corporate structure, history and reorganisation · aluminium profile business of xingfa group were...

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CORPORATE STRUCTURE, HISTORY AND REORGANISATIONCORPORATE STRUCTURE, HISTORY AND REORGANISATIONCORPORATE STRUCTURE, HISTORY AND REORGANISATIONCORPORATE STRUCTURE, HISTORY AND REORGANISATIONCORPORATE STRUCTURE, HISTORY AND REORGANISATION

OUR GROUP AND SHAREHOLDING STRUCTUREOUR GROUP AND SHAREHOLDING STRUCTUREOUR GROUP AND SHAREHOLDING STRUCTUREOUR GROUP AND SHAREHOLDING STRUCTUREOUR GROUP AND SHAREHOLDING STRUCTURE

The following chart sets out the shareholding structure and corporate structure ofour Group immediately following the completion of the Global Offering and the CapitalisationIssue, assuming that the Over-allotment Option is not exercised:

Our Company(incorporated in the Cayman Islands)

investment holding

Xingfa BVI(incorporated in BVI)

investment holding

Xingfa SG(incorporated in Singapore)

investment holding

Xingfa Aluminium(established in the PRC)

manufacture and sale ofaluminium profiles

Public

32.8%

100%

100%

100%

23.1% 14.1% 30.0%

Luo Su(Note)

Luo Riming(Note)

Liao Yuqing(Note)

Note: Each of Messrs. Luo Su, Luo Riming and Liao Yuqing is an executive Director.

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HISTORY AND DEVELOPMENTHISTORY AND DEVELOPMENTHISTORY AND DEVELOPMENTHISTORY AND DEVELOPMENTHISTORY AND DEVELOPMENT

Our corporate historyOur corporate historyOur corporate historyOur corporate historyOur corporate history

IntroductionIntroductionIntroductionIntroductionIntroduction

Our Group was originated from the restructuring of our Predecessor Entities, namely,Xingfa Group, Xingfa Innovation and Foshan Xingfa in which our Controlling Shareholdershave equity interests since 1999. From 1999 and up to the commencement of theReorganisation, our Controlling Shareholders’ interests in the Aluminium Profile Businesshad been conducted through our Predecessor Entities only.

Set out below is the simplified corporate structure chart of our Predecessor Entitiesimmediately before the Reorganisation:

Messrs. Luo Su, Luo Riming and Liao Yuqing (Note 1)

Hang Fat (Note 5)Xingfa Group

(Note 2)

Xingfa Innovation(Notes 2 and 3)

Leahin Coating(Note 4)

Foshan Xingfa(Note 2)

100% 100%

100%51%91.3%

Notes:

1. Each of Xingfa Group and Hang Fat was beneficially owned as to 46% by Mr. Luo Su, as to 33%by Mr. Luo Riming and as to 21% by Mr. Liao Yuqing.

2. Each of Xingfa Group, Xingfa Innovation and Foshan Xingfa, being our Predecessor Entities,was principally engaged in the Aluminium Profile Business.

3. The remaining 8.7% of the equity interest of Xingfa Innovation was owned by three IndependentThird Parties.

4. The remaining 49% of the equity interest of Leahin Coating was owned by an Independent ThirdParty. Leahin Coating was not engaged in the Aluminium Profile Business.

5. Hang Fat was a distributor of our Predecessor Entities for the Hong Kong and Macau region.

During the Track Record Period and before the Reorganisation, each of ourPredecessor Entities was principally engaged in the Aluminium Profile Business and,therefore, owned certain machinery and equipment as well as land and premises for theoperation of the Aluminium Profile Business. After years of development, such operationstructure and the existence of three Predecessor Entities no longer made much economicsense and were rather inefficient from a corporate management and administration

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perspective. Therefore, with the aim to streamline the business operation and corporatestructure of the various entities which were engaged in the Aluminium Profile Businessand in preparation for a listing, our Controlling Shareholders initiated the Reorganisationso as to centralise all Aluminium Profile Business then carried out by our PredecessorEntities to Xingfa Aluminium.

The Aluminium Profile Business was gradually transferred from our PredecessorEntities to our Group during the period from May 2006 to July 2007. Details of theprocedures of the Reorganisation are more particularly described in the sub-paragraph“The Reorganisation” below.

The ReorganisationThe ReorganisationThe ReorganisationThe ReorganisationThe Reorganisation

Step 1: Establishment of Xingfa Aluminium

The Reorganisation started with (i) the incorporation of Xingfa SG to act as theholding company of Xingfa Aluminium by our Controlling Shareholders in April 2006 and(ii) the establishment of Xingfa Aluminium by Xingfa Group and Xingfa SG in May 2006whereby Xingfa Group contributed RMB60 million to the registered capital of XingfaAluminium partly in cash (as to RMB26 million) and partly by way of asset contribution(those assets comprising mainly machinery and equipment with an aggregate value ofRMB34 million) and Xingfa SG contributed RMB40 million to the registered capital ofXingfa Aluminium in cash. Except for certain production machinery and equipment whichwere then in the course of delivery and had not been recognised in the books of XingfaGroup at the time of injecting registered capital to Xingfa Aluminium as well as certainancillary equipment purchased after the injection of registered capital to Xingfa Aluminiumwere not injected into Xingfa Aluminium, all machinery and equipment relating to theAluminium Profile Business of Xingfa Group were injected into Xingfa Aluminium.

Step 2: Transformation of Xingfa Aluminium from a sino-foreign equity joint venture to awholly foreign owned enterprise

On 15 August 2006, Xingfa Group and Xingfa SG entered into an equity transferagreement pursuant to which Xingfa Group agreed to sell and Xingfa SG agreed topurchase 60% equity interest in Xingfa Aluminium at a consideration of RMB60 million.Such consideration represented 60% of the registered capital of Xingfa Aluminium.

On 31 August 2006, 佛山市對外貿易經濟合作局 (Bureau of Foreign Trade andEconomic Cooperation of Foshan) approved the transfer and Xingfa Aluminium became awholly foreign owned enterprise.

Step 3: Merger of Foshan Xingfa with Xingfa Aluminium

On 15 October 2006, Xingfa Aluminium, Foshan Xingfa, Xingfa SG and Hang Fatentered into a merger agreement pursuant to which Xingfa Aluminium was merged withFoshan Xingfa, resulting in Xingfa Aluminium becoming the surviving entity and FoshanXingfa becoming dissolved in December 2006. Upon such merger, all assets and liabilitiesthen recorded in the books of Foshan Xingfa (including the Vacant Land) were consolidatedand merged into the books of Xingfa Aluminium.

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Pursuant to Article 55 of the Acquisition Regulations, the relevant rules andregulations relating to merger and de-merger of foreign invested enterprise is applicableto the merger of a PRC enterprise by a foreign invested enterprise. Our legal adviser asto PRC law has confirmed that 《關於外商投資企業合併與分立的規定》(Regulations relatingto the merger and de-merger of foreign invested enterprise) amended and promulgated in2001 is the principal legislation governing the merger and de-merger of foreign investedenterprise, and accordingly it is the “relevant rules and regulations” referred to in Article55 of the Acquisition Regulations for governing the merger of Foshan Xingfa and XingfaAluminium, even after the promulgation of the Acquisition Regulations. Our legal adviseras to PRC law has further confirmed that pursuant to such regulations, merger or de-merger shall be approved by the original approving authority of the enterprises concerned,and that 佛山市對外貿易經濟合作局 (Bureau of Foreign Trade and Economic Cooperationof Foshan) is the competent PRC governmental authority to approve the merger andapproval from Ministry of Commerce or Bureau of Foreign Trade and Economic Cooperationof Guangdong is not required.

