Hengxin Technology Ltd. — Interim / Quarterly Report 2013

Aug 19, 2013

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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)

INTERIM REPORT FOR THE SECOND QUARTER AND SIX MONTHS ENDED 30 JUNE 2013

FINANCIAL HIGHLIGHTS

1. Revenue for the six months ended 30 June 2013 decreased by approximately 20.9% to approximately RMB503.2 million

2. Gross profit decreased by approximately 12.6% to approximately RMB99.3 million

3. Net profit attributable to equity holders of the parent decreased by approximately 28.8% to approximately RMB33.0 million

4. Basic earnings per share was RMB0.08

5. No payment of interim dividend for the six months ended 30 June 2013 has been recommended

• for identification purpose only

– 1 –

The board of directors (the “ Board ”) of Hengxin Technology Ltd. (the “ Company ”) is pleased to announce the unaudited consolidated results of the Company and its subsidiaries (collectively hereinafter referred as the “ Group ”) for the six months ended 30 June 2013 and for the three months ended 30 June 2013 together with the comparative figures for the corresponding periods in 2012 as follow:

CONSOLIDATED INCOME STATEMENT

For the six months ended 30 June (“1H”)

Notes Revenue 5 Cost of sales Gross profit Other income 6 Selling and distribution expenses Administrative expenses Other operating expenses Finance costs 7 Profit before income tax 8 Income tax expense 9 Net profit attributable to equity holders of parent Other comprehensive income Items that may be classified subsequently to profit or loss: Exchange difference arising from consolidation of foreign operations Total comprehensive income attributable to equity holders of the parent Earnings per share attributable to equity holders of the parent Basic and diluted(RMB cents) 12 Dividends per share(RMB cents)

1H2013 1H2012 RMB’000 RMB’000 (unaudited) (unaudited) 503,186 635,816 (403,874) (522,157) 99,312 113,659 4,414 7,048 (24,103) (27,582) (17,474) (17,994) (13,341) (7,312) (1,969) (11,572) 46,839 56,247 (13,829) (9,907) 33,010 46,340 (49) (369) 32,961 45,971 8.5 11.8 N.A. N.A.

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CONSOLIDATED INCOME STATEMENT

For the three months ended 30 June (“2Q”)

Revenue Cost of sales Gross profit Other income Selling and distribution expenses Administrative expenses Other operating expenses Finance costs Profit before income tax Income tax expense Net profit attributable to equity holders of parent Other comprehensive income Items that may be classified subsequently to profit or loss: Exchange difference arising from consolidation of foreign operations Total comprehensive income attributable to equity holders of the parent Earnings per share attributable to equity holders of the parent Basic and diluted(RMB cents)

2Q2013 2Q2012 RMB’000 RMB’000 (unaudited) (unaudited) 301,242 376,215 (240,792) (307,255) 60,450 68,960 1,517 1,793 (12,744) (15,518) (8,652) (8,641) (8,262) (6,106) (424) (6,097) 31,885 34,391 (10,644) (6,632) 21,241 27,759 (350) (165) 20,891 27,594 5.4 7.1

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

Reversal of inventory obsolescence Depreciation of property, plant and equipment Gain on disposal of available-for-sale investment Loss on disposal of property, plant and equipment Amortisation of prepaid lease payments Foreign exchange losses (gains) Interest expense Interest income Research and development expenses	Group 3 mths ended 30 Jun 2013 2012 Change RMB’000 RMB’000 % (unaudited) (unaudited) — (63) –100.0% 5,057 4,367 15.8% — (68) –100.0% 66 3 N.M. 140 140 0.0% 2,537 2,105 20.5% 424 6,097 –93.0% (427) (1,020) –58.1% 5,643 3,964 42.4%	Group 6 mths ended 30 Jun 2013 2012 Change RMB’000 RMB’000 % (unaudited) (unaudited) — (63) –100.0% 10,114 8,714 16.1% — (68) –100.0% 86 10 N.M. 280 280 0.0% 3,385 (643) N.M. 1,969 11,572 –83.0% (1,449) (2,229) –35.0% 9,354 6,768 38.2%

N.M.: Not meaningful

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Notes ASSETS Current assets Cash and bank balances Pledged cash deposits Trade receivables 14 Other receivables and prepayments Inventories Leasehold land Total current assets Non-current assets Leasehold land Property, plant and equipment 13 Other receivables and prepayments Available-for-sale investment Deferred tax assets Total non-current assets Total assets LIABILITIES AND EQUITY Current liabilities Short term loans Trade payables 15 Other payables Income tax payable Total current liabilities NET CURRENT ASSETS	As 30 June 2013 RMB’000 (unaudited) 145,165 822 731,723 59,252 101,842 560 1,039,364 18,622 143,859 5,760 10,000 3,522 181,763 1,221,127 30,000 123,307 20,718 5,493 179,518 859,846	at 31 December 2012 RMB’000 (audited) 265,853 20,170 618,352 24,297 108,241 560
		1,037,473
		18,901 151,957 5,760 10,000 3,618
		190,236
		1,227,709
		41,999 156,293 19,074 1,916
		219,282
		818,191

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION (CONT’D)

Notes Non-current liability Deferred tax liabilities TOTAL LIABILITIES NET ASSETS Equity attributable to equity holders of the parent Share capital 11 General reserves Special reserve Translation reserve Accumulated profits TOTAL EQUITY TOTAL EQUITY AND LIABILITIES	As at 30 June 31 December 2013 2012 RMB’000 RMB’000 (unaudited) (audited) 3,200 2,979 182,718 222,261 1,038,409 1,005,448 295,000 295,000 137,682 134,381 (6,017) (6,017) (1,147) (1,098) 612,891 583,182 1,038,409 1,005,448 1,221,127 1,227,709

