Hengxin Technology Ltd. — Annual Report 2010

Feb 18, 2011

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this announcement, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this announcement.

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HENGXIN TECHNOLOGY LTD. 亨鑫科技有限公司 *

(carrying on business in Hong Kong as HX Singapore Ltd.)

(incorporated in Singapore with limited liability)

(Singapore Company Registration Number 200414927H)

(Hong Kong Stock Code: 1085)

(Singapore Stock Code: I85)

ANNOUNCEMENT OF FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010

FINANCIAL HIGHLIGHTS

1. Revenue decreased by 26.8% to RMB 1,183.1 million

2. Gross profit decreased by 29.1% to RMB 221.7 million

3. Net profit attributable to equity holders of the parent decreased by 31.6% to RMB 102.6 million

4. Basic earnings per share was RMB 0.30

5. Proposed final dividend of RMB 3.96 cents per share

– 1 –

The board of directors (the “ Board ”) of Hengxin Technology Ltd. (the “ Company ”) is pleased to announce the consolidated results of the Company and its subsidiary (collectively hereinafter referred as the “ Group ”) for the year ended 31 December 2010 and for the three months ended 31 December 2010 together with the comparative figures for the corresponding periods in 2009 as follows:

CONSOLIDATED INCOME STATEMENT

For the year ended 31 December 2010

2010 Notes RMB ‘000 (unaudited) Revenue 5 1,183,131 Cost of sales (961,470) Gross profit 221,661 Other income 6 15,292 Selling and distribution expenses (55,841) Administrative expenses (36,256) Other operating expenses (10,404) Finance costs 7 (9,723) Profit before income tax 8 124,729 Income tax expense 9 (22,174) Net profit attributable to equity holders of the parent 102,555 Other comprehensive (loss) income: Exchange difference arising from consolidation of foreign operations (20) Total comprehensive income attributable to equity holders of the parent 102,535 Earnings per share attributable to equity holders of the parent Basic and diluted (RMB cents) 11 30.4 Dividends per share (RMB cents) 10 3.96

2009 RMB ‘000 1,615,265 (1,302,579) 312,686 7,557 (82,768) (35,142) (7,390) (16,013) 178,930 (29,064) 149,866 16 149,882 44.6 4.38

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CONSOLIDATED INCOME STATEMENT

For the 3 months ended 31 December (“ 4Q ”) 2010

4Q ended 2010 RMB ‘000 (unaudited) Revenue 317,714 Cost of sales (261,495) Gross profit 56,219 Other income 2,390 Selling and distribution expenses (14,566) Administrative expenses (10,889) Other operating expenses (3,598) Finance costs (751) Profit before income tax 28,805 Income tax expense (5,563) Net profit attributable to equity holders of the parent 23,242 Other comprehensive (loss) income: Exchange difference arising from consolidation of foreign operations (25) Total comprehensive income attributable to equity holders of the parent 23,217 Earnings per share attributable to equity holders of the parent Basic and diluted (RMB cents) 6.8

4Q ended 2009 RMB ‘000 377,947 (304,277) 73,670 2,243 (18,236) (4,686) (2,008) (3,118) 47,865 (6,961) 40,904 25 40,929 12.2

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Profit before income tax is determined after charging (crediting) the following: -

		Group			Group
	3	mths ended 31 Dec		Full year ended		31 Dec
	2010	2009	Change	2010	2009	Change
		(re-stated)			(re-stated)
	RMB’000	RMB’000	%	RMB’000	RMB’000	%
(Reversal) Allowance for
inventory obsolescence	618	(577)	N.M.	806	(577)	N.M.
Depreciation of property,
plant and equipment	4,096	3,356	22.1	14,838	11,528	(28.7)
Fair value loss on held-for-
trading investments	—	—	N.M.	1,472	—	N.M.
Gain on disposal of
available-for-
sale investment	—	(698)	(100.0)	(109)	(698)	(80.2)
Loss on disposal of property,
plant and equipment	—	1	(100.0)	8	5	60.0
Amortisation of prepaid
lease payments	140	140	0.0	560	537	4.3
Foreign exchange
(gains) losses	762	(569)	N.M.	421	(1,553)	N.M.
Interest expense	751	3,118	(75.9)	9,723	16,013	(39.3)
Interest income	961	(1,048)	N.M.	(4,732)	(3,362)	N.M.
Research and development
expenses1	2,613	2,576	2.7	7,054	8,437	(21.0)

N.M.: Not meaningful

1 Included in Other Operating Expenses

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 December 2010

2010 Notes RMB ‘000 (unaudited) ASSETS Current assets Cash and bank balances 247,078 Pledged cash deposits 62,596 Trade receivables 13 626,702 Other receivables and prepayments 12,958 Inventories 128,377 Available-for-sale investment 2,000 Prepaid lease payment 560 Total current assets 1,080,271 Non-current assets Prepaid lease payment 20,021 Available-for-sale investment — Property, plant and equipment 140,978 Deposit for acquisition of land use right 5,760 Deferred tax assets 2,518 Total non-current assets 169,277 Total assets 1,249,548 LIABILITIES AND EQUITY Current liabilities Short term loans 40,000 Trade payables 14 323,263 Other payables 25,476 Income tax payable 6,102 Total current liabilities 394,841 NET CURRENT ASSETS 685,429	2009 RMB ‘000 147,676 120,486 718,172 24,148 184,247 500 560
	1,195,789
	20,581 2,000 139,260 5,760 2,398
	169,999
	1,365,788
	175,221 474,642 32,390 6,458
	688,711
	507,078

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION - CONT’D

As at 31 December 2010

2010 Notes RMB ‘000 (unaudited) Non-current liability Deferred tax liabilities 1,998 TOTAL LIABILITIES 396,839 NET ASSETS 15 852,709 Equity attributable to equity holders of the parent Share capital 11 295,000 General reserves 104,839 Special reserve (6,017) Translation reserve (4) Accumulated profits 458,891 TOTAL EQUITY 852,709 TOTAL EQUITY AND LIABILITIES 1,249,548	2009 RMB ‘000 1,413 690,124 675,664 205,771 87,287 (6,017) 16 388,607 675,664 1,365,788

