changes in accounting policies and practices, major risk areas,significant adjustments resulting from the audit, compliance with accounting standardsand compliance with the Listing Manual and any other relevant statutory or regulatoryrequirements;

(c) review the risk profile of the Company, its internal control and risk managementprocedures and the appropriate steps to be taken to mitigate and manage risks atacceptable levels determined by the new Board of Directors;

(d) ensure co-ordination between the external and internal auditors and the management,and review the assistance given by the management to the auditors, and discussproblems and concerns, if any, arising from the interim and final audits, and any matterswhich the auditors may wish to discuss (in the absence of the management, wherenecessary);

(e) review and discuss with the external auditors any suspected fraud or irregularity, orsuspected infringement of any relevant laws, rules or regulations, which has or is likelyto have a material impact on the Enlarged Group’s operating results or financial position,and the management’s response;

(f) consider the appointment, remuneration, terms of engagement or re-appointment of theexternal and internal auditors and matters relating to the resignation or dismissal of theauditors;

(g) review and approve any interested person transactions falling within the scope ofChapter 9 of the Listing Manual;

(h) review any transactions with associated companies of the Enlarged Group;

(i) review potential conflicts of interest (if any);


64

(j) evaluate the independence of the external auditors;

(k) review the adequacy of the internal audit function and ensuring that a clear reportingstructure is in place between the audit committee and the internal auditors;

(l) review arrangements by which staff of the Company may, in confidence, raise concernsabout possible impropriety in matters of financial reporting and other matters and theadequacy of procedures for independent investigation and appropriate follow-up actionin response to such complaints;

(m) undertake such other reviews and projects as may be requested by the new Board, andwill report to new Board its findings from time to time on matters arising and requiring theattention of the new Audit Committee; and

(n) generally undertake such other functions and duties as may be required by statute or theListing Manual, or by such amendments as may be made thereto from time to time.

In addition, all future transactions with related parties shall comply with the requirements ofthe Listing Manual. As required by paragraph 1(9)(e) of Appendix 2.2 of the Listing Manual,the Proposed Directors shall abstain from voting in any contract or arrangement or proposedcontract or arrangement in which he has a personal material interest.

Apart from the duties listed above, the new Audit Committee shall commission and review thefindings of internal investigations into matters where there is any suspected fraud orirregularity, or failure of internal controls or infringement of any Singapore law, rule orregulation which has or is likely to have a material impact on the Company’s operating resultsand/or financial position.

Information Disclosure

Following completion of the Proposed Acquisition, the Company will continue to implement apolicy of providing full disclosure of material corporate information as commerciallyappropriate through press announcements, press releases and shareholders’ circulars aswell as through the statutory interim and annual financial results announcements.

13.12.5 Interested Person Transactions

Transactions between a company and its chief executive officer, director, controllingshareholder and/or any of their associates are considered interested person transactionspursuant to the provision of Chapter 9 of the Listing Manual.

Please see the section entitled “Interested Person Transactions” in the Letter to Shareholdersfrom the Novo Group of this Circular for more information on the interested persontransactions undertaken by the Novo Group in FP2006 and FY2007, and for the period from1 May 2007 up to the Latest Practicable Date. Save as disclosed in the section entitled“Interested Person Transactions” in the Letter to Shareholders from Novo Group of thisCircular, none of the Directors of the Company, the Proposed Directors or the ControllingShareholders of the Novo Group or their respective associates were and are interested in anymaterial transactions undertaken by the Company or the Novo Group.

The Proposed Directors have represented to the Judicial Managers that, save as disclosed inthe section entitled “Interested Person Transactions” in the Letter to Shareholders from NovoGroup of this Circular and to the best of the Proposed Directors’ knowledge and belief, neitherthe Proposed Directors nor any of the Controlling Shareholders of the Novo Group and/or


65

their associates was or is interested, whether directly or indirectly, in any material transactionundertaken by the Novo Group within the last two financial years ended 30 April 2006 and2007, and for the period from 1 May 2007 up to the Latest Practicable Date.

13.12.6 Potential Conflicts of Interest

The Proposed Directors have represented to the Judicial Managers that, save as disclosed insection entitled “Interested Person Transactions” in the Letter to Shareholders from NovoGroup of this Circular and to the best of the Proposed Directors’ knowledge and belief, noneof the Proposed Directors, Controlling Shareholders of the Novo Group, Proposed ExecutiveOfficers and/or any of their associates has any material interest, whether direct or indirect, in:

(a) any material transactions to which the Novo Group was or is a party;

(b) any company carrying on the same business or carrying on a similar trade as the NovoGroup; and

(c) any enterprise or company that is the customer or supplier of goods or services of theNovo Group.

Please see the section entitled “Potential Conflicts of Interests” in the Letter to Shareholdersfrom Novo Group of this Circular for more information on the potential conflicts of interests.

14. RISK FACTORS

Shareholders should carefully evaluate each of the following considerations and all of theother information set forth in this Circular. Some of the following considerations relateprincipally to the industry in which the Novo Group operates and its businesses in general.Other considerations relate principally to general economic and political conditions.

The Proposed Directors have represented to the Judicial Managers that, to the best of theProposed Directors’ knowledge and belief, all risk factors which are material to Shareholdersin making an informed judgement of the Novo Group have been set out in this section of thisCircular.

Save as disclosed below, to the best of the Judicial Managers’ knowledge and belief, all riskfactors which are material to Shareholders in making an informed judgment of the NovoGroup, the Proposed Acquisition and the Enlarged Group have been set out in this Circular.Following completion of the Proposed Acquisition, the risk factors in relation to the NovoGroup will also be relevant to the Enlarged Group. If any of the following considerations anduncertainties develops into actual events, the business, financial condition or results ofoperations of the Enlarged Group could be materially and adversely affected.

14.1 Risk Factors Relating To The Novo Group

The Novo Group has a short operating track record

The Novo Group has a short operating history upon which an investor may evaluate itsperformance. It commenced operations since early 2005 and as a result, it is difficult toaccurately forecast the Novo Group’s future revenue and operating expenses. Accordingly,the Novo Group’s past performance may not be indicative of its present and futureperformance trend.


66

The Novo Group faces risk of default by its suppliers and/or customers

Steel is a commodity that is characterised by price volatility whereby prices can fluctuate. Ifthe price for steel suddenly increases sharply, its suppliers may renege on their contractualobligations to the Novo Group and sell the Novo Group’s orders to third parties at the higherprice. In such an event, the Novo Group may face difficulties in fulfilling our obligations to itscustomers who have contracted to purchase the steel products in question from the NovoGroup. Conversely, if the price for steel suddenly drops sharply, its customers may not honourtheir contractual obligations with the Novo Group to purchase the steel products the NovoGroup has ordered as they will be able to purchase the same from the market at the lowerprice. If this happens, the Novo Group is still obliged to fulfil its contractual obligations topurchase the steel from its suppliers. In the event that the Novo Group has to resort to legalproceedings to enforce its contractual rights against its suppliers and/or customers for anydefault as aforesaid, such events would have an unfavourable impact on its business.

The Novo Group is reliant on key management personnel

The success of the Novo Group is dependent on the continued efforts of its seniormanagement team comprising its Executive Directors and Executive Officers. TheseExecutive Directors and Executive Officers (details of whom are set out in the Letter toShareholders from the Novo Group) possess relevant experience in the management andoperations of the steel trading business and have made contributions to the development ofthe Novo Group. The Novo Group’s daily operations depend significantly on the performanceof its senior management team. In the event that the Novo Group loses the services of anymember of its senior management team without timely and suitable replacements and/or it isnot able to attract and retain qualified and experienced personnel, it could have anunfavourable impact on its business.

The Novo Group is reliant on major suppliers

Major suppliers who each contributed 5% and more of the Novo Group’s total purchases,collectively, accounted for 87.0% and 74.7% of the Novo Group’s total purchases for FP2006and FY2007 respectively. The largest supplier accounted for 18.2% and 21.5% of the NovoGroup’s total purchases for FP2006 and FY2007 respectively.

The Novo Group has long term framework contracts with its major suppliers. However, suchlong term framework contracts do not contain provisions that provide assurance that thesuppliers will continue to supply the Novo Group with raw materials and steel products in thefuture. If the Novo Group is unable to maintain its business relationships with its majorsuppliers for raw materials and steel products or, if a number of its suppliers were to encounterdifficulties in their operations and reduce or cease their business relationships with the NovoGroup and the Novo Group is not able to secure alternative sources of supply to fulfil its salesorders, the Novo Group’s operating results and profitability may be adversely affected.

The Novo Group is reliant on major customers

Major customers who each contributed 5% and more of the Novo Group’s total sales,collectively, accounted for 51.1% and 32.9% of the Novo Group’s total sales for FP2006 andFY2007 respectively. The biggest customer for each of FP2006 and FY2007 accounted for15.0% and 17.1% of the Novo Group’s total sales for FP2006 and FY2007 respectively.


67

If the Novo Group is unable to maintain its business relationships with its major customers forraw materials and steel products or, if a number of its customers were to encounter difficultiesin their operations and reduce or cease their business relationships with the Novo Group, theNovo Group’s operating results and profitability may be adversely affected.

Lack of long-term continuity of customers and suppliers

The Novo Group’s major customers and major suppliers for FP2006 are different from themajor customers and major suppliers for FY2007. This lack of continuity of customers andsuppliers is because steel trading is cyclical in nature, and the shifts in business dynamicsrequires Novo Group to adapt quickly in changing whom they sell to or buy from at any pointin time. If the Novo Group is unable to adapt quickly enough to find new customers andsuppliers as necessitated by shifts in business dynamics, its operations and financialperformance may be adversely affected.

The Novo Group is reliant on bank facilities to finance trading activities

The Novo Group is reliant on the use of bank facilities to finance the purchase of steel fortrading. If the Novo Group is unable to renew its bank facilities when they become due and/orthe Novo Group is unable to obtain other sources of funding, its operations and financialperformance may be adversely affected. Further, any significant fluctuations in interest ratesmay adversely affect its financial performance.

The Novo Group deals with high contract values

The contracts entered into by the Novo Group with its customers or suppliers for the purchaseor sale of steel products are normally substantially high in value. From FP2006 to FY2007, thehighest contract value entered into by the Novo Group amounted to approximately US$10million and the lowest amounted to approximately US$200,000 (excluding trial orders).Consequently, if the Novo Group is unable to perform its obligations under the contracts itentered, the potential liability and loss resulting thereto would be significant and mayadversely affect its operations and financial performance.

Cyclical nature of the steel industry

The global steel industry is cyclical in nature and at times has been characterised by excesscapacity in the market. Excess capacity had resulted in lower international market prices forsteel products. There can be no assurance that international market prices for steel productswill not decline in the future. Fluctuation in international prices of steel products may causefluctuations on market demand on steel products, which may, as a result, adversely affect thebusiness of the Novo Group.

The PRC steel industry has also shown a cyclical nature, reflecting fluctuations in demand forsteel products in the PRC. Domestic demand for steel products in the PRC is primarilyaffected by domestic economic conditions as well as the PRC government’s monetary andfiscal policies. Other factors affecting domestic demand include supply and demand for theinternational steel market and fluctuations in the demand of industries with heavy usage insteel, such as the shipbuilding, construction, automobile and machinery industries. The PRCmarket for steel products may experience cyclical fluctuations in the future and that suchfluctuations may adversely affect the prices and volumes of the Novo Group’s sales of thePRC’s steel products to the international market.


68

Competition from other suppliers

The Novo Group may compete with other active steel traders in the international market, andadditionally, the Novo Group’s suppliers (who are potentially steel mills) may also competewith other steel mills in the world. Choices of substituted suppliers/traders for steel productsby end-user may depend on the overall competitiveness of the steel products supplied by theNovo Group.

Intervention by the PRC government in the development of the PRC’s steel industry

Whilst the current policies of the PRC government toward the domestic steel industry aregenerally market-oriented, the PRC government still closely monitors the development of thesteel industry and may from time to time exercise control over such development by issuingand implementing new policies. In addition, the PRC government has imposed approval orfiling requirements for any project involving significant capital investment.

The PRC government has recently issued new policies to control the overall productioncapacity of the PRC’s steel industry and to reduce the number of relatively small-scale orlow-tech steel plants. Up to April 2007, the PRC government has implemented various exportrestrictions on steel products. Amongst the restrictions are the revocation of rebates in exportvalue-added taxes, the execution of an export licensing system, and the imposition of exporttaxes. There can be no assurance that the PRC government will not in the future introduce orimplement any other new policies or any other changes to the regulatory approval processthat may cause delay in or adversely affect the Novo Group’s current or future tradingactivities in the PRC’s steel products or its business in general. If the PRC government shouldintroduce or implement any such policy, the Novo Group’s results of operations may beadversely affected.

Changes in the political, economic and regulatory environment in the PRC

The PRC economy has primarily been a planned and centralised economy, characterised bystate ownership of productive assets. However, since 1978, the PRC government hasundergone cautious reforms of its economic systems. Such reforms have resulted ineconomic growth for the PRC in the last two decades. However, many of the reforms areunprecedented or experimental and are expected to be refined and modified from time totime. Other political, economic and social factors, including in particular, the PRC’s recententry into the WTO, may also lead to further readjustment of the reform measures. Thisrefinement and readjustment process may consequently have a material impact on the NovoGroup’s operations in the PRC or a material adverse impact on its financial performance.

As the Novo Group purchases steel products mainly from the PRC and on-sell the same tothe international market, its financial performance and condition may be adversely affected bychanges in the PRC’s political, economic and social conditions and by changes in policies ofthe PRC government or changes in laws, regulations or the interpretation or implementationthereof.

Uncertainty in the PRC legal system

The PRC legal system is based on the PRC Constitution and is made up of written laws,regulations, rules and directives. The PRC government is still in the process of developing itslegal system so as to meet the needs of investors and to encourage foreign investment. Asthe PRC economy is undergoing development generally at a faster pace than its legal system,


69

some degree of uncertainty exists in connection with whether and how existing laws andregulations will apply to certain events or circumstances. Some of the laws and regulations,and the interpretation, implementation and enforcement thereof, are still at an experimentalstage and are, therefore, subject to policy changes which are uncertain.

Acts of God, war, terrorist attacks and contagious diseases

The business of the Novo Group may be affected by general economic conditions in the PRCand other parts of the world. Acts of God such as natural disasters and outbreaks ofhighly-contagious diseases such as atypical pneumonia are beyond the control of the NovoGroup and may adversely affect the economy, infrastructure and livelihood of people in thePRC and other parts of the world. The Novo Group’s business and profitability may beadversely affected should such acts of God and/or outbreaks occur and/or continue. Therecan be no assurance that any war, terrorist attack or other hostilities in any part of the world,potential, threatened or otherwise, will not, directly or indirectly, have an adverse effect on theoperations and profitability of the Novo Group.

14.2 Other Risk Factors Relating To The Enlarged Group

In addition, the following factors are also relevant in assessing the risks relating to theEnlarged Group:

No prior market for the new Shares of the Company on an enlarged group basis

The new Shares have never been traded on an Enlarged Group basis. As such, there can beno assurance that an active trading market for the new Shares will develop or, if developed,will sustain.

Independent Shareholders will face immediate and substantial dilution and mayexperience future dilution to shareholdings

The Proposed Acquisition will result in immediate dilution to the shareholdings of IndependentShareholders as the Consideration Shares will be allotted and issued to New PageInvestments Ltd, a company owned by the Vendors. In addition, the Company may issue newShares or convertible securities after completion of the Proposed Acquisition. Should the newShares be placed out and convertible securities be issued and converted, there may befurther dilution to the shareholdings of Independent Shareholders.

Accounting treatment of goodwill arising from reverse acquisition

Pursuant to the proposed reverse acquisition, a goodwill of approximately US$1.88 million willarise due to the difference between the fair value of the consideration effectively given byNovo Group to acquire the Company and the aggregate of the fair values of the identifiablenet assets of the Company. This amount may be written off in the income statement of theEnlarged Group for FY2008 following an impairment assessment. Please refer to thesub-section on “Effect of Goodwill” under paragraph 13.8.2 for further details.

Volatility of the new Share price of the Company

The issue price of the Consideration Shares allotted and issued to acquire the ordinary sharesof Novo may not be indicative of prices of the new Shares that will prevail in the tradingmarket. The trading prices of the new Shares could be subject to fluctuations in response to


70

variations in the results of operations, changes in general economic conditions, changes inaccounting principles or other developments affecting the Enlarged Group, the customers orcompetitors, changes in financial estimates by securities analysts, the operating and stockprice performance of other companies, general stock market price fluctuations and otherevents or factors. Volatility in market prices of the new Shares may be caused by factorsbeyond the control of the Enlarged Group and may be unrelated and disproportionate to theoperating results of the Enlarged Group.

The market price of the new Shares may fluctuate significantly and rapidly as a result of,amongst other things, the following factors, some of which are beyond the control of theEnlarged Group:

(a) the success or failure of the Enlarged Group’s management team in implementingbusiness and growth strategies;

(b) announcements by the Company, following completion of the Proposed Acquisition, ofsignificant contracts, acquisitions, strategic alliances or capital commitments;

(c) loss of the Enlarged Group’s major customers or failure to complete significant orders orcontracts;

(d) changes in the Enlarged Group’s operating results;

(e) involvement in litigation;

(f) unforeseen contingent liabilities of the Enlarged Group;

(g) addition or departure of key personnel of the Enlarged Group;

(h) changes in share prices of companies with similar business to the Enlarged Group thatare listed in Singapore;

(i) changes in securities analysts’ estimates of the Enlarged Group’s financial performanceand recommendations;

(j) differences between the Enlarged Group’s actual financial operating results and thoseexpected by investors and securities analysts; and

(k) changes in general market conditions and broad market fluctuations.

Concentration of control

Yu Wing Keung, Dicky and Chow Kin Wa who (through New Page Investments Ltd) willacquire majority control over the Company after completion of the Proposed Transactions, willbe able to influence the outcome of matters submitted to Shareholders for approval. Uponcompletion of the Proposed Transactions, New Page Investments Ltd will become aControlling Shareholder holding approximately 67.0% of the Enlarged Share Capital. Yu WingKeung, Dicky and Chow Kin Wa are directors of and hold 70% and 30% respectively of NewPage Investments Ltd. Please see the sections entitled “Financial Effects of the ProposedTransactions” and “Principal Shareholders” in the Letter to Shareholders of this Circular formore information on the effects of the Proposed Transactions on and the resultingshareholding structure of the Company. As a result, Yu Wing Keung, Dicky and Chow Kin Wawill be able to exercise significant influence over all matters requiring Shareholders’ approval,including the election of directors and the approval of significant corporate transactions. YuWing Keung, Dicky and Chow Kin Wa will also effectively have veto power with respect to anyShareholders’ action or approval requiring a special resolution. Such concentration ofownership may also have the effect of delaying, preventing or deterring a change in controlof the Company, which may otherwise have benefited the Shareholders.


71

15. ADVICE OF THE INDEPENDENT FINANCIAL ADVISER IN RELATION TO THEWHITEWASH RESOLUTION

Phillip Securities has been appointed as the Independent Financial Adviser to advise theJudicial Managers and Independent Shareholders in relation to the Whitewash Resolution.

Taking into consideration the factors set out in its letter, Phillip Securities is of the view thatthe Whitewash Resolution, when considered in the context of the Proposed Acquisition, is notprejudicial to the interests of Independent Shareholders. Accordingly, Phillip Securities hasadvised the Judicial Managers to recommend to Independent Shareholders to vote in favourof the Whitewash Resolution.

A copy of the letter from Phillip Securities in relation to the Whitewash Resolution isreproduced in Appendix B of this Circular.

16. INTERESTS OF JUDICIAL MANAGERS, DIRECTORS AND SUBSTANTIALSHAREHOLDERS

As at the Latest Practicable Date, the interests of Directors in the issued and paid-up sharecapital as recorded in the Register of Directors’ Shareholdings pursuant to Section 164 of theCompanies Act are as follows:

Direct interest Deemed interestDirectors No. of Shares % No. of Shares %

Khoo Boo Tat 26,691,435 5.42 — —

Ong Eng Hin — — — —

Soh Gim Teik — — — —

Tiong Hin Won 1,000,000 0.20 — —

Koh Tai Joo Charlie — — — —

Gurbachan Singh — — — —

Lin Yin Mew @ Paul — — — —

As at the Latest Practicable Date, the interests of the substantial shareholders of theCompany in the issued and paid-up share capital as recorded in the Register of SubstantialShareholders maintained pursuant to Section 88 of the Act are as follows:

Direct interest Deemed interestShareholders No. of Shares % No. of Shares %

See Lop Fu James 24,589,220 5.00 — —

Official Assignee 23,620,304 4.80 234,406,407 47.6

Neo Investment Pte Ltd (In JudicialManagement) 210,202,103 42.72 210,786,103 42.84

Save as disclosed above, none of the Judicial Managers, Directors or substantialshareholders has any interest, whether direct or indirect, in the Proposed Transactions.


72

17. RECOMMENDATION OF THE JUDICIAL MANAGERS

Having considered and reviewed, amongst other things, the terms of the Novo SPA, therationales for and the financial effects of the Proposed Transactions, the advice of PhillipSecurities in relation to the Whitewash Resolution, the risk factors and other investmentconsiderations, and all other relevant facts set out in this Circular, the Judicial Managers areof the opinion that all the resolutions as set out in the section entitled “Notice of ExtraordinaryGeneral Meeting” of this Circular are in the best interests of the Company. Accordingly, theJudicial Managers recommend that Shareholders vote in favour of all the resolutions to beproposed at the EGM, notice of which have been set out in the section entitled “Notice ofExtraordinary General Meeting” of this Circular.

18. EXTRAORDINARY GENERAL MEETING

The EGM, notice of which have been set out in the section entitled “Notice of ExtraordinaryGeneral Meeting” of this Circular, will be held at Singapore Management University, Lee KongChian School of Business, Seminar Room 2.5 (Level 2), 81 Victoria Street, Singapore 188065on 27 February 2008 at 10.00 a.m. for the purpose of considering and, if thought fit, passingthe resolutions (with or without modifications) set out in the notice of the EGM.

19. ACTION TO BE TAKEN BY SHAREHOLDERS

If a Shareholder is unable to attend the EGM and wishes to appoint a proxy to attend and voteon his behalf, he should complete, sign and return the attached proxy form in accordance withthe instructions printed thereon as soon as possible and, in any event, so as to reach theregistered office of the Company at 47 Hill Street #05-01, Singapore Chinese Chamber ofCommerce & Industry Building, Singapore 179365 by not later than 25 February 2008 on10.00 a.m. The completion and return of the proxy form by a Shareholder will not prevent himfrom attending and voting at the EGM in person if he so wishes.

20. JUDICIAL MANAGERS’ RESPONSIBILITY STATEMENT

This Circular has been seen and approved by the Judicial Managers who accept responsibilityfor the accuracy of the information given herein on behalf of the Company and confirm that,having made all reasonable enquiries, to the best of their knowledge and belief the factsstated and opinions expressed in this Circular are fair and accurate in all material respects asat the date of this Circular and that there are no material facts the omission of which wouldmake any statement in this Circular misleading.

Where information relating to the Vendors, the Novo Group or the Enlarged Group has beenextracted from published or otherwise available sources or is otherwise based on informationobtained from the Vendors or Novo, the sole responsibility of the Judicial Managers has beento ensure that such information has been accurately and correctly extracted from thesesources or, as the case may be, reflected or reproduced in this Circular. The JudicialManagers have not undertaken any independent verification of the information furnished bythe Vendors, and/or the Novo Group.

The Judicial Managers are acting only as agents of the Company and disclaim any and allliabilities to the extent that such liabilities shall not have arisen directly from the negligence orwilful default of the Judicial Managers.


73

21. FINANCIAL ADVISER’S RESPONSIBILITY STATEMENT

Mitsubishi UFJ Securities (Singapore), Limited, the financial adviser to the Company,confirms that, to the best of its knowledge and belief, having made due and careful enquiriesreasonable under the circumstances, this Circular constitutes full and true disclosure of allmaterial facts in relation to the Proposed Transactions and is not aware of any other materialfacts, the omission of which would make any statement in this Circular misleading in anymaterial respect as at the Latest Practicable Date. Where information has been extractedfrom published or publicly available sources, the sole responsibility of Mitsubishi UFJSecurities (Singapore), Limited has been to ensure that such information has been accuratelyand correctly extracted from such sources.

22. CONSENTS

(a) Baker Tilly TFWLCL has given and has not withdrawn its written consent to the issue ofthis Circular with the inclusion herein of the Unaudited Pro Forma Combined FinancialInformation For The Financial Period From 31 January 2005 to 30 April 2006 andFinancial Year Ended 30 April 2007 and the Unaudited Pro Forma Combined FinancialInformation For The Financial Period From 1 May 2007 to 30 September 2007 in theform and context in which they appear in this Circular and references to its name in theform and context in which it appears in this Circular and to act in such capacity in relationto this Circular.

(b) Phillip Securities Pte Ltd has given and has not withdrawn its written consent to the issueof this Circular with the inclusion herein of the Independent Financial Adviser’s advice inrespect of the Whitewash Waiver and references to its name in the form and context inwhich it appears in this Circular and to act in such capacity in relation to this Circular.

(c) The Financial Adviser, the Legal Adviser to the Company in respect of the ProposedAcquisition and the Financial Adviser to the Novo Group have each given and have notwithdrawn their respective written consents to the issue of this Circular with the inclusionherein of their respective names and references to their respective names in the formsand context in which they respectively appear in this Circular and to act in suchrespective capacities in relation to this Circular.

23. DOCUMENTS AVAILABLE FOR INSPECTION

The following documents may be inspected at the registered office of the Company duringnormal business hours for a period of six months from the date of this Circular:

(a) The Memorandum and Articles of Association of the Company;

(b) The Scheme of Arrangement and the Explanatory Statement both dated 7 September2007 between the Company and the Creditors;

(c) The Novo SPA dated 23 August 2007 between the Company and Vendors;

(d) The Convertible Loan Agreement dated 31 July 2007 between the Company andVendors;

(e) The letter of Independent Financial Adviser set out in Appendix B of this Circular;

(f) Unaudited Pro Forma Combined Financial Information For The Financial Period From31 January 2005 to 30 April 2006 and Financial Year Ended 30 April 2007 set out inAppendix C of this Circular;


74

(g) Unaudited Pro Forma Combined Financial Information For The Financial Period From1 May 2007 to 30 September 2007 set out in Appendix D of this Circular;

(h) Audited Financial Statements of Novo Commodities Limited For The Financial PeriodFrom 31 January 2005 (Date of Incorporation) to 30 April 2006 and Financial Year Ended30 April 2007 set out in Appendix E of this Circular; and

(i) The letters of consent referred to in the section entitled “Consents” in the Letter toShareholders of this Circular.

24. OTHER INFORMATION

Please see Appendix A for more information on the material contracts entered by the NovoGroup and the material litigation of the Novo Group.

Yours faithfullyFor and on behalf of Neocorp International Ltd. (In Judicial Management)

Kon Yin TongJudicial Manager


75

1 February 2008

To: The Shareholders ofNeocorp International Ltd.

Dear Sir/Madam

PROPOSED ACQUISITION BY NEOCORP INTERNATIONAL LTD. OF THE NOVO GROUP

A. INTRODUCTION

This letter has been prepared by the Vendors, as the directors of the Novo Group, on behalfof the Novo Group, for inclusion in this Circular. Except where the context otherwise requires,capitalised terms defined in this Circular shall apply throughout this letter.

B. INFORMATION ON THE NOVO GROUP

B.1.1 Background

Novo Group started when Novo HK was incorporated in Hong Kong on 31 January 2005.Currently, Novo Group comprises, inter alia, two principal operating companies, namely NovoHK and Novo CPL, located in Hong Kong and Singapore respectively, and two associatedcompanies, Novostal HK and Novostal PL, operating in Hong Kong and Singaporerespectively.

Novo Group is principally engaged in the business of international trading of various steelproducts and their raw materials. It is also involved in business activities targeting at providingan integrated service related to its core trading activities, which comprises shipping, logisticsarrangement and other support services such as arranging financing and insurance servicesfor its customers and suppliers.

Generally, Novo sources and procures various types of steel products from producers andmanufacturers in the PRC, and supplies them to its customers mainly operating in Asia,Middle East and Europe. Novo seeks to procure raw materials such as iron ore, pellets, scrapand pig irons for steel mills in the PRC. As at 30 April 2007, Novo has shipped approximately850,000 mt of steel products to more than 15 countries in Asia, Middle East and Europe.

Novo CPL and Novostal PL were awarded the Global Trader Programme status for a periodof five years from 1 May 2007 and 1 January 2006 respectively by IE Singapore which entitlesthem to enjoy concessionary tax rate of 10% on income derived from qualifying tradingtransactions.


76


B.1.2 Group Structure of the Novo Group

As at the Latest Practicable Date, the corporate structure of Novo Group is as follows:

Yu Wing Keung, Dicky(70%)

Chow Kin Wa(30%)

100%

100%100%

100% 100% 100% 100%100%

Novo BVINova MBL Novo HK Novo CPL Global Wealth TL Novosteel DMCC

Nova SPL Novo IL Rico

30% 30%

100%

Novostal HK

Novostal PL

50%

Xinghua BVI

100%

Xinghua HK

45%

Iron And Steel

77

Please see the section entitled “Enlarged Group Structure” in the Letter to Shareholders ofthis Circular for a diagrammatic representation of the corporate structure of the EnlargedGroup.

The brief details of Novo Group are as follows:

NameDate and countryof incorporation

Principal placeof business

Principalbusinesses

% of directequity interestheld by Novo

Global WealthTrading Ltd(6)

3 January 1996, BVI (1) Investmentholding

100%

Nova ShippingPte. Ltd.(7)

1 June 2006,Singapore

Singapore Shippingbrokerage

100%

NovoCommoditiesLimited(7)

8 December 2005,BVI

(2) Trading andinvestment

100%

NovoCommoditiesPte. Ltd.(7)

7 July 2005,Singapore

Singapore Trading andinvestment

100%

NovoCommoditiesLimited(7)

31 January 2005,Hong Kong

Hong Kong Trading andinvestment

100%

Novo InvestmentLimited(7)

27 October 2006,Hong Kong

Hong Kong Consultancyservices

100%

Nova Maritime(B.V.I.)Limited(7)

23 May 2005, BVI (2) Shippingbrokerage

100%

NovosteelDMCC(7)

27 March 2007,United ArabEmirates

United ArabEmirates


100%

XinghuaHoldingsLimited(8)

24 October 2007,BVI

(1) Investmentholding

50%(9)

XinghuaHoldings(China)Limited(8)

22 November 2007,Hong Kong


50%(9)

Iron And SteelResourcesLimited(8)

11 March 2005,Hong Kong


45%(9)

Novostal Limited 11 March 2005,Hong Kong


30%(3)

Novostal Pte. Ltd 12 July 2005,Singapore

Singapore Trading andinvestment

30%(4)

Rico Group Ltd 28 February 2005,BVI


30%(5)

Notes:

(1) These companies are investment holding companies and do not carry out any operations.


78

(2) These companies are currently dormant.

(3) Novostal Limited is a wholly-owned subsidiary of Rico Group Ltd, a 30% owned associated company of GlobalWealth Trading Ltd.

(4) Novostal Pte. Ltd. is an associated company 30% held by Global Wealth Trading Ltd. The remainingshareholders of the company are Mr Jureeratana Surapong (35%) and Ms Limpiyachart Sirinuch (35%) who arenot related to any Directors or Shareholders of Novo Group.

(5) Rico Group Ltd is an associated company 30% held by Global Wealth Trading Ltd. The remaining shareholdersof the company are Mr Jureeratana Surapong (35%) and Ms Limpiyachart Sirinuch (35%) who are not relatedto any Directors or Shareholders of Novo Group.

(6) The total 1 share issued fully-paid of Global Wealth Trading Ltd was transferred to Yu Wing Keung, Dicky on 7September 2004. Prior to the acquisition by the company of the interests in Novostal Pte. Ltd. and Rico GroupLtd, the company was dormant since the date of its incorporation.

(7) Please refer to the section entitled “Principal Business Activities” in the Letter to Shareholders from Novo Groupof this Circular for more information on the subsidiaries’ business functions and scope of services.

(8) Please refer to the section entitled “Future Plans” in the Letter to Shareholders from Novo Group of this Circularfor more information of the associated companies’ business functions and scope of services.

(9) Please refer to the section entitled “Future Plans” in the Letter to shareholders from Novo Group of this Circularfor more information on the remaining shareholders of the associated companies.

Save as disclosed above, the Novo Group has no other subsidiaries and associatedcompanies.

B.2 SHARE CAPITAL

The following is a summary of the changes in the issued share capital of Novo Group in thethree years preceding the Latest Practicable Date:

DateNo. of sharesissued Purpose of issue

Resultantissued share

capital

Novostal Limited 11 March 2005 1 Issued share capitalas at incorporation

HK$1

11 May 2005 9,999,999 Working capital HK$10,000,000

30 June 2006 5,600,000 Working capital HK$15,600,000

Novo CommoditiesLimited

31 January2005

10,000 Issued share capitalas at incorporation

HK$10,000

22 April 2005 3,990,000 Working capital HK$4,000,000

13 June 2006 4,000,000 Working capital HK$8,000,000

Novo InvestmentLimited

27 October2006


HK$10,000

Nova Shipping Pte.Ltd.

1 June 2006 200,000 Issued share capitalas at incorporation

S$200,000

Novostal Pte. Ltd. 12 July 2005 200,000 Issued share capitalas at incorporation

S$200,000

30 November2005

1,800,000 Working capital S$2,000,000

Novo CommoditiesPte. Ltd.

7 July 2005 200,000 Issued share capitalas at incorporation

S$200,000


79

DateNo. of sharesissued Purpose of issue

Resultantissued share

capital

Global Wealth TradingLtd

14 September2007

9 Allotment and issueof share

US$10

Novo CommoditiesLimited

5 January 2006 10 Allotment and issueof shares

US$10

Nova Maritime (B.V.I.)Limited

23 May 2005 10 Issued share capitalas at incorporation

US$10

Rico Group Ltd 11 May 2005 100 Allotment and issueof shares

US$100

Novosteel DMCC 26 August 2007 100 Allotment and issueof shares

AED200,000

Xinghua HoldingsLimited

24 October2007


US$1,000,000

Xinghua Holdings(China) Limited

22 November2007

1,000,000 Issued share capitalas at incorporation

US$1,000,000

Iron And SteelResources Limited

11 March 2005 1 Issued share capitalas at incorporation

HK$1

13 November2007

9,999 Allotment and issueof shares

HK$10,000

Save as disclosed above, there were no changes in the issued and paid-up share capital ofNovo Group within the three years preceding the Latest Practicable Date.

Save as disclosed above, no shares in, or debentures of, Novo Group had been issued, orwere proposed to be issued, as fully or partly paid for in cash or for a consideration other thancash, within the three years preceding the Latest Practicable Date.

B.2.1 Principal Shareholders

Except for the associated companies of the Novo Group, as at the Latest Practicable Date,the Novo Group is held as to 70% by Yu Wing Keung, Dicky and 30% by Chow Kin Wa.

Save for the Proposed Conversion, no person has been, or is entitled to be, granted an optionto subscribe for shares in, or debentures of, the Company or the Novo Group.

B.3 HISTORY AND BUSINESS

B.3.1 History and Development

The history of Novo Group began when its Vice Chairman, Chow Kin Wa, established NovoHK in early 2005. When Novo’s Executive Chairman, Yu Wing Keung, Dicky, joined Novo HKlater in 2005, he steered Novo HK to focus on the business of international trading of steelproducts and related raw materials. The initial products traded by Novo HK were slab, hotrolled coil, hot rolled plate and cold rolled coil. Subsequently, it expanded to include otherproducts such as billet, deformed bar, wire rod and merchant bar. Since Novo commenced itssteel trading activities, it has been mainly sourcing steel products from the PRC, CIS andSouth America for resale to customers in Asia and Europe.


80

Novo’s Executive Chairman, Yu Wing Keung, Dicky, has 20 years’ experience in multinationalsteel manufacturing, investment and trading business and has established extensive globalbusiness networks in the steel trading industry. Novo’s Vice Chairman, Chow Kin Wa, has 15years’ experience in multinational steel manufacturing, investment and trading business andhad served as senior executive for major international steel trading companies. Theco-founders’ first mission was in assembling and recruiting for the Novo Group a team ofexperienced professionals in the trading and manufacturing of steel products and the relatedraw materials. In 2006, Novo recruited its Treasurer, Kwan Yee Mui, Tonette, who isresponsible for overseeing the overall banking and financing operations for Novo Group. Shehas over 20 years of corporate banking experience and had held senior positions as regionaldepartment head for commodity finance over the last 12 years for several foreign banks. Inthe same year, Novo recruited Ma Yiu Ming as its General Manager, Operations, who isresponsible for Novo Group’s business coordination and integration of various functionaldevelopments. He is a fellow member of the Institute of Chartered Shipbrokers and has over25 years of experience in international traffic and logistic business, particularly in shipping,insurance, cargo inspection, arbitration and legal consulting. The appointment of theseexperienced personnel is integral to Novo’s growth and competitiveness as they possessin-depth knowledge of our business and industry, and understand Novo’s customers’ andsuppliers’ needs and requirements.

The co-founders’ vision was to develop Novo Group into an integrated supply chain operation,emanating from its core steel trading operations, to cover the key services required by itssuppliers and customers such as sourcing, processing, shipping, warehousing, financing andmarketing services. They believe that this integrated service strategy will put Novo Group ina strong competitive position with its customers and suppliers as well as improve its operatingmargins.

Towards realising the integrated supply chain operation, Novo MBL and Nova SPL wereincorporated on 23 May 2005 and 1 June 2006 respectively to provide shipping, warehousing,logistics and insurance services and Novo IL was incorporated on 27 October 2006 to providefinancing consultancy services.

Novo established its presence in Singapore with the incorporation of Novo CPL on 7 July2005. Novo CPL was awarded the Global Trader Programme status for a period of five yearsfrom 1 May 2007 by IE Singapore which entitles Novo CPL to enjoy concessionary tax rateof 10% on income derived from qualifying trading transactions.

Apart from Novo’s operations in Hong Kong and Singapore, Novo has established a networkof overseas agents and representations in various strategic locations in different parts of theworld to better serve its customers. These markets include Middle East, South Korea, Japan,Philippines, Vietnam, Indonesia, India, Thailand, Italy, Spain, United Kingdom, Germany,Switzerland, Italy, Russia and South America.

Novo has entered into several long term framework agreements and strategic co-operationagreements (collectively, “Long Term Framework Agreements”) with supplying mills wherebythe framework for the supply of steel products by the supplying mills to Novo is set out andwhich normally include terms such as:

(a) a validity period of a year which is automatically renewed upon expiring for a furtherperiod of a year unless written notice of termination has been given by any party;

(b) the types of products to be supplied;


81

(c) the contracted quantum of product to be supplied for the whole year and on a monthlybasis; and

(d) the price of the product for each order to be determined by market condition subject toparties’ mutual consent.

Such Long Term Framework Agreements do not contain provision that imposes penalties onthe defaulting party for any breach of the terms therein.

In October 2006, Novo entered into a Long Term Framework Agreement with Tianjin Iron &Steel Co., Limited for the monthly allocation of finished products including hot rolled plates.

In December 2006, Novo entered into a Long Term Framework Agreement with Tianjin TiantieZhaer Steel Production Co., Ltd for the monthly supplies of square bar exports.

In January 2007, Novo entered into a Long Term Framework Agreement with ChangshuYicheng Special Steel Co., Ltd for monthly supplies of steel plate exports.

In January 2007, Novo entered into a Long Term Framework Agreement with TianjinLongkang International Trade Co., Ltd. for the monthly allocation of deformed steel bars.

With these long term agreements, Novo secured strong, reliable and regular supply of steelproducts from the contracting suppliers which enabled Novo to focus on marketing it’sproducts to the rest of the world. All these agreements have given a strong backing to theGroup’s business development in South East Asia, India, Middle East and European markets.

Novo established its presence in the Middle East with the incorporation of Novosteel DMCCin Dubai on 27 March 2007. On 30 August 2007, Novo Group transferred the 30% stakes intwo associated companies, namely, Novostal HK and Novostal PL, from its ExecutiveChairman, Yu Wing Keung, Dicky, to Global Wealth TL. The associated companies focus onassisting the Sahaviriya Steel Group in Thailand in sourcing for its required steel products inthe region. Novostal PL was also awarded Global Trader Programme status for a period of fiveyears from 1 January 2006 by IE Singapore.

In September 2007, Novo carried out its first trade for raw materials by selling iron ore to theircustomer in the PRC.


82

B.3.2 Business Model

Industry Overview

Worldwide steel production was approximately 1.1 billion mt in 2004 and 1.2 billion mt in 2005and grew to 1.24 billion mt in 2006(1) as depicted in the following diagram.

200000

400000

600000

800000

1000000

1200000

1400000

000’

Met

ric

To

ns

(MT

)

01996 1997

Year

1998 1999 2000 2002 2003 2004 2005 2006

Source: IISI Steel Statistical Yearbook 2006

European Union (25)

North America

Asia (include China)

China

World

2001

Total production of crude steel by region

The trading volume for semi-finished and finished steel products was around 360 million mtin 2005 and 400 million mt in 2006 and is expected to further increase to 440 million mt and480 million mt in 2007 and 2008 respectively(1). Steel is a material that is universally requiredfor daily purpose and it grows in positive co-relation to a country’s gross domestic product.Most countries are consuming their own production of steel while any surplus will be exportedand those countries which are deficient in producing enough for their own needs will need toimport the deficit portion thus giving rise to the trading activities.

Worldwide steel trading volume has been on an uptrend from 1996 to 2005 as depicted in thefollowing diagrams(1).

1996 1997 1998 1999 2000 2002 2003 2004 20052001

000’

Met

ric

Ton

s (M

T)

0

50000

100000

150000

200000

250000

300000

350000

400000

European Union (25)

North America

Asia (include China)

China

World

Source: IISI Steel Statistical Yearbook 2006Year

Exports of semi-finished and finished steel Products


83

Year

%o

f ch

ang

e

China

World

Change of percentage in exports of semi-finished and finished steel products

1997 1998 1999 2000 2002 2003 2004 20052001

150

120

90

60

30

0

-30

-60

Estimated value of world steel production

0

100

200

300

400

500

600

700

800

900

US

$ b

illio

n

US $ billion

19971996 1998 1999 2000 2002 2003 2004 20052001

Year Source: IISI Steel Statistical Yearbook 2006

In recent years, there has been an increase in world steel trading transactions which areeffected by steel traders as opposed to transactions carried out between suppliers andend-purchasers directly. The increasing roles of steel traders in the industry are due to thefollowing reasons:

(a) Established steel traders have better sourcing capabilities as compared to suppliers andend-users of steel products to seek out and match demand and to supply requirements;

(b) Established steel traders are able to pool together the orders of several end-users andmake purchases in bulk and enjoy economy of scale. Most steel mills are unwilling tomeet orders of end users which are below a certain quantum as it is not cost-effectiveto the steel mills to customise their production specifications if the order is too small;

(c) Experienced steel traders are more familiar with export, shipping, insurance and otherlogistics requirements and are able to value-add to the sale and purchase transactionsby the addition of such ancillary services to the supplier and the end-users; and

(d) There are always imbalances on supply and demand on different kinds of steel productsin different countries, due to changes in political and economic situation includingincidences of active industry plunges in supply and demand. Experienced traders areneeded to re-allocate resources created due to such imbalances.