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STATEMENT OF FINANCIAL POSITION — COMPANY LEVEL

ASSETS Current assets Cash and bank balances Other receivables and prepayments Amount due from subsidiaries Total current assets Non-current assets Subsidiaries Total non-current assets Total assets LIABILITIES AND EQUITY Current liabilities Other payables Total current liabilities NET CURRENT ASSETS Non-current liability Deferred tax liabilities Total non-current liability TOTAL LIABILITIES NET ASSETS Equity attributable to equity holders of the parent Share capital Accumulated profits TOTAL EQUITY TOTAL EQUITY AND LIABILITIES	As 30 June 2013 RMB’000 (unaudited) 22,233 194 95,927 118,354 392,544 392,544 510,898 4,184 4,184 114,170 — — 4,184 506,714 295,000 211,714 506,714 510,898	at 31 December 2012 RMB’000 (audited) 22,863 154 5,342
		28,359
		392,386
		392,386
		420,745
		3,663
		3,663
		24,696
		—
		—
		3,663
		417,082
		295,000 122,082
		417,082
		420,745

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CONSOLIDATED STATEMENT OF CASH FLOWS

For the period ended 30 June

GROUP RMB’000 Operating activities Profit before income tax Adjustments for: Depreciation of property, plant and equipment Amortisation of prepaid lease payments Reversal of inventory obsolescence Loss on disposal of property, plant and equipment Interest expense Interest income Gain on disposal of available-for-sale investments Exchange differences arising on foreign currency translation Operating profit before working capital changes Trade receivables Other receivables and prepayments Inventories Trade and bill payables Other payables and accruals Cash (used in) generated from operations Interest paid Interest income received Income tax paid

1 Apr 13 to 30 Jun 13 1 Apr 12 to 30 Jun 12 1 Jan 13 to 30 Jun 13 1 Jan 12 to 30 Jun 12 (unaudited) (unaudited) (unaudited) (unaudited) 31,885 34,391 46,839 56,247 5,057 4,367 10,114 8,714 140 140 280 280 — (63) — (63) 66 3 86 10 424 6,097 1,969 11,572 (427) (1,020) (1,449) (2,229) — (68) — (68) 1,567 1,219 2,714 (1,496) 38,712 45,066 60,553 72,967 (86,426) (120,855) (113,371) (128,191) (25,184) (1,177) (34,955) (15,176) 692 2,540 6,399 14,161 39,308 95,727 (32,986) (24,711) 9,074 (1,033) 1,644 (13,381) (23,824) 20,268 (112,716) (94,331) (424) (6,097) (1,969) (11,572) 427 1,020 1,449 2,229 (7,501) (3,982) (9,935) (16,299)

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CONSOLIDATED STATEMENT OF CASH FLOWS (CONT’D)

For the period ended 30 June

GROUP RMB’000 Net cash (used in) generated from operating activities Investing activities Acquisition of property, plant and equipment Proceeds from disposal of property, plant and equipment Acquisition of available-for-sale investment Proceeds from disposal of available-for-sale investment Net cash used in investing activities Financing activities Repayment of short-term bank loans Proceeds from short-term bank loans Decrease (increase) in pledged bank deposits Net cash (used in) from financing activities Net decrease in cash and cash equivalents Effects of foreign exchange translation Cash and cash equivalents at the beginning of the period Cash and cash equivalents at the end of the period

1 Apr 13 to 30 Jun 13 1 Apr 12 to 30 Jun 12 1 Jan 13 to 30 Jun 13 1 Jan 12 to 30 Jun 12 (unaudited) (unaudited) (unaudited) (unaudited) (31,322) 11,209 (123,171) (119,973) (1,512) (929) (2,654) (3,622) 36 — 36 — — (15,000) — (15,000) — 15,068 — 15,068 (1,476) (861) (2,618) (3,554) — (60,000) (71,999) (80,000) — 30,000 60,000 70,000 (42) (19,071) 19,348 15,408 (42) (49,071) 7,349 5,408 (32,840) (38,723) (118,440) (118,119) (1,401) (892) (2,248) 1,147 179,406 246,353 265,853 323,710 145,165 206,738 145,165 206,738

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STATEMENT OF CHANGES IN EQUITY

Consolidated Statement of Changes in Equity for the period ended 30 June 2013

	Share	General	Special	Translation	Accumulated
GROUP	capital	reserve	reserve	reserve	profits	Total
RMB’000
Balance at 1 January 2013	295,000	134,381	(6,017)	(1,098)	**583,182 **	1,005,448
Total comprehensive income for
the period	—	—	—	(49)	33,010	32,961
Transfer to reserves	—	3,301	—	—	(3,301)	—
Balance at 30 June 2013	295,000	137,682	(6,017)	(1,147)	**612,891 **	1,038,409
Consolidated Statement of Changes	in Equity	for the period ended 30 June 2012
	Share	General	Special	Translation	Accumulated
GROUP	capital	reserve	reserve	reserve	profits	Total
RMB’000
Balance at 1 January 2012	295,000	122,889	(6,017)	(294)	527,396	938,974
Total comprehensive income for
the period	—	—	—	(369)	46,340	45,971
Transfer to reserves	—	2,787	—	—	(2,787)	—
Balance at 30 June 2012	295,000	125,676	(6,017)	(663)	570,949	984,945

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STATEMENT OF CHANGES IN EQUITY