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STATEMENT OF FINANCIAL POSITION - COMPANY LEVEL

As at 31 December 2010

2010 RMB ‘000 (unaudited) ASSETS Current assets Cash and bank balances 103,303 Other receivables and prepayments 63 Amount due from subsidiaries 5,706 Total current assets 109,072 Non-current assets Subsidiaries 321,984 Property, plant and equipment 15 Total non-current assets 321,999 Total assets 431,071 LIABILITIES AND EQUITY Current liabilities Other payables 4,423 Total current liabilities 4,423 NET CURRENT ASSETS 104,649 Non-current liability Deferred tax liabilities — Total non-current liability — TOTAL LIABILITIES 4,423 NET ASSETS 426,648 Equity attributable to equity holders of the parent Share capital 295,000 Accumulated profits 131,648 TOTAL EQUITY 426,648 TOTAL EQUITY AND LIABILITIES 431,071	2009 RMB ‘000 9,307 392 1,024
	10,723
	320,961 24
	320,985
	331,708
	7,694
	7,694
	3,029
	—
	—
	7,694
	324,014
	205,771 118,243
	324,014
	331,708

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CONSOLIDATED STATEMENT OF CASH FLOWS

For the year/period ended 31 December 2010

Group 1 Oct 10 to 31 Dec 10 RMB ‘000 Cash flows from operating activities Profit before tax 28,806 Adjustments for: Depreciation of property, plant and equipment 4,096 Amortisation of leasehold land 140 Allowance (Reversal of) for stock obsolescence 619 Loss on disposal of property, plant and equipment 2 Interest expense 751 Interest income (961) Gain on disposal of available- for-sale investment — Loss on disposal of held-for-trading investments — Exchange differences arising on foreign currency translation (104) Operating profit before working capital changes 33,349 Trade receivables 73,952 Other receivables and prepayments 9,981 Inventories (26,383) Trade and bill payables (17,098) Other payables and accruals 1,157 Cash generated from operations 74,958 Interest paid (751) Interest income received 961 Income tax paid (4,166) Net cash generated from operating activities 71,002	1 Oct 09 to 31 Dec 09 RMB ‘000 52,756 3,356 140 (577) 1 3,118 (1,048) (698) — 447 57,495 93,719 (15,544) (34,260) (29,385) (11,969) 60,056 (3,118) 1,048 (12,034) 45,952	1 Jan 10 to 31 Dec 10 RMB ‘000 124,729 14,838 560 806 8 9,723 (4,732) (109) 1,472 (858) 146,437 91,470 11,190 55,064 (151,379) (6,914) 145,868 (9,723) 4,732 (22,065) 118,812	1 Jan 09 to 31 Dec 09 RMB ‘000 178,930 11,528 537 (577) 5 16,013 (3,362) (698) — 571 202,947 (163,651) (22,699) (60,412) 270,707 (11,809) 215,083 (16,013) 3,362 (28,496) 173,936

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Group Cash flows from investing activities Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of available-for- sale investments Proceeds from disposal of available-for-sale investments Acquisition of held-for- trading investments Proceeds from disposal of held-for-trading investments Payment of deposit for acquisition of land use right Net cash used in investing activities	1 Oct 10 to 31 Dec 10 RMB ‘000 (6,585) — — — — — — (6,585)	1 Oct 09 to 31 Dec 09 RMB ‘000 (23,373) — (26,000) 26,698 — — — (22,675)	1 Jan 10 to 31 Dec 10 RMB ‘000 (16,567) 3 (10,000) 10,609 (20,000) 18,528 — (17,427)	1 Jan 09 to 31 Dec 09 RMB ‘000 (59,988) 5 (28,600) 29,298 — — (5,760) (65,045)

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Group Cash flows from financing activities Proceeds from issue of new shares, net of issue expenses Dividend paid Repayment of short-term bank loans Proceeds from short-term bank loans Decrease (increase) in pledged bank deposits Net cash (used in) generated from financing activities Net increase (decrease) in cash and cash equivalents Effects of foreign exchange translation Cash and cash equivalents at the beginning of the financial period/year Cash and cash equivalents at the end of the financial year	1 Oct 10 to 31 Dec 10 RMB ‘000 89,230 — (109,528) 40,000 23,189 42,891 107,308 79 139,691 247,078	1 Oct 09 to 31 Dec 09 RMB ‘000 — — (360,000) 220,221 31,880 (107,899) (84,622) (423) 232,721 147,676	1 Jan 10 to 31 Dec 10 RMB ‘000 89,229 (14,719) (585,221) 450,000 57,890 (2,821) 98,564 838 147,676 247,078	1 Jan 09 to 31 Dec 09 RMB ‘000 — (5,496) (948,800) 852,221 (49,717) (151,792) (42,901) (555) 191,132 147,676

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STATEMENT OF CHANGES IN EQUITY

Consolidated Statement of Changes in Equity for the year ended 31 December 2010

GROUP-RMB ‘000 Balance at 1 January 2010 as previously reported Adjustment As re-stated Issue of new ordinary shares (net of share issue exp) Total comprehensive income for the year Transfer to reserves Dividends Balance at 31 December 2010	Share capital 205,771 — 205,771 89,229 — — — 295,000	General reserve 87,287 — 87,287 — — 17,552 — 104,839	Special reserve — (6,017) (6,017) — — — — (6,017)	Translation Accumulated reserve profits (4,055) 392,678 4,071 (4,071) 16 388,607 — — (20) 102,555 — (17,552) — (14,719) (4) 458,891	Total 681,681 (6,017)
					675,664 89,229 102,535 — (14,719)
					852,709