Note:

(1) The information was obtained from the International Iron and Steel Institute Steel Statistical Yearbook 2006 byInternational Iron and Steel Institute (“IISI”). IISI has not consented to the inclusion of the information extracted


84

from the relevant yearbook published by it and is thereby not liable for such information under Sections 253 and254 of the SFA. While we have taken reasonable steps to ensure that the information from the relevantpublication published by the IISI is reproduced in its proper form and context, neither we nor any other party hasconducted independent review of the information contained in such publication nor verified the accuracy of thecontents of the relevant information.

Principal Business Activities

The principal activities of Novo Group are to engage in global steel trading and to providerelated support services such as processing, shipping, arranging for financing and insuranceservices, so as to provide integrated steel supplying and steel marketing services to itscustomers and suppliers respectively.

Trading Activities

Novo Group supplies steel products and related raw materials to end users and steel mills ona long term and recurring basis. Novo Group plays an active and important role in supplyingsteel products to the end users and has the capabilitiy of directly sourcing in bulk quantitiesfrom major steel mills in the world and at the same time, also assist such steel mills in sourcingfor related raw materials. Due to the competitive pricing of steel products offered by the steelmills in the PRC in the last two financial years, Novo Group derived most of its supply of steelproducts from the PRC steel mills during this period. With respect to customers, Novo Group’strading activities usually involve sourcing, processing, arranging for financing and insuranceservices and related logistics services to deliver the required products to customers’designated locations. With respect to suppliers, Novo Group’s trading activities usuallyinvolve marketing, processing, arranging for financing and insurance services and relatedlogistics services to deliver the required products to end users.

Novo Group’s trading activities play an important role in the steel industry by sourcing forresources within the steel industry from countries with overall cost competitiveness to supplyto end users in different key markets who are in need of the relevant resources.

In addition to trading of the standard products, Novo Group also performs an important rolein matching the supply and demand forces of certain non-standard products. Thesenon-standard products are actually the off-specification products that resulted from the massproduction process and are rejected simply because they do not conform to the specificationor dimensions required by the customers. To the steel mills, it is not cost-effective to recyclethese off-specification products. Novo Group is able to allocate such non-standard productsto appropriate customers competitively and effectively. Non-standard products sometimesalso result from minor defects occurring in the products caused during production, forexample, dents and scratches on the steel surfaces. As steel mills do not find it cost-effectiveto rectify such minor defects, Novo Group is able to add value by performing minor processingon such products and selling them to customers at premium prices.

Support Services

In addition to its core steel trading activities, Novo Group is also adding value in the trade bycarrying out minor processing work to the steel products where opportunities arise. Forexample, the customers may request for the products to be inspected, separated, packed,bundled, marked, processed or cut in certain ways which the suppliers are unable toaccommodate. Novo Group may carry out such minor processing work to meet thecustomers’ requirements and this in turn allows Novo Group to charge higher rates for theproducts sold.


85

Novo Group is also creating value for their trading partners by providing ancillary servicessuch as sourcing, bank financing, inspection, insurance, shipping and logistics, marketing,and other professional services with the aim of reducing the latters’ operating costs.

Novo Group is able to assist its suppliers, through the provision of consultancy for financingservices, in securing banking facilities on project basis. For example, a supplier who signs acontract to manufacture steel products for Novo Group is able to present the said contract tothe bank and receive payment from the bank to fund its manufacturing cost even before itcommences manufacturing. Such tie-up arrangement involving the suppliers, the banks andNovo Group has resulted in a win-win situation for all parties and thereby setting up aconducive framework for long-term cooperation which enhances trading activities.

Lastly, Novo Group creates value for its customers by extending favourable credit terms to itscustomers. The industry norm in any contract for the purchase of steel products is forcustomers to make payment for the products by way of L/Cs when the products are deliveredonto the ship at the port of shipment notwithstanding that the products may then take up tothree months to be delivered to the customers. Novo Group allows selected customers tomake orders for products with payment to be made only on final delivery. For customers whoare buying the products for on-selling to third parties, this arrangement helps to free upbanking facilities available to the customers which enhances trading activities. Novo Groupusually charge a commission on such credit terms offered to its customers.

In order to incorporate the above value added services into seamless integrated steel supplyand/or marketing services to its customers and suppliers, the following subsidiaries’ businessfunctions and scope of services are structured as follows:

(a) Novo HK, Novo CPL and Novosteel DMCC — sourcing, trading and distribution,marketing services with Novo HK covering the region of North Asia, Novo CPL coveringthe region of South East Asia and India, and Novosteel DMCC covering the Middle Eastregion;

(b) Novo BVI — intermediate contracting party for Novo Group for contracts signed withthird parties, principally for risk management purposes;

(c) Nova MBL and Nova SPL — shipping agent and logistics, including insurance with NovaMBL covering the region of North Asia and Nova SPL covering the region of South EastAsia and India. These were incorporated as separate companies as there is intention forthem to offer their services to third parties in the future; and

(d) Novo IL — consultancy for financing services involving mainly assisting trading partiesto tie-up with banks for banking facilities. Such consultancy services involve helping itsclients to organize its business and financial information as part of the presentationdocuments to be submitted to the bank in its loan application, and co-ordinating thenecessary information and documents required by the bank. The Novo Group is able toprovide such service as it is familiar with the needs and profile of its clients and has goodworking relationship with various bankers who are active in the industry. In addition, asNovo Group is the trading partner of these clients, Novo Group’s role as the link with thebankers also serves to help the banks in learning the background of these clients. Theday-to-day operations are managed by the Treasurer of Novo Group, Kwan Yee Mui,Tonette.

Novo Group believes that its integrated service strategy will put Novo Group in a strongcompetitive position with its customers and suppliers as well as improving its operating profitmargins.


86

Products Traded

The following steel production flow chart outlines the various stages of steel production fromraw materials to iron making, steel making, rolling and finally to the various steel products:


87

The steel products actively traded or intended to be actively traded by Novo include but is notlimited to:

(a) Raw Materials such as iron ore, pellets, scrap and pig iron which are generally used forproducing semi-finished or finished steel products, such as billet, bloom and slabs etc.Currently, Novo’s customers for these products are mainly located in the PRC andpotentially to steel manufacturing centres in the world. Novo’s first trade for raw materialwas carried out in October 2007. While Novo is not active in the trading of raw materialat this moment, it has already allocated resources to develop a strong presence in thissegment of activity in the near future.

(b) Semi-Finished Products such as billets and slabs which are generally used forproducing wire rod, deformed steel bar, hot rolled plate and hot rolled coil. Novo’s tradesin semi-finished products accounted for 35.8% of its sales in FY2007. Novo’s customersfor semi-finished products are mainly re-rolling mills who are mainly buying billets forrolling long products and slabs for rolling flat products.

(c) Finished Products comprising:

i) Long products like deformed bar, wire rod, tubes, sections, angles and channels;and

ii) Flat products like hot rolled coil, hot rolled plate, cold rolled coil and cold rolledsheet.

Such finished products are generally used for heavy industries, construction and/orelectrical appliances. Novo’s trades in finished products accounted for 64.2% of its salesin FY2007. Novo’s customers for finished products are mainly in industries such asconstruction, property development or are end users of different industries includingautomobile, shipbuilding, electrical appliances, importers, distributors, stockists,processing factories or steel decoiling centres.

(d) Special and Coated Products which are generally used for general construction,electrical appliances, automobile, shipbuilding and other heavy and light industries.Novo has so far carried out one minor trade in this category but will carry out moreactivities in this category after it has acquired sufficient human resources.


88

Novo’s customers are end-users from different industries, including integrated steel mill,rolling mills, stockists, distributors, importers and end users. Our main customers arelocated in Indonesia, India, PRC, Singapore, Taiwan, Spain, Philippines, Vietnam, Italy,Korea and Middle East in respect of sales transacted in FP2006 and FY2007 asdepicted in the diagrams below.

Geographical distribution of customers (2005 -2006)

North Asia

India and Middle East

South East Asia

Other Regions

36.44%

33.52%

27.39%

2.65%

33.29%

16.84%

42.40%

7.47%

North Asia

South-East Asia

India and Middle East

Other Regions

Geographical distribution of customers (2006-2007)


89

B.3.3 Simplified Workflow Process illustration

The workflow process that is generally involved in our trading activities is shown in thefollowing diagram:

Enquiries from Buyers Enquiries from Sellers

Matching enquiries frombuyers and sellers

Entering into contractswith customers and

suppliers

Shipping Arrangements

Payment

Matching enquiries from purchasers to quotations from suppliers

Upon receiving an enquiry from a potential purchaser, Novo Group’s trader would solicitquotations from suppliers to match the enquiry.

At this stage, information relating to price, size specifications, origin, packing, shipmentschedule, payment terms, coil/bundle weight, coil dimensions, packing conditions, sizetolerance, application, loading/discharging ports were obtained. Checks are also conductedinto the background of the purchaser/supplier where possible as well as on the identity of theend-user, manufacturer and the whereabouts of the final destination that the products areheaded for.


90

Entering into contracts with purchasers and suppliers

When negotiating contract terms with purchasers and suppliers, all offers to purchasers areaptly captioned by adding “Subject unsold” if offers are made to more than one purchaser,“Subject reconfirmation” if supplier has not confirmed sale and “Firm Offer” where applicable.All bids to suppliers must state that they are subject to short validity period (normally about 24hours) in order to solicit a quick response.

Shipping arrangement

The normal practice is to ensure that the date of delivery by the supplier is at least 15 daysearlier than the date of delivery promised to the customer. Checks will be conducted on thelead-time and voyage time with the supplier and shipping company respectively. Full vesseldetails, ETD, ETA, agent contacts and other information will be requested from theshipper/ship agent.

The normal practice is to buy FOB and sell CFR, to charter the vessel via the assistance ofreliable chartering/shipping companies/shipowners. Where selling or buying is on FOB basis,it is preferred that it is CQD both sides in order to avoid demurrage and dispatch costs. Thechartering company will be consulted for all shipping matters like port loading/dischargingfacilities, vessel particulars, freight estimation, voyage, etc.

Payment

A documentary letter of credit or L/C is frequently the agreed method of settlement forinternational trade of steel products. Back-to-back L/C is a method of financing both sides ofa transaction in which Novo, as middleman, buys goods from its supplier and sells them to itscustomer, both settlements being made under documentary credits.

Novo generally requests from purchasers for the L/C to be opened immediately afterconfirmation of order/contract. Any non-standard payment terms are subject to Novo Group’sappointed senior management’s approval. Where dealing with sellers/suppliers, the L/C is tobe opened preferably after receiving the master L/C from the purchaser. However, NovoGroup is prepared to open the L/C in advance, and/or entertain other payment method whichis approved by its senior management.

To obtain payment under the L/C, the typical documents to be furnished by the seller/supplierinclude invoice, packing list, certificate of origin, certificate issued by surveyor, mill testcertificate, bills of lading, beneficiary’s certificate advising on subject details after the bills oflading date, and beneficiary’s certificate confirming full set of documents has been sent afterthe bills of lading date.

B.3.4 Quality Control

Maintaining a high standard of quality in the services Novo provides to its customers andsuppliers is important to the success of Novo’s business. Towards this end, Novo hasincorporated certain internal working practices such as requiring the weekly order report to beissued by its staff to summarize status of all pending orders, including order status report,shipment report, request for chartering vessel. Such steps enable Novo’s management tomonitor and keep track of all orders, discover and solve problems early as and when theyoccur and be in a position to update customers on the status of their orders at all time. Incertain cases, like when dealing with a new supplier, Novo will arrange for third partyinternational surveyors to inspect the steel products at points of loading and discharge to


91

provide assurance to its customers that the steel products delivered conform to theirspecification. Novo also holds regular management meetings to exchange ideas, reviewrunning orders and to initiate new ideas among key traders, operators and management inorder to provide better services that cater to the needs of its customers. Novo continuouslyobtains feedback from its customers and suppliers to assess those areas of its business inwhich it can improve to ensure that customers’ satisfaction is achieved at all times.

B.3.5 Research and Development

The nature of Novo’s business does not require it to carry out any research and developmentactivity. Notwithstanding this and in order to ensure that Novo remains competitive, itsmanagement team routinely researches into ways in which Novo can further improve itstrading processes. Its sales and marketing team also carries out market intelligence researchto understand the industry trends and influences in the markets in which its customers arelocated as well as emerging aspects of steel fabrication and competitive features in the steelindustry in the PRC.

B.3.6 Sales and Marketing

Novo has extensive sales and marketing networks with branch offices and representatives inthe cities of the PRC such as Tianjin, Shanghai and Guangzhou, as well as in countries suchas Dubai, Philippines, Japan, South Korea, Taiwan, Singapore, Vietnam, India, Indonesia,Brazil, Thailand, Germany, Switzerland and Italy.

Novo’s sales and marketing activities are carried out by its trading department which has 6experienced traders as at the Latest Practicable Date and is led by its Vice Chairman, ChowKin Wa, who reports to Novo’s Executive Chairman, Yu Wing Keung, Dicky. Novo’s tradingteam comprises mainly trading professionals who have up to 20 years of professionalexperience in the steel trading industry.

As we receive long term supply of steel products from our suppliers all year round pursuantto the Long Term Framework Agreements we entered into with our suppliers, our tradingteams are mainly focused on selling and marketing of the allocated resources. The sales areconducted via facsimiles, emails, telephone calls and even personal visits to the customersas personal networking and connections are integral to the growth of Novo.

B.3.7 Intellectual Property

As at the Latest Practicable Date, Novo does not own any trademark, patent, or licence or hasany applications relating thereto or any other intellectual property rights.

B.3.8 Seasonality

Novo does not generally experience seasonality in its business.

B.3.9 Staff Training

Novo conducts in-house training for its staff to equip them with the necessary skills andknowledge relevant to their respective job scope so as to improve their work efficiency andeffectiveness. Novo’s in-house training includes orientation programmes for its newemployees to familiarise them with the general working environment and work culture, as wellas skills enrichment programmes for its sales staff to improve their competencies in selling


92

and product knowledge. Novo provide its staff with relevant procedure manual relating totrading and operation to help establish consistent working practices and set a basis for higherefficiency and long term business development.

Novo provides on-the-job training program to staff in different departments, particularly in thetrading and operations department where staff travel frequently with senior managers.

Novo’s staff training expenses for FP2006 and FY2007 were negligible.

B.3.10 Insurance

Novo insures its business for, inter alia, the following:

(a) fire on assets including furniture, fixtures and fittings, racking system, plant andequipment, renovations, improvements and all other contents at its office premises;

(b) losses or delay in the shipment of its merchandise;

(c) losses caused by burglary including assets at office premises; and

(d) workmen’s compensation for its employees.

The Proposed Directors are of the view that the above insurance policies are adequate forNovo’s existing operations. However, significant disruption to Novo’s operations as a result offire or any other causes, may still have a material adverse effect on Novo’s results ofoperations or financial condition. Novo is not insured against loss of key personnel andbusiness interruption. If such events were to occur, Novo’s business may be materially oradversely affected. Novo will review its insurance coverage annually.

B.3.11 Major Suppliers

The suppliers accounting for 5.0% or more of Novo’s total purchases for FP2006 and FY2007are provided below:

ProductsSupplied

Percentage of total purchases(%)

FP2006 FY2007

Minmetals Steel Co. Ltd Finished 18.2 7.0

Eldon Development Ltd Finished 13.2 —

CSN Export S.A.R.L Finished 12.8 —

LNM Marketing FZE Finished 10.0 1.6

Jinan Iron & Steel Co Ltd Finished 8.6 8.2

Rizhao Steel Co Ltd Semi-Finished 7.1 —

Zhejiang Materials Industry International Co Ltd Finished 6.0 3.9

Zhejiang Metals & Materials Co Finished andSemi-Finished

5.9 —

Tangshan Great Target Enterprise Co Ltd Finished 5.2 2.0

Tianjin Longkang International Trade Co Ltd Finished — 21.5

Tianjin Iron & Steel Co. Ltd Finished — 13.8

Dalian Dongzhan Group Co Ltd Semi-Finished — 10.3

Sinosteel Iron & Steel Co Semi-Finished — 8.4

Changshu Yicheng Special Steel Co Ltd Finished — 5.5


93

Novo places great emphasis on evaluating and selecting its suppliers and will only work withthose who are able to provide Novo with products that meet its requirements and atcompetitive prices. Novo’s suppliers will generally have one or more of the followingstrengths:

(a) They possess better and more advanced technology as well as production facilities forthe production of steel products and are thus able to produce high quality products at themost competitive pricing; and

(b) Their production facilities are located near ports and are well served by good andefficient road infrastructures thus ensuring time and cost savings in the delivery andshipment of goods.

Novo has entered into several Long Term Framework Agreements with its suppliers. Pleaserefer to the section entitled “History and Development” of the Letter to Shareholders fromNovo Group of this Circular for more information.

In general, the variations in the type and amount of products purchased from Novo’s suppliersover the last two financial years are due mainly to factors such as the availability of supplies,competitive pricing and the nature of Novo’s customers’ order requirements.

None of the Proposed Directors, Proposed Executive Officers or substantial shareholdershave any interest, direct or indirect, in any of the above suppliers and Novo is not materiallydependent on any industrial, commercial or financial contract (including a contract with asupplier).

B.3.12 Major Customers

Details of Novo’s customers accounting for 5.0% or more of Novo’s total revenue for FP2006and FY2007 are provided below:

ProductsPurchased

Percentage of total turnover(%)

FP2006 FY2007

Reliance Petroleum Ltd Finished 15.0 —

PT Krakatau Steel Semi-Finished 8.4 17.1

MSTC Ltd Finished andSemi-Finished

7.5 4.6

Shandong Yuanpu Imp. & Export Co Ltd Finished 7.5 0.1

Zhejiang Materials Industry International Co Ltd Finished 6.5 —

JSW Steel Ltd Finished 6.2 —

Amesco FZE Finished — 9.2

Tradeline (LLC) Finished — 6.6

In general, the variations in the type and amount of products sold to Novo’s customers overthe last two financial years are due mainly to factors such as the availability of supplies,competitive pricing and the nature of Novo’s customers’ order requirements.

Save as disclosed above, Novo is not materially dependent on any other contracts with othercustomers and none of the Proposed Directors, Proposed Executive Officers or substantialshareholders have any interest, direct or indirect, in any of the above customers.


94

B.3.13 Credit Management

Novo does not accept walk-in customers due to the prudent credit control proceduresemployed by Novo. Novo will only work with customers and/or suppliers which have met oneor more of the following criteria:–

(a) It has had prior business relationship with Novo’s directors or management in theprevious years;

(b) It is a listed company;

(c) It is a referral from bank; or

(d) It is a reputable manufacturer/end user in the market.

The management will review the need for making allowance for doubtful receivables on aquarterly basis. Generally, specific allowance for doubtful receivables will be made wherecollection is considered unlikely by the management.

There was no allowance for doubtful receivables and bad debts written off for the FP2006 andFY2007 due to the nature of Novo’s business, whereby all transactions with customers andsuppliers are conducted via banking facilities.

Our trade debtors’ turnover days were as follows:

As at 30 April 2006 As at 30 April 2007

Debtors’ turnover days 126(1) 14(1)

Note:

(1) Debtors’ turnover days for FP2006 and FY2007 are computed as:

FP2006: US$21,016,400

US$76,009,897X 455 days = 126 days FY2007: US$11,881,079

US$310,913,163X 365 days = 14 days

The balances fo the bills receivables at the end of each financial period would cover the steeltrades that happened to be outstanding at the close of each financial period.

The main reason for the different turnover days for the two years is that there were moreoutstanding bills receivables pending processing and payment as at 30 April 2006.

Please refer to the net cash generated from operating activities section under B.4.2 of thisCircular for further elaboration.

Our creditors’ turnover days were as follows:


Creditors’ turnover days 124(1) 18(1)

Note:

(1) Creditors’ turnover days for FP2006 and FY2007 are computed as:

FP2006: US$19,237,893

US$70,849,807X 455 days = 124 days FY2007: US$13,549,369

US$276,304,527X 365 days = 18 days

The balances of bills payable at the end of each financial period would cover the steel tradesthat happen to be outstanding at the close of each financial period.


95

The main reason for the different turnover days for the two years is that there were moreoutstanding bills pending processing and payment as at 30 April 2006.

Please refer to the net cash generated from operating activities section under B.4.2 of thisCircular for further elaboration.

B.3.14 Inventory Management

Generally, Novo does not keep stock and will only confirm its purchase order with suppliersafter it receives the confirmation of purchase from the customers, which normally involvesendorsement of L/C or placement of deposit by the customers. Novo’s buying orders arealways matched against selling orders on a back-to-back basis. As at 31 July 2007, Novo hasapproximately US$6 million (10,000 mt) worth of steel products in its inventory arising from aone-off incident whereby the customer who contracted to purchase the steel productsbreached the contract of sale and Novo then re-sold the steel products to a third partysubsequently.

B.3.15 Properties And Fixed Assets

As at the Latest Practicable Date, the Novo Group owns the following property:

LocationGross floorarea (sq m)

Tenure/Tenureterm Usage Encumbrances

Room 1109, 11/F,China MerchantsTower, Shun TakCentre, 168-200Connaught RoadCentral, Hong Kong

100.61 Leasehold/75years from 31/12/1980, renewablefor a further termof 75 years

Office Mortgaged toNanyangCommercial Bank,Ltd.

The net book value of the property, plant and equipment described above as at the LatestPracticable Date is approximately US$1.32 million.

As at the Latest Practicable Date, the Novo Group leases the following properties:

Location Use

Grossfloorarea(sq m) Tenure

AnnualRental Landlord

Room 1108, 11/F, ChinaMerchants Tower, ShunTak Centre, 168-200Connaught RoadCentral, Hong Kong

Office 99.41 2 years from 1June 2007 to31 May 2009

HK$474,000 JackfulInvestmentLimited(1)

Note:

(1) Jackful Investment Limited is an investment holding company owned by Yu Wing Keung, Dicky, the ExecutiveChairman of Novo Group and his spouse.


96

B.3.16 Competition

The steel trading market is highly fragmented with no single steel trader dominating thebusiness. Apart from Novo, there are few established global steel traders that are active indifferent product and market segments with substantial turnovers of over US$100 million perannum, as shown in the table below:

Company Name Main Office Main Product Main Market Main Source

Noble Group Limited(www.thisisnoble.com)

Hong Kong/Singapore

Iron Ore PRC India

Stemcor Holdings Ltd(www.stemcor.com)

UnitedKingdom

Iron Ore PRC Australia

Duferco(www.duferco.com)

Switzerland Steel Products South America/Africa/Europe

CIS

There are also steel traders that operate in smaller scale of less than US$100 million perannum and each of these steel traders may operate only in their niche market with differentproducts, supply sources and market areas.

While Novo does not have any direct competitors who offer the same products from the samesupply source and selling to the same market segments, it may from time to time competewith different steel traders in isolated transactions where it happens to be selling the sametype of product to the same market.

B.3.17 Competitive Strengths

The Vendors, as the directors of the Novo Group consider the following to be the corecompetitive strengths:

(a) Experienced management team

Novo has an experienced and committed management team comprising professionalswho each has many years of experience in the industry. Novo’s management team is ledby its proposed Executive Chairman, Yu Wing Keung, Dicky, and its proposed ChiefExecutive Officer, Chow Kin Wa. Collectively, Yu Wing Keung, Dicky and Chow Kin Wahave more than 35 years’ experience in multinational steel trading business and haveestablished extensive global business networks as well as accumulated substantialknowledge of the markets Novo serves. Novo’s experienced management team allowsit the possibility to offer products and value added activities in sourcing, processing,marketing, logistics, financing, operations and insurance.

(b) Strong support from banks

Novo enjoy strong financial support from its bankers. As at the Latest Practicable Date,Novo has banking facilities amounting to US$301 million. The steel trading businessrequires vast amount of financing to fund the purchase of steel products and this servesas a barrier to entry for new market entrants in the steel trading industry. It is a testimonyof the goodwill and reputation of Novo’s Executive Chairman, Yu Wing Keung, Dicky, inthe steel trading industry that notwithstanding the short history of the Novo Group, Novohas gained strong financial support from the aforesaid banks.


97

(c) Long term contracts with its suppliers

Novo has entered into Long Term Framework Agreements with supplying mills thusensuring secured, uninterrupted and sizable sources of supply of quality steel productsfor its business activities. Please refer to the section entitled “History and Development”of the Letter to Shareholders from Novo Group of this Circular for more information. Asat the Latest Practicable Date, Novo has entered into Long Term FrameworkAgreements for the purchase of steel products totalling a minimum 1,760,000 mt peryear. For FY2007, purchases from suppliers with Long Term Framework Agreementsaccounted for approximately 43.0% of the total steel purchased, which translates toapproximately 44.5% of the total revenue for the year.

(d) High degree of repeat customers

Novo’s ability to supply quality products at competitive pricing has helped to secure ahigh degree of repeat customers. This can be evidenced by such customers’ records ofmonthly/quarterly purchase from Novo whereby the same products supplied by thesame suppliers through Novo, are repeatedly transacted.

(e) Novo enjoys economies of scale

Novo makes its purchases in bulk and thus enjoy economies of scale from its sourcingactivities. Generally, Novo’s bulk purchases result in Novo being able to enjoy discountsin pricing. Purchasing in bulk also results in Novo being accorded preferential treatmentby its suppliers, such as higher priority for purchases, better credit terms and timelydelivery. Furthermore, Novo’s suppliers normally require minimum purchases whichNovo is able to meet when it makes bulk purchases. Most steel mills are unwilling tomeet orders of end users which are below a certain threshold tonnage as it is notcost-effective for the steel mills to customise their production specifications if the orderis too small. As such, Novo’s customers may not be able to purchase directly fromNovo’s suppliers unless their orders are sufficiently large. Therefore, purchasing from orthrough Novo allows the customers as well as Novo to enjoy the cost savings throughbulk purchases.

(f) Diversity of steel products offered

Novo trades in a diversity of steel products which include slabs, billets, hot rolled coils,hot rolled plates, I-Beams, deformed bars, wire rods, cold rolled coils and sheets. Pleaserefer to the section entitled “Products Traded” for more details. Due to the diverse rangeof products traded by Novo, it is able to meet the different needs of its customers. Novois also able to reduce the adverse impact of price and/or demand changes within thesteel industry as a result of the diversity of products offered.

B.3.18 Government Regulations

As at the Latest Practicable Date, our business operations in Singapore, Hong Kong andelsewhere are not subject to any special legislation, regulatory controls or environmentalissues other than those generally applicable to companies (including foreign investmentcompanies) and business operating in Singapore, Hong Kong and elsewhere. We have notexperienced any adverse effect on our business in complying with these regulations. OurDirectors believe that our Group has complied with all relevant laws and regulations. Thefollowing are the main laws and regulations that affect our operations:


98

Singapore

Regulation of Imports and Exports Act, Cap. 272A and Regulation of Imports andExports Regulations

Under the Regulation of Imports and Exports Act, Cap. 272A, the International EnterpriseSingapore Board (“IE Board”) may, subject to the approval of the Minister of Trade andIndustry, make regulations for the registration, regulation and control of all or any class ofgoods imported into, exported from, transshipped in or in transit through Singapore. TheRegulation of Imports and Exports Regulations (“RIER”) was prescribed by the IE Board in1999 to control the import, export or transshipment of goods through requirements of permits.We are subject to the regulations provided under RIER as we export (to our customerslocated outside Singapore) and import goods ourselves.

As at the Latest Practicable Date, we have obtained all material licences, permits, approvalsand consents for our business operations and have complied with all relevant conditionsimposed thereunder.

B.3.19 Trends and Prospects

Trend Information

The Proposed Directors have observed that Novo Group’s trading activities plays animportant role in the steel industry due to the intrinsic fact that there always tends to be amismatch in the supply and demand forces due to influencing factors such as governmentpolicies, economic ups and downs, different industrial cycles, minimum economic runs as wellas the overall market trends for that particular raw material, semi-finished product as well asfinished product. Opportunities therefore arise for experienced traders to match supply anddemand imbalance in different markets. Due to Novo’s market intelligence, efficient networkof representative offices, traders and agents as well as Novo’s good reputation in the industryrelating to its reliability in orders fulfilment, Novo has gained the confidence of its customers.This is demonstrated by the high volume of repeat business given by customers to Novo.

As at the Latest Practicable Date, we have outstanding sales orders of approximatelyUS$90.7 million. Generally, these orders are subject to cancellation, deferral or reschedulingby our customers. Therefore, due to the possibility of changes in our customers’ deliveryschedules or cancellations and potential delays in delivery, our order book as at any particulardate may not be indicative of our revenue for any succeeding period.

Save for the above, the Proposed Directors are not aware of any other known recent trendsin sales and inventory and in the costs and selling prices of steel products and related rawmaterials or other known trends, uncertainties, demands, commitments or events that arereasonably likely to have a material and adverse effect on the Novo Group in the currentfinancial year.


99

Prospects

The Proposed Directors believe that the prospects for the steel products industry are gooddue to the following factors:

(a) Global demand for steel continues to rise

The global demand for steel has been increasing due to global economic growth. ThePRC, accounting for 31% of the world’s steel demand has been the main contributor ofglobal steel growth having consumed 287 million tonnes in the first nine months of 2006,up 28.75 million tonnes or 10% from the corresponding period in 2005(1). Coupled withthe continuing economic growth in India, the demand for steel is likely to increasesubstantially with large-scale infrastructure projects taking place such as theconstruction of dams, motorways and ports(2). These two steel-intensive countries areexpected to continue to boost the global demand for steel in the immediate future.

An example of a large-scale infrastructure project taking place is the development ofintegrated resorts in Singapore. The integrated resorts to be developed at MarinaBayfront and Sentosa Island in Singapore involve a total investment amounting to S$5billion and are expected to be operational by 2009(3). With developments of such scale,the demand for construction material will be strong which in turn benefit the Novo Groupas steel products will be used in the construction of the resorts or other structures withinthe resorts.

(b) Increasing global reliance on the supply of steel from the PRC

Novo’s established working relationships with its suppliers in the PRC will put it in goodposition to act as the conduit for the supply of steel products from the PRC to the restof the world.

(c) The development of integrated supply chain operation

The demand for one-stop value added services is a growing trend in all industries andthe steel trading industry is no exception. Customers who purchase steel products aregravitating towards traders who not only provide sourcing services but also provideancillary services like arranging for shipping, bank financing, insurance and otherlogistic services. Novo believes that by developing its integrated sourcing and marketingservices, Novo will be in a good position to work closely with its customers and suppliersas well as in improving its operating profit margins.

(d) The development of Middle East market and South American market as emergingmarkets

Recent economic boom in the Middle East market and South American market emergingin the world economy and thus the increasing demand for infrastructures generatesdemand for construction materials, of which steel is an integral part of such materials.


100

(e) The development of steel industry in China leading to increasing demand for ironore

The PRC is a producer of over 30% of the world market steel capacity(4). There has beenfurther investment in big steel mills in the PRC leading to strong growth in the demandfor raw material needed by all steel mills for their iron and steel production. It alsoprovides Novo with more opportunities to export steel products to overseas markets.

(f) Present and continuing huge market

Novo operates in a huge market with potential for significant growth. With an estimatedsteel trading market size of 400 million mt in 2006, Novo traded approximately 480,000mt in 2006 which is 0.12% of total global production. Novo’s growth potential is thus notlimited by the size of the market and it can focus on building up its capacity andresources for its trading operations with minimum concern of over-capacity.

Notes:

(1) The information was obtained from an article by OECD entitled “OECD Steel Committee sees marketoutlook bright but slower demand expected in 2007” published on the Internet website of OPEC athttp://www.oecd.org. OECD has not consented to the inclusion of the information extracted from therelevant article published by it and is thereby not liable for such information under Sections 253 and 254of the SFA. While we have taken reasonable steps to ensure that the information from the relevantpublication published by the OECD is reproduced in its proper form and context, neither we nor any otherparty has conducted independent review of the information contained in such article nor verified theaccuracy of the contents of the relevant information.

(2) The information was obtained from an article by DBResearch, the research arm of the Deutsche BankGroup, entitled “Steel Markets in India: Companies set for expansion” published on the Internet websiteof DBResearch at http://www.dbresearch.com. DBResearch has not consented to the inclusion of theinformation extracted from the relevant article published by it and is thereby not liable for suchinformation under Sections 253 and 254 of the SFA. While we have taken reasonable steps to ensurethat the information from the relevant publication published by the DBResearch is reproduced in itsproper form and context, neither we nor any other party has conducted independent review of theinformation contained in such article nor verified the accuracy of the contents of the relevant information.

(3) The information was obtained from an article by Channel NewsAsia entitled “Singapore gives nod to twocasinos” posted on 18 April 2005 on the Internet website of Channel NewsAsia. Channel NewsAsia hasnot consented to the inclusion of the information extracted from the relevant article posted by it and isthereby not liable for such information under Sections 253 and 254 of the SFA. While we have takenreasonable steps to ensure that the information from the relevant article posted by the ChannelNewsAsia is reproduced in its proper form and context, neither we nor any other party has conductedindependent review of the information contained in such article nor verified the accuracy of the contentsof the relevant information.

(4) The information was obtained from the International Iron and Steel Institute Steel Statistical Yearbook2006 by IISI. IISI has not consented to the inclusion of the information extracted from the relevantyearbook published by it and is thereby not liable for such information under Sections 253 and 254 of theSFA. While we have taken reasonable steps to ensure that the information from the relevant publicationpublished by the IISI is reproduced in its proper form and context, neither we nor any other party hasconducted independent review of the information contained in such publication nor verified the accuracyof the contents of the relevant information.


101

B.3.20 Future Plans

The Novo Group has the following growth and expansion plans:

(a) Engage in a proposed joint venture for steel fabrication and processing

On 9 October 2007 and 27 November 2007, Global Wealth TL (part of Novo Group)entered into two binding co-operation agreements with Mayford Investments Limited(“Mayford Investments”) to form a joint venture company in the BVI, Xinghua BVI, as aholding company for a new company to be incorporated in Hong Kong, Xinghua HK, withthe object to establish two enterprises in the PRC to engage in, inter alia, processing andselling of prefabricated steel products in Zhang Jia Gang New Industrial Zone andtrading of steel products in the PRC (“Zhang Jia Gang Project”). Xinghua BVI wasincorporated in October 2007 whereby Novo holds 50% of the total registered capital inthe company and Mayford Investments holds the remaining 50%. Xinghua HK wasincorporated in November 2007 and is wholly owned by Xinghua BVI. The controllingshareholder of Mayford Investments also owns controlling interest in a group ofcompanies in the PRC that is involved in, inter alia, the production and sale of coldrolled, galvanised and pre-painted steel coils (which are the raw materials necessary forthe Zhang Jia Gang Project) and that constructed and owns goods wharf in Zhang JiaGang. The Zhang Jia Gang Project is subject to the necessary approvals, consents andthe grant of licences from the relevant governmental authorities in the PRC.

In November 2007, Global Wealth TL (part of Novo Group) incorporated a joint venturecompany in Hong Kong, Iron And Steel, with Mr Lin Xiutong and Mr Ji Naxin, to engagein, inter alia, the sourcing and trading of iron ore and thermal coke from Indonesia(“Indonesia Project”). Novo holds 45% of the total registered capital in Iron And Steelwhile Mr Lin Xiutong holds 45% and Mr Ji Naxin holds the balance 10%. Mr Lin Xiutongand Mr Ji Naxin have established a network for the sourcing of iron ore and thermal cokefrom Indonesia.

Novo intends to leverage on its core trading expertise in steel products to complementthe business operations of the Zhang Jia Gang Project and Indonesia Project. Novointends to fund part of its investments in the proposed joint venture companies from theproceeds of the Proposed Compliance Placement.

Novo may also expand its businesses through other acquisitions, joint ventures andstrategic alliances that will complement Novo’s current and future businesses. Suchexpansion includes exploring opportunities to carry out fabrication of steel products, toset up steel processing and warehousing facilities in strategic cities of the PRC, and toset up bonded warehouses in the PRC in two to three years time. Save for the ZhangJia Gang Project and Indonesia Project as disclosed above, Novo is currently notengaged in any advanced discussion with any party for acquisitions, joint ventures orstrategic alliances. Should such opportunities arise, Novo will seek approval, wherenecessary, from Shareholders and the relevant authorities as required by the relevantrules and regulations.

(b) The development of an integrated supply chain operation

Novo is seeking to differentiate its business by providing other complimentary andvalue-added services to its suppliers and customers over and above its core tradingbusiness. It aims to develop an integrated supply chain operation by providing ancillaryservices such as shipping, logistics, marketing and other professional services.


102

(c) Trading of those categories of products under raw materials and coated steel andspecial steel items

These two categories of products offer opportunities for growth and potential businessas they basically involve the same suppliers and customers that Novo has already dealtwith. Once Novo has acquired sufficient expertise, it shall be able to fully develop thegrowth potential offered by trading in these two product categories.

(d) Move into trading of other commodities related to steel industry

Novo intends to capitalise on its existing global network of suppliers and customers andcurrent resources comprising its infrastructure and logistic capabilities to move into thetrading of other steel-related commodities, like ferro alloys and minerals as acomplementary business. This will benefit Novo by providing additional sources ofincome without the burden of incurring huge set-up expenses as is normally the casewhen venturing into new businesses.

(e) Expansion of market share in overseas markets

Novo intends to expand its market share by penetrating further into existing marketswhere they operate as well as entering into new geographical markets. This will beachieved by setting up representative offices in the target markets. Novo has alreadyachieved some measure of success in penetrating new markets like the Middle East,Europe and South America.

B.4 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATIONS

The following discussion of the results of operations and financial condition should be read inconjunction with the “Accountants’ Report on Unaudited Pro Forma Combined FinancialInformation of Novo Group For The Financial Period From 31 January 2005 to 30 April 2006and Financial Year Ended 30 April 2007” and related notes thereto as set out in Appendix Cof this Circular and the “Accountants’ Report on Unaudited Pro Forma Combined FinancialInformation of Novo Group For The Financial Period from 1 May 2007 to 30 September 2007”and related notes thereto as set out in Appendix D of this Circular.

The unaudited pro forma combined financial information of the Novo Group is set out aftermaking certain pro forma adjustments to restate the historical financial information assumingthat the Novo Group structure had been in place since 31 January 2005.

This discussion contains forward-looking statements that involve risks and uncertainties. Theactual results may differ significantly from those projected in the forward-looking statements.Factors that might cause future results to differ significantly from those projected in theforward-looking statements include, but are not limited to, those discussed below andelsewhere in this Circular, particularly in the section entitled “Risk Factors” in the Letter toShareholders from Novo Group of this Circular.


103

B.4.1 Financial Information Of Novo Group

The following selected financial information of our Group should be read in conjunction withthe full text of this Circular, including the “Accountants’ Report on Unaudited Pro FormaCombined Information of Novo Group For The Financial Period From 31 January 2005 to 30April 2006 and Financial Year Ended 30 April 2007” and “Accountants’ Report on UnauditedPro Forma Combined Financial Information of Novo Group For The Financial Period From 1May 2007 to 30 September 2007”.

Operating Results Of Novo Group

(US$) FP2006 FY2007 5MFY07 5MFY08

Revenue 76,009,897 310,913,163 107,681,484 211,484,043

Cost of sales (70,849,807) (276,304,527) (96,645,196) (183,508,477)

Gross profit 5,160,090 34,608,636 11,036,288 27,975,566

Other operating income 478,294 1,254,632 364,679 596,403

Distribution and selling expenses (4,048,275) (24,894,884) (8,686,564) (20,155,253)

Administrative expenses (209,003) (620,844) (122,642) (380,977)

Finance costs (233,454) (1,502,656) (655,428) (1,083,801)

Share of results of associatedcompanies 346,235 (24,881) (144,726) (39,730)

Profit before income tax 1,493,887 8,820,003 1,791,607 6,912,208

Income tax (198,704) (1,540,522) (340,715) (1,221,544)

Profit for the period/year 1,295,183 7,279,481 1,450,892 5,690,664

Earnings per Share (in UScents)(1)

Basic 0.27 1.50 0.30 1.17

Diluted 0.27 1.50 0.30 1.17

Note:

(1) For comparative purposes, EPS for the periods/year under review have been computed based on the profit forthe period/year and pre-compliance share capital of 484,753,671 Shares.


104

FINANCIAL POSITION OF NOVO GROUP

(US$)As at

30 April 2006As at

30 April 2007

As at30 September

2007

Non-current assets

Property, plant and equipment — 1,446,173 1,436,356

Investment in associated companies 742,096 717,215 684,092

742,096 2,163,388 2,120,448

Current assets

Receivables 21,341,317 12,206,386 39,872,016

Inventories — — 817,688

Cash and bank balances 3,378,398 14,594,603 9,856,907

24,719,715 26,800,989 50,546,611

Total assets 25,461,811 28,964,377 52,667,059


Borrowings — 434,817 381,809

Current liabilities

Payables 22,938,054 15,715,953 31,212,292

Bank overdraft — 10,258 6,491

Borrowings 397,540 1,211,082 2,507,539

Tax payable 198,704 1,739,226 2,960,770

23,534,298 18,676,519 36,687,092

Total liabilities 23,534,298 19,111,336 37,068,901

Net assets 1,927,513 9,853,041 15,598,158

Equity attributable to equity holders of theCompany

Share capital 632,330 1,278,377 1,332,830

Retained earnings 1,295,183 8,574,664 14,265,328

1,927,513 9,853,041 15,598,158


105

OPERATING RESULTS OF NOVO GROUP (translated to Singapore Dollars)(1)

(S$) FP2006 FY2007 5MFY07 5MFY08

Revenue 125,568,350 482,848,142 170,244,426 321,878,713

Cost of sales (117,043,881) (429,100,930) (152,796,055) (279,299,902)

Gross profit 8,524,469 53,747,212 17,448,371 42,578,811

Other operating income 790,142 1,948,443 576,557 907,725

Distribution and selling expenses (6,687,750) (38,661,755) (13,733,458) (30,676,295)

Administrative expenses (433,347) (1,287,284) (193,897) (1,076,248)

Finance costs (385,666) (2,333,625) (1,036,232) (1,649,545)

Share of results of associatedcompanies 571,980 (38,640) (228,812) (60,469)


Income tax (328,259) (2,392,431) (538,670) (1,859,190)

Profit for the period/year 2,051,569 10,981,920 2,293,859 8,164,789

Earnings per Share (in S$cents)(2)

Basic 0.42 2.27 0.47 1.68

Diluted 0.42 2.27 0.47 1.68

FINANCIAL POSITION OF NOVO GROUP (translated to Singapore Dollars)(3)

(S$)As at 30 April

2006As at 30 April

2007As at 30

September 2007

Non-current assets

Property, plant and equipment — 2,198,183 2,134,425

Investment in associated companies 1,175,480 1,090,167 1,016,561

1,175,480 3,288,350 3,150,986

Current assets

Receivables 33,804,646 18,553,707 59,249,816

Inventories — — 1,215,084

Cash and bank balances 5,351,382 22,183,797 14,647,364

39,156,028 40,737,504 75,112,264

Total assets 40,331,508 44,025,854 78,263,250


Borrowings — 660,922 567,368

Current liabilities

Payables 36,333,878 23,888,249 46,381,466

Bank overdraft — 15,592 9,646

Borrowings 629,703 1,840,845 3,726,203

Tax payable 314,747 2,643,624 4,399,704

37,278,328 28,388,310 54,517,019


106

(S$)As at 30 April

2006As at 30 April

2007As at 30

September 2007

Total liabilities 37,278,328 29,049,232 55,084,387

Net assets 3,053,180 14,976,622 23,178,863

Equity attributable to equity holders ofthe Company

Share capital 1,001,611 1,943,133 1,980,585

Retained earnings 2,051,569 13,033,489 21,198,278

3,053,180 14,976,622 23,178,863

Notes:

(1) The income statements of Novo Group for FP2006, FY2007, 5MFY07 and 5MFY08 are translated using theaverage rates for the respective periods. Please see section on “Exchange Rates”.