Statement of Changes in Equity of the Company for the period ended 30 June 2013

COMPANY Share capital RMB’000 Balance at 1 January 2013 295,000 Total comprehensive income for the period — Balance at 30 June 2013 295,000 Statement of Changes in Equity of the Company for the period ended 30 COMPANY Share capital RMB’000 Balance at 1 January 2012 295,000 Total comprehensive income for the period — Balance at 30 June 2012 295,000	Accumulated profits Total 122,082 417,082 89,632 89,632 211,714 506,714 June 2012 Accumulated profits Total 130,840 425,840 (3,978) (3,978) 126,862 421,862

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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 Company is an investment holding company, and the principal activities of the Group 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 presentation currency of the Group.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The report has been prepared in accordance with the measurement and recognition criteria of the Singapore Financial Reporting Standards (“ SFRS ”). The report also include the applicable disclosure requirements of the Hong Kong Companies Ordinance (Chapter 32 of the Laws of Hong Kong) and the Rules Governing the Listing of Securities on the SEHK (the “ Listing Rules ”).

The report is presented in RMB and all values are rounded to the nearest thousand (“ RMB’000 ”) except when otherwise indicated.

Accounting policies

The Group has applied the same accounting policies and methods of computation in the financial statements for the current financial period reported on, as in the recently audited consolidated financial statements for the financial year ended 31 December 2012.

3. APPLICATION OF SFRS

The Group adopted the new and revised SFRS that are mandatory for the financial periods beginning on or after 1 January 2013.

The adoption of new and revised SFRS did not have any impact on the results of the Group for the financial period ended 30 June 2013.

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 (includes Antennas and High Temperature Resistant Cables)

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4. SEGMENT INFORMATION (CONT’D)

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

Segment revenues and results

For management purpose, the Group is currently organised into two distinct core product lines — radio frequency coaxial cables, and other telecommunication equipment. These product lines are the basis on which the Group reports 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.

GROUP Six months ended 30 June 2013 Revenue Segment Results Segment profit Interest income Finance costs Other income Other expenses Profit before income tax Income tax Net profit for the period 2012 Revenue Segment Results Segment profit Interest income Finance costs Other income Other expenses Profit before income tax Income tax Net profit for the period	Radio frequency coaxial cables RMB’000 386,959 40,591 1,115 (1,522) 515,397 54,675 1,629 (9,380)	Telecommunication equipment and accessories RMB’000 113,398 11,876 327 (447) 119,456 12,672 380 (2,192)	Others RMB’000 2,829 317 — — 963 103 — —	Unallocated RMB’000 — (5,534) 7 — — (6,167) 220 —	Total RMB’000 503,186 47,250 1,449 (1,969) 2,965 (2,856) 46,839 (13,829) 33,010 635,816 61,283 2,229 (11,572) 4,819 (512) 56,247 (9,907) 46,340

• excludes research and development expenses

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4. SEGMENT INFORMATION (CONT’D)

Other segment information

Other segment information
GROUP Six months ended 30 June 2013 Capital expenditure Depreciation expense Amortisation of leasehold land Reversal of (Allowance for) inventory obsolescence 2012 Capital expenditure Depreciation expense Amortisation of leasehold land Reversal of (Allowance for) inventory obsolescence Statement of net assets As at 30 June 2013 Assets: Segment assets Unallocated assets Total assets Liabilities: Segment liabilities Unallocated liabilities Total liabilities As at 31 December 2012 Assets: Segment assets Unallocated assets Total assets Liabilities: Segment liabilities Unallocated liabilities Total liabilities	Radio frequency coaxial cables RMB’000 1,961 7,149 216 — 1,442 6,746 227 111 Radio frequency coaxial cables RMB’000 912,554 137,789 925,282 167,294	Telecommunication equipment and accessories RMB’000 576 2,099 64 — 337 1,563 53 (21) Telecommunication equipment and accessories RMB’000 267,981 40,463 267,092 48,291	Others RMB’000 117 865 — — 1,843 401 — — Others RMB’000 18,165 282 12,318 3,013	Unallocated RMB’000 — 1 — — — 4 — (27) Unallocated RMB’000 — 22,427 — 4,184 — 23,017 — 3,663	Total RMB’000 2,654 10,114 280 —
					3,622 8,714 280 63
					Total RMB’000 1,198,700 22,427
					1,221,127
					178,534 4,184
					182,718
					1,204,692 23,017
					1,227,709
					218,598 3,663
					222,261

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4. SEGMENT INFORMATION (CONT’D)

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.

	Revenue from external	customer	Non-current	assets
	For the six months	ended	As at
	30 June		30 June	31 December
	2013	2012	2013	2012
	RMB’000	RMB’000	RMB’000	RMB’000
Central Asia	439,449	589,773	168,240	176,613
South Asia	25,380	35,506	2	6
Others	38,357	10,537	—	—
Total	503,186	635,816	168,242	176,619

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. An analysis of the Group’s revenue, other income and gains is as follows:

Sale of goods OTHER INCOME Government grants Interest income Compensation claims received Foreign exchange gains Gain on disposal of available-for-sale investments Others Total	For the six months ended 30 June 2013 2012 RMB’000 RMB’000 (unaudited) (unaudited) 503,186 635,816 For the six months ended 30 June 2013 2012 RMB’000 RMB’000 (unaudited) (unaudited) 2,509 3,839 1,449 2,229 274 232 — 643 — 68 182 37 4,414 7,048	For the six months ended 30 June 2013 2012 RMB’000 RMB’000 (unaudited) (unaudited) 503,186 635,816 For the six months ended 30 June 2013 2012 RMB’000 RMB’000 (unaudited) (unaudited) 2,509 3,839 1,449 2,229 274 232 — 643 — 68 182 37 4,414 7,048
		7,048