Consolidated Statement of Changes in Equity for the year ended 31 December 2009

GROUP-RMB ‘000 Balance at 1 January 2009 as previously reported Adjustment As re-stated Total comprehensive income for the year Transfer to reserves Dividends Balance at 31 December 2009 (re-stated)	Share capital 205,771 — 205,771 — — — 205,771	General reserve 62,341 — 62,341 — 24,946 — 87,287	Special reserve — (6,017) (6,017) — — — (6,017)	Translation Accumulated reserve profits (4,033) 273,216 4,033 (4,033) — 269,183 16 149,866 — (24,946) — (5,496) 16 388,607	Total 537,295 (6,017)
					531,278 149,882 — (5,496)
					675,664

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STATEMENT OF CHANGES IN EQUITY

Statement of Changes in Equity of the Company for the year ended 31 December 2010

	Share	Translation	Accumulated
COMPANY	capital	reserve	profits	Total
	RMB ‘000	RMB ‘000	RMB ‘000	RMB ‘000
Balance at 1 January 2010 as
previously reported	205,771	(3,716)	121,959	324,014
Adjustment	—	3,716	(3,716)	—
As re-stated	205,771	—	118,243	324,014
Issue of new ordinary shares
(net of share issue exp)	89,229	—	—	89,229
Total comprehensive income
for the year	—	—	28,124	28,124
Dividends	—	—	(14,719)	(14,719)
Balance at 31 December 2010	295,000	—	131,648	426,648
Statement of Changes in Equity of the Company for the year			ended 31 December 2009
	Share	Translation	Accumulated
COMPANY	capital	reserve	profits	Total
	RMB ‘000	RMB ‘000	RMB ‘000	RMB ‘000
Balance at 1 January 2009 as
previously reported	205,771	(3,676)	49,099	251,194
Adjustment	—	3,676	(3,676)	—
As re-stated	205,771	—	45,423	251,194
Total comprehensive income
for the year	—	—	78,316	78,316
Dividends	—	—	(5,496)	(5,496)
Balance at 31 December 2009
(re-stated)	205,771	—	118,243	324,014

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. CORPORATE INFORMATION

The Company is a limited liability company incorporated in Singapore on 18 November 2004 under the Singapore Companies Act and its shares are dual primarily listed on the Singapore Exchange Securities Trading Limited (the “ SGX-ST ”) and The Stock Exchange of Hong Kong Limited (the “ SEHK ”) since 11 May 2006 and 23 December 2010 respectively. The registered office of the Company is located at 10 Anson Road #15-07, International Plaza, Singapore 079903. The principal place of business of the Group is located at No. 138 Taodu Road, Dingshu Town, Yixing City, Jiangsu Province, the People’s Republic of China (the “ PRC ”).

The principal activities of the Company are research, design, development and manufacture of telecommunications and technological products, production of radio frequency coaxial cables for mobile communications and mobile communications systems exchange equipment. The Group’s operations are principally conducted in the PRC.

The consolidated financial statements are presented in Renminbi (“ RMB ”), being the functional currency of the Group.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Financial Information has been prepared in accordance with Singapore Financial Reporting Standards (“ SFRS ”) (which include all Singapore Financial Reporting Standards and Singapore Financial Reporting Interpretations (“ INT SFRS ”) issued by the Accounting Standards Council of Singapore throughout the Relevant Periods.

The Financial Information has been prepared on a historical cost basis except as set out in the accounting policies below. The Financial Information is presented in RMB and all values are rounded to the nearest thousand (“ RMB’000 ”) except when otherwise indicated.

Impact of new and revised Singapore Financial Reporting Standards

It should be noted that accounting estimates and assumptions are used in preparation of the financial statements. Although these estimates are based on management’s best knowledge and judgment of current events and actions, actual results may ultimately differ from those estimates.

Accounting policies

The Group has applied the same accounting policies and methods of computation in the financial statements for the current financial year/period reported on, as in the recently audited consolidated financial statements for the financial year ended 31 December 2009.

Certain reclassifications have been made to the prior years’ financial statements to enhance comparability with the current year’s financial statements.

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3. APPLICATION OF SINGAPORE FINANCIAL REPORTING STANDARDS

The Group adopted the following new and revised SFRS that are mandatory for the financial periods beginning on or after 1 January 2010.

The adoption of new and revised SFRS did not have any impact on the results of the Group for the financial year ended 31 December 2009.

4. SEGMENT INFORMATION

For management purposes, the Group is organized into business units based on their products, and currently has three reportable operating segments as follows:

• Manufacturing and sale of RF Coaxial Cable Series for mobile communications (“ RF Coaxial Cables ”)

• Coaxial Cables for telecommunications equipment and accessories (“ Accessories ”)

• Others

An analysis by principal activity of contribution to the results is as follows:

Segment revenues and results

For management purpose, the Group is organised into two core product lines - radio frequency coaxial cables, and other telecommunication equipment. These product lines are the basis on which the Group report its primary segment information.

Segment revenue and expense include the operating revenue and expenses which are directly attributable to a segment and the relevant portion of such revenue and expense that can be allocated on a reasonable basis to a segment.

– 14 –

GROUP Year ended 31 December 2010 Revenue Segment Results Segment profit Interest income Finance costs Other income Other expenses Profit before income tax Income tax Net profit for the year 2009 Revenue Segment Results Segment profit Interest income Finance costs Other income Other expenses Profit before income tax Income tax Net profit for the year	Telecommunication Radio frequency equipment and coaxial cables accessories RMB ‘000 RMB ‘000 1,011,635 171,496 115,212 19,531 4,046 685 (8,314) (1,409) 1,344,014 271,251 167,651 33,835 2,797 564 (13,324) (2,689)	Others RMB ‘000 — — — — — — — —	Unallocated RMB ‘000 — (12,233) 1 — — (15,147) 1 —	Total RMB ‘000 1,183,131
				122,510 4,732 (9,723) 10,560 (3,350)
				124,729 (22,174)
				102,555
				1,615,265
				186,339 3,362 (16,013) 4,195 1,047
				178,930 (29,064)
				149,866