The Vacant Land had been owned by Foshan Xingfa since 2003 until it, togetherwith all other assets and liabilities of Foshan Xingfa, was transferred to Xingfa Aluminiumat the time of the merger of Xingfa Aluminium and Foshan Xingfa in December 2006.

On 25 December 2006, 佛山市對外貿易經濟合作局 (Bureau of Foreign Trade andEconomic Cooperation of Foshan) issued an approval for the merger of Foshan Xingfawith Xingfa Aluminium and the dissolution of Foshan Xingfa after the merger. The newcertificate of approval and the approval from the Administration for Industry and Commerceof the PRC were issued on 25 December 2006 and 26 December 2006 respectively.

The Vacant Land was subsequently disposed of to an Independent Third Party bythe completion confirmation (成交確認書 ) and the transfer agreement for state-ownedland use right in respect of the Vacant Land signed on 29 December 2006 and 26February 2007 respectively. Details of such disposal are disclosed in the paragraphheaded “Manufacturing facilities and capacity” in the section headed “Business” in thisprospectus.

Step 4: Cessation of Aluminium Profile Business by Xingfa Group and Xingfa Innovationand commencement of Aluminium Profile Business by Xingfa Aluminium

Following the establishment of Xingfa Aluminium in May 2006, in late June 2006,Xingfa Aluminium issued a notice to the customers and the suppliers of our Group tonotify them that the Predecessor Entities and Xingfa Aluminium were then undertakingsome internal restructuring and commencing from 1 July 2006, all aluminium profilesmarketed under the “Xingfa” brand would be marketed and sold by Xingfa Aluminium butnot the Predecessor Entities. However, our Group has not entered into any agreement forthe sale and purchase of the Aluminium Profile Business and its related assets with ourControlling Shareholders nor with Xingfa Group and Xingfa Innovation.

Xingfa Aluminium has continued to use the same machinery and equipment whichthe Predecessor Entities used to engage in the Aluminium Profile Business prior to thecommencement of the Reorganisation (including those which had been transferred toXingfa Aluminium by Xingfa Group by way of capital contribution) to operate the AluminiumProfile Business.

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Since July 2006, customers of our Group have commenced placing purchase orderswith Xingfa Aluminium for the purchase of aluminium profiles marketed under the “Xingfa”brand and Xingfa Aluminium has commenced to procure raw materials for its own useand Xingfa Group and Xingfa Innovation started to gradually reduce the size of its operationof the Aluminium Profile Business. In December 2006 and at the request of Xingfa Group’sbankers, Xingfa Innovation disposed of certain but not all machinery and equipment (thenet book value of which amounted to approximately RMB11.64 million as at 31 December2006) for the Aluminium Profile Business to Xingfa Group for the purpose of enablingXingfa Group to generate certain level of income to maintain the credit facilities grantedto Xingfa Group. Xingfa Innovation itself kept 16 units of machinery and equipment (thenet book value of which amounted to approximately RMB5.58 million as at 31 December2006).

In January 2007, substantially all of the employees then under the employment ofXingfa Group and Xingfa Innovation ceased to be employed by Xingfa Group and XingfaInnovation and the employees entered into new employment contracts with XingfaAluminium.

During the Track Record Period, each of Xingfa Group and Xingfa Innovation wasprincipally engaged in the Aluminium Profile Business. Immediately prior to the completionof the Reorganisation, Xingfa Group and Xingfa Innovation had ceased to engage in theAluminium Profile Business.

Negotiation for the proposed sale of the Chancheng Land commenced in June 2006in line with local government zoning policy. Accordingly, our Controlling Shareholdershave not transferred the Chancheng Factory (including the Chancheng Land) from XingfaGroup and Xingfa Innovation to Xingfa Aluminium before completion of the Reorganisation.

Step 5: Leasing of machinery and equipment as well as factory premises to XingfaAluminium

Following the completion of steps 1 to 4 of the Reorganisation as mentioned above,Xingfa Group remains to own 102 units of machinery and equipment and various structuresand buildings with a total gross floor area of approximately 45,518.86 sq.m. comprised inthe Chancheng Factory which are related to the Aluminium Profile Business. XingfaInnovation also remains to own 16 units of machinery and equipment and various structureand buildings with a total gross floor area of approximately 29,940.65 sq.m. comprised inthe Chancheng Factory which are related to the Aluminium Profile Business. Out of anaggregate of 118 units of machinery and equipment leased from Xingfa Group and XingfaInnovation, 3 of them are aluminium extruders (their exclusion capacity is used to calculatethe Group’s production capacity) with an annual designed production capacity ofapproximately 12,540 tonnes, it represented about 15.7% as compared to the annualdesigned production capacity of the 16 units of aluminium extruders owned by the Groupof approximately 79,760 tonnes. The remaining 115 units of leased machinery andequipment comprise smelters, costing machineries and other ancillary productionmachineries.

Our legal adviser as to PRC law is of the view that the purchase of machinery andequipment as well as land and premises by Xingfa Aluminium from Xingfa Group andXingfa Innovation should not be governed by the Acquisition Regulations because the

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provisions in the Acquisition Regulations as to acquiring domestic assets only apply toforeign invested enterprise established after 8 September 2006. As Xingfa Aluminiumwas established before the Acquisition Regulations becoming effective on 8 September2006, the purchase of domestic assets is the ordinary business activity of Xingfa Aluminiumand therefore the said purchase before and after the Listing should not be subject to theAcquisition Regulations. However, it may still be possible that the PRC governmentauthority may request such purchase be approved by the Ministry of Commerce of thePRC because the amount of assets and value involved in the purchase are relativelylarge and that Xingfa Group and Xingfa Innovation are related parties of our Group. Inlight of the possible uncertainty in the interpretation of the Acquisition Regulations by thePRC government authority and in order to centralise the operation of the AluminiumProfile Business in Xingfa Aluminium and to resolve the issues of potential competingbusiness if those assets were to be kept by those Predecessor Entities, having consideredthe uncertainty in the steps and timeframe for obtaining the requisite approvals for theacquisition, our Directors are of the view that it is in the best interests of our Group andShareholders as a whole to lease all these deemed appropriated machinery and equipmentas well as land and premises from Xingfa Group and Xingfa Innovation. In this connection,in July 2007, Xingfa Aluminium entered into various lease agreements with Xingfa Groupand Xingfa Innovation to lease back all machinery and equipment together with land andpremises used in the Aluminium Profile Business, the legal ownership of which does notbelong to Xingfa Aluminium. Details of such leases are set out in the section headed“Connected transactions” in this prospectus.

Up to the Latest Practicable Date, neither our Company nor any of our ControllingShareholders have filed any application to the Ministry of Commerce in the PRC pursuantto the Acquisition Regulations for the transfer of the Chancheng Factory and othermachinery and equipment for the time being because there is uncertainty in theinterpretation of the Acquisition Regulations.

