Xingye Copper International Group Limited 興業銅業國際集團有限公司 Annual Report 2007 Xingye Copper International Group Limited Xingye Copper International Group Limited 興業銅業國際集團有限公司 二 零 零 七 年 年 報 興業銅業國際集團有限公司 （於開曼群島註冊成立之有限公司） (incorporated in the Cayman Islands with limited liability) 股份代號 : 0505 Stock Code : 0505 二零零七年年報 Annual Report 2007 Xingye Copper International Group Limited Annual Report 2007 Corporate Information 2 Corporate Structure 3 Four Year Financial Summary 4 Contents Chairman’s Statement 6 Management Discussion and Analysis 8 Corporate Governance Report 19 Report of the Directors 27 Directors and Senior Management 38 Auditors’ Report 42 Consolidated Income Statement 44 Consolidated Balance Sheet 45 Balance Sheet 47 Consolidated Statement of Changes in Equity 48 Consolidated Cash Flow Statement 49 Notes to the Financial Statements 51 Glossary 100 1 Xingye Copper International Group Limited Annual Report 2007 Corporate Information BOARD OF DIRECTORS REGISTERED OFFICE Cricket Square Executive Directors Hutchins Drive Mr. HU Changyuan (Chairman) P.O. Box 2681 Mr. CHEN Jianhua Grand Cayman KY1-1111 (Deputy Chairman and General Manager) Cayman Islands Mr. WANG Jianli PRINCIPAL PLACE OF BUSINESS Mr. MA Wanjun Hong Kong Independent Non-Executive Directors 41st Floor Mr. CUI Ming Bank of China Tower Mr. XIE Shuisheng 1 Garden Road Ms. LI Li Central, Hong Kong PRC Audit Committee Nos. 2-9, Jin Xi Road Ms LI Li (Chairman) Hangzhou Bay Development Zone Mr. CUI Ming Cixi City Mr. XIE Shuisheng Ningbo City, Zhejiang Province 315336, PRC Remuneration Committee Mr. CUI Ming (Chairman) CAYMAN ISLANDS PRINCIPAL SHARE Ms. LI Li REGISTRAR AND TRANSFER OFFICE Mr. WANG Jianli Butterfield Fund Services (Cayman) Limited Butterfield House Nomination Committee 68 Fort Street Mr. XIE Shuisheng (Chairman) P.O. Box 705 Mr. CUI Ming Grand Cayman KY1-1107 Mr. CHEN Jianhua Cayman Islands CHIEF FINANCIAL OFFICER AND COMPANY HONG KONG BRANCH SHARE REGISTRAR SECRETARY AND TRANSFER OFFICE Tricor Investor Services Limited Mr. CHAN Chung Kik, Lewis 26/F, Tesbury Centre 28 Queen’s Road East AUTHORISED REPRESENTATIVES Hong Kong Mr. WANG Jianli Mr. CHAN Chung Kik, Lewis PRINCIPAL BANKERS Agricultural Bank of China PRINCIPAL LEGAL ADVISORS China Construction Bank Hong Kong PUBLIC RELATIONS CONSULTANT DLA Piper Hong Kong Porda International (Finance) Woo, Kwan, Lee & Lo PR Co., Ltd. Cayman Islands COMPLIANCE ADVISER Conyers Dill & Pearman, Cayman Quam Capital Limited AUDITORS COMPANY WEBSITE KPMG, Certified Public Accountants www.xingyecopper.com STOCK CODE 505 2 Xingye Copper International Group Limited Annual Report 2007 Corporate Structure 3 Xingye Copper International Group Limited Annual Report 2007 Four Year Financial Summary RESULTS 2007 2006 2005 2004 RMB’000 RMB’000 RMB’000 RMB’000 Turnover 2,096,133 1,512,430 641,164 468,607 Gross profit 217,330 183,399 82,690 73,153 Result from operating activities 196,806 135,677 74,082 55,852 Profit attributable to equity holders of the Company 150,845 106,696 48,437 32,588 EARNINGS PER SHARE 2007 2006 2005 2004 Basic earnings per share (RMB) 0.33 0.24 0.11 0.07 Diluted earnings per share (RMB) 0.33 N/A N/A N/A ASSETS, LIABILITIES AND EQUITY 2007 2006 2005 2004 RMB’000 RMB’000 RMB’000 RMB’000 Non-current assets 492,782 491,054 495,862 428,446 Current assets 826,321 547,724 330,208 214,819 Total assets 1,319,103 1,038,778 826,070 643,265 Current liabilities 669,109 695,421 483,047 256,266 Non-current liabilities 112,013 10,783 31,766 62,014 Total liabilities 781,122 706,204 514,813 318,280 Net current assets/(liabilities) 157,212 (147,697) (152,839) (41,447) Total assets less current liabilities 649,994 343,357 343,023 386,999 Capital and reserves attributable to equity holders of the Company 537,981 332,074 311,257 303,575 Minority interests – 500 – 21,410 4 Xingye Copper International Group Limited Annual Report 2007 Four Year Financial Summary FINANCIAL RATIOS AND OTHER FINANCIAL INFORMATION 2007 2006 2005 2004 EBITDA (RMB’000) 226,346 165,165 99,063 67,606 Profitability ratios: Gross profit margin(1) (%) 10.4% 12.1% 12.9% 15.6% Operating profit margin(2) (%) 9.4% 9.0% 11.6% 11.9% Net profit margin(3) (%) 7.2% 7.1% 7.6% 7.0% EBITDA margin(4) (%) 10.8% 10.9% 15.5% 14.4% Rate of return on equity(5) (%) 28.0% 32.1% 15.6% 10.7% Liquidity ratios: Current ratio(6) (times) 1.2 0.8 0.7 0.8 Quick ratio(7) (times) 0.8 0.4 0.5 0.5 Inventory turnover(8) (days) 34 35 46 53 Trade receivable turnover(9) (days) 26 15 24 25 Trade payable turnover(10) (days) 15 17 19 17 Capital adequacy ratios: Gearing ratio(11) (%) 47.8% 51.2% 50.8% 39.1% Net borrowings to equity(12) (%) 71.2% 109.9% 88.2% 72.1% Interest coverage ratio(13) (times) 6.2 8.6 7.0 8.9 Notes: (1) Gross profit margin is equal to gross profit divided by turnover times 100%. (2) Operating profit margin is equal to