• exclude research and development expenses

– 15 –

Other segment information

GROUP Year ended 31 December 2010 Capital expenditure Depreciation expense Amortisation of leasehold land Allowance for inventory obsolescence 2009 Capital expenditure Depreciation expense Amortisation of leasehold land Allowance for inventory obsolescence	Telecommunication Radio frequency equipment and coaxial cables accessories RMB ‘000 RMB ‘000 13,611 2,307 12,679 2,150 479 81 725 81 54,396 10,978 9,584 1,934 447 90 (480) (97)	Others RMB ‘000 649 — — — — — — —	Unallocated RMB ‘000 — 9 — — 374 10 — —	Total RMB ‘000 16,567 14,838 560 806
				65,748 11,528 537 (577)

– 16 –

Statement of net assets

Telecommunication Radio frequency equipment and As at 31 December, coaxial cables accessories Others Unallocated RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000 2010 Assets: Segment assets 974,595 165,217 649 — Unallocated assets 109,087 Total assets Liabilities: Segment liabilities 335,536 56,880 — — Unallocated liabilities 4,423 Total liabilities 2009 Assets: Segment assets 1,127,487 227,554 — — Unallocated assets 10,747 Total assets Liabilities: Segment liabilities 567,834 114,596 — — Unallocated liabilities 7,694 Total liabilities	Total RMB ‘000 1,140,461 109,087
	1,249,548
	392,416 4,423
	396,839
	1,355,041 10,747
	1,365,788
	682,430 7,694
	690,124

– 17 –

Geographical segment

The segmented information for geographical regions is based on the locations of customers and the location of the assets. In line with the group’s business strategy, the market is currently grouped into three geographical regions, namely Central Asia, South Asia and Others.

Central Asia South Asia Others Total	Revenue from external customer Non-current assets For the year ended 31 December 2010 2009 2010 2009 RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000 1,148,809 1,526,800 169,200 169,851 28,325 85,165 77 148 5,997 3,300 — — 1,183,131 1,615,265 169,277 169,999	Revenue from external customer Non-current assets For the year ended 31 December 2010 2009 2010 2009 RMB ‘000 RMB ‘000 RMB ‘000 RMB ‘000 1,148,809 1,526,800 169,200 169,851 28,325 85,165 77 148 5,997 3,300 — — 1,183,131 1,615,265 169,277 169,999
		169,999

5. REVENUE

Revenue, which is also the Group’s turnover, represents the net invoiced value of goods sold, after deduction of relevant taxes and allowances for returns and trade discounts and the value of services rendered. An analysis of the Group’s revenue, other income and gains is as follows:

	For the year ended
	31 December
	2010 2009
	RMB ‘000 RMB ‘000
Sale of goods	1,183,131 1,615,265

The sales and net profit generated for each of the 6 months period are as follow:

Group (a) Sales reported for first half (b) Net profit reported for first half (c) Sales reported for second half (d) Net profit reported for second half Total Sales : Total Net Profit :	2010 RMB’000 584,095 54,749 599,036 47,806 1,183,131 102,555	2009 RMB’000 762,215 60,588 853,050 89,278 1,615,265 149,866	Change % -23.4% -9.6% -29.8% -46.5%
			-26.8%
			-31.6%

– 18 –

6. OTHER INCOME

Government grants Interest income Gain on disposal of available-for-sale investments Government grants - Jobs credit scheme Others Total	For the year ended 31 December 2010 2009 RMB ‘000 RMB ‘000 9,732 2,856 4,732 3,362 109 698 33 36 686 605 15,292 7,557	For the year ended 31 December 2010 2009 RMB ‘000 RMB ‘000 9,732 2,856 4,732 3,362 109 698 33 36 686 605 15,292 7,557
		7,557

7. FINANCE COSTS

	For the year ended
	31 December
	2010 2009
	RMB ‘000 RMB ‘000
Interest on short term bank borrowings	9,723 16,013

– 19 –

8. PROFIT BEFORE INCOME TAX

Profit before tax is arrived at after charging/(crediting) the following during the year:

Cost of inventories recognised as expense (including allowance of (reversal of) inventory obsolescence) Depreciation of property, plant and equipment Amortisation of leasehold land Auditors’ remuneration Employee benefits expense Cost of defined contribution plans Directors’ fees - directors of the Company Directors’ remuneration: Directors of the Company Directors of the subsidiaries Total staff costs Research and development expenses (included in Other Operating Expenses) Net foreign exchange losses (gains) Loss on disposal of property, plant and equipment Fair value loss on sale of held-for-trading investments Fair value gain on sale of available-for-sale financial assets

For the year ended 31 December 2010 2009 RMB ‘000 RMB ‘000 960,664 1,303,156 14,838 11,528 560 537 1,138 1,453 42,015 64,509 2,662 2,246 1,342 1,270 509 3,719 549 439 47,077 72,183 7,054 8,437 421 (1,553) 8 5 1,472 — (109) (698)

– 20 –

9. INCOME TAX EXPENSE

Current Withholding taxes Under provision of current tax in prior years Deferred	For the year ended 31 December 2010 2009 RMB ‘000 RMB ‘000 17,242 23,846 4,397 4,675 70 39 465 504 22,174 29,064	For the year ended 31 December 2010 2009 RMB ‘000 RMB ‘000 17,242 23,846 4,397 4,675 70 39 465 504 22,174 29,064
		29,064

The Company is incorporated in Singapore and is subject to income tax rate of 17% for the year ended 31 December 2010 (2009: 17%).

Under the law of the People’s Republic of China on Enterprise Income Tax (the “ EIT Law ”) effective from 1 January 2008, applicable income tax rate of Jiangsu Hengxin Technology Co., Ltd. in 2010 is 15%.

Taxes on profits elsewhere have been calculated at the rates of tax prevailing in the country in which the Group operates.

10. DIVIDENDS

	2010	2009
	RMB ‘000	RMB ‘000
Proposed first and final tax-exempt cash dividend of
S$0.0077 (2009: S$0.0091) per ordinary share	15,383	14,719

The proposed final dividend for the year is subject to the approval of the Company’s shareholders at the forthcoming annual general meeting.