Step 6: Incorporation of Xingfa BVI and acquisition of Xingfa SG

Xingfa BVI was incorporated on 2 October 2007 by our Controlling Shareholders forthe purpose of acting as the intermediate company of our Group. On 29 February 2008,our Controlling Shareholders transferred their respective shares in Xingfa SG to XingfaBVI in consideration of the allotment and issuance of an aggregate of 1,000 shares in theshare capital of Xingfa BVI to our Controlling Shareholders. After such transfer, XingfaSG was wholly owned by Xingfa BVI which in turn was wholly owned by our ControllingShareholders.

Step 7: Incorporation of our Company which acts as the holding company of our Group

Our Company was incorporated in the Cayman Islands on 13 September 2007. On29 February 2008, our Controlling Shareholders transferred their respective shares inXingfa BVI to our Company in consideration of and in exchange for which our Company(i) allotted and issued, credited as fully paid, 10,000,000 new Shares as to 4,600,000Shares to Mr. Luo Su, as to 3,300,000 Shares to Mr. Luo Riming and as to 2,100,000Shares to Mr. Liao Yuqing; and (ii) credited as fully paid at par the 10,000,000 nil-paidShares then held as to 4,600,000 Shares by Mr. Luo Su, as to 3,300,000 Shares by Mr.Luo Riming and as to 2,100,000 Shares by Mr. Liao Yuqing. After such transfer, XingfaBVI was wholly owned by our Company which in turn was wholly owned by our ControllingShareholders.

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Our Directors confirm that through the above steps of Reorganisation, the operationof the Aluminium Profile Business was transferred into our Group and the corporatestructure of our Group is much simplier and more streamlined for the purpose of Listing.

Legality of the ReorganisationLegality of the ReorganisationLegality of the ReorganisationLegality of the ReorganisationLegality of the Reorganisation

As more particularly set out in the above paragraphs describing the steps of theReorganisation (other than the merger of Foshan Xingfa with Xingfa Aluminium), XingfaGroup and Xingfa Innovation had not transferred the legal ownership of all assets andliabilities relating to the Aluminium Profile Business to our Group. In July 2007, XingfaAluminium entered into various lease agreements with Xingfa Group and Xingfa Innvoationto lease back to our Group all machinery and equipment together with land and premisesused in the Aluminium Profile Business.

Our legal adviser as to PRC law has made an unofficial verbal enquiry with therelevant governmental authorities in the PRC (including the Ministry of Commerce) as totheir interpretation of the Acquisition Regulations. Based on the unofficial views of theofficial of the Ministry of Commerce who is in an appropriate position to offer views on theenquiry, our legal adviser as to PRC law considered that the Reorganisation was not incircumvention of the Acquisition Regulations.

Our legal adviser as to PRC law has confirmed that the Reorganisation as a whole,including the transfer of business, assets and liabilities, was legal and valid, and is notsubject to any approvals pursuant to the Acquisition Regulations and has complied withall relevant rules and regulations in the PRC.

Our legal adviser as to PRC law advised that the profit distribution by XingfaAluminium after Listing is not subject to the Acquisition Regulations.

As advised by our legal adviser as to PRC law, the Acquisition Regulations, whichtook effect from 8 September 2006, will apply to cases where (i) the acquisition of equityin a non-foreign invested enterprise (“Domestic EnterpriseDomestic EnterpriseDomestic EnterpriseDomestic EnterpriseDomestic Enterprise”) by foreign investors resultingin the transformation of such Domestic Enterprise into a foreign invested enterprise; (ii)foreign investors, through a foreign invested enterprise established in the PRC after 8September 2006, acquire the assets of a Domestic Enterprise and operates such assets;and (iii) after 8 September 2006, foreign investors agree to acquire the assets of aDomestic Enterprise and then establish a foreign invested enterprise by way of injectingsuch assets as capital contribution and operate such assets by that foreign investedenterprise. Details of the PRC rules and regulations applicable to each step of theReorganisation are set out below:

– Step 1: The establishment of Xingfa Aluminium was approved by 佛山市禪城區對外貿易經濟合作局 (Bureau of Foreign Trade and EconomicCooperation of Chancheng District, Foshan City) in May 2006. Ourlegal adviser as to PRC law confirms that 佛山市襌城區對外貿易經濟合作局 (Bureau of Foreign Trade and Economic Cooperation ofChancheng District, Foshan City) is the competent PRC governmentalauthority to approve the establishment of Xingfa Aluminium. Moreover,since the establishment of Xingfa Aluminium (i.e. 26 May 2006) tookplace before the effective date of the Acquisition Regulations (i.e. 8September 2006), the Acquisition Regulations were not applicable inthis respect.

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– Step 2: The transformation of Xingfa Aluminium from a sino-foreign equityjoint venture to a wholly foreign owned enterprise by way of acquisitionof 60% interest of Xingfa Aluminium by Xingfa SG from Xingfa Groupwas approved by 佛山市對外貿易經濟合作局 (Bureau of ForeignTrade and Economic Cooperation of Foshan) on 31 August 2006.Such approval was issued before the Acquisition Regulations hasbecome effective (i.e. 8 September 2006). Therefore, the AcquisitionRegulations were not applicable and the then applicable PRC lawsand regulations regulating such transfer was 《外國投資者併購境內企業暫行規定》(Provisional Rules on Acquisition of DomesticEnterprises by Foreign Investors) (“Provisional Acquisition RulesProvisional Acquisition RulesProvisional Acquisition RulesProvisional Acquisition RulesProvisional Acquisition Rules”)which were promulgated on 7 March 2003 and became effective on12 April 2003.

Pursuant to the Provisional Acquisition Rules, the transfer of equityinterest of Xingfa Aluminium should be governed by the relevantlaws and regulations governing foreign investment and 《外商投資企業股東股權變更的若干規定》(Certain regulations relating to thechange in shareholding of foreign invested enterprise).

Pursuant to 《外商投資企業股東股權變更的若干規定》(Certainregulations relating to the change in shareholding of foreign investedenterprise), the transfer should be approved by the original approvingauthority of Xingfa Aluminium.

Our legal adviser as to PRC law confirms that 佛山市對外貿易經濟合作局 (Bureau of Foreign Trade and Economic Cooperation ofFoshan) is the competent PRC governmental authority to approvethe transfer and the Group has obtained all necessary approvalsfrom PRC governmental authority for the transfer pursuant to thethen applicable laws and regulations.

– Step 3: The merger of Foshan Xingfa with Xingfa Aluminium was governedby Article 55 of the Acquisition Regulations pursuant to which therelevant rules and regulations relating to merger and de-merger offoreign invested enterprise is applicable to the merger of a PRCenterprise by a foreign invested enterprise.

Pursuant to the rules and regulations relating to merger and de-merger of foreign invested enterprise (i.e.《關於外商投資企業合併與分立的規定》(Regulations relating to the merger and de-merger offoreign invested enterprise)), merger or de-merger shall be approvedby the original approving authority of the enterprises concerned.