6. OTHER INCOME

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7. FINANCE COSTS

FINANCE COSTS
	For the six months ended
	30 June
	2013	2012
	RMB’000	RMB’000
	(unaudited)	(unaudited)
Interest on short term bank borrowings	1,969	11,572

8. PROFIT BEFORE INCOME TAX

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

Cost of inventories recognised as expense (including allowance of (reversal of) inventory obsolescence) Depreciation of property, plant and equipment Amortisation of leasehold land 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 Net foreign exchange loss (gain) Loss on disposal of property, plant and equipment Gain on disposal of available-for-sale investments	For the six months ended 30 June 2013 2012 RMB’000 RMB’000 (unaudited) (unaudited) 403,874 522,220 10,114 8,714 280 280 23,504 20,528 1,515 3,043 797 800 952 804 20 360 26,788 25,535 3,385 (643) 66 10 — (68)	For the six months ended 30 June 2013 2012 RMB’000 RMB’000 (unaudited) (unaudited) 403,874 522,220 10,114 8,714 280 280 23,504 20,528 1,515 3,043 797 800 952 804 20 360 26,788 25,535 3,385 (643) 66 10 — (68)
		25,535
		(643) 10 (68)

9. INCOME TAX EXPENSE

Current Deferred	For the six months ended 30 June 2013 2012 RMB’000 RMB’000 (unaudited) (unaudited) 13,512 9,656 317 251 13,829 9,907	For the six months ended 30 June 2013 2012 RMB’000 RMB’000 (unaudited) (unaudited) 13,512 9,656 317 251 13,829 9,907
		9,907

The Company is incorporated in Singapore and is subject to income tax rate of 17% for the six months ended 30 June 2013 (2012: 17%).

Under the law of the People’s Republic of China on Enterprise Income Tax (the “EIT Law”), applicable income tax rate of Jiangsu Hengxin Technology Co. Ltd, the Group’s PRC incorporated key subsidiary, in 2013 is 15% (2012: 15%).

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9. INCOME TAX EXPENSE (CONT’D)

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

10. DIVIDENDS

The Company did not recommend or declare any interim dividend for the six months ended 30 June 2013. No interim dividend was also declared nor paid for the previous financial period ended 30 June 2012.

11. SHARE CAPITAL

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

Details of the changes in the Company’s share capital are	as follows:
	No. of shares
Share capital — Ordinary Shares	’000	RMB’000	S$’000
Balance as at 31 December 2012 and 30 June 2013	388,000	295,000	58,342

In accordance with the memorandum of association and articles of association of the Company, treasury shares are not allowed in the Company.

12. EARNINGS PER SHARE

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

Earnings per share_(RMB) — Basic — Diluted Weighted average no. of shares applicable to basic EPS(’000) Weighted average no. of shares based on fully diluted basis(’000)_	Group 3 months ended 30-Jun-13 30-Jun-12 (unaudited) (unaudited) 5.4 7.1 5.4 7.1 388,000 388,000 388,000 388,000	Group 6 months ended 30-Jun-13 30-Jun-12 (unaudited) (unaudited) 8.5 11.8 8.5 11.8 388,000 388,000 388,000 388,000	Group 6 months ended 30-Jun-13 30-Jun-12 (unaudited) (unaudited) 8.5 11.8 8.5 11.8 388,000 388,000 388,000 388,000
			11.8
			388,000 388,000

There were no potential dilutive ordinary shares in existence during the period ended 30 June 2012 and 2013.

13. PROPERTY, PLANT AND EQUIPMENT

During the six months ended 30 June 2013, the Group’s capital expenditure was approximately RMB2.7 million (2012: RMB3.6 million).

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14. TRADE RECEIVABLES

Trade receivables Allowance for doubt debts Net Notes receivable Total	30 June 2013 RMB’000 (unaudited) 688,178 (15,762) 672,416 59,307 731,723	31 December 2012 RMB’000 (audited) 581,661 (15,762)
		565,899 52,453
		618,352

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 1 to 2 years TRADE PAYABLES Trade payables Bill payables	30 June 2013 RMB’000 (unaudited) 499,385 183,447 48,891 731,723 30 June 2013 RMB’000 (unaudited) 123,307 — 123,307	31 December 2012 RMB’000 (audited) 435,238 148,025 35,089
		618,352
		31 December 2012 RMB’000 (audited) 93,422 62,871
		156,293

15. TRADE PAYABLES

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	30 June 2013 RMB’000 (unaudited) 113,580 4,515 4,185 1,027 123,307	31 December 2012 RMB’000 (audited) 84,370 67,931 2,621 1,371
		156,293

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16. 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 30-Jun-13 31-Dec-12 (unaudited) (audited) 1,038,409 1,005,448 388,000 388,000 2.68 2.59	Company 30-Jun-13 31-Dec-12 (unaudited) (audited) 506,714 417,082 388,000 388,000 1.31 1.07	Company 30-Jun-13 31-Dec-12 (unaudited) (audited) 506,714 417,082 388,000 388,000 1.31 1.07
			1.07

17. RELATED PARTY TRANSACTIONS

(a) Transactions

During the period, the Group had the following significant transactions with Suzhou Hengli Telecommunications Materials Co. Ltd:

Materials Co. Ltd:
	For the six months ended
	30 June
	2013	2012
	RMB’000	RMB’000
	(unaudited)	(unaudited)
Purchase of raw materials	1,117	3,294