(2) For comparative purposes, EPS for the periods/year under review have been computed based on the profit forthe period/year and pre-compliance share capital of 484,753,671 Shares.

(3) The balance sheets of Novo Group as at 30 April 2006, 30 April 2007 and 30 September 2007 are translatedusing the closing rates for the respective periods. Please see section on “Exchange Rates”.

B.4.2 Review Of Past Performance

The following discussion of our business and results of operations for FP2006 and FY2007(the “Relevant Periods”) and for the 5 months ended 30 September 2006 and 2007 (the“Interim Review Periods”) should be read in conjunction with the “Accountants’ Report onUnaudited Pro Forma Combined Financial Information For The Financial Period From 31January 2005 to 30 April 2006 and Financial Year Ended 30 April 2007” and “Accountants’Report on Unaudited Pro Forma Combined Financial Information of Novo Group For TheFinancial Period From 1 May 2007 to 30 September 2007”.

This discussion contains forward-looking statements that involve risks and uncertainties.Factors that might cause future results to differ significantly from those projected in theforward-looking statements include but are not limited to, those discussed below andcontained elsewhere in this Circular, particularly in the “Risk Factors” section of this Circular.

The figures in this section are approximate figures and where appropriate, for ease ofreference, we have rounded the figures to one decimal place.

Basis Of Presentation

The pro forma combined financial information has been prepared for illustrative purposesonly. Such information is prepared based on certain assumptions, to show what:

(i) the financial results, changes in equity and cash flows of the Pro forma Group for thefinancial period from 31 January 2005 to 30 April 2006, financial year ended 30 April2007, financial period from 1 May 2006 to 30 September 2006 and financial period from1 May 2007 to 30 September 2007 would have been if the group structure as of the dateof the Circular had been in place on 31 January 2005; and

(ii) the financial position of the pro forma Group as at 30 April 2006, 30 April 2007 and 30September 2007 would have been if the group structure as of the date of the Circularhad been in place on 31 January 2005.


107

The objective of these pro forma combined financial information is to show what the historicalfinancial information would have been had the Pro forma Group existed since 31 January2005.

OVERVIEW

Revenue

Novo Group is principally engaged in the business of international trading of various steelproducts and their raw materials. It is also involved in business activities targeting at providingan integrated service related to its core trading activities, which comprises shipping, logisticsarrangement and other support services such as arranging financing and insurance servicesfor its customers and suppliers.

The steel products that are sold by Novo Group can be categorised into four productsegments:

• Raw materials for integrated steel mills, these include iron ore, direct reduced iron, hotbriquette iron and scrap (“Raw Materials”). Novo Group has not traded in such productsduring the Relevant Periods and Interim Review Periods and it is the intention of theGroup to commence trading in such products in the second half of FY2008. Please referto the section entitled “Future Plans” of this Circular for further details;

• Semi-finished products from integrated steel mills, these include mainly steel billets andsteel slabs (“Semi-Finished Products”);

• Finished products, these include mainly steel plates, hot rolled coils, cold rolled coils,wire rods and deformed bars (“Finished Products”); and

• Special and coated products, these include mainly galvanized steel coils, pre-paintedgalvanized steel coils and tinplate (“Special and Coated Products”). Novo Groupcommenced trading in such products in FY2007.

Revenue is recognised when significant risks and rewards of ownership of the goods aretransferred to the buyer. Novo Group’s revenue represents amount receivable or received forthe sales of goods net of sale related taxes, rebates and discounts and after eliminating saleswithin the Group. Novo Group normally sells its products to its customers on the CFR terms,meaning that significant risks and rewards of ownership of the goods are transferred to thebuyer once the vessel arrives in the designated port of call. As part of Novo Group’s valueadded services to its customers, Novo Group is responsible for chartering the vessel to deliverthe goods to its customers’ designated port of call. The freight charges that Novo Groupcharges its customers are incorporated into the selling price of its steel products. In the pasttwo financial years, Novo Group’s revenue had increased significantly from US$76.0 millionin FP2006 to US$310.9 million in FY2007. For the 5 months ended 30 September 2007, ourrevenue was US$211.5 million which was an increase of approximately 96.4% or US$103.8million as compared to the corresponding period in 2006.

The main reasons for the increase in revenue during both the Relevant Periods and theInterim Review Periods were mainly due to:

(i) the significant increase of tonnage of total steel traded;

(ii) the increase in steel prices; and

(iii) the increase of freight charges.


108

Geographically, Novo Group’s revenue is derived from four different regions:

• North Asia, this includes mainly China, Japan, Taiwan and Korea (“North Asia”);

• South-East Asia, this includes mainly Indonesia, Thailand, Singapore, Vietnam and thePhilippines (“South-East Asia”);

• India and Middle East, this includes mainly India, Iran, Cyprus and United Arab Emirates(“India and Middle East”); and

• Other regions which include countries located in the European and South Americanregions (“Other Regions”).

Factors affecting our revenue

A detailed account of the risk factors affecting Novo Group’s business activities are set outunder the “Risk Factors” section of this Circular. The major factors affecting Novo Group’srevenue are as follows:

(a) Novo Group’s ability to retain existing and secure new customers;

(b) Novo Group’s ability to ensure stable supplies of quality products at competitive price;

(c) Novo Group’s ability to provide and deal in a diversified range of products within eachproduct segment;

(d) Novo Group’s reputation of delivering the goods to its customers in timely manner;

(e) Novo Group’s ability to expand its sales and distribution network;

(f) Novo Group’s business is mainly driven by its senior management team and any loss ofthem may have an adverse effect on Novo Group’s revenue;

(g) Both supply and demand for steel products which contributed to steel trading activities.In particularly, over the Relevant Periods, there has been an increase in global steelproduction and consumption. Global crude steel production and the apparent crudesteel consumption has also increased significantly;

(h) The general price level of steel — over the Relevant Periods, the price of steel has beenincreasing due to the higher demand for steel and, particularly for Novo Group, certainexport policy changes in the PRC; and

(i) Freight charges which affect the selling price of steel products have increased during theRelevant Periods. Factors that affect freight charges include price level of oil as well asthe demand for a particular trade route.

Cost of sales

During the Relevant Periods and Interim Review Periods, Novo Group’s cost of sales wasonly related to material costs. Novo Group’s cost of sales during the Relevant Period did notinclude transportation cost, stevedoring, wharfage charges and port charges because NovoGroup purchases its supplies from suppliers on FOB basis where the significant risks andrewards of ownership of the goods are transferred to Novo Group once the goods are loadedon the Novo Group’s designated vessel. As such, Novo Group is not responsible for thetransportation of the goods from the supplier’s warehouse to the port, neither is Novo Groupresponsible for the loading of the cargo from the port onto the designated vessel. Hence,outward freight charges and expenses incurred for the transportation of cargos to customers’warehouses (if any) are classified as distribution and selling expenses.


109

Cost of sales represented approximately 93.2%, 88.9% and 86.8% of revenue for FP2006,FY2007 and 5MFY08 respectively. The reason for the gradual decrease in the cost of salesas a percentage of revenue was due mainly to an increase in tonnage in the amount of steelproducts purchased by Novo Group, which allows Novo Group to enjoy bulk discount onpurchases. Furthermore, towards the end of FP2006, Novo Group has, in additional to itsusual channel of purchasing through its local agents, commenced its purchases directly fromsteel mills as it was able to place bigger orders with such sellers. Steel mills are usually ableto offer more competitive price due to the high volume of sales and this has helped to reduceNovo Group’s material costs during the year. During the Relevant Periods, tonnage tradedhas increased from 186,000 mt to 658,000 mt.

Other operating income

Other operating income comprises mainly from agency fees received and bank interestincome. The table below sets out the other items of other operating income:

Breakdown of other operatingincome (%) FP2006 FY2007 5MFY07 5MFY08

Agency fees received 18.8 56.7 55.1 28.9

Management fees received — — — 21.5

Compensation received 53.3 1.6 — 6.7

Commission received 0.8 2.6 8.1 —

Service fees received — 4.6 — 8.1

Exchange gain — 4.8 1.2 —

Sundry income 11.5 0.5 1.7 0.9

Finance income - bank interestincome 15.6 29.2 33.9 33.9

Total 100.0 100.0 100.0 100.0

Agency fees received, comprising L/C agency fee and shipping agency fee, accounted forapproximately 18.8%, 56.7% and 28.9% of the total other operating income for FP2006,FY2007 and 5MFY08 respectively. L/C agency fee relates to fee received from Novostal PLfor the use of Novo Group’s unutilised L/C facilities. Under such arrangements, which is tofacilitate transactions of its associated companies, Novo Group will request its banks to openL/C for use by its associated companies and to debit relevant commissions and charges to theassociated companies. The banks remain as the lenders under all circumstances and NovoGroup merely consented to allow its associated companies to make use of its unutilised L/Cfacilities. The amount drawndown for this purpose was US$48.4 million during FY2007. Therehas been no default on payment by its associated companies and there was no amountoutstanding as at the end of FY2007.

The Directors of Novo Group have confirmed that the above arrangement is not prejudicial tothe interest of Novo Group as the associated companies only utilised the unutilised portion ofthe L/C facilities. Nevertheless, Novo Group has from January 2007 ceased sucharrangement and does not intend to extend the use of Novo Group’s unutilised L/C facilitiesto its associated companies in future.

Shipping agency fee relates to brokerage, commission and agency fee received fromNovostal PL and Novostal HK.


110

Bank interest income from deposits accounted for 15.6%, 29.2% and 33.9% of Novo Group’stotal other operating income in FP2006, FY2007 and 5MFY08 respectively.

In FP2006, Novo Group received compensation of US$255,000 from two customers fornon-fulfillment of sales contracts. In 5MFY08, Novo Group received compensation ofUS$40,000 from a supplier for non-fulfillment of supply contract.

In 5MFY08, Novo Group also charged management fees of US$128,000 to Novostal HK forNovostal HK’s share of salaries and staff related costs as a result of transfer of employees toNovo Group. This is in contrast to FP2006 and FY2007 whereby Novo Group was chargedmanagement fees by Novostal HK.

Other operating income also includes service fees received that are paid to Novo Group ona monthly basis for assisting Novostal HK in liaising and organisation of documents forsubmission to the banks when utilising the banking facilities.

Distribution and selling expenses

The Novo Group sells its products to customers mainly on CFR basis but occasionally on CIFbasis upon the request of the customers. A large majority of Novo Group’s sales transactionsare on CFR basis. As the extra cost of the insurance premium payable to procure marineinsurance under the CIF basis is borne by the customer, the choice of using CFR basis or CIFbasis to sell its products does not affect Novo Group’s gross and net profit margins.Distribution and selling expenses comprise mainly outward freight charges and agency feespaid, while miscellaneous expenses include inspection fee, insurance, port handling charges,ship handling charges and salary expenses.

Breakdown of distribution andselling expenses (%) FP2006 FY2007 5MFY07 5MFY08

Outward freight charges 71.8 80.4 76.0 86.3

Agency fee paid 21.5 13.8 20.0 6.4

Miscellaneous 6.7 5.8 4.0 7.3

Total 100.0 100.0 100.0 100.0

Administrative expenses

Administrative expenses comprise mainly salaries and staff-related costs for ourmanagement and administrative staff, office expenses, entertainment, transportation, andothers. Office expenses comprise mainly office consumables, utilities, depreciation ofproperty, office equipment and motor vehicle and insurance.

Finance costs

Novo Group’s finance costs comprise mainly interest on bank loans, interest on bankoverdrafts, discounted bills charges and bank charges. Interest expenses incurred relatemainly to bank loans and accounted for 21.2%, 62.9% and 67.9% of total finance costs inFP2006, FY2007 and 5MFY08 respectively. Bank charges also accounted for 78.8%, 37.1%and 32.1% of total finance costs in FP2006, FY2007 and 5MFY08 respectively.


111

Income tax

Novo Group’s income tax constitutes 13.3%, 17.5% and 17.7% of Novo Group’s profit beforetax in FP2006, FY2007 and 5MFY08 respectively.

The subsidiaries of Novo Group are incorporated in Hong Kong, Singapore and British VirginIslands and are taxed in accordance with the respective prevailing tax regulations of thejurisdiction in which they are incorporated.

REVIEW OF PAST PERFORMANCE

Breakdown of past performance by product segments

For the purpose of this section, Novo Group has categorised its steel trading products intofour product segments, namely Raw Materials, Semi-Finished Products, Finished Productsand Special and Coated Products.

While it is possible to segment our revenue by product segment, the allocation of costs, savefor (i) costs of sales (which is mainly material costs), (ii) outward freight charges and (iii)agency fees paid, cannot be done in a similar manner with reasonable accuracy. This isbecause these costs are not directly traceable to individual product segment given that labour,administrative and finance resources are shared between different product segments. Assuch, it will not be meaningful to provide a breakdown of profit beyond operating profit.

The breakdown of Novo Group’s revenue, operating profit and operating profit margin foreach of these product segments for the Relevant Periods and Interim Review Periods are setout below:–

Revenue FP2006 FY2007 5MFY07 5MFY08

(US$’000) % (US$’000) % (US$’000) % (US$’000) %

Raw Materials — — — — — — — —

Semi-Finished Products 15,790 20.8 111,281 35.8 58,691 54.5 7,643 3.6

Finished Products 60,220 79.2 199,456 64.1 48,990 45.5 203,841 96.4

Special and CoatedProducts — — 176 0.1 — — — —

Total 76,010 100.0 310,913 100.0 107,681 100.0 211,484 100.0

Operating Profit(1) FP2006 FY2007 5MFY07 5MFY08

(US$’000) % (US$’000) % (US$’000) % (US$’000) %

Raw Materials — — — — — — — —

Semi-Finished Products 164 11.9 1,733 15.5 1,062 39.3 981 10.6

Finished Products 1,218 88.1 9,415 84.4 1,638 60.7 8,308 89.4

Special and CoatedProducts — — 2 0.1 — — — —

Total 1,382 100.0 11,150 100.0 2,700 100.0 9,289 100.0


112

Operating Profit Margin (%) FP2006 FY2007 5MFY07 5MFY08

Raw Materials — — — —

Semi-Finished Products 1.04 1.56 1.81 12.84

Finished Products 2.02 4.72 3.34 4.08

Special and Coated Products — 1.14 — —

Overall 1.82 3.59 2.51 4.39

Note:

(1) Operating profit is derived from gross profit less freight charges incurred for shipping steel products to customers(“outward freight charges”) and distribution agency fees incurred, which are the two main components ofdistribution and selling expenses attributable to the product segment.

Breakdown of past performance by geographical regions

For the purpose of this section, Novo Group has categorised its steel trading activities intofour geographical regions, namely North Asia, South-East Asia, India and Middle East andOther Regions, which are based on our customers’ designated port of call.

While it is possible to segment our revenue by geographical regions, the allocation of costs,save for (i) costs of sales (which is mainly material costs), (ii) outward freight charges and (iii)agency fees paid, cannot be done in a similar manner with reasonable accuracy. This isbecause these costs are not directly traceable to individual geographical regions given thatlabour, administrative and finance resources are shared between different geographicalregions. As such, it will not be meaningful to provide a breakdown of profit beyond operatingprofit.

The breakdown of Novo Group’s revenue, operating profit and operating profit margin foreach of these geographical regions for the Relevant Periods and Interim Review Periods areset out below:–

Revenue FP2006 FY2007 5MFY07 5MFY08

(US$’000) % (US$’000) % (US$’000) % (US$’000) %

North Asia 27,699 36.4 23,225 7.5 24,371 22.6 28,589 13.5

South-East Asia 20,820 27.4 131,852 42.4 47,677 44.3 33,977 16.1

India and Middle East 25,478 33.5 103,491 33.3 21,565 20.0 79,448 37.6

Other Regions(1) 2,013 2.7 52,345 16.8 14,068 13.1 69,470 32.8

Total 76,010 100.0 310,913 100.0 107,681 100.0 211,484 100.0

Operating Profit(2) FP2006 FY2007 5MFY07 5MFY08

(US$’000) % (US$’000) % (US$’000) % (US$’000) %

North Asia 570 41.2 220 2.0 295 10.9 1,234 13.3

South-East Asia 444 32.1 2,801 25.1 1,266 46.9 2,200 23.7

India and Middle East 287 20.8 5,822 52.2 643 23.8 709 7.6

Other Regions(1) 81 5.9 2,307 20.7 496 18.4 5,146 55.4

Total 1,382 100.0 11,150 100.0 2,700 100.0 9,289 100.0


113

Operating Profit Margin (%) FP2006 FY2007 5MFY07 5MFY08

North Asia 2.06 0.95 1.21 4.32

South-East Asia 2.13 2.12 2.66 6.47

India and Middle East 1.13 5.63 2.98 0.89

Other Regions(1) 4.02 4.41 3.53 7.41

Overall 1.82 3.59 2.51 4.39

Notes:

(1) Other Regions include countries located in the European and South American regions. Europe predominantlyconsists of Spain, Italy and Russia.

(2) Operating profit is derived from gross profit less freight charges incurred for shipping steel products to customers(“outward freight charges”) and distribution agency fees incurred, which are the two main components ofdistribution and selling expenses attributable to the geographical segment.

FP2006 vs FY2007

Revenue

Novo Group’s revenue increased by US$234.9 million or 309.0% from US$76.0 million inFP2006 to US$310.9 million in FY2007 mainly due to the increase of sales of theSemi-Finished Products from US$15.8 million in FP2006 to US$111.3 million in FY2007 andthe sale of Finished Products from US$60.2 million in FP2006 to US$199.5 million in FY2007.

The increase in revenue for the Semi-Finished Products and Finished Products segments isdue mainly to the increase in tonnage traded and increase in steel prices during the RelevantPeriods. The total number of tonnes traded for the Semi-Finished Products increase by215,000 mt or 467.4% from 46,000 mt in FP2006 to 261,000 mt in FY2007. The total numberof tonnes traded for the Finished Products increased by 257,000 mt or 183.6% from 140,000mt in FP2006 to 397,000 mt in FY2007. The average price for the Semi-Finished Productsincreased by US$83 or 24.2% from US$343 per ton in FP2006 to US$426 per ton in FY2007.The average selling price for Finished Products increased by US$72 or 16.7% from US$430per ton in FP2006 to US$502 per ton in FY2007.

As compared to FP2006, being the inception year, Novo Group’s product range as well ascustomer base has increased in FY2007 and have contributed significantly to the increase inthe Group’s revenue for FY2007. Novo Group’s ability to deal in a diversified range ofproducts within each product segment has further helped in its increase in revenue. Forexample, in FY2007, Novo Group sold 11,000 mt of Hot Rolled Strips and 130,000 mt of SteelPlates, two products classified under Finished Products that were not traded in duringFP2006.

Geographically, revenue from South East Asia, India and Middle East and Other Regionsincreased by approximately US$111.0 million, US$78.0 million and US$50.3 millionrespectively. This is mainly due to Novo Group’s ability to expand its sales and distributionnetwork in these regions. For example, in FP2006, Novo Group did not trade in Singapore,however in FY2007, it sold US$27.1 million worth of steel products to Singapore. NovoGroup’s revenue from Indonesia increased by US$46.8 million or 731.3 % from US$6.4million in FP2006 to US$53.2 million in FY2007. Novo Group’s expansion into the Middle Eastregion has also seen its revenue increase by US$63.3 million as compared to FP2006.However, Novo Group’s revenue decreased in North Asia, which is due mainly to decrease inrevenue from China by US$17.4 million or 98.9% from US$17.6 million in FP2006 to


114

US$232,000 in FY2007. The reduction in revenue from the PRC was mainly due to thecyclical effect of steel production and consumption. PRC has slowly evolved from a netimporter of steel products to a net exporter of steel products.

Operating profit

Novo Group’s gross profit is derived from revenue less cost of sales and its operating profitis derived from taking gross profit less outward freight charges and distribution agency feesincurred. Novo Group’s gross profit increased by US$29.4 million or 570.7% from US$5.2million in FP2006 to US$34.6 million in FY2007. The increase in gross profit was mainly dueto the significant increase in revenue contributions from Semi-Finished Products and FinishedProducts.

Novo Group’s cost of sales increased by US$205.5 million or 290.1% from US$70.8 million inFP2006 to US$276.3 million in FY2007. The increase in cost of sales is due mainly to thesignificant increase in tonnage traded (please refer to the section entitled “Revenue” abovefor the respective increase in tonnage traded for Semi-Finished Products and FinishedProducts) and the cost of steel in FY2007. The average cost price per ton for theSemi-Finished Products increased by US$66 or 20.1% from US$329 per ton in FP2006 toUS$395 per ton in FY2007. The average cost price per ton for Finished Products increasedby US$38 or 9.5% from US$398 per ton in FP2006 to US$436 per ton in FY2007.

Outward freight charges increased by US$17.1 million or 589.7% from US$2.9 million inFP2006 to US$20.0 million in FY2007. The increase in outward freight charges is due mainlyto the increase in (i) number of shipments arising from increased sales as well as shipmentof Novo Group’s products to more geographical locations around the World and (ii) higherfreight charges due to longer voyages to new markets served. Additionally, the increase in oilprices in FY2007 has further increased outward freight charges.

Distribution agency fees incurred increased by US$2.5 million or 290.8% from US$870,000 inFP2006 to US$3.4 million in FY2007. Novo Group uses agents who are based in differentcountries to assist them in expanding their distribution network as such agents are able toprovide in depth local market knowledge. Novo Group incurred insignificant amount of agencyfee in FP2006 for Other Regions as compared to US$752,000 in FY2007 when it expandedits business. The agency fees paid in North Asia, South East Asia and India and Middle Eastincreased by US$296,000, US$1.2 million and US$310,000 respectively or representing anincrease of 259.6%, 540.5% and 57.9% in the respective regions which is consistent with theincrease in revenue.

Novo Group’s operating profit increased by US$9.8 million or 706.8% from US$1.4 million inFP2006 to US$11.2 million in FY2007. In terms of product segments, the operating profit inthe Semi-Finished Products segment increased by US$1.6 million or 956.7% fromUS$164,000 in FP2006 to US$1.7 million in FY2007. The operating profit for FinishedProducts increased by US$8.2 million or 673.0% from US$1.2 million in FP2006 to US$9.4million in FY2007. In terms of geographical regions, Novo Group’s operating profit in SouthEast Asia increased by US$2.4 million or 530.9% from US$444,000 in FP2006 to US$2.8million in FY2007. Novo Group’s operating profit in India and Middle East increased byUS$5.5 million or 1,928.6% from US$287,000 in FP2006 to US$5.8 million in FY2007. NovoGroup’s operating profit in the Other Regions showed the greatest improvement, increasingby almost 27 folds or US$2.2 million from US$81,000 in FP2006 to US$2.3 million in FY2007.The increase in operating profit in the above regions is due to (i) the increase in revenue inthe respective regions and (ii) the increase in product mix within the different product


115

segments. However, the operating profit in North Asia has decreased by US$350,000 or61.4% from US$570,000 in FP2006 to US$220,000 in FY2007. The decrease in operatingprofit in the North Asia region is due to lower revenue in this particular region, which is mainlydue to lower sales to the PRC. As mentioned in the revenue section above, this is mainly dueto the cyclical effect of the demand for imported steel from the PRC.

Based on the foregoing discussions, save for North Asia and South-East Asia, operating profitmargin for each product segments and geographical regions has increased for FY2007. NovoGroup’s outward freight charges in South East Asia as a percentage of revenue generatedfrom South East Asia has increased from 3.0% in FP2006 to 4.6% in FY2007. Novo Group’soperating profit margin in North Asia has also decreased by 1.1 percentage point from 2.1%in FP2006 to 1.0% in FY2007 and this is due mainly to the decrease in operating profit ofUS$570,000 in FP2006 to US$220,000 in FY2007.


Novo Group’s other operating income increased by US$776,000 or 162.3% from US$478,000in FP2006 to US$1.3 million in FY2007. This was due to an increase of agency fee receivedby almost 7 folds or US$622,000 from US$90,000 in FP2006 to US$712,000 in FY2007. Theincrease in agency fee was mainly due to an increase of US$188,000 in L/C agency fee inFY2007 when Novo HK allowed Novostal PL to use its excess L/C facilities.

Bank interest income increased significantly by US$292,000 or 389% from US$75,000 inFP2006 to US$367,000 in FY2007, which was due mainly to higher interest rate as well ashigher amount of deposits being placed with the banks as a result of higher amount of facilitiesgranted by the banks. Novo Group’s bank deposits increased from US$3.4 million in FP2006to US$14.6 million in FY2007. Lastly, Novo Group did not record any service fee received andexchange gain in FP2006, but recorded US$58,000 and US$60,000 respectively in FY2007.


Novo Group’s administrative expenses increased by US$412,000 or 197% from US$209,000in FP2006 to US$621,000 in FY2007. This was due mainly to the increase in management feepaid to Novostal HK of approximately US$225,000 relating to Novo Group’s share of salariesand staff related costs as a result of expansion in distribution and trading network. NovostalHK had an increase of headcount by 10 employees from 13 employees in FP2006 to 23employees in FY2007. Hence the remuneration for staff increased by approximatelyUS$143,000 or 168.2% from US$85,000 in FP2006 to US$228,000 in FY2007. Theremuneration to key management increased by US$92,000 or 317% from US$29,000 inFP2006 to US$121,000 in FY2007.

Finance costs

Novo Group’s finance costs increased by US$1.3 million or 544% from US$233,000 inFP2006 to US$1.5 million in FY2007. This was due to an increase in bank charges ofUS$373,000 or 202.7% from US$184,000 to US$557,000. Novo Group’s interest on bankloans increased by US$850,000 or 1,734.7% from US$49,000 in FP2006 to US$899,000 inFY2007.


116

The significant increase in bank charges and interest in bank loans is due to the increase inusage of banking facilities for the growth of the business. Novo Group’s banking facilities haveincreased by US$125 million or 245.1% from US$51 million in FP2006 to US$176 million inFY2007.

Share of results of associated companies

Novo Group’s share of results of associated companies decreased by US$371,000 or 107.2%from a profit of US$346,000 in FP2006 to a loss of US$25,000 in FY2007. This was duemainly to a significant decrease in Novostal HK’s trading activities in Thailand as its customermade lesser purchase.

Income tax

Novo Group’s income tax increased by US$1.3 million or 675.3% from US$199,000 inFP2006 to US$1.5 million in FY2007. This was due mainly to an increase in profit before taxof US$7.3 million from FP2006 to FY2007.

The effective tax rate for FP2006 and FY2007 was 13.3% and 17.5% respectively. Effectivetax rate for FP2006 was lower than the prevailing Hong Kong rate was due solely to therecognition of share of associated companies’ after tax results at groups’ pre-tax levelpursuant to presentation requirement of Financial Reporting Standard 1. Had the share ofassociated companies’ results been excluded, the effective tax rate for FP2006 and FY2007would have been 17.3% and 17.4% respectively.

Profit after income tax

Novo Group’s profit after tax increased by US$6.0 million or 462.0% from US$1.3 million inFP2006 to US$7.3 million in FY2007. This was due mainly to the reasons affecting operatingprofit and operating profit margin mentioned above.

5MFY07 vs 5MFY08

Revenue

Novo Group’s revenue increased by US$103.8 million or 96.4% from US$107.7 million in5MFY07 to US$211.5 million in 5MFY08 mainly due to the increase of sales of the FinishedProducts from US$49.0 million in 5MFY07 to US$203.8 million in 5MFY08, slightly offset bythe decrease in the sale of Semi-Finished Products from US$58.7 million in 5MFY07 toUS$7.6 million in 5MFY08.

The increase in revenue for the Finished Products segment is due mainly to the increase intonnage traded and increase in steel prices for this product category during the InterimReview Periods. The total number of tonnes traded for the Finished Products increased by236,000 mt or 231.4% from 102,000 mt in 5MFY07 to 338,000 mt in 5MFY08. For 5MFY08,the average price for the Finished Products increased by US$123 or 25.6% from US$480 perton in 5MFY07 to US$603 per ton in 5MFY08.

In contrast, there has been a significant decrease in the contribution to Novo Group’s revenuefor the Semi-Finished products. The total number of tonnes traded for the Semi-FinishedProducts decreased by 126,000 mt or 89.4% from 141,000 mt in 5MFY07 to 15,000 mt in5MFY08. This is mainly due to the export duties being imposed by the PRC authorities on


117

Semi-Finished Products such as steel slabs and steel billets, making the Semi-FinishedProducts sourced from the PRC less price competitive in the global steel market. However,Novo has been able to adapt promptly to these market changes by shifting their focus toconcentrate on trading of Finished Products which also commands a better operating profitmargin.

Geographically, revenue from India and Middle East and Other Regions increasedsignificantly by approximately US$57.9 million (or approximately 2.7 folds) and US$55.4million (or approximately 3.9 folds) respectively. This is mainly due to Novo Group’s continuedexpansion of its sales and distribution network and greater marketing focus particularly inthese 2 regions (for example, the number of customers in Italy and Spain increased from 6customers for 5MFY07 to 24 customers for 5MFY08), as a result of higher demand forFinished Products such as deformed bars and steel plates from these 2 regions. Revenuefrom South East Asia decreased by approximately US$13.7 million or 28.7% from US$47.7million in 5MFY07 to US$34.0 million in 5MFY08. This is mainly due a decrease inSemi-Finished Products traded to this region in 5MFY08 as a result on shift in focus to tradingof Finished Products.

Operating profit

Novo Group’s gross profit increased by US$17.0 million or 153.5% from US$11.0 million in5MFY07 to US$28.0 million in 5MFY08. The increase in gross profit was mainly due to thesignificant increase in revenue contributions from Finished Products which generally givesbetter gross profit margin. In 5MFY08, the revenue contributed from Finished Productsaccounted for 96.4% of total revenue.

Novo Group’s cost of sales increased by US$86.9 million or 89.9% from US$96.6 million in5MFY07 to US$183.5 million in 5MFY08. The increase in cost of sale is due mainly to theoverall increase in tonnage traded for Finished Products and the cost of steel in 5MFY08. Theaverage cost price per ton for Finished Products increased by US$101 or 23.9% from US$422per ton in 5MFY07 to US$523 per ton in 5MFY08.

Although the outward freight charges have increased by US$10.8 million or 163.6% fromUS$6.6 million in 5MFY07 to US$17.4 million in 5MFY08, Novo was able to pass on most ofthe increase to its customers. The increase in outward freight charges is due mainly to thehigher freight charges as a result of longer voyages for delivery to markets such as the MiddleEast and Europe, which is in line with the revenue growth in these 2 regions. Additionally, thecontinued increase in oil prices in 5MFY08 has further increased outward freight charges.

Distribution agency fees incurred decreased by US$0.4 million or 23.5% from US$1.7 millionin 5MFY07 to US$1.3 million in 5MFY08. The agency fees paid in India and Middle East andOther Regions increased by US$126,000 and US$546,000 respectively or representing anincrease of 53.7% and 157.6% in the respective regions which is consistent with the increasein revenue. The increase has been offsetted by a decrease in agency fees paid in North Asiaand South East Asia region due to a decrease in revenue for these 2 regions.

Novo Group’s operating profit increased by US$6.6 million or 244.0% from US$2.7 million in5MFY07 to US$9.3 million in 5MFY08. In terms of product segments, the operating profit inthe Semi-Finished Products segment has not changed significantly. The operating profit forFinished Products increased by US$6.7 million or 407.2% from US$1.6 million in 5MFY07 toUS$8.3 million in 5MFY08. In terms of geographical regions, Novo Group’s operating profithas increased across all the 4 regions with the Other Regions showing the greatest


118

improvement, increasing by over 900% or US$4.6 million from US$0.5 million in 5MFY07 toUS$5.1 million in 5MFY08. The increase in operating profit in the Other Regions is due to (i)the increase in revenue and (ii) the increase in sale of Finished Products to this region whichcommands a higher operating profit margin.

Based on the foregoing discussions, save for India and Middle East, operating profit marginfor each product segments and geographical regions has increased for 5MFY08. Novo’soperating profit margin for Semi-Finished Products increased significantly by 11.0 percentagepoints from 1.81% in 5MFY07 to 12.84% in 5MFY08 as Novo Group managed to secure oneparticular batch of steel billets at a pre-imposition of export duties purchase price from thesteel mills and was able to subsequently sell to customers at the much higher prevailingmarket price. As mentioned earlier, the amount of tonnages traded for Semi-FinishedProducts in 5MFY08 is only 15,000 mt, a significant decrease of 126,000 mt as compared to5MFY07. Novo Group’s operating profit margin in India and Middle East decreased by 2.1percentage point from 3.0% in 5MFY07 to 0.9% in 5MFY08 due mainly to a change in theproduct mix of products sold to this region.


Novo Group’s other operating income increased by US$231,000 or 63.5% from US$365,000in 5MFY07 to US$596,000 in 5MFY08. This was partly due to management fees ofUS$128,000 charged to Novostal HK for Novostal HK’s share of salaries and staff relatedcosts as a result of transfer of employees to Novo Group. This is in contrast to FP06 and FY07whereby Novo Group was charged management fees by Novostal HK.

Bank interest income has also increased significantly by US$78,000 or 62.9% fromUS$124,000 in 5MFY07 to US$202,000 in 5MFY08, which was due mainly to higher interestrate as well as higher amount of deposits being placed with the banks as a result of higherprofits earned and higher pledged deposits. Novo Group’s fixed deposits increased fromUS$3.7 million in 5MFY07 to US$8.5 million in 5MFY08. Lastly, Novo Group did not recordany compensation received and service fees received in 5MFY07, but recorded US$40,000and US$48,000 respectively in 5MFY08. As mentioned earlier, the compensation is receivedfrom a supplier for non-fulfillment of supply contract.


Novo Group’s administrative expenses increased by US$258,000 or 210.6% fromUS$123,000 in 5MFY07 to US$381,000 in 5MFY08. The increase in employee salaries wasmainly due to the increase in number of employees from 13 in 5MFY07 to 30 in 5MFY08 andan overall increase in salaries for the directors and employees. Overseas travelling andentertainment expenses incurred also increased as a result of business growth in theEuropean and Middle East markets.

Finance costs

Novo Group’s finance costs increased by US$428,000 or 65.4% from US$655,000 in 5MFY07to US$1.1 million in 5MFY08. This was due to an increase in bank charges of US$142,000 or68.9% from US$206,000 to US$348,000. Novo Group’s interest on bank loans also increasedby US$319,000 or 76.7% from US$416,000 in 5MFY07 to US$735,000 in 5MFY08. Theincrease in bank charges and interest in bank loans is due to the increase in usage of bankingfacilities and bank loans as a result of growth in business.


119

Novo Group’s available banking facilities have increased by US$200 million or 281.7% fromUS$71 million as at 30 September 2006 to US$271 million as at 30 September 2007.

Share of results of associated companies

Novo Group’s share of losses of associated companies decreased by US$105,000 or 72.5%from a loss of US$145,000 in 5MFY07 to a loss of US$40,000 in 5MFY08. This was mainlydue to lower operating expenses incurred by the associates in 5MFY08 as the employeeshave been transferred to Novo Group.

Income tax

Novo Group’s income tax expense increased by US$881,000 or 258.5% from US$341,000 in5MFY07 to US$1.2 million in 5MFY08. This was due mainly to an increase in profit before taxof US$5.1 million or 285.8% from US$1.8 million in 5MFY07 to US$6.9 million in 5MFY08.

The effective tax rate for 5MFY07 and 5MFY08 was 19.0% and 17.7% respectively. Effectivetax rate for 5MFY07 was higher than the prevailing Hong Kong rate, due solely to therecognition of share of associated companies’ after tax losses at groups’ pre-tax levelpursuant to presentation requirement of Financial Reporting Standard 1. Had the share ofassociated companies’ losses been excluded, the effective tax rate for both of 5MFY07 and5MFY08 would have been 17.6%.

Profit after income tax

Novo Group’s profit after tax increased by US$4.2 million or 292.2% from US$1.5 million in5MFY07 to US$5.7 million in 5MFY08. This was due mainly to the reasons affecting operatingprofit and operating profit margin mentioned above.

B.4.3 Liquidity And Capital Resources

Novo Group’s operations and expansion are mainly financed through a combination ofinternal and external sources of funds. Novo Group’s internal sources of funds comprisemainly cash generated from our operating activities. Novo Group’s external sources of fundscomprise mainly borrowings from financial institutions and capital contributed and loans/advances extended by the Vendors. The principal uses of Novo Group’s cash have mainlybeen for meeting Novo Group’s capital expenditures, working capital requirements, operatingexpenses, repayment of bank borrowings, pledging of fixed deposits and financial expenses.

As steel trading is a capital intensive business, Novo Group is required to maintain sufficientcash reserves to enable Novo Group to continuously utilise its banking facilities to generaterevenue. As at 30 September 2007, Novo Group has cash and cash equivalents comprisingcash and bank balances of US$6.7 million.

As at the Latest Practicable Date, Novo Group has secured total banking facilities ofapproximately US$301 million, of which US$149.5 million has been utilised and US$151.5million is still available for utilisation. Novo Group is currently in discussion with several bankswith an aim to secure additional banking facilities of approximately US$200 million. Furtherdetails on Novo Group’s banking facilities as at 30 April 2007 and as at the Latest PracticableDate can be found in the section entitled “Capitalisation and Indebtedness” of this Circular.


120

The Proposed Directors of the Novo Group are of the opinion that, after taking into accountits cash and bank balances position, available bank facilities, bank loans and cash fromoperating activities, Novo Group has adequate working capital as at the date of this Circularfor its present requirements.

Novo Group has set out below a summary of its net cash flows for the Relevant Periods andInterim Review Periods under review:

(US$) FP2006 FY2007 5MFY07 5MFY08


Adjustment for non-cash items and netinterest (received)/paid (371,476) 587,878 478,127 589,052

Changes in working capital (418,247) 3,677,806 456,639 (12,179,795)

Interest income received 74,715 367,023 123,696 202,267

Net cash generated from/(used in)operating activities 778,879 13,452,710 2,850,069 (4,476,268)

Net cash generated from/(used in)investing activities (3,016,095) (12,324,949) (2,422,093) 10,338,548

Net cash generated from/(used in)financing activities 2,995,380 (769,594) (1,107,986) (245,111)

Net increase/(decrease) in cash and cashequivalents 758,164 358,167 (680,010) 5,617,169

Cash and cash equivalents at beginningof financial period/year — 758,164 758,164 1,116,331

Cash and cash equivalents at end offinancial period/year 758,164 1,116,331 78,154 6,733,500

Net cash generated from operating activities

FP2006

Novo Group recorded a net cash inflow from operating activities of approximatelyUS$779,000 in FP2006. This comprised cash generated from operating activities beforechanges in working capital of US$1.1 million, adjusted for net working capital outflows ofapproximately US$418,000 and cash inflows of US$75,000 arising from interest income.

As Novo HK was incorporated on 31 January 2005, there is no basis for comparison for themovement in working capital from the previous financial year.

FY2007

Novo Group recorded a net cash inflow from operating activities of US$13.5 million inFY2007. This comprised cash generated from operating activities before changes in workingcapital of US$9.4 million, adjusted for net working capital inflows of US$3.7 million and cashinflows of US$367,000 arising from interest income. The net working capital inflows were theresult of:


121

(i) an increase in bills receivables of US$9.1 million mainly due to an increase in sales inFY2007; and

(ii) a decrease in trade payables of US$5.7 million due to settlement of payment forpurchase of steel products.

Due to the financing terms offered by the banks to Novo Group for its business (typically thefinancing period is less than 30 days), its net working capital cash flow as at the financialyear-end date does not necessarily reflect its efficiency or lack of efficiency in running itsbusiness. The balances of the receivables and payables at the end of each financial yearwould only cover the steel trades that happen to be outstanding at the close of each financialyear.

5MFY07

Novo Group recorded a net cash inflow from operating activities of approximately US$2.9million in 5MFY07. This comprised cash generated from operating activities before changesin working capital of US$2.3 million, adjusted for net working capital inflows of approximatelyUS$457,000 and cash inflows of US$124,000 arising from interest income. The net workingcapital inflows were the result of:

(i) a decrease in bills receivables of US$19.8 million mainly due to collection of billsreceivables for the sales made in 5MFY07; and

(ii) an increase in bills payables of US$19.4 million due to purchases of steel products madeas at the end of 5MFY07.

As mentioned above, due to the financing terms offered by the banks to Novo Group for itsbusiness (typically the financing period is less than 30 days), its net working capital cash flowas at the financial period-end date does not necessarily reflect its efficiency or lack ofefficiency in running its business. The balances of the receivables and payables at the end ofeach financial period would only cover the steel trades that happen to be outstanding at theclose of each financial period.

5MFY08

Novo Group recorded a net cash outflow from operating activities of US$4.5 million in5MFY08. This comprised cash generated from operating activities before changes in workingcapital of US$7.5 million, adjusted for net working capital outflows of US$12.2 million andcash inflows of US$202,000 arising from interest income. The net working capital outflowswere the result of:

(i) an increase in goods in transit of US$818,000 due to delay in finalisation of sales as aresult of discrepancies in documents submitted by a customer to the banks;

(ii) an increase in bills receivables of US$25.6 million mainly due to an increase in sales in5MFY08 whereby the receivables have not been collected as at 30 September 2007;and

(iii) a decrease in bills payables of US$14.2 million due to settlement of payment forpurchase of steel products.