The merger of Foshan Xingfa was approved by 佛山市對外貿易經濟合作局 (Bureau of Foreign Trade and Economic Cooperation ofFoshan) on 8 November 2006. Our legal adviser as to PRC lawconfirms that pursuant to the Acquisition Regulations, the merger ofFoshan Xingfa shall be governed by 《關於外商投資企業合併與分立的規定》(Regulations relating to the merger and de-merger of foreign

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invested enterprise) and pursuant to such regulations, 佛山市對外貿易經濟合作局 (Bureau of Foreign Trade and Economic Cooperationof Foshan) is the competent PRC governmental authority to approvethe merger.

– Step 4: The cessation of the Aluminium Profile Business by Xingfa Groupand Xingfa Innovation and the commencement of the AluminiumProfile Business by Xingfa Aluminium are not subject to the AcquisitionRegulations because Xingfa Group and Xingfa Innovation had nottransferred the legal ownership of any assets and liabilities relatingto the Aluminium Profile Business to our Group.

– Step 5: The leasing of machinery and equipment as well as factory premisesto Xingfa Aluminium is not subject to the Acquisition Regulationsbecause pursuant to Article 2 of the Acquisition Regulations, “外國投資者併購境內企業 ” (acquisition of domestic enterprise by foreigninvestor) under the Acquisition Regulations shall mean (i) theacquisition of the shareholding, or subscription of shares, of domesticcompanies resulting in the transformation of such Domestic Enterpriseinto a foreign invested enterprise; or (ii) the acquisition and operationof assets owned by Domestic Enterprise by foreign investedenterprise; or (iii) the establishment of foreign invested enterprise byinjecting assets acquired from Domestic Enterprise.

Our legal adviser as to PRC law confirms that the leasing of machineryand equipment as well as land and premises by our Group does notfall within the ambit of “外國投資者併購境內企業 ” (acquisition ofdomestic enterprise by foreign investor) under the AcquisitionRegulations, and therefore, the Acquisition Regulations are notapplicable in such circumstances.

– Steps 6 These two steps of Reorganisation were not subject to the Acquisitionand 7: Regulations because these transactions were conducted outside the

PRC.

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Set out below is the simplified corporate structure chart of our Predecessor Entities,certain companies controlled by our Controlling Shareholders and members of our Groupimmediately after the completion of the Reorganisation:

Messrs. Luo Su, Luo Riming and Liao Yuqing

(Note 1)

Our Company

(Note 2)

Xingfa Curtain Wall

(Notes 1 and 5)

Xingfa Group

(Note 2)

100% 100% 100%

Xingfa Innovation

(Notes 2 and 3)

Leahin Coating

(Note 4)

51%91.3%

Xingfa BVI

Xingfa SG

100%

100%

100%

Xingfa Aluminium

Notes:

1. Each of Xingfa Group, our Company and Xingfa Curtain Wall was beneficially owned as to 46%by Mr. Luo Su, as to 33% by Mr. Luo Riming and as to 21% by Mr. Liao Yuqing. In December2006, Messrs. Luo Su, Luo Riming and Liao Yuqing acquired the entire equity interest of XingfaCurtain Wall.

2. Each of Xingfa Group and Xingfa Innovation, being our Predecessor Entities, were no longerengaged in the Aluminium Profile Business and at present, is principally engaged in the tradingof aluminium ingots and leasing of certain land and premises and machinery and equipment toour Group.

3. As at the Latest Practicable Date, Xingfa Innovation was owned as to 91.3% by Xingfa Groupand as to 8.7% by three Independent Third Parties.

4. The remaining 49% of the equity interest of Leahin Coating was owned by an Independent ThirdParty. Leahin Coating was not engaged in the Aluminium Profile Business.

5. Xingfa Curtain Wall was not engaged in the Aluminium Profile Business.

Rationale behind the ReorganisationRationale behind the ReorganisationRationale behind the ReorganisationRationale behind the ReorganisationRationale behind the Reorganisation

During the Track Record Period, all assets (including the Vacant Land and theChancheng Land) relating to the Aluminium Profile Business owned by the PredecessorEntities and our Group were used as a single production unit solely to support theoperation of the Aluminium Profile Business and could not be separately operated.

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The Reorganisation was designed to (i) achieve the centralisation of the AluminiumProfile Business which was previously operated by our Predecessor Entities in XingfaAluminium as far as practicable under the prevailing PRC laws and regulations and (ii)avoid any potential competing interests coming from our Predecessor Entities and ourControlling Shareholders.

As advised by our Directors, the original plan of the Reorganisation was to centralisethe Aluminium Profile Business then carried out by the Predecessor Entities to XingfaAluminium by way of either legal merger and acquisition of the Predecessor Entities andtransfer of the legal titles of all relevant assets of the Aluminium Profile Business. Suchreorganisation plan was feasible at that time and our Group did not contemplate anymajor legal obstacles.

The first step of the Reorganisation started in May 2006 when Xingfa Aluminiumwas established by Xingfa Group and Xingfa SG whereby Xingfa Group contributed RMB60million to the registered capital of Xingfa Aluminium partly in cash (as to RMB26 million)and partly by way of asset contribution (those assets comprising mainly machinery andequipment with an aggregate value of RMB34 million) and Xingfa SG contributed RMB40million to the registered capital of Xingfa Aluminium in cash.

The Reorganisation went on to the second step in August 2006 when XingfaAluminium became a wholly foreign owned enterprise.

As at 31 August 2006, Xingfa Innovation was owned as to 74.23% by Xingfa Groupand as to approximately 25.77% by seven Independent Third Parties. Our Directorsconfirmed that while any acquisition of assets from Xingfa Innovation by Xingfa Aluminiumwould then require the consents from the seven Independent Third Parties, our Grouphad not been able to conclude the negotiation with these seven Independent Third Partiesbefore the introduction of the Acquisition Regulations. Taking into account the possibleimpact of the Acquisition Regulations, Xingfa Aluminium did not proceed for the acquisitionof assets from Xingfa Innovation.

Due to the introduction of the Acquisition Regulations which became effective on 8September 2006, our Group has re-considered the feasibility of the remaining steps ofthe Reorganisation and the time required for obtaining the requisite approvals accordingto the Acquisition Regulations if the Acquisition Regulations were imposed by the relevantgovernment authorities to apply to the remaining steps of the Reorganisation.

Since there is uncertainty as to the interpretation of the Acquisition Regulations andtaking into account the interests of our Group and our then ultimate shareholders as awhole, our Group continued the Reorganisation by way of lease arrangement and allother major assets relating to the Aluminium Profile Business were leased to our Group.Our legal adviser as to PRC law is of the view that such lease arrangement is not subjectto the Acquisition Regulations and has complied with the all applicable laws and regulationsin the PRC.