(b) Compensation of key management personnel

The remuneration of directors and other members of key management during the period were as follows:

Short term benefits Retirement benefits scheme contribution Total CAPITAL COMMITMENTS Contracted but not provided for: Property, plant and equipment Donation commitment Total	For the six months ended 30 June 2013 2012 RMB’000 RMB’000 (unaudited) (unaudited) 1,800 2,169 61 30 1,861 2,199 As at 30 June 31 December 2013 2012 RMB’000 RMB’000 1,120 1,120 6,500 7,000 7,620 8,120	For the six months ended 30 June 2013 2012 RMB’000 RMB’000 (unaudited) (unaudited) 1,800 2,169 61 30 1,861 2,199 As at 30 June 31 December 2013 2012 RMB’000 RMB’000 1,120 1,120 6,500 7,000 7,620 8,120
		2,199
		at 31 December 2012 RMB’000 1,120 7,000
		8,120

18. CAPITAL COMMITMENTS

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19. COMMITMENT

As at 30 June 2013, the net book value of certain constructions were built on a piece of land located in the PRC (the “ No. 5 Land ”) amounted to approximately RMB27.2 million. In addition, the Group had prepaid RMB5.76 million as deposit for the acquisition of such land but the Group has yet to obtain the land certificate. At the end of the reporting period, the management remains committed to secure the No. 5 Land.

20. OPERATING LEASE ARRANGEMENTS

As at 30 June 2013, the Group had total future minimum lease payments under non-cancellable operating leases, which are payable as follows:

which are payable as follows:
Within one year In the second to fifth years inclusive	As 30 June 2013 RMB’000 958 713 1,671	at 31 December 2012 RMB’000 961 1,177
		2,138

Operating lease payments represent rentals payable by the Group and Company for certain of its office and workshop properties. Leases are negotiated for an average of 1 to 3 years.

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(I) MANAGEMENT DISCUSSION AND ANALYSIS

Half year performance — six months ended 30 June

Material changes are explained below:

Revenue

Revenue decreased by approximately RMB132.6 million, or approximately 20.9% from approximately RMB635.8 million in the six months ended 30 June 2012 (“ 1H2012 ”) to approximately RMB503.2 million in the six months ended 30 June 2013 (“ 1H2013 ”) due to lower orders for the Group’s products during the period.

RF Coaxial Cable

Revenue generated from RF Coaxial Cables decreased by approximately RMB128.4 million or approximately 24.9% from approximately RMB515.4 million in 1H2012 to approximately RMB387.0 million in 1H2013.

Accessories

Revenue generated from Accessories decreased by approximately RMB6.1 million or approximately 5.1% from approximately RMB119.5 million in 1H2012 to approximately RMB113.4 million in 1H2013.

Others (HTRC and Antenna)

Revenue generated in this segment increased by approximately RMB1.9 million or approximately 211.1% from approximately RMB0.9 million in 1H2012 to approximately RMB2.8 million in 1H2013.

Gross profit margin

The Group achieved an overall gross profit margin of approximately 19.7% in 1H2013 compared to 1H2012, arising from sales of products with higher margins during the period. The Group continues to monitor production efficiencies to ensure optimal raw materials and labour utilisation, stringent selection of suppliers in tender biddings to keep costs to a minimum, coupled with efficient use of various resources to keep up with price pressures resulting from keen competition.

Other income

Other income decreased by approximately RMB2.6 million or approximately 37.1% from approximately RMB7.0 million in 1H2012 to approximately RMB4.4 million in 1H2013, which is due to lower interest income and government grants awarded to the Group’s key subsidiary, Jiangsu Hengxin Technology Co., Ltd.

Selling and distribution expenses

Selling and distribution expenses decreased by approximately RMB3.5 million or approximately 12.7% from approximately RMB27.6 million in 1H2012 to approximately RMB24.1 million in 1H2013, which is in line with the Group’s lower sales during the period.

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Administrative expenses

Administrative expenses remained largely constant at approximately RMB17.5 million, decreasing RMB0.5 million or approximately 2.8% compared to RMB18.0 million in 1H2012.

Other operating expenses

Other operating expenses increased by approximately RMB6.0 million or approximately 82.2% from approximately RMB7.3 million in 1H2012 to approximately RMB13.3 million in 1H2013. The increase arose from foreign exchange losses incurred at approximately RMB3.4 million and an increase in R&D expenses of approximately RMB2.6 million from customer requests for new product specifications during the period.

Finance costs

Finance costs decreased by approximately RMB9.6 million or approximately 82.8% from approximately RMB11.6 million in 1H2012 to approximately RMB2.0 million in 1H2013. The decrease is due to lower borrowings in 2013 compared to the same period in 2012.

Profit before income tax

Profit before income tax decreased by approximately RMB9.4 million or approximately 16.7% from approximately RMB56.2 million in 1H2012 to approximately RMB46.8 million in 1H2013 due to lower revenue generated.

Income tax expense

The Group’s main subsidiary has been subject to an incentive tax rate of 15% as it has been awarded as a high-tech enterprise in the PRC since 2011. The increase in income tax expenses is due to withholding taxes of RMB5.0 million being paid for dividends declared from the Group’s China subsidiary to its holding company during the period.

Accordingly, income tax expense increased by approximately RMB3.9 million or approximately 39.4% from approximately RMB9.9 million in 1H2012 to approximately RMB13.8 million in 1H2013.

Net profit

In view of the above, net profit attributable to equity holders of the parent decreased by approximately RMB13.3 million or approximately 28.7% from approximately RMB46.3 million in 1H2012 compared to approximately RMB33.0 million in 1H2013.