As explained earlier, due to the financing terms offered by the banks to Novo Group for itsbusiness (typically the financing period is less than 30 days), its net working capital cash flowas at the financial year-end date does not necessarily reflect its efficiency or lack of efficiency


122

in running its business. The balances of the bills receivables and payables at the end of eachfinancial period would only cover the steel trades that happen to be outstanding at the closeof each financial period. In the case of bills receivables, within 5 days subsequent to 30September 2007, a total of approximately US$9.8 million has been collected. Had this amountbeen collected as at 30 September 2007, the net cash generated from operating activitieswould have been a net cash inflow of US$5.3 million. These outstanding receivables aremainly letters of credit issued by the customers’ banks which will be settled upon thecompletion of shipment and submission of documents to the banks. Todate, there have beenno instances of non-collectibility of the bills receivables.

Net cash flows used in investing activities

Novo Group’s net cash flow used in investing activities mainly pertains to fixed depositspledged to banks. As Novo Group is primarily involved in steel trading, it is required to utilisea range of banking facilities offered by the banks to conduct its business. Some of thesefacilities require Novo Group to pledge fixed deposits to secure them.

FP2006

In FP2006, net cash used in investing activities was US$3.0 million due mainly to fixeddeposits of US$2.6 million pledged with the banks for banking facilities, and investment inassociated companies of US$396,000.

FY2007

In FY2007, net cash used in investing activities was US$12.3 million due mainly to fixeddeposits of US$10.8 million pledged with the banks for additional banking facilities, andpurchase of property, plant and equipment of US$1.5 million.

5MFY07

In 5MFY07, net cash used in investing activities was US$2.4 million due mainly to purchaseof property amounting to US$1.4 million and increase in fixed deposits of US$1.0 millionpledged with the banks for banking facilities.

5MFY08

In 5MFY08, net cash generated from investing activities was US$10.3 million due mainly tolesser fixed deposits required to be pledged with the banks for the banking facilities used. Thefixed deposits pledged with the banks are based on a certain margin of the total amount ofbanking facilities utilised as at the point in time.

Net cash flows from financing activities

Net cash flow from financing activities was derived mainly from bank borrowings. Bankborrowings pertain to short-term freight loans and mortgage loan. These short-term freightloans are repayable not more than 30 days from commencement date.

FP2006

Net cash generated from financing activities amounted to US$3.0 million in FP2006 duemainly to advances from directors of US$2.0 million and proceeds from new shares issued ofUS$632,000.


123

FY2007

Net cash used in financing activities amounted to US$770,000 in FY2007. This was due torepayment of advances from directors of US$1.8 million, repayment of bank borrowings ofUS$16.5 million and interest expense paid of US$899,000. These cash outflows were partiallyoffset by proceeds from bank borrowings of US$17.7 million and proceeds from new sharesissued of US$646,000.

5MFY07

Net cash used in financing activities amounted to US$1.1 million in 5MFY07. This was due torepayment of advances from directors of US$1.5 million, repayment of bank borrowings ofUS$5.0 million and interest expense paid of US$449,000. These cash outflows were partiallyoffset by proceeds from bank borrowings of US$5.2 million and proceeds from new sharesissued of US$645,000.

5MFY08

Net cash used in financing activities amounted to US$245,000 in 5MFY08. This was due torepayment of advances from directors of US$807,000, repayment of bank borrowings ofUS$15.2 million and interest expense paid of US$736,000. These cash outflows were partiallyoffset by proceeds from bank borrowings of US$16.4 million and proceeds from new sharesissued of US$54,000.

B.4.4 Material Capital Expenditures And Divestments

Capital Expenditure

The tables below set out our major capital expenditure and capital divestment respectively forFP2006, FY2007, 5MFY08 and up to the Latest Practicable Date.

Capital expenditure (US$’000) FP2006 FY2007 5MFY08

1 May 2007to Latest

Practicable Date

Leasehold land and building — 1,370 — —

Furniture and equipment — 16 2 3

Computer equipment — 6 10 13

Motor vehicle — 47 — —

Renovation — 38 1 1

Total — 1,477 13 17

Capital divestment (US$’000) FP2006 FY2007 5MFY08

1 May 2007to Latest

Practicable Date

Machineries — — — —

Office equipment — — — —

Motor vehicles — — — —

Total — — — —


124

Novo Group’s capital expenditure in FY2007 mainly relate to purchase of leasehold land andbuilding in Hong Kong, which is mainly financed by bank borrowings. In 5MFY08, the capitalexpenditure mainly relates to purchase of computer equipment.

Capital commitment

The capital commitment of Novo Group is mainly financed by internal cash resources. As atthe Latest Practicable Date, Novo Group does not have any capital commitment.

Operating lease commitments

As at the Latest Practicable Date, Novo Group has the following operating leasecommitments:

(US$)Latest

Practicable Date

No later than one financial year 95,640

Later than one financial year but no later than five financial years 168,870

264,510

Bills discounted with recourse

As at the Latest Practicable Date, Novo Group has total bills discounted with recourse ofUS$20,004,657.

B.4.5 Capitalisation And Indebtedness

The following table shows the cash and bank balances, indebtedness and capitalization ofNovo Group, based on its management accounts as at 30 November 2007 and as adjustedfor the application of the net proceeds from the issue of the Compliance Shares, afterdeducting estimated expenses related to the Proposed Compliance Placement.

The table should be read in conjunction with the “Accountants’ Report on Unaudited ProForma Combined Financial Information For The Financial Period From 31 January 2005 to 30April 2006 and Financial Year ended 30 April 2007 as set out in Appendix C of this Circularand the related notes included in this Circular and the section entitled “Review of PastPerformance” of this Circular.

(US$)

As at30 November

2007

As adjusted for the netproceeds from the

issuance of theCompliance Shares

Cash and bank balances


Pledge deposits 5,793,249 5,793,249

7,724,613 33,907,726


125

(US$)

As at30 November

2007

As adjusted for the netproceeds from the

issuance of theCompliance Shares

Short term debt:

Bank overdraft, unsecured — —

Bank borrowings, secured 2,831,891 2,831,891

Convertible loan — —

Advances from trade receivables factored — —

Long term debt:

Bank borrowings, secured 359,788 359,788

Total indebtedness 3,191,679 3,191,679

Total shareholders’ equity 18,110,703 44,293,816

Total capitalization and indebtedness 21,302,382 47,485,495

As at 30 November 2007, Novo Group had short-term bank borrowings amounting to US$2.8million which comprises various loans with interest rates ranging from 3.8% to 7.4% perannum and secured by (i) legal pledge on Novo Group’s leasehold land and building, (ii) legalpledge on Novo Group’s fixed deposits, and (iii) personal guarantees from the Vendors(Please refer to section entitled “Interested Person Transactions” of the Letter toShareholders from the Novo Group of this Circular for more details). The short-term bankborrowings comprise freight loans and current portion of bank loan. Freight loans are payablewithin 30 days from commencement date. Bank loan is repayable by monthly instalments andmatures on 18 July 2011.

To the best of the Proposed Directors’ knowledge, Novo Group is not in breach of any of theterms and conditions or covenants associated with any credit arrangements or bank loanwhich could materially affect Novo Group’s financial position and results or businessoperations, or the investments of Novo Group’s shareholders.

Save as disclosed above, as at the Latest Practicable Date, Novo Group has no otherborrowings or indebtedness in the nature of borrowings.

Save as disclosed above and changes in Novo Group’s retained earnings arising from its dayto day operations in the ordinary course of our business, there were no material changes toits shareholders’ equity and indebtedness.

Contingent liabilities

As at the Latest Practicable Date, Novo Group does not have any contingent liabilities.


126

B.4.6 Foreign Exchange Management

Novo Group’s financial statements are prepared in US$, which is its functional currency. Assteel trading are usually negotiated and transacted in US$, a significant majority of NovoGroup’s products are traded in US$ although they are purchased and sold over many differentcountries and geographical regions. Accordingly, a majority of Novo Group’s business is donein US$ denomination. The percentage of Novo Group’s sales and purchases denominated inUS$ and other currency for the periods under review are as follows:

Sales (%) FP2006 FY2007

US$ 100.00 94.24

Other currency — 5.76

100.00 100.00

Purchases (%) FP2006 FY2007

US$ 99.34 99.68

Other currency 0.66 0.32

100.00 100.00

Currently, Novo Group does not have a formal hedging policy with respect to its foreignexchange exposure as Novo Group normally transacts its business in US$ and hence thereis no significant exposure to foreign exchange risk. Novo Group does not use forwardcontracts to hedge their exposure to foreign currency risk. Novo Group will continue to monitorits foreign exchange exposure in the future and will consider hedging any material foreignexchange exposure should the need arise. Should Novo Group enter into any hedgingtransaction in the future, such transaction shall be subject to review and approval by the boardof directors. In addition, should Novo Group decide to establish any formal hedging policy inthe future, such policy shall be subject to review and approval by the board of directors priorto its implementation. Novo Group’s Audit Committee will review periodically the hedgingpolicies, (if any), all types of instruments used for hedging as well as the foreign exchangepolicies and practices of Novo Group.

B.4.7 Dividends

Novo HK was incorporated on 31 January 2005 and except for an interim dividend in respectof FY2008 amounting to US$4 million paid to its shareholders on 31 December 2007, it hasnot declared or distributed any cash dividend on its shares since its incorporation.

Currently, Novo Group does not have a fixed dividend policy. Any declaration and payment ofdividends in the future will be determined at the sole discretion of the board of the EnlargedGroup subject to shareholders’ approval, and will depend upon the Enlarged Group’soperating results, financial conditions, other cash requirements including capitalexpenditures, the terms of the borrowing arrangements, (if any), and other factors deemedrelevant by the directors of the Enlarged Group. Therefore, there can be no assurance thatdividends will be paid in the future or of the amount or timing of any dividends that will be paidin the future.

Information relating to taxes payable on dividends are set out in section entitled “Taxation” ofthis Circular.


127

B.5 DIRECTORS, KEY EXECUTIVE OFFICERS AND EMPLOYEES OF THE ENLARGEDGROUP

B.5.1 Directors And Key Executive Officers Of The Enlarged Group

Directors

The particulars of the Proposed Directors following the completion of the ProposedAcquisition are set out below.

Name Age Address Current Occupation

Yu Wing Keung, Dicky 44 52A Tower 6, Phase 2,Bel-Air Residence, No. 38 Bel-AirAvenue, Pokfulam, Hong Kong

Chairman, NovoCommodities Limited

Chow Kin Wa 41 Flat B, 51/F, Block 6 CoastalSkyline, Tung ChungNew Territories, Hong Kong

Vice Chairman, NovoCommodities Limited

Chow Kin San 43 Room 2821, IndiHome138, Yeung Uk RoadTsuen Wan, Hong Kong

Chairman, Focus CapitalInvestment Inc and ViceChairman, StrategicAlliance Limited

Chua Keng Hiang 52 Apt Blk 942 Tampines Ave 5#10-237, Singapore 520942

Partner, KK Chua & Co.

Tan Siok Chin 37 41, Ewe Boon Road, #04-43,Singapore 259335

Advocate and Solicitor,ACIES Law Corporation

Information on the business and working experience, education and professionalqualifications, if any, and areas of responsibilities of the Proposed Directors are set out below:

Yu Wing Keung, Dicky is proposed to be appointed as Executive Chairman of the EnlargedGroup following Completion. He is one of the founders of Novo. He is responsible for theformulation of our Group’s strategic directions and expansion plans, and managing ourGroup’s overall business development. As our founder, he played a pivotal role in the growthand development of our Group. He has been instrumental in the setting up and expansion ofour steel trading business since our establishment in 2005. He has over 20 years’ experiencein multinational steel manufacturing, investment and trading business, and has establishedextensive global business networks. From 1997 to 2005, he was executive director of BurwillHoldings Limited, a consolidated enterprise engaged in the business of international steeltrading, warehousing, processing, distribution and investment. He joined Linkful InternationalHoldings Ltd as executive director in 1996 after working for British Steel (Thailand) as generalmanager. He holds a Master of Business Administration from the University of Durham and isa member of Chartered Institute of Marketing, United Kingdom.

Chow Kin Wa is proposed to be appointed as Chief Executive Officer of the Enlarged Groupfollowing Completion. He is one of the founders of Novo. He is responsible for the businessdevelopment and trading activities of our Group. He also assists our Executive Chairman inoverseeing the overall management, operations and the setting of corporate directions andstrategies of our Group. He has 15 years’ experience in multinational steel trading andmanufacturing business. In 1992, he was a trading manager with a steel trading company,Linkful International Holdings Ltd. From 1998 to 2004, he was a deputy general manager ofBurwill Holdings Limited to assist in its steel trading business. He holds a Master of Sciencein Information Systems from Hawaii Pacific University.


128

Chow Kin San is proposed to be appointed as a Non-Executive Director of the EnlargedGroup following Completion. He is currently the chairman of Focus Capital Investment Inc.,and vice chairman of Strategic Alliance Limited. He co-founded Focus Capital Investment Incin 2002 which provides management and investment consultancy services to othercompanies. He has over 20 years’ experiences in operations, finance, management andinvestment in trading and manufacturing environmental in Asia and USA. Since 1991, he hadserved as senior executive for several companies and has been involved in corporate strategyand development functions. He holds Master of Science in Electric Commerce and InternetComputing and Master of Business Administration from The University of Hong Kong andUniversity of South Australia respectively. He is currently a Fellow member of NationalInstitute of Accountant, Australia, and member of The Institute of Electrical and ElectronicsEngineers, Inc..

Chua Keng Hiang is proposed to be appointed as an Independent Director of the EnlargedGroup following Completion. He is currently a partner in an audit firm, KK Chua & Co. Priorto joining KK Chua & Co in 1999, Mr. Chua had twenty years of experience in publicaccounting, corporate finance; and industrial management. From 1979 to 1987, he served asan audit manager in Coopers & Lybrand. From 1987 to 1994, he served as a vice presidentin the corporate finance division of United Overseas Bank Limited. From 1994 to 1998, he wasthe president of IPC Capital Pte Ltd, an investment holding company. From 1998 to 1999, hewas a finance director of Mintwell Group, a company which manufactures optic heads. MrChua holds an honours degree in Accountancy from the then University of Singapore. He isa member of the Institute of Certified Public Accountants of Singapore as well as a fellowmember of the Association of Chartered Certified Accountants, United Kingdom.

Tan Siok Chin is proposed to be appointed as an Independent Director of the Enlarged Groupfollowing Completion. She is an advocate and solicitor practicing in Singapore and has 14years of experience in legal practice. Currently she is a director of ACIES Law Corporation,a firm of advocates and solicitors, heading its corporate practice group. Prior to joining ACIESLaw Corporation in 2004, she practiced as a partner in the law firm of Messrs Rajah & Tann,advising on laws relating to capital markets and corporate finance, mergers and acquisitionsand private equity markets, which she joined in 2001. From 1999 to 2001, she served as adirector in GES International Limited and was their head of legal and director in charge ofcorporate development. From 1997 to 1999, she was a partner with Yeo Wee Kiong &Partners, advising on laws relating to capital markets and corporate finance, mergers andacquisitions and private equity markets. Her main areas of practice are corporate finance,mergers and acquisitions, capital markets and commercial matters. She graduated from theNational University of Singapore with a Bachelor of Laws (Honours) degree.

The proposed Non-Executive Director, Chow Kin San, is the elder brother of Chow Kin Wa,the proposed Chief Executive Officer. Save as disclosed, none of the Directors or theProposed Directors is related to one another, to the Proposed Executive Officers or to anySubstantial Shareholder of the Vendors.


129

Save as disclosed below and excluding the directorship held in the Novo Group, none of theProposed Directors currently holds or has held any directorships in the past five yearspreceding the date of this Circular:

Name Present Directorships Past Directorships

Yu Wing Keung, Dicky Group companies Group companies

Nova MBLNovo ILNovo CPLNovosteel DMCCNova SPLNovo HKGlobal Wealth TLNovo BVIRicoNovostal PLNovostal HKXinghua BVIXinghua HKIron And Steel

Nil

Other companies Other companies

Cafes Do Brasil LimitedJackful Investment LimitedWinble LimitedWinhill Investments Limited

Burwill Holdings LtdWorldmetal Holdings LimitedETP (China) LimitedETP (International) Limited

Chow Kin Wa Group companies Group companies

Nova MBLNovo ILNovo CPLNovosteel DMCCNova SPLNovo HKGlobal Wealth TLNovo BVIRicoNovostal PLNovostal HK

Nil

Xinghua BVIXinghua HKIron And Steel


Cafes Do Brasil Limited Worldmetal Holdings Limited


130


Chow Kin San Group companies Group companies

Nil Nil


Focus Capital Investment IncStrategic Alliance LimitedSky Bridge International

LimitedGlobal Power Logistics Pte

Ltd

Nil

Chua Keng Hiang Group companies Group companies

Nil Nil


CF Consulting Pte LtdJadason Enterprises LtdOcean Sky International LtdMemtech International LtdHwa Chong International

School

Tat Seng Packaging GroupLtd

PSC Corporation LtdFirst Engineering Ltd

Tan Siok Chin Group companies Group companies

Nil Nil


ACIES Law CorporationDesign Studio Furniture

Manufacturer LtdCosmosteel Holdings LtdKauai Investments Pte. LtdCentraland Limited

Boulton Capital Asia PteLimited


131

EXECUTIVE OFFICERS

The particulars of the Proposed Executive Officers are set out below:

Name Age Address Current Occupation

Kwan Yee Mui, Tonette 42 3A Block 6, La VistaDiscovery BayHong Kong

Treasurer

Ma Yiu Ming 46 Flat A, 15/F, Block 22Mei Wah CourtSouth Horizons, HongKong

General Manager,Operations

Lam Ying Ngor 49 Flat H, 16/F Ling PakMansionPark Vale, 8 Greig RoadHong Kong

Finance andAdministration Manager

Chu Wai Lim 39 Room 601, Block FSui Wo Court, Fotan,ShatinNew Territories, HongKong

Trade Finance Manager

Chan Ying Lap 55 Blk 119, Simei Street 1#10-502Singapore 520119

Operations Manager

Information on the business and working experience, education and professionalqualifications, if any, and areas of responsibilities of the Proposed Executive Officers are setout below:

Kwan Yee Mui, Tonette, our Treasurer, joined us in 2006 and is responsible for the overallfinance and risk management of our Group. She has over 20 years of experience in corporatebanking. Prior to joining us, she was with Standard Chartered Bank, Hong Kong, where shewas a regional head for its commodity finance division. She was a head for structured tradefinance with ANZ, Hong Kong Branch and regional head for commodity finance with FortisBank, Hong Kong from 1994 to 2001. Since 1987, she had been holding senior positions forseveral banks and has been involved in their retail and commercial banking business units.She holds a Bachelor of Arts from The University of Hong Kong.

Ma Yiu Ming, our General Manager, Operations, is responsible for our Group’s businesscoordination and integrating various functional developments such as operations, shipping,insurance and legal. He has over 25 years of experience in international traffic and logisticsbusiness, particular in shipping, insurance, cargo inspection, arbitration and legal consulting.Prior to joining us, he was a senior manager with Burwill Resources Limited, a wholly-ownedsubsidiary of Burwill Holdings Limited from 1999 to 2006. Since 1988, he has been holdingmanagerial positions with various shipping and chartering companies and has been involvedin their ship’s operations and chartering functions. He is currently a Fellow member of Instituteof Chartered Shipbrokers. He holds a Master of Business and Administration from The Open


132

University of Hong Kong and a Bachelor of Business and Administration from The OpenLearning Institute of Hong Kong.

Lam Ying Ngor, our Finance and Administration Manager, oversees the operations of ourfinance department and is responsible for our financial accounting, office administration andhuman resources functions. She has 25 years’ accounting experience in international tradingand manufacturing business. Prior to joining our Group in 2006, she was an assistantaccounting manager at Wah Yuet Industrial Co Ltd, a member of Kaba Holding AG, a publiclisted company in Switzerland, where she was responsible for reviewing and analysingfinancial reports and supervising a team of more than 10 staffs to handle full set of accounts.Since 1989, she held the position as accountant with various companies and supervised heraccounting team in handling full set of accounts and preparing financial reports. She iscurrently a fellow member of the Association of Chartered Certified Accountants and amember of Hong Kong Institute of Certified Public Accountants. She holds a Degree ofBachelor of Science in Applied Accounting from Oxford Brookes University.

Chu Wai Lim, our Trade Finance Manager, is responsible for the management of creditfacilities, overall bills and documentations and letters of credits issues with banks. Prior tojoining us in 2005, he was responsible for handling and checking all bills and importdocuments at The Hongkong and Shanghai Banking Corporation Ltd and Banca Monte DeiPaschi Di Siena S.p.a. Between 2003 to 2004, he was an officer at Burwill Resources Limited,a wholly-owned subsidiary of Burwill Holdings Limited, where he was responsible for handlingall its bills transactions. He worked for several banks and was involved in handling all billstransaction from 1996 to 2003. He holds a Higher Certificate in Banking from Hong KongTechnical Colleges and a Certificate of Banking from The Chartered Institute of Bankers,Hong Kong Centre. He also holds a Certificate in PC & Network Management from TheUniversity of Hong Kong.

Chan Ying Lap, our Operations Manager, is responsible for handling all office operation,trade finances, banking relationship and bills documentations in Singapore. He has over 25years’ relevant experience in handling bills documentations. Prior to joining us, he wasresponsible for handling and checking all bills and documents at Skandinaviska EnskildaBankem AB and Calyon Bank from 2004 to 2006. Since 1992, he worked for several banksand trading companies and was involved in handling all bills transaction. He received formaleducation up to secondary school.

Save as disclosed below and excluding the directorship held in the Novo Group, none of theProposed Executive Officers currently holds or has held any directorships in the past fiveyears preceding the date of this Circular:


Kwan Yee Mui, Tonette Group companies Group companies

Novo Investment Ltd Dynamite Investments Ltd


Nil Nil


133


Ma Yiu Ming Group companies Group companies

Nil Nil


Nil Nil

Lam Ying Ngor Group companies Group companies

Nil Nil


Nil Nil

Chu Wai Lim Group companies Group companies

Nil Nil


Nil Nil

Chan Ying Lap Group companies Group companies

Nil Nil


Nil Nil

Save as disclosed, none of the Directors or the Proposed Directors is related to one another,to the Proposed Executive Officers or to any Substantial Shareholder of the Vendors. To thebest of our knowledge and belief, there are no arrangements or undertakings with anycustomers, suppliers or others, pursuant to which any of the Proposed Directors and theProposed Executive Officers was appointed.


134


B.5.2 Proposed Management Reporting Structure of the Enlarged Group

The following chart shows the proposed management reporting structure of the Enlarged Group:

TreasuryTreasurer

Kwan Yee Mui, Tonette

Finance and Administration

Finance and Administration Manager

Lam Ying Ngor

Trade FinanceTrade Finance Manager

Chu Wai Lim

CEOChow Kin Wa

Executive ChairmanYu Wing Keung, Dicky

Board of Directors

SingaporeOperations Manager

Chan Ying Lap

TradingHead

Chow Kin Wa

OperationGeneral Manager,

OperationsMa Yiu Ming

135

B.5.3 Remuneration

The compensation paid or payable to each of the Proposed Directors and the PropsoedExecutive Officers for services rendered in their respective capacities for FP2006, FY2007and FY2008 (excluding performance bonus) in bands of S$250,000 per annum, are set outas follows:

FP2006 FY2007 FY2008

Novo directors

Yu Wing Keung, Dicky Band I Band I Band II

Chow Kin Wa Band I Band I Band II

Chow Kin San NA NA Band I

Chua Keng Hiang NA NA Band I

Tan Siok Chin NA NA Band I

Novo key executive officers

Kwan Yee Mui, Tonette NA Band I Band I

Ma Yiu Ming NA Band I Band I

Lam Ying Ngor NA Band I Band I

Chu Wai Lim Band I Band I Band I

Chan Ying Lap Band I Band I Band I

Notes:

Band I: Compensation of between S$1 to S$250,000 per annum

Band II: Compensation of between S$250,001 to S$500,000 per annum

B.5.4 Staff

All the full-time employees of the Novo Group for the past two financial years ended 30 April2007 are based in Hong Kong, Singapore and PRC. The functional distribution of full-timeemployees of the Novo Group as at the end of the period under review was as follows:


Management(1) 4 7

Finance, accounts and administrative 4 6

Trading 2 4

Operation 2 3

Trade Finance 1 3

Total 13 23

Note:

(1) Directors and executive officers of the Novo Group are classified under “Management”.


136

The geographical distribution of our full-time employees as at 30 April 2006 and 30 April 2007are as follows:

Geographical As at 30 April 2006 As at 30 April 2007

Hong Kong 11 18

Singapore 2 3

PRC 0 2

Total 13 23

As at the Latest Practicable Date, the Novo Group had 32 full-time employees. From time totime and depending on requirements, the Novo Group may employ workers on a temporaryor contract basis. As at the Latest Practicable Date, the Novo Group had no temporaryworkers or contract workers.

The employees of Novo Group are not unionised. The relationship between the managementof the Novo Group and employees is good and there have been no industrial disputes with theemployees since the Novo Group commenced operations.

B.6 INTERESTED PERSON TRANSACTIONS

In general, transactions between the Novo Group and any of its interested persons (namely,the Proposed Directors, the Proposed Executive Officers, Controlling Shareholders and/ortheir associates thereof) are known as interested person transactions. The followingdiscussion sets out the material interested person transactions for the last two financial yearsended 30 April 2006 and 2007 and the period from 1 May 2007 up to the Latest PracticableDate based on the Novo Group’s transactions with interested persons as construedaccordingly.

Save as disclosed in this Circular, none of the Proposed Directors, the Proposed ExecutiveOfficers, Controlling Shareholders and/or their associates thereof was or is interested,whether directly or indirectly, in any material transaction undertaken by the Novo Group withinthe last two financial years ended 30 April 2006 and 2007 and for the period from 1 May 2007up to the Latest Practicable Date.

Present and On-Going Interested Person Transactions

Loans and advances to and from Directors

Novo Group had in the past obtained advances from our Executive Chairman, Yu WingKeung, Dicky and our Chief Executive Officer, Chow Kin Wa to fund the working capitalrequirements of the Novo Group. Yu Wing Keung, Dicky and Chow Kin Wa had also in thepast obtained advances from the Novo Group. These advances included the portion of theConvertible Loan paid by the Novo Group on behalf of Yu Wing Keung, Dicky and Chow KinWa. These loans and advances were made on a preferential basis as they were interest-free,unsecured and had no fixed terms of repayment.


137

The amount of loans and advances owing to Yu Wing Keung, Dicky and Chow Kin Wa by theNovo Group as at the end of each of the last two financial years and the Latest PracticableDate were as follows:

Amounts owing by NovoGroup to interested persons

As at 30 April 2006(US$’000)

As at 30 April 2007(US$’000)

As at the LatestPracticable Date

(US$’000)

Advances from Yu WingKeung, Dicky 1,961 406 2,156

Advances from Chow Kin Wa 220 2 497

Total 2,181 408 2,653

The amount of advances owing by Yu Wing Keung, Dicky and Chow Kin Wa to the NovoGroup as at the end of each of the last two financial years and the Latest Practicable Datewere as follows:

Amounts owing to NovoGroup by interestedpersons

As at 30 April 2006(US$’000)

As at 30 April 2007(US$’000)


(US$’000)

Advances to Yu Wing Keung,Dicky 166 127 —

Advances to Chow Kin Wa — 31 —

Total 166 158 —

For the past two financial years and up to the Latest Practicable Date (the “Relevant Period”),the largest amount owing by the Novo Group to the following interested persons, based onmonth-end balances of such amounts owing to the respective interested persons, were:

Amount owing by Novo Group to interested persons: (US$’000)

Yu Wing Keung, Dicky 2,185

Chow Kin Wa 511

Total 2,696

During the Relevant Period, the largest amount owing by the following interested person tothe Novo Group, based on month-end balances of such amounts owing by the respectiveinterested persons, were:–

Amount owing to Novo Group by interested persons: (US$’000)


Chow Kin Wa 750

Total 1,512

After Completion, Yu Wing Keung, Dicky and Chow Kin Wa have no intention to enter into anysimilar transactions with the Enlarged Group.


138

Leases

Novo Group leases the following premises from Jackful Investment Limited, a companyowned by Yu Wing Keung, Dicky, our Executive Chairman and his spouse:

LocationGross floorarea (sq m) Tenure

AnnualRental Usage

Room 1108, 11/F, ChinaMerchants Tower, Shun TakCentre, 168-200 ConnaughtRoad Central, Hong Kong

99.41 2 years from 1 June2007 to 31 May2009

HK$474,000 Office

The rental rate is at a discount of approximately 20% from the prevailing market rental rate forsimilar premises in the vicinity. Other than the rental rate, the lease is entered into betweenthe parties on an arm’s length basis and on normal commercial terms. Upon Completion, anyrenewal of the lease for the above premises will be entered in accordance with suchguidelines as described in Chapter 9 of the Listing Manual.

Personal guarantees provided by Interested Persons

Yu Wing Keung, Dicky and Chow Kin Wa have provided joint and several personal guarantees(the “Guarantees”) for certain banking facitities granted by financial institutions to NovoGroup. There was no fee paid by Novo Group to Yu Wing Keung, Dicky and Chow Kin Wa forthe Guarantees and as such was not on an arm’s length basis. The amounts utilised from thebanking facilities secured by the Guarantees as at the dates set out below were as follows:

As at30 April 2006

As at30 April 2007


Amounts (US$) 60,420,648 129,843,076 149,463,083

The highest amount of facilities guaranteed by Yu Wing Keung, Dicky and Chow Kin Wa withinthe past two financial years and up to the date of the Latest Practicable Date isUS$149,463,083. Upon Completion, the above guarantors intend to obtain a release anddischarge of the Guarantees from the respective financial institutions by substituting the samewith other securities to be furnished by Novo Group that are acceptable to them, if required.Should any of the financial institutions be unwilling to release and discharge the Guarantees,the guarantors have undertaken to continue to provide the Guarantees.

Other Transaction

Provision of project management services by Focus Capital Investment Inc

Chow Kin San, who is the brother of Chow Kin Wa and the chairman of Focus CapitalInvestment Inc (“Focus”), is the proposed Non-Executive Director of the Enlarged Group.Focus provides project management services to the Novo Group in relation to the ProposedTransactions pursuant to a consultancy agreement. The aggregate amounts paid by NovoGroup to Focus in the last two financial years and from 1 May 2007 up to the LatestPracticable Date are set out below:

FP2006 FY20071 May 2007 to Latest

Practicable Date

Amounts (US$) Nil 33,000 33,333


139

The above transactions were conducted on an arm’s length basis and on normal commercialterms. The Proposed Directors are of the view that the provision of the aforesaid services willnot interfere with Chow Kin San’s independent judgment in his role as Non-Executive Directorof the Enlarged Group.

The engagement of Focus for the aforesaid project management services will end upon thecompletion of the Proposed Transactions. Novo Group may in future engage Focus or ChowKin San for other consultancy services if the need arises. All future transactions madebetween the Enlarged Group and Focus or Chow Kin San will be entered in accordance withsuch guidelines as described in the section “Review Procedures for Future Interested PersonTransactions” of this Circular and Chapter 9 of the Listing Manual.

Chapter 9 of the Listing Manual

Under Chapter 9 of the Listing Manual, where a listed company or any of its subsidiaries orassociated companies over which the listed company has control (other than a subsidiary orassociated company that is listed on a foreign stock exchange) proposes to enter into atransaction with the listed company’s interested persons, shareholders’ approval and/or animmediate announcement is required in respect of the transaction if the value of thetransaction is equal to or exceeds certain financial threshold. In particular, shareholders’approval is required where the value of such transaction is not below S$100,000 and is:

(i) equal to or more than 5% of the latest audited NTA of the listed company; or

(ii) equal to or more than 5% of the latest audited NTA, when aggregated with othertransactions entered into with the same interested person during the same financialyear.

Definitions under the Listing Manual

Under the Listing Manual:

(a) the term “interested person” is defined to mean a director, chief executive officer, orcontrolling shareholder of the listed company or an associate of any such director, chiefexecutive officer or controlling shareholder; and

(b) the term “associate” is defined to mean:

(i) in relation to any director, chief executive officer, substantial shareholder orcontrolling shareholder (being an individual):

• his immediate family;

• the trustee of any trust of which he and his immediate family is a beneficiaryor, in the case of a discretionary trust, is a discretionary object; and

• any company in which he and his immediate family (that is, the spouse, child,adopted child, step child, sibling or parent) together (directly or indirectly)have an interest of 30% or more;

(ii) in relation to a substantial shareholder or a controlling shareholder (being acompany) means any other company which is its subsidiary or holding company oris a subsidiary of such holding company or one in the equity of which it and/or suchother company or companies taken together (directly or indirectly) have an interestof 30% or more.


140

REVIEW PROCEDURES FOR FUTURE INTERESTED PERSON TRANSACTIONS

To ensure that future transactions with Interested Persons are undertaken on normalcommercial terms and are consistent with our Group’s usual business practices and policies,which are generally no more favourable than those extended to unrelated third parties, thefollowing procedures will be implemented by the Enlarged Group.

In relation to any purchase of products or procurement of services from Interested Persons,quotes from at least two unrelated third parties in respect of the same or substantially thesame type of transactions will be used as comparison wherever possible. The purchase priceor procurement price shall not be higher than the most competitive price of the twocomparative prices from the two unrelated third parties. The Audit Committee will review thecomparables, taking into account, the suitability, quality and cost of the product or service, andthe experience and expertise of the supplier.

In relation to any sale of products or provision of services to Interested Persons, the price andterms of two other completed transactions of the same or substantially the same type oftransactions to unrelated third parties are to be used as comparison wherever possible. TheInterested Persons shall not be charged at rates lower than that charged to the unrelated thirdparties.

All interested persons transactions above S$100,000 are to be approved by a Director whoshall not be an Interested Person in respect of the particular transaction. Any contracts to bemade with an Interested Person shall not be approved unless the pricing is determined inaccordance with our usual business practices and policies, consistent with the usual margingiven or price received by us for the same or substantially similar type of transactions betweenus and unrelated parties and the terms are no more favourable than those extended to orreceived from unrelated parties.

For the purposes above, where applicable, contracts for the same or substantially similar typeof transactions entered into between us and unrelated third parties will be used as a basis forcomparison to determine whether the price and terms offered to or received from theInterested Person are no more favourable than those extended to unrelated parties.

In addition, we shall monitor all interested person transactions entered into by us categorisingthe transactions as follows:

(i) a “category one” interested person transaction is one where the value thereof is inexcess of 5% of the NTA of our Group; and

(ii) a “category two” interested person transaction is one where the value thereof is belowor equal to 5% of the NTA of our Group.

“Category one” interested person transactions must be approved by the Audit Committee priorto entry. “Category two” interested person transactions need not be approved by the AuditCommittee prior to entry but shall be reviewed on a half-yearly basis by the Audit Committee.

When renting properties from or to an interested person, our Directors shall take appropriatesteps to ensure that such rent is commensurate with the prevailing market rates, includingadopting measures such as making relevant enquiries with landlords of similar properties andobtaining suitable reports or reviews published by property agents (as necessary), includingindependent valuation report by property valuer, where appropriate. The rent payable shall bebased on the most competitive market rental rate of similar property in terms of size and


141

location, based on the results of the relevant enquiries. Such transactions shall be subject toreview by the Audit Committee on a half-yearly basis.

We will prepare relevant information to assist the Audit Committee in its review.

Before any agreement or arrangement with an Interested Person that is not in the ordinarycourse of business of the Enlarged Group is transacted, prior approval must be obtained fromthe Audit Committee. In the event that a member of the Audit Committee is interested in anyinterested person transactions, he will abstain from reviewing that particular transaction. Anydecision to proceed with such an agreement or arrangement would be recorded for review bythe Audit Committee.

We will also comply with the provisions in Chapter 9 of the Listing Manual in respect of allfuture interested person transactions, and if required under the Listing Manual, the Act or theSFA, we will seek independent Shareholders’ approval for such transactions.

B.7 CONFLICTS OF INTEREST

Save as disclosed below and in the section entitled “Interested Person Transactions” in theLetter to Shareholders from Novo Group of this Circular, none of the Proposed Directors, theProposed Executive Officers, Controlling Shareholders, and/or any of their associates hasany material interest, whether direct or indirect, in:

(a) any material transactions to which the Novo Group was or is a party;

(b) any corporation which carries on the same business or deals in similar products as theexisting business of the Novo Group; and

(c) any enterprise or company that is the Novo Group’s customer or supplier of goods orservices.

B.8 MATERIAL BACKGROUND INFORMATION ON THE PROPOSED DIRECTORS,PROPOSED EXECUTIVE OFFICERS AND CONTROLLING SHAREHOLDERS

Save as disclosed below, none of the Proposed Directors, Proposed Executive Officers orControlling Shareholders of the Novo Group:

(a) had at any time during the last ten years, had an application or a petition under anybankruptcy laws of any jurisdiction filed against him or against a partnership of which hewas a partner at the time when he was a partner or at any time within two years from thedate he ceased to be a partner;

(b) had at any time during the last ten years, had an application or a petition under any lawof any jurisdiction filed against an entity (not being a partnership) of which he was adirector or an equivalent person or a key executive, at the time when he was a directoror an equivalent person or a key executive of that entity or at any time within two yearsfrom the date he ceased to be a director or an equivalent person or a key executive ofthat entity, for the winding up or dissolution of that entity or, where that entity is thetrustee of a business trust, that business trust, on the ground of insolvency;

(c) has any unsatisfied judgment against him;

(d) has ever been convicted of any offence, in Singapore or elsewhere, involving fraud ordishonesty, which is punishable with imprisonment, or has been the subject of anycriminal proceedings (including any pending criminal proceedings of which he is aware)for such purpose;


142

(e) has ever been convicted of any offence, in Singapore or elsewhere, involving a breachof any law or regulatory requirement that relates to the securities or futures industry inSingapore or elsewhere, or been the subject of any criminal proceedings (including anypending criminal proceedings of which he is aware) for such breach;

(f) had at any time during the last ten years, had judgment entered against him in any civilproceedings in Singapore or elsewhere involving a breach of any law or regulatoryrequirement that relates to the securities or futures industry in Singapore or elsewhere,or a finding of fraud, misrepresentation or dishonesty on his part, or been the subject ofany civil proceedings (including any pending civil proceedings of which he is aware)involving an allegation of fraud, misrepresentation or dishonesty on his part;

(g) has ever been convicted in Singapore or elsewhere of any offence in connection with theformation or management of any entity or business trust;

(h) has ever been disqualified from acting as a director or an equivalent person of any entity(including the trustee of a business trust), or from taking part directly or indirectly in themanagement of any entity or business trust;

(i) has ever been the subject of any order, judgment or ruling of any court, tribunal orgovernmental body, permanently or temporarily enjoining him from engaging in any typeof business practice or activity;

(j) has ever, to his knowledge, been concerned with the management or conduct, inSingapore or elsewhere, of the affairs of:

(i) any corporation which has been investigated for a breach of any law or regulatoryrequirement governing corporations in Singapore or elsewhere;

(ii) any entity (not being a corporation) which has been investigated for a breach ofany law or regulatory requirement governing such entities in Singapore orelsewhere;

(iii) any business trust which has been investigated for a breach of any law orregulatory requirement governing business trusts in Singapore or elsewhere; or

(iv) any entity or business trust which has been investigated for a breach of any law orregulatory requirement that relates to the securities or futures industry inSingapore or elsewhere,

Chua Keng Hiang

From 1994 to 1997, Chua Keng Hiang, engaged by a Singapore listed company as thepresident of one of its subsidiaries, was involved in the management of that subsidiary’sinvestee company in China. During the period of his involvement, the investee companywas on two occasions interviewed by the PRC authorities for non-compliance withcertain customs regulations. In one instance, the company’s bonded warehouse staffabused the facilities for personal gain and absconded. In the other case, the importagent misrepresented to the company and did not comply with certain customsregulations. To his best knowledge, no punitive action was taken against the companyin both instances.

(k) in connection with any matter occurring or arising during the period when he was soconcerned with the entity or business trust; or


143

(l) has been the subject of any current or past investigation or disciplinary proceedings, orhas been reprimanded or issued any warning, by the Authority or any other regulatoryauthority, exchange, professional body or governmental agency, whether in Singaporeor elsewhere.

Yu Wing Keung, Dicky

On or around April 2004, the Stock Exchange of Hong Kong Limited (“HKSE”) issued apublic criticism in respect of WellNet Holdings Limited (“WellNet”) and all its executivedirectors including Yu Wing Keung, Dicky (who was then employed by Wellnet as themanaging director in charge of steel trading division) in respect of the breaches ofcertain listing rules of HKSE. The public criticism of Wellnet arose from its sharerepurchases of such number of its own shares exceeding 25% of the issued capital onor around April 2001, and that such repurchases were made during the period of onemonth prior to the announcement of its annual results. The executive directors ofWellnet were criticised for their reply in the negative given to the HKSE in response toits query on the reason for the unusual movement in price and volume of the trading ofWellnet’s shares at the material time when Wellnet has purchased its own shares.Subsequent to the public criticism, levelled at WellNet’s executive directors as a whole,no further action was taken against Yu Wing Keung, Dicky, in his personal capacity.

Chow Kin San

(i) Serenity Park Building Management Ltd (“Serenity”)

A claim was made in November 2006 in the Hong Kong Small Claims Tribunal (“SmallClaim Tribunal”) by Serenity against Chow Kin San and his wife for a sum ofapproximately HK$2,167 comprising 3 months arrears of property management feerelating to his apartment managed by Serenity. As both of Mr Chow and his wife wereworking in China during the relevant period and only returned to Hong Kongoccasionally, his wife has made arrangements to submit auto-pay application forms tothe management office authorising all monthly maintenance charges to be debiteddirectly from his bank account via auto-pay arrangement. Mr Chow only found outsubsequently, when the claim was made by Serenity in the Small Claims Tribunal, thathis authorisation for the auto-pay was unsuccessful. The claim was therefore the resultof an administrative oversight by him and miscommunication between the parties. MrChow confirmed that he had since settled the arrears and upon application by Serenity,an order granting leave to the application to discontinue the claim had been given by theSmall Claims Tribunal on or about December 2006.

(ii) China Overseas Property Services Ltd (“COPS”)

In May 2003, a claim was made in the Small Claim Tribunal by COPS against Chow KinSan for a sum of approximately HK$17,959 relating to late payment of management fee.Due to his tight working schedule during that time, Mr Chow was unable to makearrangement for autopay in respect of the management fees. Despite his attempt tomake payments via cheques during the interim period, he missed settling some of thepayments and the outstanding amount had prompted a claim being made by COPSagainst him. He promptly settled upon the notification of the claim and autopayarrangement was put in place. He has confirmed that he had since settled theoutstanding payment.


144

B.9 SERVICE AGREEMENTS

Yu Wing Keung, Dicky, and Chow Kin Wa will, upon completion of the Proposed Acquisition,enter into service agreements (collectively the “Service Agreements” and each a “ServiceAgreement”) with the Company. Each of their Service Agreements will continue for a term ofthree years unless terminated by either party with not less than six months notice in writingto the other. Each of the Service Agreements may also be terminated if any of them commitsa breach of the Service Agreement, such as being convicted of any offence involving fraud ordishonesty or being adjudicated bankrupt. There are no benefits payable to the ProposedDirectors upon termination of their employment with the Enlarged Group.