Our legal adviser as to PRC law is of the view that the acquisition of all assets(including (i) the Chancheng Land and certain machinery and equipment (“Retained LandRetained LandRetained LandRetained LandRetained Landand PPMand PPMand PPMand PPMand PPM”) and; (ii) miscellaneous working capital items (“Retained Working CapitalRetained Working CapitalRetained Working CapitalRetained Working CapitalRetained Working Capital”)which were generated from the operation of the Aluminium Profile Business during the

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Track Record Period and which, our Directors consider, would not materially affect thefuture operation of the Aluminium Profile Business by our Group) and liabilities of XingfaGroup and Xingfa Innovation prior to the Listing should not be governed by the AcquisitionRegulations because the provisions of Acquisition Regulations as to acquiring domesticassets only apply to foreign invested enterprise established after 8 September 2006. AsXingfa Aluminium was established before the Acquisition Regulations becoming effectiveon 8 September 2006, the purchase of domestic assets is the ordinary course of businessactivity of Xingfa Aluminium and therefore the purchase before and after the Listingshould not be subject to the Acquisition Regulations. However, it may still be possiblethat the PRC governmental authority may request such purchase be approved by theMinistry of Commerce of the PRC because the amount of assets and value involved inthe purchase are relatively large and that the sellers of these assets are related parties ofour Group. In light of the uncertainty in the interpretation of the Acquisition Regulations,our Directors are of the view that it is in the best interests of our Group and theShareholders as a whole to distribute these assets back to our Controlling Shareholdersby way of deemed appropriation and retained by the Predecessor Entities.

Although Xingfa Group and Xingfa Innovation have retained the legal titles to theRetained Land and PPM and Retained Working Capital, Xingfa Group and Xingfa Innovationare no longer engaged in the Aluminium Profile Business after the Reorganisation andare currently engaged in the trading of aluminium ingots and leasing of certain land andpremises and machinery and equipment to our Group as their new business. The principalpurpose of the leasing arrangement in respect of the Retained Land and PPM is tofacilitate our Group’s operation of the Aluminium Profile Business so as to ensure thatour Group’s operation of the Aluminium Profile Business would not be disrupted as aresult of the completion of the Reorganisation and the deemed appropriation. It is ourmanagement’s plan to, subject to compliance with the applicable legal and regulatoryrequirements, acquire the Retained Land and PPM (other than the Chancheng Land) assoon as practicable after Listing. Further particulars of such proposed acquisitions are setout in the paragraph headed “Possible connected transactions” in the section headed“Connected transactions” in this prospectus.

From an accounting perspective, as the Aluminium Profile Business that has beentransferred from our Predecessor Entities to our Group is under common control of ourControlling Shareholders before and after the Reorganisation, the audited financialstatements of our Group for the Track Record Period as set out in Appendix I to thisprospectus have been prepared as if the Aluminium Profile Business had been operatedby the companies comprising our Group throughout the Track Record Period. The resultsrelated to the Aluminium Profile Business are included in the audited financial statementsfor the Track Record Period as set out in Appendix I to this prospectus. The RetainedLand and PPM and Retained Working Capital are reflected as a deemed appropriation ofnet assets to our Controlling Shareholders by the Aluminium Profile Business as at 28July 2007.

Taking into account the steps involved in the Reorganisation and the legal restrictionsin transferring all assets and liabilities of Xingfa Group and Xingfa Innovation to XingfaAluminium, our Directors consider that distribution by way of deemed appropriation inform of retaining the net assets in the Predecessor Entities is an appropriate method soas to avoid the need of first realising the current assets by our Group for making thedistribution in cash.

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Changes in shareholding structure of the Predecessor Entities and members of our GroupChanges in shareholding structure of the Predecessor Entities and members of our GroupChanges in shareholding structure of the Predecessor Entities and members of our GroupChanges in shareholding structure of the Predecessor Entities and members of our GroupChanges in shareholding structure of the Predecessor Entities and members of our Group

Set out below is a summary of changes in shareholding structure of the PredecessorEntities and members of our Group:

(A) Predecessor Entities

(1) Xingfa Group

Xingfa Group was originally transformed from 廣東興發鋁型材廠(Guangdong Xingfa Aluminium Profiles Factory), a collectively-owned enterpriseestablished in the PRC on 28 August 1990 and was principally engaged inthe manufacture and sale of aluminium profiles and related products. In 1999,our Controlling Shareholders acquired from 南海市南莊鎮經濟發展總公司(Nanhai Nanzhuang Economic Development Company) 100% equity interestsin and, where appropriate, all assets owned by 廣東興發鋁型材廠 (GuangdongXingfa Aluminium Profiles Factory).

Following the acquisition, 廣東興發鋁型材廠 (Guangdong XingfaAluminium Profiles Factory) was transformed from a collectively-ownedenterprise into a limited liability company and changed its name to 廣東興發鋁型材廠有限公司 (Guangdong Xingfa Aluminium Co., Ltd.) in April 1999.Since then, the entire equity interest of 廣東興發鋁型材廠有限公司 (GuangdongXingfa Aluminium Co., Ltd.) has been beneficially owned by our ControllingShareholders as to 46% by Mr. Luo Su, as to 33% by Mr. Luo Riming and asto 21% by Mr. Liao Yuqing. In April 2004, 廣東興發鋁型材廠有限公司(Guangdong Xingfa Aluminium Co., Ltd.) changed its name to Xingfa Group.

In May 2006, Xingfa Group and Xingfa SG established Xingfa Aluminium,our principal operating subsidiary, as a sino-foreign equity joint venture in thePRC. At the time of the establishment, the registered capital of XingfaAluminium was RMB100 million of which 40% was contributed by Xingfa SGand 60% was contributed by Xingfa Group. In accordance with the cooperativejoint venture contract of Xingfa Aluminium, Xingfa Group has contributedRMB60 million to the registered capital of Xingfa Aluminium as to RMB26million in cash and as to RMB34 million by way of injection of machinery andequipment. Xingfa Group subsequently sold its investment in Xingfa Aluminiumto our Group as more particularly described in the paragraph headed “XingfaAluminium” below.

In July 2007, our Group and Xingfa Group entered into (i) a machinerylease agreement pursuant to which Xingfa Group leases 102 units of machineryand equipment in relation to the production of aluminium profiles owned by itto our Group; and (ii) a lease agreement pursuant to which Xingfa Groupleases 10 industrial buildings, a dormitory, a research building and variousstructures with a total gross floor area of approximately 45,518.86 sq.m.situated at the Chancheng Factory to our Group. Further information on thesetransactions are set out in the section headed “Connected transactions” inthis prospectus.

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At present, the principal businesses of Xingfa Group include trading ofaluminium ingots and leasing certain land and premises and productionmachinery to our Group as mentioned above.

(2) Xingfa Innovation

Xingfa Innovation was originated from 南海廣發鋁型材廠 (NanhaiGuangfa Aluminium Profiles Factory), a collectively-owned enterpriseestablished in the PRC on 13 January 1992 and was principally engaged inthe sale and distribution of aluminium profiles. In 1999, our ControllingShareholders acquired from 南海市南莊鎮經濟發展總公司(Nanhai NanzhuangEconomic Development Company) 100% equity interests in and, whereappropriate, all assets owned by 南海廣發鋁型材廠 (Nanhai GuangfaAluminium Profiles Factory).

Following the acquisition,南海廣發鋁型材廠 (Nanhai Guangfa AluminiumProfiles Factory) was transformed from a collectively-owned enterprise into alimited liability company and changed its name to 南海市興發創新有限公司(Nanhai Xingfa Innovation Aluminium Co., Ltd.) in December 1999. At thattime, 南海市興發創新有限公司 (Nanhai Xingfa Innovation Aluminium Co., Ltd.)was owned as to approximately 74.2% by Xingfa Group.