Second quarter performance — Three months ended 30 June

Revenue

Group revenue decreased by approximately RMB75.0 million, or approximately 19.9% from approximately RMB376.2 million in the three months ended 30 June 2012 (“ 2Q2012 ”) to approximately RMB301.2 million in the three months ended 30 June 2013 (“ 2Q2013 ”) as a result of lower orders for the Group’s products during the period.

– 22 –

RF Coaxial Cable

Revenue generated from RF Coaxial Cables decreased by approximately RMB64.9 million or approximately 21.7% from approximately RMB298.5 million in 2Q2012 to approximately RMB233.6 million in 2Q2013.

Accessories

Revenue generated from Accessories decreased by approximately RMB10.3 million or approximately 13.4% from approximately RMB77.1 million in 2Q2012 to approximately RMB66.8 million in 2Q2013.

Others (HTRC and Antenna)

Revenue generated in this segment increased by approximately RMB0.2 million or approximately 33.3% from approximately RMB0.6 million in 2Q2012 to approximately RMB0.8 million in 2Q2013.

Gross profit margin

Gross profit margin for 2Q2013 stood at approximately 20.1% compared to approximately 18.3% in 2Q2012, primarily due to increased sales of products with higher margins during the period.

Other income

Other income decreased by approximately RMB0.3 million or approximately 16.7% from approximately RMB1.8 million in 2Q2012 to approximately RMB1.5 million in 2Q2013 as a result of lower interest income earned during the period.

Selling and distribution expenses

Selling and distribution expenses decreased by approximately RMB2.8 million or approximately 18.1% from approximately RMB15.5 million in 2Q2012 to approximately RMB12.7 million in 2Q2013, which is in line with the Group’s lower revenue during the period.

Other operating expenses

Other operating expenses increased by approximately RMB2.2 million or approximately 36.1% from approximately RMB6.1 million in 2Q2012 to approximately RMB8.3 million in 2Q2013. The increase was due to more R&D activities undertaken in response to customer requests for new specifications during the period.

Finance costs

Finance costs decreased by approximately RMB5.7 million or approximately 93.4% from approximately RMB6.1 million in 2Q2012 to approximately RMB0.4 million in 2Q2013, primarily due to lower amount of borrowings in 2013 compared to the same period in 2012.

Profit before income tax

Profit before income tax decreased by approximately RMB2.5 million or approximately 7.3% from approximately RMB34.4 million in 2Q2012 to approximately RMB31.9 million in 2Q2013 as a result of lower revenue generated.

– 23 –

Income tax expense

The Group’s main subsidiary has been subject to an incentive tax rate of 15% as it has been awarded as a high-tech enterprise in the PRC since 2011. The increase in income tax expenses is due to withholding taxes of RMB5.0 million being paid for dividends declared from the Group’s China subsidiary to its holding company during the period.

Accordingly, income tax expense increased by approximately RMB4.0 million or approximately 60.6% from approximately RMB6.6 million in 2Q2012 to approximately RMB10.6 million in 2Q2013.

Net profit

In view of the above, net profit attributable to equity holders of the parent decreased by approximately RMB6.6 million or approximately 23.7% from approximately RMB27.8 million in 2Q2012 to approximately RMB21.2 million in 2Q2013.

Statement of Financial Position

Material fluctuations of items in the statement of financial position are explained below:

Pledged bank deposits

Pledged bank deposits are used as security for commercial bills used for payment to suppliers. Pledged bank deposits decreased by approximately RMB19.4 million or approximately 96.0% from approximately RMB20.2 million as at 31 December 2012 to approximately RMB0.8 million as at 30 June 2013 due to a reduction in use of commercial bills for payment to suppliers during the period.

Trade receivables

Trade receivables increased by approximately RMB113.3 million or approximately 18.3% from approximately RMB618.4 million as at 31 December 2012 to approximately RMB731.7 million as at 30 June 2013.

Average trade receivables turnover days are 295 days as at 30 June 2013 compared to 223 days as at 31 December 2012 and 321 days as at 31 March 2013.

The macro-economic slowdown in the PRC has resulted in the Group’s major customers taking a longer period in making payments. Nonetheless, most trade receivables balances are recent sales which are well within the average credit period given to our customers.

For amounts due more than six months and longer, these mainly pertain to final payment (upon project completion) owed by the three main PRC telecom operators. These outstanding balances relate to projects undertaken by these operators which had longer project completion date than as initially anticipated. These operators have been the Group’s long-time customers and the Group has been receiving regular payments from them. In view of the Group’s long-standing dealings with them and the regular receipts it had obtained from these customers, the Group does not foresee any issue in the collection of these receivables.

The Group will endeavour to continue its collection efforts on the outstanding balances.

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Other receivables and prepayments

Other receivables and prepayments increased by approximately RMB35.0 million or approximately 144.0% from approximately RMB24.3 million as at 31 December 2012 to approximately RMB59.3 million as at 30 June 2013. Of this balance, RMB50.2 million relates to deposits to suppliers, compared to approximately RMB14.1 million as at 31 December 2012. The increase pertains to deposits paid to suppliers in order to facilitate strict delivery schedules as required by customers.

Inventories

Inventories (comprising raw materials, work-in-progress and finished goods) decreased by approximately RMB6.4 million or approximately 5.9% from approximately RMB108.2 million as at 31 December 2012 to approximately RMB101.8 million as at 30 June 2013 due to the lower sales during the period.

Property, plant and equipment

Property, plant and equipment decreased by approximately RMB8.1 million or approximately 5.3% from approximately RMB152.0 million as at 31 December 2012 to approximately RMB143.9 million as at 30 June 2013 arising mainly due to depreciation expenses during the period.