11. SHARE CAPITAL

Details of the changes in the Company’s share capital are as follows:

Share capital - Ordinary Shares No. of shares ‘000 Balance as at 31 December 2009 336,000 Issue of new shares 52,000 Balance as at 31 December 2010 388,000	RMB ‘000 205,771 89,229 295,000	S$ ‘000 40,766 17,576
		58,342

In line with the Company’s Memorandum & Association, treasury shares are not allowed in the Company.

– 21 –

12. EARNINGS PER SHARE

Earnings per share is calculated by dividing the Group’s net profit attributable to shareholders for the period/year by the weighted average number of ordinary shares outstanding during the year.

Earning per share (RMB) – Basic – Diluted Weighted average no. of shares applicable to basic earnings per share (‘000) Weighted average no. of shares based on fully diluted basis (‘000)	Group 3 months ended 31 Dec 2010 2009 0.06 0.12 0.06 0.12 341,087 336,000 341,087 336,000	Group Full year ended 31 Dec 2010 2009 0.30 0.45 0.30 0.45 337,282 336,000 337,282 336,000	Group Full year ended 31 Dec 2010 2009 0.30 0.45 0.30 0.45 337,282 336,000 337,282 336,000
			0.45
			336,000 336,000

There were no potential dilutive ordinary shares in existence during the two years ended 31 December 2009 and 2010.

13. TRADE RECEIVABLE

Trade receivables Allowance for doubt debts Notes receivable	As at 31 December 2010 2009 RMB ‘000 RMB ‘000 607,841 729,037 (15,762) (15,762) 592,079 713,275 34,623 4,897	As at 31 December 2010 2009 RMB ‘000 RMB ‘000 607,841 729,037 (15,762) (15,762) 592,079 713,275 34,623 4,897
		713,275
		4,897

The Group allows credit period of 180 days to its trade customers. The aging of trade receivables, net of allowance for doubtful debts presented based on the invoice date at the end of the reporting period, is as follows:

0 to 180 days 181 to 360 days Over 360 days	As at 31 December 2010 2009 RMB ‘000 RMB ‘000 500,229 565,117 97,288 149,860 29,185 3,195 626,702 718,172	As at 31 December 2010 2009 RMB ‘000 RMB ‘000 500,229 565,117 97,288 149,860 29,185 3,195 626,702 718,172
		718,172

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14. TRADE PAYABLE

Trade payables Bill payables	As at 31 December 2010 2009 RMB ‘000 RMB ‘000 137,213 158,035 186,050 316,607 323,263 474,642	As at 31 December 2010 2009 RMB ‘000 RMB ‘000 137,213 158,035 186,050 316,607 323,263 474,642
		474,642

Trade payables comprise amounts outstanding for trade purchases. Payment terms with suppliers are mainly on credit within 90 days from the invoice date. The aging of trade payables and notes payables are as follows:

0 to 90 days 91 to 180 days 181 to 360 days Over 360 days	As at 31 December 2010 2009 RMB ‘000 RMB ‘000 192,781 286,955 128,253 185,961 1,044 1,532 1,185 194 323,263 474,642	As at 31 December 2010 2009 RMB ‘000 RMB ‘000 192,781 286,955 128,253 185,961 1,044 1,532 1,185 194 323,263 474,642
		474,642

15. NET ASSET VALUE

The net asset value per ordinary share of the Group and Company is shown below:

Net Assets (RMB ‘000) Number of ordinary shares (‘000) Net Asset Value per ordinary share (RMB)	Group As at 31 December 2010 2009 852,709 675,664 388,000 336,000 2.20 2.01	Company As at 31 December 2010 2009 426,648 324,014 388,000 336,000 1.10 0.96	Company As at 31 December 2010 2009 426,648 324,014 388,000 336,000 1.10 0.96
			0.96

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(I) MANAGEMENT DISCUSSION AND ANALYSIS

Year-on-year performance

Revenue

Group revenue for the financial year ended 31 December 2010 decreased by approximately RMB 432.2 million, or approximately 26.8%, from approximately RMB 1,615.3 million in the previous financial year to approximately RMB 1,183.1 million in the current financial year ended 31 December 2010. Such decrease was due to lower telecom operators’ spending during the financial year which affected both sales in RF Coaxial Cables and Accessories.

RF Coaxial Cable

Revenue generated from RF Coaxial Cables decreased by approximately RMB 332.4 million, or approximately 24.7%, from approximately RMB 1,344.0 million in the previous financial year to approximately RMB 1,011.6 million in the current financial year ended 31 December 2010.

Accessories

Revenue generated from Accessories decreased by approximately RMB 99.8 million, or approximately 36.8%, from approximately RMB 271.3 million in the previous financial year to approximately RMB 171.5 million in the current financial year ended 31 December 2010.

Gross profit margin

Although there had been a constant downward pressure on average selling prices of our products, the Group had been able to maintain a relatively steady gross profit margin during the financial year ended 31 December 2010 at approximately 18.7% compared to approximately 19.4% in the previous financial year. Various measures had been undertaken to ensure a more effective cost control program, including the reduction of raw materials costs, improvement of manufacturing processes and vigilant selection of suppliers for better logistics coordination, better pricing and payment terms.

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Other income

Other income increased by approximately RMB 7.7 million, or approximately 102.4%, from approximately RMB 7.6 million in the previous financial year to approximately RMB 15.3 million in the current financial year ended 31 December 2010. The increase is due to increased government grants given to the Group’s key subsidiary, Jiangsu Hengxin Technology Co., Ltd.

Selling and distribution expenses

Selling and distribution expenses decreased by approximately RMB 27.0 million, or approximately 32.6%, from approximately RMB 82.8 million in the previous financial year to approximately RMB 55.8 million in the current financial year ended 31 December 2010. The decrease was in line with the Group’s lower sales achieved during the financial year ended 31 December 2010.