In May 2001, 南海市興發創新有限公司 (Nanhai Xingfa InnovationAluminium Co., Ltd.) was transformed from a limited liability company to ajoint stock company and changed its name to Xingfa Innovation. XingfaInnovation was then owned as to approximately 74.2% by Xingfa Group andas to approximately 25.8% by seven Independent Third Parties.

In July 2007, our Group and Xingfa Innovation entered into (i) amachinery lease agreement pursuant to which Xingfa Innovation leases 16units of machinery and equipment in relation to the production of aluminiumprofiles owned by it to our Group; and (ii) a lease agreement pursuant towhich Xingfa Innovation leases 3 industrial buildings, 3 warehouses, anexhibition hall and Levels 1 to 5 of an 8-storey office building with a totalgross floor area of approximately 29,840.65 sq.m. situated at the ChanchengFactory to our Group. Further information on these transactions are set out inthe section headed “Connected transactions” in this prospectus.

In December 2007, Xingfa Group acquired from four Independent ThirdParties 17.1% of the shares of Xingfa Innovation. As a result of the acquisition,Xingfa Innovation was held as to approximately 91.3% by Xingfa Group andas to approximately 8.7% by three Independent Third Parties.

At present, the principal businesses of Xingfa Innovation include tradingof aluminium ingots and leasing certain land and premises and productionmachinery to our Group as mentioned above.

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(3) Foshan Xingfa

Foshan Xingfa (formerly known as 南海興發鋁型材有限公司 (NanhaiXingfa Aluminium Profiles Co., Ltd.)) was established in the PRC in June1990. Foshan Xingfa was principally engaged in the manufacture and sale ofaluminium profiles, metal dies and thermal-break strips.

In 1999, our Controlling Shareholders acquired from 南海市南莊鎮經濟發展總公司(Nanhai Nanzhuang Economic Development Company) 100% equityinterests in and, where appropriate, all assets owned by Foshan Xingfa andHang Fat.

In April 2002, Hang Fat acquired the remaining 50% interest in FoshanXingfa from Xingfa Group. Following such acquisition, Foshan Xingfa changedto a wholly-foreign owned enterprise and was wholly-owned by Hang Fat.With effect from 21 March 2003, our Controlling Shareholders beneficiallyowned the entire issued share capital of Hang Fat as to 46% by Mr. Luo Su,as to 33% by Mr. Luo Riming and as to 21% by Mr. Liao Yuqing. The beneficialownership of Hang Fat was evidenced by confirmatory deeds of trust dated23 October 2007 and executed by the registered shareholders in favour ofour Controlling Shareholders and the legality of the Reorganisation is notaffected by such confirmatory deeds of trust.

Pursuant to the Reorganisation and with a view to streamlining thecorporate structure, Foshan Xingfa merged with Xingfa Aluminium and FoshanXingfa was approved to be dissolved in December 2006 and thus ceased tobe a wholly-owned subsidiary of Hang Fat. All assets (including the VacantLand of approximately 144,000 sq.m. which was originally owned by FoshanXingfa and sold to an Independent third Party subsequently) and liabilities ofFoshan Xingfa were merged into Xingfa Aluminium. The consideration ofRMB110 million paid by Xingfa SG to Hang Fat in respect of the merger ofFoshan Xingfa with Xingfa Aluminium was determined with reference to theaudited net asset value of Foshan Xingfa as at 30 September 2006.

(B) Our Group members

(1) Xingfa Aluminium

Xingfa Aluminium, our principal operating subsidiary, was establishedin the PRC as a sino-foreign equity joint venture in May 2006 and was thenowned as to 60% by Xingfa Group and as to 40% by Xingfa SG. Since itsestablishment in May 2006, Xingfa Aluminium has gradually taken up theoperation of the Aluminium Profile Business of the Predecessor Entities.

In August 2006, Xingfa Aluminium became a wholly-foreign ownedenterprise after Xingfa SG acquired Xingfa Group’s 60% equity interest inXingfa Aluminium at a cash consideration of RMB60 million. Xingfa SG financedsuch acquisition cost by way of borrowings and such borrowings weresubsequently assigned to our Controlling Shareholders at the face value andwere capitalised as share capital of Xingfa SG in December 2006.

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In December 2006, Xingfa Aluminium merged with Foshan Xingfa (whichwas then owned by Hang Fat) in accordance with applicable laws andregulations of the PRC, following which Foshan Xingfa was approved to bedissolved in December 2006 and all its assets and liabilities were mergedwith Xingfa Aluminium. As a result of such merger, Xingfa SG (which remainedas the sole investor in Xingfa Aluminium) was indebted to Hang Fat an amountof RMB110 million, which was assigned to our Controlling Shareholders at itsface value and was capitalised as share capital of Xingfa SG in December2006.

As advised by our legal adviser as to PRC law, all necessaryadministrative and legal procedures and requirements in relation to theestablishment (and the contribution of the registered capital by the then equityholders), changes in equity interests in and legal status of Xingfa Aluminiumand the merger with Foshan Xingfa have been complied with and therestructuring procedures in respect of Xingfa Aluminium were in compliancewith the relevant PRC laws and regulations and are legal and valid.

On 8 August 2006, six PRC governmental and regulatory agencies,including the Ministry of Commerce and the China Securities RegulatoryCommission (“CSRCCSRCCSRCCSRCCSRC”), promulgated the Acquisition Regulations. TheAcquisition Regulations require that an offshore special purpose vehicle formedfor listing purposes and controlled, directly or indirectly, by PRC companiesor individuals, such as our Company, shall obtain approval from the CSRCprior to the listing and trading of the securities of such offshore special purposevehicle on an overseas stock exchange. Our legal adviser as to PRC law hasadvised us that the Listing does not require approval of the CSRC as ourCompany had obtained all necessary approvals from the relevant competentPRC regulatory authorities for the Reorganisation before 8 September 2006,the effective date of the Acquisition Regulations.

Pursuant to Notice 75, each of our Controlling Shareholders is requiredto apply to relevant foreign exchange administration authorities for foreignexchange registration of overseas investment before they set up or controlour Company and its associated overseas companies. Our legal adviser as toPRC law confirmed that our Controlling Shareholders had completed therequired registration and no other approval or consent in relation to theirdirect or indirect interests in our Company is required to be obtained. TheReorganisation complies with applicable PRC laws and regulations, and allnecessary approvals from the PRC regulatory authorities, including thenecessary foreign exchange registration, required to implement theReorganisation have been obtained.

(2) Xingfa SG

Xingfa SG was incorporated in Singapore on 3 April 2006 by ourControlling Shareholders for the purpose of acting as the investment holdingcompany of Xingfa Aluminium and owned as to 46% by Mr. Luo Su, as to33% by Mr. Luo Riming and as to 21% by Mr. Liao Yuqing. In May 2006,

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Xingfa SG and Xingfa Group established Xingfa Aluminium in the PRC as asino-foreign equity joint venture. As described in the sub-paragraph headed“Xingfa Aluminium” above, Xingfa SG became the sole owner of XingfaAluminium in August 2006.

On 29 February 2008, our Controlling Shareholders transferred theirrespective shares in Xingfa SG to Xingfa BVI in consideration of the allotmentand issuance, credited as fully paid, of an aggregate of 1,000 shares in theshare capital of Xingfa BVI to our Controlling Shareholders. After such transfer,Xingfa SG was wholly owned by Xingfa BVI which in turn was wholly ownedby our Controlling Shareholders.