Pursuant to the terms of the respective Service Agreements, the annual salary of therespective Proposed Directors will be as follows:

Annual salary US$’000


Chow Kin Wa 256

Yu Wing Keung, Dicky, and Chow Kin Wa will be paid a performance bonus based on theEnlarged Group’s audited consolidated profits before taxation as follows:

Director PBT Performance Bonus

Yu Wing Keung, Dicky Where PBT is equal to or morethan US$8.8 million but lessthan US$11.0 million




Chow Kin Wa Where PBT is equal to or morethan US$8.8 million but lessthan US$11.0 million




Each Proposed Executive Director shall also be entitled to the use of a car during their termof service.

The Service Agreements provide that during the continuance of their employment with theEnlarged Group, Yu Wing Keung, Dicky and Chow Kin Wa shall, amongst other things, devotetheir whole time and attention to the business of the Enlarged Group and shall not engage inany other business or be concerned or interested, whether for reward or gratuitously, in anycapacity in any trade or business or occupation of a similar nature to or competitive with thatcarried on by the Enlarged Group. The prohibition extends to the holding of any public orprivate office which, in the opinion of the Enlarged Group, may hinder or otherwise interferewith the performance of their duties to the Enlarged Group.

The Service Agreements also contain non-competition undertakings by each of Yu WingKeung, Dicky and Chow Kin Wa which are effective during, as well as 12 months after thecessation of, their employment with the Enlarged Group. During such period, Yu Wing Keung,Dicky and Chow Kin Wa shall not, amongst other things, engage in any other business or be


145

concerned or interested, whether for reward or gratuitously, in any capacity in any trade orbusiness or occupation of a similar nature to or competitive with that carried on by theEnlarged Group.

Had the Service Agreements been implemented in FY2007, the profit before tax of theEnlarged Group would have been US$8.3 million, the net profit attributable to equity holdersof the Company would have been US$6.9 million and the earnings per new Share would havebeen 0.13 US cents instead of 0.14 US cents.

Save for the Service Agreements, there are no bonus or profit sharing plans or any otherprofit-linked agreements or arrangements between the Company and any of the ProposedDirectors or Proposed Executive Officers following completion of the Proposed Acquisition.

Save as disclosed above, there are no existing or proposed service contracts entered into orto be entered into by the Company or any of the subsidiaries in the Enlarged Group with anyof the Proposed Directors or Proposed Executive Officers which provides for compensationin the form of stock options, or pension, retirement or other similar benefits, or other benefits,upon the termination of employment following completion of the Proposed Acquisition.

B.10 CORPORATE GOVERNANCE

B.10.1 Board Practices

The new Board recognises the importance of corporate governance to Shareholders, and willexert best efforts to implement the good practices recommended in the new Code ofCorporate Governance 2005.

Upon completion of the Proposed Transactions, the Proposed Directors will be appointed tothe Board. The Board will then comprises two executive Directors, one non-executive Directorand two independent Directors, whose office will expire in accordance with the provision of theArticles of Association.

B.10.2 New Nominating Committee

The new Nominating Committee will comprise the Proposed Directors, Tan Siok Chin, ChuaKeng Hiang and Chow Kin San. The chairman of the new Nominating Committee is Tan SiokChin. The new Nominating Committee has been set up to be responsible for the nominationof the Proposed Directors (including the Proposed Independent Directors of the Company)taking into consideration each Proposed Director’s contribution and performance, followingcompletion of the Proposed Acquisition. The new Nominating Committee is also charged withthe responsibility of determining annually whether a Proposed Director is independent. Underthe Articles, at least one-third of the Proposed Directors are required to retire from office atevery annual general meeting of the Company after completion of the Proposed Acquisition.Every Proposed Director must retire from office at least once every three years. A retiringProposed Director is eligible and may be nominated for re-election. Each member of theNominating Committee shall abstain from voting on any resolutions, making anyrecommendations and/or participating in any deliberations of the new Nominating Committeein respect of the assessment of his performance or re-nomination as a Proposed Director.


146

B.10.3 New Remuneration Committee

The new Remuneration Committee will comprise the Proposed Directors, Tan Siok Chin,Chua Keng Hiang and Chow Kin San. The chairman of the Remuneration Committee will beTan Siok Chin. The new Remuneration Committee will be responsible for recommending tothe new Board a framework of remuneration for the Proposed Directors and ProposedExecutive Officers and key executives, and determine specific remuneration packages for theproposed executive chairman and each of the Proposed Executive Director.

The recommendations of the new Remuneration Committee will be submitted forendorsement by the entire new Board. All aspects of remuneration, including but not limitedto directors’ fees, salaries, allowances, bonuses, options and benefits-in-kind shall becovered by the new Remuneration Committee. Each member of the new RemunerationCommittee shall abstain from voting on any resolutions, making recommendations and/orparticipating in any deliberations of the new Remuneration Committee in respect of hisremuneration package.

The total remuneration of the employees who are related to the Proposed Directors will bereviewed annually by the new Remuneration Committee to ensure that their remunerationpackages are in line the staff remuneration guidelines and commensurate with theirrespective job scopes and level of responsibilities. In the event that a member of the newRemuneration Committee is related to the employee under review, he will abstain from suchreview.

The remuneration paid to employees who are immediate family members of the ProposedDirectors will be disclosed in the annual report, following completion of the ProposedAcquisition, in the event such remuneration exceeds S$150,000 for that financial year.

B.10.4 New Audit Committee

The new Audit Committee will comprise the Proposed Directors, Chua Keng Hiang, Tan SiokChin and Chow Kin San. The chairman of the new Audit Committee is Chua Keng Hiang.

The new Audit Committee will assist the new Board in discharging their responsibility tosafeguard the assets, maintain adequate accounting records, and develop and maintaineffective systems of internal control, with the overall objective of ensuring that managementcreates and maintains an effective control environment in the Company following completionof the Proposed Acquisition. The new Audit Committee will provide a channel ofcommunication between the new Board, the management and the external auditors of theCompany on matters relating to audit following completion of the Proposed Acquisition. Inorder to facilitiate the new Audit Committee to discharge its responsibilities, the managementof the Company shall assist and provide the new Audit Committee with access to theinformation relating to the individual companies within the Group and the associatedcompanies.

In particular, the new Audit Committee will meet at least quarterly, following completion of theProposed Acquisition, to discuss and review the following where applicable:

(a) review the audit plans of the external auditors, including the results of the external andinternal auditors’ examination and their evaluation of the system of internal accountingcontrols, their letter to management and the management’s response;


147

(b) review the quarterly, half-yearly and annual financial statements and balance sheet andprofit and loss accounts before submission to the new Board for approval, focusing inparticular on changes in accounting policies and practices, major risk areas, significantadjustments resulting from the audit, compliance with accounting standards andcompliance with the Listing Manual and any other relevant statutory or regulatoryrequirements;

(c) review the risk profile of the Company, its internal control and risk managementprocedures and the appropriate steps to be taken to mitigate and manage risks atacceptable levels determined by the new Board;

(d) ensure co-ordination between the external and internal auditors and the management,and review the assistance given by the management to the auditors, and discussproblems and concerns, if any, arising from the interim and final audits, and any matterswhich the auditors may wish to discuss (in the absence of the management, wherenecessary);

(e) review and discuss with the external auditors any suspected fraud or irregularity, orsuspected infringement of any relevant laws, rules or regulations, which has or is likelyto have a material impact on the Enlarged Group’s operating results or financial position,and the management’s response;

(f) consider the appointment, remuneration, terms of engagement or re-appointment of theexternal and internal auditors and matters relating to the resignation or dismissal of theauditors;

(g) review and approve any interested person transactions falling within the scope ofChapter 9 of the Listing Manual;

(h) review any transactions with associated companies of the Enlarged Group;

(i) review potential conflicts of interest (if any);

(j) evaluate the independence of the external auditors;

(k) review the adequacy of the internal audit function and ensuring that a clear reportingstructure is in place between the audit committee and the internal auditors;

(l) review arrangements by which staff of the Company may, in confidence, raise concernsabout possible impropriety in matters of financial reporting and other matters and theadequacy of procedures for independent investigation and appropriate follow-up actionin response to such complaints;

(m) undertake such other reviews and projects as may be requested by the new Board, andwill report to new Board its findings from time to time on matters arising and requiring theattention of the new Audit Committee; and

(n) generally undertake such other functions and duties as may be required by statute or theListing Manual, or by such amendments as may be made thereto from time to time.

In addition, all future transactions with related parties shall comply with the requirements ofthe Listing Manual. As required by paragraph 1(9)(e) of Appendix 2.2 of the Listing Manual,the Proposed Directors shall abstain from voting in any contract or arrangement or proposedcontract or arrangement in which he has a personal material interest.


148

Apart from the duties listed above, the new Audit Committee shall commission and review thefindings of internal investigations into matters where there is any suspected fraud orirregularity, or failure of internal controls or infringement of any Singapore law, rule orregulation which has or is likely to have a material impact on the Company’s operating resultsand/or financial position.

B.10.5 Information Disclosure

Following completion of the Proposed Acquisition, the Enlarged Group will continue toimplement a policy of providing full disclosure of material corporate information ascommercially appropriate through press announcements, press releases and shareholders’circulars as well as through the statutory interim and annual financial results announcements.

C. PROPOSED DIRECTORS AND VENDORS’ RESPONSIBILITY STATEMENT

This Circular has been seen and approved by the Proposed Directors and Vendors, and theycollectively and individually accept full responsibility to the Company and the Shareholdersand the Company’s advisors for the truth and accuracy of the information contained in the“Letter to Shareholders from the Novo Group”, the sections entitled “Material Contracts of theNovo Group” and “Material Litigation of the Novo Group” in Appendix A of this Circular andgenerally all information given in this Circular in respect of the Proposed Acquisition, the NovoCompanies and the Enlarged Group.

The Proposed Directors and Vendors also confirm, having made all reasonable enquiries, thatto the best of their knowledge and belief, there are no other facts relating to such informationthe omission of which would make any statement herein misleading and that this Circularconstitutes full and true disclosure of all material facts in relation to such information.

Yours faithfullyFor and on behalf of the board of directors of Novo

Yu Wing Keung, Dicky Chow Kin WaChairman Vice Chairman


149

MATERIAL CONTRACTS OF THE NOVO GROUP

There were no contract, not being contracts entered into in the ordinary course of business of the NovoGroup, entered into by the Novo Group within the two years preceding the date of lodgement of thisCircular that are or may be material.

MATERIAL LITIGATION OF THE NOVO GROUP

The Novo Group is not engaged, in the last 12 months before the date of this Circular, in any litigationor arbitration as plaintiff or defendant in respect of any claims or amounts which are material in thecontext of the Proposed Acquisition and the Vendors, as the directors of the Novo Group have noknowledge of any proceedings pending or threatened against the Novo Group or any facts likely to giverise to any litigation, claims or proceedings which may have a material effect on the financial positionor the business of the Novo Group. In the context of the Proposed Acquisition, a claim is consideredto be material if the amount claimed by, or against the Novo Group exceeds U$0.5 million (beingapproximately 5.0% of the NTA of the Novo Group as at 30 April 2007 of U$9.85 million).

APPENDIX A

A-1

LETTER FROM PHILLIP SECURITIES PTE LTD TOTHE JUDICIAL MANAGERS OF NEOCORP INTERNATIONAL LTD.

1 February 2008

The Judicial Managers ofNeocorp International Limited47 Hill Street #05-01Singapore Chinese Chamber ofCommerce and Industry BuildingSingapore 179365

Dear Sirs,

THE WHITEWASH RESOLUTION FOR THE WAIVER BY THE SHAREHOLDERS OF NEOCORPINTERNATIONAL LTD. (THE “COMPANY”) OF THE RIGHT TO RECEIVE A MANDATORYTAKEOVER OFFER FROM THE VENDORS AND THEIR CONCERT PARTIES

Except where the context otherwise requires or where otherwise stated, the definitions used in theCircular shall apply throughout this letter.

1. INTRODUCTION

On 28 August 2007, the Judicial Managers announced, inter alia, that the Company had enteredinto the Novo SPA on 23 August 2007 pursuant to which the Company will acquire the SaleCompanies from the Vendors (the “Proposed Acquisition”) for a consideration of approximatelyS$110.65 million (the “Purchase Consideration”). The Purchase Consideration shall be satisfiedby the allotment and issue of a total of 3,688,270,000 new Pre-Acquisition Shares (the“Consideration Shares”) at S$0.03 each (the “Share Issue Price”).

The Company also announced that it had entered into the Convertible Loan Agreement with theVendors on 31 July 2007 for the subscription and issue of convertible loan notes for an aggregateprincipal amount of up to S$3,000,000, wherein the Vendors are to loan the Company up toS$3,000,000 (the “Vendors Loan”) to fund the payment of professional fees and cost and expenseassociated with the Proposed Acquisition. The Vendors will have the option to convert all or partof the Vendors Loan into new Shares at the Share Issue Price (the “Loan Conversion Shares”).

As the Vendors, together with their concert parties (if any), will hold approximately 97.7% of theEnlarged Share Capital after the Proposed Transactions but before the Proposed CompliancePlacement, a change in control of the Company will accordingly arise immediately. As one or moreof the relative figures as computed on the bases set out in Rule 1006 of the Listing Manualexceeds 100% and there is a change in control of the Company, the Proposed Acquisition isdeemed to be a “Very Substantial Acquisition” or “Reverse Takeover Transaction” under Rule1015 of the Listing Manual. Pursuant to Rule 1015 of the Listing Manual, the Proposed Acquisitionis subject to the approval of Shareholders and the SGX-ST.

Pursuant to Rule 14 of the Code and Section 139 of the SFA, the Vendors and/or their concertparties will be required to make a mandatory unconditional general offer for all the remainingShares or new Shares, as the case may be, not owned or agreed to be acquired by the Vendorsand/or their concert parties at the highest price paid or agreed to be paid by the Vendors and/ortheir concert parties for the Shares in the past six months, unless such obligation is waived by theSIC.

APPENDIX B

B-1

The SIC has, on 3 October 2007, waived the requirement for the Vendors and their concert partiesto make a general offer for the Company under Rule 14 of the Code in the event that their votingrights increase to 30% or more as a result of the acquisition of the Consideration Shares pursuantto the Proposed Acquisition subject to amongst other things, conditions set out in Section 6.2 ofthe Circular, which includes the appointment of an independent financial adviser to advise theIndependent Shareholders on the Whitewash Resolution.

Accordingly, Phillip Securities Pte Ltd (“Phillip Securities”) has been appointed to advise theJudicial Managers of the Company in their recommendation to the Independent Shareholders inrespect of the Whitewash Resolution.

2. TERMS OF REFERENCE

Phillip Securities was neither a party to the negotiations entered into by the Company in relationto the Proposed Acquisition nor were we involved in the deliberations leading to the decision onthe part of the Judicial Managers to enter into the Proposed Acquisition. We do not, by this letter,warrant the merits of the Proposed Acquisition, other than to advise the Judicial Managers of theCompany as to whether the Whitewash Resolution is prejudicial to the interests of IndependentShareholders.

Our terms of reference do not require us to evaluate or comment on the legal, commercial andfinancial merits and/or risks of the Proposed Acquisition and as such, we do not express anopinion thereon. We are also not addressing the relative merits of the Proposed Acquisition ascompared to any alternative transactions previously considered by the Company or that otherwisemay be available to the Company in the future. Such evaluations or comments are and remain thesole responsibility of the Judicial Managers although we may draw upon their views or make suchcomments in respect thereof (to the extent deemed necessary or appropriate by us) in arriving atour opinion.

In the course of our evaluation, we have held discussions with the Judicial Managers and haveexamined publicly available information and information provided to us by the Judicial Managersand professional advisors of the Company and their representatives, including information in theCircular. We have not independently verified such information, whether written or verbal, andaccordingly cannot and do not warrant the accuracy or completeness of such information.Nevertheless, the Judicial Managers have confirmed to us that, to the best of their knowledge andbelief, the information contained herein constitutes a full and true disclosure, in all materialrespects, of all material facts on the Proposed Acquisition, and there is no other information orfact, the omission of which would cause any information contained herein to be inaccurate,incomplete or misleading in any material respect. We have also made reasonable enquiries andused our judgement in assessing such information and have found no reason to doubt thereliability of such information. We have further assumed that all statements of fact, belief, opinionand intention made by the Judicial Managers in the Circular have been reasonably made after dueand careful enquiry.

We have not made an independent evaluation or appraisal of the assets and liabilities of theNeocorp Group or the Novo Group, and we have not been furnished with any such evaluation orappraisal, other than the unaudited balance sheet of the Neocorp Group as at 31 July 2007 andthe unaudited consolidated financial statements of the Novo Group for FY2007. We have also notreviewed any financial or profit forecasts or business plans of the Neocorp Group or the NovoGroup.

APPENDIX B

B-2

The scope of our appointment does not require us to express, and we do not express, a view onthe future growth prospects and earnings potential of the Neocorp Group after the ProposedAcquisition. In addition, we are not expressing any view herein as to the future financialperformance of the Neocorp Group after the Proposed Acquisition.

Our view is based upon the market, economic and industry conditions as well as the informationprovided to us as at the Latest Practicable Date. In arriving at our view, and with the consent ofthe Judicial Managers, we have taken into account certain other factors and have been requiredto make certain assumptions as set out in this letter. We assume no responsibility to update,revise or reaffirm our opinion in light of any subsequent development after the Latest PracticableDate that may affect our opinion contained herein.

In arriving at our recommendation, we have not had regard to the specific investment objectives,financial situation, tax position or unique needs and constraints of any Shareholders. As differentShareholders may have different investment objectives, we would advise you to recommend thatany individual Shareholder who may require specific advice in relation to his Shares shouldconsult his stockbroker, bank manager, solicitor, accountant or other professional advisers.

The Company has been separately advised by its other advisers in the preparation of the Circular(other than this letter). We have had no role or involvement and have not provided any advice,financial or otherwise, whatsoever in the preparation, review and verification of the Circular (otherthan this letter). Accordingly, we take no responsibility for, and express no views (express orimplied) on, the contents of the Circular (other than this letter).

We have prepared this letter for the use of the Judicial Managers in connection with theirconsideration of the Whitewash Resolution and their advice to the Independent Shareholdersarising thereof. Our recommendation in relation to the Whitewash Resolution, as set out in section15 of the Circular, should be considered in the context of the entirety of this letter.

3. TERMS OF THE PROPOSED ACQUISITION


The Purchase Consideration amounts to approximately S$110.65 million, which isequivalent to ten (10) times the FY2007NPAT. The Purchase Consideration shall be satisfiedby the allotment and issue of a total of 3,688,270,000 Consideration Shares, representingapproximately 95.1% of the Enlarged Share Capital.


The completion of the Proposed Acquisition is conditional upon the fulfillment of certainconditions precedent on or before the Completion Date and full details of it can be found insection 5.3 of the Circular.

3.3 Appointment of New Directors to the Board on Completion of the ProposedAcquisition

Information on the new Board of the Enlarged Group after completion of the ProposedAcquisition can be found in section 5.4 of the Circular.

APPENDIX B

B-3

4. THE PROPOSED CONVERSION OF THE VENDORS LOAN

Information on the proposed conversion of the Vendors Loan can be found in section 9 of theCircular.

5. THE PROPOSED WHITEWASH RESOLUTION

We set out extracts from section 6 of the Circular in italics as follows:

5.1 Mandatory General Offer requirement under The Code

As at the Latest Practicable Date, the Vendors and their concert parties do not hold anyShares or instruments convertible into rights to subscribe for and options in respect ofShares or new Shares, as the case may be. Upon completion of the Proposed Acquisitionand the Proposed Conversion (but before the Proposed Compliance Placement), theVendors, as well as their nominee, New Page Investments Ltd, will in aggregate hold up toapproximately 3,788,270,000 new Pre-Acquisition Shares (to be consolidated into473,533,750 Shares pursuant to the Proposed Post-Acquisition Consolidation),representing 97.7% of the total issued share capital of the Company.

Pursuant to Rule 14 of the Code and Section 139 of the SFA, the Vendors and/or theirconcert parties will be required to make a mandatory unconditional general offer for all theremaining Shares or new Shares, as the case may be, not owned or agreed to be acquiredby the Vendors and/or their concert parties at the highest price paid or agreed to be paid bythe Vendors and/or their concert parties for the Shares in the past six months, unless suchobligation is waived by the SIC.

5.2 Conditional waiver of the Mandatory General Offer requirement by the SIC

The SIC has on, 3 October 2007, waived the requirement for the Vendors and their concertparties to make a general offer for the Company under Rule 14 of the Code in the event thatthe Vendors’ Concert Party Group’s voting rights increase to 30% or more as a result of theacquisition of the Consideration Shares pursuant to the Proposed Acquisition, subject to thefollowing conditions:

(a) a majority of holders of voting rights of the Company approve at a general meeting,before the issue of the Consideration Shares to the Vendors’ Concert Party Group, theWhitewash Resolution by way of a poll to waive their rights to receive a general offerfrom the Vendors’ Concert Party Group;

(b) the Whitewash Resolution is separate from other resolutions;

(c) the Vendors’ Concert Party Group, parties acting in concert with them and parties notindependent of them abstain from voting on the Whitewash Resolution;

(d) the Vendors’ Concert Party Group and their concert parties did not acquire and are notto acquire, any Shares or instruments convertible into and options in respect of Shares(other than subscriptions for, rights to subscribe for, instruments convertible into oroptions in respect of new shares in the Company which have been disclosed in thisCircular):

(i) during the period between the announcement of the Proposed Acquisition andthe date Shareholders’ approval is obtained for the Whitewash Resolution; and

APPENDIX B

B-4

(ii) in the six (6) months prior to the announcement of the Proposed Acquisition, butsubsequent to negotiations, discussions or the reaching of understandings oragreements with the directors of the Company in relation to such issue;

(e) the Company appoints an independent financial adviser to advise the IndependentShareholders on the Whitewash Resolution;

(f) the Company sets out clearly in its circular to Shareholders:

(i) details of the proposed issue of the Consideration Shares;

(ii) the dilution effect of issuing the Consideration Shares pursuant to the ProposedAcquisition to existing holders of voting rights;

(iii) the number and percentage of voting rights in the Company as well as thenumber of instruments convertible into, rights to subscribe for and options inrespect of Shares held by the Vendors’ Concert Party Group and their concertparties as at the Latest Practicable Date;

(iv) the number and percentage of voting rights to be issued to the Vendors’ ConcertParty Group under the Proposed Acquisition;

(v) a specific and prominent reference to the fact that the Proposed Acquisition willresult in the Vendors’ Concert Party Group holding shares carrying over 49% ofthe voting rights of the Company based on its enlarged share capital and theVendors’ Concert Party Group will be free to acquire further Shares withoutincurring any obligation under Rule 14 of the Code to make a general offer for theCompany; and

(vi) that Shareholders, by voting for the Whitewash Resolution, are waiving theirrights to a general offer from the Vendors’ Concert Party Group at the highestprice paid by the Vendors’ Concert Party Group and their concert parties for theShares in the past six (6) months preceding the commencement of the ProposedAcquisition;

(g) this Circular states that the waiver granted by the SIC to the Vendors’ Concert PartyGroup and their concert parties from the requirement to make a general offer underRule 14 is subject to the conditions stated in paragraphs (a) to (f) above;

(h) the Vendors’ Concert Party Group obtains the SIC’s approval in advance for thoseparts of this Circular that refer to the Whitewash Resolution; and

(i) to rely on the Whitewash Resolution, the acquisition of the Consideration Shares by theVendors’ Concert Party Group pursuant to the Proposed Acquisition must becompleted within three (3) months of the approval of the Whitewash Resolution.

As at the Latest Practicable Date, all the above conditions imposed by the SIC (save andexcept for the condition requiring approval of the majority of voting rights of the Companypresent and voting at a general meeting for the Whitewash Resolution) have been satisfied.

5.3 Whitewash Resolution

Shareholders are requested to vote on a poll, the Whitewash Resolution set out as anordinary resolution in the Notice of EGM as set out in the section entitled “Notice ofExtraordinary General Meeting” of this Circular, waiving their rights to receive a general offerfrom the Vendors’ Concert Party Group and their concert parties for the Company underRule 14 of the Code arising from the issue and allotment of the Consideration Shares to theVendors’ Concert Party Group pursuant to the Proposed Acquisition.

APPENDIX B

B-5

Shareholders should also note that by voting in favour of the Whitewash Resolution,they will be waiving their rights to receive a general offer from the Vendors’ ConcertParty Group, which the Vendors’ Concert Party Group would otherwise be obliged tomake at the highest price paid or agreed to be paid by the Vendors’ Concert PartyGroup and their concert parties for Shares or new Shares, as the case may be, in thepast six months, in accordance with Rule 14 of the Code and Section 139 of the SFA.

Pursuant to obtaining Shareholders’ approval for the Whitewash Resolution and uponcompletion of the Proposed Acquisition, the Vendors will, through New PageInvestments Ltd, hold in excess of 49.0% of the Enlarged Share Capital. IndependentShareholders should note that by voting for the Whitewash Resolution, they will bewaiving their rights to a general offer from the Vendors’ Concert Party Group andunder Rule 14 of the Code, the Vendors and their concert parties could thereafteracquire additional new Shares in the Company without incurring a mandatoryunconditional general offer obligation insofar as their aggregate equity interestsremain in excess of 49.0% in the six months prior to any such subsequent acquisitionof new Shares in the Company.

Independent Shareholders should note that the Proposed Acquisition is conditionalupon the Whitewash Resolution being approved by the Shareholders as theWhitewash Resolution is a condition precedent in the Novo SPA. If the IndependentShareholders do not vote in favour of the Whitewash Resolution, the ProposedAcquisition will NOT be completed.

6. EVALUATION OF THE WHITEWASH RESOLUTION

In our evaluation of the proposed Whitewash Resolution, we have given due consideration to thefollowing key factors:–

(a) the rationale for the Proposed Acquisition;

(b) the Purchase Consideration; and

(c) the Share Issue Price.

6.1 Rationale for the Proposed Acquisition

It is not within our terms of reference to comment or express an opinion on thecommercial merits of the Proposed Acquisition or the future prospects of theEnlarged Group. Nevertheless, we have reviewed the rationale for the ProposedAcquisition as set out in Section 5.6 of the Circular and would like to highlight the followingsalient points:–

We note that the Company has been under judicial management since 28 October 2005,and the trading in the Shares on the SGX-SESDAQ has been suspended since September2005. Since trading in the Shares was suspended, the Company has found it challenging inits search for profitable companies and businesses that are able to satisfy the quantitativecriteria for a re-listing under Rule 211 of the Listing Manual.

APPENDIX B

B-6

The Company had disposed of its equity interests in Adventure Systems Pte Ltd andPresscrete Engineering Pte Ltd on 8 November 2005 and 23 February 2006 respectively.The Company’s remaining three subsidiaries, namely Adventure Training Systems (AsiaPacific) Pte Ltd, Neocorp Innovations Pte Ltd and Ceramic Technologies Pte Ltd, arecurrently in liquidation in view of their adverse financial conditions. The Neocorp Group istherefore no longer engaged in any on-going business activities.

Based on the unaudited balance sheet as at 31 July 2007, the Company had a capitaldeficiency of S$16.4 million and a net tangible liability per Share of 3.34 cents. The nettangible liability per Share is due to accumulated losses as at 31 July 2007 of about S$47.9million which exceeded the issued share capital of the Company of S$31.5 million.Subsequent to 31 July 2007 and up to the Latest Practicable Date, there has been nomaterial developments or change to the financial position of the Company, other thancontinued losses incurred for operating expenses.

The Proposed Acquisition is intended to transform the Neocorp Group into a major globalsteel trading business with significantly enhanced market capitalisation, prospects, businessscale and profitability.

The following is a summary of the pro forma unaudited profit and loss and balance sheet ofthe Novo Group for FP2006 and FY2007:–

Summary of Profit and Loss

(US$’000)FP2006

(Unaudited)FY2007

(Unaudited)

Revenue 76,010 310,913

Gross profit 5,160 34,609

Profit before income tax 1,494 8,820

Income tax (199) (1,541)

Profit for the year/period 1,295 7,279

Summary of Balance Sheet

(US$’000)30 April 2006(Unaudited)

30 April 2007(Unaudited)

Non-current assets 742 2,163

Current assets 24,720 26,801

Total assets 25,462 28,964

Non-current liability — 435

Current liabilities 23,534 18,676

Total liabilities 23,534 19,111

Net assets 1,928 9,853

Shareholders’ equity 1,928 9,853

APPENDIX B

B-7

Please see the Letter to Shareholders from the Novo Group of this Circular for moreinformation on the history, business and prospects of the Novo Group.

Upon completion of the Proposed Acquisition, the judicial management of the Company willbe terminated. The Company will have a new board of directors and a new managementteam, who are experienced in the trading of finished products and raw materials in the steelindustry.

The Proposed Acquisition is expected to enable the lifting of the current trading suspensionof the Shares. The Company intends to make an application to the SGX-ST for the transferof its listing on the SGX-SESDAQ to the SGX-ST Mainboard on completion of the ProposedTransactions. Resumption in the trading of its Shares, or new Shares, as the case may be,which is subject to the approval of the SGX-ST and the Proposed Compliance Placement,will provide the minority Shareholders with the opportunity to liquidate or deal with theirshareholdings in the Company.


We note that the Purchase Consideration is ten (10) times the FY2007NPAT.

In evaluating the Purchase Consideration, we have considered the valuation statistics(namely price-earnings ratio (“PER”) and price-to-book ratio (“P/B”)) of selected comparablecompanies which are primarily engaged in the trading and distribution of metals (the“Comparable Companies”) and listed on the SGX-ST as indication of the current marketexpectations with regards to the valuation of these businesses.

A brief description of the Comparable Companies is set out as follows:–

Company name Principal Business

MarketCapitalisation

as at the LatestPracticable Date

(S$m)

Latest Full YearFinancialsReported

AEI CorporationLtd

Principally engaged in theproduction of quality precisionaluminium alloy extruded profiles.It also provides anodising servicesin order to meet its customers’finishing requirements.

41.8 31 December 2006

Albedo Limited Trading and distribution of steel-related materials and themanufacturing of cast productsconsisting of mainly iron and steelrolls

12.0 31 December 2006

APPENDIX B

B-8




(S$m)


Asia EnterprisesHoldings Ltd

Steel distributor that supplies awide range of steel products andprovides value-added steelprocessing services to industrialend-users in Singapore and theAsia-Pacific region. The Groupalso operates its own steel servicecentre which provides value-addedsteel processing services thatcomplement its core distributionbusiness.

118.2 31 December 2006

CosmosteelHoldings Ltd

Supplier and distributor of pipingsystem components to customersin the design, engineering and/orfabrication works mainly in theenergy, marine and otherindustries in Southeast Asia.

54.6 30 September 2007

HG MetalManufacturingLtd

Stockist and distributor of steelproducts and also a manufacturerof flat bars and mild steel lipchannels.

141.7 30 September 2007

Hupsteel Ltd Import, export and retailing ofhardware to the oil refining,petrochemical, marine engineeringand repairing industries as well asthe energy sector. It is alsoinvolved in the provision ofengineering services, generaltrading, dealing in steel, piping andtubing products, property andinvestment holding andwarehousing services.

191.3 30 June 2007

Noble Group Ltd Specialist in the origination anddelivery of strategic raw materialsin the agriculture, energy, metalsand minerals markets, addingvalue at each stage of the supplychain. The Group is also involvedin technical ship management,trade finance and coal miningamong others.

4,852.4 31 December 2006

APPENDIX B

B-9




(S$m)


Sin Ghee HuatCorporation Ltd

Distributor of stainless steelproducts used in, amongst others,the oil and gas, petrochemical,marine, construction and foodprocessing industries

91.0 30 June 2007

We wish to highlight that the Comparable Companies are not identical to the Novo Group interms of market capitalisation, composition and type of business activities and products,track record, scale of operations, asset base, geographical spread and risk profile. Theinformation set out in the following table is thus meant for illustrative purposes only, and maynot provide very meaningful bases of comparison with the Novo Group.

6.2.1 Price Earnings Ratio (“PER”) Comparison

We set out below the PERs of the Comparable Companies based on their respectiveclosing share prices and the latest publicly available announcements of the full-yearbasic EPS of the respective companies as at the Latest Practicable Date.

Company namePER

(times)

AEI Corporation Ltd 7.7

Albedo Limited 11.3

Asia Enterprises Holdings Ltd 7.7

Cosmosteel Holdings Ltd 7.2

HG Metal Manufacturing Ltd 7.8

Hupsteel Ltd 6.1

Noble Group Ltd 23.5

Sin Ghee Huat Corporation Ltd 5.1

High 23.5

Average 9.6

Weighted Average(1) 21.5

Low 5.1

Novo Group 10.0(2)

(Source: Companies’ annual reports for the latest completed financial year)

Notes:–

(1) Weighted based on the respective market capitalisation of the Comparable Companies as at theLatest Practicable Date

(2) As implied by the Purchase Consideration

APPENDIX B

B-10

For illustration purposes only, based on the above analysis, we note the following:–

(a) the implied PER of 10.0 times for the Novo Group is within the range of PER of5.1 times to 23.5 times for the Comparable Companies; and

(b) the implied PER of 10.0 times for the Novo Group is higher than the averagePER of 9.6 times but lower than the weighted average PER of 21.5 times for theComparable Companies.

6.2.2 Price-to-Book (“P/B”) Comparison

We set out below the P/B ratios of the Comparable Companies based on theirrespective closing share prices and the latest publicly available announcements ofthe book value of the respective companies as at the Latest Practicable Date.

Company nameP/B

(times)

AEI Corporation Ltd 0.8

Albedo Limited 0.9

Asia Enterprises Holdings Ltd 1.5

Cosmosteel Holdings Ltd 1.6

HG Metal Manufacturing Ltd 1.2

Hupsteel Ltd 1.3

Noble Group Ltd 3.3

Sin Ghee Huat Corporation Ltd 1.2

High 3.3

Average 1.5

Weighted Average(1) 3.1

Low 0.8

Novo Group 7.4(2)

(Source: Companies’ annual reports for the latest completed financial year)

Notes:–

(1) Weighted based on the respective market capitalisation of the Comparable Companies as at theLatest Practicable Date

(2) Based the Purchase Consideration and Novo Group’s NTA of US$9.9 million for the financial yearended 30 April 2007

For illustration purposes only, based on the above analysis, we note the following:–

(a) the implied P/B ratio of 7.4 times for the Novo Group is above the range of P/Bratio of 0.8 times to 3.3 times for the Comparable Companies; and

(b) the implied P/B ratio of 7.4 times for the Novo Group is higher than the averageP/B ratio of 1.5 times and the weighted average P/B ratio of 3.1 times for theComparable Companies.

We also note that the Comparable Companies are listed companies whereas theNovo Group is not listed on any exchange.

APPENDIX B

B-11

6.3 The Share Issue Price

In evaluating whether the Share Issue Price is fair and reasonable, we have considered thefollowing:–

6.3.1 Market Quotations

Assuming that the Proposed Pre-Acquisition Consolidation was completed prior tothe suspension of trading in the Shares in September 2005 and based on the lasttraded price of S$0.015 for the Shares, the estimated price of the Shares after theProposed Pre-Acquisition Consolidation would have been S$0.375 per Share (the“Adjusted Last Traded Price”). Thus, the Share Issue Price of S$0.03 represents adiscount of 92% to the Adjusted Last Traded Price

However, we recognize that it may not be reasonable to compare the Share IssuePrice with the last traded price of the Shares as the latter may not fully reflect theCompany’s present financial condition and the prevailing circumstances.

6.3.2 NTA of the Company

It is a generally acceptable practice to make reference to the premium over/discountto NTA per Share of broadly similar companies as an indication of current marketexpectations.

We note, however, that based on the unaudited balance sheet as at 31 July 2007, theCompany had net tangible liabilities of S$16.4 million. Accordingly, it would not bemeaningful to assess the reasonableness of the Share Issue Price from anasset-based perspective. We wish to highlight that the Issue Price is at a value thatis higher than the NTL per Share.

7. FINANCIAL EFFECTS OF THE PROPOSED TRANSACTIONS

The financial effects of the Proposed Transactions on the Company and the Enlarged Group arefor illustrative purposes only. The objective is to illustrate what the historical information mighthave been had the Completion been completed at an earlier date. However, such information isnot necessarily indicative of the actual results of the operations or the related effects in thefinancial position that would have been attained had the Completion been completed at such anearlier date. Given that the financial effects presented below are pro forma in nature and forillustrative purposes only, it does not represent the actual financial position and/or results of theCompany and the Enlarged Group immediately after the completion of the ProposedTransactions.

Information for the following sections has been extracted from the Circular. In particular, we wishto highlight that the financial effects presented in the Circular were computed based on certainassumptions and on the following information:–

(a) the audited financial statements of the Company for FY2004 being the last audited resultsof the Company before the Company’s Shares were suspended on 15 September 2005 fromtrading on SGX-SESDAQ;

(b) the management accounts of the Company as at 31 July 2007; and

(c) the unaudited pro forma combined financial statements of the Sale Companies for FY2007.

APPENDIX B

B-12

Please refer to Section 13.8.2 of the Circular for more information on the financial effects of theProposed Transactions.

7.1 Share Capital

After completion of the Proposed Transactions, the Company would have an issued capitalof S$157.3 million comprising 657,685,671 Shares as compared to S$31.5 millioncomprising 492,084,283 Shares before the Proposed Transactions.

7.2 Earnings per New Share

Based on its audited consolidated financial statements for FY2004, the Neocorp Groupreported a net loss and loss per Share of US$3.2 million and 0.65 US cents respectively.After the Proposed Transactions, the pro forma profit after income tax attributable to equityholders and earnings per Share of the Enlarged Group would be US$7.3 million and 1.11 UScents respectively based.

7.3 NTA

Based on its unaudited balance sheet as at 31 July 2007, the Neocorp Group had a negativeshareholders’ equity of US$10.8 million and NTL per Share of 2.2 US cents. After theProposed Transactions, the pro forma NTA and NTA per Share of the Enlarged Group areestimated to be US$36.0 million and 5.48 US cents respectively.

7.4 Gearing

Based on its audited balance sheet as at 30 November 2004, the Neocorp Group had totalborrowings of US$6.0 million and gearing ratio of 0.48 times. After the completion of theProposed Transactions, the Enlarged Group would have total borrowings US$1.7 million andgearing ratio of 0.04 times.

8. OTHER CONSIDERATIONS

8.1 Whitewash Resolution As A Condition Precedent for the Proposed Acquisition

The Whitewash Resolution is a condition precedent for the Proposed Acquisition andconsequently, a condition precedent for the following transactions contemplated in theCircular:–

(a) The Scheme of Arrangement

In conjunction with the Proposed Transactions, the Company has entered into theScheme of Arrangement with the Creditors under which the Company proposes toissue the Scheme Shares to the Creditors in full satisfaction, release and discharge ofthe Company’s liabilities under the Outstanding Debts. The Scheme of Arrangementwas approved by Creditors on 24 September 2007 and was sanctioned by the court on11 October 2007.

(b) The Proposed Compliance Placement

Subject to Shareholders’ approval, the Company will enter into share placementagreements with placement agent(s) and/or investors for the placement of new Sharesin relation to the Proposed Compliance Placement subject to, inter alia, the agreement

APPENDIX B

B-13

between the Company and the placement agent(s) and/or investors on the share issueprice. In this connection, up to 172,932,000 Compliance Shares will be allotted andissued to the public investors. The Company expects to receive net proceeds ofapproximately S$40 million (after deducting estimated expenses) upon the completionof the Proposed Compliance Placement which would substantially augment theCompany’s capital base.

Accordingly, if the Whitewash Resolution is not approved by the Independent Shareholders,the Proposed Acquisition will not take place and consequently, the Scheme of Arrangementand the Proposed Compliance Placement will also not take place.

8.2 Dilution of Shareholdings of Independent Shareholders

The existing Independent Shareholders will experience significant dilution in theirshareholding interests in the Company. Upon completion of the Proposed Transactions,existing Independent Shareholders’ interests will be diluted to 0.4% of the Enlarged ShareCapital.

Please refer to Section 13.4 of the Circular for more information on the dilutive effect of theProposed Transactions.

8.3 Moratorium

The Vendors and their nominee, New Page Investments Ltd, who will hold the ConsiderationShares and Conversion Shares, have undertaken not to dispose of or transfer any of theConsideration Shares and Conversion Shares for a period of 12 months from the date of thelisting of the Shares, and has undertaken to retain at least 50.0% of the aggregate of theConsideration Shares and Conversion Shares they hold for a period of 12 months thereafter.The Vendors have also undertaken not to dispose of or transfer any part of theirshareholdings in New Page Investments Ltd for a period of 24 months from the date of thelisting of the Shares.

8.4 Risk Factors

We advise you to draw the attention of Independent Shareholders to Section 14 of theCircular which detail the risk factors in relation to the Proposed Acquisition. We wish tohighlight the following risk factors in particular:–

(a) The Novo Group has a short operating track record

The Novo Group has a short operating history upon which an investor may evaluate itsperformance. It commenced operations since early 2005 and as a result, it is difficultto accurately forecast the Novo Group’s future revenue and operating expenses.Accordingly, the Novo Group’s past performance may not be indicative of its presentand future performance trend.

(b) Lack of long-term continuity of customers and suppliers

The Novo Group’s major customers and major suppliers for FP2006 are different fromthe major customers and major suppliers for FY2007. This lack of continuity ofcustomers and suppliers is because steel trading is cyclical in nature and the shifts inbusiness dynamics requires Novo Group to adapt quickly in changing whom they sell

APPENDIX B

B-14

to or buy from at any point in time. If the Novo Group is unable to adapt quickly enoughto find new customers and suppliers as necessitated by shifts in business dynamics, itsoperations and financial performance may be adversely affected.

(c) The Novo Group is reliant on bank facilities to finance trading activities

The Novo Group is reliant on the use of bank facilities to finance the purchase of steelfor trading. If the Novo Group is unable to renew its bank facilities when they becomedue and/or the Novo Group is unable to obtain other sources of funding, its operationsand financial performance may be adversely affected. Further, any significantfluctuations in interest rates may adversely affect its financial performance.

(d) Cyclical nature of the steel industry

The global steel industry is cyclical in nature and at times has been characterised byexcess capacity in the market. Excess capacity had resulted in lower internationalmarket prices for steel products. There can be no assurance that international marketprices for steel products will not decline in the future. Fluctuation in international pricesof steel products may cause fluctuations on market demand on steel products, whichmay, as a result, adversely affect the business of the Novo Group.