Administrative expenses

Administrative expenses increased by approximately RMB 1.2 million, or approximately 3.4%, from approximately RMB 35.1 million in the previous financial year to approximately RMB 36.3 million in the current financial year ended 31 December 2010. The increase was mainly due to the expenses incurred for the Group’s dual primary listing application in Hong Kong during the financial year 2010.

Other operating expenses

Other operating expenses increased by approximately RMB 3.0 million or approximately 40.5% from approximately RMB 7.4 million in the previous financial year to approximately RMB 10.4 million in the current financial year ended 31 December 2010. The increase was mainly due to foreign exchange gains in the previous financial year compared to an exchange loss incurred in the current financial year 2010, and was further contributed by the loss of sale of held-fortrading investments amounting approximately RMB 1.5 million during the financial year 2010.

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Finance costs

Finance costs decreased by approximately RMB 6.3 million, or approximately 39.4%, from approximately RMB 16.0 million in the previous financial year to approximately RMB 9.7 million in the current financial year ended 31 December 2010. The decrease was in line with the decrease in short term bank borrowings obtained during the financial year ended 31 December 2010.

Profit before income tax

Profit before income tax decreased by approximately RMB 54.2 million, or approximately 30.3%, from approximately RMB 178.9 million in the previous financial year to approximately RMB 124.7 million in the current financial year ended 31 December 2010 due to lower revenue generated in 2010.

Income tax expense

The Group’s main subsidiary is subject to an incentive tax rate of 15% as it had been awarded as a high-tech enterprise in 2008. This rate is higher than the effective tax rate of 12.5% that the subsidiary enjoyed in 2009. The decrease in income tax expenses is due to the overall decrease in profit before tax for the financial year. Accordingly, income tax expense decreased by approximately RMB 6.9 million, or approximately 23.7%, from approximately RMB 29.1 million in the previous financial year to approximately RMB 22.2 million in the current financial year ended 31 December 2010.

Net profit

In view of the above, net profit attributable to equity holders of the parent decreased approximately RMB 47.3 million from approximately RMB 149.9 million in 2009 to approximately RMB 102.6 million in 2010.

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Performance

Revenue

Group revenue decreased by approximately RMB 60.2 million, or approximately 15.9%, from approximately RMB 377.9 million in 4Q2009 to approximately RMB 317.7 million in the 4Q2010. The decrease was due to a relative decrease in spending by telecom operators in the PRC and overseas during the 4Q2010, which affected both sales in RF Coaxial Cables and Accessories.

RF Coaxial Cable

Revenue generated from RF Coaxial Cables decreased by approximately RMB 13.8 million, or approximately 4.6%, from approximately RMB 302.7 million in 4Q2009 to approximately RMB 288.9 million in 4Q2010.

Accessories

Revenue generated from Accessories decreased by approximately RMB 46.4 million, or approximately 61.7%, from approximately RMB 75.2 million in 4Q2009 to approximately RMB 28.8 million in 4Q2010.

Gross profit margin

Gross profit margin for 4Q2010 stood at approximately 17.7% compared to approximately 19.5% in 4Q2009. This is due to intensifying competition which weighed down on average selling prices of our products in both operating segments during the financial period.

Other income

Other income increased by approximately RMB 0.2 million, or approximately 9.1%, from approximately RMB 2.2 million in 4Q2009 to approximately RMB 2.4 million in 4Q2010. The increase is due to relatively higher government grants given to the Group’s key subsidiary, Jiangsu Hengxin Technology Co., Ltd. during the financial period.

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Selling and distribution expenses

Selling and distribution expenses decreased by approximately RMB 3.6 million, or approximately 19.8%, from approximately RMB 18.2 million in 4Q2009 to approximately RMB 14.6 million in 4Q2010. The decrease was in line with the Group’s lower sales achieved during the financial period.

Administrative expenses

Administrative expenses increased by approximately RMB 6.2 million, or approximately 131.9%, from approximately RMB 4.7 million in 4Q2009 to approximately RMB 10.9 million in 4Q2010. The increase was mainly due to the expenses incurred for the Group’s dual primary listing application in Hong Kong.

Other operating expenses

Other operating expenses increased by approximately RMB 1.6 million, or approximately 80.0%, from approximately RMB 2.0 million in 4Q2009 to approximately RMB 3.6 million in 4Q2010. The increase was due to foreign exchange losses incurred during the financial period.

Finance costs

Finance costs decreased by approximately RMB 2.3 million, or approximately 74.2%, from approximately RMB 3.1 million in 4Q2009 to approximately RMB 0.8 million in 4Q2010. The decrease was in line with the decrease in short term bank borrowings obtained during the financial year in 2010.

Profit before income tax

Profit before income tax decreased by approximately RMB 19.1 million, or approximately 39.9%, from approximately RMB 47.9 million in 4Q2009 to approximately RMB 28.8 million in 4Q2010 due to lower revenue generated in 2010.

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Income tax expense

The Group’s main subsidiary in the PRC is subject to an incentive tax rate of 15% as it had been awarded as a high-tech enterprise in 2008. This rate is higher than the effective tax rate of 12.5% that the subsidiary enjoyed in 2009. The decrease in income tax expenses is due to the overall decrease in profit before tax for the financial year. Accordingly, income tax expense decreased by approximately RMB 1.4 million, or approximately 20.0%, from approximately RMB 7.0 million in the 4Q2009 to approximately RMB 5.6 million in the 4Q2010.

Net profit

In view of the above, net profit attributable to equity holders of the parent decreased by approximately RMB 17.7 million from approximately RMB 40.9 million in 4Q2009 to approximately RMB 23.2 million in 4Q2010.

STATEMENT OF FINANCIAL POSITION

Material fluctuations of balance sheet items are explained below:

Pledged bank deposits

Pledged bank deposits are used as a pledged against commercial bills used for payment to suppliers. Such decrease by approximately in RMB 57.9 million from approximately RMB 120.5 million as at 31 December 2009 to approximately RMB 62.6 million as at 31 December 2010 was due to a lower amount of bank deposits required to be set aside as securities for a lower balance payable in the form of commercial bills to suppliers.