(3) Xingfa BVI

Xingfa BVI was incorporated in BVI on 2 October 2007 for the purposeof acting as the intermediate holding company of our Group following theacquisition of the entire issued share capital of Xingfa BVI disclosed in thepreceding paragraph.

(4) Our Company

Our Company was incorporated in the Cayman Islands on 13 September2007.

As the final step of the Reorganisation, our Company and our ControllingShareholders entered into a share purchase agreement dated 29 February2008 pursuant to which our Company acquired the entire issued share capitalof Xingfa BVI in consideration of and exchange for (i) the allotment and issue,credited as fully paid, of 10,000,000 new Shares to our Controll ingShareholders; and (ii) the crediting as fully paid at par the 10,000,000 nil-paidShares then held by our Controlling Shareholders. Thereafter, our Companybecame the ultimate holding company of its existing subsidiaries, namely,Xingfa Aluminium, Xingfa SG and Xingfa BVI.

The Reorganisation undertaken by us in preparation for the Listing ismore particularly described in the paragraph headed “Group reorganisation”in Appendix V to this prospectus.

Assets acquired or leased from the Predecessor Entities during the ReorganisationAssets acquired or leased from the Predecessor Entities during the ReorganisationAssets acquired or leased from the Predecessor Entities during the ReorganisationAssets acquired or leased from the Predecessor Entities during the ReorganisationAssets acquired or leased from the Predecessor Entities during the Reorganisation

During the Reorganisation, our Group acquired or leased from the PredecessorEntities a number of assets which are more particularly discussed below:

1. In May 2006, Xingfa Group contributed RMB60 million to the registered capitalof Xingfa Aluminium as to RMB26 million in cash and as to RMB34 million byway of injection of machinery and equipment. The machinery and equipmentinjected by Xingfa Group included mainly core production facilities for themanufacturing of aluminium profiles.

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2. In December 2006, Foshan Xingfa was merged with Xingfa Aluminium. Allassets (including the Vacant Land of a site area of approximately 144,000sq.m. which was subsequently sold to an Independent Third Party) andliabilities of Foshan Xingfa were merged into Xingfa Aluminium.

3. Since 28 July 2007, our Group has leased from the Predecessor Entities (i)certain production machinery with a carrying value of approximately RMB20million as at 31 July 2007 (of which the costs were approximately RMB22million and the accumulated depreciation were approximately RMB2 million)and (ii) certain land and premises with a carrying value of approximatelyRMB59 million as at 31 July 2007 (of which the costs were approximatelyRMB113 million and the accumulated depreciation was approximately RMB54million), particulars of which are as follows:

– 102 units of machinery and equipment (including aluminium extruders,smelters, coating machinery, mould production machinery and otherproduction accessories) with a net book value of approximately RMB15million as at 31 July 2007 in relation to the production of aluminiumprofiles owned by Xingfa Group;

– 16 units of machinery and equipment (including coating machinery, mouldproduction machinery and other production accessories) with a net bookvalue of approximately RMB5 million as at 31 July 2007 in relation tothe production of aluminium profiles owned by Xingfa Innovation;

– 10 industrial buildings, a dormitory, a research building and variousstructures with a net book value of approximately RMB44 million with atotal gross floor area of approximately 45,518.86 sq.m. comprised inthe Chancheng Factory owned by Xingfa Group; and

– 3 industrial buildings, 3 warehouses, an exhibition hall and Levels 1 to5 of an 8-storey office building with a net book value of approximatelyRMB15 million with a total gross floor area of approximately 29,840.65sq.m. comprised in the Chancheng Factory owned by Xingfa Innovation.

Details of the above lease agreements are set out in the section headed“Connected transactions” in this prospectus.

Other than the above, our Group has not acquired any other assets or assumedany other liabilities from the Predecessor Entities pursuant to the Reorganisation. On theother hand, the Predecessor Entities ceased to be engaged in the Aluminium ProfileBusiness in which we are now engaged in, following the acquisition or leasing of theassets by our Group disclosed above.

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Our business development milestonesOur business development milestonesOur business development milestonesOur business development milestonesOur business development milestones

Our Group was founded in 1986 by 南海市南莊鎮經濟發展總公司 (Nanhai NanzhuangEconomic Development Company). With years of efforts, our Group has now become awell-known aluminium profile manufacturer in the PRC. The following sets out the keymilestones of our Group since its establishment:

1980s The “Xingfa” branded product was first launched to the market inthe 1980s. Our first production plant was constructed in FoshanCity of Guangdong Province of the PRC and our Group’s productsat that time included mainly anodic oxidation aluminium profiles.

The first “Xingfa” trade mark was registered in the PRC in 1986.

At the time of the establishment of 南海縣興發鋁型材廠 (NanhaiXingfa Aluminium Factory), Mr. Luo Su was its legal representative.

1990s In 1990s, we expanded our range of aluminium profiles to includethose with electrophoresis coating, powder coating and PVDFcoating. In 1994, in recognition of our attendance of the PacificCoast Builders Conference, our Group was presented with theGolden Product Award for our aluminium extrusion profiles by theMoscone Center in San Francisco.

In 1996, our production plant was recognised by the Ministry ofConstruction of the PRC as the “Construction Aluminium ProfilesProduction Base for the Ministry of Construction of the PRC” (國家建設部鋁型材生產基地 ). Our powder coating technology andproducts received the “State New Product” (國家級新產品 ) awardin 1996 as assessed by the local departments and offices of theMinistry of Science and Technology of the PRC and otherprofessional assessment organisations on the basis that therelevant product were first developed in the PRC or that suchproducts were exceptional amongst its class produced inaccordance with the prevailing policies on technology in industry.

2000 to the Since 2000, we have been developing various series of high-endLatest aluminium profile doors and windows including the 2000 series ofPracticable patented novel sealed sliding windows, the 2005 series ofDate energy-saving polyurethane pour sliding windows, the 70B series

of injected thermal break single-sash lift windows and the newWinger™ series which are durable and reduce glare and heatthus conserving energy. By optimising the structural design ofdoors and windows and using adiabatic extrusion materials, weare able to manufacture doors and windows that are energyconserving. Our insulating aluminium profiles with thermal barrierand our energy-saving polyurethane pour extrusion profile wereproduced according to state standards.

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In 2000, we established a research and development centre (“R&DR&DR&DR&DR&DCentreCentreCentreCentreCentre”) for aluminium engineering technology which was certifiedas the Xingfa Key Engineering Technology R&D Center ofGuangdong Province by the Department of Science andTechnology of Guangdong Province, Development of ReformCommission of Guangdong Province and the Economic and TradeCommission of Guangdong Province in June 2005. Our R&DCentre conducts research and development of new products andtechnology. We set up a physical and chemical inspection andtesting laboratory as part of our R&D Centre in 2001 for the qualityassessment of our production process and our products. Thislaboratory was certified by 中國實驗國家級認可委員會 (ChinaNational Accreditation Board for Laboratories) on 5 March 2004as a nationally-accredited laboratory. Please refer to the paragraphheaded “Major awards and achievements” in the section headed“Business” for details on the scope and criteria for obtaining suchaccreditation.