The PRC steel industry has also shown a cyclical nature, reflecting fluctuations indemand for steel products in the PRC. Domestic demand for steel products in the PRCis primarily affected by domestic economic conditions as well as the PRC government’smonetary and fiscal policies. Other factors affecting domestic demand include supplyand demand for the international steel market and fluctuations in the demand ofindustries with heavy usage in steel, such as the shipbuilding, construction, automobileand machinery industries. The PRC market for steel products may experience cyclicalfluctuations in the future and that such fluctuations may adversely affect the prices andvolumes of the Novo Group’s sales of the PRC’s steel products to the internationalmarket.

9. CONCLUSION AND RECOMMENDATION

In arriving at our recommendation, we have reviewed and evaluated the relevant factors which wedeem to have significant relevance to our assessment of the Whitewash Resolution, including,inter alia, the representations and information provided by the Judicial Managers and the directorsand management of the Novo Group in the Circular, the current financial condition of theCompany, the terms of the Proposed Acquisition and the valuation statistics of the ComparableCompanies.

In our assessment, we have noted the following:–

(a) The implied PER of 10.0 times for the Novo Group is higher than the average PER of 9.6times for the Comparable Companies;

(b) the implied P/B ratio of 7.4 times for the Novo Group is higher than the P/B ratios for theComparable Companies although the Comparable Companies are listed entities while theNovo Group is currently privately held;

(c) the significant dilution of shareholdings to the existing Independent Shareholders after thecompletion of the Proposed Transactions; and

(d) the risk factors set out in Section 14 of the Circular and Section 8.4 of this letter.

APPENDIX B

B-15

Notwithstanding the above, we are of the opinion that the Whitewash Resolution is not prejudicialto the interests of Independent Shareholders particularly when considered in the context of theProposed Acquisition, the Scheme of Arrangement and the Proposed Compliance Placementhaving regard to, inter alia, the following factors:–

(a) The adverse financial position of the Neocorp Group. The Company reported a net loss ofS$5.3 million in FY2004 and had a capital deficiency of S$16.4 million based on itsunaudited balance sheet as at 31 July 2007 and up to the Latest Practicable Date, there hasbeen no material developments or change to the financial position of the Company, otherthan continued losses incurred for operating expenses;

(b) The Company has been under judicial management since October 2005. The Company isno longer engaged in any on-going business activities. Its remaining 3 subsidiaries namely,Adventure Training Systems (Asia Pacific) Pte Ltd, Neocorp Innovations Pte Ltd andCeramic Technologies Pte Ltd, are currently in liquidation;

(c) Since trading in the Shares was suspended, the Company has found it challenging in itssearch for profitable companies and businesses that are able to satisfy the quantitativecriteria for re-listing under Rule 211 of the Listing Manual;

(d) The Proposed Acquisition is intended to transform the Neocorp Group into a major globalsteel trading business with significantly enhanced market capitalisation, prospects, businessscale and profitability. Upon completion of the Proposed Acquisition, the judicialmanagement of the Company will be terminated;

(e) The Proposed Acquisition is expected to enable the lifting of the current trading suspensionof the Shares. The Company intends to make an application to the SGX-ST for the transferof its listing on the SGX-SESDAQ to the SGX-ST Mainboard on completion of the ProposedTransactions. Resumption in the trading of its Shares, or new Shares, as the case may be,which is subject to the approval of the SGX-ST and the Proposed Compliance Placement,will provide the minority Shareholders with the opportunity to liquidate or deal with theirshareholdings in the Company;

(f) The implied PER of 10.0 times for the Novo Group is within the range of PERs of 5.1 timesto 23.5 times for the Comparable Companies;

(g) The implied PER of 10.0 times for the Novo Group is lower than the weighted average PERof 21.5 times for the Comparable Companies;

(h) The Judicial Managers have not, to-date, received alternative proposal which, in their view,is commercially more advantageous to Shareholders; and

(i) Approval of the Independent Shareholders for the Whitewash Resolution is a conditionprecedent for the Proposed Acquisition which is, in turn, a condition precedent for theScheme of Arrangement and the Proposed Compliance Placement. The issuance ofScheme Shares pursuant to the Scheme of Arrangement shall constitute a full and finalsettlement of all liabilities owed by the Company to the respective Creditors while thecompletion of the Proposed Compliance Placement would substantially augment its capitalbase.

Accordingly, we therefore advise you to recommend that Independent Shareholders votein favour of the Whitewash Resolution at the Extraordinary General Meeting, the notice ofwhich is set out in the Circular.

APPENDIX B

B-16

Notwithstanding our recommendation, Independent Shareholders should note that there is nocertainty as to the completion of the Proposed Compliance Placement as it is subject to, inter alia,the agreement between the Company and the placement agent(s) and/or investors on the issueprice. If the Proposed Compliance Placement did not occur, the Enlarged Group would not be ableto raise the additional capital of S$40 million for investment and general working capital purposes.In addition, it would not be able to fulfill the shareholding distribution set out in the Listing Manualand the trading in the Shares would remain suspended. Nevertheless, the completion of theProposed Acquisition would allow Shareholders to participate in the equity of a profitablebusiness.

In performing our evaluation, we have not verified the financial projections of the Neocorp Groupand/or the Novo Group. Our opinion set forth herein is based solely on publicly availableinformation and information which was provided by the Judicial Managers and the directors andmanagement of the Novo Group in the Circular. In addition, Judicial Managers should note thatwe have arrived at these recommendations based on information made available to us prior toand including the Latest Practicable Date.

We have prepared this letter for the use of the Company, to be incorporated into the Circular toShareholders dated 1 February 2008, in connection with their consideration of the WhitewashResolution.

Our recommendations are addressed to the Judicial Managers for their benefit, in connection withand for the purpose of their consideration of the Whitewash Resolution. Any recommendationsmade by the Judicial Managers in respect of the Whitewash Resolution shall remain theirresponsibility.

Our recommendations may not be used and/or relied on by any other person for any purpose atany time and in any manner except with Phillip Securities’ prior written consent in each specificcase. Our recommendations are governed by the laws of Singapore, and are strictly limited to thematters stated herein and does not apply by implication to any other matter.

For and on behalf ofPHILLIP SECURITIES PTE LTD

SOON BOON SIONGMANAGING DIRECTOR & HEADCORPORATE FINANCE

CLEMENT LEOWMANAGING DIRECTORCORPORATE FINANCE

APPENDIX B

B-17

NOVO GROUP

UNAUDITED PRO FORMA COMBINED FINANCIALINFORMATION FOR THE FINANCIAL PERIOD

FROM 31 JANUARY 2005 TO 30 APRIL 2006 ANDFINANCIAL YEAR ENDED 30 APRIL 2007

CONTENTS

Accountants’ Report. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-2

Unaudited Combined Income Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-4

Unaudited Combined Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-5

Unaudited Combined Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-6

Unaudited Combined Statements of Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-7

Notes to the Unaudited Pro Forma Combined Financial Information . . . . . . . . . . . . . . . . . . . C-8

APPENDIX C

C-1

ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA COMBINED FINANCIALINFORMATION OF NOVO GROUP (“PRO FORMA GROUP”)

31 January 2008

The Judicial ManagersNeocorp International Ltd(In Judicial Management)47 Hill Street #05-01Singapore 179365

The Board of DirectorsNovo Commodities LimitedRoom 1108 11/FChina Merchants Tower168-200 Connaught Road CentralHong Kong

Dear Sirs

This Report has been prepared for inclusion in the Circular to the shareholders of Neocorp InternationalLtd (the “Circular”) in connection with the proposed acquisition of shares owned by Yu Wing Keung,Dicky and Chow Kin Wa in certain companies (“Novo Group” or the “Pro forma Group”).

We report on the unaudited pro forma combined financial information of Novo Group set out on pagesC-4 to C-31 of the Circular to be dated 1 February 2008, which has been prepared, for illustrativepurposes only and based on certain assumptions and after making certain adjustments to show what:

(i) the financial results and changes in equity of the Pro forma Group for the financial period from 31January 2005 to 30 April 2006 and financial year ended 30 April 2007, and cash flows of the Proforma Group for the financial period ended 30 April 2006 and financial year ended 30 April 2007would have been if the group structure as of the date of this report had been in place on 31January 2005; and

(ii) the financial position of the Pro forma Group as at 30 April 2006 and 2007 would have been if thegroup structure as of the date of this report had been in place on 31 January 2005.

The pro forma combined financial information, because of its nature, may not give a true picture of thePro forma Group’s actual financial position, results, changes in equity and cash flows.

The pro forma combined financial information is the responsibility of the directors. Our responsibility isto express an opinion on the pro forma combined financial information based on our work. We carriedout procedures in accordance with Singapore Statement of Auditing Practice: SAP 24: “Auditors andPublic Offering Documents”.

We are satisfied that the financial statements of the companies that are included in the Pro forma Groupare in form and content appropriate and proper for the purpose of the preparation of the pro formafinancial information of the Pro forma Group and we have received satisfactory information andexplanation as required by us for that purpose.

APPENDIX C

C-2

In our opinion,

(i) the pro forma combined financial information has been properly prepared from the relevantfinancial statements of the companies making up the Pro forma Group which are prepared inaccordance with Singapore Financial Reporting Standards for the financial period from 31January 2005 to 30 April 2006 and financial year ended 30 April 2007;

(ii) the pro forma combined financial information has been properly prepared in a manner consistentwith the format of the financial statements and the accounting policies of the unaudited Pro formaGroup set out in Note 3 to the pro forma combined financial information;

(iii) the unaudited pro forma combined financial information has been properly prepared on the basisof preparation stated in Note 2 to the pro forma combined financial information; and

(iv) each material adjustment made to the information used in the preparation of the pro formacombined financial information is appropriate for the purpose of preparing such financialinformation.

Baker Tilly TFWLCLCertified Public AccountantsSingapore

Partner: Ong Kian Guan

APPENDIX C

C-3

NOVO GROUP

UNAUDITED COMBINED INCOME STATEMENTSFOR THE FINANCIAL PERIOD FROM 31 JANUARY 2005 TO30 APRIL 2006 AND FINANCIAL YEAR ENDED 30 APRIL 2007

Notes31.01.05 to

30.04.06 2007USD USD

Revenue 6 76,009,897 310,913,163

Cost of sales (70,849,807) (276,304,527)

Gross profit 5,160,090 34,608,636

Other operating income 7 478,294 1,254,632



Finance costs 8 (233,454) (1,502,656)

Share of results of associated companies 346,235 (24,881)

Profit before income tax 9 1,493,887 8,820,003

Income tax 10 (198,704) (1,540,522)

Profit for the period/year 1,295,183 7,279,481

Earnings per share (in cents)

Basic 11 0.27 1.50

Diluted 11 0.27 1.50

The accompanying notes form an integral part of this unaudited pro forma combined financialinformation.

APPENDIX C

C-4

NOVO GROUP

UNAUDITED COMBINED BALANCE SHEETSAT 30 APRIL 2006 AND 2007

Notes 2006 2007USD USD

Non-current assets

Property, plant and equipment 12 — 1,446,173

Investment in associated companies 13 742,096 717,215

742,096 2,163,388

Current assets

Receivables 14 21,341,317 12,206,386

Cash and bank balances 15 3,378,398 14,594,603

24,719,715 26,800,989

Total assets 25,461,811 28,964,377


Borrowings 16 — 434,817

Current liabilities

Payables 17 22,938,054 15,715,953

Bank overdraft (unsecured) 18 — 10,258

Borrowings 16 397,540 1,211,082

Tax payable 198,704 1,739,226

23,534,298 18,676,519

Total liabilities 23,534,298 19,111,336

Net assets 1,927,513 9,853,041

Equity

Share capital 19 632,330 1,278,377


1,927,513 9,853,041


APPENDIX C

C-5

NOVO GROUP

UNAUDITED COMBINED STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL PERIOD FROM 31 JANUARY 2005 TO 30 APRIL 2006 ANDFINANCIAL YEAR ENDED 30 APRIL 2007

Sharecapital

Retainedearnings Total

USD USD USD

Balance at 31 January 2005 1,283 — 1,283

Issue of share capital 631,047 — 631,047

Net profit for the period — 1,295,183 1,295,183

Balance at 30 April 2006 632,330 1,295,183 1,927,513


Net profit for the year — 7,279,481 7,279,481

Balance at 30 April 2007 1,278,377 8,574,664 9,853,041


APPENDIX C

C-6

NOVO GROUP

UNAUDITED COMBINED STATEMENTS OF CASH FLOWFOR THE FINANCIAL PERIOD FROM 31 JANUARY 2005 TO 30 APRIL 2006 ANDFINANCIAL YEAR ENDED 30 APRIL 2007

31.01.05 to30.04.06 2007

USD USDCash flows from operating activities


Adjustments for:

Depreciation of property, plant and equipment — 30,996

Interest expense 49,474 899,024

Interest income (74,715) (367,023)

Share of results of associated companies (346,235) 24,881

Operating cash flow before movements in working capital 1,122,411 9,407,881

Receivables (21,175,533) 9,127,620

Payables 20,757,286 (5,449,814)

Cash generated from operations 704,164 13,085,687

Interest income received 74,715 367,023

Net cash generated from operating activities 778,879 13,452,710

Cash flows from investing activities

Investment in associated companies (395,861) —

Purchase of property, plant and equipment — (1,477,169)

Increase in fixed deposits pledged (2,620,234) (10,847,780)

Net cash used in investing activities (3,016,095) (12,324,949)

Cash flows from financing activities

Advances from/(to) directors 2,014,984 (1,764,976)

Proceeds from borrowings 7,427,923 17,720,822

Repayments of borrowings (7,030,383) (16,472,463)

Interest expense paid (49,474) (899,024)

Proceeds from shares issued 632,330 646,047

Net cash generated from/(used in) financing activities 2,995,380 (769,594)

Net increase in cash and cash equivalents 758,164 358,167

Cash and cash equivalents at beginning of financial period/year — 758,164

Cash and cash equivalents at end of financial period/year 758,164 1,116,331

Cash and cash equivalents are represented by:


Less bank overdraft — (10,258)

Less fixed deposits pledged * (2,620,234) (13,468,014)

758,164 1,116,331

* This relates to deposits pledged with banks for borrowings (note 16) and bank facilities (note 17).


APPENDIX C

C-7

NOVO GROUP

NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATIONFOR THE FINANCIAL PERIOD FROM 31 JANUARY 2005 TO 30 APRIL 2006 ANDFINANCIAL YEAR ENDED 30 APRIL 2007

These notes form an integral part of and should be read in conjunction with the accompanyingcombined financial information.

1. General

The unaudited pro forma combined financial information has been prepared for inclusion in theCircular to shareholders of the Neocorp International Ltd in connection with the proposedacquisition of shares owned by Yu Wing Keung, Dicky and Chow Kin Wa in certain companies(“Novo Group” or the “Pro forma Group”).

2. Basis of preparation of the unaudited pro forma combined financial information of the Proforma Group

(a) Proposed acquisition

Upon completion of the proposed acquisition, the companies within the Pro forma Groupare:–

Name of companiesCountry ofincorporation

Principalactivities

Issued andpaid-up capital

Percentageof equity

held

Held by Neocorp International Ltd

Novo Commodities Limited*@ Hong Kong Trading andinvestment

USD1,025,641 100%

Nova Maritime (B.V.I.)Limited#

British VirginIslands

Shippingbrokerage

USD10 100%

Nova Shipping Pte. Ltd.** Singapore Shippingbrokerage

USD131,944 100%

Novo Investment Limited# Hong Kong Consultancyservices

USD1,282 100%

Novo Commodities Pte. Ltd.** Singapore Trading andinvestment

USD119,489 100%

Global Wealth Trading Ltd# British VirginIslands

Investmentholding

USD10 100%

Novosteel DMCC# United ArabEmirates


USD54,444 100%

Novo Commodities Ltd# British VirginIslands


USD10 100%

APPENDIX C

C-8

2. Basis of preparation of the unaudited pro forma combined financial information of the Proforma Group (cont’d)

(a) Proposed acquisition (cont’d)


Principalactivities

Issued andpaid-up capital

Percentageof equity

held

Held by Global Wealth Trading Ltd

Rico Group Ltd# British VirginIslands

Investmentholding

USD100 30%

Novostal Pte. Ltd.@@ Singapore Trading andinvestment

USD1,319,436 30%

Xinghua Holdings Limited# British VirginIslands

Investmentholding

USD1,000,000 50%

Iron And Steel ResourcesLimited#


USD1,282 45%

Held by Rico Group Ltd

Novostal Limited@ Hong Kong Trading andinvestment

USD2,000,000 100%

Held by Xinghua Holdings Limited

Xinghua Holdings (China)Limited#

Hong Kong Investmentholding

USD1,000,000 100%

The above companies operate in their respective country of incorporation except for NovaMaritime (B.V.I.) Limited and Novo Commodities Ltd, which operate in Singapore and HongKong, respectively.

Upon completion of proposed acquisition, the holding company will refer to NeocorpInternational Ltd. Related companies in this combined financial information refer to membersof the holding company’s group of companies upon completion of the proposed acquisition.

* audited by Baker Tilly TFWLCL for purpose of preparation of the pro forma combined financial information

** audited by Baker Tilly TFWLCL

@ audited by Shom & Yu CPA Limited

@@ audited by Tan, Teo & Partners

# not required to be audited

(b) Basis of preparation and compilation

The financial information set out in this report is expressed in United States Dollars (“USD”)which is the functional currency of the companies in the Pro forma Group.

The pro forma combined financial information set out in this report has been prepared forillustrative purposes only. Such information is prepared based on certain assumptions, toshow that:–

(i) the financial results, changes in equity and cash flows of the Pro forma Group for thefinancial period from 31 January 2005 to 30 April 2006 and financial year ended 30April 2007 would have been if the group structure as of the date of this report had beenin place on 31 January 2005; and

APPENDIX C

C-9


(b) Basis of preparation and compilation (cont’d)

(ii) the financial position of the Pro forma Group as at 30 April 2006 and 2007 would havebeen if the group structure as of the date of this report had been in place on 31 January2005.

The objective of these pro forma combined financial information is to show what thehistorical financial information would have been had the Pro forma Group existed since 31January 2005.

However, the pro forma combined financial information of the Pro forma Group is notnecessarily indicative of the results of operations or related effects on financial position thatwould have been obtained had the Pro forma Group actually existed earlier.

3. Significant accounting policies

(a) Basis of accounting

The combined financial information have been prepared in accordance with SingaporeFinancial Reporting Standards (“FRS”) including related interpretations promulgated byCouncil on Corporate Disclosure and Governance (“CCDG”). The combined financialinformation have been prepared under the historical cost convention except as disclosedwhere appropriate in the combined financial information.

The preparation of combined financial information in conformity with FRS requires the useof estimates and assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the combined financialinformation and the reported amounts of revenues and expenses during the financial period.Although these estimates are based on management’s best knowledge of current eventsand actions and historical experiences and various other factors that are believed to bereasonable under the circumstances, actual results may ultimately differ from thoseestimates.

The carrying amount of cash and cash equivalents, trade and other current receivables andpayables and provision approximate their respective fair value due to the relativelyshort-term maturity of these financial instruments.

In the preparation of the combined financial information, the Pro forma Group has adoptedall the FRS and Interpretations of FRS (“INT FRS”) issued by CCDG that are relevant to itsoperations and effective for the financial years presented in the combined financialinformation.

At the date of the balance sheet, the following FRSs and INT FRS were issued, revised oramended but not effective:

FRS 40 Investment Property

FRS 107 Financial Instruments: Disclosures

FRS 108 Operating Segments

INT FRS 109 Reassessment of Embedded Derivatives

INT FRS 110 Interim Financial Reporting and Impairment

APPENDIX C

C-10

3. Significant accounting policies (cont’d)

(a) Basis of accounting (cont’d)

INT FRS 111 FRS 102 — Group and Treasury Share Transactions

INT FRS 112 Service Concession Arrangements

Amendments to FRS 1 Presentation of Financial Statements on Capital Disclosure

The directors anticipate that the adoption of these FRS and INT FRS (where applicable) infuture periods will have no material financial impact on the combined financial information ofthe Pro forma Group.

(b) Basis of consolidation

All material intragroup balances and transactions and resulting unrealised profits areeliminated in preparing the combined financial information. Unrealised losses resulting fromintragroup transactions are also eliminated unless costs cannot be recovered.

(c) Associated companies

An associate is an entity over which the Pro forma Group has significant influence and thatis neither a subsidiary nor an interest in a joint venture. Significant influence is the power toparticipate in the financial and operating policy decisions of the investee but it is not controlor joint control over those policies.

The results and assets and liabilities of associated companies are incorporated in thesefinancial statements using the equity method of accounting. Under the equity method,investments in associated companies are carried in the consolidated balance sheet at costas adjusted for post-acquisition changes in the Pro forma Group’s share of the net assets ofthe associate, less any impairment in the value of individual investments.

Any excess of the cost of acquisition over the Pro forma Group share of the net fair valueof the identifiable assets, liabilities and contingent liabilities of the associate recognised atthe date of acquisition is recognised as goodwill. The goodwill is included in the carryingamount of the investment and is assessed for impairment as part of the investment. Anyexcess of the Pro forma Group’s share of the net fair value of the identifiable assets,liabilities and contingent liabilities over the cost of the acquisition, after reassessment, isrecognised immediately in the consolidated income statement.

Where a group entity transacts with an associate of the Pro forma Group, profits and lossesare eliminated to the extent of the Pro forma Group’s interest in the relevant associate.

(d) Revenue and other operating income

Revenue is measured at the fair value of the consideration received or receivable andrepresents amounts receivable for the sale of goods net of rebates and discounts, and aftereliminating sales within the Pro forma Group.

These are recognised on the following basis:

Sales of goods — when significant risks and rewards of ownership of the goods aretransferred to the buyer.

Interest income — on a time proportion basis using the effective interest method.

APPENDIX C

C-11


(e) Borrowing costs

All borrowing costs that are interest and other costs incurred in connection with theborrowing of funds are recognised as an expense in the period in which they are incurredexcept for borrowings costs that are directly attributable to the acquisition, construction orproduction of a qualifying asset that necessarily take a substantial period of time to get readyfor their intended use or sale are capitalised as part of the cost of that asset untilsubstantially all the activities necessary to prepare the qualifying asset for its intended useor sale are complete. The interest expense is calculated using the effective interest ratemethod.

(f) Defined contribution plans

The Pro forma Group participates in a defined contribution Mandatory Provident Fundretirement benefits scheme (the “MPF Scheme”) for its employees in Hong Kong who areeligible to participate in the MPF Scheme, in accordance with the Mandatory Provident FundSchemes Ordinance. Contributions are made based on percentage of the employees’ basicsalaries and are charged to the income statement as they become payable in accordancewith the rules of the MPF Scheme. The assets of the MPF Scheme are held separately fromthose of the Pro forma Group in an independently administered fund. The Pro forma Group’semployer contributions vest fully with the employees when contributed into MPF Scheme.

(g) Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income taxis recognised in the income statement except to the extent that it relates to items recogniseddirectly to equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax ratesenacted or substantially enacted at the balance sheet date, and any adjustment to taxpayable in respect of previous years.

Deferred tax is provided using the liability method, on all temporary differences at thebalance sheet date arising between the tax bases of assets and liabilities and their carryingamounts in the financial statements. Currently enacted tax rates are used in thedetermination of deferred income tax.

Deferred tax assets are recognised to the extent that it is probable that future taxable profitwill be available against which the temporary differences can be utilised.

Deferred tax liabilities are recognised for all taxable differences associated with investmentsin subsidiary and associated companies, except where the timing of the reversal of thetemporary differences can be controlled and it is probable that the temporary differences willnot reverse in the foreseeable future.

Deferred taxes are charged or credited to equity if the tax relates to items that are creditedor charged, in the same or a different period, directly to equity.

APPENDIX C

C-12


(h) Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and anyimpairment losses. The initial cost of property, plant and equipment comprises its purchaseprice, including import duties and non-refundable purchase taxes and any directlyattributable costs of bringing an asset to its working condition and location for its intendeduse less any trade discounts and rebates.

Subsequent expenditure relating to property, plant and equipment that has already beenrecognised is added to the carrying amount of the assets when it is probable that futureeconomic benefits, in excess of the standard of performance of the asset before theexpenditure was made, will flow to the Pro forma Group and the cost can be reliablymeasured. Other subsequent expenditure is recognised in the combined income statementduring the financial period/year when it is incurred.

Depreciation is charged so as to write off the cost of all property, plant and equipment, lessany estimated residual value over their estimated useful lives, using the straight-line methodas follows:

No. of years

Leasehold land and building 40 to 50 years

Furniture and equipment 5 years

Computer equipment 5 years

Motor vehicle 5 years

Renovation 5 years

Fully depreciated assets are retained in the combined financial information until they are nolonger in use.

(i) Impairment of non-financial assets

At each balance sheet date, the Pro forma Group reviews the carrying amounts of itsnon-financial assets to determine whether there is any indication that those assets havesuffered an impairment loss. If any such indication exists, the recoverable amount of theasset is estimated in order to determine the extent of the impairment loss (if any). Where itis not possible to estimate the recoverable amount of an individual asset, the Pro formaGroup estimates the recoverable amount of the cash-generating unit to which the assetbelongs.

Recoverable amount is the higher of fair value less costs to sell and value in use. Inassessing value in use, the estimated future cash flows are discounted to their present valueusing a pre-tax discount rate that reflects current market assessments of the time value ofmoney and the risks specific to the asset.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less thanits carrying amount, the carrying amount of the asset (cash-generating) is reduced to itsrecoverable amount. An impairment loss is recognised immediately in the income statement,unless the relevant asset is carried at a revalued amount, in which case the impairment lossis treated as a revaluation decrease.

APPENDIX C

C-13


(i) Impairment of non-financial assets (cont’d)

Where an impairment loss subsequently reverses, the carrying amount of the asset(cash-generating unit) is increased to the revised estimate of its recoverable amount, but sothat the increased carrying amount does not exceed the carrying amount that would havebeen determined had no impairment loss been recognised for the asset (cash-generatingunit) in prior years. A reversal of an impairment loss is recognised immediately in the incomestatement, unless the relevant asset is carried at a revalued amount, in which case thereversal of the impairment loss is treated as a revaluation increase.

(j) Financial instruments

Financial assets and financial liabilities are recognised on the Pro forma Group’s balancesheet when the Pro forma Group becomes a party to the contractual provisions of theinstrument.

(i) Trade and other receivables

Trade and other receivables are measured at initial recognition at fair value, and aresubsequently measured at amortised cost using the effective interest rate method.Appropriate allowances for estimated irrecoverable amounts are recognised in theincome statement when there is objective evidence that the asset is impaired. Theallowance recognised is measured as the difference between the asset’s carryingamount and the present value of estimated future cash flows discounted at theeffective interest rate computed at initial recognition.

(ii) Cash and cash equivalents

Cash and cash equivalents comprise cash on hand, demand deposits and fixeddeposits which are subject to an insignificant risk of changes in value. These alsoinclude bank overdrafts that form an integral part of the Pro forma Group’s cashmanagement.

(iii) Financial liabilities and equity

Financial liabilities and equity instruments issued by the Pro forma Group are classifiedaccording to the substance of the contractual arrangements entered into and thedefinitions of a financial liability and an equity instrument. An equity instrument is anycontract that evidences a residual interest in the assets of the Pro forma Group afterdeducting all of its liabilities. The accounting policies adopted for specific financialliabilities and equity instruments are set out below.

(iv) Trade and other payables

Payables are initially measured at fair value, and are subsequently measured atamortised cost, using the effective interest rate method.

(v) Equity instruments

Equity instruments issued by the Pro forma Group are recorded at the proceedsreceived, net of direct issue costs.

APPENDIX C

C-14


(j) Financial instruments (cont’d)

(vi) Borrowings

Interest-bearing bank loans are initially measured at fair value, and are subsequentlymeasured at amortised cost, using the effective interest rate method. Any differencebetween the proceeds (net of transaction costs) and the settlement or redemption ofborrowings is recognised over the term of the borrowings in accordance with the Proforma Group’s accounting policy for borrowing costs.

(k) Provision

Provisions are recognised when the Pro forma Group has a legal or constructive obligationas a result of past events and it is probable that an outflow of resources will be required tosettle the obligation, and a reliable estimate of the amount can be made. Provisions aremeasured at the directors’ best estimate of the expenditure required to settle the obligationat the balance sheet date, and are discounted to present value where the effect is material.

(l) Foreign currencies

(1) Functional and presentation currency

The management determined the currency of the primary economic environment inwhich the Pro forma Group operates (“the functional currency”) to be United StatesDollars (“USD”). The combined financial information of the Pro forma Group ispresented in USD. Sales and major costs of sales including major operating expensesare primarily influenced by fluctuations in USD.

(2) Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) aretranslated into the functional currency using the exchange rates prevailing at the datesof the transactions. Currency translation gains and losses resulting from the settlementof such transactions and from the translation at year-end exchange rates of monetaryassets and liabilities denominated in foreign currencies are recognised in the incomestatement.

(3) Translation of Group entities’ financial statements

The results and financial position of all the group entities (none of which has thecurrency of a hyperinflationary economy) that have a functional currency different fromthe presentation currency are translated into the presentation currency as follows:

(i) Assets and liabilities for each balance sheet presented are translated at theclosing rate at the date of the balance sheet;

(ii) Income and expenses for each income statement are translated at averageexchange rates (unless the average is not a reasonable approximation of thecumulative effect of the rates prevailing on the transaction dates, in which caseincome and expenses are translated using the exchange rates at the dates of thetransactions); and

APPENDIX C

C-15


(l) Foreign currencies (cont’d)

(3) Translation of Group entities’ financial statements (cont’d)

(iii) All resulting exchange differences are taken to the foreign currency translationreserve within equity.

On consolidation, currency translation differences arising from the translation of the netinvestment in foreign operations (including monetary items that, in substance, formpart of the net investment in foreign entities) and borrowings and other currencyinstruments designated as hedges of such investments are taken to the foreigncurrency translation reserve. When a foreign operation is disposed of, such exchangedifferences are taken to the income statement as part of the gain or loss on disposal.

(m) Operating lease

Leases where a significant portion of the risks and rewards of ownership are retained by thelessor are classified as operating leases. Payments made under operating leases (net of anyincentives received from the lessor) are taken to the income statement on straight-line basisover the lease term.

When an operating lease is terminated before the expiry of the lease period, any paymentrequired to be made to the lessor by way of penalty is recognised as an expense in theperiod in which termination takes place.

(n) Segment reporting

In accordance with the Pro forma Group’s internal financial reporting, the Pro forma Grouphas determined that business segments be presented as the primary reporting format. Inrespect of business segment reporting, unallocated costs represent administrative, certaindistribution and selling expenses. Segment assets consist primarily of receivables and cashand bank balances. Segment liabilities comprise operating liabilities and borrowings.

Capital expenditure comprises additions to property, plant and equipment. In respect ofgeographical segment reporting, sales are based on the country in which the customer islocated and total assets and capital expenditure are where the assets are located.

4. Critical accounting judgements and key sources of estimation uncertainty

Estimates and assumptions concerning the future and judgements are made in the preparation ofthe combined financial information. They affect the application of the Pro forma Group’saccounting policies, reported amounts of assets, liabilities, income and expenses and disclosuremade. They are assessed on an on-going basis and are based on experience and relevantfactors, including expectations of future events that are believed to be reasonable under thecircumstances.

(a) Critical judgement made in applying accounting policies

In the process of applying the Pro forma Group’s accounting policies, management hasmade certain judgements apart from those involving estimations which have significanteffect on amounts recognised in the combined financial information.

APPENDIX C

C-16

4. Critical accounting judgements and key sources of estimation uncertainty (cont’d)

(a) Critical judgement made in applying accounting policies (cont’d)

Impairment of investments and financial assets

The Pro forma Group follows the guidance of FRS 39 on determining when an investmentor financial asset is other than temporarily impaired. This determination requires significantjudgement by the Pro forma Group which evaluates, among other factors, the duration andextent to which the fair value of an investment or financial asset is less than its cost, and thefinancial health of and near-term business outlook for the investment or financial asset,including factors such as industry and sector performance, changes in technology andoperational and financing cash flow.

(b) Key sources of estimation uncertainty

The key assumptions concerning the future and other key sources of estimation uncertaintyat the balance sheet date, that have a significant risk of causing a material adjustment to thecarrying amounts of assets and liabilities within the next financial year are discussed below:

(i) Depreciation of property, plant and equipment

Management estimates the useful lives of the Pro forma Group’s property, plant andequipment to be within 5 to 50 years. The estimates for the useful lives and relateddepreciation charges for its property, plant and equipment is based on commercialfactors which could change significantly as a result of level of usage, technicalinnovation and competitor actions in response to severe market conditions. Changesin those commercial factors could impact the economic useful lives and the residualvalues of these assets and therefore future depreciation charges could be revised.

(ii) Income taxes

The Pro forma Group has exposure to income taxes in numerous jurisdictions.Significant judgement is involved in determining the Pro forma Group-wide provisionfor income taxes. There are certain transactions and computations for which theultimate tax determination is uncertain during the course of business. The Pro formaGroup recognises liabilities for expected tax issues based on estimates of whetheradditional taxes will be due. Where the final tax outcome of these matters is differentfrom the amounts that were initially recognised, such differences will impact the incometax and deferred tax provisions in the period in which such determination is made. Thecarrying amount of the Pro forma Group’s tax payable at 30 April 2006 and 30 April2007 was USD198,704 and USD1,739,226 respectively.

APPENDIX C

C-17

5. Related party transactions

A related party is an entity that directly or indirectly, through one or more intermediaries, is undercommon or joint control with members of the Pro forma Group companies. Related party includesassociated companies.

The following related party transactions took place between the Pro forma Group and anassociated company during the financial period/year on terms agreed by the parties concerned:

31.01.05 to30.04.06 2007

USD USD

Agency fees from associated companies 90,125 244,040

Agency fees paid to an associated company 11,477 26,363

Service fees from an associated company — 57,692

Handling fees from an associated company 40,378 —

Management fees paid to an associated company 181,203 406,339

Intra-group transactions that have been eliminated in the combined financial information are notdisclosed as related party transactions above.

6. Revenue

31.01.05 to30.04.06 2007

USD USD

Sales of steel products 76,009,897 310,913,163

7. Other operating income

31.01.05 to30.04.06 2007

USD USD

Agency fees received 90,125 711,767

Compensation received 255,000 19,983

Commission received 3,632 32,407

Service fees received — 57,692

Exchange gain — 59,762

Sundry income 54,822 5,998

403,579 887,609

Finance income:

— bank interest income 74,715 367,023

478,294 1,254,632

APPENDIX C

C-18

8. Finance costs

31.01.05 to30.04.06 2007

USD USD

Discounted bills charges — 46,606

Bank charges 183,980 557,026

Interest on bank loans 49,474 898,776

Interest on bank overdraft — 248

233,454 1,502,656

9. Profit before income tax

Profit before income tax is determined after charging the following:

31.01.05 to30.04.06 2007

USD USD

Depreciation — 30,996

Distribution agency fees 869,777 3,432,347

Freight charges 2,907,872 20,027,254

Management fees paid to an associated company 181,203 406,339

— Include share of:–

Salaries and related costs

— key management 27,856 67,292

— staff 82,094 220,578

Contribution to defined contribution plans

— key management 696 1,433

— staff 3,188 7,410

Pre-operating expenses — 3,247

Rental expenses — 1,135

Remuneration of key management

— salaries and related costs — 51,288

— contribution to defined contribution plans — 1,026

Salaries and related costs — 474

APPENDIX C

C-19

10. Income tax

31.01.05 to30.04.06 2007

USD USD

Tax expense attributable to profits is made up of:

Current income tax 198,704 1,540,522

The income tax expense on the results of the financial period/year varies from the amount ofincome tax determined by applying the applicable corporate income tax rate to profit beforeincome tax due to the following factors:

31.01.05 to30.04.06 2007

USD USD


Tax at the domestic rates applicable to profit in the countrieswhich the Pro forma Group operates 199,626 1,547,881

Expenses not deductible for tax purpose 63,629 3,467

Income not subject to tax (1,380) (7,298)

Share of results of associated companies (63,162) 3,731

Others (9) (7,259)

198,704 1,540,522

Pursuant to Income Tax Act of Singapore, Singapore-incorporated members of the Pro formaGroup are subjected to statutory income tax rate of 18% (2006: 20%).

Pursuant to Inland Revenue Ordinance of Hong Kong, members of the Pro forma Group which areincorporated in Hong Kong are subjected to statutory income tax rate of 17.5%.

Members of the Pro forma Group incorporated under the International Business Companies Actof the British Virgin Islands (“BVI”) are exempted from payment of BVI income taxes.

11. Earnings per share

Earnings per share is computed based on the enlarged share capital of Neocorp International Ltdon a fully diluted basis immediately after completion of the proposed acquisition but beforeproposed compliance placement.

31.01.05 to30.04.06 2007

USD USD

Profit attributable to Shareholders 1,295,183 7,279,481

Number of ordinary shares upon completion of proposedacquisition but before proposed compliance placement 484,753,671 484,753,671

Basic and diluted earnings per share (in cents) 0.27 1.50

APPENDIX C

C-20

12. Property, plant and equipment

Leaseholdland andbuilding

Furnitureand

equipmentComputerequipment

Motorvehicle Renovation Total

USD USD USD USD USD USD

Cost

Additions during the yearand balance at 30.4.2007 1,369,974 15,439 6,177 47,324 38,255 1,477,169

Accumulated depreciation

Charge for 2007 andbalance at 30.4.2007 25,687 1,144 289 789 3,087 30,996

Net book value

At 30.4.2007 1,344,287 14,295 5,888 46,535 35,168 1,446,173

At the balance sheet date, property, plant and equipment with the following carrying amount werepledged to certain banks for credit facilities:

2006 2007USD USD

Leasehold land and building — 1,344,287

13. Investment in associated companies

(a) Investment in associated companies comprises:

2006 2007USD USD

Unquoted equity shares, at cost 395,861 395,861

Share of post acquisition profit 346,235 321,354

Balance at end of period/year 742,096 717,215

(b) Details of associated companies are as follows:

Name Principal activities

Country ofincorporation andplace of business

Percentage ofequity held by thePro forma Group2006 2007

% %


Rico Group Ltd Investment holding British VirginIslands

30 30

Novostal Pte. Ltd. Trading and investment Singapore 30 30

APPENDIX C

C-21

13. Investment in associated companies (cont’d)

Name Principal activities

Country ofincorporation andplace of business

Percentage ofequity held by thePro forma Group2006 2007

% %


Novostal Limited Trading and investment Hong Kong 30 30

(c) The summarised financial information of the Pro forma Group’s associates which is notadjusted for the percentage of ownership held by the Pro forma Group are as follows:

2006 2007USD USD

Revenue 112,064,239 335,261,475

Profit/(loss) after tax 1,154,118 (82,939)

Total assets 6,206,164 17,866,992


14. Receivables

2006 2007USD USD

Bills receivables 21,016,400 11,881,079

Deposits — 6,490

Prepayments 41,458 711

Other receivables 23,277 14,544

Non-trade balances due from

— related parties 94,398 145,089

— directors 165,784 158,473

324,917 325,307

21,341,317 12,206,386

The receivables from related parties and directors are unsecured, interest free and are payableon demand.

Receivables denominated in currencies other than the functional currency of the Pro forma Groupcompanies are as follows:

2006 2007USD USD

Hong Kong Dollars (“HKD”) 2,480 300,300

Singapore Dollars (“SGD”) — 608

Chinese Renminbi — 3,462

APPENDIX C

C-22

15. Cash and bank balances

2006 2007USD USD

Cash on hand and at bank 758,164 646,158

Fixed deposits (unpledged portion) — 480,431

Fixed deposits (pledged portion) 2,620,234 13,468,014

3,378,398 14,594,603

As at 30 April 2006 and 30 April 2007, fixed deposits mature within 30 days from the balance sheetdate, and have effective interest rates of 3.875% to 4.450% as at 30 April 2006, and 4.673% to5.130% as at 30 April 2007.

The Pro forma Group has pledged its fixed deposits to banks for banking facilities granted (notes16 and 17).

Cash and bank balances denominated in currencies other than the functional currency of the Proforma Group companies are as follows:

2006 2007USD USD

Hong Kong Dollars 1,031,752 3,136

The cash at bank at year end generally earn interest at rate of 1.5% to 3% per annum in 2006 and1.5% to 4.75% per annum in 2007.

16. Borrowings

2006 2007USD USD

Non-current

Secured

Bank loan — 434,817

Current

Secured


Freight loans 397,540 1,090,871

Total current borrowings 397,540 1,211,082

Total borrowings 397,540 1,645,899

APPENDIX C

C-23

16. Borrowings (cont’d)

Borrowings denominated in currencies other than the functional currency of the Pro forma Groupcompanies are as follows:

2006 2007USD USD

Hong Kong Dollars — 555,028

The borrowings are secured by:–

(i) legal pledge of the Pro forma Group’s leasehold land and building (note 12);

(ii) legal pledge on the Pro forma Group’s fixed deposits; and

(iii) personal guarantees from directors

Freight loans as at 30 April 2006 and 30 April 2007 are repayable within 27 days and 7 to 30 days,respectively, from commencement date. Bank loan is repayable by monthly instalments andmatures on 18 July 2011.

The weighted average interest rates at the balance sheet date were as follows:

2006 2007% %

Bank loan — 5.2

Freight loans 3.19 3.16

17. Payables

2006 2007USD USD

Payables 136,816 —

Bills payable 19,101,077 13,549,369

19,237,893 13,549,369

Sales deposits received 10,000 —

Accrued operating expenses 949,360 1,741,666

Payables due to

— related companies 560,033 16,437

— directors 2,180,768 408,481

3,700,161 2,166,584

22,938,054 15,715,953

APPENDIX C

C-24

17. Payables (cont’d)

Bills payable to banks are secured by fixed deposits pledged (note 15).

The amounts payable to related companies and directors are unsecured, interest free andrepayable on demand.

Payables denominated in currencies other than the functional currency of the Pro forma Groupcompanies are as follows:

2006 2007USD USD


Singapore Dollars — 2,890


18. Bank overdraft (unsecured)

Bank overdraft is denominated in United Arab Emirates Dirham (“AED”).

19. Share capital

2006 2007USD USD

Issued and fully paid capital 632,330 1,278,377

The share capital is a summation of the issued capital of Novo Commodities Limited, NovaMaritime (B.V.I.) Limited, Novo Commodities Pte. Ltd., Global Wealth Trading Ltd, NovoCommodities Ltd, Nova Shipping Pte. Ltd. and Novo Investment Limited as at the respectiveperiod/year end.

2006 2007Number of

issued sharecapital

Total sharecapitalUSD

Number ofissued share

capital


Balance at

— 31 January 2005 10,001 1,283 — —

— 1 May 2006 — — 4,200,021 632,330

Issue of shares 4,190,020 631,047 4,210,000 646,047

Balance at end of financial period/year 4,200,021 632,330 8,410,021 1,278,377

APPENDIX C

C-25

19. Share capital (cont’d)

All issued shares are fully paid.

Issued capital at 31 January 2005 relates to incorporation of the following companies:

(i) Global Wealth Trading Ltd issued 1 share of USD1 per share for cash on 3 January 1996;and

(ii) Novo Commodities Limited issued 10,000 shares of HKD1 (USD 0.13) per share for cash on31 January 2005.