Short-term bank loans

Short-term bank loans decreased by approximately RMB12.0 million or approximately 28.6% from approximately RMB42.0 million as at 31 December 2012 to approximately RMB30.0 million in 30 June 2013 arising from partial repayment of borrowings during the period.

Trade payables and Other payables

Trade payables decreased by approximately RMB33.0 million or approximately 21.1% from approximately RMB156.3 million as at 31 December 2012 to approximately RMB123.3 million as at 30 June 2013 in line with lower sales in 1H2013.

Other payables increased by approximately RMB1.6 million or approximately 8.4% from approximately RMB19.1 million as at 31 December 2012 to approximately RMB20.7 million as at 30 June 2013 as certain expenses have been accrued for through the year compared to year end provisions made in previous periods.

Income tax payable

Income tax payable increased by approximately RMB3.6 million or approximately 189.5% from RMB1.9 million as at 31 December 2012 compared to 30 June 2013.

Cash and bank balances

Cash and bank balances decreased RMB120.7 million or approximately 45.4% from RMB265.9 million as at 31 December 2012 compared to RMB145.2 million as at 30 June 2013 mainly due to longer customer collections, payments to suppliers and repayment of borrowings during the period.

– 25 –

(II) LIQUIDITY, FINANCIAL RESOURCES

In addition to its short-term interesting-bearing facilities, the Group generally finances its operations from cash flows generated internally. For the six months ended 30 June 2013, the Group’s negative working capital resulted in additional loans being obtained to finance the Group’s operations.

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 of the Group 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.

Net cash borrowings Total equity Net debt to equity ratio (%)	As at 30 June 31 December 2013 2012 RMB’000 RMB’000 (unaudited) (audited) (115,165) (223,854) 1,038,409 1,005,448 (11.10) (22.26)

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

As at 30 June 2013		As at 31 December 2012
Secured	Unsecured	Secured	Unsecured
RMB’000	RMB’000	RMB’000	RMB’000
(unaudited)	(unaudited)	(audited)	(audited)
—	30,000	—	41,999

There is no amount repayable after one year.

(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)

The recent emergence of several over-the-top services has led to a steady decline in sms/voice services revenue within the telecoms industry. With the underlying overall growth momentum in the PRC and abroad being likely to soften in the near term, telecom operators have inevitably taken the careful and selective spending approach through higher quality, yet cost-efficient equipments and systems. These factors have continued to raise competition at higher levels with continued pressure on selling prices.

Despite the factors above, the Group will endeavour to press on with efforts to monitor changing market conditions closely, make refinements on business strategies and broaden its product variety as well as enhance its branding to expand the Group’s business contributors in the long

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run. In addition, we will capitalize on our good relationships with our suppliers and customers to, amongst others, negotiate more favourable prices, and continue to market the Group’s current range of products.

Directors’ and Chief Executive’s Interests and Short Positions in Shares and Underlying Shares and Debentures

As at 30 June 2013, the interests and short positions of the directors (the “ Directors ”) and chief executives of the Company in shares and underlying shares and debentures of the Company or its associated corporations (within the meaning of Part XV of the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) (the “ SFO ”)), which are required to be notified to the Company and SEHK pursuant to Divisions 7 and 8 of Part XV of the SFO (including interest and short positions which they are deemed or taken to have under such provisions of the SFO) or which are required to be entered into, as recorded in the register required to be kept by the Company pursuant to Section 352 of Part XV of the SFO, or as otherwise notified to the Company and the SEHK pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers (the “ Model Code ”) as set out in Appendix 10 of the Listing Rules, were as follows:

Long positions in the Company:

	Number of issued	Number of issued	shares in the Company	shares in the Company
				Approximate
				percentage of the
	Personal	Corporate	Total	Company’s issued
Name of Directors	interests	interests	interests	share capital
Mr Cui Genxiang(1)	—	90,294,662	90,294,662	23.27%
Ms Zhang Zhong(2)	—	28,082,525	28,082,525	7.24%

Notes:

• (1) Mr Cui Genxiang beneficially owns the entire issued share capital of Kingever Enterprises Limited (“ Kingever ”), and Kingever in turn holds approximately 23.27% of the total issued shares in the Company.

• (2) Ms Zhang Zhong beneficially owns the entire issued share capital of Wellahead Holdings Limited (“ Wellahead ”), and Wellahead in turn holds approximately 7.24% of the total issued shares in the Company.

Saved as disclosed above, as at 30 June 2013, none of the Directors and chief executives of the Company nor their associates had or deemed to have any interests or short position in the shares, underlying shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO), which has been recorded in the register maintained by the Company pursuant to Section 352 of Part XV of the SFO or which has been notified to the Company and the SEHK pursuant to the Model Code.

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Substantial Shareholders’ and Other Persons’ Interests in Shares and Underlying Shares

As at 30 June 2013, insofar as in known to the Directors and chief executives of the Company, the following shareholders have interests of 5% or more of the issued share capital of the Company were recorded in the register of interests required to be kept by the Company pursuant to Section 336 of Part XV of the SFO:

Long positions:

Long positions:
			Approximate
		Number of	percentage of the
		ordinary	Company’s issued
Name	Capacity and nature of interests	shares held	share capital
Kingever_(Note (a))_	Registered owner and	90,294,662	23.27%
	beneficially owned
Mr Cui Genxiang_(Note (a))_ Deemed interest and interest		90,294,662	23.27%
	in controlled company
Wellahead_(Note (b))_	Registered owner and	28,082,525	7.24%
	beneficially owned
Ms Zhang Zhong_(Note (b))_ Deemed interest and interest		28,082,525	7.24%
	in controlled company

Notes:

• (a) Kingever is a company incorporated in the British Virgin Islands, and the entire issued share capital of which is beneficially owned by Mr Cui Genxiang.