operating profit divided by turnover times 100%. (3) Net profit margin is equal to profit attributable to equity holders of the Company divided by turnover times 100%. (4) EBITDA margin is equal to EBITDA divided by turnover times 100%. (5) Rate of return on equity is equal to profit attributable to equity holders of the Company divided by capital and reserves attributable to equity holders of the Company times 100%. (6) Current ratio is equal to current assets divided by current liabilities. (7) Quick ratio is equal to current assets net of inventories divided by current liabilities. (8) Inventory turnover is equal to the average of the beginning and ending inventory volume for the year divided by the sales volume times 365 days. (9) Trade receivable turnover is equal to the average of the beginning and ending trade and bills receivables for the year divided by turnover times 365 days. (10) Trade payable turnover is equal to the average of the beginning and ending trade and bills payables for the year divided by cost of sales times 365 days. (11) Gearing ratio is equal to total borrowings divided by total assets times 100%. (12) Net borrowings to equity ratio is equal to total borrowings net of cash and cash equivalents and pledged deposits divided by equity attributable to the equity holders of the Company times 100%. (13) Interest coverage is equal to EBITDA divided by interest expenses. 5 Xingye Copper International Group Limited Annual Report 2007 Chairman’s Statement To Shareholders, On behalf of the Board of Directors (the “Board”), I am pleased to present the first annual report of Xingye Copper International Group Limited (the “Company”) and its subsidiaries (the “Group”) for the year ended 31 December 2007 since our successful listing on the main board of the Stock Exchange on 27 December 2007. On 27 December 2007, the Group successfully listed on the Stock Exchange (the “Listing”) and allotted and issued 150,000,000 Shares pursuant to the global offering. On 11 January 2008, the over-allotment option was exercised and pursuant to which, 22,500,000 Shares were allotted and issued. Taking into account the exercise of the overallotment option, the net proceeds raised from the Listing amounted to approximately RMB221.0 million. The overwhelming market response to our global offering reflected market confidence in the solid business fundamentals of the Group. The success of our Listing marked a new milestone and granted the Group an access to the international capital markets. As a result, we now have the financial agility to capture additional growth opportunities in the copper semi-manufacturing industry. During the year under review, the Group harvested encouraging results with substantial growth in both revenues and profit compared with the prior year. Our revenue surged 38.6% to exceed RMB2,096.1 million. The profit attributable to equity holders of the Company grew by 41.4% to RMB150.8 million. Earnings per share amounted to RMB0.33, representing an increase of 37.5% as compared to the prior year. In 2007, the Group maintained its position as the leading producer of high precision copper plates and strips in the PRC with four different high precision product lines: tin phosphorous bronze plates and strips, brass plates and strips, lead frame strips and nickel silver plates and strips. According to the 2008 Issue 4 of Copper Manufacture Studies published by Beijing Antaike Information Development Co., Ltd, the Group is the largest producer of high precision tin phosphorous bronze plates and strips, high precision lead frame strips and high precision nickel silver plates and strips in terms of production volume in the PRC in 2007. In 2007, the Group’s “Three Ring” “ ” trademark was awarded the title of “China’s Top Brand” and “China’s well-known Trademark”. These awards evidence the strong recognition of our brand and trademark among the public and provide customers with an assurance of quality of our products, and as a result our products are widely used in a variety of electronic appliances, telecommunication equipment, automobile components, and electricity transmission devices and transformers. In 2007, notwithstanding the impact by macro control and structural adjustment, the development of China’s copper semi-manufacturing industry was favoured by the continuously stable growing domestic economy. The domestic copper consumption is still active since China remained as the largest copper consumer in the world where the domestic copper consumption required a large amount of copper importation. Being of one of the leading manufacturers of higher copper plates and strips in PRC, the Group is able to take full advantage of our stable growth business model with a competitive cost structure to continuously gain share in the global copper plates and strips market.