Trade receivables

Trade receivables decreased by approximately RMB 91.5 million from approximately RMB 718.2 million as at 31 December 2009 to approximately RMB 626.7 million as at 31 December 2010.

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Average trade receivables turnover days are 212 days as at 31 December 2010 compared to 147 days as at 31 December 2009. Whilst there is an increase of turnover days, it is a decrease from the 229 days trade receivables turnover as at 30 September 2010. Most of the trade receivables balances are recent sales which are well within the average credit period given to our customers. Collections have slowed down as a result of slower repayment from one of the three major PRC telecom operators. The three PRC telecom operators have no history of bad debts and continue to make regular payments to the Group. The Group believes that the risk of collection is remote as it has not experienced such default since transacting with this particular telecom operator.

Other receivables and prepayments

Other receivables and prepayments decreased by approximately RMB 11.1 million from approximately RMB 24.1 million as at 31 December 2009 to approximately RMB 13.0 million as at 31 December 2010. The decrease in balance is due to a higher amount of advanced payment to suppliers as at 31 December 2009 arising from the higher demand of products.

Inventories

Inventories (comprising raw materials, work-in-progress and finished goods) decreased by approximately RMB 55.8 million from approximately RMB 184.2 million as at 31 December 2009 to approximately RMB 128.4 million as at 31 December 2010. This is in line with the decrease in demand by PRC’s telecom operators of the Group’s products during the year 2010.

Property, plant and equipment

Property, plant and equipment increased by approximately RMB 1.7 million from approximately RMB 139.3 million in 31 December 2009 to approximately RMB 141.0 million as at 31 December 2010 due to a construction of a new building in the premises of our PRC subsidiary arising from the need for more office space by the Group.

30

Short-term bank loans

Short-term bank loans decreased by approximately RMB 135.2 million from approximately RMB 175.2 million in 31 December 2009 to approximately RMB 40.0 million in 31 December 2010 as the need for lesser raw materials resulted in a lower amount of working capital required during the year 2010.

Trade payables and Other payables

Trade payables decreased by approximately RMB 151.3 million from approximately RMB 474.6 million as at 31 December 2009 to approximately RMB 323.3 million as at 31 December 2010 in line with the decrease in purchases for raw materials during the year 2010.

Other payables and accruals decreased by approximately RMB 6.9 million from approximately RMB 32.4 million as at 31 December 2009 to approximately RMB 25.5 million as at 31 December 2010 as higher amount of accruals were made for employee benefits expenses in 2009 in line with the Group’s better performance.

Income tax payable

Income tax payable decreased by approximately RMB 0.4 million during the period in line with a lower profit posted for the last quarter of the financial year 2010.

Cash and bank balances

Cash and bank balances increased by approximately RMB 99.4 million from RMB 147.7 million to approximately RMB 247.1 million mainly due to proceeds obtained from the issue of new ordinary shares by the Company on the SEHK on 23 December 2010.

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(II)LIQUIDITY, FINANCIAL RESOURCES

In addition to its short-term interesting-bearing facilities, the Group generally finances its operations from cash flows generated internally.

The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximizing the return to shareholders through the optimization of debt and equity balance.

The Management monitors capital based on the Group net gearing ratio. The Group net gearing ratio is calculated as net borrowings divided by total equity. Net borrowings are calculated as total short-term loans less cash and cash equivalents at the end of the reporting period.

	As a 31	December
	2010	2009
	RMB‘000	RMB‘000
Net cash borrowings	(207,078)	27,545
Total equity	852,709	675,664
Net debt to equity ratio (%)	(24.28)	4.08

Amount repayable in one year or less, or on demand:

As at 31	December 2010	As at 31	December 2009
Secured	Unsecured	Secured	Unsecured
RMB’000	RMB’000	RMB’000	RMB’000
—	40,000	10,221	165,000

As at 31 December 2009, the secured bank loan of RMB 10,221,000 was secured by certain of the subsidiary’s bank deposits amounting to RMB 11,000,000.

There is no amount repayable after one year.

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(III)PROSPECTS (A COMMENTARY AT THE DATE OF THE ANNOUNCEMENT OF THE COMPETITIVE CONDITIONS OF THE INDUSTRY IN WHICH THE GROUP OPERATES AND ANY KNOWN FACTORS OR EVENTS THAT MAY AFFECT THE GROUP IN THE NEXT REPORTING PERIOD AND THE NEXT 12 MONTHS)

On 23 December 2010, the Group was successfully listed on the SEHK, issuing 52 million new ordinary shares priced at HK$2.25 each. With approximately HK$95.0 million of net proceeds raised from this offering, the Group intends to utilise approximately 43.6% of the net proceeds to diversify our product portfolio to antennas, 29.1% in high temperature resistant cables, and 9.1% each in expanding our sales networks overseas, enhancing our research and development team and as working capital respectively.

In line with the above expansion strategies, the Group has commenced construction of the manufacturing line for one of the high temperature resistant cables products. Construction of the line is expected to be completed by the first quarter of 2011, and the commencement of manufacture, barring unforeseen circumstances, should commence in the second quarter of 2011.

To strengthen our market position, we will continue to focus in expanding our overseas clientele base, especially in India, through our various sales activities.

Domestic demand within the PRC may continue to be weak arising from lower demand from telecom operators, while the overall operating environment is still highly competitive and is expected to impose downward pressures on the margins of our products. However, the Group expects a gradual improvement in business conditions in 2011. The ability of the Group to forecast with normal confidence levels continues to be affected by various elements such as currency fluctuations, volatile telecom operators’ spending, uncertainties in credit markets and commodity cost volatility.

The Group continues to seek viable opportunities for acquisitions, joint ventures or other investments that are a complementary strategic fit with our existing business.

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(IV) SUPPLEMENTARY INFORMATION

1. Reconciliation between SFRSs and IFRSs

For the year ended 31 December 2010, there were no material differences between the consolidated financial statements of the Group under SFRSs and IFRSs (this includes all of IFRS, International Accounting Standards and Interpretations).