Certain members of the Pro forma Group issued the following shares during the financialperiod/year:–

Period from 31 January 2005 to 30 April 2006

(i) Novo Commodities Limited issued 3,990,000 shares of HKD1 (USD 0.13) per share for cashon 22 April 2005 to provide funds for the expansion of the company’s operations;

(ii) Nova Maritime (B.V.I.) Limited issued 10 shares of USD1 per share for cash on 23 May 2005to incorporate the company;

(iii) Novo Commodities Pte. Ltd. issued 200,000 shares of SGD1 (USD 0.60) per share for cashon 7 July 2005 to incorporate the company; and

(iv) Novo Commodities Ltd issued 10 shares of USD1 per share for cash on 5 January 2006 toincorporate the company.

Year ended 30 April 2007

(i) Nova Shipping Pte. Ltd. issued 200,000 shares of SGD 1 (USD 0.66) per share for cash on1 June 2006 to incorporate the company;

(ii) Novo Commodities Limited issued 4,000,000 shares of HKD1 (USD 0.13) per share for cashon 13 June 2006 to provide funds for the expansion of the company’s operations; and

(iii) Novo Investment Limited issued 10,000 shares of HKD1 (USD 0.13) per share for cash on27 October 2006 to incorporate the company.

20. Commitments

(a) Operating lease commitments

2006 2007USD USD

No later than one financial year — 14,212

Later than one financial year but not later than five financial years — 9,474

— 23,686

APPENDIX C

C-26

20. Commitments (cont’d)

(b) Bills discounted with recourse

2006 2007USD USD

Bills discounted with recourse 17,385,587 10,666,275

21. Financial instruments

(a) Financial risk management

The Pro forma Group’s overall risk management is determined and carried out by the boardof directors on an informal basis.

The Pro forma Group’s activities expose it to a variety of financial risks, namely foreignexchange risk, interest rate risk, credit risk and liquidity risk.

The Pro forma Group does not engage in derivative financial instruments for speculativepurposes.

(i) Foreign exchange risk

The Pro forma Group transacts its business mainly in US Dollar and hence there is nosignificant exposure to foreign exchange risk. The Pro forma Group does not useforward contracts to hedge its exposure to foreign currency risk.

(ii) Interest rate risk

The Pro forma Group’s exposure to changes in interest rates relates primarily to thePro forma Group’s debt obligations and fixed deposits placed with financial institutions.The Pro forma Group maintains its borrowings in both variable and fixed rateinstruments depending on which terms are more favourable to the Pro forma Group.The Pro forma Group manages its interest rate risk on its interest income by placing thesurplus funds in fixed deposits of varying maturities and interest rate terms.

(iii) Credit risk

The Pro forma Group’s principal financial assets are cash and bank balances, andreceivables.

Bank balances are placed with reputable financial institutions.

The Pro forma Group’s credit risk is primarily attributable to its receivables.

The Pro forma Group has no significant concentration of credit risk, with exposurespread over a large number of counterparties and customers.

(iv) Liquidity risk

The Pro forma Group monitors and maintains sufficient cash and cash equivalents, andadequate credit facilities for its liquidity and cash flow requirements.

APPENDIX C

C-27

21. Financial instruments (cont’d)

(b) Fair value of financial assets and financial liabilities

The carrying amounts of financial assets and liabilities as at balance sheet datesapproximate their fair values.

22. Segment information

Segment accounting policies are the same as the policies of the Pro forma Group as describedin Note 3.

(a) Business segments

Semi-finishedproducts

Finishedproducts Others Total

USD USD USD USD

Period from 31 January 2005 to30 April 2006

Revenue 15,789,606 60,220,291 — 76,009,897

Segment results 164,606 1,217,835 — 1,382,441

Unallocated income 478,294

Unallocated costs (479,629)

Finance costs (233,454)

Share of results of associates 346,235

Profit before income tax 1,493,887

Income tax (198,704)

Net profit for the period 1,295,183

Assets and liabilities

Unallocated assets 25,461,811

Total assets 25,461,811

Unallocated liabilities 23,534,298

Total liabilities 23,534,298

APPENDIX C

C-28

22. Segment information (cont’d)

(a) Business segments (cont’d)


Finishedproducts Others Total

USD USD USD USD


Revenue 111,280,849 199,456,038 176,276 310,913,163

Segment results 1,732,953 9,414,075 2,007 11,149,035

Unallocated income 1,254,632

Unallocated costs (2,056,127)

Finance costs (1,502,656)

Share of results of associates (24,881)


Income tax (1,540,522)

Net profit for the year 7,279,481






Semi-finished products include mainly steel slabs and billets. Finished products includemainly steel plates, hot rolled coils, cold rolled coils, wire rods and deformed bars. Othersinclude special and coated products such as galvanised steel coils, pre-painted galvanisedsteel coils and tinplate.

There is no reasonable basis to allocate other income and administrative, certain distributionand selling expenses to the different segments, and accordingly these items have beendisclosed as unallocated income and unallocated costs respectively.

Assets of the Pro forma Group are utilised interchangeably between the different segmentsand there is no reasonable basis to allocate liabilities of the Pro forma Group between thedifferent segments. Accordingly capital expenditure, assets and liabilities of the Pro formaGroup are disclosed as unallocated in the segment report.

(b) Secondary reporting format — geographical segments

The turnover by geographical segments are based on the location of customers regardlessof where the goods are produced.

The Pro forma Group’s operations are located in 4 main geographical areas. The followingtable provides an analysis of the Pro forma Group’s sales by geographical markets,irrespective of the origin of the goods and services.

APPENDIX C

C-29


(b) Secondary reporting format — geographical segments (cont’d)

Sales revenue by geographical markets:

2006 2007USD USD

North Asia 27,698,532 23,225,034

South East Asia 20,820,402 131,852,347

India and Middle East 25,477,935 103,490,705

Others 2,013,028 52,345,077

76,009,897 310,913,163

Assets by geographical markets:

2006 2007USD USD

North Asia 8,093,975 14,839,676

South East Asia 7,247,727 2,692,474

India and Middle East 9,373,545 9,995

Others 4,468 9,258,844

24,719,715 26,800,989

The Pro forma Group’s capital expenditures are all incurred and located in Hong Kong andaccordingly no further geographical segment information is presented.

23. Subsequent events

(a) Novosteel DMCC

On 26 August 2007, AED200,000 (USD54,444) was injected in Novosteel DMCC as initialpaid-up capital.

(b) Global Wealth Trading Ltd

Global Wealth Trading Ltd issued 9 shares of USD1 per share for cash on 14 September2007 to provide funds for the expansion of the company’s operations.

(c) Xinghua Holdings Limited

In October 2007, Xinghua Holdings Limited issued shares amounting to USD500,000 toGlobal Wealth Trading Ltd.

APPENDIX C

C-30

23. Subsequent events (cont’d)

(d) Xinghua Holdings (China) Limited

In November 2007, Xinghua Holdings (China) Limited issued shares amounting toUSD1,000,000 to Xinghua Holdings Limited.

(e) Iron And Steel Resources Limited

In November 2007, Iron And Steel Resources Limited issued shares amounting USD577 toGlobal Wealth Trading Ltd.

(f) On 31 December 2007, the Board of Directors of Novo Commodities Limited declared andpaid tax exempt interim dividend of USD0.50 per share, amounting to USD4 million.

24. Authorisation of unaudited pro forma combined financial information

The unaudited pro forma combined financial information of the Pro forma Group for the financialperiod from 31 January 2005 to 30 April 2006 and financial year ended 30 April 2007 wereauthorised for issue in accordance with a resolution of the directors dated 31 January 2008.

APPENDIX C

C-31

NOVO GROUP

UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATIONFOR THE FINANCIAL PERIOD FROM 1 MAY 2007 TO 30 SEPTEMBER 2007

CONTENTS

Accountants’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-2

Unaudited Combined Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-4

Unaudited Combined Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-5

Unaudited Combined Statement of Changes in Equity. . . . . . . . . . . . . . . . . . . . . . . . . . . D-6

Unaudited Combined Statement of Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . D-7

Notes to the Unaudited Pro Forma Combined Financial Information. . . . . . . . . . . . . . . . D-8

APPENDIX D

D-1

ACCOUNTANTS’ REPORT ON THE UNAUDITED PRO FORMA COMBINED FINANCIALINFORMATION OF NOVO GROUP (“PRO FORMA GROUP”)

31 January 2008

The Judicial ManagersNeocorp International Ltd(In Judicial Management)47 Hill Street #05-01Singapore 179365

The Board of DirectorsNovo Commodities LimitedRoom 1108 11/FChina Merchants Tower168-200 Connaught Road CentralHong Kong

Dear Sirs

This Report has been prepared for inclusion in the Circular to be dated 1 February 2008 to theshareholders of Neocorp International Ltd (the “Circular”) in connection with the proposed acquisitionof shares owned by Yu Wing Keung, Dicky and Chow Kin Wa in certain companies (“Novo Group” orthe “Pro forma Group”).

Scope of review

We have reviewed the accompanying unaudited pro forma combined financial information of NovoGroup set out on pages D-4 to D-32 of the Circular which comprise the unaudited combined incomestatement, unaudited combined statement of changes in equity and unaudited combined cash flowstatement of the Novo Group for the five months ended 30 September 2007 and the unauditedcombined balance sheet of the Novo Group as at 30 September 2007, and significant accountingpolicies and other explanatory notes. The directors are responsible for the preparation and fairpresentation of these unaudited combined financial information in accordance with Singapore FinancialReporting Standard 34, “Interim Financial Reporting” (“FRS 34”). Our responsibility is to express aconclusion on this unaudited pro forma combined financial information based on our review.

For the purpose of this report, the comparative figures for the corresponding five months ended 30September 2006 were extracted from the unaudited pro forma combined management financialinformation and we have not carried out a review of this financial information. The unaudited pro formacombined management financial information of the Novo Group for the period ended 30 September2006 is the responsibility of the directors.

We conducted our review in accordance with Singapore Standard on Review Engagements 2410,“Review of Interim Financial Information Performed by the Independent Auditor of the Entity”. A reviewof the unaudited pro forma combined financial information consists of making inquiries, primarily ofpersons responsible for financial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted in accordance withSingapore Standards on Auditing and consequently does not enable us to obtain assurance that wewould become aware of all significant matters that might be identified in an audit. Accordingly, we donot express an audit opinion.

APPENDIX D

D-2

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the unaudited proforma combined financial information does not present fairly, in all material respects, the unaudited proforma combined financial position of the Pro forma Group as at 30 September 2007, and of itsunaudited combined results, unaudited combined statement of changes in equity and unauditedcombined cash flows for the five months ended 30 September 2007 in accordance with FRS 34.

Baker Tilly TFWLCLCertified Public AccountantsSingapore

Partner: Ong Kian Guan

APPENDIX D

D-3

NOVO GROUP

UNAUDITED COMBINED INCOME STATEMENTFOR THE FINANCIAL PERIOD FROM 1 MAY 2007 TO 30 SEPTEMBER 2007

Five months ended30 September

Notes 2006 2007USD

(Unaudited)USD

(Unaudited)

Revenue 6 107,681,484 211,484,043

Cost of sales (96,645,196) (183,508,477)

Gross profit 11,036,288 27,975,566

Other operating income 7 364,679 596,403



Finance costs 8 (655,428) (1,083,801)

Share of results of associated companies (144,726) (39,730)


Income tax 10 (340,715) (1,221,544)

Profit for the period 1,450,892 5,690,664

Earnings per share (in cents)

Basic 11 0.30 1.17

Diluted 11 0.30 1.17


APPENDIX D

D-4

NOVO GROUP

UNAUDITED COMBINED BALANCE SHEETAT 30 SEPTEMBER 2007

NotesAs at

30 April 2007As at

30 September 2007USD

(Audited)USD

(Unaudited)

Non-current assets

Property, plant and equipment 12 1,446,173 1,436,356

Investment in associated companies 13 717,215 684,092

2,163,388 2,120,448

Current assets

Receivables 14 12,206,386 39,872,016

Inventories 15 — 817,688


26,800,989 50,546,611

Total assets 28,964,377 52,667,059


Borrowings 17 434,817 381,809

Current liabilities

Payables 18 15,715,953 31,212,292

Bank overdraft (unsecured) 19 10,258 6,491

Borrowings 17 1,211,082 2,507,539

Tax payable 1,739,226 2,960,770

18,676,519 36,687,092


Net assets 9,853,041 15,598,158

Equity

Share capital 20 1,278,377 1,332,830


9,853,041 15,598,158


APPENDIX D

D-5

NOVO GROUP

UNAUDITED COMBINED STATEMENT OF CHANGES IN EQUITYFOR THE FINANCIAL PERIOD FROM 1 MAY 2007 TO 30 SEPTEMBER 2007

Sharecapital


USD USD USD

Balance at 30 April 2006 632,330 1,295,183 1,927,513



Balance at 30 September 2006 (Unaudited) 1,277,095 2,746,075 4,023,170

Balance at 30 April 2007 (Audited) 1,278,377 8,574,664 9,853,041



Balance at 30 September 2007 (Unaudited) 1,332,830 14,265,328 15,598,158


APPENDIX D

D-6

NOVO GROUP

UNAUDITED COMBINED STATEMENT OF CASH FLOWFOR THE FINANCIAL PERIOD FROM 1 MAY 2007 TO 30 SEPTEMBER 2007


2006 2007USD

(Unaudited)USD

(Unaudited)

Cash flows from operating activitiesProfit before income tax 1,791,607 6,912,208Add non cash items:Depreciation of property, plant and equipment 7,706 22,367Interest expense 449,391 735,829Interest income (123,696) (202,267)Share of results of associated companies 144,726 39,730Exchange difference — (6,607)

Operating cash flow before movements in working capital 2,269,734 7,501,260Inventories — (817,688)Receivables 19,839,682 (26,861,302)Payables (19,383,043) 15,499,195

Cash generated from/(used in) operations 2,726,373 (4,678,535)Interest income received 123,696 202,267

Net cash generated from/(used in) operating activities 2,850,069 (4,476,268)

Cash flows from investing activitiesPurchase of property, plant and equipment (1,369,974) (12,550)Decrease in fixed deposits subjected to restriction (1,052,119) 10,351,098

Net cash (used in)/generated from investing activities (2,422,093) 10,338,548

Cash flows from financing activitiesAdvances to directors (1,528,131) (807,184)Proceeds from borrowings 5,179,888 16,429,087Repayments of borrowings (4,955,116) (15,185,638)Interest expense paid (449,391) (735,829)Proceeds from shares issued 644,764 54,453

Net cash used in financing activities (1,107,986) (245,111)

Net (decrease)/increase in cash and cash equivalents (680,010) 5,617,169Cash and cash equivalents at beginning of financial period 758,164 1,116,331

Cash and cash equivalents at end of financial period 78,154 6,733,500

Cash and cash equivalents are represented by:Cash and bank balances 3,750,507 9,856,907Less Bank overdraft — (6,491)

3,750,507 9,850,416Less fixed deposits pledged* (3,672,353) (3,116,916)

78,154 6,733,500



APPENDIX D

D-7

NOVO GROUP

NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATIONFOR THE FINANCIAL PERIOD FROM 1 MAY 2007 TO 30 SEPTEMBER 2007

These notes form an integral part of and should be read in conjunction with the accompanyingcombined financial information.

1. General

The unaudited pro forma financial information has been prepared for inclusion in the Circular toshareholders of the Neocorp International Ltd in connection with the proposed acquisition ofshares owned by Yu Wing Keung, Dicky and Chow Kin Wa in certain companies (“Novo Group”or the “Pro forma Group”).

2. Basis of preparation of the unaudited pro forma combined financial information of the Proforma Group

(a) Proposed acquisition

Upon completion of the proposed acquisition, the companies within the Pro forma Groupare:–


Principalactivities

Issued andpaid-upcapital

Percentageof equity

held

Held by Neocorp International Ltd

Novo Commodities Limited Hong Kong Trading andinvestment

USD1,025,641 100%

Nova Maritime (B.V.I.) Limited British VirginIslands

Shippingbrokerage

USD10 100%

Nova Shipping Pte. Ltd. Singapore Shippingbrokerage

USD131,944 100%

Novo Investment Limited Hong Kong Consultancyservices

USD1,282 100%

Novo Commodities Pte. Ltd. Singapore Trading andinvestment

USD119,489 100%

Global Wealth Trading Ltd British VirginIslands

Investmentholding

USD10 100%

Novosteel DMCC United ArabEmirates


USD54,444 100%

Novo Commodities Ltd British VirginIslands


USD10 100%

APPENDIX D

D-8


(a) Proposed acquisition (cont’d)


Principalactivities

Issued andpaid-upcapital

Percentageof equity

held


Rico Group Ltd British VirginIslands

Investmentholding

USD100 30%

Novostal Pte. Ltd. Singapore Trading andinvestment

USD1,319,436 30%

Xinghua Holdings Limited British VirginIslands

Investmentholding

USD1,000,000 50%

Iron And Steel ResourcesLimited


USD1,282 45%


Novostal Limited Hong Kong Trading andinvestment

USD2,000,000 100%

Held by Xinghua Holdings Limited

Xinghua Holdings (China)Limited

Hong Kong Investmentholding

USD1,000,000 100%

The above companies operate in their respective country of incorporation except for NovaMaritime (B.V.I.) Limited and Novo Commodities Ltd, which operate in Singapore and HongKong, respectively.

Upon completion of proposed acquisition, the holding company will refer to NeocorpInternational Ltd. Related companies in this unaudited pro forma combined financialinformation refer to members of the holding company’s group of companies upon completionof the proposed acquisition.

(b) Basis of preparation and compilation

The unaudited pro forma combined financial information set out in this report is expressedin United States Dollars (“USD”) which is the functional currency of the companies in the Proforma Group.

The unaudited pro forma combined financial information set out in this report has beenprepared for illustrative purposes only. Such information is prepared based on certainassumptions, to show that:–

(i) the financial results, changes in equity and cash flows of the Pro forma Group for thefinancial period from 1 May 2007 to 30 September 2007 would have been if the groupstructure as of the date of this report had been in place on 31 January 2005; and

(ii) the financial position of the Pro forma Group as at 30 September 2007 would havebeen if the group structure as of the date of this report had been in place on 31 January2005.

APPENDIX D

D-9


(b) Basis of preparation and compilation (cont’d)

The objective of these unaudited pro forma combined financial information is to show whatthe historical financial information would have been had the Pro forma Group existed since31 January 2005.

However, the unaudited pro forma combined financial information of the Pro forma Group isnot necessarily indicative of the results of operations or related effects on financial positionthat would have been obtained had the Pro forma Group actually existed earlier.



The unaudited pro forma combined financial information have been prepared in accordancewith Singapore Financial Reporting Standards (“FRS”) including related interpretationspromulgated by Council on Corporate Disclosure and Governance (“CCDG”). The combinedfinancial information have been prepared under the historical cost convention except asdisclosed where appropriate in the combined financial information.

The preparation of unaudited pro forma combined financial information in conformity withFRS requires the use of estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets and liabilities at the date of theunaudited pro forma combined financial information and the reported amounts of revenuesand expenses during the financial period. Although these estimates are based onmanagement’s best knowledge of current events and actions and historical experiences andvarious other factors that are believed to be reasonable under the circumstances, actualresults may ultimately differ from those estimates.

The carrying amount of cash and cash equivalents, trade and other current receivables andpayables and provision approximate their respective fair value due to the relativelyshort-term maturity of these financial instruments.

In the preparation of the unaudited pro forma combined financial information, the Pro formaGroup has adopted all the FRS and Interpretations of FRS (“INT FRS”) issued by CCDG thatare relevant to its operations and effective for the financial period presented in the unauditedpro forma combined financial information.

At the date of the balance sheet, the following FRSs and INT FRS were issued, revised oramended but not effective:

FRS 23 Borrowing costs








APPENDIX D

D-10



The directors anticipate that the adoption of these FRS and INT FRS (where applicable) infuture periods will have no material financial impact on the unaudited pro forma combinedfinancial information of the Pro forma Group.

(b) Basis of consolidation

All material intragroup balances and transactions and resulting unrealised profits areeliminated in preparing the unaudited pro forma combined financial information. Unrealisedlosses resulting from intragroup transactions are also eliminated unless costs cannot berecovered.

(c) Associated companies

An associate is an entity over which the Pro forma Group has significant influence and thatis neither a subsidiary nor an interest in a joint venture. Significant influence is the power toparticipate in the financial and operating policy decisions of the investee but it is not controlor joint control over those policies.

The results and assets and liabilities of associated companies are incorporated in thesefinancial statements using the equity method of accounting. Under the equity method,investments in associated companies are carried in the unaudited combined balance sheetat cost as adjusted for post-acquisition changes in the Pro forma Group’s share of the netassets of the associate, less any impairment in the value of individual investments.

Any excess of the cost of acquisition over the Pro forma Group share of the net fair valueof the identifiable assets, liabilities and contingent liabilities of the associate recognised atthe date of acquisition is recognised as goodwill. The goodwill is included in the carryingamount of the investment and is assessed for impairment as part of the investment. Anyexcess of the Pro forma Group’s share of the net fair value of the identifiable assets,liabilities and contingent liabilities over the cost of the acquisition, after reassessment, isrecognised immediately in the unaudited combined income statement.

Where a group entity transacts with an associate of the Pro forma Group, profits and lossesare eliminated to the extent of the Pro forma Group’s interest in the relevant associate.

(d) Revenue and other operating income

Revenue is measured at the fair value of the consideration received or receivable andrepresents amounts receivable for the sale of goods net of rebates and discounts, and aftereliminating sales within the Pro forma Group.


Sales of goods — when significant risks and rewards of ownership of the goodsare transferred to the buyer.


APPENDIX D

D-11


(e) Borrowing costs


(f) Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Pro formaGroup pays fixed contributions into separate entities such as the Central Provident Fund andMandatory Provident Fund retirement benefits scheme, and will have no legal orconstructive obligation to pay further contributions if any of the funds do not hold sufficientassets to pay all employee benefits relating to employee service in current or preceding year.Contributions to national pension schemes are recognised as an expense in the period inwhich the related service is performed.

(g) Income tax

Income tax on the profit or loss for the period comprises current and deferred tax. Incometax is recognised in the income statement except to the extent that it relates to itemsrecognised directly to equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the period, using tax ratesenacted or substantially enacted at the balance sheet date, and any adjustment to taxpayable in respect of previous years.



Deferred tax liabilities are recognised for all taxable differences associated with investmentsin subsidiary and associated companies, except where the timing of the reversal of thetemporary differences can be controlled and it is probable that the temporary differences willnot reverse in the foreseeable future.


APPENDIX D

D-12


(h) Property, plant and equipment


Subsequent expenditure relating to property, plant and equipment that has already beenrecognised is added to the carrying amount of the assets when it is probable that futureeconomic benefits, in excess of the standard of performance of the asset before theexpenditure was made, will flow to the Pro forma Group and the cost can be reliablymeasured. Other subsequent expenditure is recognised in the unaudited combined incomestatement during the financial period when it is incurred.


No. of years



Computer equipment 3 to 5 years


Renovation 5 years

Fully depreciated assets are retained in the unaudited pro forma combined financialinformation until they are no longer in use.

(i) Inventories

Inventories are carried at the lower of cost and net realisable value. Net realisable value isthe estimated selling price in the ordinary course of business less applicable sellingexpenses.

(j) Impairment of non-financial assets

At each balance sheet date, the Pro forma Group reviews the carrying amounts of itsnon-financial assets to determine whether there is any indication that those assets havesuffered an impairment loss. If any such indication exists, the recoverable amount of theasset is estimated in order to determine the extent of the impairment loss (if any). Where itis not possible to estimate the recoverable amount of an individual asset, the Pro formaGroup estimates the recoverable amount of the cash-generating unit to which the assetbelongs.


APPENDIX D

D-13


(j) Impairment of non-financial assets (cont’d)



(k) Financial instruments

Financial assets and financial liabilities are recognised on the Pro forma Group’s balancesheet when the Pro forma Group becomes a party to the contractual provisions of theinstrument.




Cash and cash equivalents comprise cash on hand, demand deposits and fixeddeposits which are subject to an insignificant risk of changes in value. These alsoinclude bank overdrafts that form an integral part of the Pro forma Group’s cashmanagement.


Financial liabilities and equity instruments issued by the Pro forma Group are classifiedaccording to the substance of the contractual arrangements entered into and thedefinitions of a financial liability and an equity instrument. An equity instrument is anycontract that evidences a residual interest in the assets of the Pro forma Group afterdeducting all of its liabilities. The accounting policies adopted for specific financialliabilities and equity instruments are set out below.

APPENDIX D

D-14


(k) Financial instruments (cont’d)




Equity instruments issued by the Pro forma Group are recorded at the proceedsreceived, net of direct issue costs.

(vi) Borrowings

Interest-bearing bank loans are initially measured at fair value, and are subsequentlymeasured at amortised cost, using the effective interest rate method. Any differencebetween the proceeds (net of transaction costs) and the settlement or redemption ofborrowings is recognised over the term of the borrowings in accordance with the Proforma Group’s accounting policy for borrowing costs.

(l) Provision

Provisions are recognised when the Pro forma Group has a legal or constructive obligationas a result of past events and it is probable that an outflow of resources will be required tosettle the obligation, and a reliable estimate of the amount can be made. Provisions aremeasured at the directors’ best estimate of the expenditure required to settle the obligationat the balance sheet date, and are discounted to present value where the effect is material.

(m) Foreign currencies

(1) Functional and presentation currency

The management determined the currency of the primary economic environment inwhich the Pro forma Group operates (“the functional currency”) to be United StatesDollars (“USD”). The unaudited pro forma combined financial information of the Proforma Group is presented in USD. Sales and major costs of sales including majoroperating expenses are primarily influenced by fluctuations in USD.

(2) Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) aretranslated into the functional currency using the exchange rates prevailing at the datesof the transactions. Currency translation gains and losses resulting from the settlementof such transactions and from the translation at period-end exchange rates of monetaryassets and liabilities denominated in foreign currencies are recognised in theunaudited combined income statement.

APPENDIX D

D-15


(m) Foreign currencies (cont’d)

(3) Translation of Group entities’ financial statements

The results and financial position of all the group entities (none of which has thecurrency of a hyperinflationary economy) that have a functional currency different fromthe presentation currency are translated into the presentation currency as follows:

(i) Assets and liabilities presented are translated at the closing rate at the date of thebalance sheet;

(ii) Income and expenses are translated at average exchange rates (unless theaverage is not a reasonable approximation of the cumulative effect of the ratesprevailing on the transaction dates, in which case income and expenses aretranslated using the exchange rates at the dates of the transactions); and

(iii) All resulting exchange differences are taken to the foreign currency translationreserve within equity.

On consolidation, currency translation differences arising from the translation of the netinvestment in foreign operations (including monetary items that, in substance, formpart of the net investment in foreign entities) and borrowings and other currencyinstruments designated as hedges of such investments are taken to the foreigncurrency translation reserve. When a foreign operation is disposed of, such exchangedifferences are taken to the income statement as part of the gain or loss on disposal.

(n) Operating lease



(o) Segment reporting

In accordance with the Pro forma Group’s internal financial reporting, the Pro forma Grouphas determined that business segments be presented as the primary reporting format. Inrespect of business segment reporting, unallocated costs represent administrative, certaindistribution and selling expenses. Segment assets consist primarily of receivables and cashand bank balances. Segment liabilities comprise operating liabilities and borrowings.

Capital expenditure comprises additions to property, plant and equipment. In respect ofgeographical segment reporting, sales are based on the country in which the customer islocated and total assets and capital expenditure are where the assets are located.

APPENDIX D

D-16


Estimates and assumptions concerning the future and judgements are made in the preparation ofthe unaudited pro forma combined financial information. They affect the application of the Proforma Group’s accounting policies, reported amounts of assets, liabilities, income and expensesand disclosure made. They are assessed on an on-going basis and are based on experience andrelevant factors, including expectations of future events that are believed to be reasonable underthe circumstances.


In the process of applying the Pro forma Group’s accounting policies, management hasmade certain judgements apart from those involving estimations which have significanteffect on amounts recognised in the unaudited pro forma combined financial information.


The Pro forma Group follows the guidance of FRS 39 on determining when an investmentor financial asset is other than temporarily impaired. This determination requires significantjudgement by the Pro forma Group which evaluates, among other factors, the duration andextent to which the fair value of an investment or financial asset is less than its cost, and thefinancial health of and near-term business outlook for the investment or financial asset,including factors such as industry and sector performance, changes in technology andoperational and financing cash flow.




Management estimates the useful lives of the Pro forma Group’s property, plant andequipment to be within 3 to 50 years. The estimates for the useful lives and relateddepreciation charges for its property, plant and equipment is based on commercialfactors which could change significantly as a result of level of usage, technicalinnovation and competitor actions in response to severe market conditions. Changesin those commercial factors could impact the economic useful lives and the residualvalues of these assets and therefore future depreciation charges could be revised.

(ii) Income taxes

The Pro forma Group has exposure to income taxes in numerous jurisdictions.Significant judgement is involved in determining the Pro forma Group-wide provisionfor income taxes. There are certain transactions and computations for which theultimate tax determination is uncertain during the course of business. The Pro formaGroup recognises liabilities for expected tax issues based on estimates of whetheradditional taxes will be due. Where the final tax outcome of these matters is differentfrom the amounts that were initially recognised, such differences will impact the incometax and deferred tax provisions in the period in which such determination is made. Thecarrying amount of the Pro forma Group’s tax payable at 30 September 2007 wasUSD2,960,770 (30 April 2007: USD1,739,226).

APPENDIX D

D-17


A related party is an entity that directly or indirectly, through one or more intermediaries, is undercommon or joint control with members of the Pro forma Group companies. Related party includesassociated companies.

The following related party transactions took place between the Pro forma Group and anassociated company during the financial period on terms agreed by the parties concerned:


2006 2007USD USD

Agency fees from associated companies 84,391 6,438

Agency fees paid to an associated company 16,550 1,248

Service fees from an associated company — 48,077

Management fees paid to an associated company 64,103 —

Management fees from an associated company — 128,205

Intra-group transactions that have been eliminated in the unaudited combined financialinformation are not disclosed as related party transactions above.

6. RevenueFive months ended

30 September2006 2007USD USD


7. Other operating incomeFive months ended



Management fees received — 128,205

Compensation received — 40,000

Service fees received — 48,077

Commission received 29,694 —

Exchange gain 4,412 —


240,983 394,136

Finance income:

— bank interest income 123,696 202,267

364,679 596,403

APPENDIX D

D-18

8. Finance costs


2006 2007USD USD

Discounted bills charges 33,239 1,249

Bank charges 206,037 347,972



655,428 1,083,801




2006 2007USD USD

Depreciation 7,706 22,367

Distribution agency fees 1,738,807 1,297,742

Freight charges 6,597,430 17,388,372

Management fees paid to an associated company 64,103 —



— key management 10,634 —

— staff 32,906 —


— key management 200 —

— staff 922 —


Directors’ remuneration — 53,846


— other key management — 85,419

— staff — 157,251


— other key management — 2,539

— staff — 6,975

APPENDIX D

D-19

10. Income taxFive months ended




The income tax expense on the results of the financial period varies from the amount of incometax determined by applying the applicable corporate income tax rate to profit before income taxdue to the following factors:


2006 2007USD USD


Tax at the domestic rates applicable to profit in the countries which thePro forma Group operates 338,536 1,220,607

Expenses not deductible for tax purpose 2,179 1,249

Income not subject to tax (26,769) (7,876)

Share of results of associated companies 26,769 7,564

340,715 1,221,544

Pursuant to Income Tax Act of Singapore, Singapore-incorporated members of the Pro formaGroup are subjected to statutory income tax rate of 18% (2006: 20%). Novo Commodities Pte.Ltd. was awarded the Global Trader Programme Status on 30 April 2007 and is subjected toconcessionary income tax rate of 10% for the five months period ended 30 September 2007.

Pursuant to Inland Revenue Ordinance of Hong Kong, members of the Pro forma Group which areincorporated in Hong Kong are subjected to statutory income tax rate of 17.5%.

Members of the Pro forma Group incorporated under the International Business Companies Actof the British Virgin Islands (“BVI”) are exempted from payment of BVI income taxes.

11. Earnings per share

Earnings per share is computed based on the enlarged share capital of Neocorp International Ltdon a fully diluted basis immediately after completion of the proposed acquisition but beforeproposed compliance placement.


2006 2007USD USD

Profit attributable to Shareholders 1,450,892 5,690,664

Number of ordinary shares upon completion of proposed acquisition butbefore proposed compliance placement 484,753,671 484,753,671

Basic and diluted earnings per share (in cents) 0.30 1.17

APPENDIX D

D-20



Furnitureand




Year ended 30 April 2007(audited)

Cost

Additions during the year andbalance at 30.4.2007 1,369,974 15,439 6,177 47,324 38,255 1,477,169


Charge for the year andbalance at 30.4.2007 25,687 1,144 289 789 3,087 30,996

Net book value

At 30.4.2007 1,344,287 14,295 5,888 46,535 35,168 1,446,173

Period ended 30 September2007 (unaudited)

Cost

Balance at 1.5.2007 1,369,974 15,439 6,177 47,324 38,255 1,477,169

Additions — 2,310 9,727 — 513 12,550

Balance at 30.9.2007 1,369,974 17,749 15,904 47,324 38,768 1,489,719


Balance at 1.5.2007 25,687 1,144 289 789 3,087 30,996

Charge for the period 12,844 1,398 977 3,943 3,205 22,367

Balance at 30.9.2007 38,531 2,542 1,266 4,732 6,292 53,363

Net book value

At 30.9.2007 1,331,443 15,207 14,638 42,592 32,476 1,436,356


As at30 April 2007

USD(Audited)

As at30 September 2007

USD(Unaudited)

Leasehold land and building 1,344,287 1,331,443

APPENDIX D

D-21

13. Investment in associated companies

(a) Investment in associated companies comprises:

As at30 April 2007

USD(Audited)


USD(Unaudited)

Unquoted equity shares, at cost 395,861 395,861

Share of post acquisition profit 321,354 281,624

Exchange difference — 6,607

Balance at end of year/period 717,215 684,092

(b) Details of associated companies are as follows:

NamePrincipalactivities

Country ofincorporationand place ofbusiness

Percentage of equity heldby the Pro forma Group30 April

2007%

30 September2007

%(Audited) (Unaudited)


Rico Group Ltd Investmentholding

British VirginIslands

30 30

Novostal Pte. Ltd. Trading andinvestment

Singapore 30 30


Novostal Limited Trading andinvestment

Hong Kong 30 30

(c) The summarised financial information of the Pro forma Group’s associated companies whichis not adjusted for the percentage of ownership held by the Pro forma Group are as follows:

30 April 2007USD

(Audited)

30 September 2007USD

(Unaudited)

Revenue 335,261,475 64,944,962

Loss after tax (82,939) (132,433)

Total assets 17,866,992 6,957,935


APPENDIX D

D-22

14. Receivables

As at30 April 2007

USD(Audited)


USD(Unaudited)


Deposits 6,490 106,532

Prepayments 711 128,625

Amount recoverable — freight — 149,310




— directors 158,473 962,801

325,307 2,367,802

12,206,386 39,872,016

The receivables from related parties and directors are unsecured, interest free and are payableon demand.

Receivables denominated in currencies other than the functional currency of the Pro forma Groupcompanies are as follows:

As at30 April 2007

USD(Audited)


USD(Unaudited)


Singapore Dollars (“SGD”) 608 —

Chinese Renminbi 3,462 26,386

Euro — 6,935,220

15. Inventories

As at30 April 2007

USD(Audited)


USD(Unaudited)

Goods-in-transit, at cost — 817,688

APPENDIX D

D-23

16. Cash and bank balancesAs at

30 April 2007USD

(Audited)


USD(Unaudited)

Cash on hand and at bank 646,158 1,325,966

Fixed deposits (unpledged portion) 480,431 5,414,025


14,594,603 9,856,907

As at 30 September 2007, fixed deposits mature within 30 days from the balance sheet date, andhave effective interest rates of 1.68% to 4.825% (30 April 2007: 4.673% to 5.130%).

The Pro forma Group has pledged its fixed deposits to banks for banking facilities granted (notes17 and 18).

Cash and bank balances denominated in currencies other than the functional currency of the Proforma Group companies are as follows:

As at30 April 2007

USD(Audited)


USD(Unaudited)

Hong Kong Dollars 3,136 95,231

Singapore Dollars — 127,509


Euro — 1,521

UAE Dirham — 67,230

The cash at bank at year end generally earn interest at rate of 1.25% to 4.25% per annum as at30 September 2007 (30 April 2007: 1.5% to 4.75% per annum).

17. BorrowingsAs at

30 April 2007USD

(Audited)


USD(Unaudited)

Non-current

Secured

Bank loan 434,817 381,809

Current

Secured

Bank loan 120,211 123,858

Freight loans 1,090,871 2,383,681

Total current borrowings 1,211,082 2,507,539

Total borrowings 1,645,899 2,889,348

APPENDIX D

D-24


Borrowings denominated in currencies other than the functional currency of the Pro forma Groupcompanies are as follows:–

As at30 April 2007

USD(Audited)


USD(Unaudited)



(i) legal pledge of the Pro forma Group’s leasehold land and building (note 12);

(ii) legal pledge on the Pro forma Group’s fixed deposits; and

(iii) personal guarantees from directors

Freight loans as at 30 September 2007 are repayable within 5 to 25 days (30 April 2007: 7 to 30days), from commencement date. Bank loan is repayable by monthly instalments and matures on18 July 2011.


As at30 April 2007

%(Audited)


%(Unaudited)

Bank loan 5.2 4.15


18. PayablesAs at

30 April 2007USD

(Audited)


USD(Unaudited)

Bills payable 13,549,369 27,730,403

Sales deposits received — 318,500

Accrued operating expenses 1,741,666 2,691,362

Payables due to

— related companies 16,437 66,402

— directors 408,481 405,625

2,166,584 3,481,889

15,715,953 31,212,292

Bills payable to banks are secured by fixed deposits pledged (note 16).


APPENDIX D

D-25

18. Payables (cont’d)

Payables denominated in currencies other than the functional currency of the Pro forma Groupcompanies are as follows:–

As at30 April 2007

USD(Audited)


USD(Unaudited)


Singapore Dollars 2,890 3,888

Chinese Renminbi 3,923 —


Bank overdraft is denominated in Hong Kong Dollars.

As at 30 April 2007, bank overdraft was denominated in United Arab Emirates Dirham.

20. Share capital

As at30 April 2007

USD(Audited)


USD(Unaudited)

Issued and fully paid capital 1,278,377 1,332,830

The share capital is a summation of the issued capital of Novo Commodities Limited, NovaMaritime (B.V.I.) Limited, Novo Commodities Pte. Ltd., Global Wealth Trading Ltd, NovoCommodities Ltd, Nova Shipping Pte. Ltd., Novo Investment Limited and Novosteel DMCC as atthe respective period/year end.

30 April 2007 30 September 2007Number of

issued sharecapital



capital


(Audited) (Audited) (Unaudited) (Unaudited)

Balance at

— 1 May 4,200,021 632,330 8,410,021 1,278,377

Issue of shares 4,210,000 646,047 109 54,453

Balance at end of financial year/period 8,410,021 1,278,377 8,410,130 1,332,830


APPENDIX D

D-26

20. Share capital (cont’d)


(i) Nova Shipping Pte. Ltd. issued 200,000 shares of SGD 1 (USD 0.66) per share for cash on1 June 2006 to incorporate the company;

(ii) Novo Commodities Limited issued 4,000,000 shares of HKD1 (USD 0.13) per share for cashon 13 June 2006 to provide funds for the expansion of the company’s operations; and

(iii) Novo Investment Limited issued 10,000 shares of HKD1 (USD 0.13) per share for cash on27 October 2006 to incorporate the company.

Period from 1 May 2007 to 30 September 2007

(i) Novosteel DMCC issued 100 shares of AED 2,000 (USD 544) per share for cash on 26August 2007 to incorporate the company; and

(ii) Global Wealth Trading Ltd issued 9 shares of USD 1 per share for cash on 14 September2007 to provide funds for the expansion of the company’s operations.

21. Commitments


As at30 April 2007

USD(Audited)


USD(Unaudited)

No later than one financial year 14,212 14,128

Later than one financial year but not later than five financialyears 9,474 3,532

23,686 17,660


As at30 April 2007

USD(Audited)


USD(Unaudited)


22. Capital management

The Pro forma Group’s objectives when managing capital are:

(a) To safeguard the Pro forma Group’s ability to continue as a going concern, so that itcontinues to provide returns for shareholders and benefits for other stakeholders;

(b) To support the Pro forma Group’s stability and growth; and

(c) To provide capital for the purpose of strengthening the Pro forma Group’s risk managementcapability.

APPENDIX D

D-27

22. Capital management (cont’d)

The Pro forma Group actively and regularly reviews and manages its capital structure to ensureoptimal capital structure and shareholder returns, taking into consideration the future capitalrequirements of the Pro forma Group and capital efficiency, prevailing and projected profitability,projected operating cash flows, projected capital expenditures and projected strategic investmentopportunities. The Pro forma Group currently does not adopt any formal dividend policy.

Management regards total equity as capital, for capital management purpose. The amount ofcapital as at 30 April 2007 and 30 September 2007 amounted to USD 9,853,041 and USD15,598,158 respectively, which the management considers as optimal having considered theprojected capital expenditures and the projected strategic investment opportunities.

23. Financial instruments


The Pro forma Group’s overall risk management is determined and carried out by the boardof directors on an informal basis.

The Pro forma Group’s activities expose it to a variety of financial risks, namely foreignexchange risk, interest rate risk, credit risk and liquidity risk.

The Pro forma Group does not engage in derivative financial instruments for speculativepurposes.


The Pro forma Group transacts its business mainly in US Dollar and hence there is nosignificant exposure to foreign exchange risk. The Pro forma Group does not useforward contracts to hedge its exposure to foreign currency risk.


The Pro forma Group’s exposure to changes in interest rates relates primarily to thePro forma Group’s debt obligations and fixed deposits placed with financial institutions.The Pro forma Group maintains its borrowings in both variable and fixed rateinstruments depending on which terms are more favourable to the Pro forma Group.The Pro forma Group manages its interest rate risk on its interest income by placing thesurplus funds in fixed deposits of varying maturities and interest rate terms.

(iii) Credit risk

The Pro forma Group’s principal financial assets are cash and bank balances, andreceivables.


The Pro forma Group’s credit risk is primarily attributable to its receivables.

The Pro forma Group has no significant concentration of credit risk, with exposurespread over a large number of counterparties and customers.

APPENDIX D

D-28

23. Financial instruments (cont’d)

(a) Financial risk management (cont’d)

(iv) Liquidity risk

The Pro forma Group monitors and maintains sufficient cash and cash equivalents, andadequate credit facilities for its liquidity and cash flow requirements.