• (b) Wellahead is a company incorporated in the British Virgin Islands, and the entire issued share capital of which is beneficially owned by Ms Zhang Zhong.

Saved as disclosed above, as at 30 June 2013, no person, other than the Directors, whose interests are set out in the paragraph headed “Directors’ and chief executives’ interests and short positions in shares and underlying shares and debentures” above, has an interest or short position in the shares or underlying shares of the Company that was required to be recorded.

Arrangements to Enable Directors to Acquire Benefits by Means of the Acquisition of Shares and Debentures

Neither at the end of the financial period nor at any time during the financial period did there subsist any arrangement whose object is to enable the Directors of the Company to acquire benefits by means of the acquisition of shares or debentures in the Company or any other body corporate.

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(IV) SUPPLEMENTARY INFORMATION

1. 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 unaudited interim results of the Group for the six months ended 30 June 2013.

2. Compliance with Corporate Governance Code

The Company has complied with all the code provisions as set out in the Code on Corporate Governance Practices (formerly set out in Appendix 14 to the Listing Rules) and the new addition of the Corporate Governance Code for the six months ended 30 June 2013.

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

The Board confirms, having made specific enquiries with all directors of the Company that during the six months ended 30 June 2013, all the directors have complied with the required standards of the Model Code as set out in Appendix 10 of the Listing Rules.

4. Share capital

• (i) Details of any changes in the company’s share capital arising from rights issue, bonus issue, share buy-backs, exercise of share options or warrants, conversion of other issues of equity securities, issue of shares for cash or as consideration for acquisition or for any other purpose since the end of the previous period reported on. State also the number of shares that may be issued on conversion of all the outstanding convertibles, as well as the number of shares held as treasury shares, if any, against the total number of issued shares excluding treasury shares of the issuer, as at the end of the current financial period reported on and as at the end of the corresponding period of the immediately preceding financial year.

year.
	No. of shares
Share capital — Ordinary Shares	’000	RMB’000
Balance as at 30 June 2013 and 31 December 2012	388,000	295,000

There were no changes in the issued share capital of the Company for the second quarter and six months ended 30 June 2013.

• (ii) To show the total number of issued shares excluding treasury shares as at the end of the current financial period and as at the end of the immediately preceding year.

As at 30 June 2013 and 31 December 2012, there were no treasury shares.

• (iii) A statement showing all sales, transfers, disposal, cancellation and/or use of treasury shares as at the end of the current financial period reported on.

Not applicable.

– 29 –

5. Dividends

No dividend has been recommended by the Company for the period ended 30 June 2013.

6. Review of financial results

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

7. Audit or review in accordance with applicable accounting standards

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

8. Whether the same accounting policies and methods of computation as in the issuer’s most recently audited annual financial statements have been applied

The Group has applied the same accounting policies and methods of computation in the financial statements for the current financial period reported on, as in the recently audited consolidated financial statements for the financial year ended 31 December 2012.

9. If there are any changes in the accounting policies and methods of computation, including any required by an accounting standard, what has changed, as well as the reasons for, and the effect of, the change.

Not applicable.

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

For the six months ended 30 June 2013, neither the Company nor its subsidiaries had purchased, sold or redeemed any of the securities of the Company.

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

Not applicable.

12. If the group has obtained a general mandate from shareholders for Interest Person Transactions (“IPTs”), the aggregate value of such transactions as required under SGX Listing Manual Rule 920(1)(a)(ii). If no IPT mandate has been obtained, a statement to that effect.

No mandate from shareholders has been obtained for IPTs.

13. Disclosure on the Website of the Exchanges

This report shall be published on the websites 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).

14. Negative assurance pursuant to SGX Listing Manual Rule 705(5)

We, Cui Genxiang and Xu Guoqiang , being two directors of Hengxin Technology Ltd. (the “Company”), do hereby confirm on behalf of the Board of Directors of the Company (“Board”) that, to the best of the Board’s knowledge, nothing has come to the attention of the Board which may render the 2Q2013 and 1H2013 financial results to be false or misleading in any material aspect.

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15. Use of IPO proceeds

As at the date of the financial period reported on, the Company has utilised approximately RMB60.0 million of the net proceeds raised from the dual primary listing on the Stock Exchange of Hong Kong Limited (the “ IPO Proceeds ”).

The details of the use of the IPO Proceeds are tabulated below:

Intended Use Diversify product portfolio of High Temperature Resistant Cables Diversify product portfolio of Antennas Expansion of sales network into overseas market Enhance research and development General working capital Total	Revised Amount Used Balance RMB’000 RMB’000 RMB’000 7,130(1) (2,240) 4,890 35,370 (29,235) 6,135 7,382 (895) 6,487 7,382 (3,752) 3,630 23,859 (23,859) — 81,123 (59,981) 21,142

(1) Please refer to the Company’s announcement dated 9 October 2012 on the change in use of proceeds.

(2) The breakdown of the use of proceeds for general working capital is as follows:

Details	Used
	RMB’000
Purchase of raw materials	23,032
Purchase of equipment	408
General admin expenses	419
Total	23,859
	By Order of the Board
	Hengxin Technology Ltd.
	Cui Genxiang
	Executive Chairman

Singapore, 7 August 2013

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

– 31 –