2. Operational and Financial Risk Management

(i) Market risk

The major market risks the Group is exposed to include changes in the sale prices of key products, changes in the costs of raw materials (mainly copper) and fluctuations in interest and foreign exchange rates.

(ii) Commodity price risk

The Group is also exposed to commodity price risk arising from fluctuations in product sale prices and costs of raw materials.

(iii)Interest rate risk

The major market interest rate risk that the Group is exposed to includes the Group’s short term debt obligations which are subject to variable interest rates.

(iv) Foreign currency risk

The Group’s revenue and costs are denominated in RMB, Indian Rupees (“INR”) and United States Dollars (“USD”). Some costs may be denominated in HKD, INR or Singapore Dollars (“SGD”). Transactions in INR are limited.

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3. Contingent liabilities

The Group has commitments as at 31 December 2010 in respect of the following:

2010 2009 RMB‘000 RMB‘000 Contracted but not provided for: Property, plant and equipment 14,590 4,225

At 31 December 2010, certain constructions were built on a piece of land located in the PRC (the “ No. 5 Land ”) amounting to approximately RMB 38.3 million. In addition the Group had prepaid RMB 5.76 million as deposit for the acquisition of such land but the Group has yet to obtain the land certificate. In the opinion of the Group, the No. 5 Land is highly likely to be put on auction. Pursuant to a directors’ resolution in 2010, the Group resolved to take part in the future auction (if any) of the No. 5 Land at an estimated price of approximately RMB 6.8 million or at a higher price to be authorised by the directors. Please refer to details of No.5 Land as set out in the prospectus of the Company dated 14 December 2010.

4. Employees and Remuneration Policies

As at 31 December 2010, there were 661 (2009: 755) employees in the Group. Staff remuneration packages are determined by consideration of market conditions and the performance of the individuals concerned, and are subject to review from time to time. The Group also provides other staff benefits including medical and life insurance, and grants discretionary incentive bonuses and share options to eligible staff based on their performance and contributions to the Group.

The Company adopted the share option scheme for its employees at an extraordinary general meeting held on 27 October 2010 (the “ Scheme ”). No option has been granted under the Scheme since its adoption and up to the date of this announcement.

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5. Material Litigation and Arbitration

As at 31 December 2010, the Group was not involved in any material litigation or arbitration.

6. Audit Committee

The Company’s audit committee members are Mr. Tay Ah Kong Bernard, Mr. Chee Teck Kwong Patrick, Mr. Tam Chi Kwan Michael and Ms. Zhang Zhong. The audit committee, which is chaired by Mr. Tay Ah Kong Bernard, has reviewed the annual results of the Group for the year ended 31 December 2010.

7. Compliance with the Code on Corporate Governance Practices

The Company has, save as disclosed below, complied with the code provisions of the Code on Corporate Governance Practices (the “ Corporate Governance Code ”) in Appendix 14 of the Rules Governing the Listing of Securities on the SEHK (the “ Listing Rules ”) for the year ended 31 December 2010.

8. Compliance with the Model Code for Securities Transactions by Directors of Listed Issuer

The Board confirms, having made specific enquiries with all directors and supervisors, that during the year ended 31 December 2010, all members of the Board and all supervisors have complied with the required standards of the Model Code for Securities Transactions by Directors of Listed Issuer as set out in Appendix 10 of the Listing Rules.

9. Annual General Meeting

The 2010 annual general meeting of the Company will be held on 28 April 2011 in Singapore. For further details of the annual general meeting, please refer to the Notice of Annual General Meeting, which will be despatched in due course.

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10. Review of financial results

The results have not been audited or reviewed by the auditors.

The figures in respect of this results announcement of the Group for the year ended 31 December 2010 have been checked by the Group’s auditor, Deloitte & Touche LLP. The work performed by Deloitte & Touche LLP in this respect did not constitute an assurance engagement in accordance with Singapore Standards on Auditing, Singapore Standards on Review Engagements or Singapore Standards on Assurance Engagements and consequently no assurance has been expressed by Deloitte & Touche LLP on this result announcement.

11. Audit or review in accordance with applicable accounting standards

The figures have not been audited or reviewed by the Company’s auditors.

12. Auditors’ report (including any qualifications or emphasis of matter)

Not applicable.

13. Closure of Register of Members

The book closure date of the register of members will be announced at a later date. During the book closure date, no transfer of shares of the Company will be effected. In order to qualify for the proposed final dividend, all transfers, accompanied by the relevant share certificates, must be lodged with the Singapore principal share registrar of the Company, Boardroom Corporate & Advisory Services Pte Ltd. at 50 Raffles Place, #32-01, Singapore Land Tower, Singapore 048623 (for Singapore Shareholders) or the Hong Kong branch share registrar of the Company, Tricor Investor Services Limited at level 28, Three Pacific Place, 1 Queen’s Road East , Hong Kong (for Hong Kong Shareholders), not later than 5:00 p.m. on Tuesday, 3 May 2011.

14. Purchase, Sales or Redemption of the Company’s Securities

For the year ended 31 December 2010, neither the Company nor its subsidiaries had purchased, sold or redeemed any of the securities of the Company.

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15. Disclosure on the Website of the Exchanges

This announcement shall be published on the website of SGX-ST (http:// www.sgx.com), the SEHK (http://www.hkex.com.hk) and on the Company’s website (http://www.hengxin.com.sg).

By Order of the Board Hengxin Technology Ltd. Cui Genxiang Executive Chairman

Singapore, 18 February 2011

As at the date of this announcement, the executive directors of the Company are Mr. Cui Genxiang and Dr. Song Haiyan; the non-executive director is Ms. Zhang Zhong; and the nonexecutive independent directors are Mr. Tay Ah Kong Bernard, Mr. Chee Teck Kwong Patrick and Mr. Tam Chi Kwan Michael.

• for identification purpose only.

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