24. Segment information

Segment accounting policies are the same as the policies of the Pro forma Group as describedin Note 3.

(a) Business segments


Finishedproducts Total

USD USD USD

Period from 1 May 2006 to30 September 2006 (Unaudited)

Revenue 58,691,678 48,989,806 107,681,484

Segment results 1,061,859 1,638,192 2,700,051


Unallocated costs (472,969)

Finance costs (655,428)



Income tax (340,715)


30 April 2007 (Audited)






APPENDIX D

D-29


(a) Business segments (cont’d)


Finishedproducts Total

USD USD USD

Period from 1 May 2007 to30 September 2007 (Unaudited)

Revenue 7,643,337 203,840,706 211,484,043

Segment results 981,638 8,307,814 9,289,452


Unallocated costs (1,850,116)

Finance costs (1,083,801)



Income tax (1,221,544)


30 September 2007 (Unaudited)






Semi-finished products include mainly steel slabs and billets. Finished products includemainly steel plates, hot rolled coils, cold rolled coils, wire rods and deformed bars.

There is no reasonable basis to allocate other income and administrative, certain distributionand selling expenses to the different segments, and accordingly these items have beendisclosed as unallocated income and unallocated costs respectively.

Assets of the Pro forma Group are utilised interchangeably between the different segmentsand there is no reasonable basis to allocate liabilities of the Pro forma Group between thedifferent segments. Accordingly capital expenditure, assets and liabilities of the Pro formaGroup are disclosed as unallocated in the segment report.

APPENDIX D

D-30


(b) Secondary reporting format — geographical segments

The turnover by geographical segments are based on the location of customers regardlessof where the goods are produced.

The Pro forma Group’s operations are located in 4 main geographical areas. The followingtable provides an analysis of the Pro forma Group’s sales by geographical markets,irrespective of the origin of the goods and services.

Sales revenue by geographical markets:


2006USD

2007USD

(Unaudited) (Unaudited)

North Asia 24,370,923 28,588,670

South East Asia 47,676,998 33,977,159

India and Middle East 21,565,316 79,448,262

Others 14,068,247 69,469,952

107,681,484 211,484,043

Assets by geographical markets:

As at30 April 2007

USD(Audited)


USD(Unaudited)

North Asia 14,839,676 18,848,462

South East Asia 2,692,474 339,091

India and Middle East 9,995 10,724,330

Others 9,258,844 20,634,728

26,800,989 50,546,611

The Pro forma Group’s capital expenditures are mainly incurred and located in Hong Kongand accordingly no further geographical segment information is presented.

APPENDIX D

D-31

25. Subsequent events

(a) In October 2007, Xinghua Holdings Limited issued shares amounting to USD500,000 toGlobal Wealth Trading Ltd.

(b) In November 2007, Xinghua Holdings (China) Limited issued shares amounting toUSD1,000,000 to Xinghua Holdings Limited.

(c) In November 2007, Iron And Steel Resources Limited issued shares amounting to USD577to Global Wealth Trading Ltd.

(d) On 31 December 2007, the Board of Directors of Novo Commodities Limited declared andpaid tax exempt interim dividend of USD0.50 per share, amounting to USD4 million.

26. Authorisation of unaudited pro forma combined financial information

The unaudited pro forma combined financial information of the Pro forma Group for the financialperiod from 1 May 2007 to 30 September 2007 were authorised for issue in accordance with aresolution of the directors dated 31 January 2008.

APPENDIX D

D-32

NOVO COMMODITIES LIMITED(Co. Reg. No. 949449)

FINANCIAL STATEMENTSFOR THE FINANCIAL PERIOD FROM 31 JANUARY 2005

(DATE OF INCORPORATION) TO30 APRIL 2006 AND

FINANCIAL YEAR ENDED 30 APRIL 2007

CONTENTS

Statement by directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-2

Auditors’ Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-3

Income Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-4

Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-5

Statements of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-6

Statements of Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-7

Notes to the Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . E-8

APPENDIX E

E-1

NOVO COMMODITIES LIMITED(Incorporated in Hong Kong)

STATEMENT BY DIRECTORS

In the opinion of the Directors:

(i) the financial statements set out on pages E-4 to E-21 are drawn up so as to give a true and fairview of the state of affairs of the Company as at 30 April 2006 and 30 April 2007 and of the results,changes in equity and cash flows of the Company for the financial period from 31 January 2005(date of incorporation) to 30 April 2006 and financial year ended 30 April 2007; and

(ii) at the date of this statement there are reasonable grounds to believe that the Company will beable to pay its debts as and when they fall due.

On behalf of the Directors

Chow Kin Wa Yu Wing Keung DickyDirector Director

31 January 2008

APPENDIX E

E-2

AUDITORS’ REPORT TO THE MEMBER OFNOVO COMMODITIES LIMITED(Incorporated in Hong Kong)

We have audited the accompanying financial statements of Novo Commodities Limited as set out onpages E-4 to E-21, which comprise the balance sheets as at 30 April 2006 and 30 April 2007, theincome statements, changes in equity and cash flow statements for the financial period from 31January 2005 (date of incorporation) to 30 April 2006 and financial year ended 30 April 2007, and asummary of significant accounting policies and other explanatory notes.

The financial statements have been prepared for inclusion in the Circular to the shareholders ofNeocorp International Ltd (under Judicial Management) in connection with the proposed acquisition ofshares owned by Yu Wing Keung, Dicky and Chow Kin Wa, in certain companies.

Directors’ Responsibility for the Financial Statements

The Company’s directors are responsible for the preparation and fair presentation of these financialstatements in accordance with the Singapore Financial Reporting Standards. This responsibilityincludes designing, implementing and maintaining internal controls relevant to the preparation and fairpresentation of financial statements that are free from material misstatement, whether due to fraud orerror; selecting and applying appropriate accounting policies; and making accounting estimates thatare reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with Singapore Standards on Auditing. Those Standards require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonable assurancewhether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosuresin the financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal controls relevant to the entity’spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by directors, as well as evaluatingthe overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

Opinion

In our opinion, the financial statements are properly drawn up in accordance with the SingaporeFinancial Reporting Standards so as to give a true and fair view of the state of affairs of the Companyas at 30 April 2006 and 30 April 2007 and the results, changes in equity and cash flows of the Companyfor the financial period from 31 January 2005 (date of incorporation) to 30 April 2006 and financial yearended 30 April 2007.

Baker Tilly TFWLCLCertified Public Accountants

31 January 2008

APPENDIX E

E-3


INCOME STATEMENTSFOR THE FINANCIAL PERIOD FROM 31 JANUARY 2005 (DATE OF INCORPORATION)TO 30 APRIL 2006 AND FINANCIAL YEAR ENDED 30 APRIL 2007

Notes31.01.05 to

30.04.06 2007USD USD

Revenue 5 76,009,897 310,913,163

Cost of sales (70,849,807) (276,304,527)

Gross profit 5,160,090 34,608,636

Other operating income 6 459,481 1,196,780



Finance costs 7 (233,367) (1,502,555)


Income tax 9 (198,704) (1,532,774)

Profit for the period/year 936,748 7,287,087

The accompanying notes form an integral part of the financial statements.

APPENDIX E

E-4


BALANCE SHEETSAT 30 APRIL 2006 AND 2007

Notes 2006 2007USD USD

Non-current assets

Property, plant and equipment 10 — 1,446,173

Current assets

Receivables 11 21,177,812 12,209,484


24,538,871 26,798,726

Total assets 24,538,871 28,244,899


Borrowings 13 — 434,817

Current liabilities

Payables 14 22,493,058 15,607,787

Bank overdraft (unsecured) 15 — 10,258

Borrowings 13 397,540 1,211,082

Tax payable 198,704 1,731,478

23,089,302 18,560,605


Net assets 1,449,569 9,249,477

Equity

Share capital 16 512,821 1,025,642

Retained earnings 936,748 8,223,835

1,449,569 9,249,477


APPENDIX E

E-5


STATEMENTS OF CHANGES IN EQUITYFOR THE FINANCIAL PERIOD FROM 31 JANUARY 2005 (DATE OF INCORPORATION)TO 30 APRIL 2006 AND FINANCIAL YEAR ENDED 30 APRIL 2007

Sharecapital


USD USD USD

At date of incorporation 1,282 — 1,282

Issue of share capital during the period 511,539 — 511,539

Net profit for the period — 936,748 936,748

Balance at 30 April 2006 512,821 936,748 1,449,569


Net profit for the year — 7,287,087 7,287,087

Balance at 30 April 2007 1,025,642 8,223,835 9,249,477


APPENDIX E

E-6


STATEMENTS OF CASH FLOWFOR THE FINANCIAL PERIOD FROM 31 JANUARY 2005 (DATE OF INCORPORATION)TO 30 APRIL 2006 AND FINANCIAL YEAR ENDED 30 APRIL 2007

31.01.05 to30.04.06 2007

USD USD

Cash flows from operating activities


Adjustments for:

Depreciation of property, plant and equipment — 30,996

Interest expense 49,474 899,024

Interest income (68,357) (367,015)

Operating cash flow before movements in working capital 1,116,569 9,382,866

Receivables (21,177,812) 9,126,536

Payables 20,757,286 (5,149,499)

Cash generated from operations 696,043 13,359,903

Interest income received 68,357 367,015

Net cash generated from operating activities 764,400 13,726,918

Cash flows from investing activities

Purchase of property, plant and equipment — (1,477,169)

Increase in fixed deposits pledged (2,620,234) (10,847,780)

Net cash used in investing activities (2,620,234) (12,324,949)

Cash flows from financing activities

Advances from/(to) directors 1,735,772 (1,893,980)

Proceeds from borrowings 7,427,923 17,720,822

Repayment of borrowings (7,030,383) (16,472,463)

Interest expense paid (49,474) (899,024)

Proceeds from shares issued 512,821 512,821

Net cash generated from/(used in) financing activities 2,596,659 (1,031,824)

Net increase in cash and cash equivalents 740,825 370,145

Cash and cash equivalents at beginning of financial period/year — 740,825

Cash and cash equivalents at end of financial period/year 740,825 1,110,970

Cash and cash equivalents are represented by:


Bank overdraft (unsecured) — (10,258)

Less fixed deposits pledged * (2,620,234) (13,468,014)

740,825 1,110,970



APPENDIX E

E-7


NOTES TO THE FINANCIAL STATEMENTSFOR THE FINANCIAL PERIOD FROM 31 JANUARY 2005 (DATE OF INCORPORATION)TO 30 APRIL 2006 AND FINANCIAL YEAR ENDED 30 APRIL 2007

These notes form an integral part of and should be read in conjunction with the accompanying financialstatements.

1. Corporate information

Novo Commodities Limited (the “Company”) (Registration no: 949449) was incorporated in HongKong on 31 January 2005 under the Hong Kong Companies Ordinance. At the date ofincorporation, the issued share capital was USD1,282 divided into 10,000 ordinary shares of USD0.13 each. The Company is a wholly-owned subsidiary of Carlos Holdings Ltd (formerly known asNovo Commodities Holdings Limited), incorporated in British Virgin Islands.

The principal place of business and registered address of the Company is Unit 1108, 11/F, ChinaMerchants Tower, 168-200 Connaught Road Central, Hong Kong.

The principal activities of the Company are those of trading and investment. There were nosignificant changes in the nature of these activities during the financial year.

The financial statements have been prepared for inclusion in the Circular to the shareholders ofNeocorp International Ltd (under Judicial Management) in connection with the proposedacquisition of shares owned by Yu Wing Keung, Dicky and Chow Kin Wa, in certain companies.



The financial statements have been prepared in accordance with Singapore FinancialReporting Standards (“FRS”) and under the historical cost convention except as disclosedwhere appropriate in the financial statements.

The preparation of financial statements in conformity with FRS requires the use of estimatesand assumptions that affect the reported amounts of assets and liabilities and disclosure ofcontingent assets and liabilities at the date of the financial statements and the reportedamounts of revenues and expenses during the financial period. Although these estimatesare based on management’s best knowledge of current events and actions and historicalexperiences and various other factors that are believed to be reasonable under thecircumstances, actual results may ultimately differ from those estimates.

The carrying amount of cash and cash equivalents, current receivables and payables andprovision approximate their respective fair value due to the relatively short-term maturity ofthese financial instruments.

APPENDIX E

E-8



At the date of the balance sheet, the following FRSs and Interpretations of FRS (“INT FRS”)were issued, revised or amended but not effective:




INT FRS 109 Reassessment of Embedded Derivatives





The Company anticipates the adoption of these FRS and INT FRS (where applicable) in thefuture periods will have no material financial impact on the financial statements of theCompany.

(b) Revenue and other operating income

Revenue is measured at the fair value of the consideration received or receivable andrepresents amounts receivable for the sale of goods net of rebates and discounts.


Sales of goods — when significant risks and rewards of ownership of the goodsare transferred to the buyer.


(c) Borrowing costs


APPENDIX E

E-9


(d) Income tax

Income tax on the profit or loss for the year comprises current and deferred tax. Income taxis recognised in the income statement except to the extent that it relates to items recogniseddirectly to equity, in which case it is recognised in equity.

Current tax is the expected tax payable on the taxable income for the year, using tax ratesenacted or substantially enacted at the balance sheet date, and any adjustment to taxpayable in respect of previous years.




(e) Property, plant and equipment


Subsequent expenditure relating to property, plant and equipment that has already beenrecognised is added to the carrying amount of the assets when it is probable that futureeconomic benefits, in excess of the standard of performance of the asset before theexpenditure was made, will flow to the Company and the cost can be reliably measured.Other subsequent expenditure is recognised in the income statement during the financialperiod/year when it is incurred.


No. of years



Computer equipment 5 years


Renovation 5 years

Fully depreciated assets are retained in the financial statements until they are no longer inuse.

APPENDIX E

E-10


(f) Impairment of non-financial assets

At each balance sheet date, the Company reviews the carrying amounts of its non-financialassets to determine whether there is any indication that those assets have suffered animpairment loss. If any such indication exists, the recoverable amount of the asset isestimated in order to determine the extent of the impairment loss (if any). Where it is notpossible to estimate the recoverable amount of an individual asset, the Company estimatesthe recoverable amount of the cash-generating unit to which the asset belongs.




(g) Financial instruments

Financial assets and financial liabilities are recognised on the Company’s balance sheetwhen the Company becomes a party to the contractual provisions of the instrument.




Cash and cash equivalents comprise cash on hand, demand deposits and fixeddeposits which are subject to an insignificant risk of changes in value. These alsoinclude bank overdrafts that form an integral part of the Company’s cash management.

APPENDIX E

E-11


(g) Financial instruments (cont’d)


Financial liabilities and equity instruments issued by the Company are classifiedaccording to the substance of the contractual arrangements entered into and thedefinitions of a financial liability and an equity instrument. An equity instrument is anycontract that evidences a residual interest in the assets of the Company after deductingall of its liabilities. The accounting policies adopted for specific financial liabilities andequity instruments are set out below.




Equity instruments issued by the Company are recorded at the proceeds received, netof direct issue costs.

(vi) Borrowings

Interest-bearing bank loans are initially measured at fair value, and are subsequentlymeasured at amortised cost, using the effective interest rate method. Any differencebetween the proceeds (net of transaction costs) and the settlement or redemption ofborrowings is recognised over the term of the borrowings in accordance with theCompany’s accounting policy for borrowing costs.

(h) Provision

Provisions are recognised when the Company has a legal or constructive obligation as aresult of past events and it is probable that an outflow of resources will be required to settlethe obligation, and a reliable estimate of the amount can be made. Provisions are measuredat the directors’ best estimate of the expenditure required to settle the obligation at thebalance sheet date, and are discounted to present value where the effect is material.

(i) Foreign currencies

(i) Functional and presentation currency

Items included in the financial statements of the Company are measured using thecurrency that best reflects the economic substance of the underlying events andcircumstances relevant to that entity (“the functional currency”). The financialstatements of the Company are presented in United States Dollars, which is theCompany’s functional currency and presentation currency.

(ii) Transactions and balances

Transactions in a currency other than the functional currency (“foreign currency”) aretranslated into the functional currency using the exchange rates prevailing at the datesof the transactions. Currency translation gains and losses resulting from the settlementof such transactions and from the translation at year-end exchange rates of monetaryassets and liabilities denominated in foreign currencies are recognised in the incomestatement.

APPENDIX E

E-12


(j) Operating lease




Estimates and assumptions concerning the future and judgements are made in the preparation ofthe financial statements. They affect the application of the Company’s accounting policies,reported amounts of assets, liabilities, income and expenses and disclosure made. They areassessed on an on-going basis and are based on experience and relevant factors, includingexpectations of future events that are believed to be reasonable under the circumstances.


In the process of applying the Company’s accounting policies, management has madecertain judgements apart from those involving estimations which have significant effect onamounts recognised in the combined financial statements.


The Company follows the guidance of FRS 39 on determining when an investment orfinancial asset is other than temporarily impaired. This determination requires significantjudgement by the Company which evaluates, among other factors, the duration and extentto which the fair value of an investment or financial asset is less than its cost, and thefinancial health of and near-term business outlook for the investment or financial asset,including factors such as industry and sector performance, changes in technology andoperational and financing cash flow.




Management estimates the useful lives of the Company’s property, plant andequipment to be within 5 to 50 years. The estimates for the useful lives and relateddepreciation charges for its property, plant and equipment is based on commercialfactors which could change significantly as a result of level of usage, technicalinnovation and competitor actions in response to severe market conditions. Changesin those commercial factors could impact the economic useful lives and the residualvalues of these assets and therefore future depreciation charges could be revised.

APPENDIX E

E-13

3. Critical accounting judgements and key sources of estimation uncertainty (cont’d)

(b) Key sources of estimation uncertainty (cont’d)

(ii) Income taxes

The Company has exposure to income taxes in numerous jurisdictions. Significantjudgement is involved in determining the Company’s provision for income taxes. Thereare certain transactions and computations for which the ultimate tax determination isuncertain during the course of business. The Company recognises liabilities forexpected tax issues based on estimates of whether additional taxes will be due. Wherethe final tax outcome of these matters is different from the amounts that were initiallyrecognised, such differences will impact the income tax and deferred tax provisions inthe period in which such determination is made. The carrying amount of the Company’stax payable at 30 April 2006 and 30 April 2007 was USD198,704 and USD1,731,478respectively.


A related party is an entity in which the directors have or are deemed to have an interest andwhere one of them has either the ability to control the other or can exercise significant influenceover the other in making financial or operating decisions.

The following related party transactions took place between the Company and related partiesduring the financial period/year on terms agreed by the parties concerned:

31.01.05 to30.04.06 2007

USD USD

Agency fees from related parties 90,125 244,040

Handling fees from a related party 40,378 —

Management fees paid to a related party 181,203 406,339

Consultancy fees paid to a related party — 57,692

Agency fees paid to a related party 11,477 26,363

5. Revenue

31.01.05 to30.04.06 2007

USD USD


APPENDIX E

E-14

6. Other operating income

31.01.05 to30.04.06 2007

USD USD


Compensation received 255,000 19,983

Commission received 3,632 32,407

Exchange gain — 59,610


391,124 829,765

Finance income:

— Bank interest income 68,357 367,015

459,481 1,196,780

7. Finance costs

31.01.05 to30.04.06 2007

USD USD

Discounted bills charges — 46,606

Bank charges 183,893 556,925



233,367 1,502,555



31.01.05 to30.04.06 2007

USD USD

Depreciation — 30,996

Distribution agency fees 869,777 3,432,347

Freight charges 2,907,872 20,027,254

Management fees paid to a related party 181,203 406,339



— key management 27,856 67,292

— staff 82,094 220,578


— key management 696 1,433

— staff 3,188 7,410


Exchange loss 4,752 —

Salaries and related cost — 474

APPENDIX E

E-15

9. Income tax

31.01.05 to30.04.06 2007

USD USD



The income tax expense on the results of the financial period/year varies from the amount ofincome tax determined by applying the applicable corporate income tax rate to profit beforeincome tax due to the following factors:

31.01.05 to30.04.06 2007

USD USD


Tax calculated at Hong Kong statutory tax rate of 17.5% 198,704 1,543,476

Expenses not deductible for tax purpose 467 124

Income not subject to tax (458) (3,567)

Others (9) (7,259)

198,704 1,532,774



Furnitureand




Cost

Additions during the year andbalance at 30.4.2007 1,369,974 15,439 6,177 47,324 38,255 1,477,169


Charge for 2007 and balanceat 30.4.2007 25,687 1,144 289 789 3,087 30,996

Net book value

At 30.4.2007 1,344,287 14,295 5,888 46,535 35,168 1,446,173

APPENDIX E

E-16

10. Property, plant and equipment (cont’d)


2006 2007USD USD

Leasehold land and building — 1,344,287

11. Receivables

2006 2007USD USD


Deposits — 6,490

Prepayments 41,459 —



— holding company 2,480 3,672


— directors — 158,208

161,412 328,405

21,177,812 12,209,484

The receivables from holding company, related parties and directors are unsecured, interest freeand are payable on demand.

Receivables denominated in currencies other than the functional currency of the Company are asfollows:

2006 2007USD USD



12. Cash and bank balances

2006 2007USD USD

Cash on hand and at bank 740,825 640,797

Fixed deposits (unpledged portion) — 480,431


3,361,059 14,589,242

APPENDIX E

E-17

12. Cash and bank balances (cont’d)

As at 30 April 2006 and 30 April 2007, fixed deposits mature within 30 days from the balance sheetdate, and have effective interest rates of 3.875% to 4.450% as at 30 April 2006 and 4.673% to5.130% as at 30 April 2007.

The Company has pledged its fixed deposits to banks for banking facilities granted (notes 13 and14).

Cash and bank balances denominated in currencies other than the functional currency of theCompany are as follows:

2006 2007USD USD


The cash at bank at year end generally earn interest at rate of 1.5% to 3% per annum in 2006 and1.57% to 4.75% per annum in 2007.

13. Borrowings

2006 2007USD USD

Non-current

Secured


Current

Secured


Freight loans 397,540 1,090,871

Total current borrowings 397,540 1,211,082

Total borrowings 397,540 1,645,899

Borrowings denominated in currencies other than the functional currency of the Company are asfollows:

2006 2007USD USD

Hong Kong Dollars — 555,208


(i) legal pledge of the Company’s leasehold land and building (note 10);

(ii) legal pledge on the Company’s fixed deposits; and

(iii) personal guarantees from directors.

APPENDIX E

E-18


Freight loans as at 30 April 2006 and 30 April 2007 are repayable within 27 days and 7 to 30 days,respectively, from commencement date. Bank loan is repayable by monthly instalments andmatures on 18 July 2011.


2006 2007% %

Bank loan — 5.2


14. Payables

2006 2007USD USD

Trade payables 136,816 —

Bills payable 19,101,077 13,549,369

19,237,893 13,549,369

Sales deposits received 10,000 —

Accrued operating expenses 949,360 1,740,750

Payables due to


— directors 1,735,772 —

3,255,165 2,058,418

22,493,058 15,607,787

The bills payable to banks are secured by fixed deposits pledged (note 12).


Payables denominated in currencies other than the functional currency of the Company are asfollows:

2006 2007USD USD




Bank overdraft is denominated in United Arab Emirates Dirham.

APPENDIX E

E-19

16. Share capital

2006 2007USD USD

Issued and fully paid capital 512,821 1,025,642

2006 2007Number of

issued sharecapital



capital


Date of incorporation/balance atbeginning of financial year 10,000 1,282 4,000,000 512,821

Proceeds from share issue 3,990,000 511,539 4,000,000 512,821

Balance at end of financial period/year 4,000,000 512,821 8,000,000 1,025,642


The Company issued 3,990,000 shares of HKD1 (USD 0.13) per share for cash on 22 April 2005,and 4,000,000 shares of HKD1 (USD 0.13) per share for cash on 13 June 2006 to provide fundsfor the expansion of the Company’s operations.

17. Commitments


2006 2007USD USD

No later than one financial year — 14,212

Later than one financial year but not later than five financial years — 9,474

— 23,686


2006 2007USD USD


18. Financial Instruments


The Company’s overall risk management is determined and carried out by the board ofdirectors on an informal basis.

The Company’s activities expose it to a variety of financial risks, namely foreign exchangerisk, interest rate risk, credit risk and liquidity risk.

APPENDIX E

E-20

18. Financial Instruments (cont’d)

(a) Financial risk management (cont’d)

The Company does not engage in derivative financial instruments for speculative purposes.


The Company transacts its business mainly in US Dollar and hence there is nosignificant exposure to foreign exchange risk. The Company does not use forwardcontracts to hedge its exposure to foreign currency risk.


The Company’s exposure to changes in interest rates relates primarily to theCompany’s debt obligations and fixed deposits placed with financial institutions. TheCompany maintains its borrowings in both variable and fixed rate instrumentsdepending on which terms are more favourable to the Company. The Companymanages its interest rate risk on its interest income by placing the surplus funds in fixeddeposits of varying maturities and interest rate terms.

(iii) Credit risk

The Company’s principal financial assets are cash and bank balances, andreceivables.


The Company’s credit risk is primarily attributable to its receivables.

The Company has no significant concentration of credit risk, with exposure spread overa large number of counterparties and customers.

(iv) Liquidity risk

The Company monitors and maintains sufficient cash and cash equivalents, andadequate credit facilities for its liquidity and cash flow requirements.



19. Subsequent event

On 31 December 2007, the Board of Directors of Novo Commodities Limited declared and paidtax exempt interim dividend of USD0.50 per share, amounting to USD4 million.

20. Authorisation of financial statements

The financial statements of the Company for the financial period from 31 January 2005 (date ofincorporation) to 30 April 2006 and financial year ended 30 April 2007 were authorised for issuein accordance with a resolution of the directors dated 31 January 2008.

APPENDIX E

E-21

NEOCORP INTERNATIONAL LTD.(IN JUDICIAL MANAGEMENT)

Incorporated in the Republic of Singapore(Company Registration No.: 198902648H)

Notice is hereby given that an Extraordinary General Meeting (“EGM”) of Neocorp International Ltd.(In Judicial Management) (the “Company”) will be held at Singapore Management University, Lee KongChian School of Business, Seminar Room 2.5 (Level 2), 81 Victoria Street, Singapore 188065 on 27February 2008 at 10.00 a.m. for the purpose of considering and, if thought fit, passing with or withoutmodifications, the following resolutions:–

ORDINARY RESOLUTION 1: THE PROPOSED PRE-ACQUISITION CONSOLIDATION

That:

(a) every 25 existing ordinary shares in the capital of the Company be consolidated into onePre-Acquisition Share in the capital of the Company with effect from a date to be fixed by theDirectors;

(b) any fraction of a Pre-Acquisition Share which may arise from the consolidation pursuant toparagraph (a) above shall be disregarded, and all fractions of the Pre-Acquisition Shares to whichholders of the issued ordinary shares in the capital of the Company would otherwise be entitledto shall be aggregated and sold and the proceeds arising therefrom shall be retained for thebenefit of the Company; and

(c) the Judicial Managers or the Directors of the Company (as the case may be) be and are herebyauthorised to do and execute all such acts and things as they or he may consider necessary orexpedient to give effect to this resolution and implement any of the foregoing.

ORDINARY RESOLUTION 2: THE PROPOSED ALLOTMENT AND ISSUE OF 5,350,000 NEWPRE-ACQUISITION SHARES PURSUANT TO THE CONVERSION OF S$160,500 OF THE TRITECHLOAN INTO SHARES AT THE RATE OF S$0.03 FOR EACH PRE-ACQUISITION SHARE INSATISFACTION OF THE REPAYMENT OBLIGATIONS UNDER THE LOAN AGREEMENTPERTAINING TO THE TRITECH LOAN

That:

(a) the Judicial Managers or the Directors of the Company (as the case may be) be and are herebyauthorised to issue and allot 5,350,000 Pre-Acquisition Shares pursuant to the conversion ofS$160,500 of the Tritech Loan into Shares at the rate of S$0.03 for each Pre-Acquisition Sharein satisfaction of the repayment obligations under the loan agreement pertaining to the TritechLoan; and

(b) the Judicial Managers or the Directors of the Company (as the case may be) be and are herebyauthorised to generally exercise all discretion and do, approve and authorize all such acts andthings as may be necessary or expedient in connection with, or to give effect to the debtconversion and all other matters referred in or contemplated by this resolution.

NOTICE OF EXTRAORDINARY GENERAL MEETING

F-1

ORDINARY RESOLUTION 3: THE PROPOSED ALLOTMENT AND ISSUE OF UP TO 64,726,000NEW PRE-ACQUISITION SHARES TO THE CREDITORS PURSUANT TO THE TERMS OF THESCHEME OF ARRANGEMENT

That:–

(a) the Judicial Managers or the Directors of the Company (as the case may be) be and are herebyauthorised to allot and issue up to 64,726,000 new Pre-Acquisition Shares of S$0.03 each in thecapital of the Company as may be necessary in connection with the Scheme of Arrangement,credited as fully paid up, free from all liens, charges and other encumbrances and ranking paripassu in all respects with the then existing Pre-Acquisition Shares, in favour of the Creditors of theScheme of Arrangement or their nominees, as they may direct, in full and final settlement of theamounts owing to them by the Company pursuant to the Scheme of Arrangement; and

(b) the Judicial Managers or the Directors of the Company (as the case may be) be and are herebyauthorised to complete and do all such acts and things including, without limitation, to execute allsuch documents and to approve any amendments, alteration or modification to any documents asthey may consider necessary, desirable or expedient to give full effect to the Scheme ofArrangement.

ORDINARY RESOLUTION 4: THE PROPOSED ALLOTMENT AND ISSUE OF UP TO 100,000,000NEW PRE-ACQUISITION SHARES TO THE VENDORS PURSUANT TO THE CONVERTIBLE LOANAGREEMENT

That, subject to and contingent upon the passing of Ordinary Resolutions 1, 2, 3, 5 and 8:

(a) the Judicial Managers or the Directors of the Company (as the case may be) be and are herebyauthorised to issue the Convertible Loan Notes and issue and allot up to 100,000,000 newPre-Acquisition Shares to the Vendors and/or their nominees pursuant to the Convertible LoanAgreement between the Vendors and the Company; and

(b) the Judicial Managers or the Directors of the Company (as the case may be) be and are herebyauthorised to generally exercise all discretion and do, approve and authorize all such acts andthings as may be necessary or expedient in connection with, or to give effect to the ProposedConversion, all transactions contemplated therein and all other matters referred in orcontemplated by this resolution.

ORDINARY RESOLUTION 5: THE PROPOSED ACQUISITION OF THE SALE SHARES AND THEALLOTMENT AND ISSUE OF THE CONSIDERATION SHARES

That, subject to and contingent upon the passing of Ordinary Resolutions 1, 2, 3, 4 and 8:

(a) approval be and is hereby given for the acquisition by the Company of the Sale Companies to besatisfied by the allotment and issue of up to approximately 3,688,270,000 new Pre-AcquisitonShares in the capital of the Company at an issue price of S$0.03 per new Pre-Acquisition Sharein accordance with the Novo SPA between the Vendors and the Company;

(b) approval be and is hereby given for the allotment and issue of up to approximately 3,688,270,000new Pre-Acquisition Shares to the Vendors and/or their nominees at an issue price of S$0.03 pernew Pre-Acquisition Share in satisfaction of the consideration for the Proposed Acquisition;

(c) the Judicial Managers or the Directors of the Company (as the case may be) be and are herebyauthorised to do all such things (including without limitation entering into all such transactions,arrangements and agreements and executing all such documents) as he or they may considernecessary or expedient to give effect to this resolution.


F-2

ORDINARY RESOLUTION 6: THE PROPOSED POST-ACQUISITION CONSOLIDATION

That, subject to and contingent upon the passing of Ordinary Resolutions 1, 2, 3, 4, 5 and 8 and SpecialResolutions 1 and 2:

(a) every eight Pre-Acquisition Shares in the capital of the Company be consolidated into oneordinary share (“Share”) in the capital of the Company with effect from a date to be fixed by theDirectors;

(b) any fraction of a Share which may arise from the consolidation pursuant to paragraph (a) aboveshall be disregarded, and all fractions of the Shares to which holders of the issued ordinary sharesin the capital of the Company would otherwise be entitled to shall be aggregated and sold and theproceeds arising therefrom shall be retained for the benefit of the Company; and

(c) the Judicial Managers or the Directors of the Company (as the case may be) be and are herebyauthorised to do and execute all such acts and things as they or he may consider necessary orexpedient to give effect to this resolution and implement any of the foregoing.

ORDINARY RESOLUTION 7: THE PROPOSED ALLOTMENT AND ISSUE OF UP TO 172,932,000SHARES IN CONNECTION WITH THE PROPOSED COMPLIANCE PLACEMENT, FOR THEPURPOSE OF MEETING THE SHAREHOLDING DISTRIBUTION REQUIREMENTS OF THELISTING MANUAL

That, subject to and contingent upon the passing of Ordinary Resolutions 4, 5 and 6, approval be andis hereby given, pursuant to Section 161 of the Companies Act, to the Judicial Managers or theDirectors of the Company (as the case may be) to allot and issue up to 172,932,000 Shares at an issueprice to be determined by the Company in consultation with Mitsubishi UFJ Securities (Singapore),Limited, the financial adviser to the Company, and placement agent(s) to be appointed, but will not beless than S$0.20 per Share (subject to the prevailing market conditions at the time of placement), anytime and upon such terms and conditions, but only for the purposes of complying with the shareholdingdistribution requirements of the Listing Manual, and to such persons as the Judicial Managers or theDirectors of the Company (as the case may be) shall in his or their absolute discretion deem fit, and,unless revoked or varied by the Shareholders in general meeting, such authority shall continue in fullforce until the conclusion of the next annual general meeting or the date by which the next annualgeneral meeting is required by law to be held, whichever is earlier.

ORDINARY RESOLUTION 8: THE PROPOSED WHITEWASH RESOLUTION

That, subject to and contingent upon the passing of Ordinary Resolution 5, the shareholders of theCompany hereby resolve, on a poll, irrevocably waive their rights to receive a mandatory general offerin accordance with Rule 14 of the Singapore Code on Take-overs and Mergers from the Vendors’Concert Party Group and their respective concert parties as a result of the issue and allotment of theConsideration Shares to the Vendors’ Concert Party Group pursuant to the Proposed Acquisition.

SPECIAL RESOLUTION 1: THE PROPOSED CAPITAL REDUCTION

That pursuant to Article 12 of the Articles of Association of the Company and Section 78G read withSection 78I of the Companies Act and subject to the confirmation of the High Court of the Republic ofSingapore (“High Court”):

(a) the issued and paid up share capital of the Company be reduced by S$33,541,778 and that suchreduction be effected by cancelling the issued and paid-up share capital of the Company whichhas been lost or is unrepresented by available assets to the extent of S$33,541,778;


F-3

(b) that an amount equal to S$33,541,778, being the credit arising from the cancellation of the issuedand paid up capital, be applied in writing off the accumulated losses of the Company as at 25January 2008 to the extent of S$33,541,778; and

(c) approval be and is hereby given to the Judicial Managers or the Directors of the Company (as thecase may be) to take such steps and exercise such discretion in connection with all or any of theabove matters, with full power to assent to any condition, modification, variation and/oramendment as may be required by the High Court or relevant authorities, as the JudicialManagers or Directors may in their absolute discretion deem fit, advisable, necessary orexpedient to give effect to this resolution and the Proposed Capital Reduction.

SPECIAL RESOLUTION 2: THE PROPOSED CHANGE OF NAME OF THE COMPANY FROM“NEOCORP INTERNATIONAL LTD.” TO “NOVO GROUP LTD.”

That, subject to and contingent upon the passing of Ordinary Resolution 5 and the completion of theProposed Acquisition:

(a) the name of the Company be changed to “Novo Group Ltd.” and that the name “Novo Group Ltd.”shall be substituted for “Neocorp International Ltd.”, wherever the latter name appears in theCompany’s Memorandum and Articles of Association.

(b) the Judicial Managers or the Directors of the Company (as the case may be) be and are herebyauthorised to complete and do all such acts and things (including without limitation entering intoall such transactions, arrangements and agreements and executing all such documents) as he orthey may consider necessary or expedient to give effect to this resolution.

By Order of the Judicial Managers

Foo Soon SooCompany Secretary1 February 2008

Notes:–

(1) A shareholder of the Company entitled to attend and vote at the EGM of the Company may appoint not more than twoproxies to attend and vote in his/her stead. A shareholder of the Company which is a corporation, is entitled to appoint itsauthorised representative or proxy to vote on its behalf. A proxy need not be a shareholder of the Company.

(2) If a proxy is to be appointed, the instrument appointing a proxy must be duly deposited at the registered office of theCompany at 47 Hill Street #05-01, Singapore Chinese Chamber of Commerce & Industry Building, Singapore 179365 notlater than 48 hours before the time appointed for the holding of the EGM.

(3) The instrument appointing a proxy must be signed by the appointor or his attorney duly authorised in writing. Where theinstrument appointing a proxy is executed by a corporation, it must be executed either under its common seal or under thehand of any officer or attorney duly authorised.

(4) A Depositor’s name must appear on the Depository Register maintained by The Central Depository (Pte) Limited as at 48hours before the time fixed for holding the EGM in order for the Depositor to be entitled to attend and vote at the EGM.


F-4

NEOCORP INTERNATIONAL LTD.(IN JUDICIAL MANAGEMENT)Incorporated in the Republic of Singapore(Company Registration No.: 198902648H)

PROXY FORM

EXTRAORDINARY GENERAL MEETING

Important:1. For investors who have used their CPF monies to buy the Shares, this report

is forwarded to them at the request of their CPF Approved Nominees and issent solely FOR INFORMATION ONLY.

2. This Proxy Form is not valid for use by CPF investors and shall be ineffectivefor all intents and purposes if used or purported to be used by them.

I/We* (Name) NRIC/Passport no.*

of (Address)being a shareholder/shareholders* of NEOCORP INTERNATIONAL LTD. (IN JUDICIAL MANAGEMENT) (the “Company”)hereby appoint:

Name AddressNRIC/Passport

No.

Proportion ofShareholdings

(%)

and/or*

Name AddressNRIC/Passport

No.

Proportion ofShareholdings

(%)

as my/our* proxy/proxies* to attend and to vote for me/us* on my/our* behalf and, if necessary, to demand a poll at theExtraordinary General Meeting (the “EGM”) of the Company to be held at Singapore Management University, Lee Kong ChianSchool of Business, Seminar Room 2.5 (Level 2), 81 Victoria Street, Singapore 188065 on 27 February 2008 at 10.00 a.m., andat any adjournment thereof.

(Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the resolution as setout in the Notice of EGM. In the absence of specific directions, the proxy/proxies will vote or abstain as he/they may think fit, ashe/they will on any other matter arising at the Extraordinary General Meeting.)

Resolutions To be used on ashow of hands

To be used in theEvent of a Poll

For Against No. ofVotesFor**

No. ofVotes

Against**Ordinary Resolution 1: The Proposed Pre-Acquisition ConsolidationOrdinary Resolution 2: The proposed allotment and issue of 5,350,000 newPre-Acquisition Shares pursuant to the conversion of S$160,500 of theTritech Loan into Shares at the rate of S$0.03 for each Pre-AcquisitionShare in satisfaction of the repayment obligations under the loanagreement pertaining to the Tritech LoanOrdinary Resolution 3: The proposed allotment and issue of up to64,726,000 new Pre-Acquisition Shares to the Creditors pursuant to theterms of the Scheme of ArrangementOrdinary Resolution 4: The proposed allotment and issue of up to100,000,000 the new Shares to the Vendors pursuant to the ConvertibleLoan AgreementOrdinary Resolution 5: The proposed acquisition of the Sale Shares andthe allotment and issue of the Consideration SharesOrdinary Resolution 6: The Proposed Post-Acquisition ConsolidationOrdinary Resolution 7: The proposed allotment and issue of up to172,932,000 new Shares in connection with the Proposed CompliancePlacement, for the purpose of meeting the shareholding distributionrequirements of the Listing ManualOrdinary Resolution 8: The proposed Whitewash Resolution (Note: Thevote of this resolution will be conducted by poll)Special Resolution 1: The Proposed Capital ReductionSpecial Resolution 2: The proposed change of name of the Company from“Neocorp International Ltd.” to “Novo Group Ltd.”

* Delete accordingly** If you wish to exercise all your votes “For” or “Against”, please indicate an “X” within the box provided. Alternatively, please indicate the

number of votes as appropriate.

Dated this day of 2008

Signature(s) of Shareholder(s) or Common Seal

IMPORTANT: PLEASE READ NOTES OVERLEAF

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

----

-✂

Notes

1. Please insert the total number of Shares held by you. If you have Shares entered against your name in the DepositoryRegister (as defined in Section 130A of the Companies Act, Cap. 50), you should insert that number of Shares. If you haveShares registered in your name in the Register of Members of the Company, you should insert that number of Shares. If youhave Shares entered against your name in the Depository Register and registered in your name in the Register of Membersof the Company, you should insert the aggregate number of Shares. If no number is inserted, this form of proxy will bedeemed to relate to all the Shares held by you.

2. A shareholder entitled to attend and vote at the EGM is entitled to appoint not more than two proxies to attend and vote onhis behalf. A proxy need not be a shareholder of the Company.

3. The instrument appointing a proxy or proxies, duly executed, must be deposited at the registered office of the Company at47 Hill Street #05-01, Singapore Chinese Chamber of Commerce & Industry Building, Singapore 179365 not less than 48hours before the time appointed for the EGM.

4. Where a shareholder appoints more than one proxy, he shall specify the proportion of his shareholding to be representedby each proxy and, if no percentage is specified, the first named proxy shall be deemed to represent 100 per cent. of theshareholding and the second named proxy shall be deemed to be an alternate to the first named.

5. The instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorised inwriting. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed under itscommon seal or under the hand of its attorney or a duly authorised officer.

6. Where an instrument appointing a proxy or proxies is signed on behalf of the appointor by an attorney, the letter or powerof attorney or a duly certified copy thereof must (failing previous registration with the Company) be lodged with theinstrument of proxy, failing which the instrument may be treated as invalid.

7. A corporation which is a shareholder may authorise by resolution of its directors or other governing body such person asit thinks fit to act as its representative at the EGM, in accordance with Section 179 of the Companies Act, Cap. 50.

8. The submission of an instrument or form appointing a proxy by a shareholder does not preclude him from attending andvoting in person at the EGM if he so wishes.

9. The Company shall be entitled to reject an instrument of proxy which is incomplete, improperly completed, illegible or wherethe true intentions of the appointor are not ascertainable from the instructions of the appointor specified on the instrumentof proxy. In addition, in the case of Shares entered in the Depository Register, the Company may reject an instrument ofproxy if the shareholder, being the appointor, is not shown to have Shares entered against his name in the DepositoryRegister as at 48 hours before the time appointed for holding the meeting, as certified by The Central Depository (Pte)Limited to the Company.

10. Terms not defined herein shall have the meanings ascribed to them in the Company’s Circular to the Shareholders dated1 February 2008.

SNP Vite Ltd (Singapore)