In 2001, we launched our new conductive aluminium profilescatered for metro locomotive. As a result of the success in theproduct, we were subsequently awarded with the “GuangdongProvince Science and Technology Award (Third Class)” (廣東省科學技術獎勵三等獎 ) by the People’s Government of theGuangdong Province in 2005 as assessed by the GuangdongProvince Science and Technology Administrative Department inrespect of the product’s innovativeness, applicability, economicand social benefits, and modernisation effect, the “TechnologicalAchievement Certificate” by the Department of Science andTechnology of Guangdong Province in 2004 for its advancementin science and technology research and applicability which isappraised, verified and assessed by the local and state leveltechnological achievement management entity through anapplication and registration process taking into account the stateand scope of achievement, barrier to entry to market place,intellectual property status, state of application and economicbenefits, etc., and the “State Torch Project Certificate” approvedby the Ministry of Science and Technology of the PRC and grantedby the Torch High Tech Industrial Development Center of theMinistry of Science and Technology in recognition of among otherthings the product’s high functionality, technical advancement andinnovativeness in 2005. As at the Latest Practicable Date, thesaid product was used in the metro locomotive engineering projectsin major cities in the PRC, such as Shanghai, Guangzhou, Nanjing,Lanzhou and Huaihua.

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Another merited product, which was launched in 2002, is our highperformance aluminium profiles for refrigerated containers, whichreceived (i) the “State Key New Product” award as assessed bythe local departments and offices of the Ministry of Science andTechnology of the PRC and other professional assessors on suchbasis including that such product is picked from a pool of productsthat are innovative, hi-tech, with good production potential, hasthe potential of becoming a well-known brand both in the PRCand overseas, and will provide substantial economic and socialbenefits to the people of the PRC and in accordance with the 《國家重點新產品計劃評估指南（2007）》, (ii) the “TechnologicalAchievement Certificate” for its advancement in science andtechnology research and applicability which is appraised, verifiedand assessed by the local and state level technologicalachievement management entity through an application andregistration process taking into account the state and scope ofachievement, barrier to entry to market place, intellectual propertystatus, state of application and economic benefits, etc., (iii) the“Guangdong Province Key New Product Certificate” granted bythe Department of Science and Technology of the GuangdongProvince through an application process and assessment onamong other things the kind and level of technology used, marketdemand and risks, economic and social benefits, product qualityand applicability, and (iv) the “Foshan City Chancheng DistrictScience and Technology Award (First Class)” by the Foshan CityChancheng District Science and Technology Bureau in 2003through a nomination and assessment process on among otherthings the project’s characteristics, content, technology involved,background, findings, inventions and innovativeness, comparisonwith similar projects in the PRC and overseas, applicability, andeconomic and social benefits.

In 2004, our high performance aluminium profiles heat sinks werelaunched.

From 2000 to 2005, our Group expanded our production facilitiesin Foshan City, and by 2005, the gross floor area for our productionat the Chancheng Factory reached approximately 75,000 sq.m.

In 2006, we received ISO9001:2000 and Mil itary QualityManagement System Certification from The International CertificateNetwork and China Certif ication Center for Quality MarkCertif ication Group and Beij ing Junyou Chengxin QualityCertification Co., Ltd., respectively.

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As a testimony of the quality of our products and services, in2003, we were awarded “Certificate for Product Exemption fromQuality Surveillance Inspection”, as well as “No. 1 of Top-TenNational Aluminium Profiles Enterprise” by CNFA which assesses,among other things, our Group’s total production volume and value,sales, tax payment, profit and foreign exchange generated on anannual basis, product quality, rank and leadership in industry andreputation. In 2004, we were awarded “China Top Brand Product”granted in accordance with the procedures set under the《中國名牌產品管理辦法》 and appraised on among other things salesvolume and value, export volume and value and related taxpayment, market demand, quality, economic and social benefitsand development prospects and “International Platinum Star forQuality Certif icate” by the Business Init iative DirectionsInternational Organization which award was presented inrecognition of our outstanding commitment to quality andexcellence in the realms of customer satisfaction, leadership,innovation and technology through assessments on among otherthings customer satisfaction, communication strategies,benchmarking, information and data analysis, leadership, planningand decision-making, human resources, continuing education andtraining, processes and production, financial outcome, businessresults, ISO 9000 and TQM. In 2006, our trademark “XING FA 興發牌 ” was certified by the State Administration for Industry andCommerce of the PRC as the “China Well-known Trademark” whichgrant was subject to (i) the relevant trademark being registeredand used consecutively for more than three years, (ii) that it ishighly reputable in the PRC and well known to the relevant public,and (iii) an application process with the issuing organizationwhereby, among other things, the submission and assessment onevidentiary materials such as sales volume and sales bygeographical area nationwide and abroad in respect of the goodsusing the relevant trademarks, major economic indicators (suchas annual yield, sales amount, profit, market share, etc) of thegoods using the relevant trademark and its rank in the industry inthe relevant province for the past three years and registrationhistory and status. Please refer the paragraph headed “Majorawards and achievements” in the section headed “Business” ofthis prospectus for further details.

Over the years, our Group has developed numerous proprietarytechnologies and patents in respect of our products which wereregistered in the name of Mr. Luo Su, our executive Director,Xingfa Innovation and/or Xingfa Group. At the Latest PracticableDate, all of such patents which our Directors consider aresignificant to our Group’s business have been successfullyassigned to and registered in the name of our Group. Pleaserefer to the paragraph headed “Our intellectual property rights” inAppendix V to this prospectus for the registered patents whichour Directors consider material to our business.

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In 2006, to meet our anticipated business expansion, our Group

begun formulating our plan to relocate our production base housed

in the Chanchang Factory in Nanzhuang Town, Chancheng District,to the Sanshui Factory in Sanshui District, Foshan City, Guangdong

Province, the PRC. Four smelting and five extrusion production

lines commenced commercial production since September 2007.Our Directors expect that the relocation of our production base to

the Sanshui Factory will be completed by the end of 2009 and

upon integration of the production facilities originally located atthe Chancheng Factory and the new production facilities to be

acquired, the Sanshui Factory will have an annual designed

production capacity of approximately 150,000 tonnes of aluminiumprofiles in 2010.

In 2006, in recognition of our Group’s effort in improving researchand development, our Group was accredited the “Postdoctoral

Scientific Research Workstation” by the National Postdoctoral

Management Committee of the Ministry of Personnel of the PRC.In the same year, we participated in and co-funded a project for

the research and development of high performance aluminium

profi le for high speed marine vessels. Such product ischaracterised by its anti-corrosion, high tensile strength, good

toughness and weldability.

Over the years, our Group has been one of the suppliers of

aluminium construction materials in construction projects involving

renowned buildings and constructions, including China World TradeCentre Tower 3 in Beijing, the renovation of the Great Hall of the

People, Olympic Village, the construction of the southern extension

project of Guangzhou Metro Line 4, the Pazhou Exhibition ComplexPhase Two Curtain Wall material project of China Import and

Export Fair (Canton Fair) and the Burj Tower Project in Dubai.

corporate structure, history and reorganisation · aluminium profile business of xingfa group were...

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